NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBY THISCERTIFICATENORTHESECURITIESINTOWHICHTHESESECURITIESARECONVERTIBLEHAVEBEENREGISTEREDUNDERTHESECURITIESACTOF1933,ASAMENDED,ORAPPLICABLESTATESECURITIES LAWS.THE SECURITIESMAYNOT BE OFFEREDFOR SALE, SOLD, TRANSFERRED ORASSIGNED(I) IN THEABSENCE OF(A)AN EFFECTIVEREGISTRATION STATEMENTFOR THE SECURITIESUNDER THESECURITIESACT OF1933,ASAMENDED, OR(B)ANOPINIONOFCOUNSEL(WHICHCOUNSEL SHALLBE SELECTEDBYTHEHOLDER), INAGENERALLYACCEPTABLEFORM, THATREGISTRATIONISNOTREQUIREDUNDERSAIDACT OR(II)UNLESS SOLDPURSUANTTORULE144ORRULE144AUNDERSAIDACT.NOTWITHSTANDING THEFOREGOING, THESECURITIES MAY BEPLEDGED INCONNECTIONWITHABONAFIDEMARGINACCOUNTOROTHERLOANORFINANCINGARRANGEMENT SECUREDBYTHESECURITIES.
PrincipalAmount:$37,500.00 I
ssue Date:February 6,2014
PurchasePrice:$37,500.00
CONVERTIBLEPROMISSORYNOTE
FORVALUERECEIVED,MINDSOLUTIONS,INC.(f/k/aVOISINC.),aNevada
corporation(hereinaftercalledthe“Borrower”),herebypromisestopaytotheorderofASHER ENTERPRISES,INC.,aDelawarecorporation,orregisteredassigns(the“Holder”)thesumof
$37,500.00togetherwithanyinterestassetforthherein,onNovember10,2014(the“MaturityDate”),andtopayinterestontheunpaidprincipalbalancehereofattherateofeightpercent(8%)(the“Interest Rate”) perannumfrom the date hereof(the“IssueDate”) until the same becomes dueandpayable,whetherat maturity or uponacceleration orbyprepayment or otherwise.ThisNote may not beprepaid inwhole or in partexceptas otherwiseexplicitlysetforthherein.Anyamountofprincipalorinterest onthisNotewhichisnotpaidwhendueshall bearinterestattherateoftwentytwopercent(22%)perannumfromthe duedatethereofuntil thesameispaid(“Default Interest”).Interestshallcommenceaccruingon thedatethattheNote isfully paidand shall becomputed on the basis of a 365-day yearand theactual number of dayselapsed.All paymentsduehereunder(to the extent notconverted intocommon stock, $0.001 parvalue pershare(the“CommonStock”)inaccordancewiththe terms hereof)shall be made in lawful money of theUnited States ofAmerica.All payments shall be madeat suchaddressastheHolder shall hereaftergive to the Borrowerbywritten noticemade inaccordancewith the provisionsof thisNote.Wheneveranyamountexpressedtobe dueby the termsof thisNote is dueonanydaywhich isnotabusinessday,thesameshallinsteadbedueonthenextsucceeding daywhichisabusinessdayand,inthecaseofany interestpaymentdate whichisnotthedateonwhich thisNote is paid infull, the extensionof the due date thereof shall not be taken intoaccountfor purposes ofdetermining theamount of interest due on suchdate.As used in thisNote,the term“businessday” shall meananyday otherthan a Saturday,Sunday ora day onwhichcommercial banksin thecityofNewYork,NewYorkareauthorized orrequired bylaw orexecutive order toremainclosed.Eachcapitalized term used herein,and not otherwise defined, shall have the meaningascribed thereto in thatcertain Securities PurchaseAgreement dated the datehereof, pursuant towhich thisNotewas originallyissued(the“PurchaseAgreement”).
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ThisNoteisfreefromalltaxes,liens,claimsandencumbranceswithrespecttotheissue thereofandshallnotbesubjecttopreemptiverightsorothersimilarrightsofshareholdersoftheBorrowerandwill not imposepersonal liabilityupon theholderthereof.
The followingterms shallapplyto thisNote:
ARTICLEI.CONVERSIONRIGHTS
1.1 ConversionRight.TheHoldershallhavetherightfromtimetotime,andatanytimeduringtheperiodbeginningonthedatewhichisonehundredeighty(180)daysfollowing the date of thisNoteandending on the later of:(i) the MaturityDateand(ii) the date ofpaymentofthe DefaultAmount(asdefinedinArticleIII) pursuanttoSection1.6(a)orArticleIII,eachinrespectoftheremaining outstandingprincipalamountofthisNotetoconvertalloranypart of the outstandingand unpaid principalamount of thisNote intofully paidand non-assessable shares of Common Stock,as such Common Stock exists on the IssueDate, orany shares ofcapital stock or other securities of the Borrower intowhich such Common Stock shall hereafterbechanged orreclassifiedat theconversion price(the“Conversion Price”)determined asprovidedherein(a“Conversion”);provided,however,that innoevent shall theHolder beentitledtoconvertanyportionofthisNoteinexcessofthatportionof thisNoteuponconversion ofwhich the sumof(1) the numberof shares of Common Stock beneficially owned by theHolderand itsaffiliates(other than sharesof Common Stockwhich may be deemed beneficially owned through theownership of the unconverted portion of theNotes or the unexercisedor unconvertedportionofany othersecurity oftheBorrowersubjecttoalimitationonconversion orexerciseanalogousto thelimitationscontained herein)and(2)the numberofshares of Common Stock issuableupon theconversion of theportion of thisNotewithrespect towhich the determination of this proviso is being made,wouldresult in beneficial ownershipby theHolderand itsaffiliates ofmorethan 9.99%oftheoutstanding sharesof Common Stock. For purposes of theproviso to the immediatelyprecedingsentence, beneficial ownership shallbe determined inaccordancewith Section 13(d) of the SecuritiesExchangeAct of 1934,asamended(the“ExchangeAct”),and Regulations 13D-G thereunder,exceptas otherwise providedinclause(1)ofsuchproviso,provided,further,however,thatthelimitationsonconversion may bewaivedby theHolder upon,at theelection of theHolder, not less than 61 days’ prior notice to the Borrower,and the provisions of theconversion limitation shallcontinue toapply until such 61st day(or such later date,as determined by theHolder,as may be specified in such notice ofwaiver).The number of shares of Common Stock to be issued uponeachconversion of thisNote shall be determined by dividing the ConversionAmount(as defined below)by theapplicable Conversion Price then ineffect on the date specified in the notice ofconversion,intheformattachedheretoasExhibitA(the“NoticeofConversion”),deliveredto theBorrowerbytheHolderinaccordancewith Section 1.4 below; provided that theNoticeof Conversion is submittedbyfacsimile ore-mail(orby other meansresulting in, orreasonablyexpected toresult in, notice) to the Borrower before 6:00 p.m.,NewYork,NewYork time on suchconversion date(the“ConversionDate”).The term“ConversionAmount” means,withrespect toanyconversion of thisNote, the sum of(1) the principalamount of thisNote to beconverted in suchconversionplus(2)at theHolder’s option,accruedand unpaid interest, ifany, on such principalamountat the interestratesprovided in thisNote to the ConversionDate,plus
(3)attheHolder’soption,DefaultInterest,ifany,ontheamountsreferredtointheimmediately precedingclauses(1)and/or(2)plus(4)attheHolder’soption,anyamountsowedtotheHolder pursuant to Sections 1.3and 1.4(g)hereof.
