Attached files
Exhibit
10.2
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 MAY BE THE LEGAL COUNSEL OPINION (AS
DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER
APPLICABLE EXEMPTION 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.
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Principal
Amount: $33,507.50
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Issue
Date: April 28, 2021
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Actual
Amount of Purchase Price: $30,740.82
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CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, TEGO CYBER INC., a Nevada corporation
(hereinafter called the “Borrower” or the
“Company”), hereby promises to pay to the order of
REYNALD THAUVETTE and
DOMINIQUE JOYAL (together
jointly and/or separately) (the “Holder”), in the form
of lawful money of the United States of America, the principal sum
of up to $33,507.50 (the “Principal Amount”) (subject
to adjustment herein), with a purchase price of $30,740.82 (the
“Consideration”) plus an original issue discount in the
amount of up to $2,766.68 (the “OID”), and to pay
interest on the Principal Amount under this Note at the rate of
eight percent (8%) (the “Interest Rate”) per annum
guaranteed from the date that the amount of Consideration is fully
funded in accordance with the terms of this Note until the same
becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise, as further provided herein. This
Note is issued in exchange for $10,000.00 and for the
Holder’s surrender of the Convertible Note previously issued
by the Marker plus accrued interest. All obligation of Maker to
Holder, as represented in the previously issued Convertible Note
hereto are replace and superseded in their entirety by the terms of
this Note. The Holder shall pay $30,740.82 of the Consideration on
the day of the full execution of the Note and all related
transactional documents related to this Note, and the outstanding
principal amount under this Note shall be $33,507.50 (which
includes the OID). The maturity date for this Note shall be nine
(9) months from the effective date of the Holder’s payment of
the Consideration (“Maturity Date”), and is the date
upon which the principal sum as well as any accrued and unpaid
interest and other fees shall be due and payable. Notwithstanding
any other provision of this Note or any related transaction
documents, Borrower may prepay this Note only pursuant to Section
1.9 hereof.
It is
further acknowledged and agreed that the Principal Amount owed by
Borrower under this Note shall be increased by the amount of all
expenses up to a maximum of $500 incurred by the Holder relating to
the conversion of this Note into shares of Common Stock. All such
expenses shall be deemed added to the Principal Amount hereunder to
the extent such expenses are paid by the Holder.
Interest shall
commence accruing on the date that the Note is fully funded and
shall be computed on the basis of a 365-day year and the actual
number of days elapsed. Any Principal Amount or interest on this
Note which is not paid when due shall bear interest at the rate the
lesser of (a) fifteen percent (15%) per annum from the due date
thereof until the same is paid (“Default Interest”);
(b) or the maximum rate allowed by law.
All
payments due hereunder (to the extent not converted into shares of
common stock, $0.001 par value per share, of the Borrower (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.
Each
capitalized term used herein, and not otherwise defined, shall have
the meaning ascribed thereto in that certain Securities Purchase
Agreement, dated as of the Issue Date, pursuant to which this Note
was originally issued (the “Purchase Agreement”). 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. As used herein, the
term “Trading Day” means any day that shares of Common
Stock are listed for trading or quotation on the Principal Market
(as defined in the Purchase Agreement), any tier of the NASDAQ
Stock Market, the New York Stock Exchange or the NYSE
American.
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, at any time while there are amounts
outstanding under the Note, to convert all or any portion of the
then outstanding and unpaid Principal Amount and interest
(including any Default Interest) 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 (as defined below) 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 this Note 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 Conversion Shares 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 then outstanding shares of Common Stock. For
purposes of the proviso set forth in 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 “1934 Act”), and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such
proviso, provided, however,
that the limitations on conversion may be waived (up to 9.99%) 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 Conversion
Shares 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 or
Borrower’s transfer agent 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 or
Borrower’s transfer agent before 11:59 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 Rate 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).
1.2
Conversion Price.
(a) Calculation of Conversion
Price. The per share conversion price into which Principal
Amount and interest (including any Default Interest) under this
Note shall be convertible into shares of Common Stock hereunder
(the “Conversion Price”) shall be equal to $0.10 (the
“Fixed Conversion Price”), provided, further, that upon any event
of default (as defined herein) after the Issue Date which remains
uncured for a period of five (5) calendar days, the Conversion
Price shall equal the lower of (i) the Fixed Conversion Price; (ii)
discount to market based upon subsequent financings with other
investors; or (iii) seventy five percent (75%) multiplied by the
lowest closing price of the Common Stock during the twenty (20)
consecutive Trading Day period immediately preceding the date of
the respective conversion (the “Alternate Conversion
Price”); To the extent the Conversion Price is below the par
value per share, the Borrower will take all steps necessary to
solicit the consent of the stockholders to reduce the par value to
the lowest value possible under law, provided however that the
Borrower agrees to honor all conversions submitted pending this
increase. If at any time the Conversion Price as determined
hereunder for any conversion would be less than the par value of
the Common Stock, then at the sole discretion of the Holder, the
Conversion Price hereunder may equal such par value for such
conversion and the Conversion Amount for such conversion may be
increased to include Additional Principal, where “Additional
Principal” means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
conversion shares issuable upon such conversion to equal the same
number of conversion shares as would have been issued had the
Conversion Price not been adjusted by the Holder to the par value
price.
