Subordinated Convertible Debenture Note
INTEREST RATE - 24% per annum
PRINCIPAL AMOUNT: $ ______________
(minimum $50,000.00)
DATE OF ISSUE: , 2006
MATURITY DATE: , 2008
Neptune Industries, Inc. a corporation organized and existing under the laws
of the State of
Florida, ("Corporation"), for value received, hereby promises to pay to the
party executing the
Subscription Agreement executed in conjunction with this Note or his
registered assigns, (the
"Holder") the principal amount of $___,000.00 Dollars on the first day of
the twenty-fifth
month after the Date of Issue, if not previously paid or satisfied as
provided herein, upon
presentation and surrender of this Debenture Note (the ?Note?) at the home
office of the
Corporation, in such coin or currency of the United States of America as at
the time of payment
shall be legal tender for the payment of public and private debts, and to pay
interest thereon from
the Date of Issue at the rate specified in Section 1 below, either in kind as
provided in Section 1
below or in like coin and currency, until payment of the full principal
amount has been made or
duly provided for.
THIS NOTE, AND ANY COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF OR IN PAYMENT OF ANY INTEREST DUE ON THE PRINCIPAL
AMOUNT, CAN ONLY BE TRANSFERRED IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS. THIS NOTE AND SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT, UNLESS, IN THE OPINION OF COUNSEL TO THE
CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
1. INTEREST RATE AND PAYMENT. This Note shall bear interest at the rate of
Twenty-
Four Percent (24 %) per annum. Interest shall be payable quarterly,
commencing on the Date of
Issue, with the first interest payment due on the fifteenth day of the
calendar month beginning
after the end of the calendar quarter of the Date of Issue, and thereafter on
the fifteenth day of
the first month after each succeeding calendar quarter. Interest due for
any quarterly payment
which is for less than a full calendar quarter, shall be pro-rated on a daily
basis. Interest due shall
be paid by the Corporation to the Holder at the address of the Holder as then
reflected on the
records of the Corporation.
Interest on this Note shall be paid in cash or, in the discretion of the
Corporation (subject to the
provisions of this paragraph) at the time of each payment of interest, in
kind by the issuance of
such number of shares of the $0.001 par value common stock of the Corporation
(the ?Common
Stock?) to the Holder of this Note, as shall be equal in value to the
interest then due (the
?Interest Shares?). For purposes of determining the number of shares of the
Common Stock to
be issued in kind as payment for any interest due, the Common Shares shall be
valued at the
average of the closing bid price for the Common Shares, on such exchange or
electronic medium
on which the Common Shares are then traded, for the last twenty (20) trading
days of the
calendar quarter for which the interest payment is due (the ?Average Closing
Price?).
Notwithstanding the foregoing, the right of the Corporation to make any
interest payment in
shares of Common Stock on a particular date is subject to the satisfaction
(or waiver by the
Holder) of the following additional conditions on such date: (1) there is
then an effective
registration statement covering the Interest Shares, to be issued on such
date for which no stop
order is in effect; (2) no Event of Default shall exist on such date; (3) the
Average Closing Price
is equal to or greater than $.15 per share (as appropriately adjusted for any
stock split, stock
dividend or other similar corporate action); and (4) the Corporation has
sufficient authorized but
unissued shares of Common Stock to provide for the issuance of the Interest
Shares to the
Holder and the other holders of the Corporation Notes. At any time the
Corporation delivers a
notice to the Holder of its election to pay the interest in shares of Common
Stock, the
Corporation shall timely file a prospectus supplement pursuant to Rule 424 of
the Act disclosing
such election.
2. DUE DATE. The principal amount of this Note, together with any accrued
but unpaid
interest, shall be due and payable on the fifteenth (15th) day of the twenty-
fifth (25th) month after
the Date of Issue, unless previously paid, converted or otherwise satisfied
as provided herein.
