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Ex-10.39
Form of the $500,000 in Convertible Promissory Notes
issued by the Company in December 1999
EXHIBIT 10.39
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR
TRANSFERED UNLESS (I) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN
EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE.
THIS CONVERTIBLE PROMISSORY NOTE (THE "NOTE") IS SUBJECT TO TRANSFERABILITY
RESTRICTIONS PURSUANT TO SECTION 4 HEREIN AND SHALL NOT BE TRANSFERRED BY THE
COMPANY UNLESS THE HOLDER HEREOF COMPLIES THEREWITH. ANY ATTEMPTED TRANSFER OF
SECURITIES NOT IN COMPLIANCE WITH SUCH SECTION 4 SHALL BE NULL AND VOID.
TELEGEN CORPORATION
Convertible Promissory Note
US $___________ San Mateo, California
December __, 1999
FOR VALUE RECEIVED, TELEGEN CORPORATION, a California corporation
(together with its successors and assigns, the "Company"), promises to pay to
the order of _______________ (the "Holder"): (i) US $____________ (the "Face
Value") plus (ii) simple interest on the unpaid balance at the time such
interest is due. Interest on the unpaid balance of the Face Value shall accrue
at the rate of Fifteen Percent (15%) per annum and shall be payable with the
Face Value on the date on which the Face Value is payable. Payment of all
amounts due to Holder hereunder shall be made by wire transfer to Holder in
accordance with written instructions given to the Company.
The following is a statement of the rights of the Holder and the
conditions to which this Note is subject, to which the Holder, by acceptance of
this Note, hereby agrees:
1. REPAYMENT OBLIGATION
(a) REPAYMENT. The Company shall be required to repay the Face Value
and any accrued but unpaid interest on this Note in full on the date which is
the earlier of: (i) one (1) year from the date hereof or (ii) the effective date
under a plan of reorganization (the "Plan") that is confirmed in Chapter 11 Case
No 98-34876-DM-11, entitled IN RE TELEGEN CORPORATION (the "Chapter 11 Case"),
presently pending in the United States Bankruptcy Court for the Northern
District of California (the "Court"). The Company shall not be entitled to
prepay any portion of the Face Value or interest at any time before this Note is
due in full, except with the written approval of the Holder and authorization by
the Court.
(b) ADJUSTMENT IN NOTE'S FACE VALUE. Upon any prepayment by the
Company of this Note, the Company will on its books and records reduce the Face
Value of this Note and send notice of such change to the Holder hereof. To the
extent the Note's Face Value is greater than zero on the Company's books and
records, the Company will upon request by the Holder hereof, deliver a new Note
of like tenor in the principal amount remaining on such Note.
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2. CONVERSION
(a) CONVERSION. Upon confirmation of a Plan by the Court, the Holder
shall have the option, in lieu of repayment in cash, to convert, in whole or in
part, all or any portion of the outstanding principal amount or interest on the
Note (a "Portion") to the Company's post-reorganization common stock by (i)
surrender of this Note, together with (ii) an executed Notice of Conversion,
substantially in the form of EXHIBIT A attached hereto, at the Company's
Principal Executive Office. The number of shares of Common Stock into which any
Portion may be converted shall be determined by multiplying the price per share
of the Company's last prior offering of its common stock by Eighty Percent (80%)
(the "Conversion Price") and dividing the Portion by the Conversion Price. No
fractional shares or scrip representing fractions of shares will be issued on
conversion, and the number of shares issued shall be founded up to the nearest
whole share. The shares of Common Stock issued or issuable upon conversion of
this Note are referred to herein as the "Shares."
(b) ISSUANCE OF SECURITIES ON CONVERSION. Conversion of this
Note, in whole or in part, shall occur if the Holder elects to convert under
Section 2(a) above. As soon as practicable after conversion of all or part of
this Note, the Company, at its expense, will cause to be issued, in the name
of the Holder, or such persons as the Holder may designate, and delivered to
the Holder's registered address, a certificate or certificates for the total
number of Shares to which the Holder shall be entitled on such conversion.
The Company will use its best efforts to cause such Shares to be issued in
exchange for an administrative expense in the Chapter 11 Case, within the
meaning of 11 U. S. C. Section 1145(a)(1)(A).
3. NOTICES. Any notice, request, or other communications required or
permitted hereunder shall be in writing and shall deemed to have been duly given
if sent by facsimile, or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery, addressed (a)
if to the Holder, to it at the last known address appearing on the books of the
Company maintained for such purpose, or (b) if to the Company, to it at 1840
Gateway Drive, Suite 200, San Mateo, California 94404, attention: Chief
Executive Officer, telephone (650) 261-9400, facsimile (650) 261-9468. Any party
hereto may by notice so given change its address for future notice hereunder.
All such notices will be deemed to have been given (i) upon confirmation of
delivery, if sent by facsimile or registered or certified mail or (ii) upon
delivery, if sent by courier or personal delivery.