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1.2 | Conversion Price. |
(a) CalculationofConversionPrice.Theconversionprice(the“ConversionPrice”)shallequaltheVariableConversionPrice(asdefinedherein)(subjecttoequitableadjustmentsforstocksplits,stock dividendsorrightsofferingsbytheBorrowerrelatingtotheBorrower’ssecuritiesor the securitiesofany subsidiary of theBorrower,combinations,recapitalization,reclassifications,extraordinary distributionsand similarevents).The"VariableConversionPrice" shallmean58%multipliedby theMarketPrice(as definedherein)(representing adiscountrateof42%).“MarketPrice”meanstheaverageofthelowest three(3)TradingPrices(as definedbelow)forthe CommonStockduringthethirty(30)TradingDayperiodending onthelatestcompleteTradingDaypriortotheConversionDate.“Trading Price”means,foranysecurityasofanydate,theclosing bid priceon theOver-the-CounterBulletinBoard, orapplicable tradingmarket(the“OTCBB”)asreportedbyareliablereporting service(“Reporting Service”)designated by theHolder(i.e.Bloomberg) or,iftheOTCBBis not the principal trading marketfor such security,theclosing bidpriceof such security on the principal securitiesexchange or tradingmarketwhere suchsecurity is listed or tradedor, if noclosingbidprice ofsuch securityisavailableinanyoftheforegoingmanners,theaverageoftheclosingbid prices ofanymarket makersfor such security thatare listedinthe“pink sheets”by theNationalQuotationBureau,Inc.If theTradingPricecannot becalculatedfor such security onsuch date inthemannerprovidedabove, theTrading Price shallbethefair marketvalueas mutuallydetermined bytheBorrowerandtheholders ofamajorityininterest oftheNotes beingconvertedforwhich thecalculation of theTrading Price isrequired inorder to determine the ConversionPriceofsuchNotes.“TradingDay”shallmeananydayonwhichtheCommon Stockistradableforany periodontheOTCBB,or onthe principalsecuritiesexchange or other securities market onwhich theCommon Stock isthen beingtraded.
(b) ConversionPriceDuring MajorAnnouncements.NotwithstandinganythingcontainedinSection1.2(a)tothecontrary,intheeventtheBorrower(i)makesapublicannouncementthatitintendstoconsolidateormergewithanyothercorporation(otherthana mergerinwhich theBorroweris the surviving orcontinuingcorporationand itscapital stock is unchanged) or sell or transferall or substantiallyall of theassets of theBorrower or(ii)any person,group orentity(including theBorrower) publiclyannounces atender offer to purchase 50%ormoreoftheBorrower’s Common Stock(orany othertakeoverscheme)(thedateoftheannouncementreferred to inclause(i)or(ii)ishereinafterreferredtoasthe“AnnouncementDate”), then the Conversion Price shall,effective upon theAnnouncementDateandcontinuing through theAdjustedConversion PriceTerminationDate(asdefined below), beequal to the lowerof(x)theConversion Pricewhichwouldhavebeenapplicablefor a Conversion occurring ontheAnnouncementDateand(y)theConversionPricethatwouldotherwisebeineffect.Fromandafter theAdjusted Conversion PriceTerminationDate, the Conversion Price shall be determinedas setforth in this Section 1.2(a).For purposes hereof,“Adjusted Conversion PriceTerminationDate” shall mean,withrespect toanyproposed transaction or tender offer(or takeoverscheme)forwhich a publicannouncementascontemplatedbythis Section 1.2(b) has beenmade,thedateuponwhichtheBorrower(inthecaseofclause(i)above)ortheperson, grouporentity(inthecaseofclause(ii)above)consummatesorpubliclyannouncesthe termination orabandonment of the proposed transaction or tender offer(or takeoverscheme)whichcaused this Section 1.2(b)to becomeoperative.
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1.3 AuthorizedShares.TheBorrowercovenantsthatduringtheperiodtheconversionrightexists,theBorrowerwillreservefromitsauthorizedandunissuedCommon Stockasufficientnumberofshares,freefrompreemptiverights,toprovidefortheissuanceof Common Stock upon the fullconversion ofthisNoteissued pursuant to thePurchase Agreement.TheBorrowerisrequiredatalltimestohaveauthorizedandreservedfive timesthe numberof sharesthatisactually issuableuponfullconversion oftheNote(basedontheConversionPrice of theNotesineffectfromtime totime)(the“ReservedAmount”).The ReservedAmountshall be increasedfrom time to time inaccordancewith theBorrower’s obligations hereunder.TheBorrowerrepresents that upon issuance, such shareswill be dulyand validly issued,fullypaidandnon-assessable. Inaddition,iftheBorrowershallissueanysecuritiesormakeanychangeto itscapitalstructurewhichwouldchange the number of sharesof CommonStockintowhichtheNotesshallbeconvertibleatthethencurrentConversionPrice, theBorrowershallatthesame timemakeproperprovisionsothatthereafterthereshallbea sufficientnumberofsharesof Common Stockauthorizedandreserved,freefrom preemptiverights,forconversion of the outstandingNotes.TheBorrower(i)acknowledges thatithasirrevocably instructeditstransferagenttoissuecertificatesfortheCommonStockissuableuponconversionofthisNote,and
(ii) agreesthatitsissuanceofthisNoteshallconstitutefullauthoritytoitsofficersandagentswhoarechargedwiththedutyofexecutingstockcertificatestoexecuteandissuethenecessarycertificatesfor sharesof CommonStockinaccordancewiththe termsandconditionsof thisNote.
If,atanytimetheBorrowerdoesnotmaintaintheReservedAmountitwillbeconsideredanEvent ofDefault underSection 3.2 ofthe Note.
1.4 | Method ofConversion. |
(a) Mechanics ofConversion. SubjecttoSection1.1, thisNotemaybeconvertedbytheHolderinwholeorinpartatany timefromtimetotimeaftertheIssueDate,by(A) submittingtotheBorrower aNotice ofConversion(byfacsimile,e-mail orotherreasonable means ofcommunication dispatched ontheConversionDateprior to6:00p.m.,NewYork,NewYork time)and(B)subject toSection1.4(b),surrendering thisNoteat theprincipal office of the Borrower.
(b) SurrenderofNoteUponConversion.Notwithstandinganythingtothecontrarysetforthherein,uponconversionofthisNoteinaccordancewiththetermshereof,theHolder shallnotberequiredtophysicallysurrender thisNote tothe Borrower unlesstheentire unpaid principalamount of thisNote is soconverted.TheHolderand the Borrower shall maintainrecords showing theprincipalamount soconvertedand thedates ofsuchconversions or shall use suchothermethod,reasonably satisfactorytotheHolderandtheBorrower,soas not torequirephysical surrender ofthisNoteuponeachsuchconversion.In theevent ofanydisputeor discrepancy,suchrecords oftheBorrowershall,primafacie,becontrollinganddeterminative in theabsence of manifesterror.Notwithstanding theforegoing, ifanyportion of thisNote isconvertedasaforesaid,theHolder maynottransfer thisNote unlesstheHolderfirstphysically surrenders thisNote tothe Borrower,whereupon the Borrowerwillforthwith issueand deliver upontheorderoftheHolderanewNoteofliketenor,registeredastheHolder(uponpayment by theHolderofanyapplicable transfer taxes) mayrequest,representing in theaggregate theremainingunpaidprincipalamount ofthisNote.TheHolderandanyassignee, byacceptanceof thisNote,acknowledgeandagreethat,byreasonoftheprovisionsofthisparagraph,following
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conversionofaportionofthisNote,theunpaidandunconvertedprincipalamountofthisNoterepresentedbythisNotemaybeless than the amount stated on the facehereof.
(c) PaymentofTaxes.TheBorrowershallnotberequiredtopayanytaxwhichmaybepayableinrespectofanytransfer involvedinthe issueanddeliveryofsharesof Common Stock or other securities or property onconversionof thisNote in aname other than thatoftheHolder(orin streetname),andtheBorrowershallnot berequiredtoissue or deliveranysuchsharesorother securitiesorpropertyunlessanduntilthepersonorpersons(otherthan theHolder or thecustodian inwhose street name such sharesare to be heldfor theHolder’saccount)requestingtheissuancethereofshallhavepaidtotheBorrowertheamountofanysuch taxorshall have established to thesatisfaction oftheBorrowerthat such taxhas been paid.
(d) DeliveryofCommonStockUponConversion.UponreceiptbytheBorrowerfromtheHolderofafacsimiletransmissionore-mail(orotherreasonablemeansofcommunication)ofaNoticeofConversionmeeting therequirementsforconversionas provided in this Section 1.4, the Borrower shall issueanddeliver orcause tobe issuedand delivered to or upon the orderof theHoldercertificatesfor the Common Stock issuable upon suchconversionwithin three(3) business daysafter suchreceipt(the“Deadline”)(and, solely in thecase ofconversionoftheentireunpaidprincipalamounthereof,surrenderofthisNote)inaccordancewith theterms hereof andthePurchaseAgreement.