3. SUBORDINATION. This Note, shall be a subordinated obligation of the
Corporation
and shall be junior in right of payment to all indebtedness incurred by the
Corporation for money
borrowed, all guarantees, all endorsements, and all other contingent
obligations of the
Corporation, including all modifications, deferrals, renewals, or extensions
of such indebtedness,
existing as of the date of this Note ["Senior Indebtedness"]; provided,
however, that the
Corporation shall not enter into any indebtedness that is senior to this Note
except with the
written consent of the Placement Agent, as agent for and on behalf of the
Holders of the
Corporation Notes.
4. PREPAYMENT. The Corporation may at any time and from time to time after
the
Common Stock of the Corporation first maintains a closing price of $1.25 or
more for ten (10)
consecutive trading days, upon thirty (30) days prior notice in accordance
with Section 17
hereof, prepay the principal of this Note in whole or in part without premium
or penalty . Any
prepayment of principal of this Note if in cash, shall include accrued
interest to the date of
prepayment on the principal amount being prepaid.
In the event that the Corporation (i) undertakes one or more subsequent
offerings of its stock or a
debt instrument after the Final Closing Date of the Offering of the Note, and
(ii) the cumulative
amount received by the Corporation from all such subsequent offerings during
the twelve (12)
month period after such Final Closing Date exceeds $5,000,000, then the full
principal amount
due on this Note, together with any accrued but unpaid interest, shall be due
and payable
immediately. In determining the cumulative amount of any such subsequent
offerings, any
amounts received by the Corporation in connection with the offering or
conversion of the
convertible debenture notes of which this Note is a part, and the proceeds of
the exercise of any
warrants issued as part of the same offering, shall not be taken into
account.
5. CONVERSION. The Holder shall have the right, at the option of the
Holder at any time
prior to maturity, commencing with the Date of Issue, to convert the
principal amount of this
Note into shares of the Corporation's Common Stock, as such shares shall be
constituted at the
date of Conversion, at a conversion rate of $0.30 per share of Common Stock.
The principal
amount of this Note shall be converted into Common Stock, subject to such
adjustment or
adjustments, if any, of such conversion rate in effect at the time of
conversion determined in
accordance with this section 5, upon surrender of this Note at the home
office of the
Corporation, accompanied by written notice of conversion (the "Conversion
Right"). No
fractional shares or scrip representing fractional shares will be issued upon
the surrender of this
Note for conversion.
The number of shares of Common Stock to be purchased upon the exercise hereof
shall be
subject to adjustment from time to time as follows.
A. In case the Corporation shall, while this Note remains
unexercised, in whole or in part,
and in force, effect a recapitalization of such character that the shares of
Common Stock
purchasable hereunder shall be changed into or become exchangeable for a
larger or
smaller number of shares, then, after the date of record for effecting such
recapitalization, the number of shares of Common Stock which the holder
shall be
entitled to purchase hereunder shall be increased or decreased, as the case
may be, in
direct proportion to the increase or decrease in the number of shares of
Common Stock
resulting from such recapitalization. For the purpose of this subsection A,
the term
"recapitalization" shall include, without limitation, a stock dividend, stock
split, or
reverse stock split and shall be considered a change into or an exchange for
a larger or
smaller number of shares, as the case may be.
B. In case of any consolidation of the Corporation with, or
merger of the Corporation
with or into any other corporation, or in case of any sale or conveyance of
all or
substantially all of the assets of the Corporation in such a way that
holders of Common
Stock shall be entitled to receive stock, securities, cash or assets with
respect to or in
exchange for shares of the Common Stock, then, as a condition of such
consolidation,
merger or sale or conveyance, lawful and adequate provision shall be made
whereby the
Holder shall have the right to purchase and receive, upon the basis of and
upon the terms
and conditions specified in this Note and in lieu of shares of the Common
Stock
purchasable hereunder, such shares of stock, securities, cash or assets as
may be issued in
connection with such consolidation, merger, sale or conveyance in an amount
which is, as
nearly as possible, equal in value to what the Holder would have received if
he had
exercised his Conversion Right prior to the date of such consolidation,
merger, sale or
conveyance and owned the shares of Common Stock issuable upon the exercise
of his
Conversion Right at the time of such consolidation, merger, sale or
conveyance. The
Corporation will not effect any consolidation or merger , or sale or
conveyance of assets
unless prior to the consummation thereof the successor corporation (if other
than the
Corporation) resulting from such consolidation or merger or the corporation
purchasing
such assets shall assume, by written instrument, executed and mailed or
delivered to the
Holder at the last address of such Holder appearing on the books of the
Corporation, (i)
the obligation to deliver to such Holder such shares of stock, securities or
assets as, in
accordance with the foregoing provisions, such Holder may be entitled to
purchase, and
(ii) all other obligations of the Corporation under this Note.
