EXHIBIT 10.17
REVOLVING
PROMISSORY NOTE
$150,000.00 Orlando, Florida
As of July 6, 2000
THIS PROMISSORY NOTE (the "Note") is a duly authorized Note of
MEGAMEDIA NETWORKS, INC., a Delaware corporation (the "Company"), in the
principal sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00).
"Company" includes any successors or assigns of the Company.
FOR VALUE RECEIVED, the Company promises to pay THE ORLANDO GROUP
DOWNTOWN LLC, a Florida limited liability company, at 100 S. Orange Avenue,
Suite 1000, Orlando, Florida 32801, or its assigns (the "Holder"), the principal
sum of ONE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($150,000.00), or so much
thereof as may be advanced and outstanding from time to time (the "Outstanding
Principal Amount") on July 6, 2001 (the "Maturity Date"), and to pay interest
monthly on the Outstanding Principal Amount from time to time at the prime rate
announced by AmSouth Bank less one-half of one percent (0.50%) on the 1st day of
each month.
Accrual of interest shall commence at that date which the Holder
advances any monies to or on behalf of Company and will continue until the
Company has repaid in full the Outstanding Principal Amount and accrued interest
or this Note is converted in accordance with its terms. The Outstanding
Principal Amount and accrued interest of this Note is payable in such coin or
currency of the United States as at the time of payment is legal tender for
payment of public and private debts, at the address above or as designated in
writing by the Holder from time to time.
This Note is subject to the following additional provisions:
1. All payments on account of the Outstanding Principal Amount and
interest of this Note and all other amounts payable under this Note (whether
made by the Company or any other person) to or for the account of the Holder
shall be made free and clear of and without reduction by reason of any present
and future income, stamp, registration and other tax, levies, duties, cost, and
charges whatsoever imposed, assessed, levied or collected by the United States
or any political subdivision or taxing authority thereof or therein, together
with interest thereon and penalties with respect thereto, if any, on or in
respect of this Note (such taxes, levies, duties, costs and charges being herein
collectively called "US Taxes").
2. The Holder of this Note is entitled, at its option, at any time
after the Company's common stock begins trading on a recognized trading system,
to convert all or any lesser portion of the Outstanding Principal Amount and
interest into shares of common stock of the Company (the "Common Stock") at the
Conversion Price, as defined in Paragraph 3, below (the "Conversion Shares"). In
the event of any stock split, dividend, combination or similar event occurring
after a
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Conversion Date and before the issuance of the respective stock certificates,
the Conversion Price, as defined in Paragraph 3, below, will be subject to
appropriate adjustment. The Holder may convert this Note into Common Stock by
surrendering the Note to be converted to the Company, with the form of
conversion notice attached to the Note as Exhibit "A", executed by the Holder of
the Note. The Holder may elect to convert in whole or in part on multiple
occasions until the Note is paid in full.
3. The "Conversion Price" shall be that price determined by multiplying
the average closing bid price of the Common Stock on the principal exchange or
trading mechanism on which the Common Stock is traded for the three trading days
before the Company receives a Notice of Conversion (substantially in the form of
Exhibit "A") from the Holder by 80%. The Company will not issue fractional
shares or scrip representing fractions of shares of Common Stock on conversion,
but the number of shares of Common Stock issuable shall be rounded to the
nearest whole share. The date on which a Notice of Conversion is given
("Conversion Date") shall be deemed to be the date on which the Holder notifies
the Company of its intention to so convert by delivery, by facsimile
transmission or otherwise, of a copy of the Notice of Conversion to the Company
at 57 West Pine Street, Orlando, Florida, 32801, Attention: President. This Note
(if and when fully converted), together with original executed copy of the
Notice of Conversion, shall be delivered to the Company within three (3)
business days following the date on which Notice of Conversion is sent as
described above. At the Maturity Date, any unconverted principal amount and
accrued interest thereon shall be paid, at the option of the Holder, in either
(a) cash or (b) Common Stock valued at a price equal to the Conversion Price
determined as if the Note was converted into Common Stock on the Maturity Date.
4. Upon the Holder's delivery of a Notice of Conversion, properly
completed and duly executed by the Holder, the Company shall issue and, within
five (5) business days after delivery to the Company of the Notice of
Conversion, deliver to or upon the order of the Holder one or more certificates
(the "Certificates"), representing that number of shares of Common Stock into
which the portion of the Note converted is convertible, and if submitted to the
Company (but not fully converted), a Replacement Note in the principal amount
equal to the Outstanding Principal Amount not converted.
