THISNOTEHASNOTBEENREGISTEREDUNDERTHE SECURITIESACTOF 1933,ASAMENDED(THE “ACT”),ORAPPLICABLE STATESECURITIESLAWS,ANDMAYNOTBE SOLD,TRANSFERRED,OROTHERWISEDISPOSEDOFINTHEABSENCEOFSUCHREGISTRATIONORRECEIPTBYTHECOMPANYOFANOPINIONOFCOUNSEL INTHE FORM,SUBSTANCEAND SCOPEREASONABLY SATISFACTORYTOTHECOMPANYTHATTHISNOTEMAYBESOLD,TRANSFERRED,OROTHERWISEDISPOSEDOF,UNDERANEXEMPTIONFROMREGISTRATIONUNDERTHEACTANDSUCH STATE SECURITIESLAWS.
SOLARIS POWER CELLS, INC.
10% OID ConvertiblePromissory due March 31,2019 (the “Note”)
| OriginalIssueDate:As ofMay 15, 2016 | Principal Amount:USD$6,000,000 |
| | Purchase Amount: USD $5,000,000 |
Forvaluereceived,Solaris Power Cells, Inc.,a Nevadacorporation(the“Company”), herebypromisestopaytotheorderofPixel Holdings, Inc., a Delaware corporation(togetherwithitssuccessors,representatives, and permitted assigns,the“Holder”),inaccordancewiththeterms hereinafter provided, uptoan aggregate of$6,000,000(the “PrincipalAmount”). The Principal Amountoutstanding, together with all accrued interest thereon and any other amounts due pursuant to the terms of this Note,shallbe due andpayable on March 31, 2019(the“MaturityDate”).
All payments underorpursuanttothisNoterefertoand shallbemadeinUnitedStatesDollarsinimmediately availablefundstotheHolder attheaddress oftheHoldersetforthin the Purchase Agreementoratsuch otherplaceastheHoldermaydesignatefromtimetotimeinwritingtotheCompany orbywiretransfer of fundstothe Holder’s account,instructionsforwhich areattached heretoasExhibitA.
ARTICLE I
PURCHASE AGREEEMENT
Section 1.1PurchaseAgreement. ThisNote has been executedand delivered pursuant tothat certainSecuritiesPurchaseAgreementdatedasof April 30, 2016(the“PurchaseAgreement”) by andamongtheCompany,theHolder, Pixel Mags, Inc. and the Company Majority Voting Stockholder (as defined in the Purchase Agreement).Capitalizedterms usedandnototherwise definedherein shallhavethemeaningssetforthforsuchtermsinthePurchase Agreement.
Section 1.2Interest. Subject to the requirements of Section 3.6 below, the Company may repay this Note at any time on or before 90 days from the Issuance Date. If the Company repays the Principal Amount on or before 90 days from the Issuance Date, the interest rate on that payment will be zero percent. If the Company does not repay the Principal Amount on or before 90 days from the Issuance Date, a one-time interest charge of 8% shall be applied to the entire Principal Amount and shall be due and payable by the Company on the Maturity Date. Interest shall be paidin cashorrestricted sharesof theCompany’s common stock,parvalue$0.0001pershare(the“CommonStock”) atthe optionoftheHolder. Any interest payable is in addition to the original issue discount.
Section 1.3PaymentonNon-BusinessDays. Wheneveranypaymenttobemade shall bedueonaSaturday, Sunday orapublic holiday underthelawsofthe State of New York, such paymentmaybedueonthe nextsucceeding businessdayandsuch nextsucceeding dayshallbeincludedinthe calculation ofthe amountof accruedinterestpayable on such date.
Section 1.4Transfer. ThisNotemaybetransferredorsold, subjecttothe provisions ofSection 4.8ofthis Note,orpledged, hypothecatedorotherwisegrantedassecurity bythe Holder.
Section 1.5Replacement.Uponreceipt ofaduly executed,notarized andunsecuredwritten statementfromtheHolderwith respecttotheloss,theftordestruction of thisNote (oranyreplacementhereof), andwithoutrequiring anindemnity bondorothersecurity, or,inthecaseofamutilationofthisNote, uponsurrenderandcancellation ofsuchNote,theCompany shallissuea newNote,ofliketenor and amount,inlieu ofsuchlost,stolen, destroyed ormutilatedNote.
ARTICLE II
EVENTSOFDEFAULT;REMEDIES
Section 2.1Events ofDefault.Theoccurrenceofanyofthefollowing eventsshall be an “EventofDefault”underthis Note:
(a)theCompanyshallfailtomakethepayment ofany Principal Amountoutstanding onthedate suchpaymentis due hereunder;
(b)theCompanyshallfailtomake anypaymentofintereston the date such payment is due hereunder, provided, however, that if the payment of interest is made in shares of the Company’s Common Stock, it shall be an Event of Default if the Common Stock is not delivered to the Holder with3daysafterthe datesuchinterestisdue;
(c)the Company’s Common Stock is suspended from listing or fails to be quotedorlisted onatleastoneoftheOTC Markets,OTCBulletinBoard,Nasdaq CapitalMarket,NYSE MKTorTheNewYork Stock Exchange,Inc.foraperiodof5consecutiveTradingDays;
(d) the Company fails to file any reports in a timely fashion (past the filing of NT 10-Q or NT 10-K, which is a 15 day extension), causing their listing to become Delinquent;
(e) the Company shall be a party to any Change of Control;
(f)theCompany’s noticetotheHolder,including byway ofpublicannouncement, atanytime, ofitsinabilitytocomply, oritsintention not to comply,withproperrequests from the Holderforconversion ofthisNoteinto sharesofCommon Stock;
(g)theCompanyshall failto(i)timely deliverthesharesofCommon Stock uponconversion oftheNote orany accrued andunpaidinterest, or(ii)makethepayment ofanyfees and/orliquidated damagesunderthisNote or thePurchaseAgreement,whichfailureinthecaseof items(i)and(ii)ofthis Section 2.1(e)is notremedied within3business daysaftertheincurrencethereof;
(h) default shallbemadeinthe performanceorobservance of(i)anymaterialcovenant, condition oragreement containedinthisNote(otherthanassetforthinclause(e)ofthis Section 2.1)and such defaultisnotfully curedwithin 5business daysaftertheoccurrencethereofor(ii) anymaterial covenant, condition or agreement containedinthe PurchaseAgreement oranyotherTransactionDocumentswhichisnot coveredby any otherprovisions ofthis Section 2.1and such defaultisnotfully curedwithin5business daysaftertheoccurrencethereof;
(i) anymaterialrepresentation orwarrantymadebytheCompany hereinorinthePurchaseAgreement oranyotherTransactionDocumentsshallprovetohave beenfalseorincorrect orbreachedin amaterialrespect onthedateas ofwhichmade;
(j)theCompanyshall(A)defaultinanypaymentofanyamount oramounts of theprincipal orinterest onany indebtedness(otherthanthe indebtedness hereunder)theaggregate principal amountofwhichIndebtednessisin excessof$20,000or(B)defaultinthe observanceorperformance ofanyother agreement orconditionrelatingto any indebtednessorcontainedin anyinstrument oragreement evidencing, securing orrelatingthereto, orany other event shall occuror condition exist,theeffectofwhich default orother eventorconditionisto cause, ortopermittheHolderorbeneficiaryor beneficiariesof suchIndebtednessto cause,withthegiving of noticeifrequired, suchIndebtednessto become duepriortoitsstatedmaturity;
(k)theCompanyshall(i)applyfororconsenttotheappointmentof,orthetaking of possession by,areceiver, custodian,trustee or liquidator of itselforofallor asubstantialpart of its property orassets,(ii)makeageneralassignmentforthe benefitofitscreditors,(iii)commence avoluntary caseundertheUnited StatesBankruptcyCode(as noworhereafterineffect) orunderthe comparablelawsof anyjurisdiction(foreign ordomestic),(iv)file apetitionseekingtotake advantageof anybankruptcy,insolvency,moratorium,reorganization orother similarlawaffectingtheenforcement of creditors’rightsgenerally,(v)acquiesceinwritingto anypetitionfiled againstitinaninvoluntary case underUnitedStatesBankruptcyCode(as noworhereafterineffect) orunderthecomparablelaws ofanyjurisdiction(foreign ordomestic),(vi)issue anotice ofbankruptcy orwinding downofitsoperationsorissue apressreleaseregarding same,or (vii)takeanyaction underthelawsofanyjurisdiction(foreign or domestic)analogousto anyof theforegoing;
(l) a proceeding or case shallbe commencedinrespectoftheCompany,withoutits applicationorconsent,inany court ofcompetentjurisdiction, seeking(i) theliquidation,reorganization,moratorium, dissolution,windingup, orcomposition orreadjustment ofitsdebts,(ii)theappointmentofatrustee,receiver, custodian,liquidator orthelike ofitorofalloranysubstantialpartofitsassetsin connectionwiththeliquidation ordissolutionoftheCompanyor(iii) similarreliefinrespectof itunder any lawprovidingfor therelief ofdebtors, andsuchproceedingorcase describedin clause(i),(ii) or(iii) shallcontinue undismissed, orunstayed andineffect,fora period of60days oranyorderforrelief shallbeenteredinaninvoluntary caseunderUnited StatesBankruptcyCode(as noworhereafterin effect)orunderthe comparablelaws of anyjurisdiction(foreign or domestic)againsttheCompany or action underthelawsofanyjurisdiction(foreign ordomestic) analogoustoanyoftheforegoing shallbetakenwithrespecttotheCompanyand shallcontinue undismissed, orunstayedandin effectfora period of60days;or
(m)thefailure oftheCompanytoinstructitstransferagenttoremove anylegendsfrom shares ofCommon Stock eligibletobesold underRule 144 oftheSecuritiesActandissue such unlegended certificatestotheHolderwithin5business daysoftheHolder’srequestso long astheHolderhasprovidedreasonableassurances and opinionsofcounseltotheCompanythat such sharesofCommon Stockcan beresold pursuanttoRule 144;or
(n)thefailure oftheCompanytopayanyamounts duetotheHolderhereinwithin3 business days ofreceipt ofnoticetotheCompany.
