WORLDS.COM INC.
6% CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
("ACT"), OR APPLICABLE STATE LAW. THIS NOTE AND THE SHARES UNDERLYING THIS NOTE
MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW, OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
$__________ ___________, 2001
FOR VALUE RECEIVED, WORLDS.COM, INC., a New Jersey corporation
("Company"), with its principal office at 1455 East Putnam Avenue, Old
Greenwich, CT 06870, promises to pay to the order of ______________________
("Holder"), residing at _____________________________________, or registered
assigns, on ______________ [eighteen months after Initial Closing], subject to
earlier prepayment or conversion as provided herein (in any event, and as such
date may be accelerated under Section 1 hereof, the "Maturity Date"), the
principal amount of ____________________________________ ($________), in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public or private debts, together with
interest on the unpaid balance of said principal amount from time to time
outstanding at the rate of six (6%) percent per annum. Payments of principal and
interest are to be made at the address of the Holder designated above or at such
other place as the Holder shall have notified the Company in writing at least
five days before such payment is due. This Note is being issued together with
other Notes of like tenor and warrants to purchase the Company's common stock
("Common Stock") in a private offering ("Offering").
1. Events of Default.
1.1 Upon the occurrence of any of the following events (herein called
"Events of Default"):
(a) The Company shall fail to pay the principal of or interest on
this Note on the Maturity Date;
(b) (1) The Company shall commence any proceeding or other action
relating to it in bankruptcy or seek reorganization, arrangement, readjustment
of its debts, receivership, dissolution, liquidation, winding-up, composition or
any other relief under any bankruptcy law, or under any other insolvency,
reorganization, liquidation, dissolution, arrangement, composition, readjustment
of debt or any other similar act or law, of any jurisdiction, domestic or
foreign, now or hereafter existing; or (2) the Company shall admit the material
allegations of any petition or pleading in connection with any such proceeding;
or (3) the Company shall apply for, or consent or acquiesce to, the appointment
of a receiver, conservator, trustee or similar officer for it or for all or a
substantial part of its property; or (4) the Company shall make a general
assignment for the benefit of creditors;
(c) (1) The commencement of any proceedings or the taking of any
other action against the Company in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts, liquidation, dissolution, arrangement,
composition, or any other relief under any bankruptcy law or any other similar
act or law of any jurisdiction, domestic or foreign, now or hereafter existing
and the continuance of any of such events for sixty (60) days undismissed,
unbonded or undischarged; or (2) the appointment of a receiver, conservator,
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trustee or similar officer for the Company for any of its property and the
continuance of any of such events for sixty (60) days undismissed, unbonded or
undischarged; or (3) the issuance of a warrant of attachment, execution or
similar process against any of the property of the Company and the continuance
of such event for sixty (60) days undismissed, unbonded and undischarged;
(d) The Company shall fail to comply with any of its obligations
under this Note; provided, however, that (1) with respect to a failure to comply
with any of the provisions of Sections 2.2(a) and (c) of this Note, only if such
failure is not remedied within thirty (30) days after the Company's receipt of
written notice of same, and (2) with respect to a failure to comply with any of
the provisions of Section 4 of this Note, only if such failure is not remedied
within five (5) days after the Company's receipt of written notice of same;
(e) The Company shall default with respect to any indebtedness of
$50,000 or more for borrowed money (other than under this Note) if either (1)
the effect of such default is to accelerate the maturity of such indebtedness
(giving effect to any applicable grace periods) or (2) the holder of such
indebtedness declares the Company to be in default (giving effect to any
applicable grace periods); or
(f) Any judgment or judgments against the Company or any
attachment, levy or execution against any of its properties for any amount in
excess of $50,000 in the aggregate shall remain unpaid, or shall not be
released, discharged, dismissed, stayed or fully bonded for a period of
forty-five (45) days or more after its entry, issue or levy, as the case may be;
then, and in any such event, the Holder, at its option and with written notice
to the Company, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum interest rate permitted by
applicable law.
