EXHIBIT A
THIS CONVERTIBLE PROMISSORY NOTE ("CONVERTIBLE NOTE") MUST BE ACQUIRED FOR
INVESTMENT. NEITHER THIS CONVERTIBLE NOTE NOR THE STOCK INTO WHICH IT MAY BE
CONVERTED ("CONVERSION STOCK") HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, NOR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS CONVERTIBLE
NOTE NOR THE CONVERSION STOCK MAY BE OFFERED, SOLD, TRANSFERRED: (1) IN THE
ABSENCE OF A REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM; AND (11) THE TERMS OF THIS
CONVERTIBLE NOTE.
CONVERTIBLE PROMISSORY NOTE
WITH COGNOVIT PROVISION
$1,000,000.00
Cincinnati, Ohio
February 2, 2000
FOR VALUE RECEIVED, the undersigned, CYCL03PSS CORPORATION, a Delaware
corporation, with its principal place of business located at 3846 West 2 1 00
South, Salt Lake City, Utah 84120 (hereinafter called "Issuer"), promises to pay
to the order of THE PROCTER & GAMBLE COMPANY (the registered holder hereof, or
its registered successors or assign, the "Holder"), at One Procter &. Gamble
Plaza, Cincinnati, Ohio 45202, Attn: Carol M. Beyersdorfer, Vice President,
Global Fabric Care, the principal sum of ONE MILLION and NO/100 DOLLARS
($1,000,000.00) payable on February 28, 2001, and interest as set forth herein.
All sums payable hereunder are to be paid in lawful money of the United States
of America as follows:
During the term of this loan the following provisions shall apply:
1. Payment of Principal; Prepayment.
a. Accelerated Payment Date. Within 45 days of the date of the execution
of this Note, Issuer must satisfy the conditions for the second advance of Loan
proceeds, which total $750,000. In the event Issuer does not satisfy the
conditions, the entire unpaid principal balance of this Convertible Note
together with all accrued and unpaid interest shall be due and payable 30 days
from Lender's delivery of notice of such failure to Issuer.
b. Principal Payment and Final Maturity. In the event the Issuer satisfies
the conditions for the second disbursement of Loan proceeds pursuant to the Loan
Agreement of even date herewith, the entire unpaid principal balance of this
Convertible Note together with all accrued and unpaid interest and all other
amounts due and payable hereunder shall be due and payable in full on February
28, 2001 (the "Maturity Date").
c. Prepayment. Issuer shall have the right, but not the obligation, to
prepay, without penalty, all or any portion of the principal amount hereof at
any time. Such right of prepayment shall be exercisable by Issuer upon written
notice to Holder which notice is received by Holder thirty (30) days prior to
the prepayment. During the thirty (30) day consent period, Holder retains the
right of conversion described in Sections 3 and 4 of this Convertible Note.
2, Interest. This Convertible Note shall be non interest bearing.
Notwithstanding the foregoing, in the Event of a Default (as defined herein),
this Convertible Note shall accrue interest on the outstanding principal at a
default rate of interest equal to the lesser of fifteen percent (15%) per annum
or the maximum rate pen-nitted under Ohio law, from the date of the closing
disbursement.
Unless otherwise agreed to, in writing, or otherwise required by
applicable law, payments will be applied first
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to principal, and then to interest and any remaining amount to any unpaid
collection costs, late charges and other charges, provided, however, upon
delinquency or other default, Holder reserves the right to apply payments among
principal, interest, late charges, collection costs and other charges at its
discretion. All prepayments shall be applied to the indebtedness owing hereunder
in such order and manner as Holder may from time to time determine in its sole
discretion. The amount of the principal balance of this Convertible Note
outstanding from time to time as shown on the records of Holder shall be
conclusive absent manifest error as to such amount.
3. Conversion. Subject to the provisions of this Convertible Note, the Holder of
this Convertible Note has the right, at its option, at any time or from time to
time prior to the Maturity Date or in the Event of Default prior to repayment
(provided that if the Maturity Date shall be accelerated pursuant to paragraph 6
below, then the Holder's right shall extend through the accelerated maturity
date), to convert all or any portion of the original principal amount hereof,
and any accrued interest, into shares of the Issuer's common stock, with a par
value of $0.001 per share, ("Common Shares" or "Common Stock"), as such Common
Shares are constituted at the date hereof, at the average closing bid price of
the Common for the immediate ten (10) consecutive business days prior to the
date of the execution of this Convertible Note, at the office of the Issuer in
Salt Lake City, Utah, Ohio, accompanied by written notice of conversion and
written instrument of transfer, duly executed by the registered Holder. The
Common Shares into which the Holder may convert all or any part of this
Convertible Note shall be referred to as the "Conversion Stock." The date of
conversion shall be the date the surrendered Convertible Note and the duly
executed written notice of conversion are received by the Issuer (the
"Conversion Date"). As soon as practicable after the Conversion Date, the Issuer
shall reissue and deliver to the Holder, in exchange for the Convertible Note
surrendered for conversion, a new Convertible Note in like form representing the
unconverted principal amount and shall issue and deliver to such Holder a
certificate or certificates for the full number of Common Shares issuable
hereunder upon conversion, together with cash in respect of any fraction of a
Common Share issuable upon such conversion. Such conversion shall be deemed to
have been effected on the Conversion Date and the person in whose name any
certificate for Common Shares is issued on such conversion shall be deemed to
have become on such date the Holder of record of the Common Shares represented
thereby. No fractional shares of Common Shares shall be issued on conversion of
the Convertible Note. In lieu of any fractional shares to which the Holder would
otherwise be entitled, the Issuer shall pay cash. The Issuer shall pay to the
Holder accrued interest on the converted portion of the principal amount of this
Convertible Note through the Conversion Date.