(e) ObligationofBorrowertoDeliverCommonStock.Uponreceiptby theBorrowerofaNoticeofConversion,theHoldershallbedeemedtobetheholderofrecordof theCommonStockissuableuponsuchconversion,theoutstandingprincipalamountandtheamount ofaccruedandunpaid interest on thisNote shall bereduced toreflect suchconversion,and, unless theBorrower defaults on its obligations under thisArticle I,allrightswithrespect to the portion of thisNote being soconverted shallforthwith terminateexcept theright toreceive the Common Stock or other securities,cash or otherassets,as herein provided, on suchconversion.If theHolder shall havegiven aNotice of Conversionas provided herein, theBorrower’s obligation to issueanddeliver thecertificatesfor Common Stock shall beabsoluteand unconditional, irrespective of theabsence ofanyactionby theHolder toenforce the same,anywaiver orconsentwithrespect toanyprovision thereof, therecovery ofany judgmentagainstanypersonoranyaction toenforce thesame,anyfailure or delay in theenforcement ofany otherobligationoftheBorrowertotheholderofrecord,orany setoff,counterclaim,recoupment,limitationortermination,oranybreachorallegedbreachby theHolderofany obligationtotheBorrower,and irrespective ofany othercircumstancewhichmight otherwise limit suchobligationof theBorrowertotheHolderinconnectionwithsuchconversion.The ConversionDate specified in theNotice of Conversion shall be the ConversionDate so longas theNotice of Conversion isreceivedby theBorrower before 6:00 p.m.,NewYork,NewYork time, on such date.
(f) DeliveryofCommonStockbyElectronicTransfer.Inlieuof deliveringphysicalcertificatesrepresentingtheCommonStockissuableuponconversion, provided theBorrower is participatingin theDepositoryTrust Company(“DTC”)FastAutomated SecuritiesTransfer(“FAST”) program, uponrequest of theHolderand itscompliancewith the provisionscontained in Section 1.1and in this Section 1.4, theBorrower shall use its bestefforts tocause its transferagent toelectronically transmit the Common Stock issuable uponconversiontotheHolderbycrediting theaccount ofHolder’s PrimeBrokerwithDTC through itsDepositWithdrawalAgent Commission(“DWAC”)system.
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(g) FailuretoDeliverCommonStockPriortoDeadline.WithoutinanywaylimitingtheHolder’sright to pursueotherremedies, includingactual damagesand/orequitablerelief, thepartiesagreethat ifdelivery oftheCommon Stock issuableuponconversion of thisNote is not delivered by theDeadline(other than afailure due to thecircumstancesdescribedin Section 1.3above,whichfailure shall begoverned by suchSection) theBorrower shall payto theHolder $2,000 perdayincash,foreachdaybeyond theDeadline that theBorrowerfails to deliver such CommonStock.Suchcashamount shall bepaid toHolderby thefifth dayofthemonthfollowing themonthinwhichithasaccruedor,attheoptionoftheHolder(bywritten notice to theBorrower by thefirst day of the monthfollowing the month inwhich it hasaccrued),shallbeaddedtothe principalamountofthisNote,inwhicheventinterest shallaccrue thereoninaccordancewiththe termsof thisNoteandsuchadditionalprincipalamount shallbeconvertibleintoCommon StockinaccordancewiththetermsofthisNote.TheBorrower agrees that theright toconvert is avaluable right to theHolder.Thedamagesresultingfrom afailure,attempt tofrustrate, interferencewith suchconversionrightare difficult if not impossible to qualify.Accordingly thepartiesacknowledgethat the liquidateddamages provisioncontained in this Section 1.4(g)arejustified.
1.5 ConcerningtheShares.ThesharesofCommonStockissuableuponconversionofthisNotemaynotbesold ortransferredunless(i)suchsharesaresoldpursuanttoaneffectiveregistrationstatementundertheActor(ii)theBorroweroritstransferagentshall have beenfurnishedwithan opinion ofcounsel(which opinion shall be inform, substanceand scopecustomaryfor opinions ofcounsel incomparable transactions) to theeffect that the shares tobesoldortransferredmay besoldortransferredpursuanttoanexemptionfromsuchregistration or(iii)such sharesare soldor transferred pursuant to Rule144 under theAct(or a successorrule)(“Rule144”) or(iv) such sharesare transferred toan“affiliate”(as defined in Rule 144) of theBorrowerwhoagreestosellorotherwise transfer the sharesonly inaccordance with thisSection 1.5andwho isanAccredited Investor(as defined in the PurchaseAgreement).Exceptas otherwise provided in the PurchaseAgreement(and subject to theremoval provisions setforthbelow),untilsuchtimeasthesharesofCommonStockissuableuponconversion ofthisNote have beenregistered under theActor otherwise maybe sold pursuant to Rule 144withoutanyrestrictionas to the number of securitiesas of a particular date thatcan then be immediately sold,eachcertificatefor sharesofCommonStockissuableuponconversionofthisNotethathas not been so included inaneffectiveregistration statement or that has not been sold pursuant toaneffectiveregistrationstatementoranexemptionthatpermitsremovalof thelegend,shallbear alegend substantially in the followingform,asappropriate:
“NEITHERTHEISSUANCEANDSALEOFTHESECURITIESREPRESENTEDBYTHISCERTIFICATENORTHESECURITIESINTO WHICHTHESESECURITIESAREEXERCISABLEHAVEBEENREGISTEREDUNDERTHESECURITIESACTOF1933,ASAMENDED,ORAPPLICABLESTATESECURITIESLAWS.THESECURITIES MAYNOTBEOFFEREDFORSALE,SOLD,TRANSFERREDORASSIGNED (I)INTHEABSENCEOF (A)ANEFFECTIVEREGISTRATIONSTATEMENTFORTHESECURITIESUNDERTHESECURITIESACTOF 1933,ASAMENDED,OR(B)ANOPINIONOFCOUNSEL (WHICHCOUNSELSHALLBESELECTEDBY THEHOLDER), IN AGENERALLYACCEPTABLEFORM,THATREGISTRATION ISNOTREQUIREDUNDERSAIDACTOR (II)UNLESSSOLDPURSUANTTORULE 144ORRULE 144AUNDERSAIDACT.NOTWITHSTANDINGTHEFOREGOING,THESECURITIES MAYBE
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PLEDGEDINCONNECTIONWITHABONAFIDEMARGINACCOUNTOROTHERLOANORFINANCINGARRANGEMENTSECUREDBYTHESECURITIES.”
ThelegendsetforthaboveshallberemovedandtheBorrowershallissuetotheHolderanewcertificatethereforefreeofanytransferlegendif(i)theBorroweroritstransferagentshallhavereceivedanopinionofcounsel,inform,substanceand scopecustomaryfor opinions ofcounsel incomparable transactions,totheeffect that a publicsale or transferofsuch Common Stock may be made withoutregistration undertheAct,whichopinion shall be acceptedby theCompany sothatthe sale ortransfer iseffectedor(ii)inthecaseofthe CommonStock issuable uponconversion ofthisNote,suchsecurity isregisteredfor salebytheHolderunderaneffectiveregistration statementfiled under theAct or otherwise maybe sold pursuant to Rule 144withoutanyrestrictionas to the number ofsecuritiesas of aparticular date thatcan then be immediately sold.Intheevent that the Company does notaccept the opinion ofcounsel providedby theBuyerwithrespecttothetransferofSecuritiespursuant toanexemptionfromregistration, suchas Rule 144 or Regulation S,attheDeadline, itwill beconsideredanEventofDefault pursuant to Section 3.2 ofthe Note.
1.6 | EffectofCertainEvents. |
(a) EffectofMerger,Consolidation,Etc.AttheoptionoftheHolder,the sale,conveyanceordispositionofallorsubstantiallyalloftheassets oftheBorrower,theeffectuation by the Borrower of atransaction orseries ofrelated transactions inwhich morethan50% of the votingpower of the Borrower is disposed of,or theconsolidation, merger or other businesscombination of the Borrowerwith or intoanyother Person(as defined below) or Personswhen the Borrower is not the survivor shalleither:(i) be deemed to beanEvent ofDefault(asdefinedinArticle III)pursuanttowhichtheBorrowershall berequiredtopaytotheHolderupontheconsummationofandasaconditiontosuchtransactionanamountequaltotheDefaultAmount(as defined inArticleIII) or(ii) be treated pursuant to Section 1.6(b) hereof.“Person” shallmeanany individual,corporation,limitedliabilitycompany,partnership,association, trust orotherentityororganization.
