Exhibit 10.15
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY
THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.
Principal Amount: $32,500.00 Issue Date: June 1, 2011
Purchase Price: $32,500.00
CONVERTIBLE PROMISSORY NOTE
---------------------------
FOR VALUE RECEIVED, MONSTER OFFERS, a Nevada corporation (hereinafter
called the "Borrower"), hereby promises to pay to the order of ASHER
ENTERPRISES, INC., a Delaware corporation, or registered assigns (the
"Holder") the sum of $32,500.00 together with any interest as set forth
herein, on March 2, 2012 (the "Maturity Date"), and to pay interest on the
unpaid principal balance hereof at the rate of eight percent (8%) (the
"Interest Rate") per annum from the date hereof (the "Issue Date") until the
same becomes due and payable, whether at maturity or upon acceleration or by
prepayment or otherwise. This Note may not be prepaid in whole or in part
except as otherwise explicitly set forth herein. Any amount of principal or
interest on this Note which is not paid when due shall bear interest at the
rate of twenty two percent (22%) per annum from the due date thereof until
the same is paid ("Default Interest"). Interest shall commence accruing on
the Issue Date, shall be computed on the basis of a 365-day year and the
actual number of days elapsed. All payments due hereunder (to the extent not
converted into common stock, $0.001 par value per share (the "Common Stock")
in accordance with the terms hereof) shall be made in lawful money of the
United States of America. All payments shall be made at such address as the
Holder shall hereafter give to the Borrower by written notice made in
accordance with the provisions of this Note. Whenever any amount expressed to
be due by the terms of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which is a
business day and, in the case of any interest payment date which is not the
date on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining the
amount of interest due on such date. As used in this Note, the term "business
day" shall mean any day other than a Saturday, Sunday or a day on which
commercial banks in the city of New York, New York are authorized or required
by law or executive order to remain closed. Each capitalized term used
herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Securities Purchase Agreement dated the date hereof, pursuant to
which this Note was originally issued (the "Purchase Agreement").
This Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Borrower and will not impose
personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right from time to time,
and at any time during the period beginning on the date which is one hundred
eighty (180) days following the date of this Note and ending on the later of:
(i) the Maturity Date and (ii) the date of payment of the Default Amount (as
defined in Article III) pursuant to Section 1.6(a) or Article III, each in
respect of the remaining outstanding principal amount of this Note to convert
all or any part of the outstanding and unpaid principal amount of this Note
into fully paid and non- assessable shares of Common Stock, as such Common
Stock exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall hereafter be
changed or reclassified at the conversion price (the "Conversion Price")
determined as provided herein (a "Conversion"); provided, however, that in no
event shall the Holder be entitled to convert any portion of this Note in
excess of that portion of this Note upon conversion of which the sum of (1)
the number of shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Notes or the unexercised or unconverted portion of any other security of the
Borrower subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock
issuable upon the conversion of the portion of this Note with respect to
which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such proviso, provided, further, however,
that the limitations on conversion may be waived by the Holder upon, at the
election of the Holder, not less than 61 days' prior notice to the Borrower,
and the provisions of the conversion limitation shall continue to apply until
such 61st day (or such later date, as determined by the Holder, as may be
specified in such notice of waiver). The number of shares of Common Stock to
be issued upon each conversion of this Note shall be determined by dividing
the Conversion Amount (as defined below) by the applicable Conversion Price
then in effect on the date specified in the notice of conversion, in the form
attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the
Borrower by the Holder in accordance with Section 1.4 below; provided that
the Notice of Conversion is submitted by facsimile (or by other means
resulting in, or reasonably expected to result in, notice) to the Borrower
before 6:00 p.m., New York, New York time on such conversion date (the
"Conversion Date"). The term "Conversion Amount" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of this Note to
be converted in such conversion plus (2) at the Borrower's option, accrued
and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, provided, however, that the
Company shall have the right to pay any or all interest in cash plus (3) at
the Borrower's option, Default Interest, if any, on the amounts referred to
in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's
option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof.
