Exhibit 4.16
THE SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS
(I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO
THE SECURITIES ACT OF 1933, AS AMENDED, (II) SUCH SECURITIES
MAY BE SOLD PURSUANT TO RULE 144, OR (III) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE
SECURITIES LAWS.
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED
TO THE PRIOR PAYMENT IN FULL OF THE SENIOR OBLIGATIONS (AS DEFINED
IN THE SUBORDINATION AGREEMENTS HEREINAFTER REFERRED TO) PURSUANT
TO, AND TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT
DATED OCTOBER 11 , 2006, MADE BY THE SUBORDINATED CREDITOR
AND EACH OBLIGOR REFERRED TO THEREIN IN FAVOR OF FORTRESS CREDIT
CORP., AS SENIOR AGENT, ALL AS REFERRED TO IN SUCH SUBORDINATION
AGREEMENT.
IN ADDITION, THIS NOTE IS SUBORDINATED PURSUANT TO, AND SUBJECT
TO THE TERMS AND CONDITIONS OF, THE SUBORDINATION AGREEMENT (AS
DEFINED IN THE SUBSCRIPTION AGREEMENT REFERENCED BELOW)
SUBORDINATED
CONVERTIBLE PROMISSORY NOTE
$—
Issue Date: October —, 2006 Maturity Date: October
—, 2009
FOR VALUE RECEIVED, HALO Technology Holdings, Inc. (the “
Company ”) hereby promises to pay to the order of
. or its successors, assigns
and legal representatives (the " Holder ”), at c/o
or at such other location as
the Holder may designate from time to time, the aggregate principal
sum of $ (
Dollars), in lawful money of
the United States of America, together with interest thereon at a
rate of 10.0% per annum.
1. Company Notes . This
Note (the “ Note ”) is one of a series of Notes
(the " Company Notes ”) of like tenor in an aggregate
principal amount of up to $5,000,000 (Five Million Dollars) (or
such higher amount as may be agreed to by the Company) issued by
the Company pursuant to the terms of those certain Subscription
Agreements, dated of even date herewith (the " Subscription
Agreements ”), between the Company and the investor
parties thereto. Capitalized terms used herein shall have the
respective meanings ascribed thereto in the Subscription Agreements
unless otherwise defined herein.
2. Maturity Date .
Subject to the provisions of Section 9 below, the
aggregate principal amount of this Note and accrued interest
thereon shall be due and payable on October 11, 2009 (the
“ Maturity Date ”).
3. Calculation and Payment
of Interest . Interest shall be payable in shares of Common
Stock of the Company. Interest will be paid in full shares only,
with an additional share to be paid for any fractional share. The
value of each share of Common Stock for purposes of interest
payments hereunder shall be equal to 80% of the 20 trading day
trailing volume weighted average price for a share of Common Stock
ending on the trading day immediately prior to the date on which
the applicable interest payment is due. Interest hereunder shall be
calculated on the basis of a 360-day year for the actual number of
days elapsed. Interest shall be calculated on a simple interest
basis and shall accrue daily and be payable quarterly, in
arrears.
4. Prepayment . Any
prepayments hereunder shall be applied first, to the payment of any
expenses then owed to the Holder, second, to accrued interest on
this Note and third, to the payment of the principal amount
outstanding under this Note. The Company shall not have the right
to set off or otherwise deduct from amounts payable by it hereunder
any amounts whether liquidated or unliquidated, which the Holder or
any of its Affiliates may owe to the Company, which right is hereby
expressly waived to the maximum extent permitted by applicable law.
The Company shall have no right to make any prepayment of all, or
any portion of this Note unless the Company makes a simultaneous
prepayment of the other Notes under the Subscription Agreements
pari pasu . In the event of any prepayment, a prepayment
penalty in an amount equal to the remaining interest payments
through Maturity will be charged and due at the time of such
prepayment.