1.2 Non-Waiver and Other Remedies. No course of dealing or delay on the
part of the Holder of this Note in exercising any right hereunder shall operate
as a waiver or otherwise prejudice the right of the Holder of this Note. No
remedy conferred hereby shall be exclusive of any other remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
1.3 Collection Costs; Attorney's Fees. In the event this Note is turned
over to an attorney for collection or Holder otherwise seeks advice of an
attorney in connection with the exercise of its rights hereunder upon the
occurrence of an Event of Default, the Company agrees to pay all reasonable
costs of collection, including reasonable attorney's fees and expenses and all
out of pocket expenses incurred in connection with such collection efforts,
which amounts may, at the Holder's option, be added to the principal hereof.
2. Unconditional Obligation; Covenants.
2.1 Unconditional Obligation. No provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of and interest on this Note at the place, at the respective
times, at the rates, and in the currency herein prescribed.
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2.2 Affirmative Covenants. The Company covenants and agrees that, while
this Note is outstanding, it shall:
(a) Pay and discharge all taxes, assessments and governmental charges
or levies imposed upon it or upon its income and profits, or upon any properties
belonging to it before the same shall be in default; provided, however, that the
Company shall not be required to pay any such tax, assessment, charge or levy
that is being contested in good faith by proper proceedings and adequate
reserves for the accrual of same are maintained if required by generally
accepted accounting principles;
(b) Preserve its corporate existence and continue to engage in
business of the same general type as conducted as of the date hereof;
(c) Comply in all respects with all statutes, laws, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations and requirements ("Requirement(s)") of all governmental bodies,
departments, commissions, boards, companies or associations insuring the
premises, courts, authorities, officials, or officers, that are applicable to
the Company; except where the failure to comply would not have a material
adverse effect on the Company; provided that nothing contained herein shall
prevent the Company from contesting the validity or the application of any
Requirements.
3. Conversion.
3.1 Conversion. The principal and interest outstanding on the Note are
convertible, in whole, but not in part, at any time, at the election of the
Holder, into that number of shares of the Company's Common Stock determined by
dividing the principal and interest owing on the Notes at the time of conversion
by $___________ [115% of the average last sale price of a share of common stock
as reported by the OTC Bulletin Board for the five consecutive trading days
immediately prior to the date of the Initial Closing] (the "Conversion Price").
3.2 Mechanics and Effect of Conversion. In connection with any conversion
under Section 3.1, Holder shall surrender this Note, together with Holder's
written instructions to convert the Note pursuant to Section 3.1, to the Company
at its principal executive office. The Company shall, as soon as practicable,
but not later than ten (10) business days after receipt of the Note and
conversion instructions, issue and deliver to a location in the United States
designated by the Holder certificates representing the securities to which the
Holder shall be entitled as aforesaid.
3.3 Fractional Shares. The Company shall not be required to issue fractions
of shares of Common Stock upon conversion. If any fractions of a share would,
but for this Section 3.4, be issuable upon any conversion, in lieu of such
fractional share the Company shall round up or down to the nearest whole number
of shares.
3.4 Reservation of Shares. The Company shall reserve and shall at all times
have reserved out of its authorized but unissued shares of Common Stock
sufficient shares of Common Stock to permit the conversion of the unpaid
principal amount and interest pursuant to this Section 3. All shares of Common
Stock that may be issued upon conversion shall be validly issued, fully paid and
nonassessable.
4. Prepayment.
(a) The Company shall prepay the principal and interest of the
outstanding Notes by making monthly payments to each Holder of the Notes in an
amount equal to (a) the original principal amount of such Holder's Note, divided
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by the total principal amount of the Notes actually sold in the offering,
multiplied by (b) 50% of all revenues the Company receives through the sale of
products (excluding shipping, handling, discounts and taxes and not including
revenues received from advertising or services) through our online services
during a month ("Prepayments"), as reduced by any returns of products sold in
previous months.
(b) Prepayments to Holders shall commence on the 20th of the month
after the first full month following the Initial Closing and shall continue
monthly thereafter until all Notes have either been paid in full or converted
(e.g., if the Initial Closing takes place on January 5, 2001, the first
Prepayment shall be made on March 20, 2001). The first Prepayment shall be with
respect to revenues received in the first full month following the Initial
Closing. Thereafter, Prepayments shall be with respect to revenues received in
the month prior to a Prepayment. Any Prepayments made by the Company will first
be applied to interest due on the Note and then principal due.
