Exhibit 10.12
THIS PROMISSORY NOTE AND THE SECURITIES
OBTAINABLE UPON CONVERSION HEREOF (COLLECTIVELY, THE
“SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (“THE ACT”), OR THE
SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE PLEDGED,
SOLD, ASSIGNED OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
SENIOR CONVERTIBLE NOTE
FOR VALUE RECEIVED, American Telecom
Services Inc., a Delaware corporation (the “Company”),
hereby unconditionally promises to pay to the order of
(the “Holder”) the
($ )
dollars (the “Principal Amount”), together with all
accrued but unpaid interest on this Note on
,
2007 (the “Maturity Date”), subject to conversion as
provided herein. The outstanding Principal Amount of this Note
shall bear interest at the rate of eight percent (8%) per
annum (calculated daily on the basis of a 360-day year and actual
calendar days elapsed), payable on the Maturity Date (except as
otherwise provided herein in cases of conversion of this Note into
shares (“Note Shares”) of the Company’s common
stock (“Common Stock”)).
Subject to the conversion provisions
of Section 2 hereof, both the Principal Amount and accrued
interest thereon shall be paid in lawful money of the United States
of America to the Holder at
,
or at such other address as the Holder may designate by notice in
writing to the Company, in immediately available funds. If any
payment hereunder falls due on a Saturday, Sunday or legal holiday,
it shall be payable on the next succeeding business day and such
additional time shall be included in the computation of
interest.
This Note is one of a series of
senior convertible notes (“Senior Notes” or
“Notes”) containing substantially identical terms and
conditions and issued in an offering (“Offering”)
pursuant to a Confidential Private Placement Memorandum, dated
June 28, 2005 (“Memorandum”), and
Subscription/Registration Rights Agreements between the Company and
each investor in the Offering (“Investors”). This Note
is entitled to the benefits of that certain General Security
Agreement (“Security Agreement”), dated as of
July 14, 2005, between the Company and HCFP/Brenner Securities
LLC, the collateral agent for the ratable benefit of the Holder and
the other Investors, covering certain collateral of the Company
(“Collateral”), as set forth in the Security Agreement.
The issuance of this Note and the granting of the security interest
in the Collateral to the Holder pursuant to the Security Agreement
are intended by the Company and Holder to be a contemporaneous
exchange for new value given by Holder to the Company in an amount
equivalent to the value given by the Company to Holder. Capitalized
terms used but not defined herein shall have their respective
meanings assigned in the Memorandum and/or
Subscription/Registration Rights Agreement and/or Security
Agreement. The Security Agreement, the Uniform Commercial Code
Financing Statements to be filed in connection with the Security
Agreement and any and all other documents executed and
delivered
by the Company to the Holder under which the
Holder is granted liens on assets of the Company are collectively
referred to herein as the “Security Documents.” The
Note Shares are also referred to in, and entitled to the benefits
of, those certain registration rights granted by the Company
pursuant to the Subscription/Registration Rights
Agreement.
1. Ranking . The indebtedness
evidenced by this Note and the other Senior Notes and the payment
of the principal amount (including the Principal Amount) hereof and
thereof and interest hereon and thereon shall be Senior (as
hereinafter defined) to, and have priority in right of payment
over, all indebtedness of the Company, other than Permitted
Indebtedness (defined below). “Senior” shall be deemed
to mean that, in the event of any default in the payment of the
obligations represented by the Senior Notes or of any liquidation,
insolvency, bankruptcy, reorganization, or similar proceedings
relating to the Company, all sums payable on the Senior Notes,
shall first be paid in full, with interest, if any, before any
payment is made upon any other indebtedness, now outstanding or
hereinafter incurred, and, in any such event, any payment or
distribution of any character which shall be made in respect of any
other indebtedness of the Company shall be paid over to the holders
of the Senior Notes for application to the payment thereof, unless
and until the obligations under the Senior Notes (which shall mean
the principal amount thereof and other obligations arising out of,
premium, if any, on, interest on, and any costs and expenses
payable under, the Senior Notes) shall have been paid and satisfied
in full.
