most_ex41.htm


Exhibit 4.1


 


EIGHTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE


PURCHASE AGREEMENT AND SIXTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES


 


THIS EIGHTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED NOTE PURCHASE AGREEMENT AND SIXTH AMENDMENT TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTES (this “Amendment”), effective as of June 9, 2014, is made and entered into by and among MobileSmith, Inc., a Delaware corporation (the “Company”), the undersigned holders (the “Holders”, and each individually, a “Holder”) of the Convertible Secured Subordinated Promissory Notes (the “Notes”) issued by the Company from time to time pursuant to that certain Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended through the date hereof, the “Note Purchase Agreement”), among the Company and the Holders. Capitalized terms used but not defined herein have the meanings assigned to them in the Note Purchase Agreement.


 


WITNESSETH:


 


WHEREAS, the Company and the Holders desire to amend the Notes previously issued pursuant to the Note Purchase Agreement to provide that each of the Notes shall be subordinate to certain indebtedness owing, or to be owed, to Comerica Bank (the “Bank”), such subordination to be on the terms set forth in this Amendment;


 


WHEREAS, the Holders agree to subordinate: (i) all of the Company’s indebtedness and obligations to Holders, whether presently existing or arising in the future to all of the Company’s indebtedness and obligations to Bank; and (ii) all of Holders’ security interests, if any, to all of Bank’s security interests in the Company’s property;


 


WHEREAS, in connection with the Note Purchase Agreement, the Holders desire to direct Doron Roethler, as agent for the Holders (together with its successors and assigns in such capacity, the “Collateral Agent”) to amend that certain Security Agreement, dated November 14, 2007 (the “Security Agreement”), by and between the Company and the Collateral Agent;


 


WHEREAS, Section 9(a) of the Note Purchase Agreement provides that any provision of the Note Purchase Agreement may be amended with the written consent of the Company and Holders holding at least a Requisite Percentage;


 


WHEREAS, Section 8 of each of the Notes provides that any provision of the Notes may be amended with the written consent of the Company and Holders holding at least a Requisite Percentage; and


 


WHEREAS, Section 8(d) of the Security Agreement provides that it may be amended or modified by written consent of the Company and the Collateral Agent.


 




  





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NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:


 


Section 1. Amendment to Note Purchase Agreement.


 


(a) All references in the Note Purchase Agreement to “Note” or “Notes” shall mean the form of Convertible Secured Subordinated Promissory Note attached hereto as Exhibit 1.


 


(b) Section 9 of the Note Purchase Agreement is hereby amended to add the following Paragraph (l) in its entirety to read as follows:


 


(l)


 


i. Each Holder subordinates to Comerica Bank (“Bank”) any security interest or lien that such Holder may have in any property of the Company.  Notwithstanding the respective dates of attachment or perfection of the security interest of Holders and the security interest of Bank, the security interest of Bank in the Collateral, as defined in that certain Loan and Security Agreement between the Company and Bank, dated as of June 9, 2014 (as amended from time to time, the “Loan Agreement”), shall at all times be prior to the security interest of the Holders.


 


ii. All all of Borrower’s indebtedness and obligations to Holders whether presently existing or arising in the future (“Subordinated Debt”) is subordinated in right of payment to all obligations of the Company to Bank now existing or hereafter arising, together with all costs of collecting such obligations (including attorneys’ fees), including, without limitation, all interest accruing after the commencement by or against the Company of any bankruptcy, reorganization or similar proceeding, and all obligations under the Loan Agreement (the “Senior Debt”).


 


iii. No Holder will demand or receive from the Company (and the Company will not pay to any Holder) all or any part of the Subordinated Debt, by way of payment, prepayment, setoff, lawsuit or otherwise, nor will any Holder exercise any remedy with respect to the Collateral, nor will any Holder commence, or cause to commence, prosecute or participate in any administrative, legal or equitable action against the Company, nor shall the scheduled maturity date as to any portion of the Subordinated Debt be prior to the scheduled maturity date of the Senior Debt (and Holders shall immediately amend the Subordinated Debt loan documentation to extend its maturity date to effect compliance herewith) for so long as any portion of the Senior Debt remains outstanding, provided, however, that the Holders may receive regularly scheduled payments of interest that constitute Subordinated Debt, so long as an event of default under the Loan Agreement has not occurred, is not continuing and would not exist immediately after the payments to Holder were made; and provided further that nothing in this Agreement shall prohibit a Holder from converting all or any part of the Subordinated Debt into equity securities of the Company.