(b) AdjustmentDuetoMerger,Consolidation,Etc.If,atanytimewhenthisNoteisissuedandoutstandingandpriortoconversionofalloftheNotes,thereshallbeany merger,consolidation,exchangeofshares,recapitalization,reorganization, orothersimilarevent,asaresult ofwhich shares of Common Stock of theBorrower shall bechanged into the same or a different number of shares ofanotherclass orclasses of stock or securities of the Borrower oranotherentity, or incase ofanysale orconveyance ofall or substantiallyall of theassets of the Borrower other than inconnectionwith a plan ofcomplete liquidation of the Borrower,thentheHolderofthisNoteshallthereafterhavetherighttoreceiveuponconversion ofthisNote,uponthebasisanduponthetermsandconditions specifiedhereinandinlieuofthe sharesof Common Stock immediately theretofore issuable uponconversion, such stock, securities orassetswhichtheHolderwouldhavebeenentitledtoreceiveinsuchtransactionhad thisNote beenconverted infull immediately prior to such transaction(withoutregard toany limitations onconversionsetforthherein),andinany suchcaseappropriate provisions shall be madewithrespect totherightsandinterestsof theHolderof thisNote totheend that the provisions hereof(including,without limitation, provisionsforadjustment of the Conversion Priceand of the number of shares issuable uponconversion of theNote) shall thereafter beapplicable,as nearlyas maybe practicable inrelation toany securities orassets thereafter
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deliverableupontheconversionhereof.TheBorrowershallnotaffectanytransactiondescribedinthisSection1.6(b)unless(a)itfirstgives,totheextentpracticable,thirty(30)dayspriorwrittennotice(butinanyeventatleastfifteen(15) dayspriorwrittennotice) of therecorddate ofthespecialmeetingofshareholderstoapprove,orifthereisnosuchrecorddate,theconsummation of, such merger,consolidation,exchangeof shares,recapitalization,reorganizationor othersimilarevent or sale ofassets(duringwhichtime theHolder shall beentitled toconvert thisNote)and(b) theresulting successor oracquiringentity(if not theBorrower)assumesbywritten instrument the obligations of this Section 1.6(b).Theabove provisions shall similarlyapply to successiveconsolidations, mergers, sales, transfers or share exchanges.
(c) AdjustmentDuetoDistribution.IftheBorrowershalldeclareormakeanydistributionofitsassets(orrightstoacquireitsassets)toholdersofCommonStockasa dividend,stockrepurchase,bywayofreturnofcapitalor otherwise(includingany dividendor distribution to theBorrower’s shareholders incash or shares(orrights toacquire shares) ofcapital stock of asubsidiary(i.e., aspin-off))(a“Distribution”), then theHolder ofthisNote shall beentitled, uponanyconversion of thisNoteafter the date ofrecordfor determining shareholdersentitled tosuchDistribution, toreceive the amountofsuchassetswhichwouldhave been payable to theHolderwithrespect to the shares of Common Stock issuable upon suchconversion had suchHolder been the holder of such shares of Common Stock on therecord dateforthedetermination ofshareholdersentitled to suchDistribution.
(d) AdjustmentDuetoDilutiveIssuance.If,atanytimewhenanyNotes areissuedandoutstanding,theBorrowerissuesorsells,orinaccordance withthis Section1.6(d) hereofis deemedtohaveissuedorsold,anysharesofCommonStockfornoconsiderationorfor aconsideration per share(beforededuction ofreasonableexpenses orcommissions or underwritingdiscountsorallowancesinconnectiontherewith)lessthantheConversionPriceineffect on the date of such issuance(or deemed issuance) of such shares of Common Stock(a“DilutiveIssuance”), thenimmediatelyupontheDilutiveIssuance,theConversionPricewill bereduced to theamountoftheconsideration persharereceivedbytheBorrowerin suchDilutiveIssuance.
TheBorrowershallbedeemedtohaveissuedorsoldsharesofCommon StockiftheBorrowerinanymannerissuesorgrantsanywarrants,rightsoroptions(not includingemployeestockoptionplans),whetherornotimmediatelyexercisable,tosubscribefor or to purchase Common Stock or other securitiesconvertible intoorexchangeablefor Common Stock(“ConvertibleSecurities”)(suchwarrants,rightsand optionstopurchaseCommonStock or Convertible Securitiesare hereinafterreferred toas“Options”)and the price per shareforwhich Common Stock is issuable upon theexercise of suchOptions is less than the Conversion Price then ineffect, then the Conversion Price shall beequal to such price per share.For purposes of the preceding sentence, the“priceper shareforwhich Common Stock is issuable upon theexerciseof suchOptions” is determinedby dividing(i) thetotalamount, ifany,received orreceivableby theBorrowerasconsiderationfor the issuanceor grantingofall such Options, plus the minimumaggregateamount ofadditionalconsideration, ifany, payable to theBorrower upon theexercise ofall suchOptions, plus, in thecaseof Convertible Securities issuable upon theexercise of suchOptions, the minimumaggregateamount ofadditionalconsideration payableupon theconversion orexchange thereofat thetime such Convertible Securitiesfirst becomeconvertible orexchangeable,by(ii) the maximumtotal number of sharesof Common Stock issuable upon theexercise ofall suchOptions(assumingfullconversion of
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ConvertibleSecurities,ifapplicable).NofurtheradjustmenttotheConversionPricewillbe madeupon theactual issuanceofsuch Common Stock upon the exerciseofsuchOptions orupon the conversion orexchangeofConvertibleSecurities issuableuponexerciseofsuchOptions.
Additionally,theBorrowershallbedeemedtohaveissuedorsoldshares ofCommonStockiftheBorrowerinanymannerissuesorsellsanyConvertibleSecurities,whetherornotimmediatelyconvertible(otherthanwhere thesameareissuableupontheexercise ofOptions),and the priceper shareforwhich Common Stock is issuable upon suchconversionorexchangeislessthanthe ConversionPrice then ineffect, thenthe Conversion Price shall beequal tosuch priceper share.For the purposes of thepreceding sentence, the“priceper shareforwhich Common Stock is issuable upon suchconversion orexchange” is determinedby dividing(i) the totalamount, ifany,receivedorreceivableby theBorrowerasconsiderationfor the issuance or sale ofall such Convertible Securities, plus the minimumaggregateamount ofadditionalconsideration, ifany, payable to theBorrower upon theconversion orexchangethereofat the time suchConvertible Securitiesfirst becomeconvertible orexchangeable,by(ii) the maximum total number of shares of Common Stock issuable upon theconversionorexchangeofallsuchConvertibleSecurities.Nofurtheradjustmenttothe ConversionPricewillbemadeupontheactualissuanceofsuch CommonStockuponconversion or exchangeofsuch ConvertibleSecurities.
(e) PurchaseRights.If,atanytimewhenanyNotesareissuedand outstanding,theBorrowerissuesanyconvertiblesecuritiesorrightstopurchasestock,warrants, securitiesorotherproperty(the“PurchaseRights”) proratatotherecordholdersofanyclassof CommonStock,thentheHolderofthisNotewillbeentitledtoacquire,uponthetermsapplicabletosuchPurchaseRights,theaggregate PurchaseRightswhichsuchHoldercouldhaveacquired if suchHolder had held the number of shares of Common Stockacquirable uponcompleteconversion of thisNote(withoutregard toany limitations onconversioncontained herein) immediatelybefore the date onwhich arecordistakenfor the grant,issuanceor sale of such Purchase Rights or, if no suchrecord is taken, the dateas ofwhich therecord holders of Common Stockareto bedeterminedforthegrant,issueorsaleofsuch PurchaseRights.
(f) NoticeofAdjustments.UpontheoccurrenceofeachadjustmentorreadjustmentoftheConversionPriceasaresultoftheeventsdescribedinthisSection1.6,theBorrower,atitsexpense,shallpromptlycomputesuchadjustmentorreadjustmentandprepareandfurnish to theHolder acertificatesettingforth suchadjustment orreadjustmentand showing in detail thefacts uponwhich suchadjustment orreadjustment is based.TheBorrower shall, upon thewrittenrequestatany time of theHolder,furnish to suchHolder a likecertificate settingforth(i)suchadjustmentorreadjustment,(ii)theConversionPriceatthetimeineffectand(iii)thenumberofsharesofCommonStockandtheamount,ifany, ofothersecuritiesor propertywhichat thetime would be received uponconversion oftheNote.