(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 be acquired by, consolidate
or merge with any other corporation or entity (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 fifty percent (50%) or more of the Common
Stock (or any other takeover scheme) (any such transaction referred
to in clause (i) or (ii) being referred to herein as a
“Change in Control” and the date of the announcement
referred to in clause (i) or (ii) is being referred to herein 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 and (y) a fifteen
percent (15%) discount to the Acquisition Price (as defined below).
From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in Section
1.2(a). For purposes hereof, “Adjusted Conversion Price
Termination Date” shall mean, with respect to any proposed
Change in Control 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 Change in
Control which caused this Section 1.2(b) to become operative. For
purposes hereof, “Acquisition Price” shall mean a price
per share of Common Stock derived by dividing (x) the total
consideration (in cash, equity, earn- out or similar payments or
otherwise) paid or to be paid to the Borrower or its shareholders
in the Change in Control transaction by (y) the number of
authorized shares of Common Stock outstanding as of the business
day prior to the Announcement Date.
1.3 Authorized and Reserved Shares.
The Borrower covenants that at all times until the Note is
satisfied in full, 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 a number of
Conversion Shares equal to the greater of: (a) 750,000 shares of
Common Stock or (b) the sum of (i) the number of Conversion Shares
issuable upon the full conversion of this Note (assuming no payment
of Principal Amount or interest) as of any issue date (taking into
consideration any adjustments to the Conversion Price pursuant to
Section 2 hereof or otherwise) multiplied by (ii) three (3)
but subject to a maximum reserve of 1,500,000 shares without the
consent of the Company, which shall not be unreasonably withheld
(the “Reserved Amount”). In the event that the Borrower
shall be unable to reserve the entirety of the Reserved Amount (the
“Reserve Amount Failure”), the Borrower shall promptly
take all actions necessary to increase its authorized share capital
to accommodate the Reserved Amount (the “Authorized Share
Increase”), including without limitation, all board of
directors actions and approvals and promptly (but no less than
sixty (60) days following the calling and holding a special meeting
of its shareholders no more than sixty (60) days following the
Reserve Amount Failure to seek approval of the Authorized Share
Increase via the solicitation of proxies. Notwithstanding the
foregoing, in no event shall the Reserved Amount be lower than the
initial Reserved Amount, regardless of any prior conversions. The
Borrower represents that upon issuance, the Conversion 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
Conversion Shares into which this Note 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 this Note.
The Borrower (i) acknowledges that it has irrevocably instructed
its transfer agent to issue certificates for the Conversion Shares
or instructions to have the Conversion Shares issued as
contemplated by Section 1.4(f) hereof, 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 or cause the Company to electronically issue
shares of Common Stock to execute and issue the necessary
certificates for the Conversion Shares or cause the Conversion
Shares to be issued as contemplated by Section 1.4(f) hereof 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 this Note.
1.4
Method of Conversion.
(a) Mechanics of Conversion. This
Note may be converted by the Holder in whole or in part, on any
Trading Day, at any time on or after the 180th calendar day after
the Issue Date, by submitting to the Borrower or Borrower’s
transfer agent a Notice of Conversion (by facsimile, e-mail or
other reasonable means of communication dispatched on the
Conversion Date prior to 11:59 p.m., New York, New York time). Any
Notice of Conversion submitted after 11:59 p.m., New York, New York
time, shall be deemed to have been delivered and received on the
next Trading Day.
(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 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 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 Conversion Shares (or
cause the electronic delivery of the Conversion Shares as
contemplated by Section 1.4(f) hereof) within three (3) Trading
Days after such receipt (the “Deadline”) (and, solely
in the case of conversion of the entire unpaid Principal Amount and
interest (including any Default Interest) under this Note,
surrender of this Note). If the Company shall fail for any reason
or for no reason to issue to the Holder on or prior to the Deadline
a certificate for the number of Conversion Shares or to which the
Holder is entitled hereunder and register such Conversion Shares on
the Company’s share register or to credit the Holder’s
balance account with DTC (as defined below) for such number of
Conversion Shares to which the Holder is entitled upon the
Holder’s conversion of this Note (a “Conversion
Failure”), then, in addition to all other remedies available
to the Holder, (i) the Company shall pay in cash to the Holder on
each day after the Deadline and during such Conversion Failure an
amount equal to one-half percent (0.5%) of the product of (A) the
sum of the number of Conversion Shares not issued to the Holder on
or prior to the Deadline and to which the Holder is entitled and
(B) the closing sale price of the Common Stock on the Trading Day
immediately preceding the last possible date which the Company
could have issued such Conversion Shares to the Holder without
violating this Section 1.4(d); and (ii) the Holder, upon written
notice to the Company, may void its Notice of Conversion with
respect to, and retain or have returned, as the case may be, any
portion of this Note that has not been converted pursuant to such
Notice of Conversion; provided that the voiding of an Notice of
Conversion shall not affect the Company’s obligations to make
any payments which have accrued prior to the date of such notice.