C. Subject to the provisions of subsection D below, if, during the
period that the
Conversion Right remains unexercised, in whole or in part, and in force, the
Corporation
makes any distribution of its assets to holders of Common Stock as a partial
liquidating
dividend (which liquidating dividend may be by way of return of capital or
otherwise),
then after the date of record for determining shareholders entitled to such
distribution,
and before the date of such distribution, the Holder shall be entitled,
upon exercise of
his Conversion Right and purchase of any or all of the shares of Common
Stock subject
hereto, to receive the amount of such assets (or at the option of the
Corporation a sum
equal to value thereof at the time of such distribution to holders of
Common Stock as
such value is determined by the Board of Directors of the Corporation in
good faith)
which would have been payable to such Holder had he been the holder of record
of such
shares of Common Stock on the record date for the determination of
shareholders
entitled to such distribution.
D. Except as otherwise provided in subsection B above, in the case of any
sale or
conveyance of all or substantially all of the assets of the Corporation in
connection with a
plan of complete liquidation of the Corporation, or in the case of the
dissolution,
liquidation or winding up of the Corporation, all Conversion Rights under
this Note shall
terminate on a date fixed by the Corporation. Such date shall not be earlier
than the date
of the commencement of the proceedings for such dissolution, liquidation or
winding-up
and no later than 30 days after such commencement date. Notice of such
termination of
Conversion Rights shall be given to the registered Holders hereof, as the
same shall
appear on the books of the Corporation, at least 30 days prior to such
termination date.
E. If the Corporation during the period that the Conversion Right remains
unexercised in
whole or in part, and in force, offers to the holders of Common Stock any
rights to
subscribe for additional shares or Common Stock of the Corporation. then the
Corporation shall give written notice thereof to the Holder not less than 20
days prior to
the date on which the books of the Corporation are closed or a record date
fixed for the
determination of shareholders entitled to such subscription rights. Such
notice shall
specify the date (or method to be employed in fixing the date) as to which
the books shall
be closed or the record date fixed with respect to such offer or
subscription, and the right
of the Holder to participate in such offer or subscription shall terminate if
the Conversion
Right shall not be exercised on or before the date of such closing of the
books or such
record date.
F. Except as provided for in paragraph I below, in case at any time after
the date hereof
the Corporation shall in any manner grant, issue or sell any stock or
security convertible
into or exchangeable for Common Stock (?Convertible Securities?) or any
warrants or
other rights to subscribe for or to purchase, or any options for the purchase
of, Common
Stock or any Convertible Securities (such warrants, rights or options being
called
?Options?), whether or not the right to convert, exchange or exercise any
such
Convertible Securities or such Options are immediately exercisable, and the
price per
share for which Common Stock is issuable upon the conversion or exchange of
such
Convertible Securities or upon the exercise of such Options (determined by
dividing (i)
the sum of (x) the total amount, if any, received or receivable by the
Corporation as
consideration for the issue or sale of such Convertible Securities or the
granting of such
Options, plus (y) the aggregate amount of additional consideration, if any,
payable to the
Corporation upon the conversion or exchange of all such Convertible
Securities or the
exercise of all such Options, plus (z), in the case of such Options to
purchase Convertible
Securities, the aggregate amount of additional consideration, if any, payable
upon the
conversion or exchange of such Convertible Securities, by (ii) the maximum
number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities, or upon the exercise of such Options, or upon the
conversion or
exchange of all such Convertible Securities issuable upon the exercise of
such Options),
shall be less than the Conversion Price in effect immediately prior to the
time of the issue
or sale of such Convertible Securities or the granting of such Options, then
the-existing
Conversion Price hereunder shall be automatically reduced, as of the close of
business on
the effective date of such securities issuance, to a Conversion Price equal
to the lowest
price per share at which any additional shares of Common Stock was issued or
sold or
deemed to be issued or sold in such securities issuance, and such adjustment
to the
Conversion Price shall take effect immediately as of the effective date of
such securities
issuance.