1.2 Conversion Price.
(a) Calculation of Conversion Price. The conversion price (the "Conversion
Price") shall equal the Variable Conversion Price (as defined herein)(subject
to equitable adjustments for stock splits, stock dividends or rights
offerings by the Borrower relating to the Borrower's securities or the
securities of any subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events). The
"Variable Conversion Price" shall mean 55% multiplied by the Market Price (as
defined herein)(representing a discount rate of 45%). "Market Price" means
the average of the lowest three (3) Trading Prices (as defined below) for the
Common Stock during the ten (10) Trading Day period ending one Trading Day
prior to the date the Conversion Notice is sent by the Holder to the Borrower
via facsimile (the "Conversion Date"). "Trading Price" means, for any
security as of any date, the closing bid price on the Over-the-Counter
Bulletin Board, or applicable trading market (the "OTCBB") as reported by a
reliable reporting service ("Reporting Service") mutually acceptable to
Borrower and Holder and hereafter designated by Holders of a majority in
interest of the Notes and the Borrower or, if the OTCBB is not the principal
trading market for such security, the closing bid price of such security on
the principal securities exchange or trading market where such security is
listed or traded or, if no closing bid price of such security is available in
any of the foregoing manners, the average of the closing bid prices of any
market makers for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. If the Trading Price cannot be calculated for
such security on such date in the manner provided above, the Trading Price
shall be the fair market value as mutually determined by the Borrower and the
holders of a majority in interest of the Notes being converted for which the
calculation of the Trading Price is required in order to determine the
Conversion Price of such Notes. "Trading Day" shall mean any day on which the
Common Stock is traded for any period on the OTCBB, or on the principal
securities exchange or other securities market on which the Common Stock is
then being traded.
(b) Conversion Price During Major Announcements. Notwithstanding anything
contained in Section 1.2(a) to the contrary, in the event the Borrower (i)
makes a public announcement that it intends to consolidate or merge with any
other corporation (other than a merger in which the Borrower is the surviving
or continuing corporation and its capital stock is unchanged) or sell or
transfer all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces a tender
offer to purchase 50% or more of the Borrower's Common Stock (or any other
takeover scheme) (the date of the announcement referred to in clause (i) or
(ii) is hereinafter referred to as the "Announcement Date"), then the
Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be
equal to the lower of (x) the Conversion Price which would have been
applicable for a Conversion occurring on the Announcement Date and (y) the
Conversion Price that would otherwise be in effect. From and after the
Adjusted Conversion Price Termination Date, the Conversion Price shall be
determined as set forth in this Section 1.2(a). For purposes hereof,
"Adjusted Conversion Price Termination Date" shall mean, with respect to any
proposed transaction or tender offer (or takeover scheme) for which a public
announcement as contemplated by this Section 1.2(b) has been made, the date
upon which the Borrower (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or publicly
announces the termination or abandonment of the proposed transaction or
tender offer (or takeover scheme) which caused this Section 1.2(b) to become
operative.
1.3 Authorized Shares. The Borrower covenants that during the period the
conversion right exists, the Borrower will reserve from its authorized and
unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion
of this Note issued pursuant to the Purchase Agreement. The Borrower is
required at all times to have authorized and reserved five times the number
of shares that is actually issuable upon full conversion of the Note (based
on the Conversion Price of the Notes in effect from time to time)(the
"Reserved Amount"). The Reserved Amount shall be increased from time to time
in accordance with the Borrower's obligations pursuant to Section 4(g) of the
Purchase Agreement. The Borrower represents that upon issuance, such shares
will be duly and validly issued, fully paid and non-assessable. In addition,
if the Borrower shall issue any securities or make any change to its capital
structure which would change the number of shares of Common Stock into which
the Notes shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that thereafter
there shall be a sufficient number of shares of Common Stock authorized and
reserved, free from preemptive rights, for conversion of the outstanding
Notes. The Borrower (i) acknowledges that 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 a Holder of this Note submits a Notice of Conversion, and
the Borrower does not have sufficient authorized but unissued shares of
Common Stock available to effect such conversion in accordance with the
provisions of this Article I (a "Conversion Default"), the Borrower shall
issue to the Holder all of the shares of Common Stock which are then
available to effect such conversion. The portion of this Note which the
Holder included in its Conversion Notice and which exceeds the amount which
is then convertible into available shares of Common Stock (the "Excess
Amount") shall, notwithstanding anything to the contrary contained herein,
not be convertible into Common Stock in accordance with the terms hereof
until (and at the Holder's option at any time after) the date additional
shares of Common Stock are authorized by the Borrower to permit such
conversion, at which time the Conversion Price in respect thereof shall be
the lesser of (i) the Conversion Price on the Conversion Default Date (as
defined below) and (ii) the Conversion Price on the Conversion Date
thereafter elected by the Holder in respect thereof. In addition, the
Borrower shall pay to the Holder payments ("Conversion Default Payments") for
a Conversion Default in the amount of (x) the sum of (1) the then outstanding
principal amount of this Note plus (2) accrued and unpaid interest on the
unpaid principal amount of this Note through the Authorization Date (as
defined below) plus (3) Default Interest, if any, on the amounts referred to
in clauses (1) and/or (2), multiplied by (y) .24, multiplied by (z) (N/365),
where N = the number of days from the day the holder submits a Notice of
Conversion giving rise to a Conversion Default (the "Conversion Default
Date") to the date (the "Authorization Date") that the Borrower authorizes a
sufficient number of shares of Common Stock to effect conversion of the full
outstanding principal balance of this Note. The Borrower shall use its best
efforts to authorize a sufficient number of shares of Common Stock as soon as
practicable following the earlier of (i) such time that the Holder notifies
the Borrower or that the Borrower otherwise becomes aware that there are or
likely will be insufficient authorized and unissued shares to allow full
conversion thereof and (ii) a Conversion Default. The Borrower shall send
notice to the Holder of the authorization of additional shares of Common
Stock, the Authorization Date and the amount of Holder's accrued Conversion
Default
Payments. The accrued Conversion Default Payments for each calendar month
shall be paid in cash or shall be convertible into Common Stock (at such time
as there are sufficient authorized shares of Common Stock) at the applicable
Conversion Price, at the Borrower's option, as follows:
(a) In the event Holder elects to take such payment in cash, cash payment
shall be made to Holder by the fifth (5th) day of the month following the
month in which it has accrued; and
(b) In the event Holder elects to take such payment in Common Stock, the
Holder may convert such payment amount into Common Stock at the Conversion
Price (as in effect at the time of conversion) at any time after the fifth
day of the month following the month in which it has accrued in accordance
with the terms of this Article I (so long as there is then a sufficient
number of authorized shares of Common Stock).