5. Covenants . The
Company agrees that, so long as any amount payable under this Note
remains unpaid, it will not, and will cause its Subsidiaries not
to, without the prior written consent of the Holder:
(a) create, incur, guarantee,
issue, assume or in any manner become liable in respect of, any
obligation (i) for borrowed money, other than trade payables
incurred in the ordinary course of business, (ii) evidenced by
bonds, debentures, notes, or other similar instruments,
(iii) in respect of letters of credit or other similar
instruments (or reimbursement obligations with respect thereto),
except letters of credit or other similar instruments issued to
secure payment of trade payables arising in the ordinary course of
business consistent with past practices, (iv) to pay the
deferred purchase price of property or services, except trade
payables arising in the ordinary course of business consistent with
past practices, (v) as lessee under capitalized leases,
(vi) secured by a Lien (as defined below) on any asset of the
Company or a Subsidiary, whether or not such obligation is assumed
by the Company or such Subsidiary and (vii) of any other
person or entity, other than indebtedness for borrowed money
existing on the date of this Note or other obligations or other
liabilities incurred in connection with Liens permitted to be
incurred under Section 5(b)(vi) or 5(b)(vii)
hereof;
(b) create, incur, assume or
suffer to exist any lien, claim, pledge, charge, security interest
or encumbrance of any kind (“ Liens ”) on any
asset now owned or hereafter acquired by it, except:
(i) Liens existing on the date
hereof, and any Liens granted in connection with the
Company’s current senior credit facilities provided by
Fortress Credit Corp. (and its successors, assigns, and
transferees), and any refinance, amendment, extension, supplement,
restatement, restructure, refund or termination thereof, or
pursuant to any documents entered into in connection with such
credit facilities;
(ii) Liens for taxes or
assessments and similar charges either (x) not delinquent or
(y) contested in good faith by appropriate proceedings and as to
which the Company shall have set aside on its books adequate
reserves;
(iii) Liens incurred or pledges
and deposits in connection with workers’ compensation,
unemployment insurance and other social security benefits, or
securing the performance bids, tenders, leases, contracts (other
than for the repayment of borrowed money), statutory obligations,
progress payments, surety and appeal bonds and other obligations of
like nature, incurred in the ordinary course of business;
(iv) Liens imposed by law, such
as mechanics’, carriers’, warehousemen’s,
materialmen’s and vendors’ Liens, incurred in good
faith in the ordinary course of business;
(v) zoning restrictions,
easements, licenses, covenants, reservations, restrictions on the
use of real property or minor irregularities of title incident
thereto which do not in the aggregate materially detract from the
value of the property or assets of the Company and its Subsidiaries
taken as a whole or impair the use of such property in the
operation of the Company’s or its Subsidiaries’
businesses; and
(vi) other Liens incidental to
the conduct of the business of the Company or a Subsidiary or the
ownership of its or their respective property and assets which were
not incurred in connection with the borrowing of money, and which
do not in the aggregate materially detract from the value of its
property or assets; or
(c) declare or make
(i) any dividend, distribution or other payment on any capital
stock (other than the payment of dividends on the Company’s
Series D Preferred Stock, which are payable in shares of
Common Stock or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (A) any capital stock
(other than under the Subscription Agreement) or (B) any
option, warrant or other right to acquire capital stock.
(d) Notwithstanding the
foregoing, the Company shall not be required to obtain the consent
of the Holder in order to (i) incur indebtedness for borrowed
money in connection with any future acquisition by the Company,
(ii) assume any indebtedness of a target company in connection
with any acquisition by the Company, (iii) refinance, amend,
extend, supplement, restate, restructure, refund or terminate the
Company’s current senior credit facilities provided by
Fortress Credit Corp. (and its successors, assigns, and
transferees), or any documents entered into in connection with such
credit facilities, or (iv) permit the existence of any liens
in connection with any of the indebtedness described in clauses
(i), (ii) or (iii) above.
6. Conversion .
(a) Method . Subject to
the provisions hereof, the Holder hereof shall have the right to
convert this Note into (i) such number of fully paid and
non-assessable shares (the " Conversion Shares ”) of
the Company’s common stock, par value $0.00001 per share (the
" Common Stock ”) equal to the aggregate outstanding
principal amount due under this Note divided by the Conversion
Price (as defined below), by the surrender of this Note (with the
Notice of Conversion attached hereto as Appendix A duly
executed) at the principal office of the Company, or such other
office or agency of the Company as it may reasonably designate by
written notice to the Holder, during normal business hours on any
Business Day. The “Conversion Price” shall mean
$0.68 , subject to adjustment as provided in
Section 7 below.
(b) Stock Certificates
. On the date on which the Holder shall have satisfied in full the
Holder’s obligations set forth herein regarding a conversion
of this Note, the Holder (or such other person or persons as
directed by the Holder, subject to compliance with applicable
securities laws) shall be treated for all purposes as the holder of
record of such Conversion Shares as of the close of business on
such date. In the event of such conversion of this Note,
certificates for the whole number of shares of Common Stock
constituting the Conversion Shares shall be delivered to the Holder
(or such other person or persons as directed by the Holder, subject
to compliance with applicable securities laws) as promptly as is
reasonably practicable (but not later than five (5) Business Days)
after such conversion at the Company’s expense.