4. TRANSFERABILITY. With respect to any offer, sale or other disposition of
this Note or any portion thereof, the Holder will give written notice to the
Company prior thereto, describing briefly the manner of the proposed
disposition, and, if requested by the Company, a written opinion of the Holder's
counsel to the effect that such offer, sale or other distribution may be
effected without registration or qualification with any federal or state law
then in effect or necessary compliance with any other transferability
restrictions resulting thereto. Promptly upon receiving such written notice and
reasonably satisfactory opinion, if so requested, the Company, as promptly as
practicable, shall notify the Holder that the Holder may sell or otherwise
dispose of this Note. Subject to compliance with applicable state and federal
law and the terms of the notice delivered to the Company, the Holder may
transfer this Note or any portion thereof only by surrendering it to the Company
with a duly executed Assignment Form, substantially in the form attached hereto
as EXHIBIT B, whereupon the Company will cancel such Note and execute and
deliver one or more new Notes in the names and amounts specified in such
instrument and, if the Holder's entire interest in such Note is not being
assigned, in the name of the Holder for the balance of such interest, unless
otherwise specified in the Assignment Form. If a determination has been made
pursuant to this Section 4 that the opinion of counsel for the Holder is not
reasonably satisfactory to the Company, the Company shall so notify the Holder
promptly after such determination has been made. Any attempted transfer of the
Note not in compliance with this Section 4 shall be null and void.
5. ASSIGNMENT. The rights and obligations of the Company and the Holder
shall be binding upon and benefit to the successors, assigns, heirs,
administrators, and transferees of the parties. The Company may not assign its
rights and obligations hereunder without the written consent of the Holder and
the approval of the Court.
6. AMENDMENT. This Note may not be modified or amended except by the
written agreement of the parties and the approval of the Court.
7. INTEGRATION: NO SHAREHOLDER RIGHTS. This Note constitutes the full and
entire understanding and agreement between the parties hereto with regard to the
subject matter hereof, and supersedes any prior or contemporaneous
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understandings, agreements or representations between them that relate to the
subject matter hereof. Nothing contained in this Convertible Promissory 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 shareholder in respect of
meetings of shareholders for the election of directors of the Company or any
other matters or any rights whatsoever as a shareholder of the Company; and no
dividends or interest shall be payable or accrued in respect of this Note or the
interest represented hereby or the Shares obtainable hereunder until, and only
to the extent that, this Note shall have been converted.
8. CALIFORNIA LAW. This Note and the obligations of the Company and the
Holder hereunder shall be governed by and construed in accordance with the laws
of the State of California.
9. COURT APPROVAL. This Note is subject to approval by the Court in the
Chapter 11 Case and shall not be legally binding upon the Holder or the Company
until and unless approved by the Court.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its duly authorized representative on the date first above written.
TELEGEN CORPORATION
By: __________________________
Jessica L. Stevens
President/CEO
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EXHIBIT A
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full conversion of the attached Note
pursuant to the terms and conditions of Section 2 of the Note)
The undersigned registered Holder of the attached Note hereby
irrevocably converts $__________ of Face Value and interest thereon to Common
Stock of Telegen Corporation at the Conversion Price and on the terms and
conditions specified in the attached Note.
The undersigned requests that a certificate (or certificates in denominations of
shares) for the shares of Common Stock of Telegen Corporation hereby be issued
in the name of and delivered to (circle one) (a) the undersigned or (b)
_________________________________________ whose address is
__________________________________ and, if such shares of Common Stock shall not
include all the shares of Common Stock issuable as provided in the attached
Note, that a new Note of like tenor for the number of shares of Common Stock of
Telegen Corporation not being purchased hereunder be issued in the name of and
delivered to (circle one) (a) the undersigned or (b) _________________ whose
address is______________________.
Dated________________
By:
--------------------------------
(Signature of Registered Holder)
Title:
--------------------------------
NOTICE: The signature on this Notice of Exercise must correspond with
the name as written upon the face of the attached Note in every
particular, without alteration or enlargement or any change
whatever.
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EXHIBIT B
ASSIGNMENT FORM
(To be executed only upon the assignment of the attached Note
pursuant to the terms and conditions of Section 4 of the Note)
FOR VALUE RECEIVED, the undersigned registered Holder of the attached
Note hereby sells, assigns and transfers unto ________________________________,
whose address is ______________________________________________________________
all of the rights of the undersigned under the attached Note, with respect to US
$_________ of indebtedness of Telegen Corporation and, if the entire Note is
not being transferred, then a new Note of like tenor for the amount of
indebtedness of Telegen Corporation not being transferred hereunder shall be
issued in the name of and delivered to the undersigned, and does hereby
irrevocably constitute and appoint _________________________________ attorney
to register such transfer on the books of Telegen Corporation maintained for
the purpose, with full power of substitution in the premises.
Dated________________
By:
--------------------------------
(Signature of Registered Holder)
Title:
--------------------------------
NOTICE: The signature to this Assignment must correspond with the name
as written upon the face of the attached Note in every
particular, without alteration or enlargement or any change
whatever.