The Holder's election shall be made in writing to the Borrower at any time
prior to 6:00 p.m., New York, New York time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Holder shall be deemed to have elected to receive cash.
Nothing herein shall limit the Holder's right to pursue actual damages (to
the extent in excess of the Conversion Default Payments) for the Borrower's
failure to maintain a sufficient number of authorized shares of Common Stock,
and each holder shall have the right to pursue all remedies available at law
or in equity (including degree of specific performance and/or injunctive
relief).
1.4 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note may be
converted by the Holder in whole or in part at any time from time to time
after the Issue Date, by (A) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication
dispatched on the Conversion Date prior to 6:00 p.m., New York, New York
time) and (B) subject to Section 1.4(b), surrendering this Note at the
principal office of the Borrower.
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the
contrary set forth herein, upon conversion of this Note in accordance with
the terms hereof, the Holder shall not be required to physically surrender
this Note to the Borrower unless the entire unpaid principal amount of this
Note is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the Holder and the
Borrower, so as not to require physical surrender of this Note upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Borrower shall, prima facie, be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if any portion of this Note
is converted as aforesaid, the Holder may not transfer this Note unless the
Holder first physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Holder a new
Note of like tenor, registered as the Holder (upon payment by the Holder of
any applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note. The Holder and any assignee,
by acceptance of this Note, acknowledge and agree that, by reason of the
provisions of this paragraph, following conversion of a portion of this Note,
the unpaid and unconverted principal amount of this Note represented by this
Note may be less than the amount stated on the face hereof.
(c) Payment of Taxes. The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or in street
name), and the Borrower shall not be required to issue or deliver any such
shares or other securities or property unless and until the person or persons
(other than the Holder or the custodian in whose street name such shares are
to be held for the Holder's account) requesting the issuance thereof shall
have paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower
from the Holder of a facsimile transmission (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for
conversion as provided in this Section 1.4, the Borrower shall issue and
deliver or cause to be issued and delivered to or upon the order of the
Holder certificates for the Common Stock issuable upon such conversion within
three (3) business days after such receipt (and, solely in the case of
conversion of the entire unpaid principal amount hereof, surrender of this
Note) (such second business day being hereinafter referred to as the
"Deadline") in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirements of
[Section 2(g)] of the Purchase Agreement that certificates for shares of
Common Stock issued on or after the effective date of the Registration
Statement upon conversion of this Note shall not bear any restrictive
legend).
(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the
Borrower of a Notice of Conversion, the Holder shall be deemed to be the
holder of record of the Common Stock issuable upon such conversion, the
outstanding principal amount and the amount of accrued and unpaid interest on
this Note shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all rights with
respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If the Holder
shall have given a Notice of Conversion as provided herein, the Borrower's
obligation to issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of the absence of any action by the
Holder to enforce the same, any waiver or consent with respect to any
provision thereof, the recovery of any judgment against any person or any
action to enforce the same, any failure or delay in the enforcement of any
other obligation of the Borrower to the holder of record, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder of any obligation to the Borrower, and irrespective of
any other circumstance which might otherwise limit such obligation of the
Borrower to the Holder in connection with such conversion. The Conversion
Date specified in the Notice of Conversion shall be the Conversion Date so
long as the Notice of Conversion is received by the Borrower before 6:00
p.m., New York, New York time, on such date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering
physical certificates representing the Common Stock issuable upon conversion,
provided the Borrower's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and its compliance with the provisions contained
in Section 1.1 and in this Section 1.4, the Borrower shall use its best
efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system.