G. Any adjustment pursuant to the foregoing provisions of this Section 5
shall be made
on the basis of the number of shares of Common Stock which the Holder would
have
been entitled to acquire by exercise of his Conversion Right immediately
prior to the
event giving rise to such adjustment. Whenever any such adjustment is
required to be
made, the Corporation, at its expense, shall forthwith determine the new
number of
shares of Common Stock which the Holder shall be entitled to purchase
hereunder and
shall prepare a statement describing in reasonable detail the method used in
calculating
such adjustment (s) including, without limitation, a statement of (i) the
number of shares
of Common Stock outstanding or deemed to be outstanding and (ii) the number
of
shares of Common Stock which the Holder is entitled to purchase (as
adjusted). Unless
the Corporation shall receive a written objection to such statement by the
Holder within
30 days after the Holder shall receive such statement, the Holder and his
successors-in-
interest to the Note shall be absolutely stopped from objecting to such
statement and shall
be bound by the adjustment(s) reflected therein.
H. No fractional share of Common Stock shall be issuable upon the exercise of
the
Conversion Right. If a holder exercising his Conversion Right in full would
otherwise be
entitled to a fractional share of Common Stock, the Corporation shall pay
him, in lieu of
such fractional share, an amount equal to the fair market value of such
fractional share.
I. Notwithstanding anything to the contrary contained in this Note, the
issuance of stock
to employees of the Corporation, pursuant to any employee stock purchase,
stock option,
stock bonus or other benefit plan of the Corporation, or the grant by the
Corporation of
any option or other right under any such plan, shall not cause any
adjustment of the
amount of shares of Common Stock that may be purchased hereunder.
J. Upon any adjustment of the Conversion Price, then and in each such case
the
Corporation shall give prompt written notice thereof, by delivery in person
or by certified
or registered mail, return receipt requested, addressed to the Holder at the
address of
such Holder as shown on the books of the Corporation, which notice shall
state the
Conversion Price resulting from such adjustment and setting forth in
reasonable detail the
method upon which such calculation is based.
K. The issuance of certificates for shares of Common Stock upon conversion of
this Note
shall be made without charge to the holders thereof for any issuance tax in
respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be
payable in respect of any transfer involved in the issuance and delivery of
any certificate
in a name other than that of the Holder.
7. SHARES TO BE FULLY PAID. The Corporation covenants and agrees that all
shares of
Common Stock which may be issued upon the conversion of this Note will, upon
delivery, be
fully paid and non-assessable and free from all taxes (other than income
taxes, if any, of the
Holder), including, without limitation, issuance taxes in respect of such
shares, liens and charges
with respect to the purchase thereof hereunder. Subject to compliance with
federal and state
securities law requirements, the Corporation further covenants and agrees
that there are and will
be no restrictions on the sale or delivery of such shares by it to the Holder
of the Note; that all
formalities required to permit transfer of title to such shares free and
clear of all claims,
encumbrances and defects in title, in accordance with this Note, shall have
been duly complied
with, and that the Corporation shall have the right and power to sell and
deliver all shares in
accordance with the terms hereof, and such sale and delivery will be valid in
all respects:
provided, however, that nothing contained herein shall impose upon the
Corporation any
obligation to register this Note or the shares into which they are
convertible.
8. RESERVATION OF SHARES. During the period within which the Conversion
Right
represented by this Note may be exercised, the Corporation shall at all times
have authorized and
reserved or held available for the purpose of issuance or transfer upon
exercise of the rights
evidenced by the Conversion Right, a sufficient number of shares of its
Common Stock to
provide for the exercise of the Conversion Right represented by this Note and
all other Notes of
the same class.
