Note: March 6, 2015
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARECONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSIONIN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED ORSOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THESECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTIONNOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF APARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY REDEMPTION ORCONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUEDINTEREST SET FORTH BELOW.
10% CONVERTIBLE PROMISSORY NOTE
OF
START SCIENTIFIC, INC.
Issuance Date: March 6, 2015
Total Face Value of Note: $220,000
THISNOTE is a duly authorized Convertible Promissory Note of Start Scientific, Inc. a corporation duly organized and existing under the laws of the State of Delaware(the“Company”), designated as the Company's 10% Convertible Promissory Note due March 6,2016 (“Maturity Date”) in the principal amount of $220,000 (the “Note”).
FORVALUERECEIVED, the Company hereby promises to pay to the order ofIconicHoldings, LLC or its registered assigns or successors-in-interest (“Holder”) the principal sumof up to $220,000 and to pay “guaranteed” interest on the principal balance hereof (whichprincipal balance shall be increased by the Holder’s payment of additional consideration as setforth herein and which increase shall also include the prorated amount of the original issuediscount in connection with Holders payment of additional consideration) at the rate of 10%, allof which “guaranteed” interest shall be deemed earned as of the date of each such payment ofadditional consideration by the Holder on the Maturity Date, to the extent such principal amountand “guaranteed” interest have been repaid or converted into the Company's Common Stock,$0.001 par value per share (the“Common Stock”), in accordance with the terms hereof.
The initial purchase price will be $55,000 of consideration upon execution of the NotePurchase Agreement and all supporting documentation. The sum of $50,000 shall be remittedand delivered to the Company, and $5,000 shall be retained by the Purchaser through an original issue discount for due diligence and legal bills related to this transaction. The Holder reserves the
right to pay additional consideration at any time and in any amount it desires, up to the total facevalue of this Note, at its sole discretion. The principal sum (including the prorated amount of theoriginal issue discount) owed by the Company shall be prorated to the amount of considerationpaid by the Holder and only the consideration received by the Company, plus prorated“guaranteed” interest and other fees and prorated original issue discount, shall be deemed owedby the Company. The original issue discount is set at 10% of any consideration paid. TheCompany is not responsible to repay any unfunded portion of this Note.
In addition to the “guaranteed” interest referenced above, and in the Event of Defaultpursuant to Section 2(e), additional interest will accrue from the date of the Event of Default atthe rate equal to the lower of 10% per annum or the highest rate permitted by law (the “DefaultRate”).
The Note may be prepaid according to the following schedule: Between 1 and 60 days from the date of execution, the Note may be prepaid for 120% of face value plus accruedinterest. Between 61 and 90 days from the date of execution, the Note may be prepaid for 125%of face value plus accrued interest. Between 91 and 120 days from the date of execution, the Note may be prepaid for 130% of face value plus accrued interest. Between 121 and 180 days from the date of execution, the Note may be prepaid for 135% of face value plus accrued interest. After 180 days from the date of execution until the Due Date, the Note may not beprepaid without written consent from Iconic.
For purposes hereof the following terms shall have the meanings ascribed to them below:
“Business Day” shall mean any day other than a Saturday, Sunday or a day on whichcommercial banks in the City of New York are authorized or required by law or executive orderto remain closed.
“Conversion Price” shall be equal to the lower of $.10 or 58% of the lowest tradingprice of the Company’s common stock during the 20 consecutive trading days prior to the dateon which Holder elects to convert all or part of the Note. If the Company is placed on “chilled”status with the Depository Trust Company (“DTC”), the discount shall be increased by 10% until such chill is remedied. If the Company is not Deposits and Withdrawal at Custodian(“DWAC”) eligible through their Transfer Agent and the Depository Trust Company’s (“DTC”)Fast Automated Securities Transfer (“FAST”) system, the discount will be increased by 5%. Inthe case of both, the discount shall be a cumulative 15%. Any default of this Note will result in a5% increase to the Conversion Price discount.
“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note (including the prorated amount of the original issue discount), (ii) all accrued but unpaidinterest hereunder, and (iii) any default payments owing under the Note but not previously paidor added to the Principal Amount.
“Trading Day” shall mean a day on which there is trading on the Principal Market.