In addition to the foregoing, if on or prior to the Deadline the
Company shall fail to issue and deliver a certificate to the Holder
and register such Conversion Shares on the Company’s share
register or credit the Holder’s balance account with DTC for
the number of Conversion Shares to which the Holder is entitled
upon the Holder’s exercise hereunder or pursuant to the
Company’s obligation pursuant to clause (ii) below, and if on
or after such Trading Day the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving
from the Company, then the Company shall, within two (2) Trading
Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to
the Holder’s total purchase price (including brokerage
commissions and other reasonable and customary out-of-pocket
expenses, if any) for the shares of Common Stock so purchased (the
“Buy-In Price”), at which point the Company’s
obligation to deliver such certificate (and to issue such
Conversion Shares) or credit such Holder’s balance account
with DTC for such Conversion Shares shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Conversion Shares or
credit such Holder’s balance account with DTC and pay cash to
the Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common
Stock, times (B) the closing sales price of the Common Stock on the
date of exercise. Nothing shall limit the Holder’s right to
pursue any other remedies available to it hereunder, at law or in
equity, including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing
the Conversion Shares (or to electronically deliver such Conversion
Shares) upon the conversion of this Note as required pursuant to
the terms hereof.
(e) Obligation of Borrower to Deliver
Common Stock. At the time that the Holder submits the Notice
of Conversion to the Borrower or Borrower’s transfer agent,
the Holder shall be deemed to be the holder of record of the
Conversion Shares issuable upon such conversion, the outstanding
Principal Amount and the amount of accrued and unpaid interest
(including any Default Interest) under 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 the Conversion Shares (or cause the
electronic delivery of the Conversion Shares as contemplated by
Section 1.4(f) hereof) 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 sent to the Borrower or
Borrower’s transfer agent before 11:59 p.m., New York, New
York time, on such date.
(f) Delivery of Conversion Shares by
Electronic Transfer. In lieu of delivering physical
certificates representing the Conversion Shares issuable upon
conversion hereof, provided the Borrower is participating in the
Depository Trust Company (“DTC”) Fast Automated
Securities Transfer or Deposit/Withdrawal at Custodian programs,
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 reasonable best efforts to cause its transfer agent
to electronically transmit the Conversion Shares issuable upon
conversion hereof to the Holder by crediting the account of
Holder’s Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system.
1.5 Concerning the Shares. The
Conversion Shares 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 1933 Act or (ii) the
Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be the Legal Counsel
Opinion (as defined in the Purchase Agreement)) 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, Rule 144A,
Regulation S, or other applicable exemption, 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
Conversion Shares have been registered under the 1933 Act or
otherwise may be sold pursuant to Rule 144, Rule 144A, Regulation
S, or other applicable exemption without any restriction as to the
number of securities as of a particular date that can then be
immediately sold, each certificate for the Conversion Shares 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 MAY BE THE LEGAL COUNSEL OPINION (AS
DEFINED IN THE PURCHASE AGREEMENT)), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144, RULE 144A, REGULATION S, OR OTHER
APPLICABLE EXEMPTION 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 Company shall issue
to the Holder a certificate for the applicable Conversion Shares
without such legend upon which it is stamped or (as requested by
the Holder) issue the applicable Conversion Shares by electronic
delivery by crediting the account of such holder’s broker
with DTC, if, unless otherwise required by applicable state
securities laws: (a) such Conversion Shares are registered for sale
under an effective registration statement filed under the 1933 Act
or otherwise may be sold pursuant to Rule 144, Rule 144A,
Regulation S, or other applicable exemption without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, or (b) the Company or the Holder provides
the Legal Counsel Opinion (as contemplated by and in accordance
with Section 4(m) of the Purchase Agreement) to the effect that a
public sale or transfer of such Conversion Shares may be made
without registration under the 1933 Act, which opinion shall be
accepted by the Company so that the sale or transfer is effected.