9. NO VOTING RIGHTS. This Note shall not entitle the Holder to any voting
rights or other
rights as a shareholder of the Corporation, or to any other rights as a
shareholder of the
Corporation, or to any rights whatsoever except the rights herein expressed,
and no cash
dividends shall be payable or accrue in respect of this Note or the interest
represented hereby or
the shares purchasable hereunder until or unless, and except to the extent
that, the Conversion
Right shall be exercised.
10. NOTES EXCHANGEABLE; LOSS, THEFT, DESTRUCTION. This Note is
exchangeable upon the Holder's surrender of same to the Corporation for new
Notes of like tenor
representing in the aggregate the right to subscribe for and purchase the
number of shares which
may be subscribed for and purchased upon conversion hereunder, each of such
new notes to
represent the right to subscribe for and purchase such number of shares of
Common Stock as
shall be designated by the Holder at the time of such surrender.
Upon receipt of evidence satisfactory to the Corporation of the loss, theft,
destruction, or
the mutilation of this Note and, in the case of any such loss, theft or
destruction, upon delivery
of a bond or indemnify satisfactory to the Corporation, or, in the case of
any such mutilation,
upon surrender or cancellation of this Note, the Corporation shall issue to
the Holder a new Note
of like tenor, in lieu of this Note, representing the right to subscribe for
and purchase the number
of shares of Common Stock which may be subscribed for and purchase upon
conversion
hereunder.
11. NOTES NEGOTIABLE. Each taker and Holder, by taking and holding the
same,
consents and agrees that this Note, when duly endorsed, shall be deemed
negotiable and that the
Holder, upon such endorsement, may be treated by the Corporation and all
other persons dealing
with this Note as the absolute owner hereof for any purpose and as the person
entitled to exercise
the rights represented by this Note or to the transfer hereof in person or by
attorney on the books
of the Corporation, any notice to the contrary notwithstanding; but until
each transfer on such
books, the Corporation may treat the Holder as the owner hereof for all
purposes.
Notwithstanding the foregoing, the Note may be transferred only in
compliance with the legend
set forth on the face of this Note and with the terms of Section 16 hereof.
12. INFORMATION TO NOTEHOLDERS. The Corporation shall transmit to the
Holder
such information, documents and reports as are generally distributed to
shareholders of the
Corporation concurrently with the distribution thereof to such shareholders.
Additionally, in case at any time:
A. The Corporation shall declare any cash dividend upon its Common
Stock;
B. The Corporation shall declare any dividend upon its Common Stock payable
in stock
or authorize any other distribution (other than cash dividends) to the
holders of its
Common Stock;
C. The Corporation shall offer for subscription pro-rata to the holders of
its Common
Stock any additional shares of stock of any class or other notes;
D. There shall be any capital reorganization or reclassification of the
Corporation's capital
stock or consolidation or merger of the Corporation with, or sale of all or
substantially all
of its assets to another corporation;
E. There shall be any adjustment in the Conversion Price; or
F. There shall be a voluntary or involuntary dissolution, liquidation or
winding up of the
Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail,
postage prepaid, addressed to the Holder at the address of such Holder as
shown on the
books of the Corporation, (i) at least 20 days? prior written notice of the
date on which
the books of the Corporation shall close or a record shall be taken for such
dividend,
distribution or subscription rights or for determining rights to vote in
respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or
winding upon, and (ii) in the case of any such reorganization,
reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
20 days prior
written notice of the date when the same shall take place. Such notice in
accordance with
the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled
thereto, and such notice in accordance with the foregoing clause (ii) shall
also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up as the
case may be.
13. RESTRICTION ON DIVIDENDS AND PAYMENTS UPON LIQUIDATION. All
matured claims of the Holder of a Note against earnings or assets shall be
and are hereby made
superior to those of stockholders, and the Corporation agrees that as long
as this Note is
outstanding, it will not pay any dividends on its Common Stock until all
accrued and unpaid
interest on this Note has been paid or provided for. In the event of
dissolution or liquidation
(total or partial) of the Corporation, the Holder of this Note shall be
entitled to be paid in full,
both principal and interest, before any assets of the Corporation are
distributed to any common
stockholder in his capacity as a common stockholder.