The Issuer shall at all times when this Convertible Note is outstanding,
reserve and keep available out of its authorized but unissued stock, such number
of duly authorized Common Shares as shall be sufficient to effect the conversion
of this Convertible Note in accordance with its terms.
The Issuer covenants and agrees that in the event its present Common
Shares shall be reclassified, split, combined or otherwise changed, or in case
of any consolidation or merger of the Issuer with or into another corporation as
a result of which holders of Common Stock become entitled to receive securities
or other assets (including cash) with respect to or in exchange for their Common
Stock (other than a merger with a subsidiary in which merger the Issuer is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable conversion of this Convertible Note) or in case of any sale,
lease or conveyance to another corporation of the property of the Issuer as an
entirety or substantially as an entirety, the Issuer shall make proper provision
as a part of the ten-ns of such reclassification, split, combination, change,
consolidation, merger or sale, that the Holder of this Convertible Note will
thereafter be entitled to convert it into the same kind and amount of securities
(including in that term, stock of any class or classes) and other assets as may
be issuable or distributable by the terms of such reclassification, split,
combination, change, consolidation, merger or sale.
4. Registration of Conversion Stock, Transferability
a. Registration. At the Conversion Date, the Issuer shall use its best
efforts to issue fully registered Common Shares to the Holder under the
Securities Act of 1933. If such Common Shares are not registered then the Issuer
will use its best efforts to file a registration statement covering the Common
Shares within 45 days from the
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issuance of such Common Shares. In the event that the Issuer does not file a
registration statement within such 45 day period the Holder shall have demand
registration rights (whereupon the Issuer shall use its best efforts to register
the Common Shares) every three (3) months thereafter until all such Common
Shares have been registered. Notwithstanding the foregoing, if the Issuer
proposes to register its securities, each time the Issuer makes such proposal it
will give at least 30 days' advance written notice of its intention to do so to
Holder. Each Holder may then specify, by prompt notice to the Company, a number
of shares of the Conversion Shares held by it which it wishes to include in the
Issuer's proposed registration. The Issuer will effect the registration under
the Securities Act of Conversion Shares specified by Holders under this Section
4 which are not then freely transferable. All fees and expenses related to the
registration of the Common Shares shall be paid by the Issuer.
b. Transferability. This Convertible Note at the time of issuance shall be
registered upon the books of the Issuer in the name of the person to whom
issued, and it may be transferred at the principal office of the Issuer in Salt
Lake City, Utah, by surrendering it for cancellation, accompanied by a written
instrument of transfer, duly executed by the registered owner hereof, and
thereupon the Issuer shall issue and deliver in the name of and to the
transferee or transferees, in exchange hereof a new Convertible Note for a like
aggregate principal amount, subject to the terms and conditions hereof.
Neither this Convertible Note nor the Conversion Stock have been
registered under any applicable securities laws. This Convertible Note is being
issued in reliance upon exemptions provided under the Securities Act of 1933 and
applicable state securities laws. This Convertible Note is issued in reliance on
the representation, which by acceptance of this Convertible Note the Holder
makes to the Issuer, that the Holder is acquiring this Convertible Note, and any
Conversion Stock into which the Holder may convert the Convertible Note, for his
own account, for investment purposes, and not with a view to the distribution or
public offering thereof. Accordingly, this Convertible Note shall not be
transferable except upon one of the following conditions: (i) the Convertible
Note shall have been registered under all applicable state and federal
securities laws and analogous statutes applicable to such transfer; or (ii) the
Issuer shall have received an opinion of counsel, in form and substance
reasonably satisfactory to the Issuer, to the effect that such transfer may be
effected without such registration and that such transfer not constitute or
cause the violation of any such applicable securities laws or other statutes.
