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EXHIBIT 4.11
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT
REQUIRED
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Principal
Amount: $1,544,000.00
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Issue
Date: April 2, 2008
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Unsecured
Convertible Promissory Note
FOR VALUE RECEIVED, Visual
Management Systems, Inc., a Nevada corporation with
an address at 1000 Industrial Way North Suite C, Toms River,
NJ 08755 (the "Company"), hereby promises to pay to the order
of Intelligent Digital Systems, LLC, a Delaware limited
liability company, with an address at 543 Broadway,
Massapequa, New York 11758 or its
registered assigns or successors in interest
(the “Holder”), the sum of One Million
Five-Hundred Forty Four Thousand
Dollars ($1,544,000.00), on April 2, 2011 (the
"Maturity Date") or such earlier date as this Unsecured
Convertible Promissory Note (this “Note”) is
required or permitted to be repaid as provided
hereunder If not converted, or paid within 30 days
of maturity, then from and after the maturity date this Note
shall bear interest at the rate 12% per annum.
Section
1. Definitions.
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For
the purposes hereof, in addition to the terms defined
elsewhere in this Note, (a) capitalized terms not otherwise
defined herein shall have the meanings set forth in the Asset
Purchase Agreement dated as of even date herewith among the
Company, Holder, Jay Russ and IDS Patent Holding, LLC (the
“Asset Purchase Agreement”) and (b) the following
terms shall have the following meanings:
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1.1
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“Affiliate”
of a specified Person means a Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, that Person,
as such terms are used in and construed under Rule 405 under
the Securities Act.
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1.2
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“Common
Stock” means the Company’s common stock, par value
$0.001 per share.
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1.3
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“Conversion
Date” means the date upon which the Company receives
written notice from Holder, of Holder’s desire and right
(pursuant to the terms of this Note) to convert any or all of
the principal amount or accrued interest under this Note into
shares of Common Stock of the Company. For the
purposes of this definition, the date of receipt of said
notice shall be the date such notice is sent in accordance
with Section 8.1 below
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1.4
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“Conversion
Price” means the conversion price in effect on any given
date, which initially shall be equal to $1.15 but which shall
be subject to adjustment as described herein.
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1.5
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“Conversion
Shares” or “Shares” means the shares of
Common Stock issued or issuable upon conversion of any or all
of the principal amount or accrued interest under this
Note.
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1.6
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“Effective
Date” means the effective date of any registration
statement filed with the SEC covering all or such portion of
the Conversion Shares as may be specified in such registration
statement.
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1.7
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“Exchange
Act” means the Securities Exchange Act of 1934, as
amended to date.
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1.8
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“Mandatory
Default Amount” means the sum of (a) the outstanding
principal amount of this Note, plus interest thereon
calculated at the rate of 12% per annum from the date of the
Event of Default and (b) all other amounts, costs, expenses
due in respect of this Note.
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1.9
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“Permitted
Issuances” means an issuance of (a) shares of Common
Stock issued in connection with a stock split or stock
dividend described in Section 4.1, (b) shares of Common Stock
issued upon conversion of any or all of the principal amount
or accrued interest under this Note, (c) shares of capital
stock of the Company (or options, warrants or other rights to
purchase such capital stock) issuable or issued to employees,
officers, consultants or directors of the Company pursuant to
agreements or plans approved by the Board of Directors of the
Company, or (d) shares of capital stock of the Company subject
to options, warrants or convertible securities that are
outstanding as of the date hereof.
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1.10
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“Registration
Statement” means a registration statement that registers
the resale of such number of Conversion Shares of the Holder
as shall be permitted or required to be registered under the
terms of the Registration Rights Agreement, names such Holder
as a “selling stockholder” therein, and meets all
other requirements of the Registration Rights
Agreement.
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1.11
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“Specified
Debenture Holders” shall mean the holders of a majority
of the then outstanding 5% Senior Secured Original Issue
Discount Convertible Debentures (the “Debentures”)
issued by the Company.
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1.12
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“Trading
Day” means a day on which the New York Stock Exchange is
open for business.
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Section
2. Principal and Interest
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2.1
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Principal. The
principal amount due to the Holder of this Note shall be One
Million Five-Hundred Forty Four Thousand Dollars
($1,544,000.00), which shall be payable in full on the
Maturity Date to Holder or its registered assigns or
successors, unless otherwise previously paid in full or
converted. The principal of this Note may not be
prepaid, in whole or in part, prior to the Maturity Date
except with the prior consent of Holder.