14. PRINCIPAL OBLIGATION. No provision of this Note shall alter or impair
the obligation
of the Corporation, which is absolute and unconditional , to pay the
principal of and interest on
this Note at the place, at the respective times, at the rate, and in the
currency herein prescribed.
15. CORPORATE OBLIGATION. No recourse under or upon any obligation, covenant,
or
agreement contained in this Note, or for any claim based thereon or
otherwise in respect thereof,
shall he had against any promoter, subscriber to shares, Incorporator,
shareholder, officer or
director, as such, past, present or future, of the Corporation or of any
successor corporation,
either directly or through the Corporation , any successor corporation, any
trustee, any receiver,
or any other person, whether by virtue of any constitution, statute, or rule
of law, or by the
enforcement of any assessment, penalty, or otherwise; it being expressly
understood that this
Note is solely a corporate obligation of the Corporation, and that by the
acceptance of this Note
and as a part of the consideration for the issue hereof any and all such
personal liability, either
at common law, in equity, by constitution, or by statute, of any and all such
rights and claims
against, every such promoter, subscriber, incorporator, shareholder officer
or directors, as such,
are hereby expressly waived and released by the holder of this Note.
16. DEFAULT. In case any events of default, as defined below (''Events of
Default), shall
have occurred and be continuing, the principal hereof together with all
interest accrued, but
unpaid, hereon may be declared due and payable by the Holder of this Note
such further amount
as shall be sufficient to cover the cost and expenses of collection,
including, without limitation,
reasonable attorneys fees, and disbursements.
The following constitute Events of Default;
A. Default in the payment of any installment of interest upon this
Note as and when
the same shall become due and payable, and continuance after written notice
of such
default for a period of thirty (30) days; or
B. Default in the payment of the: principal upon this Note as
and when the same
shall become due and payable either at maturity, upon redemption, by
declaration, or
otherwise as provided herein; or
C. Failure on the part of the Corporation to observe or
perform any other of the
covenants or agreements on the part of the Corporation contained in this Note
or any
agreement related to the private placement transaction being consummated
simultaneously with the execution of this Note for a period of twenty (20)
days after the
date on which written notice of failure, requiring the Corporation to remedy
the same,
shall have been given to the Corporation by the Holder of this Note; or
D. the Corporation and/or its Subsidiaries fail to make a required payment
or
payments on Indebtedness of $50,000 or more in aggregate principal amount and
such
failure continues for more than twenty (20) days;
E. If the Corporation shall:
(1) Admit in writing its inability to pay its debts
generally as they become
due or
(2) File a petition in bankruptcy or a petition to take
advantage of any
insolvency act; or
(3) Make an assignment for the benefit of its creditors;
or
(4) Consent to the appointment of a receiver of itself or
of the whole or
any substantial part of its property; or
F. If the Corporation shall file a petition or answer seeking
reorganization or
arrangement under the federal bankruptcy laws or any other applicable law or
statute of
the United States of America or any state thereof; or
G. If the Corporation shall, on a petition it bankruptcy filed
against it, be adjudicated
a bankrupt, or if a court of competent jurisdiction shall enter an order or
decree (i)
appointing without the consent of the Corporation a receiver of the
Corporation or of
the whole or substantially all of its property, or (ii) approving a
petition filed against it
seeking reorganization or arrangement of the Corporation under the federal
bankruptcy
laws or any other applicable law or statute of the United States of America
or any, State
thereof, and such adjudication, order, or decree shall not be vacated or set
aside or stayed
within sixty (60) days from the date of the entry hereof.
