LIFESTREAM TECHNOLOGIES, INC.
CONVERTIBLE NOTE
CONTENTS
1. Interest
2. Payment
(a) Interest
(b) Principal
(c) Manner and Place of Payment
3. Prepayment
4. Conversion Rights
(a) Right to Convert
(b) Fractional Shares
(c) Capital Adjustments
5. Default
6. Remedies upon Default
(a) Acceleration
(b) Remedies at Law and in Equity
7. Attorneys' Fee, Costs, and Other Expenses
8. Assignment; Obligations Binding on Successors
9. Notices
10. Governing Law
11. Headings
12. Entire Agreement
13. Waiver
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT UNDER
SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE RESTRICTIONS
MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL. ANY OFFER OF
DISPOSITION OF THESE SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS W]LL BE
WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF THE
SECURITIES WITH THE CORPORATION.
CONVERTIBLE NOTE
$25,000 January 26, 1998
Sandpoint, Idaho
Lifestream Technologies, Inc., a Nevada corporation (the "Maker"),
promises to pay to the order of Xxxxxx Xxxx (the "Holder") the principal sum of
Twenty Five Thousand Dollars ($25,000) (the "Principal Sum") together with
interest, upon the terms and conditions provided in this Convertible Note (the
"Note").
1.
Interest
The unpaid balance of the Principal Sum shall bear simple interest at a
rate equal to prime rate, plus Two percent (2%) to Xxxxxx Rock from the date of
this note until such balance is paid in full or converted to common stock as
provided for. For calculation purposes the interest rate will be adjusted on the
first business day of each calendar quarter.
2.
Payment
(a) Interest. Maker shall pay accrued interest to Holder on the last
day of each calendar quarter (the "Interest Payment Date") beginning with the
first Interest Payment Date which shall not be more than Six (6) months from
date of this Note; except that all accrued interest shall be paid at the time
the principal amount is paid in full.
(b) Principal. Maker shall pay Holder the outstanding Principal Sum on
the date that is Two (2) years from the date hereof.
(c) Xxxxxx and Place of Payment. All payments shall be made by checks
drawn on Maker's corporate bank account and shall be in the lawful currency of
the United States of America. All payments shall be made to Holder at the
address specified in Section 9 or at such other place as Holder may specify in
writing.
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3.
Conversion Rights
(a) Right to Convert. At any time prior to December 31, 2000, the
Holder has the right, at its option, to convert the Note or any portion thereof,
into shares of Maker's $.001 par value common stock (the "Common Stock") by
giving a written notice that it is exercising its rights hereunder and
surrendering the Note or a portion of the note for that purpose to the Maker and
executing a stock subscription agreement representing the number of shares being
converted to (see: Exhibit A). The number of shares of common stock of Maker
that Holder shall be entitled to receive upon such conversion shall be
determined by dividing the unpaid balance of the Principal Sum by One Dollar
($1.00) (the "Conversion Factor"). Upon conversion, the shares will be subject
to a Registration Rights Agreement attached hereto as Exhibit B. All accrued and
unpaid interest at the time of the conversion shall be paid in cash and shall
not be treated as part of the unpaid balance of the Principal Sum.
(b) Fractional Shares. The Maker shall not be required to issue
fractional shares upon conversion of the Note, but shall pay in cash, in lieu of
such fractional interest, an amount equal to the difference between the unpaid
balance of the Principal Sum and the product of the Conversion Factor times the
number of whole shares determined under Paragraph 4(a).
(c) Capital Adjustments. If this Note is converted, as provided in
Paragraph 4.(a), subsequent to any share dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of shares, separation,
reorganization, or liquidation ("Capital Adjustments") occurring after the date
hereof, as a result of which shares of any class shall be issued in respect of
outstanding Common Stock or Common Stock shall be changed into the same or a
different number of shares of the same or another class or classes, the
Purchaser shall receive the aggregate number and class of shares which, if this
Note had been converted at the date hereof ("Deemed Conversion") and Common
Stock received upon the Deemed Conversion had not been disposed of, the
Purchaser would be holding, at the time of actual conversion, as a result of the
Deemed Conversion and such Capital Adjustments.
4.
Default
The term "Default" as used in this Note means any of the following
events:
If Maker, at any time fails to pay any interest payment due on this Note within
45 days of the time that it receives notice from Xxxxxx that said payment is
past due, or Maker fails to pay any payment of principal due on this Note within
15 days of the time that it receives notice from Holder that such payment is
past due; or
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(ii) If Maker admits, in writing, its inability to pay its debts as
they become due.
5.