 




  





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iv. Each Holder shall promptly deliver to Bank in the form received (except for endorsement or assignment by such Holder where required by Bank) for application to the Senior Debt any payment, distribution, security or proceeds received by such Holder with respect to the Subordinated Debt other than in accordance with this Section 9(l). For the avoidance of doubt, Bank is an intended third party beneficiary of the provisions of this Section 9(l)(iv) and may enforce the performance of such provisions by appropriate action or proceeding.


 


v. In the event of the Company’s insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law or laws relating to the relief of debtors, these provisions shall remain in full force and effect, and Bank’s claims against the Company and the estate of the Company shall be paid in full before any payment is made to any Holder.


 


vi. Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Section 9(l).  No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Section 9(l) in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Holders may have in any property of the Company.  By way of example, such instruments shall not be amended to (i) increase the rate of interest with respect to the Subordinated Debt, or (ii) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.


 


vii. This Section 9(l) shall remain effective for so long as the Company owes any amounts to Bank under the Loan Agreement or otherwise.  If, at any time after payment in full of the Senior Debt any payments of the Senior Debt must be disgorged by Bank for any reason (including, without limitation, the bankruptcy of the Company), this Section 9(l) and the relative rights and priorities set forth herein shall be reinstated as to all such disgorged payments as though such payments had not been made and each Holder shall immediately pay over to Bank all payments received with respect to the Subordinated Debt to the extent that such payments would have been prohibited hereunder.  At any time and from time to time, without notice to Holders, Bank may take such actions with respect to the Senior Debt as Bank, in its sole discretion, may deem appropriate, including, without limitation, terminating advances to the Company, increasing the principal amount, extending the time of payment, increasing applicable interest rates, renewing, compromising or otherwise amending the terms of any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against the Company or any other person.  No such action or inaction shall impair or otherwise affect Bank’s rights hereunder.


 


viii. This Section 9(l)  shall bind any successors or assignees of each Holder and shall benefit any successors or assigns of Bank.  This Section 9(l) is solely for the benefit of Holders and Bank and not for the benefit of the Company or any other party. For the avoidance of doubt, Bank is an intended third party beneficiary of the provisions of this Section 9(l) and may enforce the performance of such provisions by appropriate action or proceeding. Each Holder further agrees that if the Company is in the process of refinancing a portion of the Senior Debt with a new lender, and if Bank makes a request of the Holders, Holders shall agree to enter into a new subordination agreement with the new lender on substantially the terms and conditions of this Section 9(l).


 




  





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Section 2. Amendment to Preamble.


 


(a) The second paragraph of the preamble of each Note shall be deleted in its entirety and the following shall be inserted in lieu thereof:


 


This Note is one of the “Notes” issued pursuant to the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended, modified or supplemented, the “Note Purchase Agreement”), between the Company and the Investors (as defined in the Note Purchase Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note Purchase Agreement. This Note and the Investor are subject to certain restrictions, and are entitled to certain rights and privileges, set forth in the Note Purchase Agreement.  This Note is expressly subject to Section 9(l) of the Note Purchase Agreement.


 


(b) The provisions in the preamble of any Additional Note issued on the date hereof or hereafter shall be the same as provided in the Notes, as hereby amended.


 


Section 3. Amendment to Security Agreement.  The Holders hereby approve, and direct the Collateral Agent to provide written consent to enter into, that certain Amendment to the Security Agreement dated as of the date hereof by and between the Company and the Collateral Agent attached hereto as Exhibit 2.


 


Section 4. Ratification. Except as specifically amended above, each of the Notes and the Note Purchase Agreement shall continue in full force and effect in accordance with its terms, and is hereby in all respects ratified and confirmed.


 


Section 5. Counterparts. This Amendment may be executed in several counterparts and by facsimile or other electronic transmission, each of which shall be an original and all of which together shall constitute but one and the same.


 


[Remainder of Page Intentionally Left Blank]


 




  





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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first above written.


 




	 	
MOBILESMITH, INC.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Gleb Mikhailov	 
	 	Name:	Gleb Mikhailov	 
	 	Title:	Chief Financial Officer	 
	 	 	 	 







 




	 	
GRASFORD INVESTMENTS LTD.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Avy Lugassy	 
	 	Name:	Avy Lugassy	 
	 	
Title:

	Principal	 
	 	 	 	 












	 	
CRYSTAL MANAGEMENT LTD.

