p7
TYPE: EX-99.2
SEQUENCE: 3
DESCRIPTION: FORM OF NOTE
Page 31 of 81 Pages
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED
IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF
ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY
NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND PAYEE HEREUNDER ARE
SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN SECTION 2 HEREOF. IN THE
EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF SUCH SECTION
2, THE TERMS OF SECTION 2 SHALL GOVERN.
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FUTURELINK DISTRIBUTION CORP.
No. B-____ $____________
Senior Subordinated Convertible Note
FutureLink Distribution Corp., a corporation organized under the laws of
the State of Colorado (the "Company"), for value received, hereby promises to
pay to the order of _________________ (the "Payee" or the "holder of this Note")
or registered assigns at the offices of the Company the principal amount of
___________ Dollars ($_______) (the "Principal Amount") on the earlier of (i)
July 19, 2001; (ii) the completion of a public offering of the Company's
securities (exclusive of offerings pursuant to registration statements on S-4 or
S-8 or comparable limited purpose forms); (iii) the completion (whether through
one or a series of sales) of a private offering of the Company's securities
resulting in gross proceeds of at least $15,000,000 (except as set forth in
Section 6 hereof); or (iv) consummation by the Company of a merger, combination
or sale of substantially all of its assets or the purchase by a single entity or
person or group of affiliated entities or persons of more than 50% of the
Company's outstanding capital stock (the "Maturity Date"). Each payment by the
Company pursuant to this Note shall be made without set-off or counterclaim and
shall be made in lawful currency of the United States of America and in
immediately available funds. Interest on this Note shall accrue on the Principal
Amount outstanding from time to time at a rate per annum computed in accordance
with Section 3 hereof.
Accrued and unpaid interest shall commence on the date hereof and be
payable (i) semi-annually on January 31 and July 31 commencing January 31, 2000,
(ii) upon maturity (whether at the Maturity Date, by acceleration or otherwise),
(iii) upon conversion, on the amount converted and (iv) after maturity until
paid in full (after as well as before judgment), on demand. Each of the dates
referred to in clauses (i), (ii), (iii) and (iv) is sometimes hereinafter
referred to as an "Interest Payment Date." All computations of interest
hereunder shall be made based on the actual number of days elapsed in a year of
360 days (including the first day but excluding the last day during which any
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such Principal Amount is outstanding). Interest is payable either (i) in cash or
(ii) in shares of common stock having a value equal to the average of the
closing bid prices for the three trading days prior to the Interest Payment
Date, the method of dividend payment to be at the discretion of the Company.
All payments by the Company hereunder shall be applied first to pay any
interest which is due, but unpaid, then to reduce the Principal Amount.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees to pay to the holder hereof, on
demand, all costs and expenses (including reasonable legal fees and expenses)
incurred in connection with the enforcement and collection or this Note.
This Note is issued is issued to the Payee in connection with a private
placement of Notes through Commonwealth Associates L.P., as placement agent
("Commonwealth"), the terms of which are more fully set forth in a Confidential
Term Sheet dated July 1, 1999 (the "Term Sheet"), and pursuant to a subscription
agreement between the Company and the Payee (the "Subscription Agreement"), a
copy of which agreement is available for inspection at the Company's principal
office. Notwithstanding any provision to the contrary contained herein, this
Note is subject and entitled to certain terms, conditions, covenants and
agreements contained in the Subscription Agreement. Any transferee of this Note,
by its acceptance hereof, assumes the obligations of the Payee in the
Subscription Agreement with respect to the conditions and procedures for
transfer of this Note. Reference to the Subscription Agreement shall in no way
impair the absolute and unconditional obligation of the Company to pay both
principal hereof and interest hereon as provided herein.
In consideration for the loan evidenced by this Note and other identical
notes in the aggregate principal amount of up to $10,000,000 (the "Notes"), the
Company shall issue to the holders of the Notes (the "Holders") two-year
warrants (the "Warrants") to purchase 37,500 shares of the Company's common
stock, $.0005 par value (the "Common Stock") for each $250,000 Principal Amount
of Notes held. The Warrants will be exercisable at a per share price equal to
$8.50.