Section 2.2RemediesUponAn EventofDefault.IfanEventofDefault shallhave occurredandshallbecontinuing,theHolder ofthisNotemay atanytime atits option,(a)declarethe entire unpaidPrincipal AmountofthisNote,togetherwithallinterest accruedhereon, dueandpayable in cash, andthereupon,thesameshallbe accelerated and so dueandpayable,without presentment, demand, protest,ornotice, allofwhich are hereby expressly unconditionally andirrevocablywaived bytheCompany,(b)subjectto Section 3.1(c) hereof,demand that the PrincipalAmountof thisNotethen outstanding shall be convertedinto sharesofCommon Stockat aConversion Price(as definedin Section 3.2 below) per share calculated pursuantto Section 3.1(b) below,assumingthatthe datethatthe Event ofDefaultoccursis theConversionDate, anddemandthatallaccrued andunpaidinterest under thisNote shall beconvertedinto sharesofCommon Stockin accordancewithSection3.2 hereof, or(c) exercise or otherwise enforce anyone ormore of the Holder’srights, powers, privileges,remediesandinterests underthisNote,the PurchaseAgreement, otherTransactionDocumentsor applicablelaw.No course of delay on thepartoftheHoldershalloperateasawaiverthereoforotherwiseprejudicetheright oftheHolder.Noremedy conferred hereby shallbe exclusive ofany otherremedyreferredto herein ornowor hereafter available atlaw,in equity, bystatuteorotherwise.
Section 2.3Default Interest. Furthermore, upontheoccurrence of anEventofDefault,thentothe extentpermitted bylaw and in addition to the remedies set forth in Section 2.2 above,theCompanywillpayinteresttotheHolder, payableondemand,onall amounts due undertheNotefromthedateofthe Event ofDefault untilsuchEventofDefaultiscured,attherate ofthelesserof15%andthemaximum applicablelegalrate perannum.
ARTICLE III
CONVERSION;ANTIDILUTION; PREPAYMENT
Section 3.1Conversion.
(a)Manner of Conversion.Atanytimeafterthe 90th day following theIssuanceDate,thisNoteshallbeconvertible(inwhole orin part),atthe optionoftheHolder(the“ConversionOption”),intofully paidand non-assessable shares of the Company’sCommon Stock onthedateonwhichtheHolderfaxes a notice of conversion(the “ConversionNotice”), duly executed,totheCompany(the “ConversionDate”), provided, however,that theConversion Price shall besubjectto adjustmentas describedin Section 3.5 below. TheHolder shalldeliverthisNotetotheCompany atthe address designatedinthe PurchaseAgreement atsuchtimethatthisNoteisfully converted. Withrespectto partial conversionsofthisNote,theCompanyshallkeepwrittenrecords ofthe amount of thisNote converted asofeachConversionDate.
(b)Calculation of Number of Shares to be Issued.OnanyConversionDate,theHoldermaycause anyoutstandingPrincipalAmountofthisNoteplus all accrued and unpaidinterestto convertinto a numberoffully paidand non-assessablesharesofCommon Stockequaltothequotient oftheelectedoutstandingPrincipal Amount ofthisNote plusallinterest accrued thereon as oftheConversionDatedivided bythe ConversionPriceas computed in accordance withSection 3.2below.
(c)ConversionLimitations;Holder’sRestriction onConversion.TheCompanyshallnot effectanyconversion of thisNote,andtheHolder shallnothavetherighttoconvert any portionofthisNote, totheextentthataftergiving effect to suchconversion,theHolder(togetherwiththeHolder’s affiliates),assetforth ontheapplicableConversionNotice,wouldbeneficially ownin excessof4.99%ofthenumberof shares ofthe Company’sCommon Stock outstandingimmediately aftergiving effect to such conversion. Forpurposes oftheforegoing sentence,the numberofshares ofCommon Stockbeneficially ownedbytheHolder anditsaffiliatesshallincludethe number ofshares ofCommon Stockissuable upon conversionofthisNotewithrespecttowhichthedeterminationisbeingmade,butshall excludethe number of shares ofCommon Stockwhichwould beissuable upon(A) conversion oftheremaining, non-convertedportion of thisNotebeneficially ownedbytheHolderoranyofits affiliatesand(B) exercise orconversion oftheunexercised ornon-converted portion ofanyother securitiesoftheCompany(including,withoutlimitation, any othernotesorthe Warrants) subjectto alimitationon conversion or exercise analogoustothelimitation contained herein beneficially owned bytheHolder or any ofits affiliates. Exceptassetforthinthe preceding sentence,forpurposes of thisSection, beneficial ownership shall be calculatedinaccordancewithSection13(d)oftheExchangeAct. Tothe extentthatthelimitation containedinthis Section applies,thedetermination ofwhetherthisNoteisconvertible(inrelationtoother securities owned bytheHolder) and ofwhich a portionofthisNoteisconvertible shall beinthesolediscretion ofsuchHolder. Toensurecompliancewiththisrestriction,theHolderwill be deemedtorepresenttotheCompany eachtimeitdelivers aConversionNoticethatsuchConversionNoticehasnotviolatedtherestrictionssetforthinthis Section andtheCompany shallhave no obligationtoverify or confirmthe accuracy of suchdetermination. For purposesofthis Section,in determiningthenumber of outstanding shares ofCommon Stock,theHoldermay rely onthenumber of outstanding shares ofCommon Stock asreflectedin(x)theCompany’smostrecentForm10-Q or Form 10-K(orsuchrelatedform), asthecasemay be,(y)amorerecent public announcement bytheCompany or(z) any other notice bytheCompany ortheCompany’s TransferAgent settingforththe number of shares ofCommon Stockoutstanding.Uponthewritten ororalrequest of theHolder,theCompany shallwithintwoTradingDaysconfirm orally andinwritingtotheHolderthe number of shares ofCommon Stockthen outstanding.Inany case,the numberofoutstanding sharesofCommon Stock shallbe determinedaftergiving effecttothe conversion or exercise of securities oftheCompany,includingthisNote, bytheHolder or itsaffiliatessincethedateasofwhich suchnumberof outstanding sharesofCommon Stockwasreported.The provisions of this Sectionmay bewaived bytheHolder upon, at the electionoftheHolder, notlessthan 61 days’priornoticetotheCompany, andthe provisionsofthis Section shall continuetoapply until such 61stday(or suchlater date,as determined bytheHolder,asmay bespecifiedin such notice ofwaiver).
Section 3.2ConversionPrice.Theterm “Conversion Price” shallmean the lower of (i) One Cent ($0.01) per share or 70% (30% discount) of the average of the 3 lowest reported sale prices for the Common Stock for the 10 Trading Days immediately prior to the Issuance Date or (ii) 70% (30% discount) of the average of the 3 lowest reported sale prices for the 10 Trading Daysimmediately prior totheConversionDate.
Section3.3MechanicsofConversion.