(c) The Company shall notify each Holder in writing of each Prepayment
at least ten days prior to the date of such Prepayment.
5. Registration Rights. The Company has agreed to file a registration statement
with the Securities and Exchange Commission ("Commission") or include the shares
of Common Stock which may be issued upon conversion of this Note on a
registration statement already filed with the Commission, but not yet declared
effective, as set forth in full on Schedule 1 of the Subscription Agreement
signed by the original Holder of this Note. These registration rights shall
inure to the benefit of the transferees of this Warrant and the shares
underlying it.
6. Miscellaneous.
6.1 Required Consent. The Company may not modify any of the terms of this
Note without the prior written consent of the Holder.
6.2 Lost Documents. Upon receipt by the Company of evidence satisfactory to
it of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Company will make and deliver in lieu of such Note a new Note
of like tenor and unpaid principal amount and dated as of the original date of
the Note.
6.3 Benefit. This Note shall be binding upon and inure to the benefit of
the parties hereto and their legal representatives, successors and assigns.
6.4 Notices. All notices, requests, consents and other communications under
this Note must be in writing and is sufficiently given if delivered to the
addressees in person, by overnight courier service, or, if mailed, postage
prepaid, by certified mail (return receipt requested), and will be effective
three days after being placed in the mail if mailed, or upon receipt or refusal
of receipt, if delivered personally or by courier or confirmed telecopy, in each
case addressed as follows:
Holder: At the address designated on page 1 of this Note.
The Company: Worlds.com Inc.
1786 Bedford Street
Stamford, Connecticut 06905
Attention: Thomas Kidrin, President
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In either case, with a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016-2097
Attn: David Alan Miller, Esq.
or to such other address as any of them, by notice to the others, may designate
from time to time.
6.5 Governing Law and Jurisdiction. This Note will be deemed to have been
made and delivered in New York City and will be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
laws of the State of New York. Each of the Company and the Holder hereby (i)
agrees that any legal suit, action or proceeding arising out of or relating to
this Note will be instituted exclusively in New York State Supreme Court, County
of New York, or in the United States District Court for the Southern District of
New York, (ii) waives any objection to the venue of any such suit, action or
proceeding and the right to assert that such forum is not a convenient forum for
such suit, action or proceeding, (iii) irrevocably consents to the jurisdiction
of the New York State Supreme Court, County of New York, and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding, (iv) agrees to accept and acknowledge service of any and all process
that may be served in any such suit, action or proceeding in New York State
Supreme Court, County of New York or in the United States District Court for the
Southern District of New York and (v) agrees that service of process upon it
mailed by certified mail to its address set forth on my signature page will be
deemed in every respect effective service of process upon it in any suit, action
or proceeding.
6.6 Section Headings. Section headings herein have been inserted for
reference only and shall not be deemed to limit or otherwise affect, in any
matter, or be deemed to interpret in whole or in part any of the terms or
provisions of this Note.
6.7 Survival of Agreements. The agreements contained herein shall survive
the delivery of this Note.
IN WITNESS WHEREOF, this Note has been executed and delivered
on the date specified above by the duly authorized representative of the
Company.
WORLDS.COM INC.
By: _________________________________
Thomas Kidrin, President
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ASSIGNMENT
(To be executed by the Holder to Effect a Transfer of the Attached Note)
FOR VALUE RECEIVED, the undersigned does hereby sell, assign
and transfer unto ___________________________________________________________,
with an address of ___________________________________________________________,
all right, title and interest of the undersigned in the attached Note of
Worlds.com Inc. ("Company") and does hereby authorize the Company to transfer
such right on the books of the Company.
Dated: ___________________ _____________________________________
Name of Entity, if any*
_____________________________________
Signature*
Its_____________________________________
Title, if applicable
______________________________________
Print name
____________________________
* Must conform in all respects to name of holder as specified on the face of the
Note.
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