1.7 TradingMarketLimitations.UnlesspermittedbytheapplicablerulesandregulationsoftheprincipalsecuritiesmarketonwhichtheCommonStockisthenlistedor traded,innoeventshall the Borrower issue uponconversion ofor otherwise pursuant tothisNoteand the otherNotes issued pursuant to the PurchaseAgreement more than the maximum number of sharesof CommonStockthatthe Borrowercanissue pursuanttoanyrule of the principalUnitedStates securitiesmarketonwhichtheCommonStockisthentraded(the“MaximumShareAmount”),which shallbe9.99%ofthetotalsharesoutstanding ontheClosingDate(as defined in the PurchaseAgreement), subject toequitableadjustmentfrom time to time
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forstocksplits,stockdividends,combinations,capitalreorganizationsand similareventsrelating totheCommonStockoccurringafterthedatehereof.OncetheMaximumShareAmounthas beenissued,iftheBorrowerfailstoeliminateanyprohibitions underapplicablelawortherules orregulationsofanystockexchange,interdealerquotationsystemor otherself-regulatory organizationwithjurisdictionovertheBorroweroranyofitssecuritiesontheBorrower’sability to issue shares of Common Stock inexcess of the Maximum ShareAmount, in lieu ofanyfurtherright toconvert thisNote, thiswill beconsideredanEvent ofDefault under Section 3.3 ofthe Note.
1.8 StatusasShareholder.UponsubmissionofaNoticeofConversionbyaHolder,(i)thesharescoveredthereby(otherthantheshares,ifany,whichcannotbeissued because their issuancewouldexceed suchHolder’sallocated portion of the ReservedAmount or Maximum ShareAmount) shall be deemedconverted into shares of Common Stockand(ii) theHolder’srightsasaHolder of suchconvertedportionof thisNote shallceaseandterminate,exceptingonly therighttoreceivecertificatesforsuchsharesofCommonStockandtoanyremedies provided herein or otherwiseavailableat law or inequity to suchHolder because of afailureby the Borrowertocomplywith the terms of thisNote.Notwithstanding theforegoing, if aHolder has notreceivedcertificatesforall shares of Common Stock prior to the tenth(10th) business dayafter theexpiration of theDeadlinewithrespect to aconversion ofany portion of thisNoteforanyreason, then(unless theHolder otherwiseelects toretain its statusas a holderofCommonStock by sonotifying the Borrower)theHoldershallregaintherightsofaHolderof thisNotewithrespect to such unconverted portions of thisNoteand the Borrower shall,as soonas practicable,return such unconvertedNote to theHolderor, if theNotehas not been surrendered,adjustitsrecords toreflectthatsuchportionofthisNotehas notbeenconverted. Inallcases, theHolder shallretainall of itsrightsandremedies(including,without limitation,(i) theright toreceive ConversionDefault Payments pursuant to Section 1.3 to theextentrequired therebyfor such ConversionDefaultandanysubsequent ConversionDefaultand(ii) theright to havetheConversionPricewithrespecttosubsequentconversionsdeterminedinaccordancewith Section 1.3) fortheBorrower’sfailuretoconvertthisNote.
1.9 Prepayment.NotwithstandinganythingtothecontrarycontainedinthisNote,atany timeduringtheperiodbeginningontheIssueDateandendingonthedatewhichisninety
(90)daysfollowingtheissuedate,theBorrowershallhavetheright,exercisableonnotlessthan three(3)TradingDayspriorwrittennoticetotheHolderoftheNotetoprepaytheoutstandingNote(principalandaccrued interest), infull, inaccordancewith this Section 1.9.Anynoticeof prepaymenthereunder(an“OptionalPrepaymentNotice”)shallbedeliveredtotheHolderoftheNoteat itsregisteredaddressesand shall state:(1) that theBorrower isexercising itsright to prepay theNote,and(2) the date ofprepaymentwhich shall be not more than three(3)TradingDaysfromthedateoftheOptionalPrepaymentNotice.Onthedatefixedforprepayment(the“Optional PrepaymentDate”), theBorrower shall make payment of theOptional PrepaymentAmount(as defined below) to or upon the order of theHolderas specifiedby theHolder inwriting totheBorroweratleastone(1) business dayprior totheOptional PrepaymentDate. If theBorrowerexercises itsright to prepay theNote, theBorrower shall make payment to theHolder ofanamount incash(the“Optional PrepaymentAmount”)equalto 130%, multipliedby the sum of:(w)the thenoutstandingprincipalamount ofthisNoteplus(x) accruedandunpaid interest on the unpaid principalamount of thisNote to theOptional PrepaymentDateplus(y)Default Interest,ifany, ontheamountsreferred toinclauses(w)and(x)plus(z)anyamounts owed to theHolder pursuant to Sections 1.3and 1.4(g) hereof. If theBorrowerdeliversan OptionalPrepaymentNoticeandfailstopaytheOptionalPrepaymentAmountduetotheHolder
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oftheNotewithintwo(2)businessdaysfollowingtheOptionalPrepaymentDate,theBorrower shallforever forfeit itsright to prepaythe Notepursuant to this Section 1.9.
Notwithstandinganything tothecontrarycontained inthisNote,atany time duringtheperiodbeginningonthedatewhichisninety-one(91)daysfollowing theissuedateandending on thedatewhich is one hundredtwenty(120) daysfollowing the issuedate, the Borrower shall have theright,exercisable on not less than three(3)TradingDays priorwritten notice totheHolder oftheNotetoprepay theoutstandingNote(principalandaccrued interest), infull,inaccordancewiththisSection1.9.AnyOptional PrepaymentNotice shall be deliveredto theHolder of theNoteat itsregisteredaddressesand shall state:(1) that the Borrower isexercising itsright to prepaytheNote,and(2) the dateof prepaymentwhich shall be not more thanthree(3)TradingDaysfrom thedateoftheOptional PrepaymentNotice.On theOptional PrepaymentDate, the Borrower shall make payment of the SecondOptional PrepaymentAmount(as defined below) to or upon the order of theHolderas specifiedby theHolder inwritingto the Borrowerat least one(1) business dayprior to theOptional PrepaymentDate. If the Borrowerexercises itsright to prepay theNote, the Borrower shall make payment to theHolder ofanamount incash(the“SecondOptional PrepaymentAmount”)equal to135%,multiplied bythesumof:(w) the thenoutstanding principalamountofthisNoteplus(x) accrued andunpaidinterest onthe unpaid principalamount ofthisNote totheOptional PrepaymentDate plus(y)Default Interest, ifany, on theamountsreferred toinclauses(w)and(x) plus(z)anyamounts owedtotheHolderpursuant toSections1.3and1.4(g) hereof. If the Borrower deliversanOptional PrepaymentNoticeandfails topay the SecondOptional PrepaymentAmount due to the Holder ofthe Note within two(2) businessdaysfollowing the Optional PrepaymentDate, the Borrower shallforeverforfeit itsright to prepay the Notepursuant to this Section 1.9.
NotwithstandinganythingtothecontrarycontainedinthisNote,atanytime duringtheperiodbeginningonthedatewhichisonehundredtwenty-one(121)daysfollowing the issue dateandendingonthe datewhichis onehundredeighty(180)daysfollowing theissue date,theBorrowershall havetheright,exercisableonnot lessthanthree(3)TradingDayspriorwritten notice to theHolder of theNote to prepay the outstandingNote(principalandaccrued interest),infull,inaccordancewiththisSection 1.9.AnyOptionalPrepaymentNotice shall be deliveredto theHolder oftheNoteatitsregisteredaddressesandshallstate:(1) thatthe Borrowerisexercisingitsrightto prepaytheNote,and(2)thedateofprepaymentwhichshall be notmore thanthree(3)TradingDaysfromthe date of theOptionalPrepaymentNotice.OntheOptional PrepaymentDate,theBorrowershall makepaymentoftheThirdOptional PrepaymentAmount(as defined below) to or upon the order of theHolderas specifiedby theHolder inwritingto the Borrowerat least one(1) business dayprior to theOptional PrepaymentDate. If the Borrowerexercises itsright to prepay theNote, the Borrower shall make payment to theHolderofanamountincash(the“ThirdOptional PrepaymentAmount”)equal to140%,multiplied bythesumof:(w)the thenoutstandingprincipalamountofthisNoteplus(x) accrued andunpaidinterest onthe unpaidprincipalamount ofthisNote totheOptional PrepaymentDate plus(y)Default Interest, ifany, on theamountsreferred to inclauses(w)and(x)plus(z)anyamounts owedtotheHolderpursuant toSections1.3and1.4(g)hereof.Ifthe BorrowerdeliversanOptional PrepaymentNoticeandfails to paytheThirdOptional PrepaymentAmount due to the Holderofthe Note within two(2)businessdaysfollowing the Optional PrepaymentDate,the Borrowershallforever forfeit itsright to prepaythe Notepursuant to this Section 1.9.