5. The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing that portion of the
principal amount of the Note to be converted, plus the dollar amount of all
interest that has accrued on that portion of the Note then being converted but
which has not previously been paid, by the Conversion Price.
6. No provision of this Note shall alter or impair the obligation of
the Company, which is absolute and unconditional, to the payment of the
principal and interest of this Note at the time, place and rate, and in the coin
or currency herein prescribed. This Note is a direct obligation of the Company.
7. The Company hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of dishonor, notice of
acceleration or intent to accelerate, bringing of
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suit and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and
to be owing herein, regardless of and without notice, diligence, act or omission
as or with respect to the collection of any amount called for hereunder.
8. If the Company at any time or from time to time after the date of
this Note makes a dividend or other distribution to holders of Common Stock
payable in securities of the Company, then in each such event provision shall be
made so that the Holder shall receive upon conversion of this Note, in addition
to the number of Conversion Shares receivable, the amount of such other
securities of the Company to which the Holder on the relevant record of payment
date, as applicable, would have been entitled, plus any dividends or other
distributions would have been received with respect to such securities had the
Holder thereafter, during the period from the date of such event to and
including the Conversion Date retained such securities, subject to all other
adjustments called for during such period under this Note with respect to the
rights of the Holder.
9. If at any time or from time to time after the date of this Note, the
Common Stock issuable upon the conversion of the Note is changed into the same
or different numbers of shares of any class or classes of stock, whether by
recapitalization or otherwise (other than subdivision or combination of shares
of Common Stock or stock dividend or reorganization provided for elsewhere in
this Note or a merger or consolidation, provided for in Paragraph 3), then in
each such event the Holder shall have the right thereafter to convert the Note
into the kind of security receivable in such recapitalization, reclassification
or other change by holders of Common Stock, all subject to further adjustment as
provided herein. In such event, the formulae set forth herein for conversion
shall be equitably adjusted to reflect such change in number of shares or, if
shares of a new class of stock are issued, to reflect the market price of the
class or classes of stock issued in connection with the above described
transaction.
10. If at any time or from time to time after the date of this Note
there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification, or exchange of
shares provided for elsewhere in this Note) then, as a part of such
reorganization, provision shall be made so that the Holder shall thereafter to
be entitled to receive upon conversion of this Note the number of shares of
stock or other securities or property to which a holder of the number of Shares
deliverable upon conversion would have been entitled on such capital
reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Note with respect to the rights of the
Holder after the reorganization to the end that the provisions of this Note
shall be applicable after that event and be as nearly equivalent as may be
practicable, including, by way of illustration and not limitation, by equitably
adjusting the formulae set forth herein for conversion and redemption to reflect
the market price of the securities or property issued in connection with the
above described transaction.
11. If one or more of the "Events of Default" as described in Paragraph
12 shall occur, the Company agrees to pay all costs and expenses, including
reasonable attorney's fees, which may be incurred by the Holder in collecting
any amount due under, or enforcing any terms of, this Note.
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12. (a) "Events of Default" shall mean:
(1) The Company shall default in the timely payment of
principal and interest on the Note; or
(2) Any of the representations or warranties made by
the Company herein or in the Credit Agreement
between the Company and Holder with respect to
this Note, or in any certificate or financial or
other document heretofore or hereafter furnished
by or on behalf of the Company in connection with
the execution and delivery of this Note, shall be
false or misleading any material respect at the
time made; or
(3) The Company shall fail to perform or observe any
other covenant, provision, condition, agreement or
obligation of the Company under this Note, the
Security Agreement, the Credit Agreement, or any
other related documents, and such failure shall
continue uncured for a period of thirty (30) days
after notice from the Holder of such failure; or
(4) The Company shall (i) become insolvent, (ii) admit
in writing its inability to pay its debts as they
mature; (iii) make an assignment for the benefit
of creditors or commence proceedings for its
dissolution; or (iv) apply for or consent to the
appointment of a trustee, liquidator or receiver
for it or for a substantial part of its property
or business; or
(5) A trustee, liquidator or receiver shall be
appointed for the Company or for a substantial
part of its property or business without its
consent and shall not be discharged within thirty
(30) days after such appointment; or
(6) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental
agency shall assume custody or control of the
whole or any substantial portion of the properties
or assets of the Company and shall not be
dismissed within thirty (30) days thereafter; or
(7) Any money judgment, writ or warrant of attachment,
lien or similar process in excess of Twenty
Thousand Dollars ($20,000) in the aggregate shall
be entered or filed against the Company or any of
its properties or other assets and shall remain
unsatisfied, unvacated, unbounded or unstayed for
a period of thirty (30) days (unless such
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order provided for delayed payment) or in any
event later than five (5) days prior to the date
of any proposed sale thereunder; or
(8) Bankruptcy, reorganization, insolvency or
liquidation proceedings or other proceedings for
relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or
against the Company and if instituted against the
Company, shall not be dismissed, stayed or bonded
within sixty (60) days after such institution or
the Company shall by any action or answer approve
of, consent to, or acquiesce in any such
proceedings or admit the material allegations of,
or default in answering a petition filed in any
such proceeding.