(c) Reservation of Shares;
Stock Fully Paid; Listing . The Company shall keep reserved a
sufficient number of shares of the authorized and unissued shares
of Common Stock to provide for the conversion of this Note in
compliance with its terms. All Conversion Shares issued upon
conversion of this Note shall be, at the time of delivery of the
certificates for such Conversion Shares upon conversion of this
Note in accordance with the terms hereof, duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock of the
Company. The Company shall during all times prior to the Maturity
Date when the shares of Common Stock issuable upon the conversion
of this Note are authorized for listing or quotation on any
national securities exchange, Nasdaq (or the Over-the-Counter
Bulletin Board or the “pink sheets”, as the case may
be), keep the shares of Common Stock issuable upon the conversion
of this Note authorized for listing or quotation on such national
securities exchange, Nasdaq (or the Over-the-Counter Bulletin Board
or the “pink sheets”, as the case may be).
7. Adjustments and
Distributions .
7.1. If the Company shall, while
this Note is outstanding and at any time on or before the second
anniversary of the date hereof, issue or sell shares of its Common
Stock or “Common Stock Equivalents” (as defined below)
without consideration or at a price per share or “Net
Consideration Per Share” (as defined below) less than the
Conversion Price in effect immediately prior to such issuance or
sale, then in each such case the Conversion Price then in effect at
such time, except as hereinafter provided, shall be lowered to an
amount equal to the consideration per share received by the Company
in such issuance of Common Stock or Common Stock Equivalents.
(a) Common Stock
Equivalents .
(i) General. For the
purposes of this Note, the issuance of any warrants, options,
subscription or purchase rights with respect to shares of Common
Stock and the issuance of any securities (including, without
limitation, securities evidencing indebtedness) convertible into or
exchangeable for shares of Common Stock and the issuance of any
warrants, options, subscription or purchase rights with respect to
such convertible or exchangeable securities (collectively, "
Common Stock Equivalents ”), shall be deemed an
issuance of Common Stock. Any obligation, agreement or undertaking
to issue Common Stock Equivalents at any time in the future shall
be deemed to be an issuance at the time such obligation, agreement
or undertaking is made or arises. No adjustment of the Conversion
Price shall be made under this Note upon the issuance of any shares
of Common Stock which are issued pursuant to the exercise,
conversion or exchange of any Common Stock Equivalents.
(ii) Adjustments for
Adjustment, Cancellation or Expiration of Common Stock
Equivalents. Should the Net Consideration Per Share of any such
Common Stock Equivalents be decreased from time to time other than
as a result of the application of anti-dilution provisions
substantially similar to the provisions of this Note, then, upon
the effectiveness of each such change, the Conversion Price will be
that which would have been obtained (1) had the adjustments
made upon the issuance of such Common Stock Equivalents been made
upon the basis of the new Net Consideration Per Share of such
securities, and (2) had the adjustments made to the Conversion
Price since the date of issuance of such Common Stock Equivalents
been made to such Conversion Price as adjusted pursuant to clause
(1) above. Any adjustment of the Conversion Price which
relates to any Common Stock Equivalent shall be disregarded if, as,
and when such Common Stock Equivalent expires or is canceled
without being exercised, or is repurchased by the Company at a
price per share at or less than the original purchase price, so
that the Conversion Price effective immediately upon such
cancellation or expiration shall be equal to the Conversion Price
that would have been in effect (x) had the expired or canceled
Common Stock Equivalent not been issued, and (y) had the
adjustments made to the Conversion Price since the date of issuance
of such Common Stock Equivalents been made to the Conversion Price
which would have been in effect had the expired or canceled Common
Stock Equivalent not been issued.
(b) Net Consideration Per
Share . For purposes of this Note, the “Net Consideration
Per Share” which shall be receivable by the Company for any
Common Stock issued upon the exercise or conversion of any Common
Stock Equivalents shall be determined as follows:
(i) The “ Net
Consideration Per Share ” shall mean the amount equal to
the total amount of consideration, if any, received by the Company
for the issuance of such Common Stock Equivalents, plus the minimum
amount of consideration, if any, payable to the Company upon
exercise, or conversion or exchange thereof, divided by the maximum
aggregate number of shares of Common Stock (without regard to any
provision contained therein providing for a subsequent adjustment
to such number) that would be issued if all such Common Stock
Equivalents were exercised, exchanged or converted.
(ii) The “ Net
Consideration Per Share ” which shall be receivable by
the Company shall be determined in each instance as of the date of
issuance of Common Stock Equivalents without giving effect to any
possible future upward price adjustments or rate adjustments which
may be applicable with respect to such Common Stock
Equivalents.
(c) Stock Dividends for
Holders of Capital Stock Other Than Common Stock . In