“Underlying Shares” means the shares of common stock into which the Note is convertible (including interest or principal payments in common stock as set forth herein) inaccordance with the terms hereof.
The following terms and conditions shall apply to this Note:
Section 1.00Conversion.
(a)Conversion Right. Subject to the terms hereof and restrictions andlimitations contained herein, the Holder shall have the right, at the Holder's option, at any time to convert the outstanding Principal Amount and interest under this Note in whole or in part.
(b) The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the“Conversion Date”.
(i) Stock Certificates or DWAC. The Company will deliver to theHolder, or Holder’s authorized designee, no later than 2 Trading Days after the Conversion Date,a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In lieu of delivering physical certificates representing the shares ofCommon Stock issuable upon conversion of this Note, provided the Company's transfer agent isparticipating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer(“FAST”) program, upon request of the Holder, the Company shall use commercially reasonableefforts to cause its transfer agent to electronically transmit such shares issuable upon conversionto the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s)prime broker with DTC through its Deposits and Withdrawal at Custodian (“DWAC”) program (provided that the same time periods herein as for stock certificates shall apply).
(ii)Charges, Expenses. Issuance of Common Stock to Holder, or anyof its assignees, upon the conversion of this Noteshall be made without charge to the Holderforany issuance fee, transfer tax, postage/mailing charge or any other expense with respect to theissuance of such Common Stock. Company shall pay all Transfer Agent fees incurred from the issuance of the Common stock to Holder and acknowledges that this is a material obligation ofthis Note.
If the Company fails to deliver to the Holder such certificate or certificates (or shares throughDTC) pursuant to this Section (free of any restrictions on transfer or legends) prior to 3 Trading Days after the Conversion Date, the Company shall pay to the Holder as liquidated damages anamount equal to $2,000 per day, until such certificate or certificates are delivered. The Companyacknowledges that it would be extremely difficult or impracticable to determine the Holder’sactual damages and costs resulting from a failure to deliver the Common Stock and the inclusionherein of any such additional amounts are the agreed upon liquidated damages representing areasonable estimate of those damages and costs. Such liquidated damages will be automaticallyadded to the Principal Amount of the Note.
(c)Reservation and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its authorized and unissuedCommon Stock solely for the purpose of issuance upon conversion of this Note (and repayments in Common Stock), free from preemptive rights or any other actual contingent purchase rights ofpersons other than the Holder,not less than five times the number of shares of CommonStock as shall be issuable (taking into account the adjustments under this Section 1 but withoutregard to any ownership limitations contained herein) upon the conversion of this Note to
Common Stock (the “Required Reserve”). These shares shall be reserved in proportion with theconsideration actually received by the Company and the total shares reserved will be increasedwith future payments of consideration by Holder to ensure the Required Reserve is met. TheCompany covenants that all shares of Common Stock that shall be issuable will, upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. If the amount ofshares on reserve at the Transfer Agent for this Note in Holder’s name shall drop below theRequired Reserve, the Company will, within 2 business days of written notification from Holder,instruct the Transfer Agent to increase the number of shares so that the Required Reserve is met. The Company agrees that this is a material term of this Note and any breach of this will result ina default of the Note.
(d)Conversion Limitation. The Holder will not submit a conversion to theCompany that would result in the Holder owning more than 9.99% of the then total outstandingshares of the Company (“Restricted Ownership Percentage”).
Section 2.00Defaults and Remedies.
