EXHIBIT 10.19
-------------
CONVERTIBLE PROMISSORY NOTE
$1,010,000 - August 30, 1999
FOR VALUE RECEIVED, Heartsoft Incorporated, a Delaware corporation (the
"Company"), hereby promises to pay to Hi-Tel Group, Inc., a Florida corporation,
or its permitted assignee or transferee (hereinafter, the "Holder"), the
principal sum of One Million Ten Thousand and No/100 Dollars ($1,010,000.00), or
so much of said Principal amount as is advanced from time to time, together with
interest thereon at the rate hereinafter specified, payable in accordance with
the terms and conditions hereinafter set forth (to which the Holder, by the
acceptance hereof, hereby agrees):
1. Interest. The unpaid principal amount of this Convertible Promissory
Note (this"Note") from time to time outstanding shall bear interest from and
after the date hereof at the rate of six percent (6%) per annum. Interest shall
be calculated on the basis of a 365-day year for the actual number of days
elapsed.
2. Advance. It is contemplated that this Note shall be funded in four
(4) equal installments in the amount of $252,500.
3. Maturity. The entire unpaid principal amount of this Note, together
with all unpaid interest accrued hereon, shall be due and payable in full on
August 30, 2000. The date on which the principal and accrued interest of this
Note shall be due and payable, as determined in accordance with the preceding
sentence, is herein referred to as the "Maturity Date."
4. Manner of Payment. Payment of principal and interest on this Note
shall be made in lawful money of the United States of America by, at the
Company's option, the Company's check mailed or delivered to Holder at 2400 E.
Commercial Boulevard, Suite 205, Ft. Lauderdale, Florida 33308 or such other
address as the Holder shall specify in writing to the Company, or by wire
transfer to an account at such bank or trust company in the United States of
America as the Holder shall designate. All payments under this Note shall be
applied first to the payment of accrued interest and thereafter to the
outstanding principal balance.
5. Prepayment. Upon not less than ten (10) days' prior written notice
to the Holder, the Company may at any time prepay the principal balance of this
Note, in whole or in part, without penalty or premium. Any such prepayment shall
be accompanied by payment of the interest accrued on the principal amount so
prepaid.
6. Default and Acceleration. The Company shall be in default
immediately and without further notice beyond that specifically set forth below
upon the occurrence of any of the following, each of which shall be deemed an
"Event of Default":
(a) The Company shall commence a voluntary case or other proceedings
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy,
1
<PAGE>
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or
(b) An involuntary case or other proceeding shall be commenced against
the Company seeking liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other similar law now or
hereinafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceedings shall remain
undismissed and unstayed for a period of ninety (90) day, or an order for relief
shall be entered against the Company under the federal bankruptcy laws as now or
hereafter in effect.
Upon the occurrence of any such Event of Default, the Holder may at its
option declare the entire principal amount of this Note and all accrued interest
to be immediately due and payable, and such amount shall forthwith become due
and payable. The failure of the Holder to exercise such option to accelerate
shall not constitute a waiver on the part of the Holder of the right to exercise
the same at any other time with respect to the same Event of Default or any
other Event of Default. Nothing herein shall require the Holder to accelerate
the principal balance, and in the even that the Holder elects not to accelerate
upon the occurrence of an Event of Default, interest shall continue to be
calculated under this Note at the rate set forth above.
7. Not Transferable. This Note is personal to the Holder and is not
transferable or assignable in whole or in part by the Holder (including any
pledge or other transfer of any partial or limited or contingent interest
therein, whether or not as security for any obligation), except with the prior
written consent of the Company.
8. Optional Conversion.
8.1 By Company. At the option of th Company, the outstanding principal
balance of this Note shall be convertible at any time, in whole but not in part,
into fully paid and nonassessable share of restricted Common Stock of the
Company at the conversion price of one share of Common Stock for each $1.01 of
principal (the "Conversion Price").
For purposes of this Note, "Common Stock" shall mean the Company's common stock,
par value $0.005 per share, or any capital stock of the Company which has the
right to participate in the distribution of earnings and profits of the Company
without limit, into which such common stock may hereafter be reclassified by
appropriate amendment to the Company's Certificate of Incorporation
8.2 By Holder. In the event that the Company shall fail to pay the
principal balance and
2
<PAGE>
accrued interest on this Note at the Maturity Date or upon acceleration of
maturity by the Holder pursuant to Section 5 above, and such failure shall
continue for a period of 10 days, the Holder may, at its option, convert the
outstanding principal balance of the Holder may, at its option, convert the
outstanding principal of this Note, in whole but not in part, into fully paid
and nonassessable shares of Common Stock of the Company at the Conversion Price.
8.3 Interest. In the event the principal balance of this Note is
converted into shares of Common Stock, whether at the option of the Company or
the Holder, no interest shall be due and payable on the principal amount so
converted.
9. Conversion Procedure.
9.1 Issuance of Conversion Shares. As soon as possible after a
conversion has been effected in accordance with Section 7 above, the Company
will deliver to the Holder a stock certificate or certificates evidencing the
shares of Common Stock issuable by reason of such conversion (the "Conversion
Shares") in the name of the Holder. The issuance of stock certificates
evidencing the Conversion Shares will be made without charge to the Holder for
any cost incurred by the Company in connection with such conversion and the
related issuance of the Conversion Shares. Upon conversion of this Note, the
Company will take all such actions as are necessary in order to ensure that the
Conversion Shares issuable with respect to such conversion will, as applicable,
be validly issued, fully paid and nonassessable. No fractional Conversion Shares
shall be issued upon conversion of this Note.
9.2 Payment of Taxes. The Company shall pay all issue taxes and other
governmental charges (other than income or other taxes imposed under profits
realized by the recipient) that may be imposed in respect of the issue or
delivery of any Conversion Shares; provided, however, that the Company shall not
be obligated to pay any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of Conversion shares in any name
other than that in which this Note is registered.
9.3 Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out if its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of this
Note, such number of its shares of Common Stock as shall from time to time be
sufficient to effect a conversion of this Promissory Note and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of the entire unpaid principal balance of this Note,
the Company shall promptly seek such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of the entire
unpaid principal balance of this Note, the Company shall promptly seek such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
10. General.
3
<PAGE>
10.1 Binding Effect. The rights and obligations of the Company and the
Holder shall be binding upon and benefit the successors, heirs, administrators
and permitted transferees.
10.2 Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service, or
at such other address as party may hereafter specify in writing to the other for
purposes of notice hereunder.
10.3 No Shareholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company; and no dividends shall
be payable or accrued in respect of this Note or the Common Stock obtainable
hereunder upon conversion until, and only to the extent that, this Note shall
have been converted.
10.4 Waiver of Notice. Except as otherwise expressly specified in this
Note, the Company and each surety, guarantor, endorser or other party liable for
payment on this Note hereby waive diligence, presentment, demand, protest, and
notice of any kind whatsoever, and agree that their liability on this Note shall
not be affected by any renewal or extension in the time of payment hereof, or
any indulgences, or by any taking, release, or change in any security for
payment of this Note.
10.5 Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report this Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.
10.6 Costs and Fees. If this Note is placed in the hands of any
attorney for collection after maturity (whether at the Maturity Date or upon
acceleration), or if it is collected through legal or bankruptcy proceedings,
the Company agrees to pay all reasonable costs of collection, including but not
limited to, court costs and reasonable attorneys' fees.
10.7 Interest Limitation. All agreement between or among the Company
and the Holder, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of demand
or acceleration of the maturity hereof or otherwise, shall the interest
contracted for, charged, received, paid or agreed to be paid to the Holder
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to the Holder in
excess of the maximum lawful amount, the interest payable to the Holder shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance the Holder shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principle hereof and
not to the payment of interest, or if such excessive interest exceeds the unpaid
balance of principal hereof, such excess shall be
4
<PAGE>
refunded to the company. All interest paid or agreed to be paid to the Holder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and/or spread throughout the full period until payment in full of the
principal (including the period of any renewal or extension hereof) so that the
interest hereon for such full period shall not exceed the maximum amount
permitted by applicable law.
10.8 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Oklahoma, without regard to principles
of conflict of laws.
10.9 Headings; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to "Sections" refer to
the various Sections of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed as
of the date first above written.
HEARTSOFT, INC.
/s/ Benjamin P. Shell
-------------------------------
Benjamin P. Shell
Chairman & CEO
5