5. The following shall be considered Events of Default:
Upon the occurrence of any of the following events, the Lender may declare
the Convertible Note due and immediately payable, without further notice or
demand and the Holder shall have all rights to realize on the Collateral:
a. Failure of the Issuer to satisfy any of the conditions set forth in
Sections l(d) and 7(b) of the Loan Agreement for the second advance of Loan
proceeds; or,
b. Non-payment of principal or interest prescribed herein when due, or any
default, demand, or acceleration under the Convertible Note or related
instrument concerning the Collateral; or,
c. Non-payment of principal or interest on any other borrowed money
obligation when due or the holder of such obligation declares the obligation due
prior to its stated maturity; or,
d. Any representation or warranty of the Issuer in this or any other Loan
Document is false; or,
e. The Issuer violates, breaches or defaults under any covenant,
representation or condition of this or any other Loan Document; or,
f. The Issuer admits in writing that it is unable to pay its debts as they
mature or that it is generally not paying its debts as they mature or the
Issuer's consolidated financial statement indicates an insolvency or deficit net
worth; or,
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g. The Issuer applies for the appointment of a trustee or receiver of any
part of the assets of Issuer or commences any proceedings under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution, or
other liquidation law of any jurisdiction; or,
h. Any application for the appointment of a trustee or receiver of any
part of the assets of the Issuer, or any proceedings under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution, or
other liquidation law of any jurisdiction are commenced against the Issuer, and
the Issuer indicates its approval, consent, or acquiescence; or an order is
entered appointing such trustee or receiver, or adjudicating the Issuer bankrupt
or insolvent, or approving the petition in any such proceedings, and such order
remains in effect for thirty (30) days; or,
i. A material part of the Issuer's operations shall cease for a
period of thirty (30) days; or,
j. If, in the reasonable opinion of the Lender, there has been a material
adverse change in the business or prospects of Issuer or the conduct of the
Issuer or in the value of the Collateral which, in the reasonable judgment of
Lender, materially imperils the Issuer's ability to repay or secure its
obligations to the Lender under this Agreement; or,
k. The liquidation, termination or dissolution of Issuer; or,
l. Any levy or execution upon, or judicial seizure of, any portion of any
collateral or security for the Loan; or,
m. Any attachment or garnishment of, or the existence or filing of any
lien or encumbrance, against any portion of the Collateral, that is not removed
or released within five (5) days after its creation; or,
n. The institution of any legal action or proceedings to enforce any debt,
lien or encumbrance upon any of the Collateral, that is not dismissed within
five (5) days after its institution; or,
o. The transfer or other disposition, whether by sale, merger or otherwise
of twenty-five (25%) percent or more of the voting stock of Issuer; or,
p. Any change in the composition of the board of directors of Issuer
involving a majority of its present members or any increase in the number of
directors of Issuer; or,
q. The occurrence of any event of default under any other indebtedness of
Issuer and expiration of any applicable notice and cure period, if any; or,
r. The entry of any final judgment against Issuer in any state or federal
court in excess of $ 1 00,000; or,
s. Any third party successfully asserts any claim against any of the
Collateral.
6. Rights of Holder in the Event of Default:
Time is of the essence of this Convertible Note. At the option of Holder,
the entire unpaid principal balance, all accrued and unpaid interest and all
other amounts payable hereunder shall become immediately due and payable without
notice upon the occurrence of any Event of Default, as defined herein including,
without limitation, Issuer's failure to make any payment of principal or
interest when due under this Convertible Note or any other loan documents
executed in connection with this Convertible Note.
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Upon the occurrence of an Event of Default and during the continuation
thereof, and after maturity, including maturity upon acceleration, Holder, at
its option, may, if permitted under applicable law, do one or both of the
following: (i) accrue interest on the outstanding principal at a default rate of
interest equal to the lesser of fifteen percent (15%) per annum or the maximum
rate permitted under Ohio law, from the date of the closing disbursement, and
(ii) add any unpaid accrued interest and any cost, expenses and fees (including,
but not limited to attorneys' fees) to principal and such sum will bear interest
therefrom until paid at the rate provided in this Convertible Note (including
any increased rate).
The interest rate under this Convertible Note will not exceed the maximum
rate permitted by applicable law under any circumstances.
7. Waiver. Failure of Holder to exercise any option hereunder shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent default or in the event of continuance of any existing default after
demand for strict performance hereof.
8. Payment Obligation. No provision of this Convertible Note shall alter or
impair the obligation of the Issuer, which is absolute and unconditional, to pay
the principal of this Convertible Note and the interest payable thereon at the
place, time and in the currency herein prescribed. Issuer agrees that to the
extent Issuer makes any payment to Holder in connection with the indebtedness
evidenced by this Convertible Note, and all or any part of such payment is
subsequently invalidated, declared-to be fraudulent or preferential, set aside
or required to be repaid by Holder or paid over to a trustee, receiver or any
other entity, whether under any bankruptcy act or otherwise (any such payment is
hereinafter referred to as a "Preferential Payment"), then the indebtedness of
Issuer under this Convertible Note shall continue or shall be reinstated, as the
case may be, and, to the extent of such payment or repayment by Holder, the
indebtedness evidenced by this Convertible Note or part thereof intended to be
satisfied by such Preferential Payment shall be revived and continued in full
force and effect as if said Preferential Payment had not been made.