(g) Failure to Deliver Common Stock Prior to Deadline. Without in
any way limiting the Holder's right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of
the Common Stock issuable upon conversion of this Note is more than three (3)
business days after the Deadline (other than a failure due to the
circumstances described in Section 1.3 above, which failure shall be governed
by such Section) the Borrower shall pay to the Holder $2,000 per day in cash,
for each day beyond the Deadline that the Borrower fails to deliver such
Common Stock. Such cash amount shall be paid to Holder by the fifth day of
the month following the month in which it has accrued or, at the option of
the Holder (by written notice to the Borrower by the first day of the month
following the month in which it has accrued), shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in
accordance with the terms of this Note and such additional principal amount
shall be convertible into Common Stock in accordance with the terms of this
Note.
1.5 Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless (i) such shares
are sold pursuant to an effective registration statement under the Act or
(ii) the Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect
that the shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Act (or a successor rule) ("Rule
144") or (iv) such shares are transferred to an "affiliate" (as defined in
Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares
only in accordance with this Section 1.5 and who is an Accredited Investor
(as defined in the Purchase Agreement). Except as otherwise provided in the
Purchase Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon conversion of
this Note have been registered under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold, each certificate
for shares of Common Stock issuable upon conversion of this Note that has not
been so included in an effective registration statement or that has not been
sold pursuant to an effective registration statement or an exemption that
permits removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY
THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES."
The legend set forth above shall be removed and the Borrower shall issue to
the Holder a new certificate therefore free of any transfer legend if (i) the
Borrower or its transfer agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common
Stock may be made without registration under the Act and the shares are so
sold or transferred, (ii) such Holder provides the Borrower or its transfer
agent with reasonable assurances that the Common Stock issuable upon
conversion of this Note (to the extent such securities are deemed to have
been acquired on the same date) can be sold pursuant to Rule 144 or (iii) in
the case of the Common Stock issuable upon conversion of this Note, such
security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular
date that can then be immediately sold.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the
sale, conveyance or disposition of all or substantially all of the assets of
the Borrower, the effectuation by the Borrower of a transaction or series of
related transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other business
combination of the Borrower with or into any other Person (as defined below)
or Persons when the Borrower is not the survivor shall either: (i) be deemed
to be an Event of Default (as defined in Article III) pursuant to which the
Borrower shall be required to pay to the Holder upon the consummation of and
as a condition to such transaction an amount equal to the Default Amount (as
defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof.
"Person" shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when
this Note is issued and outstanding and prior to conversion of all of the
Notes, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of
which shares of Common Stock of the Borrower shall be changed into the same
or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other
than in connection with a plan of complete liquidation of the Borrower, then
the Holder of this Note shall thereafter have the right to receive upon
conversion of this Note, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such stock, securities or assets which
the Holder would have been entitled to receive in such transaction had this
Note been converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and
interests of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion hereof.
The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days
prior written notice (but in any event at least fifteen (15) days prior
written notice) of the record date of the special meeting of shareholders to
approve, or if there is no such record date, the consummation of, such
merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall
be entitled to convert this Note) and (b) the resulting successor or
acquiring entity (if not the Borrower) assumes by written instrument the
obligations of this Section 1.6(b). The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share
exchanges.
(c) Adjustment Due to Distribution. If the Borrower shall declare or make
any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital
or otherwise (including any dividend or distribution to the Borrower's
shareholders in cash or shares (or rights to acquire shares) of capital stock
of a subsidiary (i.e., a spin-off)) (a "Distribution"), then the Holder of
this Note shall be entitled, upon any conversion of this Note after the date
of record for determining shareholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the Holder
with respect to the shares of Common Stock issuable upon such conversion had
such Holder been the holder of such shares of Common Stock on the record date
for the determination of shareholders entitled to such Distribution.
(d) Adjustment Due to Dilutive Issuance. If, at any time when any Notes
are issued and outstanding, the Borrower issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares
of Common Stock for no consideration or for a consideration per share (before
deduction of reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith) less than the Conversion Price in effect
on the date of such issuance (or deemed issuance) of such shares of Common
Stock (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance,
the Conversion Price will be reduced to the amount of the consideration per
share received by the Borrower in such Dilutive Issuance.
The Borrower shall be deemed to have issued or sold shares of Common Stock
if the Borrower in any manner issues or grants any warrants, rights or
options (not including employee stock option plans), whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to purchase
Common Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is issuable upon
the exercise of such Options is less than the Conversion Price then in
effect, then the Conversion Price shall be equal to such price per share. For
purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Borrower
as consideration for the issuance or granting of all such Options, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Borrower upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise of all such Options
(assuming full conversion of Convertible Securities, if applicable). No
further adjustment to the Conversion Price will be made upon the actual
issuance of such Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon exercise of
such Options. Additionally, the Borrower shall be deemed to have issued or
sold shares of Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is
less than the Conversion Price then in effect, then the Conversion Price
shall be equal to such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable upon such
conversion or exchange" is determined by dividing (i) the total amount, if
any, received or receivable by the Borrower as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate amount
of additional consideration, if any, payable to the Borrower upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Conversion Price will be
made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(e) Purchase Rights. If, at any time when any Notes are issued and
outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the "Purchase
Rights") pro rata to the record holders of any class of Common Stock, then
the Holder of this Note will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if such Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note (without regard
to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
(f) Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described in
this Section 1.6, the Borrower, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a
certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the Note.