(a)Delivery of Common Stock.Notlaterthan 3TradingDaysafteranyConversionDate,theCompanyoritsdesignatedtransfer agent,asapplicable, shallissueanddelivertotheDepository TrustCompany(“DTC”)accountontheHolder’sbehalfviatheDepositWithdrawalAgentCommission System(“DWAC”)asspecifiedinthe ConversionNotice,registeredinthe name of the Holder orits designee,forthe numberofsharesofCommon StocktowhichtheHolder shallbeentitled.Inthe alternative, notlaterthan3TradingDaysafteranyConversionDate,theCompany shalldelivertotheHolderby expresscourier acertificate orcertificateswhichshallbefree ofrestrictivelegendsandtradingrestrictions(otherthanthoserequired by Section 4 of thePurchaseAgreement)representingthenumber ofshares ofCommon Stock being acquired upontheconversionof thisNote (the “DeliveryDate”).Notwithstandingtheforegoingtothe contrary,theCompany oritstransfer agent shall only be obligatedtoissueanddeliverthe sharestoDTC ontheHolder’s behalfviaDWAC(or certificatesfreeofrestrictivelegends)ifsuch conversionis inconnectionwithasaleandtheHolder hascompliedwiththe applicablerequirements of federal and state securities laws.Ifinthe case of anyConversionNotice suchcertificate or certificates are notdeliveredto orasdirected bytheHolder bytheDeliveryDate,theHolder shallbe entitled bywritten noticetotheCompanyatanytime on orbeforeitsreceipt ofsuch certificateor certificatesthereafter,torescindsuchconversion,inwhich eventtheCompany shallimmediatelyreturnthisNoteiftenderedforconversion,whereupontheCompany andtheHoldershall each berestoredtotheirrespective positionsimmediately prior tothedelivery ofsuch notice ofrevocation, exceptthat any amounts describedin Sections 3.3(b) and(c) shall be payablethroughthe date notice ofrescissionisgiventotheCompany.
(b)Penalty for Failure to Deliver Common Stock.TheCompany understandsthatadelayinthe delivery oftheshares ofCommon Stock upon conversionofthisNotebeyondtheDeliveryDatecouldresultineconomicloss totheHolder.IftheCompanyfailstodelivertotheHoldersuchsharesviaDWACoracertificateorcertificates pursuanttoSection 3.3(a)abovebytheDeliveryDate,theCompany shall payto theHolder,incash, anamountperTradingDayfor each TradingDay until such shares aredeliveredviaDWAC or certificatesare delivered,togetherwithinterest onsuchamount atarateof10% perannum, accruing until such amount and any accruedinterestthereonis paidinfull, equalto(i)1% ofthe aggregate principal amountoftheNoterequestedtobe convertedforthefirst 5 TradingDays aftertheDeliveryDateand(ii)2%oftheaggregate principal amountoftheNoterequestedtobeconvertedfor eachTradingDay thereafter.Nothing herein shalllimit aHolder’srighttopursue actualdamagesfortheCompany’sfailuretodelivercertificatesrepresenting sharesofCommon Stock upon conversionwithinthe period specifiedherein and theHolder shall havetherightto pursue allremedies availabletoitatlawor inequity(including,withoutlimitation, adecree ofspecific performanceand/or injunctiverelief).Notwithstanding anythingtothe contrary contained herein,theHolder shallbe entitledtowithdraw aConversionNotice, and uponsuchwithdrawaltheCompany shall only beobligatedto paytheliquidated damagesaccrued inaccordancewiththis Section3.3(b) throughthedatetheConversionNoticeiswithdrawn.
(c)Penalty in the Event of a Buy-In.Inadditiontoanyotherrights availabletotheHolder,iftheCompanyfailsto causeitstransfer agenttotransmittotheHolder acertificateorcertificatesrepresentingthesharesofCommon StockissuableuponconversionofthisNote onorbeforetheDeliveryDate, andifafter such datetheHolderisrequired byits brokertopurchase(inanopenmarkettransaction or otherwise) shares ofCommon Stocktodeliverinsatisfactionof a sale bytheHolderofthe shares ofCommon Stockissuable upon full or partial conversionof this Note (a“Buy-In”),thentheCompany shall(1) payin cashtotheHolderthe amount bywhich(x)theHolder’stotal purchase price(includingbrokerage commissions,ifany)for the sharesofCommon Stock so purchased exceeds(y)theamountobtained bymultiplying(A)thenumber ofsharesofCommon Stockissuable upon conversion of thisNotethattheCompanywasrequiredtodelivertotheHolderin connectionwiththe conversionatissuetimes(B)the price atwhichthe sell ordergivingriseto such purchase obligationwas executed, and(2)atthe option oftheHolder,eitherreinstatethe portionoftheNoteandequivalent number of shares ofCommon Stockforwhich such conversionwas not honored or delivertotheHolderthe number ofsharesofCommon Stockthatwouldhave beenissued hadtheCompanytimely compliedwithitsconversion anddelivery obligations hereunder. Forexample,iftheHolder purchases 20,000 shares ofCommon Stock having atotalpurchasepriceof $11,000 (or $0.55 per share)to cover aBuy-Inwithrespecttoan attempted conversion of shares ofCommon Stockwith an aggregate sale pricegivingriseto such purchase obligationof $10,000 (or $0.50 per share),under clause(1) oftheimmediately preceding sentence,theCompany shallberequiredtopaytheHolder $1,000. TheHolder shall provide written notice totheCompanyindicatingthe amounts payabletotheHolderinrespect oftheBuy-In,togetherwith applicable confirmations and other evidencereasonablyrequested bytheCompany.Nothing in this Noteshalllimit aHolder’srighttopursue any otherremedies availabletoit hereunder, at law or in equityincluding,withoutlimitation, a decreeof specific performanceand/orinjunctivereliefwithrespecttotheCompany’sfailuretotimely deliver certificatesrepresenting sharesofCommon Stock upon conversionofthisNote asrequired pursuanttotheterms hereof.
Section 3.4Right of Company to Pay in Cash. Subject to Section 3.6 below, within 72 hours from delivery by the Holder of the Holder’s first Conversion Notice to the Company, the Company may pre-pay in cash the entire Principal Amount, all accrued interest thereon and any other amounts due and owing under the Note. If the Company fails to pay the Principal Amount, all accrued interest thereon and any other amounts due and owing under the Note in cash within 72 hours from receipt of the Holder’s first Conversion Notice, upon receipt of any subsequent Conversion Notice from the Holder, the Company must issue the Common Stock in accordance with the requirements of this Section 3 and will not be entitled to pay all or any portion of the Note in cash prior to issuing the Common Stock, unless the Holder, in its sole and absolute discretion, agrees to accept such payment.
Section 3.5Adjustment ofConversion Price.
(a)TheConversion Priceshall besubjectto adjustmentfromtimetotime asfollows:
(i)AdjustmentsforStock Splits andCombinations.IftheCompany shallat anytime orfrom timetotimeaftertheIssuanceDate,effectastock splitofthe outstandingCommon Stock,theapplicableConversion Priceineffectimmediately priortothe stocksplitshallbe proportionately decreased.IftheCompany shallatanytime orfromtimetotime aftertheIssuanceDate,combinethe outstanding sharesofCommon Stock,theapplicableConversion Price ineffectimmediately priortothecombination shallbeproportionatelyincreased.Anyadjustments underthis Section3.5(a)(i) shallbeeffective atthe closeof business onthedatethestock splitor combination occurs.
(ii)AdjustmentsforCertainDividends andDistributions.IftheCompanyshall atany time orfromtimetotime aftertheIssuanceDate,makeorissue orsetarecord dateforthe determination ofholders ofCommon Stock entitledtoreceive adividendorother distribution payablein sharesofCommon Stock,then,andineach event,the applicableConversion Priceineffectimmediately priortosuch eventshallbedecreased asofthetime ofsuchissuanceor,inthe eventsuchrecorddate shallhavebeenfixed, as ofthecloseofbusinessonsuchrecord date,bymultiplying,theapplicableConversionPricethenineffect byafraction:
(1)thenumeratorofwhichshallbethetotal numberof shares ofCommon Stockissued and outstandingimmediately priortothetime ofsuchissuance orthecloseof business on suchrecord date;and
(2)thedenominatorofwhich shallbethetotal numberof sharesofCommon Stockissued and outstandingimmediately priortothetime ofsuchissuance orthecloseof business on suchrecorddateplusthenumber ofsharesofCommon Stockissuablein payment ofsuch dividendordistribution.