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Aftertheexpirationofonehundredeighty(180)followingthedateoftheNote, theBorrowershall havenoright ofprepayment.
ARTICLEII.CERTAINCOVENANTS
2.1 DistributionsonCapitalStock. Solongas theBorrowershallhaveany obligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsent(a)pay, declareorsetapartforsuchpayment,any dividendorotherdistribution(whetherincash, propertyorothersecurities)on sharesofcapital stock otherthan dividendson sharesofCommon Stock solely in theform ofadditional shares of Common Stock or(b) directly or indirectly or throughany subsidiary makeany other payment or distribution inrespect of itscapital stockexceptfordistributions pursuant toanyshareholders’ rights planwhichisapproved byamajority oftheBorrower’s disinterested directors.
2.2 RestrictiononStockRepurchases.SolongastheBorrowershallhaveany obligationunderthisNote,theBorrowershallnotwithouttheHolder’swrittenconsentredeem,repurchaseorotherwiseacquire(whetherforcash orinexchangeforproperty orothersecurities orotherwise)inany onetransaction orseries of related transactionsanysharesofcapital stockof theBorroweror anywarrants,rights oroptions topurchaseor acquire anysuch shares.
2.3 Borrowings.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershall not,without theHolder’swrittenconsent,create,incur,assumeguarantee,endorse,contingentlyagree to purchase or otherwise become liable upon the obligationofanyperson,firm,partnership,joint venture orcorporation,exceptby theendorsementofnegotiableinstrumentsfordeposit orcollection,orsuffertoexistany liabilityfor borrowedmoney,except(a)borrowingsinexistenceorcommittedonthedatehereofandofwhichtheBorrower has informedHolderinwritingpriortothedatehereof,(b)indebtednessto tradecreditors orfinancial institutionsincurred in the ordinarycourse of business or(c) borrowings, theproceedsof which shall beused torepay thisNote.
2.4 SaleofAssets.SolongastheBorrowershallhaveanyobligationunderthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,sell,leaseorotherwise dispose ofany significant portion of itsassets outside the ordinarycourse of business.Anyconsent to the disposition ofanyassets maybeconditioned on a specifieduse of the proceeds of disposition.
2.5 AdvancesandLoans. SolongastheBorrowershallhaveanyobligation underthisNote,theBorrowershallnot,withouttheHolder’swrittenconsent,lendmoney,givecredit or makeadvances toany person,firm, joint venture orcorporation, including,without limitation, officers, directors,employees, subsidiariesandaffiliates of theBorrower,except loans,credits oradvances(a) inexistence orcommitted on the date hereofandwhich theBorrowerhasinformedHolder inwritingpriortothe date hereof,(b)made inthe ordinarycourseofbusinessor (c)not inexcess of$100,000.
ARTICLEIII.EVENTSOFDEFAULT
Ifanyofthefollowingevents ofdefault(each,an“Event ofDefault”)shall occur:
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3.1 FailuretoPayPrincipalorInterest.TheBorrowerfailstopaytheprincipalhereoforinterestthereonwhen dueonthisNote,whetheratmaturity,uponacceleration or otherwise.
3.2 ConversionandtheShares.TheBorrowerfailstoissuesharesofCommon StocktotheHolder(orannouncesorthreatensinwritingthatitwillnothonoritsobligationto do so) upon exercisebytheHolder of theconversionrights of theHolderinaccordancewith the terms of thisNote,failsto transfer orcause its transferagent to transfer(issue)(electronicallyor incertificatedform)anycertificatefor shares of Common Stock issued to theHolder uponconversion ofor otherwise pursuant to thisNoteasandwhenrequired by thisNote, theBorrower directs its transferagent not to transferor delays, impairs,and/or hinders its transferagent in transferring(orissuing)(electronically or incertificatedform)anycertificatefor sharesof Common Stock to be issued to theHolder uponconversion of or otherwise pursuant to thisNoteasandwhenrequiredby thisNote, orfails toremove(or directs its transferagent not toremove or impairs, delays,and/or hinders its transferagentfromremoving)anyrestrictive legend(ortowithdrawany stop transfer instructionsinrespectthereof)onanycertificateforany sharesofCommonStockissuedtotheHolderuponconversionoforotherwisepursuanttothisNoteasandwhenrequired by thisNote(ormakesanywrittenannouncement,statementorthreatthat it does not intend tohonor the obligations described in this paragraph)andany suchfailure shallcontinueuncured(oranywrittenannouncement,statement orthreatnottohonorits obligationsshallnotberescindedinwriting)forthree(3)businessdaysaftertheHoldershall have delivered aNoticeof Conversion. Itisanobligationof theBorrower toremaincurrentin its obligations to its transferagent. It shall beanevent of default of thisNote, if aconversion of thisNote is delayed, hindered orfrustrated due to a balance owed bythe Borrower to its transferagent. Ifat the option of theHolder, theHolderadvancesanyfunds to theBorrower’s transferagent in order to process aconversion, suchadvancedfunds shall be paidbytheBorrower to theHolder withinfortyeight(48)hours ofademandfrom the Holder.
3.3 BreachofCovenants.TheBorrowerbreachesanymaterialcovenantorothermaterialtermorconditioncontainedinthisNoteandanycollateraldocumentsincludingbutnot limitedtothePurchaseAgreementandsuch breachcontinuesforaperiodoften(10)daysafterwritten noticethereofto theBorrower from the Holder.
3.4 BreachofRepresentationsandWarranties.Anyrepresentationorwarrantyof theBorrowermadehereinorinanyagreement,statementorcertificategiveninwritingpursuant heretoorinconnectionherewith(including,withoutlimitation,thePurchaseAgreement),shall befalse or misleadinginany materialrespectwhen madeand the breach ofwhich has(orwith thepassageoftime will have)amaterialadverseeffect on the rights oftheHolder withrespect to thisNote orthePurchaseAgreement.
3.5 ReceiverorTrustee.TheBorroweroranysubsidiaryoftheBorrowershall makeanassignmentforthebenefitofcreditors,orapplyfororconsenttotheappointmentofareceiver or trusteefor it orfor a substantial partof its propertyor business, or such areceiveror trusteeshall otherwisebeappointed.
3.6 Judgments.Anymoneyjudgment,writorsimilarprocessshallbeenteredorfiledagainsttheBorroweroranysubsidiaryoftheBorroweroranyofitspropertyorotherassetsformore than$50,000,andshallremainunvacated, unbondedor unstayedfora periodoftwenty
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(20)daysunlessotherwiseconsentedtobytheHolder,whichconsentwillnotbeunreasonablywithheld.
3.7 Bankruptcy. Bankruptcy, insolvency,reorganization or liquidation proceedingsorotherproceedings,voluntaryorinvoluntary,forreliefunderanybankruptcylaw oranylawforthereliefofdebtors shall beinstitutedby oragainst theBorrowerorany subsidiaryoftheBorrower.
3.8 DelistingofCommon Stock.TheBorrowershallfail tomaintain thelistingof theCommonStockonatleastoneoftheOTCBBoranequivalentreplacementexchange,theNasdaqNationalMarket,theNasdaqSmallCapMarket,theNewYorkStockExchange,ortheAmerican StockExchange.
3.9 FailuretoComplywiththeExchangeAct.TheBorrowershallfailtocomplywiththereportingrequirementsoftheExchangeAct;and/ortheBorrowershallceasetobe subject to the reportingrequirements ofthe ExchangeAct.
3.10 Liquidation.Anydissolution,liquidation,orwindingupofBorroweroranysubstantial portion ofits business.
3.11 Cessation of Operations.AnycessationofoperationsbyBorrowerorBorroweradmitsitisotherwisegenerallyunabletopayitsdebtsassuchdebtsbecomedue,provided, however, thatany disclosureoftheBorrower’sability tocontinue as a “goingconcern” shall not be anadmission that theBorrowercannotpay its debtsas theybecomedue.
3.12 Maintenanceof Assets.ThefailurebyBorrowertomaintainany material intellectualpropertyrights, personal,realpropertyorotherassetswhicharenecessarytoconduct its business(whethernoworin thefuture).
3.13 FinancialStatement Restatement.Therestatementofanyfinancialstatementsfiled by theBorrowerwiththeSECforanydateorperiodfromtwoyearspriortotheIssueDateofthisNoteanduntilthisNoteis nolonger outstanding, iftheresultofsuchrestatementwould, bycomparisontotheunrestatedfinancialstatement,haveconstituteda materialadverseeffect on therights of theHolderwithrespect to thisNote or the PurchaseAgreement.