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2.2
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Interest. No
interest shall accrue hereunder until the Maturity
Date. If not paid in full or converted in full
prior to the Maturity Date, then from and after the Maturity
Date simple interest shall accrue on the outstanding principal
amount at the annual rate of 12%.
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2.3
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Interest
Calculations. Interest shall be calculated on the basis of a
365-day year, and shall accrue daily commencing on the
Maturity Date. until payment or conversion in full of the
principal amount due hereunder, together with all accrued and
unpaid interest, liquidated damages and other amounts which
may become due hereunder, has been made. Interest shall not
accrue with respect to any principal amount previously
converted.
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Section
3. Conversion
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3.1
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Voluntary
Conversion. This Note will be convertible in whole
or in part at any time and from time to time at the discretion
of the Holder, into the Company’s Common Stock from and
after the earliest to occur of the following:
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3.1.1
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May
31, 2010;
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3.1.2
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The
approval of the conversion of this Note by the Specified
Debenture Holders; provided ,
however , that
such approval shall be deemed to have been given from and
after the first date on which no Debentures that are
outstanding on the date hereof remain outstanding;
or
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3.1.3
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Any
of the following is agreed to or publicly announced: (i) the
sale of all or substantially all of the assets of the Company,
(ii) the purchase by any party of more than 25% of the
outstanding common stock of the Company, (iii) the
commencement of a tender offer with respect to 25% or more of
the outstanding common stock of the Company, (iv) a merger
transaction which results in the shareholders of Company
immediately before the transaction owning less than 50% of the
outstanding common stock of the surviving entity after the
transaction or (v) a secondary registered offering by one or
more holders of more than 5% of the outstanding common stock
of the Company, other than pursuant to the Form SB-2
Registration Statement filed by the Company on December 21,
2007 which has been converted to a Form S-1 Registration
Statement (any such transaction, a “Company Sale
Transaction”).
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3.2
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Conversion
Price. The initial conversion price in effect on any
Conversion Date shall be equal to $1.15, subject to adjustment
as described herein (the “Conversion
Price”).
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3.3
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[Reserved]
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3.4
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Mechanics
of Conversion.
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3.4.1
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Conversion
Shares Issuable Upon Conversion of Principal Amount. Subject
to and in compliance with the provisions of this Note and the
Asset Purchase Agreement, the Holder has the right to convert
the principal or any portion thereof, into, an amount of
shares of Common Stock equal to the amount of principal plus
any accrued interest thereon being converted divided by the
Conversion Price (the number of shares so calculated the
“Conversion Number”). Upon conversion, the Company
will issue to Holder a number of shares of Common Stock equal
to the Conversion Number.
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3.4.2
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Approval
of the Specified Debenture Holders. Except where
approval is deemed given pursuant to Section 3.1.2 of this
Note, all requests by the Holder for the permission of the
Specified Debenture Holders to initiate conversion pursuant to
Section 3.1.2 of this Note shall be made through the
Company. Upon receipt of written notice from the
Holder, the Company shall promptly submit the Holder’s
request to the Specified Debenture Holders. The
Company shall not be responsible for the timeliness of any
response to the Holder’s request by the Specified
Debenture Holders, nor for the substance of their
response. In the case of the Specified Debenture
Holder’s denial of Holder’s request to initiate
conversion, Holder agrees to hold the Specified Debenture
Holders and the Company blameless and without liability for
any injury or loss to the Holder resulting from the inability
to initiate conversion. Holder agrees that it has
no recourse against the Company or the Specified Debenture
Holder’s for the Specified Debenture Holder’s
denial of Holder’s request to initiate
conversion.
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3.4.3
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Notice
of Conversion. In compliance with the terms of
section 3.1 of this Note relevant to Holder’s right to
initiate conversion of principal or accrued interest, Holder
shall indicate to Company its intention to initiate conversion
by delivering to the Company written notice of its intention
in a form substantially compliant with that of the Notice of
Conversion included as Annex A of this Note. The
date upon which the Company receives said notice shall be
deemed the Conversion Date. Except where approval
is deemed given pursuant to Section 3.1.2 of this Note, for
purposes of conversions requiring approval of the Specified
Debenture Holders, the conversion date shall be deemed the
date upon which the Company receives notice from the Specified
Debenture Holders as to their approval of the
conversion.
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3.4.4
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Tolling
of Conversion Date. If the Company shall reasonably
believe that Holder is as of the date notice of conversion is
received, not entitled to initiate conversion under the terms
of this Section 3, the Company shall as soon as practicable
indicate said belief in writing to the Holder. The
Conversion Date shall then be tolled until receipt of written
proof to the Company’s reasonable satisfaction that the
Holder is entitled to initiate conversion.