Remedies upon Default
(a) Acceleration. Upon Default, Holder may, by written notice to Maker,
accelerate the due date of the Principal Sum owing under this Note. Such
accelerated amounts shall become immediately due and payable upon receipt of
such notice by Maker.
(b) Remedies at Law and in Equity. If Holder accelerates the amounts
owing under this Note, Holder shall have the right to pursue any or all remedies
available at law or in equity, including, but not limited to, the right to bring
suit on the Note.
6.
Attorneys' Fees, Costs and Other Expenses
Xxxxx agrees to pay all costs and expenses which Holder may incur in
enforcing this Note upon Default, including, but not limited to, reasonable
attorneys' fees, expenses and costs incurred in action undertaken with respect
to this Note, or any appeal of such an action.
7.
Assignment; Obligations Binding on Successors
Maker may not assign any of its rights, duties, or obligations under
this Note without the prior written consent of Xxxxxx. This Note shall bind
Maker and its successors and assigns. All rights and powers established in this
Note shall benefit Xxxxxx and Xxxxxx's successors and assigns; provided,
however, that all transfers of this Note by Xxxxxx are subject to the
restrictions described in the legend at the end of this Note.
8.
Notices
All notices, requests, consents, payments and other communications
required or provided for herein to any party shall be in writing, and shall be
deemed to be given when: (a) delivered in person; (b) sent by first class
registered or certified mail with postage prepaid; (c) delivered by overnight
receipted courier service; or (d) except with respect to payments, sent by
confirmed facsimile transmission. Notices shall be sent to the addresses set
forth below, or to such other addresses as may hereafter be designated in
writing by the party:
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(i) If to the Maker:
Xxxxxxxxxxx Xxxx, President
Lifestream Technologies, Inc.
000 Xxxx Xx. Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
(ii) If to Holder:
Xxxxxx Rock
0000 Xxxxxx Xxx
Xxxxxx Xxxxxx, Xxxxxxxxxx 000000
9.
Governing Law
This Note will be construed, and the rights, duties and obligations of
the parties will be determined, in accordance with the laws of the State of
Nevada.
10.
Headings
Headings used in this Note have been included for convenience and ease
of reference only, and will not in any manner influence the construction or
interpretation of any provision of this Note.
11.
Entire Agreement
This Note and the Convertible Notes Subscription Agreement represent
the entire understanding of the parties with respect to the transaction giving
rise to the issuance of the Note. There are no other prior or contemporaneous
agreements, either written or oral, between the parties with respect to this
subject.
12.
Waiver
No right or obligation under this Note will be deemed to have been
waived unless evidenced by a writing signed by the party against whom the waiver
is asserted, or by the party's duly authorized representative. Any waiver will
be effective only with respect to the specific instance involved, and will not
impair or limit the right of the waiving party to insist upon strict performance
of the right or obligation in any other instance, in any other respect, or at
any other time.
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MAKER: Lifestream Technologies, Inc.
By: _________________________________
Xxxxxxxxxxx Xxxx
Its President
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EXHIBIT A
LIFESTREAM TECHNOLOGIES, INC.
CONVERTIBLE NOTE SUBSCRIPTION AGREEMENT
CONTENTS
1. Subscription
2. Conditions of Subscription
3. Representations and Warranties of Purchaser
a. Nonregistration
b. Citizenship, Residence, Etc.
c. Understanding of Risks
d. Ability to Bear Risk and Afford Loss
e. Independent Investigation and Advice
f. Investment Intent
g. Reliance by Company
h. Legend on Certificates
i. Accredited Investor
4. Transferability
5. Revocation
Representations and Warranties of the Company 6.
a. Corporate Existence and Power
b. Corporate Authorization
c. Capital Structure
d. Financial Condition
e. Litigation
f. Disclosure
g. Government Consent
h. Use of Proceeds
6. Closing
7. Miscellaneous
8. Indemnification
9. Signatures
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January 26, 1998
Xx. Xxxxxxxxxxx Xxxx, President
Lifestream Technologies, Inc.
000 Xxxx Xx, Xxxxx 000
Xxxxxxxxx, Xxxxx
Dear Sir:
The undersigned purchaser ("Purchaser") delivers this convertible note
subscription agreement (the "Agreement") in connection with the offering by
Lifestream Technologies, Inc., a Nevada corporation (the "Company"), of up to
$25,000, principal amount of the Company's "Convertible Notes" which are in the
aggregate convertible into a total of 25,000 shares of the Company's common
stock (the "Notes"). Purchaser acknowledges that it has received and reviewed
the various disclosure documents and the corporate business plan attached hereto
describing the Company and the facts surrounding that the offering (the
"Disclosure Documents:).