(iii)AdjustmentforOtherDividends andDistributions.IftheCompany shall atanytime orfromtimetotime aftertheIssuanceDate,makeorissueorset arecord dateforthe determination ofholders ofCommon Stockentitledtoreceive adividendorother distribution payablein otherthansharesofCommon Stock,then,andineach event, anappropriaterevisiontotheapplicableConversion Price shallbemadeandprovision shallbemade(by adjustments oftheConversion Priceor otherwise)sothattheHolderof thisNoteshall receive uponconversionsthereof,in additiontothe numberofsharesofCommon Stockreceivablethereon,thenumber ofsecurities oftheCompanywhichthe Holderwould havereceived hadthisNotebeenconvertedintoCommonStockonthedateofsuch event andhadthereafter, duringtheperiodfromthe dateofsucheventto andincludingtheConversionDate,retained suchsecurities(togetherwith anydistributions payablethereon during suchperiod),giving applicationtoalladjustments calledforduring such periodunderthis Section3.5(a)(iii)withrespecttotherights oftheHolderofthisNote;provided,however,thatif suchrecord dateshallhavebeenfixed andsuchdividendisnotfully paid orif suchdistributionisnotfullymadeonthedatefixedtherefor,theConversion Priceshall be adjusted pursuanttothis paragraphas ofthetime of actualpaymentof such dividends ordistributions.
(iv)AdjustmentsforReclassification, Exchangeor Substitution.IftheCommon Stockissuable uponconversion of thisNote atanytimeorfromtimetotime aftertheIssuanceDate shall bechangedtothe sameor different numberof shares of any classor classesofstock,whether byreclassification, exchange, substitutionorotherwise(otherthanbywayofastock splitor combination ofsharesorstock dividendsprovidedfor inSections 3.5(a)(i),(ii) and(iii), orareorganization,merger, consolidation, or saleof assetsprovidedforinSection 3.5(a)(v)),then,andin eachevent, anappropriaterevisiontotheConversion Priceshallbemadeandprovisions shallbemade(by adjustments of theConversion Priceorotherwise) sothattheHolder shallhavetheright thereafterto convertthisNoteintothekind and amountofsharesofstock andothersecuritiesreceivable upon suchreclassification, exchange,substitution orother change, allsubjecttofurtheradjustment asprovided herein.
(v)AdjustmentsforReorganization,Merger,Consolidation or SalesofAssets.Ifatanytime orfromtimetotime aftertheIssuanceDatethere shallbeacapitalreorganization oftheCompany(otherthanbyway ofastock splitorcombination of shares orstock dividendsor distributions providedforinSection 3.5(a)(i),(ii) and (iii), orareclassification,exchangeorsubstitution ofsharesprovidedfor inSection 3.5(a)(iv)), oramerger orconsolidationof theCompanywithor into anothercorporationwheretheholdersofoutstandingvoting securities priorto suchmergeror consolidation do notownover50%oftheoutstandingvoting securities of themerged or consolidated entity,immediately aftersuchmerger or consolidation,orthe saleof allor substantiallyall oftheCompany’s properties orassetstoany other person(an “OrganicChange”),thenas apartofsuchOrganicChangeanappropriaterevisiontotheConversion Priceshallbemadeandprovision shallbemade(by adjustmentsoftheConversion Priceorotherwise) sothattheHolder shallhavetherightthereaftertoconvert suchNoteintothekind andamount ofsharesofstock andother securitiesor property of theCompanyoranysuccessor corporationresultingfrom suchOrganic Change.In anysuch case, appropriate adjustment shallbemadeinthe application oftheprovisionsofthis Section3.5(a)(v)withrespecttotherights oftheHolderaftertheOrganicChangetothe endthattheprovisionsofthis Section 3.5(a)(v)(including anyadjustmentintheapplicableConversionPricethen ineffect and thenumberof sharesofstock orothersecurities deliverable uponconversion of thisNote) shallbeappliedafterthat eventinasnearly an equivalentmannerasmaybe practicable.
(vi)Issuance of Common Stock andCommon StockEquivalents. If the Company at any time while this Note is outstanding, shall issue shares of Common Stock or Common Stock Equivalents (as defined in the Purchase Agreement) entitling any person to acquire shares of Common Stock at a fixed price per share less than the applicable Conversion Price (if the holder of the Common Stock or Common Stock Equivalent so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at a price per share which is less than the applicable Conversion Price, such issuance shall be deemed to have occurred for less than the applicable Conversion Price), then, at the sole option of the Holder, the Conversion Price shall be adjusted to mirror the conversion, exchange or purchase price for such Common Stock or Common Stock Equivalents (including any reset provisions thereof) at issue. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. The Company shall notify the Holder in writing, no later than 1 business day following the issuance of any Common Stock or Common Stock Equivalent subject to this Section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms.
(vii)ConsiderationforStock.Incase anysharesofCommon StockoranyCommon StockEquivalentsshall beissued orsold:
(1)in connectionwithanymergerorconsolidationinwhichtheCompanyisthe surviving corporation(otherthananyconsolidation ormergerinwhichthepreviously outstanding sharesofCommon Stock oftheCompanyshallbechangedtoor exchangedforthestock or othersecuritiesofanother corporation),theamount ofconsiderationtherefor shallbe deemedto bethefairvalue,asdeterminedreasonably andingoodfaith bytheBoard ofDirectorsoftheCompany, ofsuch portionofthe assets andbusinessofthe non-surviving corporation assuchBoardmay determinetobe attributableto such shares ofCommon Stock,Convertible Securities,rights orwarrantsoroptions,asthe casemaybe;or
(2)intheeventof anyconsolidation ormerger oftheCompanyinwhichtheCompanyis notthesurviving corporation orinwhichthe previously outstanding sharesofCommon Stock oftheCompany shallbe changedinto orexchangedforthestock orothersecuritiesof another corporation,orintheeventofany sale of allorsubstantially alloftheassetsoftheCompany for stockorothersecuritiesofanycorporation,theCompanyshallbedeemedtohaveissued anumberof sharesofitsCommon Stockforstock orsecurities orother property oftheothercorporation computedonthebasisoftheactual exchangeratio onwhichthetransactionwaspredicated, andforaconsideration equal tothefairmarketvalue onthedateof suchtransaction of allsuchstock orsecuritiesorother property oftheother corporation.
If any suchcalculationresultsinadjustment of (i)theapplicableConversionPrice or (ii) thenumber ofshares ofCommon Stockissuable uponconversionoftheNote,the determination oftheapplicableConversion Priceorthe numberofsharesofCommon Stockissuable uponconversionoftheNoteimmediately prior to suchmerger, consolidationorsale, shallbemadeaftergiving effectto such adjustment ofthe number of shares ofCommon Stockissuable uponconversionoftheNote.IntheeventCommon Stockis issuedwith other shares orsecuritiesand/orother assets of theCompanyfor consideration,theconsideration computed as providedinthis Section 3.5(vii) shall be allocated amongsuchsecurities andassets as determinedingoodfaith bytheBoardofDirectorsof theCompany.
(b)RecordDate.In casetheCompany shalltakerecordofthe holdersofitsCommon Stock forthepurpose ofentitlingthemtosubscribeforor purchaseCommon StockorConvertibleSecurities,thenthedateoftheissueorsaleofthe sharesofCommon Stockshall bedeemedto besuchrecord date.
(c)CertainIssuesExcepted.Anything hereintothe contrary notwithstanding,theCompany shallnot berequiredtomake any adjustmenttotheConversionPricein connectionwith(i) securitiesissued(otherthanforcash) in connectionwith amerger, acquisition, orconsolidation,(ii) securitiesissued pursuanttoabonafidefirm underwritten public offering oftheCompany’s securities,(iii) securitiesissuedpursuanttothe conversion or exercise of convertibleor exercisable securitiesissued oroutstanding onorpriortothe datehereof orissued pursuanttothe PurchaseAgreement,(iv)the sharesofCommon Stockissuable uponthe exercise of theWarrants,(v)securitiesissuedin connectionwith strategiclicense agreements orother partnering arrangements solong assuchissuances arenotforthe purposeofraising capital,(vi)Common Stockissued oroptionsto purchaseCommon StockgrantedorissuedpursuanttotheCompany’sstockoptionplans andemployeestockpurchase plansasthey now exist and(vii)the payment ofanyaccruedinterestinshares ofCommon Stockpursuanttothis Note.
(d)NoImpairment. TheCompany shallnot, by amendmentofitsArticlesofIncorporationor through anyreorganization,transferofassets, consolidation,merger, dissolution,issueor saleofsecuritiesoranyothervoluntary action,avoid orseek toavoidtheobservance orperformanceof anyofthetermstobe observed orperformed hereunder bytheCompany, butwill atalltimesingoodfaith, assistinthe carrying outofalltheprovisions ofthis Section 3.5 andinthetaking of all suchaction asmay benecessary orappropriateinordertoprotecttheConversionRights oftheHolder againstimpairment.Inthe event theHolder shall electto convert theNoteas provided herein,theCompany cannotrefuse conversionbasedon any claimthat theHolder orany oneassociated or affiliatedwith theHolder hasbeenengagedin anyviolation oflaw,violationofan agreementtowhich theHolderis a party orfor anyreasonwhatsoever, unlessaninjunctionfroma court,ornotice,restraining andor adjoining conversion ofallorofpart of theNote shallhaveissued and theCompany postsasurety bondforthe benefit ofthe Holderinan amount equal to 130%of theamountoftheNotetheHolder haselectedtoconvert,which bond shallremainin effectuntilthecompletionof arbitration/litigationofthe dispute andtheproceeds ofwhich shallbe payabletosuchHolderinthe eventitobtainsjudgment.
(e)CertificatesastoAdjustments.Upon occurrence ofeach adjustment orreadjustment oftheConversion Priceornumber ofshares ofCommon Stockissuable uponconversion ofthisNote pursuanttothis Section3.5,theCompany atits expenseshall promptly computesuch adjustment orreadjustmentinaccordancewiththeterms hereofandfurnishtotheHolder acertificate settingforthsuch adjustmentandreadjustment,showingin detailthefacts upon which such adjustmentorreadjustmentisbased. TheCompany shall, uponwrittenrequestoftheHolder, at anytime,furnishor cause tobefurnishedtotheHolderalike certificate settingforthsuchadjustments andreadjustments,the applicableConversion Pricein effect atthetime, andthe numberofsharesofCommon Stock andthe amount,ifany, ofother securitiesorpropertywhichatthetimewould bereceived uponthe conversionofthisNote.Notwithstandingtheforegoing,theCompany shall not be obligatedto deliver a certificate unlesssuchcertificatewouldreflect anincrease ordecrease ofat least1%ofsuch adjusted amount.
(f)IssueTaxes.TheCompany shallpay any and allissue and other taxes, excludingfederal, stateor localincometaxes,thatmaybepayable inrespectofany issueordelivery ofsharesofCommon Stock onconversion of thisNotepursuantthereto;provided,however,that theCompanyshall notbe obligatedtopayany transfertaxesresultingfromanytransferrequested bytheHolderin connectionwith anysuchconversion.
(g)FractionalShares.Nofractional sharesofCommon Stockshallbeissued upon conversion ofthisNote.Inlieuof anyfractional sharestowhichtheHolderwouldotherwise beentitled,theCompany shallpay cashequaltotheproductofsuchfractionmultiplied bytheaverage oftheclosingbidprices oftheCommon Stockforthe5 consecutiveTradingDaysimmediately precedingtheConversionDate.
(h)ReservationofCommon Stock.TheCompanyshallatalltimeswhenthisNote shallbeoutstanding,reserve andkeepavailable outofitsauthorized butunissuedCommon Stock, such numberofsharesofCommon Stockasshallfromtimetotime besufficienttoeffecttheconversionofthisNoteandallinterest accruedthereon;providedthatthenumberofshares ofCommon Stock soreserved shall at notime belessthan 300% ofthe number of shares ofCommon StockforwhichthisNote and allinterestaccruedthereonare at anytime convertible (the “Reserved Amount”).TheCompanyshall,fromtimetotimeinaccordance withFloridacorporatelaw,increasetheauthorized numberofsharesofCommon Stockifatanytimethe unissued numberofauthorized sharesshallnotbe sufficientto satisfytheCompany’s obligations underthis Section 3.5(h). The Company acknowledges that (i) it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Company does not maintain the Reserved Amount it will be considered an Event of Default under Section 2.1 of this Note.
(i)RegulatoryCompliance.IfanysharesofCommonStocktobereservedforthe purpose ofconversion ofthisNoteorany interestaccrued thereon require registration orlistingwithor approvalofanygovernmental authority, stockexchange orotherregulatory bodyunderanyfederalor statelaworregulationorotherwise beforesuch sharesmay bevalidlyissued ordelivered upon conversion,theCompany shall, atits sole cost and expense,ingoodfaith and as expeditiously as possible, endeavorto securesuchregistration,listing orapproval,asthe casemay be.
Section 3.6Prepayment.
(a)Prepayment by the Company. Notwithstanding anythingtothe contrary contained herein,during the 180 days following the Issuance Date (the “Prepayment Period”) the Companyshallhavetheright, atthe Company’soption,toprepayin cashallor any portion ofthisNote as follows: (i) during the first 90 days of the Prepayment Period, the amount to prepay the Note shall equal 125%ofthePrincipal AmountoftheNote being prepaidplusallaccrued andunpaidinterest applicable atthetime ofsuchrequest; (ii) during the next 45 days of the Prepayment Period, the amount to prepay the Note shall equal135%ofthe principal amountoftheNote being prepaidplusallaccrued andunpaidinterest applicable atthetime ofsuchrequest; and (iii) during the final 45 days of the Prepayment Period, the amount to prepay the Note shall equal145%ofthe principal amountoftheNote being prepaidplusallaccrued andunpaidinterest applicable atthetime ofsuchrequest.
(b)PrepaymentUponanEventofDefault.Notwithstanding anythingtothe contrary contained herein, uponthe occurrenceofanEventofDefaultdescribedinSections 2.1(a)-(m) hereof,theHolder shallhavetheright, atsuchHolder’s option,torequiretheCompanytoprepayin cashalloraportion ofthisNoteataprice equalto 150%ofthe aggregate principal amountofthisNoteandall accrued andunpaidinterest applicable atthetime ofsuchrequest(the“EventofDefault PrepaymentPrice”).NothinginthisSection 3.6(b) shall limittheHolder’srights underSection 2.2 hereof.
(c)PrepaymentOptionUpon MajorTransaction.In additiontoall otherrightsoftheHoldercontained herein,simultaneouswiththeoccurrenceofaMajorTransaction(asdefinedin Section 3.6(e)hereof),theHolder shallhavetheright, attheHolder’s option,torequiretheCompanytoprepay allor aportion oftheHolder’sNoteatapriceequalto 150%oftheaggregate principal amount ofthis Note plus all accrued and unpaidinterest(the“MajorTransaction Prepayment Price”).
(d)PrepaymentOptionUpon Triggering Event.In additiontoallotherrights oftheHolder contained herein,afteraTriggering Event(as definedbelow),theHolder shallhavetheright,attheHolder’s option,torequiretheCompanytoprepay allor aportionofthisNotein cashataprice equaltothesumof(i)thegreater of(A) 150%oftheaggregate principal amount ofthisNoteplusall accrued andunpaidinterest and(B)inthe eventat suchtimetheHolderisunableto obtainthebenefitofits conversionrightsthroughtheconversion of thisNoteandresale of thesharesofCommon Stockissuable uponconversion hereofin accordancewiththeterms ofthisNoteandthe otherTransactionDocuments,theaggregate principal amountofthisNoteplusallaccruedbutunpaidinterest hereon,divided bytheConversionPrice on(x) the date thePrepayment Price (asdefined below)is demandedorotherwisedueor (y)the date thePrepayment Price ispaidinfull,whicheveris less,multiplied bytheVWAPon(x)thedatethePrepayment Priceis demandedor otherwise due, and(y)the datethePrepayment Priceis paidinfull,whicheverisgreater, and(ii) allotheramounts, costs, expenses andliquidated damagesdueinrespectofthisNoteandthe otherTransactionDocuments(the“Triggering EventPrepayment Price,” and,collectivelywiththe“Major TransactionPrepayment Price,”the “Prepayment Price”).
(e)MajorTransaction. A“MajorTransaction” shallbe deemedto haveoccurred at suchtime asanyofthefollowing events:
(i) a Change of Control;
(ii)theconsolidation,mergerorotherbusiness combination oftheCompanywith or into another Person (otherthan (A) pursuantto amigratorymergereffected solelyfor the purpose ofchangingthejurisdiction ofincorporation oftheCompany or(B) aconsolidation,mergeror other business combinationinwhichholders oftheCompany’svotingpowerimmediately priortothetransaction continue afterthetransactionto hold, directly or indirectly,thevoting powerof the surviving entity orentities necessarytoelect amajority of themembers ofthe boardofdirectors(ortheir equivalentifotherthan acorporation) ofsuch entity orentities);or
(ii)the saleortransferofmorethan50%oftheCompany’s assets(based onthefairmarketvalueasdeterminedingoodfaith bytheCompany’sBoard ofDirectors) other thaninventoryinthe ordinary courseofbusinessin oneorarelated series oftransactions; or
(iii) closing ofapurchase,tenderorexchange offermadetotheholdersofmorethan50%ofthe outstanding sharesofCommon Stockinwhichmorethan50%ofthe outstanding sharesofCommon Stockweretendered andaccepted.
(f)Triggering Event. A“Triggering Event”shallbedeemedtohave occurredat suchtime asany ofthefollowing events:
(i)thesuspensionfromlisting,without subsequentlisting onanyoneof,orthefailureof the Common Stockto belisted onat least one of theOTCQB,OTCBulletinBoard,Nasdaq CapitalMarket,NYSE MKTorTheNewYork Stock Exchange,Inc.for a periodof5consecutiveTradingDays;
(ii)theCompany’s noticetothe HolderofthisNote,including bywayof publicannouncement,atanytime,ofitsinabilitytocomply(includingforany ofthereasonsdescribedin Section3.8)or its intention not to complywithproperrequestsforconversion ofanyNoteinto sharesofCommon Stock;or
(iii)theCompany’sfailuretocomplywithaConversionNoticetenderedin accordancewiththeprovisions ofthisNotewithin 10 businessdaysafterthereceipt bytheCompany of the ConversionNotice;or
(iv)theCompanyderegistersitssharesofCommon Stockandasaresult suchsharesofCommon Stockare nolongerpubliclytraded;or
(v)theCompanyconsummates a“going private”transaction andasaresultthe Common Stockis nolongerregistered underSections 12(b)or12(g) oftheExchange Act.
(g)Mechanics ofPrepayment atOption ofHolderUponMajorTransaction.No soonerthan15 daysnorlaterthanten(10)days priortotheconsummation ofaMajorTransaction,butnot priortothe public announcement ofsuchMajorTransaction,theCompany shall deliverwritten noticethereofviafacsimile andovernight courier(“NoticeofMajorTransaction”)totheHolderofthisNote.AtanytimeafterreceiptofaNoticeofMajor Transaction(or,intheeventaNotice of Major Transactionisnot delivered atleast10 days priorto aMajorTransaction, at anytimewithin 10days priortoaMajorTransaction), the Holderof theNotethen outstandingmayrequiretheCompanyto prepay, effectiveimmediately priortotheconsummation of such Major Transaction, all oftheNotethen outstanding by deliveringwritten noticethereofviafacsimile and overnight courier(“NoticeofPrepayment atOption ofHolderUponMajor Transaction”)totheCompany,whichNotice ofPrepayment atOption ofHolderUpon MajorTransactionshall indicate(i)theNotethat the Holderis electingto have prepaid and(ii)theapplicableMajorTransaction Prepayment Price, as calculated pursuantto Section 3.6(c)above.
(h)MechanicsofPrepayment atOption ofHolderUponTriggering Event.Within onebusinessdayaftertheoccurrenceofaTriggering Event,theCompany shalldeliverwritten noticethereofviafacsimile and overnight courier(“NoticeofTriggering Event”)to the Holder ofthe Note. At anytime after theearlierofthe Holder’sreceiptofaNoticeofTriggering Event andthe Holderbecoming awareofaTriggering Event, the HolderofthisNotemayrequiretheCompanytoprepaytheNoteby deliveringwritten noticethereofviafacsimile andovernight courier(“NoticeofPrepayment atOptionofHolderUponTriggering Event”)totheCompany,whichNoticeof Prepayment atOption ofHolderUponTriggering Eventshallindicate(i) theamountof theNote thatthe Holderis electingtohave prepaid and(ii)theapplicableTriggering EventPrepayment Price,ascalculated pursuantto Section 3.6(d) above. The Holder shall only bepermittedtorequiretheCompanyto prepaythe Note pursuanttoSection 3.6hereofforthegreaterofaperiod of10daysafterreceipt by the Holder ofaNotice ofTriggering Eventor forsolongassuchTriggering Eventiscontinuing.
(i)Payment ofPrepayment Price.UpontheCompany’sreceipt ofaNotice(s) of Prepayment atOption ofHolderUponTriggering Eventor aNotice(s)ofPrepayment atOptionofHolderUpon MajorTransactionfromthe Holder ofthe Note,theCompany shall immediately notify the Holder oftheNotebyfacsimileoftheCompany’sreceipt ofsuchNotice(s)ofPrepaymentatOptionofHolderUpon Triggering EventorNotice(s) ofPrepayment at OptionofHolderUponMajor Transaction and the Holdershallpromptly submittotheCompanythe Holder’sNotewhich the Holder haselectedtohave prepaid. TheCompany shalldeliverthe applicable Triggering EventPrepayment Price,inthecaseofaprepayment pursuanttoSection 3.6(d),to the Holderwithin5 businessdays aftertheCompany’sreceipt of aNotice ofPrepaymentatOption ofHolderUponTriggering Eventand,inthecaseofaprepayment pursuanttoSection 3.(e),theCompany shalldelivertheapplicable MajorTransaction Prepayment Priceimmediately prior tothe consummation of theMajor Transaction.IftheCompanyshallfailtoprepaytheNote(otherthanpursuantto adisputeastothearithmetic calculation of the Prepayment Price),inadditionto anyremedy the HolderoftheNotemay have under thisNoteandthe PurchaseAgreement,theapplicable Prepayment Pricepayableinrespect oftheNote notprepaid shall bearinterest attherateof2%permonth(proratedforpartialmonths) until paidinfull.UntiltheCompany pays such unpaid applicablePrepayment Priceinfullto the Holder, theHolder shallhavethe option(the“VoidOptional PrepaymentOption”)to,inlieuofprepayment,requiretheCompanytopromptlyreturntothe Holder theNotethatwas submittedforprepayment underthis Section 3.6and forwhich theapplicable Prepayment Pricehas notbeen paid,by sendingwritten notice thereoftotheCompanyviafacsimile(the “VoidOptional PrepaymentNotice”).UpontheCompany’sreceiptof suchVoidOptionalPrepaymentNotice(s) andpriortopayment ofthefull applicable Prepayment Priceto the Holder,(i)theNoticeof Prepayment atOption ofHolderUponTriggering EventortheNoticeofPrepayment atOption ofHolderUpon MajorTransaction, asthe casemay be, shallbenullandvoidwithrespecttotheNote submittedforprepayment andforwhichtheapplicable Prepayment Pricehas notbeenpaid,(ii)theCompany shallimmediatelyreturn theNotesubmittedtotheCompanyby the Holder for prepayment underthisSection 3.6(i)andforwhich theapplicable Prepayment Pricehas notbeen paid and(iii)theConversion Price ofsuchreturnedNoteshallbeadjustedtothelesser of(A)theConversion Priceasin effectonthedateonwhichtheVoidOptionalPrepaymentNotice isdeliveredtotheCompany and(B)thelowestClosingBid Price duringthe period beginning onthe date onwhichtheNoticeof Prepayment ofOption ofHolderUponMajorTransaction ortheNotice(s) ofPrepayment atOption ofHolderUponTriggering Event, asthe casemay be,is deliveredtotheCompany and ending onthedate onwhichtheVoidOptionalPrepaymentNoticeis deliveredtotheCompany; providedthatno adjustment shallbemadeifsuch adjustmentwouldresultinanincreaseoftheConversionPricethenin effect. The Holder’sdelivery ofaVoidOptional PrepaymentNotice andexercise ofitsrightsfollowing suchnotice shallnoteffecttheCompany’s obligationstomake any paymentswhichhaveaccrued priortothedateofsuch notice. Payments providedfor inthis Section 3.6 shall haveprioritytopaymentstoother stockholdersinconnectionwith aMajorTransaction.
(j)Company PrepaymentOption upon Major Transaction.Uponthe consummation ofaMajor Transaction,theCompanymay prepayincashallorany portion of theoutstanding principal amountofthisNotetogetherwithall accrued andunpaidinterestthereon uponatleast 30days priorwritten noticetotheHolder(the“Company’s PrepaymentNotice”) ataprice equalto 150%ofthe aggregate principal amountofthis Noteplus anyaccrued butunpaidinterest(the“Company’s PrepaymentPrice”); provided,however,thatif the Holder has delivered aConversionNoticetotheCompanyor delivers aConversionNoticewithinsuch 30day periodfollowing delivery oftheCompany’s PrepaymentNotice,the principal amountoftheNoteplusanyaccruedbut unpaidinterest designatedtobeconvertedmay notbe prepaid bytheCompany andshall beconverted in accordancewith Section3.3 hereof;providedfurtherthatif duringthe period between delivery oftheCompany’s PrepaymentNotice and theCompany’sPrepaymentDate(asdefined below), the Holdershall become entitledandelectsto deliver aNoticeof Prepayment atOptionofHolderUpon MajorTransaction orNoticeofPrepayment atOptionofHolder uponTriggering Event,thensuchrightsofthe Holdershalltakeprecedence overthepreviously deliveredCompanyPrepaymentNoticeifthe Holderso elects.TheCompany’s PrepaymentNotice shallstatethedateofprepaymentwhich dateshall bethe date ofthe consummation ofthe Major Transaction(the “Company’s PrepaymentDate”),theCompany’s Prepayment Priceandtheprincipal amountofNoteplusany accruedbutunpaidinterestto beprepaid bytheCompany.TheCompany shalldelivertheCompany’s PrepaymentPriceontheCompany’s PrepaymentDate,provided,thatif theHolderdelivers aConversionNotice before theCompany’s PrepaymentDate,thenthe portion oftheCompany’s Prepayment Pricewhichwouldbe paidtoprepaytheNote coveredby suchConversionNoticeshallbereturnedtotheCompanyupondelivery oftheCommon Stockissuablein connectionwithsuchConversionNoticetothe Holder.OntheCompany’s PrepaymentDate,theCompany shallpaytheCompany’s Prepayment Price, subjectto any adjustment pursuanttotheimmediately preceding sentence,tothe Holder.IftheCompany failsto paytheCompany’s Prepayment Pricebythe 3rdbusinessday aftertheCompany’s PrepaymentDate,the prepaymentwill bedeclared nullandvoid andtheCompany shall loseitsright to serve aCompany’s PrepaymentNotice pursuanttothisSection 3.6(j)inthe future.Notwithstandingtheforegoingtothe contrary,theCompanymay effect aprepayment pursuanttothis Section 3.6(j)onlyiftradingintheCommon Stock shallnothavebeensuspended bytheSecurities and ExchangeCommission ortheNasdaq Capital Market(or other exchange ormarket onwhichtheCommon Stockistrading), andtheCompanyis inmaterial compliancewiththeterms andconditions of thisNoteandtheotherTransactionDocuments.
Section 3.7Inabilityto FullyConvert.
(a)Holder’ sOptionifCompanyCannotFullyConvert.If,upontheCompany’sreceipt ofaConversionNotice,theCompanycannotissue sharesofCommon Stockforanyreason,including,withoutlimitation, becausetheCompany(w)doesnot havea sufficient numberof sharesofCommon Stockauthorized andavailable, or(x)is otherwiseprohibited byapplicablelawor bytherules orregulations of anystockexchange,interdealer quotation system or other self-regulatory organizationwithjurisdiction overthe Companyoranyof itssecuritiesfromissuing alloftheCommon StockwhichistobeissuedtotheHolder pursuantto aConversion Notice,thentheCompanyshall issue asmany shares ofCommon Stock asitis abletoissueinaccordancewiththeHolder’sConversionNotice and,withrespecttothe unconverted portionofthis Note,the Holder, solelyatHolder’s option, canelectto:
(i)requiretheCompanytoprepaythatportionofthisNoteforwhichtheCompanyisunabletoissueCommon StockinaccordancewiththeHolder’sConversionNotice(the “Mandatory Prepayment”) ataprice pershare equaltothe Conversion Price asofsuchConversionDate(the“Mandatory Prepayment Price”); or
(ii)voiditsConversionNotice andretain orhavereturned, asthe casemay be,thisNote (providedthat theHolder’svoidingitsConversionNoticeshallnoteffecttheCompany’s obligationstomake anypaymentswhich have accruedpriortothe dateofsuch notice).
Intheevent theHoldershallelecttoconvert anyportionofthe Noteasprovided herein,theCompany cannotrefuse conversionbasedonanyclaimthattheHolder oranyoneassociated or affiliatedwith theHolder hasbeenengagedin anyviolation oflaw,violationofan agreementtowhich theHolderis aparty orforanyreasonwhatsoever, unless,aninjunctionfromacourt, onnotice,restraining andor adjoining conversion ofallorpart of theNote shallhave beenissuedandtheCompany postsa surety bondforthe benefit oftheHolderin an amount equalto 130% oftheprincipalamount oftheNote,which bondshallremainineffect untilthecompletion of arbitration/litigationofthe dispute andtheproceeds ofwhich shallbepayabletosuchHolderinthe eventitobtainsjudgment.
(b)Mechanics ofFulfillingHolder’sElection.TheCompany shall immediately sendviafacsimiletotheHolder, uponreceiptofafacsimile copyofaConversionNoticefromtheHolderwhichcannotbefully satisfiedasdescribedinSection 3.7(a)above, anotice oftheCompany’sinabilitytofully satisfytheConversionNotice(the “Inabilityto FullyConvertNotice”). SuchInabilityto FullyConvertNotice shall indicate(i)thereasonwhytheCompanyis unabletofully satisfy the Holder’sConversionNotice,(ii)theamount ofthisNotewhichcannot beconverted and(iii)theapplicable Mandatory Prepayment Price.TheHolder shall notifytheCompany ofitselection pursuantto Section 3.7(a)aboveby deliveringwritten noticeviafacsimiletotheCompany(“NoticeinResponsetoInability toConvert”).
(c)Payment ofPrepayment Price.IftheHolder shallelectto havetheNote prepaid pursuanttoSection3.7(a)(i) above,theCompanyshallpaytheMandatoryPrepayment PricetotheHolderwithin 30days oftheCompany’sreceiptoftheHolder’sNoticeinResponsetoInabilitytoConvert,providedthatpriortotheCompany’sreceiptoftheHolder’sNoticeinResponsetoInabilitytoConverttheCompany has notdelivered a noticetotheHolder stating,tothe satisfaction oftheHolder,thattheeventor conditionresultingintheMandatory PrepaymenthasbeencuredandallConversion SharesissuabletotheHolder can andwillbe deliveredtotheHolderin accordancewiththeterms ofthisNote.IftheCompany shallfailto paythe applicable Mandatory Prepayment PricetotheHolder on atimely basisas describedinthis Section3.7(c)(otherthanpursuantto adisputeastothedeterminationofthearithmetic calculationofthe Prepayment Price),in additiontoanyremedytheHoldermay have underthisNote andthe PurchaseAgreement, suchunpaidamountshallbear interest at therate of2% permonth(proratedforpartialmonths) untilpaidinfull.Untilthefull Mandatory Prepayment PriceispaidinfulltotheHolder,theHoldermay (i)voidtheMandatory Prepaymentwithrespecttothat portionoftheNoteforwhichthefull Mandatory PrepaymentPricehas notbeen paid,(ii)receive back suchNote, and(iii)require thattheConversion Price of suchreturnedNotebeadjustedtothelesserof(A)theConversionPriceasineffect onthedate onwhichtheHoldervoidedthe Mandatory Prepayment and(B)thelowestclosingbidpriceduringthe period beginning ontheConversionDate andending onthedatetheHoldervoidedtheMandatory Prepayment.
Section 3.8NoRights as Shareholder.Nothing containedinthisNote shallbe construedasconferring upontheHolder,priortothe conversion ofthisNote,therighttovote ortoreceive dividends or toconsentortoreceive notice asashareholderinrespect ofanymeetingof shareholdersfortheelection ofdirectorsoftheCompany orofanyothermatter, oranyotherrightsasa shareholder oftheCompany.
ARTICLE IV
MISCELLANEOUS
Section 4.1Notices.Anynotice, demand,request,waiverorother communicationrequired orpermittedtobegiven hereundershallbeinwriting andshall be effective(a)upon hand delivery bytelex (with correct answer backreceived),telecopy orfacsimileat theaddressornumber designatedinthePurchaseAgreement(ifdelivered ona business dayduring normalbusiness hours where suchnoticeisto bereceived), orthefirst business dayfollowing suchdelivery(ifdelivered otherthanon abusiness day during normal business hourswhere such noticeisto bereceived) or(b)onthe second business dayfollowingthe dateofmailing by expresscourierservice,fully prepaid, addressedtosuch address, or upon actualreceipt of suchmailing,whichever shallfirst occur.TheCompanywillgivewritten noticetotheHolderatleast 10 days priortothe date onwhichtheCompanytakes arecord(x)withrespectto any dividend ordistribution upontheCommon Stock,(y)withrespectto any prorata subscription offer toholders ofCommon Stock or(z)fordeterminingrightstovotewithrespecttoanyOrganicChange,dissolution,liquidation orwinding-upandin noevent shallsuchnoticebeprovidedto the Holder priorto suchinformationbeingmade knowntothe public. TheCompanywillalsogivewritten noticetotheHolderat least 10 daysprior tothedate onwhich anyOrganicChange, dissolution,liquidationorwinding-upwill takeplace andinno event shallsuch notice beprovidedtotheHolderpriortosuchinformation beingmadeknowntothe public.
Section 4.2Governing Law.ThisNote shall begoverned by and construedin accordancewiththe internallawsoftheStateofNew York,withoutgiving effectto anyofthe conflictsoflawprincipleswhichwouldresultinthe application ofthesubstantivelawofanotherjurisdiction.ThisNoteshallnotbeinterpreted orconstruedwith any presumption againstthe party causingthisNotetobe drafted.
Section 4.3Headings.Articleandsection headingsinthisNoteareincluded hereinforpurposesofconvenience ofreference only andshallnotconstitute apart of thisNote foranyother purpose.
Section 4.4Remedies,Characterizations,OtherObligations,Breaches andInjunctiveRelief.The remediesprovidedinthisNoteshallbecumulative and in additionto allother remedies available underthisNote,atlaworin equity(including,withoutlimitation, adecreeofspecific performance and/orother injunctiverelief), noremedy contained herein shall bedeemedawaiver of compliancewiththe provisionsgivingriseto suchremedy andnothing hereinshalllimit the Holder’srighttopursue actual damagesforanyfailure bytheCompanytocomplywiththeterms ofthisNote.Amountsset forth orprovidedforhereinwithrespecttopayments, conversion andthelike(andthe computationthereof) shallbethe amountstobereceived by theHolder andshall not,except as expressly provided herein,besubjecttoanyother obligation oftheCompany(ortheperformancethereof).TheCompany acknowledgesthata breach byit ofits obligations hereunderwillcauseirreparable andmaterialharmtotheHolder and thattheremedy atlawforanysuchbreachmaybeinadequate.ThereforetheCompanyagreesthat,inthe eventof any suchbreach orthreatenedbreach,theHolder shallbe entitled,in additiontoall other availablerights andremedies,atlaw orin equity,to seek andobtainsuchequitablerelief,including butnotlimitedto aninjunctionrestraining any suchbreachorthreatened breach,withoutthe necessity ofshowing economiclossandwithout any bondorothersecurity beingrequired.
Section 4.5Enforcement Expenses.TheCompany agreesto pay all costs and expensesofenforcement of thisNote, including,withoutlimitation,reasonableattorneys’feesand expenses.
Section 4.6BindingEffect.Theobligations oftheCompanyandtheHoldersetforth herein shallbebinding uponthesuccessors andassigns ofeachsuch party,whether ornotsuch successorsorassignsarepermitted bytheterms hereof.
Section 4.7Amendments.ThisNotemay notbemodified or amendedinanymannerexceptinwriting executed bytheCompanyandthe Holder.
Section 4.8CompliancewithSecurities Laws.TheHolderofthisNote acknowledgesthatthisNoteisbeing acquired solelyfortheHolder’s ownaccountandnot asanomineeforany otherparty, andforinvestment, andthattheHolder shallnotoffer,sellorotherwisedisposeofthisNote.ThisNote and anyNoteissuedinsubstitution orreplacementtherefor shall bestamped orimprintedwith alegendinsubstantiallythefollowingform:
“THISNOTEHASNOTBEENREGISTEREDUNDERTHE SECURITIESACT OF1933,ASAMENDED(THE “ACT”),ORAPPLICABLE STATESECURITIESLAWS,AND MAYNOTBE SOLDORTRANSFERRED INTHEABSENCEOFSUCHREGISTRATIONORRECEIPTBYTHECOMPANYOFANOPINIONOFCOUNSEL INTHEFORM, SUBSTANCEAND SCOPEREASONABLY SATISFACTORYTOTHECOMPANYTHATTHISNOTE MAY BESOLD,TRANSFERRED,HYPOTHECATEDOROTHERWISEDISPOSEDOF,UNDERANEXEMPTIONFROMREGISTRATIONUNDERTHEACTAND SUCHSTATE SECURITIESLAWS.”
Section 4.9ConsenttoJurisdiction.EachoftheCompany andtheHolder(i)herebyirrevocably submitstotheexclusivejurisdictionof the State ofNew York forthe purposes ofanysuit,action orproceeding arising outofor relatingtothisNoteand(ii) herebywaives, andagrees notto assertinanysuch suit,actionorproceeding, anyclaimthatitisnot personally subjecttothejurisdictionofsuchcourt,thatthesuit,actionorproceedingisbroughtinaninconvenientforum orthatthevenue ofthesuit, action orproceedingisimproper. Each oftheCompanyandtheHolder consentstoprocess being servedin any suchsuit, actionorproceeding bymailing acopythereoftosuch partyattheaddressineffectfornoticestoitunderthePurchaseAgreement andagreesthatsuchservice shall constitutegoodand sufficient serviceof process and noticethereof.Nothinginthis Section 4.9 shall affect orlimit anyrighttoserve processin anyothermannerpermitted bylaw.Eachof theCompanyandthe Holderherebyagreethatthe prevailing partyinany suit, actionorproceedingarising outoforrelatingtothisNoteshallbeentitledtoreimbursementforreasonablelegalfeesfromthe non-prevailing party.
Section 4.10PartiesinInterest.ThisNoteshallbebinding upon,inuretothe benefit ofandbe enforceable bytheCompany,the Holderandtheirrespectivesuccessors and permitted assigns.
Section 4.11FailureorIndulgenceNotWaiver.Nofailure ordelay onthepartoftheHolderinthe exercise ofanypower,rightorprivilege hereunder shalloperateasawaiverthereof, nor shall anysingle orpartialexerciseofanysuchpower,rightorprivilege precludeotherorfurther exercisethereoforofanyotherright, powerorprivilege.
Section 4.12Company Waivers. Exceptasotherwise specifically provided herein,theCompany andallothersthatmaybecomeliableforalloranypartoftheobligations evidenced bythisNote,herebywaive presentment, demand,notice of nonpayment, protest and all otherdemands’ and noticesin connectionwiththe delivery,acceptance, performance and enforcement ofthisNote, anddo herebyconsentto anynumberof renewalsofextensions ofthe timeorpaymenthereofandagreethatany suchrenewals orextensionsmay bemadewithout noticetoany suchpersons andwithout affectingtheirliability hereinanddofurtherconsenttothereleaseofanypersonliable hereon, allwithout affectingtheliability oftheotherpersons,firms orCompanyliableforthepaymentofthisNote,ANDDOHEREBY WAIVETRIALBYJURY.
(a)No delayoromission onthe partoftheHolderinexercisingitsrights underthisNote, orcourseofconductrelating hereto, shalloperate as awaiverofsuchrights oranyotherrightof theHolder, norshall anywaiver bytheHolderofanysuchrightorrights onanyoneoccasion bedeemed awaiver ofthesamerightorrightson anyfuture occasion.
(b)THECOMPANYACKNOWLEDGESTHAT THETRANSACTIONOF WHICHTHISNOTEISAPARTIS ACOMMERCIALTRANSACTION,AND TOTHEEXTENTALLOWEDBYAPPLICABLE LAW,HEREBY WAIVESITS RIGHTTONOTICEANDHEARING WITHRESPECTTOANY PREJUDGMENTREMEDY WHICHTHEHOLDERORITS SUCCESSORSOR ASSIGNS MAY DESIRETO USE.
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IN WITNESS WHEREOF, Solaris Power Cells, Inc. has duly executed this Note which has been duly authorized by its board of directors and holders of a majority of its outstanding capital stock, effective as of the date and year first above written.
| | SOLARIS POWER CELLS, INC. |
| | | |
| | By: | /s/ Leonard Caprino |
| | | Leonard Caprino, |
| | | Chief Executive Officer |
EXHIBIT A to NOTE
WIRE INSTRUCTIONS
BANK:
ADDRESS:
ABA#
SWIFT CODE:
BENEFICIARY:
ACCOUNT#:
EXHIBIT B to NOTE
FORM OF NOTICE OF CONVERSION
(To be Executed bythe Registered HolderinordertoConvertthe Note)
The undersignedherebyirrevocably electstoconvert $__________of thetheprincipal amountof the aboveNoteintoshares ofCommon StockofPocket Games, Inc.accordingtothe conditionshereof,asof thedatewritten below.
| DateofConversion: | | |
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| Applicable ConversionPrice: | | |
| Number ofshares ofCommon Stockbeneficially ownedordeemedbeneficially ownedbytheHolderonthe Date of Conversion: ___________________________________________________________ |
| Signature: | | |
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| PrintName: | | |
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| Address: | | |
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