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3.4.5
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Delivery
of Certificate Upon Conversion. Not later than seven Trading
Days after each Conversion Date, the Company shall deliver, or
cause to be delivered, to the Holder a certificate or
certificates representing the Conversion Shares which prior to
the Effective Date with respect to such Conversion Shares,
shall contain such restrictive legends as may be required
pursuant to the Securities Act. Such certificate or
certificates shall represent the number of shares of Common
Stock being acquired upon the conversion of this Note. On or
after the Effective Date with respect to such Conversion
Shares, the Company shall use its best efforts to deliver any
certificate or certificates required to be delivered by the
Company under this Section 3 electronically through the
Depository Trust Company or another established clearing
corporation performing similar functions.
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3.5
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Reservation
of Shares Issuable Upon Conversion. The Company covenants that
it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole
purpose of issuance upon conversion of this Note free from
preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other Holders
of the Notes), not less than such aggregate number of shares
of the Common Stock as shall (subject to the terms and
conditions set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of
Section 4) upon the conversion of the outstanding principal
amount of this Note. The Company covenants that all shares of
Common Stock that shall be so issuable shall, upon issue, be
duly authorized, validly issued, fully paid and nonassessable
and, if the Registration Statement is then effective under the
Securities Act, shall be registered for public sale in
accordance with such Registration Statement.
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3.6
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Fractional
Shares. Upon a conversion hereunder, the Company shall not be
required to issue stock certificates representing fractions of
shares of Common Stock, but may if otherwise permitted, make a
cash payment in respect of any final fraction of a share based
on the Conversion Price at such time.
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3.7
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Transfer
Taxes. Company shall not be required to pay any documentary,
stamp or similar taxes that may be payable in respect of the
issue or delivery of certificates representing conversion
shares, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or
Persons requesting the issuance thereof shall have paid to the
Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been
paid.
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Section
4. Certain Adjustments
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The
Conversion Price shall be adjusted from time to time by the
Company as follows:.
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4.1
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Stock
Dividends and Stock Splits. If the Company, at any
time while this Note is outstanding: (A) pays a stock dividend
or otherwise makes a distribution or distributions payable in
shares of Common Stock on shares of Common Stock or any Common
Stock Equivalents (which shall not include any shares of
Common Stock issued by the Company upon conversion of, or
payment of interest on, this Note); (B) subdivides outstanding
shares of Common Stock into a larger number of shares; (C)
combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of
shares; or (D) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the
Company, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares
of Common Stock (excluding any treasury shares of the Company)
outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any
adjustment made pursuant to this Section shall become
effective immediately after the record date for the
determination of stockholders entitled to receive such
dividend or distribution and shall become effective
immediately after the effective date in the case of a
subdivision, combination or re-classification.
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4.2
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Dilutive
Issuances.
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4.2.1
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If,
at any time while this Note is outstanding, the Company shall:
(A) issue any options, warrants or other rights (excluding
Permitted Issuances) entitling the record or beneficial holder
thereof to subscribe for, or purchase, shares of Common Stock
for a consideration per share less than the then-effective
Conversion Price; (B) issue or sell securities of the Company
convertible into, or exchangeable for, shares of Common Stock
for a consideration per share less than the then-effective
Conversion Price; or (C) issue or sell additional shares of
Common Stock for a consideration per share less than the
then-effective Conversion Price (any of the foregoing events
described in clauses (A), (B), and (C), a “Dilutive
Issuance”); then the Conversion Price shall be adjusted
to a price determined by multiplying the Conversion Price in
effect immediately prior to such Dilutive Issuance by a
fraction the numerator of which shall be the sum of the number
of shares of Common Stock (i) outstanding immediately prior to
such Dilutive Issuance, (ii) issuable upon exchange or
conversion of any exchangeable or convertible securities
outstanding immediately prior to such Dilutive Issuance, (iii)
issuable upon the exercise of all options, warrants or similar
rights outstanding immediately prior to such Dilutive Issuance
and (iv) which the aggregate consideration received by the
Company for such Dilutive Issuance would purchase at the
Conversion Price in effect immediately prior to such Dilutive
Issuance, and the denominator of which shall be the sum of the
number of shares of Common Stock in clauses (i), (ii) and
(iii) above plus the number of shares of Common Stock issued
or issuable in such Dilutive Issuance at the stated issue or
exercise price thereof.
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4.2.2
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In
the case of a Dilutive Issuance of securities for cash, the
consideration shall be deemed to be the amount of cash paid
therefor before deducting any discounts, commissions or other
expenses allowed, pai
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