1.
Subscription
Subject to the terms and conditions of this Agreement, Purchaser
irrevocably subscribes for and agrees to purchase a Note from the Company in the
principal amount of Twenty Five Thousand Dollars ($25,000) and tenders herewith
a check in the amount of $25,000 (the "Funds") payable to the order of the
Company, to be held by the Company until the conditions described in Section 7
of this Agreement have been met.
2.
Conditions of Subscription
Xxxxxxxxx understands and agrees that:
a. The Company is not bound by this Agreement until it accepts the
Agreement by signing in the space provided on the last page hereof; and
b. The Note to be issued and delivered on account of this subscription
will only be issued in the name of the Purchaser.
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3.
Representations and Warranties of Purchaser
Purchaser represents, warrants and agrees as follows:
a. Nonregistration. Purchaser understands that the Note is being
offered and sold under an exemption from registration provided for in Regulation
"D" under the Securities Act of 1933 (the "Act") and similar exemptions from the
provisions of applicable state securities or "Blue Sky" laws. Purchaser
understands that this transaction has not been scrutinized by the United States
Securities and Exchange Commission or by any administrative agency charged with
the administration of the securities laws of any state, because of the small
number of persons solicited and the private aspects of the offering, and that
all documents, records and books pertaining to this investment have been made
available to Purchaser and Purchaser's representatives.
b. Citizenship, Residence, Etc. Purchaser (i) is a citizen of the
United States, and at least 21 years of age, and (ii) is a bona fide resident
and domiciliary (not a temporary or transient resident) of the state specified
as part of Purchaser's residence address at the end of this Agreement, and has
no present intention of becoming a resident of any other state or jurisdiction.
c. Understanding of Risks. Purchaser understands and has fully
considered for purposes of this investment the risks of the investment,
restrictions on transferability of the Notes, and the stock issuable upon
conversion thereof, and the matters set forth in the Disclosure Documents,
including but not limited to the following: (i) the Notes, and the underlying
common stock subject to issuance upon conversion thereof, are a speculative
investment which involve a high degree of risk of loss by Purchaser of the
investment therein; and (ii) there are substantial restrictions on the
transferability of, and there may be no public market for, the Notes and the
underlying common stock subject to issuance upon conversion thereof, and
accordingly, it may not be possible for Purchaser to liquidate this investment
in case of emergency.
d. Ability to Bear Risk and Afford Loss. Purchaser is able (i) to bear
the economic risk of this investment for an indefinite period, and (ii) to
afford a complete loss of the investment.
e. Independent Investigation and Advice. Purchaser, in making the
decision to purchase the Note subscribed for hereunder, has relied solely upon
Purchaser's independent investigations and the advice of Purchaser's
representatives and advisors, and Purchaser and any such advisors have been
given the opportunity to ask questions of, and to receive answers from, persons
acting on behalf of the Company concerning the Company and the terms and
conditions of this offering, and to obtain any additional information, to the
extent such persons possess such information or can acquire it without
unreasonable effort or expense, necessary to verify the accuracy of the
information set forth in the Disclosure Documents.
f. Investment Intent. Purchaser is acquiring the Note subscribed for
hereunder, and will acquire any common stock issuable upon conversion thereof,
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in good faith and solely for Purchaser's own personal account, for investment
purposes only, and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof. Purchaser has no contract,
undertaking, understanding, agreement or arrangement, formal or informal, with
any person to sell, transfer or pledge to any person the Note, or any part
thereof, and Purchaser has no present plans to enter into any such contract,
undertaking, agreement or arrangement. Purchaser understands the legal
consequences of the foregoing representations and warranties to mean that
Purchaser must bear the economic risk of the investment for an indefinite period
of time because the Note and the underlying shares of common stock issuable upon
conversion thereof have not been and will not be registered under applicable
securities laws, and, therefore, cannot be sold unless they are subsequently
registered under such laws or an exemption from such registration is available.