1. Prepayment. The Principal Amount of this Note may not be prepaid, in
whole or in part, without the consent of the Payee.
2. Subordination. The Company, for itself, its successors and assigns,
covenants and agrees, and the Payee and each successive holder of this Note, by
its acceptance of this Note, likewise covenants and agrees (expressly for the
benefit of the present and future holders of the Senior Debt (as hereinafter
defined)), that the payment of principal of, and interest on, this Note is
hereby expressly subordinated in right of payment to the prior payment in full
of the principal of, premium (if any) and interest on, all Senior Debt of the
Company (other than the Notes), whether outstanding on the date hereof or
hereafter incurred or created. "Senior Debt" means (i) up to $2,000,000 of
indebtedness under an existing line of credit with a bank or other financial
institution and all renewals, extensions, refundings, amendments and
modifications of any such indebtedness and (ii) $8,038,500 principal amount of
outstanding Senior Subordinated Convertible Notes.
The provisions of this Section 2 are not for the benefit of the Company,
but are solely for the purpose of defining the relative rights of the holders of
the Senior Debt, on the one hand, and the holders of the Notes, on the other
hand. Nothing contained herein (i) shall impair, as between the
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Company and the holder of this Note, the obligations of the Company, which are
absolute and unconditional, to pay to the holder hereof all amounts payable in
respect of this Note as and when the same shall become due and payable in
accordance with the terms hereof or (ii) is intended to or shall affect the
relative rights of the holder of this Note and the creditors of the Company, or
(iii) shall prevent the holder of this Note from exercising all rights, powers
and remedies otherwise permitted by applicable law or upon a default or Event of
Default under this Note as set forth in these subordination provisions.
3. Computation of Interest.
A. Base Interest Rate. Subject to subsections 3B and 3C below, the
outstanding Principal Amount shall bear interest at the rate of eight percent
(8%) per annum.
B. Penalty Interest. In the event the Note is not repaid on the
Maturity Date, the rate of interest applicable to the unpaid Principal Amount
shall be adjusted to fifteen percent (15%) per annum from the date of default
until repayment; provided, that in no event shall the interest rate exceed the
Maximum Rate provided in Section 3C below.
C. Maximum Rate. In the event that it is determined that, under the
laws relating to usury applicable to the Company or the indebtedness evidenced
by this Note ("Applicable Usury Laws"), the interest charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith cause the effective
interest rate applicable to the indebtedness evidenced by this Note to exceed
the maximum rate allowed by law (the "Maximum Rate"), then such interest shall
be recalculated for the period in question and any excess over the Maximum Rate
paid with respect to such period shall be credited, without further agreement or
notice, to the Principal Amount outstanding hereunder to reduce said balance by
such amount with the same force and effect as though the Company had
specifically designated such extra sums to be so applied to principal and the
Payee had agreed to accept such extra payment(s) as a premium-free prepayment.
All such deemed prepayments shall be applied to the principal balance payable at
maturity. In no event shall any agreed-to or actual exaction as consideration
for this Note exceed the limits imposed or provided by Applicable Usury Laws in
the jurisdiction in which the Company is resident applicable to the use or
detention of money or to forbearance in seeking its collection in the
jurisdiction in which the Company is resident.
4. Covenants of Company
A. Affirmative Covenants. The Company covenants and agrees that, so
long as this Note shall be outstanding, it will perform the obligations set
forth in this Section 4A, unless it has otherwise obtained the prior written
consent of Commonwealth and a committee of Noteholders holding in the aggregate
not less than 10% of the outstanding Principal Amount of the Notes to be
designated by Commonwealth (the "Committee"):
(i) Taxes and Levies. The Company will promptly pay and discharge
all taxes, assessments, and governmental charges or levies imposed upon
the Company or upon its income and profits, or upon any of its property,
before the same shall become delinquent, as well as all claims for labor,
materials and supplies which, if unpaid, might become a lien or charge
upon such properties or any part thereof; provided, however, that the
company shall |
