Fill and Sign the Tennessee Statewide Multimodal Freight Plan Tngov Form

17.09 Bridge Financing Demand Note IntroductionThe form of demand note set forth in the following Section is for use in a bridge financing in which the bridge investors are loaning money to the company on a repayment on demand basis. The form of note can be changed to be secured or unsecured, and the optional provisions for security are included in the form. If the demand note is to be secured, the security agreement appended to this chapter may be used in conjunction with this demand note. If the loan is other than on a demand basis, the other form of promissory note appended to this chapter should be used. There are several choices regarding under what circumstances the loan evidenced by this note will convert into stock of the company. The foregoing chapter should be reviewed if further information on those choices is desired. Form of Bridge Financing Demand Note "THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTION ON THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS INSTRUMENT TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY. [Amount] [place where note is made] [date] [UNSECURED] [SECURED] CONVERTIBLE [SUBORDINATED] DEMAND NOTE FOR VALUE RECEIVED, XYZ, Inc. (the "Company" or the "Maker"), promises to pay to the order of [Investor] or permitted assigns (collectively, the "Payee"), the principal amount of [amount] ($___________) pursuant to the terms hereof. The unpaid principal amount hereof shall accrue simple interest (calculated on the basis of a 365-day year) at the rate of ___% per annum commencing on the date hereof. Subject to Paragraph 2 below, if not earlier converted into stock of the Company, all unpaid principal and interest shall be due and payable in full on demand by the holder [on demand by the Collateral Agent][on demand by the holders of a majority of the principal amount outstanding on the Notes.]. If no demand is made by [date], the note will be repaid on that date. The date of the demand, or if no demand the date at which the Note will be repaid, is referred to as the "Maturity Date." All payments shall be in lawful money of the United States of America at the principal office of the Company, or at such other place as the Payee may from time to time designate in writing to the Company and shall be made pro rata among all Holders. All payments shall be applied first to accrued interest, and thereafter to principal. [THIS NOTE IS SECURED PURSUANT TO THAT CERTAIN SECURITY AGREEMENT DATED AS OF [DATE] BY AND AMONG THE COMPANY AND THE HOLDERS OF THE NOTES (THE "SECURITY AGREEMENT").] [THIS NOTE IS A GENERAL UNSECURED OBLIGATION OF THE COMPANY.] 1. This note (the "Note") is one of a series of similar notes (collectively, the "Notes") issued pursuant to the terms of that certain Note and Warrant Purchase Agreement dated as of [date], to the persons loaning money to the Company pursuant to the Notes (collectively, the "Holders"). Capitalized terms not defined herein shall have the meanings set forth in the Purchase Agreement.2. In the event the Maker consummates an equity financing after the date of this Note but on or prior to the Maturity Date resulting in gross aggregate proceeds to the Company of at least [amount] (excluding the principal and interest of any Notes that, by operation of this Note, are converted in such transaction) (a "Next Equity Financing"), the principal amount of the Note [and all accrued interest] on the Note will convert automatically into fully paid and nonassessable shares of the Company's capital stock (the "New Stock") sold in such financing, at the per share price in such Next Equity Financing ("Conversion Price"). The number of shares of New Stock to be issued upon such automatic conversion shall be equal to the quotient obtained by dividing (x) the unpaid principal amount of this Note [and all accrued interest on the Note] by (y) the price per share of New Stock issued in the Next Equity Financing. Any New Stock to be issued to the Holder shall have the same rights, preferences and privileges as those applicable to shares issued in the Next Equity Financing. The Holder hereof acknowledges that he or she will be required to execute and deliver the documents required of the investors in the Next Equity Financing. 