1.7 Trading Market Limitations. Unless permitted by the applicable rules
and regulations of the principal securities market on which the Common Stock
is then listed or traded, in no event shall the Borrower issue upon
conversion of or otherwise pursuant to this Note and the other Notes issued
pursuant to the Purchase Agreement more than the maximum number of shares of
Common Stock that the Borrower can issue pursuant to any rule of the
principal United States securities market on which the Common Stock is then
traded (the "Maximum Share Amount"), which shall be 4.99% of the total shares
outstanding on the Closing Date (as defined in the Purchase Agreement),
subject to equitable adjustment from time to time for stock splits, stock
dividends, combinations, capital reorganizations and similar events relating
to the Common Stock occurring after the date hereof. Once the Maximum Share
Amount has been issued (the date of which is hereinafter referred to as the
"Maximum Conversion Date"), if the Borrower fails to eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Borrower or any of its securities on the
Borrower's ability to issue shares of Common Stock in excess of the Maximum
Share Amount (a "Trading Market Prepayment Event"), in lieu of any further
right to convert this Note, and in full satisfaction of the Borrower's
obligations under this Note, the Borrower shall pay to the Holder, within
fifteen (15) business days of the Maximum Conversion Date (the "Trading
Market Prepayment Date"), an amount equal to 150% times the sum of (a) the
then outstanding principal amount of this Note immediately following the
Maximum Conversion Date, plus (b) accrued and unpaid interest on the unpaid
principal amount of this Note to the Trading Market Prepayment Date, plus (c)
Default Interest, if any, on the amounts referred to in clause (a) and/or (b)
above, plus (d) any optional amounts that may be added thereto at the Maximum
Conversion Date by the Holder in accordance with the terms hereof (the then
outstanding principal amount of this Note immediately following the Maximum
Conversion Date, plus the amounts referred to in clauses (b), (c) and (d)
above shall collectively be referred to as the "Remaining Convertible
Amount"). In the event that the sum of (x) the aggregate number of shares of
Common Stock issued upon conversion of this Note and the other Notes issued
pursuant to the Purchase Agreement plus (y) the aggregate number of shares of
Common Stock that remain issuable upon conversion of this Note and the other
Notes issued pursuant to the Purchase Agreement, represents at least one
hundred percent (100%) of the Maximum Share Amount (the "Triggering Event"),
the Borrower will use its best efforts to seek and obtain Shareholder
Approval (or obtain such other relief as will allow conversions hereunder in
excess of the Maximum Share Amount) as soon as practicable following the
Triggering Event and before the Maximum Conversion Date. As used herein,
"Shareholder Approval" means approval by the shareholders of the Borrower to
authorize the issuance of the full number of shares of Common Stock which
would be issuable upon full conversion of the then outstanding Notes but for
the Maximum Share Amount.
1.8 Status as Shareholder. Upon submission of a Notice of Conversion by a
Holder, (i) the shares covered thereby (other than the shares, if any, which
cannot be issued because their issuance would exceed such Holder's allocated
portion of the Reserved Amount or Maximum Share Amount) shall be deemed
converted into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common
Stock and to any remedies provided herein or otherwise available at law or in
equity to such Holder because of a failure by the Borrower to comply with the
terms of this Note. Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with respect to a
conversion of any portion of this Note for any reason, then (unless the
Holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Borrower) the Holder shall regain the rights of a Holder of
this Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to
reflect that such portion of this Note has not been converted. In all cases,
the Holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Conversion Default Payments pursuant to
Section 1.3 to the extent required thereby for such Conversion Default and
any subsequent Conversion Default and (ii) the right to have the Conversion
Price with respect to subsequent conversions determined in accordance with
Section 1.3) for the Borrower's failure to convert this Note.