The Notes, and common stock issuable under conversion of the Notes, shall not be
transferable, except upon the following conditions: The Purchaser shall, prior
to any transfer (which term, as used herein, includes, without being limited to,
any sale, offer, pledge or encumbrance) or attempted transfer of such Note or
stock, give written notice to the Company of Purchaser's intention to effect
such transfer. Each such notice shall describe the manner and circumstance of
the proposed transfer in sufficient detail, and shall contain an undertaking by
the person giving such notice to furnish such other information as may be
required, to enable legal counsel designated by such Purchaser and satisfactory
to the Company and its counsel to render a legal opinion satisfactory in form to
the Company and its counsel to the effect that the proposed transfer may be
effected without registration of such stock under any applicable securities
laws. Upon receipt of such a legal opinion, such Note or stock shall be
transferred in accordance with the terms of the notice delivered by Purchaser to
the Company, with any Note or stock certificate issued upon such transfer to
bear the restrictive legend set forth in Paragraph 4.h, unless in the opinion of
such counsel such legend is not required. The Purchaser shall not be entitled to
transfer such Note or stock until receipt of such a legal opinion by the
Company, or until receipt of a "no-action" letter or similar interpretive
opinion from the staff of each appropriate securities agency, satisfactory in
form to the Company, or until registration of such securities under applicable
securities laws has become effective.
g. Reliance by Company. Purchaser understands that the Company is
relying on the truth and accuracy of the representations, declarations and
warranties made in this Agreement in offering the Note for sale to Purchaser
without having first registered the same under the Act.
h. Legend on Certificates. Purchaser consents to the placement of a
legend on the Note subscribed for hereunder, and on the certificate(s) for any
shares of common stock issued upon conversion thereof, in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, OR ANY STATE SECURITIES LAWS, AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED, ENCUMBERED, OR OTHERWISE DISPOSED OF
EXCEPT UPON SATISFACTION OF CERTAIN CONDITIONS. INFORMATION CONCERNING THESE
RESTRICTIONS MAY BE OBTAINED FROM THE CORPORATION OR ITS LEGAL COUNSEL. ANY
OFFER OR DISPOSITION OF THESE SECURITIES WITHOUT SATISFACTION OF SAID CONDITIONS
WILL BE WRONGFUL AND WILL NOT ENTITLE THE TRANSFEREE TO REGISTER OWNERSHIP OF
THE SECURITIES WITH THE CORPORATION:"
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i. Accredited Investor. Purchaser is an "Accredited Investor" as such
term is defined in Regulation D promulgated by the Securities and Exchange
Commission. specifically, Purchaser qualifies under the category or categories
of "Accredited Investor" indicated below (PURCHASER MUST INDICATE THE APPLICABLE
CATEGORY OR CATEGORIES BY INITIALING IN THE SPACE(S) PROVIDED):
_________ (initial) (i) Purchaser is a director or executive officer of the Company;
_________ (initial) (ii) Purchaser is a natural person and has an individual net worth, or
a joint net worth with Purchaser's spouse (if any), at this time in
excess of $1 million;
_________ (initial) (iii) Purchaser is a natural person and has had an individual income in
excess of $200,000 in each of 1995 and 1996, or joint income with
Purchaser's spouse (if any) in excess of $300,000 in each of
those years, and has a reasonable expectation of reaching the
same income level in 1997.
The foregoing representations and warranties and undertakings are made
by Purchaser with the intent that the Company rely on then in determining
Purchaser's suitability as a purchaser of a Note hereunder, and are true and
accurate as of the date of this Subscription Agreement and as of the date, of
issuance of the Notes, and shall survive such issuance. If in any respect, such
representations and warranties shall not be true and accurate prior to the
issuance of the Note to Purchaser, Purchaser shall give immediate written notice
of such fact to the Company, specifying which, presentations and warranties are
not true and accurate and in what respects they are not accurate.
4.
Transferability
Purchaser agrees not to transfer or assign this Agreement, or any
interest herein, and any such transfer shall be void.
5.
Revocation
Purchaser may not cancel, terminate, or revoke this Agreement, or any
agreement of Purchaser made hereunder, and this Agreement shall survive the
death or disability of Purchaser and shall be binding upon Purchaser's heirs,
executors, administrators, successors, and assigns.
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6.
Representations and Warranties of the Company
Upon acceptance hereof, the company represents and warrants as follows:
a. Corporate Existence and Power. The Company is a corporation duly
organized and existing and in good standing under the laws of the State of
Nevada, and has the corporate power to own its properties and to carry on its
business as now being conducted and as proposed to be conducted; and the Company
has the corporate power and authority to enter into this Agreement and to issue
the Note.
b. Corporate Authorization. The making and performance by the Company
of this Agreement and the Note has been duly authorized by all necessary
corporate action and will not violate any provision of its articles of
incorporation or bylaws, or result in the breach of or require any consent
under, or result in the creation of any lien upon any property or assets of the
Company pursuant to, any agreement to which the Company is a party or by which
the Company or its property may be bound; and this Agreement and the Notes
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
c. Capital Structure.