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	/s/ Doron Roethler	 
	 	
Name:

	
Doron Roethler

	 
	 	
Title:

	Beneficial Owner	 
	 	 	 	 











	 	 	 
	
 

	 	 
	 	
WILLIAM FURR

	 
	 	 	 
	 	 	 





 




	 	
THE BLUELINE FUND

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	
Name:

	 	 
	 	
Title:

	 	 
	 	 	 	 














	 	
UBP, UNION BANCAIRE PRIVEE

	 
	 	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	
Name:

	 	 
	 	
Title:

	 	 
	 	 	 	 

















  





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EXHIBIT 1


 


THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE SECURITIES LAWS. THE COMPANY, IN ITS SOLE DISCRETION, SHALL HAVE THE RIGHT TO REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH ANY 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.


 


MOBILESMITH, INC.


 


CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTE


 



	 $_______________	___________________, __ ____
	 	
  Raleigh, NC                                         







 


 


FOR VALUE RECEIVED, MobileSmith, Inc., a Delaware corporation (the “Company”) promises to pay to _____________________ (“Investor”), or its registered assigns, in lawful money of the United States of America the principal sum of ____________________ ($_____), or such lesser amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to 8.00% per annum, computed on the basis of the actual number of days elapsed and a year of 360 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) November 14, 2016, (ii) a Change of Control or (iii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Investor or made automatically due and payable in accordance with the terms hereof (such date upon which all amounts payable hereunder are due is referred to herein as the “Maturity Date”).


 


This Note is one of the “Notes” issued pursuant to the Convertible Secured Subordinated Note Purchase Agreement, dated November 14, 2007 (as amended, modified or supplemented, the “Note Purchase Agreement”), between the Company and the Investors (as defined in the Note Purchase Agreement). Capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in the Note Purchase Agreement. This Note and the Investor are subject to certain restrictions, and are entitled to certain rights and privileges, set forth in the Note Purchase Agreement.  This Note is expressly subject to Section 9(l) of the Note Purchase Agreement.


 


THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A SECURITY AGREEMENT DATED AS OF NOVEMBER 14, 2007 (AS AMENDED, RESTATED OR SUPPLEMENTED, THE “SECURITY AGREEMENT”) AND EXECUTED BY COMPANY FOR THE BENEFIT OF THE INVESTORS. ADDITIONAL RIGHTS OF INVESTOR ARE SET FORTH IN THE SECURITY AGREEMENT.


 




  





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The following is a statement of the rights of Investor and the conditions to which this Note is subject, and to which Investor, by the acceptance of this Note, agrees:


 


1. Definitions. As used in this Note, the following capitalized terms have the following meanings:


 


(a) “Business Day” shall mean any day other than a Saturday or Sunday or other day on which the New York Stock Exchange is permitted or required by law to close.


 


(b) the “Company” includes the corporation initially executing this Note and any Person which shall succeed to or assume the obligations of the Company under this Note.


 


(c)  “Conversion Price” shall mean the lowest “Applicable Conversion Price” determined for each Note issued under the Note Purchase Agreement. The “Applicable Conversion Price” for each Note issued under the Note Purchase Agreement shall be calculated by multiplying 110% by the closing price of the Company’s common stock on April 14, 2014 (in each case as adjusted for stock splits, dividends or combinations, recapitalizations or similar events).


 


(d) “Change of Control” shall mean (i) any consolidation or merger or other transaction or series of transactions involving the Company pursuant to which the Company’s stockholders own less than fifty percent (50%) of the voting securities of the surviving entity (other than an equity financing) or (ii) the sale of all or substantially all of the assets of the Company.


 


(e) “Event of Default” has the meaning given in Section 4 hereof.


 


(f) “Note Purchase Agreement” has the meaning given in the introductory paragraph hereof.


 


(g) “Obligations” shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Company to Investor of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Note, the Note Purchase Agreement and the Security Agreement, including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by the Company hereunder and thereunder, in each case, whether direct or indirect, absolute or contingent, due or to become due, and whether or not arising after the commencement of a proceeding under Title 11 of the United States Code (11 U. S. C. Section 101 et seq.), as amended from time to time (including post-petition interest) and whether or not allowed or allowable as a claim in any such proceeding.


 


(h) “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.


 




  





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(i) “Requisite Percentage” shall mean, at least a majority of the aggregate outstanding principal amount of the Notes issued pursuant to the Note Purchase Agreement


 


(j) “Securities Act” shall mean the Securities Act of 1933, as amended.