1.9 Prepayment. Notwithstanding anything to the contrary contained in this
Note, so long as the Borrower has not received a Notice of Conversion from
the Holder, then at any time during the period beginning on the Issue Date
and ending on the date which is one hundred eighty (180) days following the
date hereof, the Borrower shall have the right, exercisable on not less than
three (3) Trading Days prior written notice to the Holder of the Note to
prepay the outstanding Note (principal and accrued interest), in full, in
accordance with this Section 1.9. Any notice of prepayment hereunder (an
"Optional Prepayment") shall be delivered to the Holder of the Note at its
registered addresses and shall state: (1) that the Borrower is exercising its
right to prepay the Note, and (2) the date of prepayment (the "Optional
Prepayment Notice") which shall be not more than three (3) Trading Days from
the date of the Optional Prepayment Notice. On the date fixed for prepayment
(the "Optional Prepayment Date"), the Borrower shall make payment of the
Optional Prepayment Amount (as defined below) to or upon the order of the
Holder as specified by the Holder in writing to the Borrower at least one (1)
business day prior to the Optional Prepayment Date. If the Borrower exercises
its right to prepay the Note, the Borrower shall make payment to the Holder
of an amount in cash (the "Optional Prepayment Amount") equal to 150%,
multiplied by the sum of: (w) the then outstanding principal amount of this
Note plus (x) accrued and unpaid interest on the unpaid principal amount of
this Note to the Optional Prepayment Date plus (y) Default Interest, if any,
on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed
to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then
outstanding principal amount of this Note to the date of payment plus the
amounts referred to in clauses (x), (y) and (z) shall collectively be known
as the "Optional Prepayment Sum"). If the Borrower delivers an Optional
Prepayment Notice and fails to pay the Optional Prepayment Amount due to the
Holder of the Note within two (2) business days following the Optional
Prepayment Date, the Borrower shall forever forfeit its right to redeem the
Note pursuant to this Section 1.9.
ARTICLE II. CERTAIN COVENANTS
2.1 Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not without the Holder's
written consent (a) pay, declare or set apart for such payment, any dividend
or other distribution (whether in cash, property or other securities) on
shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock or (b) directly or
indirectly or through any subsidiary make any other payment or distribution
in respect of its capital stock except for distributions pursuant to any
shareholders' rights plan which is approved by a majority of the Borrower's
disinterested directors.
2.2 Restriction on Stock Repurchases. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not without the Holder's
written consent redeem, repurchase or otherwise acquire (whether for cash or
in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of
the Borrower or any warrants, rights or options to purchase or acquire any
such shares.
2.3 Borrowings. So long as the Borrower shall have any obligation under
this Note, the Borrower shall not, without the Holder's written consent,
create, incur, assume or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date hereof,
(b) indebtedness to trade creditors or financial institutions incurred in the
ordinary course of business or (c) borrowings, the proceeds of which shall be
used to repay this Note.
2.4 Sale of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's written
consent, sell, lease or otherwise dispose of any significant portion of its
assets outside the ordinary course of business. Any consent to the
disposition of any assets may be conditioned on a specified use of the
proceeds of disposition.
2.5 Advances and Loans. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's written
consent, lend money, give credit or make advances to any person, firm, joint
venture or corporation, including, without limitation, officers, directors,
employees, subsidiaries and affiliates of the Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the
Borrower has informed Holder in writing prior to the date hereof, (b) made in
the ordinary course of business or (c) not in excess of $100,000.
2.6 Contingent Liabilities. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the Holder's
written consent, which shall not be unreasonably withheld, assume, guarantee,
endorse, contingently agree to purchase or otherwise become liable upon the
obligation of any person, firm, partnership, joint venture or corporation,
except by the endorsement of negotiable instruments for deposit or collection
and except assumptions, guarantees, endorsements and contingencies (a) in
existence or committed on the date hereof and which the Borrower has informed
Holder in writing prior to the date hereof, and (b) similar transactions in
the ordinary course of business.
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an "Event of Default") shall
occur:
3.1 Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether at
maturity, upon a Trading Market Prepayment Event pursuant to Section 1.7,
upon acceleration or otherwise.
3.2 Conversion and the Shares. The Borrower fails to issue shares of
Common Stock to the Holder (or announces or threatens in writing that it will
not honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Note,
fails to transfer or cause its transfer agent to transfer
(issue)(electronically or in certificated form) any certificate for shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, the Borrower directs its
transfer agent not to transfer or delays, impairs, and/or hinders its
transfer agent in transferring (or issuing)(electronically or in certificated
form) any certificate for shares of Common Stock to be issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when required by
this Note, or fails to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any certificate for any shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement or threat
that it does not intend to honor the obligations described in this paragraph)
and any such failure shall continue uncured (or any written announcement,
statement or threat not to honor its obligations shall not be rescinded in
writing) for three (3) business days after the Holder shall have delivered a
Notice of Conversion.
3.3 Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any collateral
documents including but not limited to the Purchase Agreement and such breach
continues for a period of ten (10) days after written notice thereof to the
Borrower from the Holder.
3.4 Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement), shall be false or
misleading in any material respect when made and the breach of which has (or
with the passage of time will have) a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase Agreement.