(i) The authorized capital stock of the Company consists of
50,000,000 total shares of $.001 par value common stock, of which 8,041,500
shares are issued and outstanding, and 5,000,000 shares of $.001 par value
preferred shares, of which are no shares issued or outstanding. All outstanding
shares are validly issued, fully paid and nonassessable.
(ii) There are outstanding options, warrants, rights,
convertible securities or other contracts obligating the Company to issue and
transfer from treasury of its capital stock in the amount of 560,667 shares of
common stock.
(iii) The shares of Common Stock issuable to Purchaser upon
conversion of the Note will be validly issued, fully paid and nonassessable.
d. Financial Condition. The financial statements furnished to the
Purchaser fairly represent the financial condition of the Company as of the
dates of such financial statements and the results of their operations for the
periods ending on said dates.
e. Litigation. Except as set forth in the Disclosure Documents, there
are no suits or proceedings pending, or to the knowledge of the Company
threatened, against the Company that, if adversely determined, would have a
material adverse effect on the financial condition or business of the Company.
f. Disclosure. The Company has provided Purchaser with all the
information reasonably available to it without undue expense that such Purchaser
has requested for deciding whether to purchase the Note and all information that
the Company believes is reasonably necessary to enable such Purchaser to make
such decision. To the best of the Company's knowledge after reasonable
investigation, neither this Agreement nor any other written statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
g. Government Consent. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the Note or common stock
issuable thereunder, or the consummation of any other transaction contemplated
hereby.
h. Use of Proceeds. The Company presently intends to use the funds
received from the sale of the Notes for working capital purposes. Actual
application of such funds shall be determined by the Company's Board of
Directors in the exercise of its responsibilities. a.
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7.
Closing
The following terms shall govern the acceptance of this subscription,
payment for the Note, and closing of Purchaser's purchase of the Note:
a. The Company may not accept this subscription until it has received a
copy of the original convertible note marked paid in full, accompanied by a
satisfactorily completed and executed Convertible Note Subscription Agreement,
in the same form as this Agreement, from the Holder of the Convertible Note.
b. The Company may, but shall not be obligated to, effect the closing
of this offering (the "Closing") by simultaneously accepting subscription
payments, and executing the accompanying Convertible Note Subscription
Agreements and the Note. The time and date the Closing occurs shall be deemed
the "Closing Date." a.
8.
Miscellaneous
a. All notices or other communications given or made under this
Agreement shall be sufficiently given if hand-delivered or mailed by registered
or certified mail (return receipt requested and postage prepaid) to Purchaser or
to the Company at the respective addresses set forth herein, or at such other
addresses as Purchaser or the Company shall designate to the other by written
notice.
b. This Agreement shall be governed by the laws of the State of Nevada.
c. This Agreement constitutes the entire agreement among the
parties with respect to the subject matter referred to herein and may be
amended only by a writing executed by all parties.
d. If more than one person is signing this Agreement, each
representation and warranty and undertaking made herein shall be a joint and
several representation, warranty or undertaking of each person.
9.
Indemnification
Each party understands the meaning and legal consequences of the
representations and warranties that it makes in this Agreement and agrees to
defend, indemnify and hold harmless the other party (including, if applicable,
the other party's officers, directors, employees and agents) and their
successors and assigns, from and against any and all loss, damage, liability or
expense, including without limitation attorneys' fees, due to or arising out of
the inaccuracy of any of its representations or acknowledgments, or the breach
of any of its agreements, warranties or undertakings contained in this
Agreement.
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10.
Signatures
I/we have read this Subscription Agreement and agree to be bound by its
terms.
Signature of Purchaser:
_________________________
By: Xxxxxx Xxxx
___________
Date
Address:
Xxxxxx Rock
0000 Xxxxxx Xxx
Xxxxxx Xxxxxx, Xxxxxxxxxx
00000
Lifestream Technologies, Inc., a Nevada corporation, hereby accepts the
foregoing subscription subject to the terms and conditions hereof this 21st day
of January, 1998.
Lifestream Technologies, Inc.
By:__________________________
Xxxxxxxxxxx Xxxx
Its President
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EXHIBIT B
REGISTRATION RIGHTS
In the event an offering or sale of new common stock subsequent to capital
formation is made by the Company, to public investors, pursuant to a
registration statement, and an underwriting agreement is reached with one or
more broker dealers who are members of the National Association of Securities
Dealers, the conversion of this note to shares issued under Regulation "D" will
have "piggyback" registration rights on a ratable basis of existing
shareholders. The Company will be responsible for all costs related to the
filing of the registration statement.
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