CONVERTIBLEPROMISSORYNOTE AND SECURITY AGREEMENT
| US$125,000.00 | LasVegas,Nevada November30, 2012 |
Forgoodandvaluableconsideration,IDSSOLARTECHNOLOGIES,INC.,aNevada corporation,("Maker"),hereby makes and delivers this Convertible Promissory Noteand Security Agreement (this "Note")in favor of Steven J.Caspi or his assigns("Holder"),and herebyagree as follows:
1.Principal Obligationand Interest. For value received, Maker promises to pay to Holderat3010 Westchester Ave., Purchase, NY10577or at suchotherplace asHolder may designatein writing, incurrently available fundsof the UnitedStates, theprincipal sum ofOne Hundred and Twenty Five Thousand Dollars and No Cents ($125,000.00). Maker's obligation underthis Note shallaccrueinterest atthe rateof fivepercent (5.0%) per annum from the date hereofuntil paid in full,compounded monthly. Interestshallbe computed on the basis of a 365-day yearor 366-dayyear, as applicable, and actual dayslapsed.
2.Payment Terms.
Maker agrees to remit paymentinfullof all principal and interest due hereunderto Holder on or before November 30, 2013.
All payments shall be applied first to latecharges, then tointerest, then to principal and shall be credited to the Maker's account on the datethatsuch paymentis physically received by the Holder.
Maker shall have the rightto prepay all or any partof the principal underthis Note without penalty.
ThisNote shallbe accompanied byaWarrant giving Holder the rightto purchase 15,625 shares ofthe Maker'scommonstockata price of $2.00per share fora period of 5years.
3.Conversion. Holder shallhave theright at anytime to convert alloranypartof the outstanding and unpaidprincipal amount of this Noteinto fully paid and non- assessable shares of common stock ofthe Maker, at the conversion priceof $1.25 per share (the "Conversion Price")asprovidedherein (a "Conversion"). The number of sharesofcommon stock to be issuedupon each conversion of this Noteshall be determined bydividingthe Conversion Amount (as defined below) by the ConversionPrice as specified in the notice of conversion given byHolder (the "Noticeof Conversion"),delivered tothe Maker by the Holder onsuch conversion date(the"Conversion Date"). The term"Conversion Amount"means,with respect toany conversion of thisNote, thesum of (1) the principal amount of this Note to be converted in suchconversionplus (2)at the Holder's option, accrued andunpaid interest, if any, onsuchprincipal amount atthe interestrates provided inthisNote tothe Conversion Date. In no case,however, may Holder convertany portion ofthis Note into common stock of Maker if suchConversion Amount willresultin Holder (in combination with allof Holder's othershares ofMaker) owning more than 4.99% of thefully diluted,totalissued and outstanding shares of Maker's common stock.
4.Grant of Security Interest.As collateral securityforthe prompt, complete, and timely satisfactionof all present and future indebtedness, liabilities, duties, and obligations of Maker to Holder evidenced byorarising under this Note,and including, without limitation, all principal and interestpayable under this Note,any future advances addedto the principalamount due hereunder, andallattorneys' fees, costsand expenses incurred byHolderin the collection or enforcement of the same (collectively, the"Obligations"),Maker hereby pledges, assigns and grant<; to Holder acontinuing security interestand lien inall of Maker'sright,title and interest in. and tothe property,whether nowowned or hereafteracquiredbyMaker andwhethernow existingor hereafter cominginto existence or acquired, including the proceeds of any disposition thereof, describedon Exhibit "A"attached hereto andincorporated herein by this reference (collectively,the"Collateral"). As applicable, the terms of this Note with respect to Maker's grantingof a security interest intheCollateralto Holder shallbedeemed to be a security agreement under applicable provisionsof theUniform Commercial Code ("UCC"), with Maker as thedebtorand Holderas the secured party.
5.Perfection.Upon the execution and delivery ofthisNote, Makerauthorizes Holderto filesuch financing statements and otherdocuments insuch officesas shallbe necessary oras Holder may reasonably deem necessary toperfect and establish thepriority of the liens grantedby thisNote, includinganyamendments, modifications, extensions or renewals thereof.Maker agrees, uponHolder's request, to take all suchactionsas shallbenecessary or as Holder may reasonably request to perfectand establish the priority ofthe liens granted by this Note, including any amendments, modifications,extensionsor renewals thereof.
6.Representations andWarrantiesof Maker.Maker herebyrepresents and warrants thefollowing toHolder:
a. Maker and those executingthis Note onits behalfhave thefullright, power,andauthority to execute, deliverand perform theObligations underthis Note,which are notprohibited orrestrictedunder the articles of incorporationor bylaws ofMaker. This Note has beenduly executed and delivered by an authorized officerof Maker and constitutes avalid and legally bindingobligation of Maker enforceableinaccordancewith itsterms.
b. The execution ofthis Note andMaker's compliance withtheterms, conditionsand provisions hereof does not conflict with or violate any provision of any agreement, contract, lease, deed of trust,indenture,or instrument towhich Maker is a partyor bywhich Maker isbound, or constitute a default thereunder or result in the imposition of any lien, charge, encumbrance, claim orsecurity interest ofany naturewhatsoever upon any of the Collateral.
c. The security interest granted herebyinand tothe Collateral constitutes a present,valid, binding and enforceablesecurityinterest ascollateral security for the Obligations, and,except as toleasedequipment orpurchase-money encumbrancesexisting asof the dateof this Note as expressly disclosedto Holder in writing,such interests, uponperfection, will be senior and prior to any liens, encumbrances, charges, title defects, interests and rightsof any otherswith respect tosuch Collateral.
7.Covenants of Maker.For solong as anyObligations remain outstanding:
a.Maker shallnotsell, assign or transferany ofthe Collateral, or any part thereof or interest therein;
b. Maker shall pay or cause to be paid promptly when due alltaxesand assessmentson theCollateral; and
c. Maker shallkeep Holderapprised, in writing,asto thecurrent locationof all of theCollateral, providing Holder withcurrentinformation including any identifying serial numberswithrespectto the Collateralsothe Holder may perfect and maintain thepriority of its securityinterest therein.
d. Maker shallnot borrow orplace a lienagainstany oftheCollateral orthe Company withoutthe prior written consentof Holder.
8.Defaults.The following shall be events ofdefaultunder thisNote:
a.Maker's failure to remit any payment underthis Noteon before the date due,if suchfailureis not cured in full withinfive(5)days ofwritten notice of default;
b. Maker's failure toperform or breachofanynon-monetary obligationor covenant set forth inthisNote or inany otherwritten agreement between Maker and Holder if such failure isnot curedinfull within ten(10)days following delivery ofwritten noticethereof from Holder to Maker;
c. If Maker isdissolved, whether pursuant to anyapplicable articlesof incorporation or bylaws,and/or anyapplicablelaws, or otherwise;
d. Defaultin the Maker's obligationforborrowedmoney,otherthan this
Note, which shall continue for a period of twenty (20)days;
e. Thecommencementof any action or proceeding which affects the Collateral or title thereto or the interestofHoldertherein, including,but not limitedtoeminent domain, insolvency, code enforcementor arrangements or proceedings involving a bankrupt or decedent;
f. The entryof adecree or orderby acourt having jurisdiction in the premises adjudging the Maker bankrupt or insolvent, or approvingas properly fileda petition seeking reorganization,arrangement, adjustment or composition of or in respect of the Maker under the federal BankruptcyCode or any other applicable federal or state law, or appointing a receiver,liquidator, assigneeor trustee of the Maker, or any substantial part if its property, or orderingthe windingup or liquidationof its affairs, and the continuanceof anysuch decree or order unstayed and in effect for a period of twenty (20) days;
g. Maker'sinstitution of proceedings to be adjudicated a bankrupt or insolvent, or theconsentby it to the institutionof bankruptcy or insolvency proceedings against it,or itsfilingofapetition oranswer orconsentseekingreorganization or relief under the federal Bankruptcy Code or any other applicablefederal or state law, or its consent to the filing of any suchpetition or to the appointment of a receiver, liquidator, assignee or trustee of the company, orofany substantial part of its property, orits making of anassignment for thebenefit of creditorsor the admissionby it in writing of its inability to pay its debtsgenerally as they become due,or thetaking ofcorporateaction by theMaker in furtherance of any such action; or
h. Should Holder, in its sole and absolute discretion,at any time deemitself insecure or determine that repayment is at risk or unlikely and providenotless than three(3) dayswritten notice thereof to Maker.
9.Rights andRemedies of Holder.Upon the occurrence ofan event of defaultby Maker under this Note or at any time before default when the Holder reasonably feels insecure, then, in addition to allother rights and remedies at lawor in equity, Holder may exercise any one or more ofthe following rights and remedies:
a. Accelerate the time for payment of all amounts payable under this Note bywritten notice thereof to Maker, whereupon all such amounts shallbe immediatelydue and payable.
b. Pursue andenforce all ofthe rightsandremedies providedto a secured party with respect tothe Collateral under theUniform Commercial Code.
c. Make such appearance,disburse suchsums, and takesuch action as Holder deems necessary, in itssolediscretion, to protect Holder's interest, including but not limited to (i) disbursement of attorneys' fees, (ii)entry upon the Maker'sproperty to make repairs tothe Collateral, and (iii) procurement ofsatisfactoryinsurance.Any amountsdisbursed by Holder pursuant to this Section,with interest thereon, shall become additionalindebtedness of the Maker secured by theCollateral and shall be immediately dueand payable and shall bear interestfrom the dateofdisbursement at the default rate statedinthis Note. Nothingcontained inthisSection shall require Holderto incur any expense or takeany action.
d. RequireMaker to assemble theCollateral and makeit available to the Makeratthe place to bedesignated by the Holderwhichis reasonably convenient to both parties.The Holder maysell all or any part of the Collateral as a whole orinpart eitherby public auction, private sale,or other methodof disposition. TheHolder maybid at any public saleon allor any portion of theCollateral. Unless the Collateral threatenstodecline speedily invalue, Holder shall give Maker reasonable notice of the time and place of any public saleor of the time afterwhich anyprivate sale or other disposition ofthe Collateral is to bemade, and noticegiven at least 10daysbefore thetime of thesale or otherdisposition shall be conclusively presumedto bereasonable.
e. Pursue any other rights or remediesavailableto Holder at law or in equity.
10.Interest To Accrue Upon Default.Upon theoccurrence of an eventof defaultby Makerunder this Note,thebalancethen owing under the terms of thisNote shall accrue interest at the rate of eighteenpercent(18.0%) per annum, compoundedmonthly,from the date of default untilHolderissatisfiedin full.
11.Full Recourse.The liabilityof Maker forthe Obligations shall not belimitedto the Collateral, andMakershall have full liability therefor beyondthe Collateral.
12.Representation of Counsel.Maker andHolder acknowledge thatthey have consulted withor have hadthe opportunity toconsult withtheir independent legalcounsels prior to executing thisNote and have freely executed a waiver ofany conflict of interest with Cane Clark LLP which has been asked to write up this note on behalf of both parties according to terms provided jointly by them. This Note has been freely negotiated by Maker and Holder directly, andany ruleof construction tothe effect that any ambiguitiesare to beresolvedagainst thedrafting party shallnot be employedin theinterpretation of this Note.
13.ChoiceofLaws;Actions.This Note shallbe constructed andconstrued in accordance with theinternalsubstantivelaws ofthe State ofNevada, without regardto the choice of lawprinciplesof saidState. Maker acknowledges that thisNotehas beennegotiated in Clark County, Nevada. Accordingly,theexclusivevenue of any action, suit, counterclaim or cross claim arising under, out of,or in connection with this Note shall be the state orfederal courts in ClarkCounty, Nevada. Maker herebyconsents tothe personal jurisdiction of any court ofcompetent subject matterjurisdiction sittingin Clark County,Nevada.
14.Usury Savings Clause.Maker expressly agrees and acknowledges that Maker and Holder intend and agree that this Noteshallnotbe subject to the usury laws of any state other than the State of Nevada. Notwithstanding anything containedin thisNote tothecontrary, if collectionfrom Makerof interest at the rate set forth herein would be contraryto applicable laws of such State, then the applicable interest rate upon default shall be the highestinterest rate thatmay be collected from Maker under applicablelawsat such time.
15.Costs of Collection.Should the indebtedness represented by thisNote, or any part hereof, be collected atlaw, in equity,or in any bankruptcy, receivership or othercourt proceeding, or this Note beplaced in the handsofanyattorney forcollection after default, Maker agrees to pay, in addition to the principal and interest due hereon, allreasonable attorneys'fees, plus all other costsandexpensesof collectionand enforcement,includingany fees incurredin connection with such proceedings or collection of the Note and/or enforcement of Holder's rights with respect to the administration, supervision, preservation or protection of, or realization upon, any Collateral securing payment hereof.
16.Miscellaneous.
a. This Note shallbebinding upon Maker and shall inure to the benefit ofHolderandits successors,assigns,heirs, and legal representatives.
b. Any failure or delay by Holder to insist upon the strict performance of any term, condition, covenant or agreementofthis Note, or to exercise any right, power or remedyhereunder shall not constitute a waiver of any such term, condition, covenant, agreement, right, power orremedy.
c. Any provision of this Note that is unenforceable shall be severed fromthis Noteto theextent reasonably possible without invalidating or affectingthe intent, validity orenforceabilityofany otherprovision ofthis Note.
d. This Note may not be modified or amendedin any respect except in a writing executedby theparty to be charged.
e. Time is of theessence.
17.Notices.All notices required to be given under this Note shall be given atsuch address as a party may designate by written noticeto the other party. Notices may betransmitted byfacsimile, certifiedmail, privatedelivery,or any other commerciallyreasonable means, and shall be deemed given upon receipt bythe Party to whom they are addressed.
18.Waiverof CertainFormalities.Allparties tothis Note hereby waive presentment, dishonor,notice of dishonor and protest. All parties heretoconsent to, and Holder ishereby expressly authorizedto make, without notice, any and all renewals, extensions, modifications or waivers of the time for or the terms ofpayment of any sum or sums due hereunder, or under any documents or instrumentsrelating to or securing this Note, or of the performance of anycovenants, conditions or agreements hereof or thereof or the taking or release of collateral securingthis Note. Any such action taken by Holdershallnot discharge the liability of any partytothisNote.
[signature pages follow]
IN WITNESS WHEREOF,this Note hasbeen executedeffective thedateand place firstwritten above.
“Maker”:IDS SOLARTECHNOLOGIES, INC.
By:/s/ Bruce R. Knoblich
Its: Chairman & CEO
Print Name: Bruce R. Knoblich
Date: 11-29-2012
“Holder”: Steven J. Caspi
_________________
_____
IN WITNESS WHEREOF,this Note hasbeen executedeffective thedateand place firstwritten above.
"Maker":IDS SOLARTECHNOLOGIES, INC.
By: _____________________
Its: _____________________
Print Name: _____________________
Date: _____________________
“Holder”: Steven J. Caspi
/s/ Steven J. Caspi
11/29/12
Exhibit "A"
Collateral
Each and all of the following in which IDS SolarTechnologies, Inc..,a Nevada Corporation, bas anyright,title, or interest,regardlessof the mannerin whichsuch items are formallyheld or titled; allas defined inthe Nevada Uniform Commercial Code -Secured Transactions (NevadaRevised Statutes ("NRS'')§§104.9101 et.seq.) as ofthe date of the Note, and as thesame may be amended hereafter:
(1)Accounts, as defined in NRS 104.9102(1)(a)
(2)Cash proceeds, as defined in NRS 104.9102(1)(1)
(3)Chattel paper, as defined in NRS 104.9102(l)(k)
(4) Commercial tortclaims, as defined inNRS104.9102(1)(m)
(5) Commodityaccounts andcommodity contracts, as defined in NRS 104.9102(l)(n) and NRS 104.9102(1)(o), respectively,
(6)Deposit accounts, as defined in NRS 104.9102(1)(cc)
(7) Documents, as defined in NRS104.9102(l)(dd)
(8)Electronic chattel paper, as defined inNRS1049102(1)(ee)
(9)Equipment, as defined in NRS 104.9102(1)(gg)
(10) General intangibles,as defined in NRS 104.9102(1)(pp)
(11) Goods,as defined in NRS 104.9102(1)(rr)
(12) Instruments, as defined inNRS104.9102(1)(uu)
(13)Inventory,as defined in NRS104.9102(l)(vv)
(14) Investmentproperty, as defined inNRS104.9102(1)(ww)
(15) Letter-of-credit right, as defined in NRS 104.9102(l)(yy)
(16) Noncash proceeds,as defined in NRS 104.9102(l)(fff)
(17)Payment intangible, asdefined in NRS104.9102(l)(iii)
(18)Proceeds, asdefined inNRS 104.9102(1)(lll)
(19)Promissory notes, as defined inNRS 104.9102(1)(mmm)
(20) Record, asdefined in NRS 104.9102(1)(qqq)
(21) Software,asdefined in NRS 104.9102(1)(www)
(22) Supporting obligations, as defined in NRS104.9102(1)(yyy)
(23) Tangible chattel paper, as defined in NRS 104.9102(1)(zzz)
(24) The following, as defined in NRS 104.9102(2): certificated securities contracts for sale,leases, lease agreements, leasecontracts,leasehold interests, letters of credit, negotiable instruments, notes,proceedsof letters of credit, securities, security certificates, security entitlements, anduncertified securities.