3.14 ReverseSplits.TheBorrowereffectuatesareversesplitofits Common Stockwithout twenty(20)daysprior written noticeto the Holder.
3.15 Replacement ofTransferAgent.In theevent thattheBorrowerproposes toreplaceitstransferagent,theBorrowerfailstoprovide,priortotheeffectivedateofsuchreplacement,afullyexecutedIrrevocableTransferAgentInstructionsinaformasinitially deliveredpursuant tothe PurchaseAgreement(including but not limitedtothe provisionto irrevocablyreserve shares of Common Stock inthe ReservedAmount) signed by the successor transfer agent toBorrower and theBorrower.
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3.16 Cross-Default.NotwithstandinganythingtothecontrarycontainedinthisNoteortheotherrelatedorcompaniondocuments,abreachordefaultbytheBorrowerofanycovenantor othertermorconditioncontainedinanyoftheOtherAgreements,after thepassage of allapplicablenoticeandcureorgraceperiods,shall,at theoption oftheHolder, beconsidered a default under thisNoteand theOtherAgreements, inwhichevent theHolder shall beentitled(but in noeventrequired) toapplyallrightsandremediesof theHolderunder theterms of thisNoteandtheOtherAgreementsbyreasonofadefaultundersaidOtherAgreementor hereunder.“OtherAgreements” means,collectively,allagreementsand instruments between,among orby:(1) theBorrower,and, orfor thebenefit of,(2)theHolderandanyaffiliate of theHolder, including,without limitation, promissory notes; provided, however, the term“OtherAgreements” shall notinclude therelated orcompanion documents tothisNote.Each of the loan transactionswill becross-defaultedwitheach other loan transactionandwithall otherexistingandfuturedebtofBorrowerto the Holder.
Upon theoccurrenceandduring thecontinuation of anyEventofDefaultspecified in Section 3.1(solelywithrespect tofailure topaytheprincipal hereoforinterest thereonwhendueatthe MaturityDate), theNoteshallbecome immediately dueandpayableandthe Borrower shallpay totheHolder, infullsatisfactionof itsobligations hereunder,anamountequaltotheDefault Sum(as definedherein).UPONTHEOCCURRENCEANDDURINGTHECONTINUATIONOFANYEVENTOFDEFAULT SPECIFIED IN SECTION 3.2,THENOTE SHALL BECOMEIMMEDIATELYDUEAND PAYABLEANDTHE BORROWER SHALLPAYTOTHEHOLDER, INFULL SATISFACTIONOFITSOBLIGATIONSHEREUNDER,AN AMOUNTEQUALTO:(Y)THEDEFAULT SUM(ASDEFINEDHEREIN); MULTIPLIED BY(Z)TWO(2).Upon theoccurrenceand duringthecontinuation ofanyEvent ofDefault specified inSections3.1(solelywithrespect tofailure topaytheprincipal hereoforinterest thereonwhen dueonthisNoteuponaTradingMarket PrepaymentEvent pursuanttoSection1.7 or uponacceleration),3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14,and/or 3. 15exercisable through thedelivery ofwritten notice to the Borrowerby suchHolders(the“DefaultNotice”),and upon the occurrence ofanEvent ofDefault specified theremaining sections ofArticlesIII(other thanfailure to pay theprincipal hereoforinterest thereonattheMaturityDatespecified in Section 3,1 hereof), theNote shall become immediately dueandpayableand the Borrower shall payto theHolder, infull satisfaction of its obligations hereunder,anamountequal to thegreaterof(i) 150%timesthesumof(w) the then outstanding principalamountof thisNoteplus(x)accruedand unpaid interest on the unpaid principalamount of thisNote to the date ofpayment(the“Mandatory PrepaymentDate”)plus(y)Default Interest, ifany, on theamountsreferred to inclauses(w)and/or(x)plus(z)anyamounts owed to theHolder pursuant to Sections 1.3and 1.4(g) hereof(the thenoutstandingprincipalamount of thisNote to the date of paymentplustheamountsreferred to inclauses(x),(y)and(z) shallcollectively be knownas the“Default Sum”) or(ii) the“parity value”of theDefault Sum to be prepaid,where parity value means(a)the highest numberof shares ofCommon Stock issuable uponconversion oforotherwise pursuant to suchDefault Sum inaccordancewithArticle I, treating theTradingDayimmediately preceding the MandatoryPrepaymentDateas the“ConversionDate”for purposes of determining the lowestapplicable Conversion Price, unless theDefaultEventarisesas aresult of a breach inrespect of a specificConversionDate inwhichcase such ConversionDate shall be the ConversionDate),multipliedby(b) the highest Closing Pricefor the Common Stock during the periodbeginning onthedate offirst occurrenceoftheEvent ofDefaultandendingonedayprior to the Mandatory PrepaymentDate(the“DefaultAmount”)andallotheramounts payable hereunder shall immediately becomedueandpayable,allwithout demand,presentment or notice,all ofwhich herebyareexpresslywaived, togetherwithallcosts, including,without
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limitation,legalfeesandexpenses,ofcollection,andtheHoldershallbeentitledtoexerciseall other rightsandremediesavailable at laworinequity.
If theBorrowerfailstopaytheDefaultAmountwithinfive(5) businessdays ofwritten notice thatsuchamount isdueand payable, thentheHolder shallhave therightatany time,solongas theBorrowerremains in default(and so longand to theextent that there aresufficientauthorized shares), torequire theBorrower, uponwritten notice, to immediately issue, in lieu of theDefaultAmount,the number ofsharesof CommonStockof theBorrowerequaltotheDefaultAmount divided bytheConversion Pricethen ineffect.
ARTICLEIV.MISCELLANEOUS
4.1 FailureorIndulgenceNotWaiver.NofailureordelayonthepartoftheHolderintheexerciseofany power,rightorprivilegehereundershalloperateas awaiver thereof, nor shallany single or partialexercise ofany such power,right or privilege preclude other orfurtherexercise thereof or ofanyotherright, power or privileges.Allrightsandremediesexisting hereunderarecumulativeto,andnotexclusiveof,anyrightsorremedies otherwise available.
4.2 Notices.Allnotices,demands,requests,consents,approvals,andothercommunicationsrequiredorpermittedhereundershallbeinwritingand,unlessotherwise specifiedherein,shallbe(i)personallyserved,(ii)depositedinthemail,registeredorcertified,returnreceiptrequested, postage prepaid,(iii)delivered byreputableaircourier servicewithchargesprepaid,or(iv) transmittedby handdelivery, telegram, orfacsimile,addressedasset forthbelowortosuchotheraddressassuchparty shallhavespecifiedmostrecentlybywrittennotice.Any notice orothercommunicationrequiredor permittedtobegivenhereundershallbe deemedeffective(a) upon hand deliveryor delivery byfacsimile,withaccurateconfirmationgeneratedbythe transmittingfacsimile machine,attheaddressor number designatedbelow(if delivered onabusinessdayduringnormal business hourswheresuchnoticeis to bereceived),or thefirstbusinessdayfollowingsuchdelivery(if deliveredother thanona businessdayduring normal business hourswhere such notice is to bereceived) or(b) on the second business dayfollowingthe date ofmailing byexpresscourier service,fullyprepaid,addressed to suchaddress,or uponactualreceipt of suchmailing,whichever shallfirst occur.Theaddressesfor suchcommunications shall be:
Ifto theBorrower, to:
MINDSOLUTIONS,INC.(f/k/a VOISINC. )
3150EastWillowStreet SignalHill, CA90755
Attn:KERRY DRISCOLL, Chief ExecutiveOfficer facsimile:
With a copybyfaxonlyto(whichcopyshall notconstitutenotice):
PROCOPIO
Attn:JohnP.Cleary
12544High BluffDrive,Suite300SanDiego,CA92130
tel:619-515-3221directfax:619-744-5459
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Ifto the Holder:
ASHERENTERPRISES,INC.
1Linden Pl., Suite207GreatNeck,NY. 11021Attn: CurtKramer, Presidentfacsimile: 516-498-9894
With a copybyfaxonlyto(whichcopyshall notconstitutenotice):NaidichWurmanBirnbaum &Maday,LLP
80 Cuttermill Road, Suite410GreatNeck,NY11021
Attn:Bernard S.Feldman,Esq.facsimile: 516-466-3555
4.3 Amendments.ThisNoteandanyprovisionhereofmayonlybeamendedbyaninstrumentinwritingsignedby theBorrowerandtheHolder.The term“Note”andallreference thereto,asusedthroughout thisinstrument,shall meanthisinstrument(andthe otherNotesissuedpursuanttothe PurchaseAgreement)asoriginallyexecuted,or if lateramendedor supplemented, thenas soamended orsupplemented.