“Permitted Indebtedness”
means the Company’s (i) financing arrangements with
banks and institutions existing or proposed as of June 28,
2005, including the Company’s proposed factoring arrangement
for accounts receivable with CIT, as described in the Memorandum
(“Current Financing”) and (ii) any future
financing with banks or institutions undertaken to replace (but not
increase) any Current Financing at rates more favorable than those
afforded under such Current Financing (“Replacement
Financing”). The Company may not incur any other indebtedness
senior to or pari passu with the Senior Notes without the
prior written approval of the holders of at least 50% of the then
outstanding aggregate Principal Amount of the Senior
Notes.
2. Conversion .
(a) Optional Conversion . The
Principal Amount of this Note and the accrued interest thereon may
be converted at any time, in whole or part, at the option of the
Holder (“Optional Conversion”), into shares of Common
Stock at a conversion price (“Conversion Price”) equal
to the lower of (i) $3.00 per share and (ii) the
per-share price (“VPO Price”) at which the Common Stock
is sold to the public in the Company’s venture public
offering described in the Memorandum (“VPO”). To make
an Optional Conversion, the Holder shall surrender this Note, duly
endorsed, together with a written conversion notice to the Company
at its principal office setting forth (i) that the Holder is
electing to exercise its conversion rights and (ii) that
portion of the Principal Amount that the Holder is electing to
convert. In the case of an Optional Conversion, this Note shall be
deemed to have been converted immediately prior to the close of
business on the date of receipt of such conversion notice by the
Company. At its expense, the Company will, as soon as practicable
thereafter, issue and deliver to the Holder, at its address, a
certificate or certificates for the number of Note Shares to which
the Holder is entitled upon such conversion and will issue a new
Note for the remaining Principal Amount that was not
converted.
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(b) Automatic Conversion . In
the event the Company consummates a VPO at a VPO Price that exceeds
the then-applicable Conversion Price by at least 130%, all of the
Principal Amount of this Note and accrued interest thereon shall
automatically convert into shares of Common Stock at the Conversion
Price (“Automatic Conversion”). The Automatic
Conversion shall be effective on the later to occur of (1) the
closing of the VPO and (2) the expiration of any lock-up or
resale restriction imposed by a regulatory agency. At its expense,
the Company will, as soon as practicable thereafter, notify each
holder in writing of the Automatic Conversion and shall issue and
deliver to the Holder, at its address, a certificate or
certificates for the number of Note Shares to which the Holder is
entitled upon such conversion.
(c) Mandatory Conversion . In
the event the Company achieves a public market for its Common Stock
other than through a VPO, the Company may force conversion of the
Principal Amount of the Notes and accrued interest thereon at the
Conversion Price (“Mandatory Conversion”) upon prior
written notice to the Holder (“Mandatory Conversion
Notice”), but only if (i) the last sale price of the
Common Stock for the 20 consecutive trading days ending two
business days prior to the date of the Mandatory Conversion Notice
equals or exceeds 150% of the then applicable Conversion Price and
(ii) a registration statement covering the resale of the Note
Shares is in effect on the date of conversion (and has been
continuously in effect for at least 25 business days prior to the
effective date of conversion). The Mandatory Conversion shall be
effective on the date of the Mandatory Conversion Notice. At its
expense, the Company will issue and deliver to the Holder, at its
address, a certificate or certificates for the number of Note
Shares to which the Holder is entitled upon such
conversion.
(d) Interest . In the case of
any conversion of the Principal Amount into Note Shares under this
Section 2, the Holder shall receive payment of interest due on
the Principal Amount through the effective date of conversion in
the form of shares of Common Stock (“Interest Shares”).
The number of Interest Shares to be issued in a conversion under
this Section shall be equal to (i) the amount of interest
accrued through the effective conversion date on the Principal
Amount being converted divided by (ii) the average last sale
price of a share of Common Stock on the ten consecutive trading
days ending on the third day prior to the effective date of
conversion.
(e) No fractional Note Shares
. In lieu of any fractional Note Shares otherwise issuable upon
conversion, the number of Note Shares issued upon conversion shall
be rounded up to the nearest whole number.
(f) No Impairment . The
Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights
of the Holder of this Note against impairment.
3. Reservation of Shares .
The Company shall at all times have authorized and reserved for
issuance a sufficient number of shares of its capital stock to
provide for the full conversion of this Note (including interest
thereon) into Note Shares.
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4. Change of Control . In the
event of (i) any transaction or series of related transactions
(including any reorganization, merger or consolidation) that
results in the transfer of