The Company shall be responsible for the fees of its transfer agent
and all DTC fees associated with any such issuance. The Holder
agrees to sell all Conversion Shares, including those represented
by a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any. In the event that the Company does not accept the opinion of
counsel provided by the Holder with respect to the transfer of
Conversion Shares pursuant to an exemption from registration, such
as Rule 144, Rule 144A or Regulation S, at the Deadline,
notwithstanding that the conditions of Rule 144, Rule 144A,
Regulation S, or other applicable exemption, as applicable, have
been met, it will be considered an Event of Default under this
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 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 (defined in Section 3.24) 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 this Note, 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 at the
Exercise Price without adjustment for any reason, including but not
limited to default (without regard to any limitations on conversion
set forth herein). The Borrower shall not effectuate any
transaction described in this Section 1.6(b) unless (a) it first
gives, to the extent practicable, at least 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) Pending Legislation. As
of the Issue Date hereof, proposed legislation exists, namely
proposed amendments to Rule 144(d)(3)(ii) proposed on December 22,
2020 in SEC Release 2020-336, that would fundamentally change the
economic terms of this Note. In the event the rule becomes law and
becomes effective while any amounts are outstanding under this
Note, Section 1.2 hereof shall be automatically amended to contain
only a fixed conversion price of $0.10 per share. In the event that
the Borrower is in default of any of the provisions of the Note or
other Transaction Documents, and the Company has not cured said
default within five (5) calendar days, the fixed conversion price
shall be reduced to $0.05 per share (the “Default Fixed
Price”) in addition to any other principal adjustments,
default interest, or other remedies available to it under law. In
the event the final rule, or any other combination of final rules,
make this provision inoperable, invalid, or otherwise have an
effect that changes the economics of the transactions contemplated
hereby, the pertinent clause or mechanic of operation shall be
stricken and only the fixed price provision shall
remain.
(e) Dilutive Issuance. If the
Borrower, at any time within 60 days of the Issue Date, issues,
sells or grants (or has issued, sold or granted as of the Issue
Date, as the case may be) any option to purchase, or sells or
grants any right to reprice, or otherwise disposes of, or issues
(or has sold or issued, as the case may be, or announces any sale,
grant or any option to purchase or other disposition), securities
convertible into, exercisable for, or otherwise entitle any person
or entity the right to acquire, shares of Common Stock (including,
without limitation, upon conversion of this Note, and any
convertible notes or warrants outstanding as of or within 60 days
of the Issue Date), in each or any case at an effective price per
share that is lower than the then Conversion Price (such lower
price, the “Base Conversion Price” and such issuances,
collectively, a “Dilutive Issuance”) (it being agreed
that if the holder of the Common Stock or other securities so
issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights
per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price
per share that is lower than the Conversion Price, such issuance
shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance), then the Conversion Price
shall be reduced, at the option of the Holder, to a price equal the
Base Conversion Price. If the Company enters into a Variable Rate
Transaction within 60 days of the Issue Date, despite the
prohibition set forth in the Purchase Agreement, the Company shall
be deemed to have issued Common Stock or Common Stock Equivalents
at the lowest possible price per share at which such securities
could be issued in connection with such Variable Rate Transaction.
Such adjustment shall be made whenever such Common Stock or other
securities are issued. Notwithstanding the foregoing, no adjustment
will be made under this Section 1.6(e) in respect of an Exempt
Issuance or issuance made more than 60 days from the Issue Date. In
the event of an issuance of securities involving multiple tranches
or closings, any adjustment pursuant to this Section 1.6(e) shall
be calculated as if all such securities were issued at the initial
closing.
An
“Exempt Issuance” shall mean the issuance of (a) shares
of Common Stock or other securities to officers or directors of the
Company pursuant to any stock or option or similar equity incentive
plan duly adopted for such purpose, by a majority of the
non-employee members of the Company’s Board of Directors or a
majority of the members of a committee of non-employee directors
established for such purpose in a manner which is consistent with
the Company’s prior business practices; (b) securities issued
pursuant to a merger, consolidation, acquisition or similar
business combination approved by a majority of the disinterested
directors of the Company, provided that any such issuance shall
only be to a Person (or to the equity holders of a Person) which
is, itself or through its subsidiaries, an operating company or an
owner of an asset in a business synergistic with the business of
the Company and shall provide to the Company additional benefits in
addition to the investment of funds, but shall not include a
transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary
business is investing in securities; (c) securities issued pursuant
to any equipment loan or leasing arrangement, real property leasing
arrangement or debt financing from a bank or similar financial
institution approved by a majority of the disinterested directors
of the Company; (d) securities issued under the Form 1-A or S-1
filed and declared effective by the Securities and Exchange
Commission as of the date hereof; (e) existing convertible debt and
equity lines of credit in existence on the date hereof, (f) private
placements of Common Stock by the Company; and/or (g) securities
issued with respect to which the Holder waives its rights in
writing under this Section 1.6(e).