4.4 Assignability.ThisNoteshallbebindingupontheBorrowerandits successorsandassigns,andshallinuretobethebenefitoftheHolderanditssuccessorsandassigns.Each transferee ofthisNotemustbean“accreditedinvestor” (as definedinRule501(a) of the 1933Act).Notwithstandinganything in thisNote to thecontrary, thisNote may be pledgedascollateral inconnectionwith abonafidemarginaccount or other lendingarrangement.
4.5 Cost ofCollection.Ifdefault is madein thepayment ofthisNote,theBorrowershall paytheHolderhereof costs ofcollection, includingreasonable attorneys’fees.
4.6 GoverningLaw.ThisNoteshallbegovernedbyandconstruedinaccordancewiththelawsoftheStateofNewYorkwithoutregardtoprinciplesofconflictsoflaws.Anyactionbroughtbyeither partyagainstthe otherconcerningthe transactionscontemplatedbythisNoteshallbebroughtonlyinthestatecourtsofNewYorkorinthefederalcourtslocatedinthe stateandcountyofNassau.The parties tothisNote herebyirrevocablywaiveanyobjectionto jurisdictionand venueofanyaction instituted hereunderand shall notassertanydefense based onlackofjurisdictionorvenueorbaseduponforumnonconveniens.The BorrowerandHolderwaive trialby jury.The prevailing party shall beentitled torecoverfrom the other party itsreasonableattorney'sfeesandcosts. In theevent thatanyprovision of thisNote oranyotheragreementdeliveredinconnectionherewithisinvalidor unenforceable underanyapplicable statute orrule of law, then suchprovision shall be deemed inoperative to theextent that it mayconflict therewithandshall be deemed modified toconformwith such statute orruleof law.Any suchprovisionwhichmay prove invalidorunenforceableunderany lawshall notaffect the validity orenforceabilityofany otherprovision ofanyagreement.Each partyhereby irrevocablywaivespersonal serviceof processandconsents to processbeing served inanysuit,action or proceeding inconnectionwith thisAgreement orany otherTransactionDocumentby mailing acopy thereof viaregisteredorcertified mail or overnight delivery(withevidence of delivery) tosuchpartyat theaddressineffectfor noticestoitunder thisAgreementandagrees that such service shallconstitutegoodand sufficient service of processand notice thereof.
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Nothingcontainedhereinshallbedeemedtolimitinanywayanyrighttoserveprocessinany othermannerpermittedbylaw.
4.7 CertainAmounts.WheneverpursuanttothisNotetheBorrowerisrequiredto payanamountinexcessoftheoutstandingprincipalamount(ortheportionthereofrequiredto bepaidatthattime)plusaccruedandunpaidinterestplusDefaultInterest onsuchinterest,theBorrowerand theHolderagree that theactual damages to theHolderfrom thereceipt ofcash payment on thisNote may be difficult to determineand theamount to be so paidby theBorrowerrepresents stipulated damagesand not a penaltyand is intended tocompensate theHolder inpartfor lossof the opportunity toconvertthisNoteandtoearn areturnfromthe sale of shares of Common Stockacquired uponconversion of thisNoteat a price inexcess of the price paidfor such shares pursuant to thisNote.TheBorrowerand theHolder herebyagree that suchamount of stipulated damages is not plainly disproportionate to the possible loss to theHolderfrom thereceipt of acash paymentwithout the opportunity toconvert thisNote into shares ofCommon Stock.
4.8 PurchaseAgreement.ByitsacceptanceofthisNote,eachpartyagreestobe boundbytheapplicableterms ofthePurchaseAgreement.
4.9 NoticeofCorporateEvents.Exceptasotherwiseprovidedbelow,theHolder ofthisNoteshallhavenorightsasaHolderofCommonStockunlessandonly totheextentthat itconvertsthisNoteinto CommonStock.The Borrower shallprovidetheHolderwith prior notification ofanymeetingof the Borrower’s shareholders(andcopies of proxy materialsand other informationsent to shareholders). In theevent ofanytakingby the Borrower of arecord of its shareholdersforthe purpose ofdetermining shareholderswhoareentitled toreceive payment ofanydividend or other distribution,anyright to subscribefor, purchaseor otherwiseacquire(includingbywayofmerger,consolidation,reclassification or recapitalization) any share ofanyclassorany othersecuritiesorproperty,ortoreceiveany otherright,orforthepurposeof determiningshareholderswhoareentitledtovote inconnectionwithanyproposedsale,leaseorconveyance ofall or substantiallyall of theassets of the Borrower orany proposed liquidation, dissolution orwinding up of the Borrower, the Borrower shall mail anotice to theHolder,at least twenty(20)days prior to therecord date specified therein(or thirty(30) days prior to theconsummation of the transaction orevent,whichever isearlier), of the date onwhichany suchrecord istobe takenfor the purposeof suchdividend,distribution,right or otherevent,anda brief statementregarding theamountandcharacter of such dividend, distribution,right or othereventtotheextentknownatsuchtime.TheBorrowershallmakeapublicannouncementofanyeventrequiring notification to theHolder hereunder substantiallysimultaneouslywith the notification to the Holderinaccordancewith theterms ofthis Section 4.9.
4.10 Remedies.TheBorroweracknowledgesthatabreachbyitofits obligationshereunderwillcauseirreparableharmtotheHolder,byvitiating theintentand purpose of thetransactioncontemplated hereby.Accordingly, theBorroweracknowledges that theremedyatlawforabreachofitsobligationsunderthisNotewill beinadequateandagrees,in the eventofabreach orthreatened breachby theBorroweroftheprovisions ofthisNote, that theHoldershall be entitled,inaddition toall other available remediesat laworinequity,and in
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additiontothepenaltiesassessableherein,toaninjunctionorinjunctionsrestraining,preventing orcuringanybreachofthisNoteandtoenforcespecificallythetermsandprovisionsthereof,withoutthenecessityof showingeconomiclossandwithoutanybond or other securitybeingrequired.
INWITNESSWHEREOF,BorrowerhascausedthisNotetobesignedinitsnameby its dulyauthorized officerthisFebruary6, 2014.
MINDSOLUTIONS,INC.
(f/k/aVOIS INC. )
By:/s/ Kerry Driscoll
KERRYDRISCOLL
ChiefExecutiveOfficer
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EXHIBIT ANOTICEOF CONVERSION
Theundersignedherebyelectstoconvert$principalamount oftheNote(definedbelow)intothatnumberofsharesofCommonStocktobeissuedpursuant totheconversionoftheNote(“CommonStock”)assetforthbelow,ofMINDSOLUTIONS, INC.(f/k/aVOIS INC.),aNevadacorporation(the“Borrower”)according totheconditionsof theconvertible noteof the Borrower datedas of February 6, 2014(the“Note”),as of the datewritten below.Nofeewill becharged to theHolderforanyconversion,exceptfor transfer taxes, if any.
BoxCheckedas toapplicableinstructions:
[]TheBorrowershallelectronicallytransmittheCommonStockissuablepursuant tothisNoticeofConversiontotheaccountoftheundersignedoritsnomineewithDTCthroughitsDepositWithdrawalAgentCommissionsystem(“DWACTransfer”).
Nameof DTC PrimeBroker:AccountNumber:
[]TheundersignedherebyrequeststhattheBorrowerissueacertificateorcertificatesforthenumberofsharesofCommonStocksetforthbelow(which numbersarebasedontheHolder’scalculationattachedhereto) inthename(s) specifiedimmediately belowor,ifadditionalspaceisnecessary,onanattachment hereto:
ASHERENTERPRISES,INC.
1Linden Pl., Suite207GreatNeck,NY. 11021
Attention: Certificate Delivery(516)498-9890
DateofConversion:
Applicable Conversion Price: $NumberofShares ofCommon Stock to beIssued Pursuant to Conversion ofthe Notes:Amount ofPrincipalBalanceDue remaining
Under the Note afterthisconversion:
ASHERENTERPRISES,INC.
By:
Name: CurtKramer
Title:President
Date:
1Linden Pl., Suite207GreatNeck,NY. 11021
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