3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a
substantial part of its property or business, or such a receiver or trustee
shall otherwise be appointed.
3.6 Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of twenty (20) days unless
otherwise consented to by the Holder, which consent will not be unreasonably
withheld.
3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted
by or against the Borrower or any subsidiary of the Borrower.
3.8 Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTCBB or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market,
the New York Stock Exchange, or the American Stock Exchange.
3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to
comply with the reporting requirements of the Exchange Act; and/or the
Borrower shall cease to be subject to the reporting requirements of the
Exchange Act.
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower
or any substantial portion of its business.
3.11 Cessation of Operations. Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts as such
debts become due, provided, however, that any disclosure of the Borrower's
ability to continue as a "going concern" shall not be an admission that the
Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower to maintain any
material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the
future).
3.13 Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or period from two
years prior to the Issue Date of this Note and until this Note is no longer
outstanding, if the result of such restatement would, by comparison to the
unrestated financial statement, have constituted a material adverse effect on
the rights of the Holder with respect to this Note or the Purchase Agreement.
3.14 Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the Holder.
3.15 Replacement of Transfer Agent. In the event that the Borrower
proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered pursuant to the
Purchase Agreement (including but not limited to the provision to irrevocably
reserve shares of Common Stock in the Reserved Amount) signed by the
successor transfer agent to Borrower and the Borrower.
3.16 Cross-Default. Notwithstanding anything to the contrary contained in
this Note or the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained in any of
the Other Agreements, after the passage of all applicable notice and cure or
grace periods, shall, at the option of the Borrower, be considered a default
under this Note and the Other Agreements, in which event the Holder shall be
entitled (but in no event required) to apply all rights and remedies of the
Holder under the terms of this Note and the Other Agreements by reason of a
default under said Other Agreement or hereunder. "Other Agreements" means,
collectively, all agreements and instruments between, among or by: (1) the
Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the
Holder, including, without limitation, promissory notes; provided, however,
the term "Other Agreements" shall not include the agreements and instruments
defined as the Documents. Each of the loan transactions will be cross-
defaulted with each other loan transaction and with all other existing and
future debt of Borrower to the Holder.
Upon the occurrence and during the continuation of any Event of Default
specified in Section 3.1 (solely with respect to failure to pay the principal
hereof or interest thereon when due at the Maturity Date), the Note shall
become immediately due and payable and the Borrower shall pay to the Holder,
in full satisfaction of its obligations hereunder, an amount equal to the
Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL
BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER,
IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y)
THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the
occurrence and during the continuation of any Event of Default specified in
Sections 3.1 (solely with respect to failure to pay the principal hereof or
interest thereon when due on this Note upon a Trading Market Prepayment Event
pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written
notice to the Borrower by such Holders (the "Default Notice"), and upon the
occurrence of an Event of Default specified the remaining sections of
Articles III (other than failure to pay the principal hereof or interest
thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall
become immediately due and payable and the Borrower shall pay to the Holder,
in full satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150% times the sum of (w) the then outstanding principal
amount of this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the "Mandatory
Prepayment Date") plus (y) Default Interest, if any, on the amounts referred
to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of
this Note to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the "Default Sum") or (ii) the
"parity value" of the Default Sum to be prepaid, where parity value means (a)
the highest number of shares of Common Stock issuable upon conversion of or
otherwise pursuant to such Default Sum in accordance with Article I, treating
the Trading Day immediately preceding the Mandatory Prepayment Date as the
"Conversion Date" for purposes of determining the lowest applicable
Conversion Price, unless the Default Event arises as a result of a breach in
respect of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the highest Closing Price
for the Common Stock during the period beginning on the date of first
occurrence of the Event of Default and ending one day prior to the Mandatory
Prepayment Date (the "Default Amount") and all other amounts payable
hereunder shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together
with all costs, including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or in equity.
If the Borrower fails to pay the Default Amount within five (5) business
days of written notice that such amount is due and payable, then the Holder
shall have the right at any time, so long as the Borrower remains in default
(and so long and to the extent that there are sufficient authorized shares),
to require the Borrower, upon written notice, to immediately issue, in lieu
of the Default Amount, the number of shares of Common Stock of the Borrower
equal to the Default Amount divided by the Conversion Price then in effect.
ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with
charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed as set forth below or to such other address as such
party shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business
day during normal business hours where such notice is to be received) or (b)
on the second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such
communications shall be:
If to the Borrower, to:
MONSTER OFFERS
4056 Valle Del Sol
Bonsall, CA 92003
Attn: PAUL GAIN, Chief Executive Officer
facsimile:
With a copy by fax only to (which copy shall not constitute notice):
[enter name of law firm]
Attn: [attorney name]
[enter address line 1]
[enter city, state, zip]
facsimile: [enter fax number]
If to the Holder:
ASHER ENTERPRISES, INC.
