Attached files
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8-K - HDS INTERNATIONAL CORP. FORM 8-K (03/07/2014) - GOOD GAMING, INC. | hdsi8k-11072013.htm |
EX-10 - SECURITIES PURCHASE AGREEMENT - FEBRUARY 18, 2014 - GOOD GAMING, INC. | exh10-2.htm |
EX-10.1 2 exh10-1.htm CONVERTIBLE PROMISSORY NOTE - FEBRUARY 18, 2014.
exh10-1.htm
Exhibit 10.1
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.
Principal
Amount:
$15,500.00 Issue
Date: February 18, 2014
Purchase Price: $15,500.00
CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, HDS INTERNATIONAL CORP., 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
$15,500.00 together with any interest as set forth herein, on August 20,
2015 (the "Maturity Date"), and to pay simple interest ("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 annual percentage 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 date that
the Note is fully paid and 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 9.99% 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 100 days' prior notice to the
Borrower, and the provisions of the conversion limitation shall
continue to apply until such 100th 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 e-mail (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 Holder's option, accrued and unpaid interest, if any, on
such principal amount at the interest rates provided in this Note to the
Conversion Date, plus
(3) at the Holder'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.
2
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, , reclassifications,
extraordinary distributions and similar events). The "Variable
Conversion Price" shall mean 50% multiplied by the Market Price (as
defined herein) (representing a discount rate of 50%). "Market Price"
means the average of the lowest five (5) Trading Prices (as defined
below) for the Common Stock during the thirty (30) Trading Day period
ending on the latest complete Trading Day prior to the Conversion Date.
"Trading Price" means, for any security as of any date, the closing bid
price on the pink sheets, or applicable trading market (the "OTCQB") as
reported by a reliable reporting service ("Reporting Service")
designated by the Holder (i.e. Bloomberg) or, if the OTCQB 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 tradable for any period on the OTCQB, 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), provided that the transaction referenced in this
1.2(b)(ii) actually closes (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 the proposed
transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative, or the Borrower (in the case of
clause (i) 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.
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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
hereunder. 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 the Borrower does not maintain the Reserved Amount it will
be considered an Event of Default under Section 3.2 of the Note.
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,
e-mail 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
4
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 e-mail (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 (the "Deadline") (and, solely
in the case of conversion of the entire unpaid principal amount hereof,
surrender of this Note) in accordance with the terms hereof and the
Purchase Agreement.
(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 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.
5
(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 not delivered by 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 through willful or deliberate
hindrances on the part of the Borrower. 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. The
Borrower agrees that the right to convert is a valuable right to the
Holder. The damages resulting from a failure, attempt to frustrate,
interference with such conversion right are difficult if not impossible
to qualify. Accordingly the parties acknowledge that the liquidated
damages provision contained in this Section 1.4(g) are justified.
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. "7
6
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, which opinion shall be accepted by the Company so that the sale or
transfer is effected or (ii) 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. In the event that the Company does not accept a valid
opinion of counsel provided by the Buyer with respect to the transfer of
Securities pursuant to an exemption from registration, such as Rule 144
or Regulation S, at the Deadline, it will be considered an Event of
Default pursuant to Section 3.2 of the Note.
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, 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, 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,
five (5) 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, or
other similar event or sale of assets (during which time the Holder
shall be entitled to convert this Note) and (b) the resulting
7
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) 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 all 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.
(d) 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 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 9.99% 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, and similar events relating to the Common Stock
occurring after the date hereof.
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
8
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 is thirty
(30) days following the Issue Date, 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 Notice") 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 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 125%,
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. 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 prepay the Note pursuant to
this Section 1.9.
Notwithstanding
anything to the contrary contained in this Note, at any time during the
period beginning on the date which is thirty-one (31) days following
the Issue Date and ending on the date which is sixty (60) days following
the Issue Date, 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 Optional
Prepayment Notice 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
which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the
Borrower shall make payment of the Second 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 "Second Optional Prepayment Amount") equal to 130%,
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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Second Optional Prepayment Amount due to the Holder of the
Note
9
within
two (2) business days following the Optional Prepayment Date, the
Borrower shall forever forfeit its right to prepay the Note pursuant to
this Section 1.9.