(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 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 Adjustments to Conversion
Price. At any time after the Issue Date, (i) if at any time
the Borrower does not maintain or replenish the Reserved Amount (as
defined herein) within three (3) business days of the request of
the Holder; (ii) if, once obtained as required under the
Transaction Documents, the Borrower fails to maintain the listing
of the Common Stock on at least one of the OTC Markets or an
equivalent replacement exchange, the Nasdaq National Market, the
Nasdaq Small Cap Market, the New York Stock Exchange, or the NYSE
MKT; (iii) if the Borrower fails to comply with the reporting
requirements of the Exchange Act; the reporting requirements
necessary to satisfy the availability of Rule 144 to the Holder or
its assigns, including but not limited to the timely fulfillment of
its filing requirements as a fully- reporting issuer registered
with the SEC,; (iv) if the Borrower effectuates a reverse split of
its Common Stock without twenty (20) days prior written notice to
the Holder; (v) if, once listed, subsequently OTC Markets changes
the Borrower’s designation to ‘No Information’
(Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or
‘OTC’, ‘Other OTC’ or ‘Grey
Market’ (Exclamation Mark Sign) and does not cure such status
within 10 business days; (vi) the restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two (2) 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 un-restated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase Agreement;
(vii) once it begins trading on any of the trading markets or
exchanges listed hereafter, any cessation of trading of the Common
Stock on at least one of the OTC Markets or an equivalent
replacement exchange, the Nasdaq National Market, the Nasdaq Small
Cap Market, the New York Stock Exchange, or the NYSE MKT, and such
cessation of trading shall continue for a period of five
consecutive (5) Trading Days; and/or (viii) if Borrow is trading,
the Borrower loses the “bid” price for its Common Stock
($0.0001 on the “Ask” with zero market makers on the
“Bid” per Level 2); and/or (ix) if the Holder is
notified in writing by the Company or the Company’s transfer
agent that the Company does not have the necessary amount of
authorized and issuable shares of Common Stock available to satisfy
the issuance of Shares pursuant to a Conversion Notice, then in
addition to all other remedies under this Note, the Holder shall be
entitled to increase, by two percent (2%) for each occurrence,
cumulative or otherwise, the discount to the Conversion Price shall
apply for all future conversions under the Note until such time as
the respective Default has been cured for fifteen (15) calendar
days.
1.8 Status as Shareholder. Upon
submission of a Notice of Conversion by a Holder, (i) the
Conversion Shares covered thereby (other than the Conversion
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 for
the Borrower’s failure to convert this Note.
1.9 Prepayment. Notwithstanding anything to the contrary contained
in this Note, subject to the terms of this Section, at any time
during the period beginning on the Issue Date and ending on the
date which is one hundred eighty (180) calendar days following the
Issue Date (“Prepayment Termination Date”), Borrower
shall have the right, exercisable on not less than five (5) Trading
Days prior written notice to the Holder of this Note, to prepay up
to the outstanding balance on this Note (principal and accrued
interest), in full, in accordance with this Section. 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 fifteen (15) Trading Days from the date of
the Optional Prepayment Notice; and (3) the amount (in dollars)
that the Borrower is paying. Notwithstanding Holder’s receipt
of the Optional Prepayment Notice the Holder may convert, or
continue to convert the Note in whole or in part until the Optional
Prepayment Amount (as defined herein) is paid to the Holder. 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 the
Prepayment Factor (as defined below), 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. After the
Prepayment Termination Date, the Borrower shall have no right to
prepay this Note. For purposes hereof, the “Prepayment
Factor” shall equal: one hundred five percent (105%) if the
Optional Prepayment Date occurs during one (1) through sixty (60)
calendar days following the Issue Date; one hundred twenty percent
(120%) if the Optional Prepayment Date occurs sixty-one (61)
through one hundred twenty (120) calendar days following the Issue
Date; one hundred thirty percent (130%) if the Optional Prepayment
Date occurs one hundred twenty-one (121) through one hundred eighty
(180) calendar days following the Issue Date. Borrower shall not
have any prepayment rights after one hundred eighty (180) calendar
days following the Issue Date.
ARTICLE
II. RANKING AND CERTAIN COVENANTS
2.1 Ranking and Security. The
obligations of the Borrower under this Note shall rank subordinate
with respect to any and all Indebtedness incurred as of or
following the Issue Date.
2.2 Removed and
reserved.
2.3 Removed
and reserved.
2.4 Restriction on Stock Repurchases and
Debt Repayments. 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.
2.5 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, but otherwise such consent shall not
be unreasonably withheld, conditioned, or delayed.
2.6 Advances and Loans; Affiliate
Transactions. 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, make
advances to or enter into any transaction with 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 Issue Date and which the Borrower has informed
Holder in writing prior to the Issue Date, (b) in regard to
transactions with unaffiliated third parties, made in the ordinary
course of business or (c) in regard to transactions with
unaffiliated third parties, not in excess of $500,000. So long as
the Borrower shall have any obligation under this Note, the
Borrower shall not, without the Holder’s written consent,
repay any affiliate (as defined in Rule 144) of the Borrower in
connection with any indebtedness or accrued amounts owed to any
such party outside the ordinary course of business, which
specifically excludes reasonable salaries of executive
officers.
2.7 Section 3(a)(9) or 3(a)(10)
Transaction. So long as this Note is outstanding, the
Borrower shall not enter into any transaction or arrangement
structured in accordance with, based upon, or related or pursuant
to, in whole or in part, either Section 3(a)(9) of the Securities
Act (a “3(a)(9) Transaction”) or Section 3(a)(l0) of
the Securities Act (a “3(a)(l0) Transaction”). In the
event that the Borrower does enter into, or makes any issuance of
Common Stock related to a 3(a)(9) Transaction or a 3(a)(l0)
Transaction while this note is outstanding, a liquidated damages
charge of 5% of the outstanding principal balance of this Note, but
not less than Five Thousand Dollars ($5,000), will be assessed and
will become immediately due and payable to the Holder at its
election in the form of a cash payment or added to the balance of
this Note (under Holder's and Borrower's expectation that this
amount will tack back to the Issue Date).