(b) If an Event of Default occurs, then, or at any time
thereafter, and in each and in every such case, unless such Event of Default
shall have been waived in writing by the Holder (which waiver shall not be
deemed to be a waiver of any subsequent default), the Holder may consider this
Note immediately due or payable, without presentment, demand, protest or notice
of any kind, all of which are expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder
may immediately demand without expiration of any period of grace, enforce any
and all of the Holder's rights and remedies provided herein or any other rights
or remedies afforded by law.
13. Notwithstanding anything to the contrary contained herein, each
Notice of Conversion shall contain representations to the effect that (1) the
Holder is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D promulgated by the SEC under the 1933 Act, and (2) the Conversion
Shares are being acquired for the Holder's own account and not as a nominee for
any other party.
14. The Company covenants that until it has paid all amounts due under
this Note in full, by conversion or otherwise, unless the Holder or subsequent
Holder waives compliance in writing, the Company shall:
(a) give prompt written notice to the Holder of any Event of
Default or of any other matter which has resulted in, or could reasonably be
expected to result in a materially adverse change in its financial condition or
operations;
(b) give prompt notice to the Holder of any claim, action or
proceeding which, in the event of any unfavorable outcome, would or could
reasonably be expected to have a material adverse effect on the financial
condition of the Company;
(c) at all times reserve and keep available out of its
authorized but unissued Common Stock, for the purpose of effecting the
conversion of this Note into Common Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of the outstanding principal balance of this Note into Common Stock.
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(d) upon receipt by the Company of evidence from the Holder
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note,
(i) in the case of loss, theft or destruction, upon
provision of indemnity reasonably satisfactory to
it and/or its transfer agent, or
(ii) in the case of mutilation, upon surrender and
cancellation of this Note
then the Company at its expense will execute and deliver to the Holder a new
Note, dated the date of the lost, stolen, destroyed or mutilated Note, and
evidencing the outstanding and unpaid principal amount of the lost, stolen,
destroyed or mutilated Note.
15. The Holder, by acceptance hereof, acknowledges that this Note is
being acquired for investment and that the Holder will not offer, sell or
otherwise dispose of this Note or the Common Stock issuable upon conversion
hereof except under circumstances which will not result in a violation of the
1933 Act or any applicable state securities laws.
16. In the case any provision of this Note is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that its enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected impaired thereby.
17. The Note and the Agreement between the Company and the Holder
(including all Exhibits) constitute the full and entire understanding and
agreement between the Company and the Holder with respect to the subject hereof.
Neither this Note nor any of its terms may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.
18. This Note shall be governed by and construed in accordance with the
internal laws of the State of Florida.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by a duly authorized officer, as of the date first written above.
MEGAMEDIA NETWORKS, INC.
By:__________________________________
David Gust, Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Note.)
The undersigned hereby irrevocably elects to convert $_____________ of
the Revolving Promissory Note Due July 6, 2001 and all interest accrued on that
principal amount, into shares of Common Stock of MegaMedia Networks, Inc. or its
successors (the "Company"), according to the terms and conditions set forth in
such Note, as of the date written below. If securities are to be issued to a
person other than the Undersigned, the Undersigned agrees to pay all applicable
transfer taxes with respect thereto.
The undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the SEC under the 1933 Act.
The undersigned also represents that the Conversion Shares are being
acquired for the Holder's own account and not as a nominee for any other party.
The undersigned represents and warrants that all offers and sales by
the undersigned of the Conversion Shares shall be made pursuant to an exemption
from registration under the 1933 Act.
CONVERSION DATE:___________________
APPLICABLE CONVERSION PRICE:____________________
HOLDER (PRINT TRUE LEGAL NAME & ADDRESS):__________________________
_______________________________________________________________________
_____________________________
(Signature of Duly Authorized
Representative of Holder)
ADDRESS OF HOLDER: ______________________________________
______________________________________
______________________________________
* This original Notice of Conversion must be received by the Company by the
second business day following the Conversion Date.