(e)Events of Default. An “Event of Default” is:(i) a default in payment of anyamount due hereunder which default continues for more than 5 business days after the due date;(ii) a default in the timely issuance of underlying shares upon and in accordance with termshereof, which default continues for 3 Business Days after the Company has failed to issue shares or deliver stock certificates within the 3rd day following the Conversion Date; (iii) failure by the Company for 3 days after notice has been received by the Company to comply with any materialprovision of the Note Purchase Agreement; (iv) failure of the Company to remain compliant withDTC, thus incurring a “chilled” status with DTC; (v) if the Company is subject to anyBankruptcy Event; (vi) any failure of the Company to satisfy its“filing” obligations under therules and guidelines issued by OTC Markets News Service, OTC Markets.com and theiraffiliates; (vii) any failure of the Company to provide the Holder with information related to thecorporate structure including, but not limited to, the number of authorized and outstanding shares, public float, etc. within 1 day of request by Holder; (viii) failure to have sufficient number of authorized but unissued shares of the Company’s Common Stock available for any conversion; (ix) failure of Company’s Common Stock to maintain a bid price in its trading market which occurs for at least 3 consecutive Trading Days; (x) any delisting for any reason;(xi) failure by Company to pay any of its Transfer Agent fees or to maintain a Transfer Agent of record; (xii) any trading suspension imposed by the Securities and Exchange Commission under Sections 12(j) or 12(k) of the 1934 Act; (xiii) any breach of Section 1.00 (c); or (xiv) any defaultafter any cure period under, or acceleration prior to maturity of, any mortgage, indenture orinstrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company in excess of $50,000 or for money borrowedthe repayment of which is guaranteed by the Company in excess of $50,000, whether suchindebtedness or guarantee now exists or shall be created hereafter.
Remedies. If an Event of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal Amount of this Note,including any interest due thereon, to be due and payable immediately without further action ornotice. In the event of such acceleration, the amount due and owing to the Holder shall beincreased to 150% of the outstanding Principal Amount of the Note held by the Holder plus allaccrued and unpaid interest, fees, and liquidated damages, if any. Secondarily, this Note shallaccrue additional interest on any unpaid principal from and after the occurrence and during the
continuance of an Event of Default at a rate of 10% per annum. Additionally, the occurrence ofany Event of Default of this Note will result in an additional permanent 5% increase to theConversion Price discount. Finally, the Note will accrue liquidated damages of $1,000 per dayfrom and after the occurrence and during the continuance of an Event of Default. The Companyacknowledges that it would be extremely difficult or impracticable to determine the Holder’sactual damages and costs resulting from an Event of Default and any such additional amounts arethe agreed upon liquidated damages representing a reasonable estimate of those damages andcosts. The remedies under this Note shall be cumulative and automatically added to the principalvalue of the Note.
Section 3.00General.
(f)Payment of Expenses. The Company agrees to pay all reasonable charges andexpenses, including attorneys' fees and expenses, which may be incurred by the Holder insuccessfully enforcing this Note and/or collecting any amount due under this Note.
(g)Assignment, Etc. The Holder may assign or transfer this Note to anytransferee at its sole discretion. This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.
(h)Governing Law; Jurisdiction.
(i)Governing Law.This note will be governed by and construed in accordance with the laws of the state of California without regard to any conflicts of laws or provisions thereof that would otherwise require the application of the law of any otherjurisdiction.
(ii)Jurisdiction. Any dispute or claim arising to or in any way relatedto this Note or the rights and obligations of each of the parties hereto shall be settled by bindingarbitration in San Diego, California. All arbitration shall be conducted in accordance with therules and regulations of the American Arbitration Association ("AAA"). AAA shall designate an arbitrator from an approved list of arbitrators following both parties' review and deletion of thosearbitrators on the approved list having a conflict of interest with either party. The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawfulmanner.
(ii)No Jury Trial. The Company hereto knowingly and voluntarilywaives any and all rights it may have to a trial by jury with respect to any litigation based on, orarising out of, under, or in connection with, this note.
IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be dulyexecuted on the day and in the year first above written.
START SCIENTIFIC, INC.
By:/s/ Norris R. Harris
Name: Norris R. Harris
Title: Chief Executive Officer
Date: 03/06/2015
This Note is acknowledged as: Note of March 6, 2015
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert that certain $220,000 Convertible Promissory Noteidentified as theNote)
DATE: ____________________________
FROM: Iconic Holdings, LLC
Re:$220,000 Convertible Promissory Note (this “Note”) originally issued by Start Scientific,Inc., a Delaware corporation, to Iconic Holdings, LLC on March 6, 2015.
The undersigned on behalf ofIconic Holdings, LLC, hereby elects to convert $_______________________of the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note intoshares of Common Stock, $0.001 par value per share, ofStart Scientific, Inc.(the “Company”) according tothe conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is deliveringherewith such certificates and opinions as reasonably requested by the Company in accordance therewith. Nofee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersignedrepresents as of the date hereof that, after giving effect to the conversion of this Note pursuant to thisConversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in thisNote.
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