2.8 Preservation of Business and
Existence, etc. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder’s written consent, (a) change the nature of its
business in a material respect; or (b) sell, divest, change the
structure of any material assets other than in the ordinary course
of business. In addition, so long as the Borrower shall have any
obligation under this Note, the Borrower shall maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.
2.9 Non-circumvention. The Company
hereby covenants and agrees that the Company will not, by amendment
of its Certificate or Articles of Incorporation or Bylaws, or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Note, and
will at all times in good faith carry out all the provisions of
this Note and take all action as may be required to protect the
rights of the Holder.
2.10
Lost,
Stolen or Mutilated Note. Upon receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new
Note.
ARTICLE
III. EVENTS OF DEFAULT
It
shall be considered an event of default if any of the following
events listed in this Article III (each, an “Event of
Default”) shall occur:
3.1
Conversion and the
Shares. The Borrower (i) fails to issue Conversion Shares 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, (ii) fails to transfer or cause its transfer agent to
transfer (issue) (electronically or in certificated form) any
certificate for the Conversion Shares issuable to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, (iii) reserve the Reserved Amount at all
times, or (iii) 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 the Conversion Shares issuable 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 Conversion Shares 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 five (5) Trading
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.
3.2
Breach of Agreements and
Covenants. The Borrower breaches any material agreement,
covenant or other material term or condition contained in the
Purchase Agreement, this Note, the Irrevocable Transfer Agent
Instructions or in any agreement, statement or certificate given in
writing pursuant hereto or in connection herewith or therewith,
which is not cured within five (5) days of notice that Company is
in breach thereof.
3.3
Breach of Representations
and Warranties. Any material representation or warranty of
the Borrower made in the Purchase Agreement, this Note, the
Irrevocable Transfer Agent Instructions or in any agreement,
statement or certificate given in writing pursuant hereto or in
connection herewith or therewith 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.
3.4
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.
3.5
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 $160,000, 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.
3.6
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.
3.7
Delisting of Common
Stock. Once the Borrower obtains a listing, the Borrower
should subsequently fail to maintain the listing of the Common
Stock on at least one of the Over the Counter Bulletin Board, the
OTCQB Market, any level of the OTC Markets, or any level of the
Nasdaq Stock Market or the New York Stock Exchange (including the
NYSE American).
3.8
Failure to Comply with the
1934 Act. Borrow shall remain current its quarterly, annual
and current reports with the Securities and Exchange Commission and
shall become subject to the 1934 Act within 180 days. At any time
after 180 days following the Issue Date, the Borrower shall fail to
comply with the reporting requirements of the 1934 Act and/or the
Borrower shall cease to be subject to the reporting requirements of
the 1934 Act. It shall be an Event of Default under this Section
3.9 if the Borrower shall file any Notification of Late Filing on
Form 12b-25 with the SEC.
3.9
Liquidation. Any
dissolution, liquidation, or winding up of Borrower or any
substantial portion of its business.
3.10
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.
3.11
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).
3.12
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.
3.13
Reverse Splits. The
Borrower effectuates a reverse split of its Common Stock without
twenty (20) days prior written notice to the Holder.
3.14
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.
3.15
DTC
“Chill”. The DTC places a “chill”
(i.e. a restriction placed by DTC on one or more of DTC’s
services, such as limiting a DTC participant’s ability to
make a deposit or withdrawal of the security at DTC) on any of the
Borrower’s securities.
3.16
Illegality. Any
court of competent jurisdiction issues an order declaring this
Note, the Purchase Agreement or any provision hereunder or
thereunder to be illegal.
3.17
DWAC Eligibility.
In addition to the Event of Default in Section 3.16, the Borrower
shall use its best efforts to become eligible for trading through
the DTC’s Fast Automated Securities Transfer or
Deposit/Withdrawal at Custodian programs within 180 days of the
Issue Date.
3.18 Variable
Rate Transactions; Dilutive Issuances. Borrower shall
request the consent of Lender, which consent shall not be
unreasonably withheld, if at any time within 60 days of the Issue
Date, the Borrower (i) issues shares of Common Stock (or
convertible securities or Purchase Rights) pursuant to an equity
line of credit of the Company or otherwise in connection with a
Variable Rate Transaction (entered into in the future) except for
existing lines of credit or Variable Rate Transactions existing as
of the date hereof, (ii) adjusts downward the “floor
price” at which shares of Common Stock (or convertible
securities or Purchase Rights) may be issued under an equity line
of credit or otherwise in connection with a Variable Rate
Transaction (r entered into in the future) except for existing
lines of credit or Variable Rate Transactions existing as of the
date hereof, or (iii) a Dilutive Issuance is triggered as provided
in this Note.