All powers and remedies given the Holder of this Note shall, to the extent
permitted by law, be
deemed cumulative and not exclusive of any thereof or of any other powers and
remedies
available to the holder of this Note, by judicial proceedings or otherwise,
to enforce the
performance or observance of the covenants and agreements contained in this
Note, and no
delay or omission by the Holder of this Note to exercise any right or power
accruing upon any
default occurring and continuing as aforesaid shall impair any such right or
power or shall be
construed to be a waiver of any such default or an acquiescence therein; and
every power and
remedy given to the Holder of this Note may be exercised from time to time,
and as often as
shall be deemed expedient, by the Holder of this Note.
Prior to the declaration of the maturity of this Note as provided herein
above the Holder of this
Note may waive any past default hereunder and its consequences, in the
case of any such
waiver, the Corporation and the Holder of this Note shall be restored to
their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other
default or any right consequent thereon.
17. PURCHASE FOR INVESTMENT. It is specifically understood that neither
the Note
nor the Common Stock to be issued upon the exercise of the Conversion Right
("Note Shares")
have been registered under the Securities Act of 1933, as amended ("Act"), or
under applicable
state securities laws. The Holder agrees that he is acquiring the Note and
the Note Shares for
investment purposes only and not with a view to the public distribution
thereof and further
agrees that the certificates evidencing the Note and the Conversion Shares
may be stamped with
a restrictive legend referring to such matters, noting each such restriction
as follows:
In the case of this Note:
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THE CONVERSION RIGHT CAN ONLY BE TRANSFERRED IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS. THIS NOTE AND SUCH
SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT, UNLESS,
IN THE OPINION OF COUNSEL TO THE CORPORATION, SUCH
REGISTRATION IS NOT THEN REQUIRED.
and
In the case of the Common Stock:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
?ACT?). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT WITH RESPECT TO
SUCH SHARES, OR AN OPINION OF THE REGISTERED HOLDER?S
COUNSEL REASONABLY ACCEPTABLE TO ISSUER?S COUNSEL TO
THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT.
The Corporation may issue "stop transfer" instructions to its transfer agent
with respect to this
Note (and any Notes issued in exchange thereof or in replacement thereof) and
Common Stock
issued or issuable upon exercise of the Conversion Right, the certificate for
all of which shall bear
the appropriate legend referred to herein to prevent any violation of the
provisions of this Section
17, of the Act, or of the applicable state securities laws.
The Corporation will be required to issue a new Note or certificate which
does not contain the
legend set forth in this Section 17 if the shares represented thereby are
sold pursuant to a
Registration Statement (including a current Prospectus) which becomes and is
effective under the
Act, if the staff of the Commission shall have issued a "no action" letter
(reasonably acceptable
to the Corporation's Counsel) or counsel acceptable to the Corporation shall
have rendered its
opinion (which opinion shall be reasonably acceptable to the Corporation),
which "no action "
letter or opinion shall be to the effect that such securities may be freely
sold publically without
registration under the Act. The fees and disbursements of any counsel
rendering such opinion on
behalf of a Holder shall be paid by such Holder.
18. REGISTRATION RIGHTS. The Corporation shall provide to the Holder of
this Note
registration rights for the common shares into which the Note may be
converted, including any
shares issuable as a result of an adjustment to the Conversion Price, in
accordance with a
separate Registration Rights Agreement issued to the Holder at the Date of
Issue.
19. SPECIFIC PERFORMANCE. The Corporation acknowledges that any violation
or
breach of its obligations under this Note shall result in immediate and
irreparable injury to the
Holder for which a remedy at law would be inadequate. Accordingly, in the
event of any breach
or threatened breach by the Corporation of its obligations under this Note,
the Holder shall be
entitled to have such court compel the Corporation to specifically perform
its obligations under
this Note.
20. INJUNCTION - POSTING OF BOND. In the event the Holder shall elect to
convert
this Note or a portion thereof, the Corporation may not refuse conversion
based on any claim that
the Holder or any one associated or affiliated with the Holder has been
engaged in any violation
of law, unless, an injunction from a court, on notice, restraining and or
enjoining conversion of all
or part of this Note shall have been sought and obtained and the Corporation
posts a surety bond
for the benefit of the Holder in the amount of 130% of the then-outstanding
principal amount of
this Note, which is subject to the injunction, which bond shall remain in
effect until the
completion of arbitration/litigation of the dispute and the proceeds of which
shall be payable to
the Holder to the extent it obtains judgment.