1 Linden Pl., Suite 207
Great Neck, NY. 11021
Attn: Curt Kramer, President
facsimile: 516-498-9894
With a copy by fax only to (which copy shall not constitute notice):
Naidich Wurman Birnbaum & Maday, LLP
80 Cuttermill Road, Suite 410
Great Neck, NY 11021
Attn: Bernard S. Feldman, Esq.
facsimile: 516-466-3555
4.3 Amendments. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Borrower and the Holder. The term
"Note" and all reference thereto, as used throughout this instrument, shall
mean this instrument (and the other Notes issued pursuant to the Purchase
Agreement) as originally executed, or if later amended or supplemented, then
as so amended or supplemented.
4.4 Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an
"accredited investor" (as defined in Rule 501(a) of the 1933 Act).
Notwithstanding anything in this Note to the contrary, this Note may be
pledged as collateral in connection with a bona fide margin account or other
lending arrangement.
4.5 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.
4.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by either party against
the other concerning the transactions contemplated by this Note shall be
brought only in the state courts of New York or in the federal courts located
in the state and county of Nassau. The parties to this Note hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens. The Borrower and
Holder waive trial by jury. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs. In the event
that any provision of this Note or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of any other provision of any agreement. Each party hereby irrevocably waives
personal service of process and consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any other manner permitted by law.
4.7 Certain Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal amount (or
the portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment
on this Note may be difficult to determine and the amount to be so paid by
the Borrower represents stipulated damages and not a penalty and is intended
to compensate the Holder in part for loss of the opportunity to convert this
Note and to earn a return from the sale of shares of Common Stock acquired
upon conversion of this Note at a price in excess of the price paid for such
shares pursuant to this Note. The Borrower and the Holder hereby agree that
such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Note into shares of Common Stock.
4.8 Purchase Agreement. By its acceptance of this Note, each party agrees
to be bound by the applicable terms of the Purchase Agreement.
4.9 Notice of Corporate Events. Except as otherwise provided below, the
Holder of this Note shall have no rights as a Holder of Common Stock unless
and only to the extent that it converts this Note into Common Stock. The
Borrower shall provide the Holder with prior notification of any meeting of
the Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Borrower
of a record of its shareholders for the purpose of determining shareholders
who are entitled to receive payment of any dividend or other distribution,
any right to subscribe for, purchase or otherwise acquire (including by way
of merger, consolidation, reclassification or recapitalization) any share of
any class or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to vote in
connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Borrower or any proposed liquidation,
dissolution or winding up of the Borrower, the Borrower shall mail a notice
to the Holder, at least twenty (20) days prior to the record date specified
therein (or thirty (30) days prior to the consummation of the transaction or
event, whichever is earlier), of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event,
and a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time. The
Borrower shall make a public announcement of any event requiring notification
to the Holder hereunder substantially simultaneously with the notification to
the Holder in accordance with the terms of this Section 4.9.
4.10 Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly,
the Borrower acknowledges that the remedy at law for a breach of its
obligations under this Note will be inadequate and agrees, in the event of a
breach or threatened breach by the Borrower of the provisions of this Note,
that the Holder shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties assessable
herein, to an injunction or injunctions restraining, preventing or curing any
breach of this Note and to enforce specifically the terms and provisions
thereof, without the necessity of showing economic loss and without any bond
or other security being required.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name
by its duly authorized officer this June 1, 2011.
MONSTER OFFERS
By: /s/ Paul Gain
-----------------------
PAUL GAIN
Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert $_________________ principal amount
of the Note (defined below) into that number of shares of Common Stock to be
issued pursuant to the conversion of the Note ("Common Stock") as set forth
below, of MONSTER OFFERS, a Nevada corporation (the "Borrower") according to
the conditions of the convertible note of the Borrower dated as of June 1,
2011 (the "Note"), as of the date written below. No fee will be charged to
the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
[ ] The Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission
system ("DWAC Transfer").
Name of DTC Prime Broker:
Account Number:
[ ] The undersigned hereby requests that the Borrower issue a certificate or
certificates for the number of shares of Common Stock set forth below
(which numbers are based on the Holder's calculation attached hereto) in
the name(s) specified immediately below or, if additional space is
necessary, on an attachment hereto:
ASHER ENTERPRISES, INC.
1 Linden Pl., Suite 207
Great Neck, NY. 11021
Attention: Certificate Delivery
(516) 498-9890
Date of Conversion:
Applicable Conversion Price: $___________
Number of Shares of Common Stock to be Issued
Pursuant to Conversion of the Notes:
Amount of Principal Balance Due remaining
Under the Note after this conversion:
ASHER ENTERPRISES, INC.
By:
Name: Curt Kramer
Title: President
Date:
1 Linden Pl., Suite 207
Great Neck, New York 11021