Notwithstanding
anything to the contrary contained in this Note, at any time during the
period beginning on the date which is sixty-one (61) days following the
Issue Date and ending on the date which is ninety (90) days following
the Issue Date, 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 Optional
Prepayment Notice 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
which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the
Borrower shall make payment of the Third 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 "Third Optional Prepayment Amount") equal to 135%,
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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Third 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 prepay the Note
pursuant to this Section 1.9.
Notwithstanding
any to the contrary stated elsewhere herein, at any time during the
period beginning on the date that is ninety-one (91) day from the issue
date and ending one hundred twenty (120) days following the Issue Date,
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 Optional Prepayment Notice
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 which shall be not more
than three (3) Trading Days from the date of the Optional Prepayment
Notice. On the Optional Prepayment Date, the Borrower shall make payment
of the Fourth 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
"Fourth Optional Prepayment Amount") equal to 140%, 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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Fourth 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 prepay the Note
pursuant to this Section 1.9.
Notwithstanding any to the contrary stated elsewhere herein, at any
time during the period beginning on the date that is one hundred
twenty-one (121) day from the Issue Date
10
and
ending one hundred fifty (150) days following the Issue Date, 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 Optional Prepayment Notice 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 which shall be not more than three
(3) Trading Days from the date of the Optional Prepayment Notice. On
the Optional Prepayment Date, the Borrower shall make payment of the
Fifth 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 "Fifth Optional
Prepayment Amount") equal to 145%, 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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Fifth 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 prepay the Note
pursuant to this Section 1.9.
Notwithstanding any to the contrary stated elsewhere herein, at any
time during the period beginning on the date that is one hundred
fifty-one (151) day from the Issue Date and ending one hundred eighty
(180) days following the Issue Date, 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
Optional Prepayment Notice 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
which shall be not more than three (3) Trading Days from the date of the
Optional Prepayment Notice. On the Optional Prepayment Date, the
Borrower shall make payment of the Sixth 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 "Sixth 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. If the Borrower delivers an Optional Prepayment Notice and fails
to pay the Sixth 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 prepay 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,
11
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 the board of directors.
2.2 Borrowings.
So long as the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder's written consent, (a) create,
incur, assume guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any other person, firm,
partnership, joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection, or (b) suffer to exist
any liability for borrowed money, except any borrowings that does not
render the Borrower a "Shell" company as defined in Rule 12b-2 under the
Securities Exchange Act of 1934.
2.3 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.
2.4 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 $300,000.
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 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
12
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. It is an obligation of the
Borrower to remain current in its obligations to its transfer agent. It
shall be an event of default of this Note, if a conversion of this Note
is delayed, hindered or frustrated due to a balance owed by the Borrower
to its transfer agent. If at the option of the Holder, the Holder
advances any funds to the Borrower's transfer agent in order to process a
conversion, such advanced funds shall be paid by the Borrower to the
Holder within forty eight (48) hours of a demand from the Holder.
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 $250,000, 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 OTCQB 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.
13
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
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, provided
that the Borrower shall 20 days to cure any such defaults in this
Section 3.13.
3.14 Reverse Splits.
The Borrower effectuates a reverse split of its Common Stock without
written notice to the Holder on the date it becomes effective.
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 Holder, 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 related or companion documents to this
Note. 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
14
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.
15
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:
|
||
HDS INTERNATIONAL CORP.
|
||
10 Dorrance Street - Suite 700
|
||
Providence, RI 02903
|
||
Attn: TASSOS RECACHINAS, Chief Executive Officer/President
|
||
facsimile: 888-501-2280
|
||
With a copy by fax only to (which copy shall not constitute notice):
|
||
The Law Office of Conrad C. Lysiak, P.S.
|
||
ATTN: Conrad C. Lysiak, Esq.
|
||
601 West First Avenue, Suite 903
|
||
Spokane, WA 99201
|
||
facsimile: 509-747-1770
|
||
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
|
16
Great Neck, NY 11021
|
||
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).
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
17
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. .
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 Feburary 18, 2014.
HDS INTERNATIONAL CORP.
By:
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TASSOS RECACHINAS
|
TASSOS RECACHINAS
|
|
Chief Executive Officer/President
|
18
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 HDS INTERNATIONAL CORP., a Nevada
corporation (the "Borrower") according to the conditions of the
convertible note of the Borrower dated as of February 18, 2014 (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, NY. 11021
|
19