 


(k) “Security Agreement” has the meaning given in the introductory paragraphs to this Note.


 


(l) “Transaction Documents” shall mean this Note, each of the other Notes issued under the Note Purchase Agreement, the Note Purchase Agreement, the Registration Rights Agreement, dated November 14, 2007, as amended, restated and supplemented, and the Security Agreement.


 


2. Interest. Accrued interest on this Note shall be payable in cash in quarterly installments commencing on the third month anniversary of the date of issuance of this Note with the final installment payable on the Maturity Date.


 


3. Prepayment. This Note may not be prepaid without the consent of a Requisite Percentage. Any prepayment must be made in connection with the prepayment of all outstanding Notes.


 


4. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note and the other Transaction Documents:


 


(a) Failure to Pay. The Company shall fail to pay (i) when due any principal or interest payment on the due date hereunder or (ii) any other payment required under the terms of this Note or any other Transaction Document on the date due and, with respect to this subclause (ii) only, such payment shall not have been made within five (5) days of the Company’s receipt of written notice to the Company of such failure to pay;


 


(b) Non-Performance of Affirmative Covenants. The Company shall default in the due observance or performance of any material covenant set forth in the Note, the Note Purchase Agreement or the Security Agreement, which default shall continue uncured for fifteen (15) days after receipt of written notice to the Company thereof;


 


(c) Voluntary Bankruptcy or Insolvency Proceedings. The Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing;


 




  





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(d) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within 30 days of commencement;


 


(e) Misrepresentations. Any of the representations and warranties of the Company in the Note Purchase Agreement or the Security Agreement proves to have been false or misleading in any material respect when made or furnished or deemed made;


 


(f) Judgments. One or more judgments, decrees or orders (excluding settlement orders) for the payment of money shall be entered against the Company or any of its subsidiaries involving in the aggregate a liability of $1,000,000 or more, and any such judgment, decree or order shall continue without discharge or stay for a period of sixty (60) days; or


 


(g) Cross-Defaults. The Company or any of its subsidiaries shall default in the performance or observance of any agreement or instrument relating to any indebtedness, or any other event shall occur or condition exist, and the effect of such default, event or condition is to cause or permit the holder or holders of any such indebtedness to cause indebtedness, in excess of $500,000 individually or in the aggregate, to become due prior to its stated maturity.


 


5. Rights of Investor upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default described in Sections 4(c) or 4(d)) and at any time thereafter during the continuance of such Event of Default, Investor may, with the consent of the Agent, by written notice to the Company, declare all outstanding Obligations payable by the Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. Upon the occurrence or existence of any Event of Default described in Sections 4(c) and 4(d), immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default and subject to the consent of the Agent, Investor may exercise any other right power or remedy granted to it by the Transaction Documents or otherwise permitted to it by law, either by suit in equity or by action at law, or both.


 


6. Conversion.


 


(a) Optional Conversion. At any time on or prior to the Maturity Date each Investor will have the option to convert all or a portion of the entire principal amount of the Notes outstanding into Common Stock immediately upon the Investor’s request; provided, however, that if, at the time of any particular conversion, the Company does not have the number of authorized shares of Common Stock sufficient to allow for such particular conversion as well as the issuance of the maximum amount of Common Stock permitted under the Company’s 2004 Equity Compensation Plan, the Investors may only convert that portion of their Notes outstanding for which the Company has a sufficient number of authorized shares of Common Stock. To the extent multiple Investors request conversion of their Notes on the same date, any limitations on conversion shall be applied on a pro rata basis. In such case, the Investors may request, in writing, that the Company call a special meeting of the stockholders of the Company specifically for the purpose of increasing the number of authorized shares of Common Stock to cover the remaining portion of the Notes outstanding, as well as the maximum issuances contemplated pursuant to the Company’s 2004 Equity Compensation Plan, within 90 calendar days after the Company’s receipt of the Investors’ written request. Notwithstanding the above, the Company shall use its best efforts to increase its number of authorized shares of Common Stock to 100,000,000 or such greater number so as to allow for the full conversion of any outstanding Notes on the earlier of: (1) promptly after the date on which a request for conversion, for which there are not sufficient shares available to effect such conversion, is received by the Company, or (2) the time of the next shareholder meeting. The number of shares of Common Stock that this Note may be converted into shall be determined by dividing the principal amount then outstanding by the Conversion Price at the time of conversion. If the Investor elects to convert this Note on demand, it shall provide the Company with written notice of its election at least one (1) day prior to the date selected for conversion. Upon conversion, the Investor shall deliver to the Company the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement reasonably acceptable to the Company whereby the holder agrees to indemnify the Company from any loss incurred by it in connection with this Note). However, upon such conversion of this Note, this Note shall be deemed converted and of no further force and effect, whether or not the Note is delivered for cancellation as set forth in the preceding sentence. If there shall occur a Change of Control, the Company shall give written notice to the Investor at least five (5) days prior to any closing thereof and the Investor’s election to convert this Note shall be conditional upon the consummation thereof.