21. NOTICES. Notices to be given to the Holder shall be deemed to have
been sufficiently
given, if delivered or mailed, addressed in the name and at the address of
such Holder appearing
in the records of the Corporation and, if mailed, sent first class
registered or certified mail,
postage prepaid.
22. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The descriptive headings
of several Sections of this Note are inserted for convenience only and do not
constitute a part of
this Note. This Note and any amendments hereto is being delivered and is
intended to be
performed in the State of Florida and shall be construed and enforced in
accordance with, and
rights of the parties shall be governed by, law of such State.
23. LIMITATIONS ON CONVERSION. Notwithstanding anything to the contrary
contained herein, the number of shares that may be acquired by the Holder
upon any conversion
of this Note (or otherwise in respect hereof) or upon issuance by the
Corporation of any
Conversion Shares or Interest Shares shall be limited to the extent necessary
to insure that,
following such conversion, the total number of shares of Common Stock then
beneficially owned
by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common
Stock would be aggregated with the Holder?s for purposes of Section 13(d) of
the Exchange
Act, does not exceed 4.99% of the total number of issued and outstanding
shares of Common
Stock (including for such purpose the shares of Common Stock issuable upon
such exercise) (the
?Maximum Percentage?). For such purposes, beneficial ownership shall be
determined in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated
thereunder. Each exercise of conversion rights by the Holder will constitute
a representation by
the Holder that it has evaluated the limitation set forth in this Section and
determined that
issuance of the full number of shares of Common Stock requested in such
conversion notice is
permitted under this Section. This provision shall not restrict the number
of shares of Common
Stock which a Holder may receive or beneficially own in order to determine
the amount of
securities or other consideration that such Holder may receive in the event
of a transaction
contemplated in Sections 4(b) or (c) of this Note. By written notice to the
Corporation, the
Holder may (i) waive the provisions of this Section but any such waiver will
not be effective until
the 61st day after such notice is delivered to the Corporation, nor will any
such waiver effect any
other Holder and (ii) increase or decrease the Maximum Percentage to any
other percentage not
in excess of 9.99% specified in such notice; provided that (A) any such
increase will not be
effective until the sixty-first (61st) day after such notice is delivered to
the Corporation, and (B)
any such increase or decrease will apply only to the Holder and not to any
other holder of the
Corporation Notes.
IN WITNESS WHEREOF Neptune Industries, Inc. has caused this Note
to be executed
by the signature of its President and its seal affixed and attested by its
Secretary.
: Neptune
Industries, Inc.
___________________________________
By: Ernest D.
Papadoyianis, President
Attest:
___________________________________
Corporate Secretary
( Corporate Seal)
CONVERSION NOTICE
The undersigned Holder of that certain Convertible Debenture Note of Neptune
Industries, Inc.
in the original principal amount of $ ____________ dated ________, 2006,
hereby irrevocably
exercises the option to convert this Note, or the portion hereof below
designated, into shares of
Common Stock of Neptune Industries, Inc., in accordance with the terms of the
Note, and
directs that the Common Shares issuable and deliverable upon the conversion,
together with any
check in payment for fractional shares and any notes representing any
unconverted principal
amount hereof, be issued and delivered to the registered Holder hereof unless
a different name
has been indicated below. If shares are to issue in the name of a person
other than the
undersigned, the undersigned will pay all transfer taxes and fees payable
with respect thereto.
HOLDER:
_______________________________________
Name of Holder
By:____________________________________
Signature
Printed name of signer: ____________________
Title: __________________________________
Date: __________________________________
Principal Amount to be Converted: $ _____,000.00
Fill in below for issuance of shares of Common Stock and Notes, if to be
issued otherwise than
to the registered Holder:
NAME: ______________________________________________________________
Address______________________________________________________________
_____________________________________________________________________
Print name and address, including zip code
Taxpayer ID of New Holder: ______________________________________________
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