3. All covenants, agreements and undertakings in this Note by or on behalf of any of the parties shall bind and inure to the benefit of the respective successors and assigns of the parties whether so expressed or not. 4. The Maker may [not] prepay any part of this Note [without the prior written consent of the Payee] [provided that prepayment of any Notes issued pursuant to the Purchase Agreement shall be credited to the Notes issued to a particular investor in the order of the issuance of such Notes starting with the earliest Notes issued.] [except in the event (i) of an acquisition, merger or similar transaction in which the shareholders of the Company immediately prior to such transaction own less than 50% of the voting power of the Company's shares after such transaction or (ii) a sale or transfer of all or substantially all of the Company's assets. The events described in subsections 4(i) and 4(ii) are defined as a "Liquidity Event". The Company's right to prepay this Note shall be expressly conditioned on the Company providing Payee at least twenty (20) days advance written notice of the Liquidity Event, but no more than thirty (30) days advance written notice describing the terms of the Liquidity Event in detail, including an analysis of the projected distribution to the Company's shareholders.] [Any failure to pay this Note [the Notes] upon demand or at the Maturity Date, or any initiation either voluntarily or involuntarily of any bankruptcy or insolvency proceeding shall be deemed an "Event of Default" under the Security Agreement.] 5. The Maker waives presentment for payment, demand, protest and notice of protest for nonpayment of this Note, and consents to any extension or postponement of the time of payment or any other indulgence. [This Note may be amended by agreement of the Payee and the Maker, or may be amended by agreement of the Maker and a majority-in-interest of the Holders, [or by the Collateral Agent acting on behalf of the holders of the Notes] provided all Notes are treated equally by such amendment.] Any amendment or waiver of any term of this Note shall be conducted pursuant to the terms of the Purchase Agreement. 6. In the event that Payee brings a legal action against the Maker, or the Maker brings a legal action against Payee, to enforce or otherwise determine the meaning or enforceability of this Note or any provision hereof, the party prevailing in such action shall recover from the opposing party all reasonable expenses, including attorneys' fees, directly attributable to such action.7. In no event shall any officer or director of the Company be liable for any amounts due and payable pursuant to this Note. 8. This Note shall be governed in all respects by the internal laws of the State of _______________. Any and all disputes arising out of or related to this Note shall be adjudicated exclusively in the state and federal courts located in [county] [state]. 9. [This Note shall be senior in all respects (including right of payment) to all other indebtedness of the Company, now existing or hereafter incurred.] The indebtedness evidenced by this Note is hereby expressly subordinated, to the extent and in the manner hereinafter set forth, in right of payment to the prior payment in full of all the Company's Senior Indebtedness, as hereinafter defined. "Senior Indebtedness" shall mean the principal of (and premium, if any) and unpaid interest on, or other payment obligation with respect to all indebtedness of the Company to commercial banks or equipment leasing companies for money borrowed by the Company whether or not secured, and whether incurred previously or incurred after the date the Notes are made. Any and all claims arising under this Note are and shall be at all times subject and subordinate to the Senior Indebtedness, and any interest thereon.] [If requested by the Company, the holder hereof will execute and deliver any necessary documents to assure any lender or prospective lender of Senior Indebtedness of the subordination agreed to by the holder hereof.] 10. Payee has the option to convert the principal and any unpaid interest on this Note into [class/series of Stock] at [$____] per share (as adjusted for stock splits and the like) if (i) no Next Equity Financing occurs, or will occur, by the Maturity Date, [(ii) immediately prior to a Liquidity Event, or (iii) upon the closing of an IPO.] 11. The Company hereby agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys' fees and legal expenses, incurred by the holder of this Note ("Costs") in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by declaration or otherwise. The Company agrees that any delay on the part of the holder in exercising any rights hereunder will not operate as a waiver of such rights. The holder of this Note shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies, and no waiver of any kind shall be valid unless in writing and signed by the party or parties waiving such rights or remedies. IN WITNESS WHEREOF, this Note has been executed and delivered on the date specified by the Maker and the Payee. XYZ, INC. ("MAKER") By: ________________________________ Title: ________________________________ [INVESTOR] ________________________________ Name: