EXHIBIT 10.29
NEITHER THIS SERIES B NOTE NOR THE SHARES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"SEC") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SECTION 4(A)(2) OF THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") AND/OR REGULATION D PROMULGATED THEREUNDER. NEITHER THIS
SERIES B NOTE NOR THE SHARES ISSUABLE UPON CONVERSION HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS.
Note [ ? ]
SERIES B UNSECURED CONVERTIBLE PROMISSORY NOTE
$[ ? ] Englewood, Colorado
[DATE]
FOR VALUE RECEIVED, PetroShare Corp, a Colorado corporation, and its
successors and assigns, (the "Company") promises to pay to the order of [HOLDER]
(the "Holder"), the principal sum of [ ? ] Dollars ($[ ? ]) ("Principal Amount")
in lawful money of the United States of America, together with interest on so
much of the principal balance thereof as is from time to time outstanding at the
rate hereinafter provided, and payable as hereinafter provided.
This Series B Note is one of a series of Notes, designated the Series B
Unsecured Convertible Promissory Notes (individually referred to herein as the
"Series B Note," the series of notes is referred to herein collectively as the
"Series B Notes"). All the Series B Notes shall rank pari passu in respect to
payment of principal and interest and upon any dissolution, liquidation or
winding-up of the Company. Any action permitted by this Series B Note that is
taken by one holder will be deemed to have been taken by all holders in
proportion to the Principal Amount of each Holder's Series B Note as compared to
the total Principal Amount of the Series B Notes then outstanding.
1. Interest Rate. The unpaid balance of this Series B Note shall bear
interest at the rate of fifteen percent (15%) per year, simple interest.
Interest shall be calculated on a 365-day year and the actual number of days in
each month.
2. Payment/Maturity Date. Interest on the Series B Note shall be paid
quarterly, on the last day of March, June, September and December in each year,
beginning December 31, 2017, and continuing until the Series B Note is finally
paid. The total outstanding principal balance hereof, together with accrued and
unpaid interest, shall be paid on December 31, 2018. Interest must be paid in
cash.
3. Conversion.
(a) The Holder shall have the option to convert all or any part of
the Principal Amount of this Series B Note, together with all accrued
interest thereon, in accordance with the provisions of and upon
satisfaction of the conditions contained in this Series B Note, into fully
paid and non-assessable shares of the Company's common stock as is
determined by dividing that portion of the outstanding principal balance
and accrued interest under this Series B Note as of such date that the
Holder elects to convert by the Conversion Price. The initial Conversion
Price is $1.50.
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(b) No fractional shares of common stock shall be issued upon
conversion of this Series B Note, and in lieu thereof the number of shares
of common stock to be issued upon each conversion shall be rounded-up to
the nearest whole number of shares of common stock.
(c) The Holder's conversion right set forth in this Paragraph may be
exercised at any time and from time to time but prior to payment in full
of the principal and accrued interest on this Series B Note.
(d) The Holder may exercise the right to convert all or any portion
of this Series B Note only by delivery of a properly completed conversion
notice in the form attached to this Series B Note on a Business Day to the
Company's principal executive offices. Such conversion shall be deemed to
have been made immediately prior to the close of business on the Business
Day of such delivery of the conversion notice (the "Conversion Date"), and
the Holder shall be treated for all purposes as the record holder of the
shares of common stock into which this Series B Note is converted as of
such date. For purposes of this Series B Note, a Business Day is any day
the Federal Reserve Bank is open.
(e) As promptly as practicable after the Conversion Date, the
Company at its expense shall issue and deliver to the Holder of this
Series B Note a stock certificate or certificates representing the number
of shares of common stock into which this Series B Note has been
converted.
(f) Upon the full conversion of this Series B Note, the Company
shall be forever released from all of its obligations and liabilities
under this Series B Note.
(g) Holder acknowledges that this Series B Note, as well as the
shares of common stock issuable upon conversion of this Series B Note, are
"restricted securities," as such term is defined in Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
Holder agrees that Holder will not attempt to pledge, transfer, convey or
otherwise dispose of such restricted securities except in a transaction
that is the subject of either: (i) an effective registration statement
under the Securities Act and any applicable state securities laws; or (ii)
an opinion of counsel rendered by legal counsel satisfactory to the
Company, which opinion of counsel shall be satisfactory to the Company, to
the effect that such registration is not required. The Company may rely on
such an opinion of Holder's counsel in making such determination. Holder
consents to the placement of a legend on the securities stating that the
shares represented by the certificate have not been registered under the
Securities Act and setting forth or referring to the restrictions on
transferability and sale thereof.
(h) If the common stock to be issued on conversion of this Series B
Note shall be changed into any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise, or if the Company
shall declare a dividend of its common stock, combine the shares of its
common stock into a lesser number of shares or divide the shares into a
greater number of shares, the holder of this Series B Note shall, upon its
conversion be entitled to receive, in lieu of the common stock which the
Holder would have become entitled to receive but for such change, a number
of shares of such other class or classes of stock that would have been
subject to receipt by the Holder if it had exercised its rights of
conversion immediately before such changes.
(i) If at any time there shall be a capital reorganization of the
Company's common stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Paragraph 3) or merger of the Company into another corporation, or the
sale of the Company's properties and assets as, or substantially as, an
entirety to any other person, then, as a part of such reorganization,
merger or sale, lawful provision shall be made so that the Holder of this
Series B Note will be entitled to receive the number of shares of stock or
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other securities or property from the successor corporation resulting from
such merger to which the Holder would have been entitled as a result of
such capital reorganization, merger or sale if this Series B Note had been
converted immediately before such capital reorganization, merger or sale.
(j) Upon the occurrence of each adjustment or readjustment pursuant
to any provision hereof, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to the Holder of this Series B Note a certificate
setting forth such adjustment or readjustment and showing in detail the
facts upon which such adjustment or readjustment is based.
4. Redemption. The Company may redeem this Series B Note, in whole in or
part, on 30 days' notice and without penalty at any time, provided, however,
that the Company has paid or pays at the time of redemption an amount that would
result in the Holder having received a minimum of six months' interest.
5. Reservation of Shares. At all times while this Series B Note shall be
convertible into shares of common stock, the Company shall reserve and keep
available out of its authorized but unissued shares of common stock solely for
the purpose of effecting the conversion of this Series B Note such number of its
shares of such common stock as shall from time to time be sufficient to effect
the conversion of this Series B Note in full. In the event that the number of
authorized but unissued shares of such common stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Series
B Note, then in addition to such other remedies as shall be available to the
Holder, the Company shall take such corporate action as may be necessary to
increase its authorized but unissued shares of such common stock to such number
of shares as shall be sufficient for such purpose.
6. Default. At the option of Holder, the unpaid principal balance of this
Series B Note and all accrued interest thereon shall become immediately due,
payable, and collectible, without notice or demand, upon the occurrence at any
time of any of the following events, each of which shall be deemed to be an
event of default hereunder (a " Default "): (a) The Company fails to make any
payment of interest or principal on the date on which such payment becomes due
and payable under this Series B Note;
(b) The Company breaches any representation, warranty or covenant or
defaults in the timely performance of any other obligation in its
agreements with the Series B Note holders and the breach or default
continues uncured for a period of five Business Days after the date on
which notice of the breach or default is first given to the Company, or
ten trading days after the Company becomes, or should have become aware of
such breach or default;
(c) The Company files for protection from its creditors under the
federal bankruptcy code or a third party files an involuntary bankruptcy
petition against the Company; or
(d) The Company's common stock is not listed on the OTCQB or other
public trading market.
Upon the occurrence of any event which might, upon notice or the passage of time
constitute a Default, the Company shall notify the Holder of the Series B Note
and the Holders of all other Series B Notes of the occurrence of the event of
default within ten days.
7. Default Interest and Attorney Fees. Upon declaration of a Default
hereunder, the balance of the principal remaining unpaid, interest accrued
thereon, and all other costs and fees shall be immediately due and payable. In
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the event of Default, the Company agrees to pay all costs of collection
including reasonable attorney's fees.
8. Representations, Warranties and Covenants of the Company. The Company
represents, warrants and covenants with the Holder as follows:
(a) Authorization; Enforceability. All action on the part of the
Company, necessary for the authorization, execution and delivery of this
Series B Note and the performance of all obligations of the Company
hereunder has been taken, and this Series B Note constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with
its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies.
(b) Governmental Consents. No consent, approval, qualification,
order or authorization of, or filing with, any local, state or federal
governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery or performance of
this Series B Note.
(c) No Violation. The execution, delivery and performance by the
Company of this Series B Note and the consummation of the obligations
contemplated hereby will not result in a violation in any material respect
of its Articles of Incorporation or Bylaws, or of any provision of any
mortgage, agreement, instrument or contract to which it is a party or by
which it is bound or, to the best of its knowledge, of any federal or
state judgment, order, writ, decree, statute, rule or regulation
applicable to the Company or be in material conflict with or constitute,
with or without the passage of time or giving of notice, either a material
default under any such provision or an event that results in the creation
of any material lien, charge or encumbrance upon any assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
material permit, license, authorization or approval applicable to the
Company, its business or operations, or any of its assets.
(d) Covenants. So long as any Series B Note is outstanding, the
Company will not pay any dividends or other distributions to the holders
of any shares of its preferred stock or common stock unless all payments
have been made to the Holders on a current basis.
9. Assignment of Series B Note. This Series B Note may not be assigned by
Company. The Series B Note may be assigned by Holder with the express written
consent of the Company and satisfaction of applicable securities laws.
10. Loss of Series B Note. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Series B Note, and in case of loss, theft or destruction of indemnification
in form and substance acceptable to the Company in its reasonable discretion,
and upon surrender and cancellation of this Series B Note, if mutilated, the
Company shall execute and deliver a new Series B Note of like tenor and date.
11. Non-Waiver. No delay or omission on the part of Holder in exercising
any rights or remedy hereunder shall operate as a waiver of such right or remedy
or of any other right or remedy under this Series B Note. A waiver on any one or
more occasion shall not be construed as a bar to or waiver of any such right
and/or remedy on any future occasion.
12. Maximum Interest. In no event whatsoever shall the amount paid, or
agreed to be paid, to Holder for the use, forbearance, or retention of the money
to be loaned hereunder ("Interest") exceed the maximum amount permissible under
applicable law. If the performance or fulfillment of any provision hereof, or
any agreement between Company and Holder shall result in Interest exceeding the
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limit for Interest prescribed by law, then the amount of such Interest shall be
reduced to such limit. If, from any circumstance whatsoever, Holder should
receive as Interest an amount which would exceed the highest lawful rate, the
amount which would be excessive Interest shall be applied to the reduction of
the principal balance owing hereunder (or, at the option of Holder, be paid over
to Company) and not to the payment of Interest.
13. Purpose of Loan. Company certifies that the loan evidenced by this
Series B Note is obtained for business or commercial purposes and that the
proceeds thereof will not be used primarily for personal, family, household or
agricultural purposes.
14. Waiver of Presentment. Company and the endorsers, sureties, guarantors
and all persons who may become liable for all or any part of this obligation
shall be jointly and severally liable for such obligation and hereby jointly and
severally waive presentment and demand for payment, notice of dishonor, protest
and notice of protest, and any and all lack of diligence or delays in collection
or enforcement hereof. Said parties consent to any modification or extension of
time (whether one or more) of payment hereof, the release of all or any part of
the security for the payment hereof, and the release of any party liable for
payment of this obligation. Any modification, extension, or release may be
without notice to any such party and shall not discharge said party's liability
hereunder.
15. Governing Law. As an additional consideration for the extension of
credit, Company and each endorser, surety, guarantor, and any other person who
may become liable for all or any part of this obligation understand and agree
that the loan evidenced by this Series B Note is made in the State of Colorado
and the provisions hereof will be construed in accordance with the laws of the
State of Colorado.
16. Binding Effect. The term "Company" as used herein shall include the
original Company issuing this Series B Note and any party who may subsequently
become liable for the payment hereof by virtue of an assignment by the Company
with the consent of the Holder, provided that Holder may, at its option,
consider the original Company issuing this Series B Note alone as issuer unless
Holder has consented in writing to the substitution of another party as Company.
17. Relationship of Parties. Nothing herein contained shall create or be
deemed or construed to create a joint venture or partnership between Company and
Holder, as Holder is acting hereunder as a lender only.
18. Severability. Invalidation of any of the provisions of this Series B
Note or of any paragraph, sentence, clause, phrase, or word herein, or the
application thereof in any given circumstance, shall not affect the validity of
the remainder of this Series B Note.
19. Amendment. This Series B Note may not be amended, modified, or changed,
except only by an instrument in writing signed by the Company and the Holder.
20. Time of the Essence. Time is of the essence for the performance of each
and every obligation of Company hereunder.
21. Notices. All notices, consents, approvals, requests, demands and other
communications which are required or may be given hereunder shall be in writing
and shall be duly given if personally delivered, sent by overnight courier or
posted by United States registered or certified mail, return receipt requested,
postage prepaid and addressed to the other parties at the addresses set forth
below.
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If to the Company:
PetroShare Corp.
9635 Maroon Circle, Suite 400
Englewood, Colorado 80112
Attention: Stephen J. Foley, Chief Executive Officer
If to the Holder, at the address as shown on the register maintained by the
Company for such purpose.
The Company or the Holder may change their address for purposes of this
Paragraph by giving to the other addressee notice of such new address in
conformance with this Paragraph. If the Company receives any notice pursuant to
this Series B Note or any other Note of this series, it must, not later than
five business days thereafter, dispatch a copy of such notice to the Holder of
this Series B Note and to each other Holder of any Series B Note as reflected in
the current Note Register.
IN WITNESS WHEREOF, the undersigned has executed this Series B Note as of
______.
PETROSHARE CORP.,
a Colorado corporation
By:
--------------------------
Stephen J. Foley,
Chief Executive Officer
NOTICE OF CONVERSION
To: PETROSHARE CORP.
The undersigned hereby elects to convert $ ____ principal amount of the
attached Series B Note, together with any accrued but unpaid interest on the
outstanding principal balance, into shares of Common Stock (the "Common Stock")
of PETROSHARE CORP., pursuant to the terms of the attached Series B Note.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name* as is
specified below:
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(Name)
-----------------------------------------------
(Address)
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Dated:
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Signature
* If you desire the Common Stock to be issued in a name other than the name in
which the Series B Note was issued, additional paperwork may be required to
ensure compliance with applicable securities laws.