9. Applicable Law, Jurisdiction. This Convertible Note shall be governed by and
construed according to the laws of the State of Ohio, without giving effect to
conflict of laws principles. Without limiting the right of Holder to bring any
action or proceeding against Issuer or against any property of Issuer (an
"Action") arising out of or relating to this Convertible Note or any
indebtedness evidenced hereby in the courts of other jurisdictions, Issuer
hereby irrevocably submits to the jurisdiction, process and venue of any Ohio
State or Federal court sitting in Cincinnati, Ohio, and hereby irrevocably
agrees that any Action may be heard and determined in such Ohio State court or
in such Federal court. Issuer hereby irrevocably waives, to the fullest extent
it may effectively do so, the defenses of lack of jurisdiction over any person,
inconvenient forum or improper venue, to the maintenance of any Action in any
jurisdiction.
10. Holder Deemed Owner. The person in whose name this Convertible Note shall be
registered shall be deemed the owner hereof for all purposes, including all
notices provided for herein. Payment of or on account of the principal hereof,
and conversion to Common shares as provided for herein, shall be made only to or
upon the order in writing of the registered owner hereof, and all such payments
or conversions shall be valid and effective to satisfy and discharge the
liability upon this convertible Note to the extent of the sum or sums paid on
Common Shares issued.
11. Notices. All notices required or permitted in connection with this
Convertible Note shall be in writing and given at the place and in the manner
provided in the Loan Agreement of even date herewith for the giving of notices.
All notices required or permitted in connection with this Convertible Note shall
deemed effective on the date of postmark by the U.S. Postal Service.
12. Severability. This Convertible Note is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. If any provision of this Convertible Note,
with the application thereof to any person or circumstance, shall be invalid or
unenforceable for any reason and to any extent, then the remainder of this
Convertible Note in the application of such provision to other persons or
circumstances shall not be affected thereby but rather shall be enforced to the
extent permitted by law.
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13. Successors and Assigns. All provisions contained herein shall be binding
upon the Issuer, its successors and assigns and assigns of the Holder, its
personal representatives, heirs, legatees, successors and permitted assigns.
14. JURY WAIVER. THE UNDERSIGNED AND HOLDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT TORT OR
OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND HOLDER ARISING OUT OF OR IN ANY
WAY RELATED TO THIS DOCUMENT, ANY OTHER RELATED DOCUMENT, OR ANY RELATIONSHIP
BETWEEN HOLDER AND THE UNDERSIGNED. THIS PROVISION IS A MATERIAL INDUCEMENT TO
HOLDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
15. CONFESSION OF JUDGMENT. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS
ANY ATTORNEY-AT-LAW TO APPEAR IN ANY COURT OF RECORD AND TO CONFESS JUDGMENT
AGAINST BORROWER FOR THE UNPAID AMOUNT OF THIS NOTE, PLUS ATTORNEYS' FEES AS
PROVIDED IN THIS NOTE, PLUS COSTS OF SUIT, AND TO RELEASE ALL ERRORS, AND WAIVE
ALL RIGHTS OF APPEAL. IF A COPY OF THE NOTE, VERIFIED BY AN AFFIDAVIT, SHALL
HAVE BEEN FILED IN THE PROCEEDING, IT WILL NOT BE NECESSARY TO FILE THE ORIGINAL
AS A WARRANT OF ATTORNEY. BORROWER WAIVES THE RIGHT TO ANY STAY OF EXECUTION AND
THE BENEFIT OF ALL EXEMPTION LAWS NOW OR HEREAFTER IN EFFECT. NO SINGLE EXERCISE
OF THE FOREGOING WARRANT AND POWER TO CONFESS JUDGMENT WILL BE DEEMED TO EXHAUST
THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE
INVALID, VOIDABLE, OR VOID; BUT THE POWER WILL CONTINUE UNDIMINISHED AND MAY BE
EXERCISED FROM TIME TO TIME AS HOLDER MAY ELECT UNTIL ALL AMOUNTS OWING ON THIS
NOTE HAVE BEEN PAID IN FULL.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
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IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
ISSUER:
CYCL03PSS CORPORATION
a Delaware corporation
By: /s/ William Stoddard
----------------------------------
Name: William Stoddard
Its: President
ATTEST
By: /s/ Mondis Nkoy
-----------------------
Mondis Nkoy
Secretary
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