3.19 Bid
Price. Once the Borrower obtains a listing, the Borrower
shall subsequently lose the “bid” price for its Common
Stock ($0.0001 on the “Ask” with zero market makers on
the “Bid” per Level 2) and/or a market (including the
OTC Pink, OTCQB or an equivalent replacement marketplace or
exchange).
3.20 Inside
Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to intentionally transmit, convey,
disclose, or any actual transmittal, conveyance, or disclosure by
the Borrower or its officers, directors, and/or affiliates of,
material non-public information concerning the Borrower, to the
Holder or its successors and assigns, which is not immediately
cured by Borrower’s filing of a Form 8-K pursuant to
Regulation FD on that same date
3.21 Unavailability
of Rule 144. If, at any time on or after the date which is
nine (9) months after the Issue Date, except due to the
Holder’s actions or inactions, the Holder is unable to (i)
obtain a standard “144 legal opinion letter” from an
attorney reasonably acceptable to the Holder, the Holder’s
brokerage firm (and respective clearing firm), and the
Borrower’s transfer agent in order to facilitate the
Holder’s conversion of any portion of the Note into free
trading shares of the Borrower’s Common Stock pursuant to
Rule 144, and/or (ii) thereupon deposit such shares into the
Holder’s brokerage account.
3.22 Delisting
or Suspension of Trading of Common Stock. If, at any time on
or after the Borrower obtains a listing, the Borrower’s
Common Stock (i) is suspended from trading, (ii) halted from
trading, and/or (iii) fails to be quoted or listed (as applicable)
within one hundred and eighty (180) days of Issue Date on any level
of the OTC Markets, any tier of the NASDAQ Stock Market, the New
York Stock Exchange, or the NYSE American.
3.23 Rights
and Remedies Upon an Event of Default. Upon the occurrence
and during the continuation of any Event of Default specified in
this Article III which remains uncured for five (5) days after
written notice from Holder provided to Borrower, this Note shall
become immediately due and payable and the Borrower shall pay to
the Holder, in full satisfaction of its obligations hereunder, an
amount (the “Default Amount”) equal to the Principal
Amount then outstanding plus accrued interest (including any
Default Interest) through the date of full repayment multiplied by
one hundred twenty-five percent (125%). Holder may, in its sole
discretion, determine to accept payment part in Common Stock and
part in cash. For purposes of payments in Common Stock, the
conversion formula set forth in Section 1.2 shall apply. Upon an
uncured Event of Default, all amounts payable hereunder shall
immediately become due and payable, all without demand, presentment
or notice, all of which hereby are expressly waived by the
Borrower, 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, including, without limitation.
3.24 Stock
Symbol and Listing. Within one hundred and eighty (180) days
of the Issue Date hereof, Borrower shall have obtained a trading
symbol and be able to have its common stock trade on OTC Pink,
OTCQB or higher tier exchange.
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 of the Holder 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, e-mail 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 e-mail or 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:
TEGO
CYBER INC.
8565
South Eastern Avenue, Suite 150
Las
Vegas, Nevada 89123
Attention: Shannon
Wilkinson
e-mail:
shannon.wilkinson@tegocyber.com
With a
copy by e-mail only to (which copy shall not constitute
notice):
LOCKETT
+ HORWITZ
14
Orchard Road, Suite 200
Lake
Forest, California 92630
Attention: Jessica
M. Lockett, Esq.
e-mail:
jlockett@lhlawpc.com
If to
the Holder:
REYNALD
THAUVETTE and/or DOMINIQUE JOYAL
7543
Rue du Bord du Fleuve
Trois-Riviers,
Quebec G9B 1K7
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 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. Neither the Borrower nor the Holder shall assign this Note
or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Holder may
assign its rights hereunder to any “accredited
investor” (as defined in Rule 501(a) of the 1933 Act) in a
private transaction from the Holder or to any of its
“affiliates”, as that term is defined under the 1934
Act, without the consent of the Borrower. 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. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that 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.
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; Venue; Attorney’s
Fees. This Note shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Note or any other agreement, certificate, instrument or document
contemplated hereby shall be brought only in the state courts
located in the state of Nevada or federal courts located in the
state of Nevada. The Borrower hereby irrevocably waives 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. 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
Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby 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 Note 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. The prevailing
party in any action or dispute brought in connection with this the
Note or any other agreement, certificate, instrument or document
contemplated hereby or thereby shall be entitled to recover from
the other party its reasonable attorney’s fees and
costs.
4.7 Removed
and Reserved.
4.8 Purchase Agreement. The Company
and the Holder shall be bound by the applicable terms of the
Purchase Agreement and the documents entered into in connection
herewith and therewith.
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 Change
in Control 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.
4.11 Construction;
Headings. This Note shall be deemed to be jointly drafted by
the Company and all the Holder and shall not be construed against
any person as the drafter hereof. The headings of this Note are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Note.