 




  





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(b) Mechanics of Optional Conversion. As soon as practicable following surrender by the Investor of the original of this Note, the Company shall issue and deliver to Investor a certificate or certificates for the shares of Common Stock into which the Note has been converted (bearing such legends as may be required or advisable in the opinion of counsel to the Company). Such conversion shall be deemed to have been made immediately prior to the close of business on the date selected for the conversion and the Investor shall be treated for all purposes as the record holder or holders of such Common Stock on such date.


 


(c) Fractional Shares; Interest; Effect of Conversion. No fractional shares shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional shares to Investor upon the conversion of this Note, the Company shall pay to Investor an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of any amounts specified in this Section 6(c), the Company shall be forever released from all its obligations and liabilities under this Note.


 


7. Successors and Assigns. Subject to the restrictions on transfer described in Sections 9 and 10 below, the rights and obligations of the Company and Investor shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.


 


8. Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the holders of a Requisite Percentage.


 


9. Transfer of this Note or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Investor will give written notice to the Company prior thereto, describing briefly the manner thereof, together with (unless waived by the Company) a written opinion of Investor’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, the Company, as promptly as practicable, shall notify Investor that Investor may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 9 that the opinion of counsel for Investor, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify Investor promptly after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary. Notwithstanding anything in this Section 9 to the contrary, no opinion of counsel shall be required with respect to any transfer by an Investor to its officers, directors, partners, members or other affiliates.


 




  





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10. Assignment by the Company. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the holders of a Requisite Percentage.


 


11. Notices. All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall be in writing and faxed, mailed or delivered to each party at the respective addresses of the parties as set forth in the Note Purchase Agreement, or at such other address or facsimile number as the Company shall have furnished to Investor in writing. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing or (v) two days after being deposited in the U.S. mail, first class with postage prepaid.


 


12. Pari Passu Notes. Investor acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Note Purchase Agreement or pursuant to the terms of such Notes. In the event Investor receives payments in excess of its pro rata share of the Company’s payments to the Investors of all of the Notes, then Investor shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.


 


13. Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.


 


14. Waivers. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.


 


15. Remedies Cumulative. The remedies of Investor as provided herein and in the Note Purchase Agreement and in any other documents governing or securing repayment hereof shall be cumulative and concurrent and may be pursued singly, successively, or together, at the sole discretion of Investor to the extent provided herein and in the Note Purchase Agreement and may be exercised as often as occasion therefore shall arise. No act or omission of the Investor, including specifically, but without limitation, any failure to exercise any right, remedy or recourse, shall be effective as a waiver of any right of the Investor hereunder, unless set forth in a written document executed by the Investor, and then only to the extent specifically recited therein. A waiver or release with reference to one event shall not be construed as continuing, as a bar to, or as a waiver or release of any subsequent right, remedy or recourse as to any subsequent event. All notices, waivers, releases and/or consents by an Investor shall be directed to the Company only through the Agent.


 


16. No Rights of a Stockholder. Nothing contained in this Note shall be construed as conferring upon the Investor or any other Person the right to vote or consent or to receive notice as an 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 prior to the time that this Note is converted pursuant to Section 6.


 


17. Governing Law. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law provisions of the State of Delaware, or of any other state.


 







 


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The Company has caused this Note to be issued as of the date first written above.








	 	
MOBILESMITH, INC.

	 
	 	a Delaware corporation	 
	 	 	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	 	 	 
	 	Name:	 	 
	 	 	 	 
	 	Title: 	 	 
	 	 	 	 





 



[SIGNATURE PAGE TO CONVERTIBLE SECURED SUBORDINATED PROMISSORY NOTE, DATED ________________, ISSUED TO _________________ BY MOBILESMITH, INC.]




                             









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