4.12 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any action or proceeding
that may be brought by the Holder in order to enforce any right or
remedy under this Note. Notwithstanding any provision to the
contrary contained in this Note, it is expressly agreed and
provided that the total liability of the Company under this Note
for payments which under the applicable law are in the nature of
interest shall not exceed the maximum lawful rate authorized under
applicable law (the “Maximum Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums which under the applicable law in the nature of interest that
the Company may be obligated to pay under this Note exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by applicable law and applicable to this Note is
increased or decreased by statute or any official governmental
action subsequent to the Issue Date, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
this Note from the effective date thereof forward, unless such
application is precluded by applicable law. If under any
circumstances whatsoever, interest in excess of the Maximum Rate is
paid by the Company to the Holder with respect to indebtedness
evidenced by this the Note, such excess shall be applied by the
Holder to the unpaid principal balance of any such indebtedness or
be refunded to the Company, the manner of handling such excess to
be at the Holder’s election.
4.13 Severability.
In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law
(including any judicial ruling), 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 this Note.
4.14 Terms
of Future Financings. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its subsidiaries of any
new security, with any term that the Holder reasonably believes is
more favorable to the holder of such security or with a term in
favor of the holder of such security that the Holder reasonably
believes was not similarly provided to the Holder in this Note,
then (i) the Borrower shall notify the Holder of such additional or
more favorable term within five (5) business day of the issuance
and/or amendment (as applicable) of the respective security, and
(ii) such term, at Holder’s option, shall become a part of
the transaction documents with the Holder (regardless of whether
the Borrower complied with the notification provision of this
Section 4.14). The types of terms contained in another security
that may be more favorable to the holder of such security include,
but are not limited to, terms addressing conversion discounts,
prepayment rate, conversion lookback periods, interest rates, and
original issue discounts. If Holder elects to have the term become
a part of the transaction documents with the Holder, then the
Borrower shall immediately deliver acknowledgment of such
adjustment in form and substance reasonably satisfactory to the
Holder (the “Acknowledgment”) within one (1) business
day of Borrower’s receipt of request from Holder (the
“Adjustment Deadline”), provided that Borrower’s
failure to timely provide the Acknowledgement shall not affect the
automatic amendments contemplated hereby. For avoidance of any
doubt, the foregoing of this Section 4.14 shall not apply to any
financings by the Company made under its existing Regulation A and
S-1 offerings. Nor shall this section apply to any adjustments made
to any of the Borrower’s securities issued prior to the date
hereof.
4.15 Dispute
Resolution. In the case of a dispute as to the determination
of the Conversion Price, Conversion Amount, any prepayment amount
or Default Amount, Issue, Closing or Maturity Date, the closing bid
price, or fair market value (as the case may be) or the arithmetic
calculation of the Conversion Price or the applicable prepayment
amount(s) (as the case may be), the Borrower or the Holder shall
submit the disputed determinations or arithmetic calculations via
facsimile (i) within one (1) Trading Day after receipt of the
applicable notice giving rise to such dispute to the Borrower or
the Holder or (ii) if no notice gave rise to such dispute, at any
time after the Holder learned of the circumstances giving rise to
such dispute. If the Holder and the Borrower are unable to agree
upon such determination or calculation within five (5) Trading Days
of such disputed determination or arithmetic calculation (as the
case may be) being submitted to the Borrower or the Holder, then
the Borrower shall, within three (3) Trading Day, submit (a) the
disputed determination of the Conversion Price, the closing bid
price, the or fair market value (as the case may be) to an
independent, reputable investment bank selected by the Borrower and
approved by the Holder or (b) the disputed arithmetic calculation
of the Conversion Price, Conversion Amount, any prepayment amount
or Default Amount, to an independent, outside accountant selected
by the Holder that is reasonably acceptable to the Borrower. The
Borrower shall cause at its expense the investment bank or the
accountant to perform the determinations or calculations and notify
the Borrower and the Holder of the results no later than one (1)
Trading Day from the time it receives such disputed determinations
or calculations. Such investment bank’s or accountant’s
determination or calculation shall be binding upon all parties
absent demonstrable error.
[SIGNATURE PAGE
FOLLOWS]
IN WITNESS WHEREOF, Borrower has caused
this Note to be signed in its name by its duly authorized officer
on April 28, 2021.
TEGO
CYBER INC.
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By:/s/
Shannon Wilkinson
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Name:
SHANNON WILKINSON
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Title:
CHIEF EXECUTIVE OFFICER
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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 TEGO CYBER INC., a Nevada corporation
(the “Borrower”), according to the conditions of the
Convertible Promissory Note of the Borrower dated as of December
23, 2020 (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:
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☐
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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”).
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Name of
DTC Prime Broker:
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Account
Number:
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☐
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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:
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RAYNALD
THAUVETTE and/or DOMINIQUE JOYAL
______________________________________
______________________________________
______________________________________
______________________________________
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Date of
Conversion:
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Applicable
Conversion Price: $
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Costs
Incurred by the Undersigned to Convert the Note into Shares of
Common Stock:
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Number
of Shares of Common Stock to be Issued Pursuant to Conversion of
the Note:
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Amount
of Principal Balance Due remaining Under the Note after this
conversion:
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By:
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Name:
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Title:
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Date:
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