THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, DESCRIBED IN A
SUBSCRIPTION AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THESE
SECURITIES, COPIES OF WHICH ARE AVAILABLE UPON REQUEST FROM THE COMPANY.
xXxxxxxxxxx.xxx , Inc.
8% CONVERTIBLE NOTE
xXxxxxxxxxx.xxx, Inc., a Nevada corporation (the "Company"), the
principal office of which is located at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000, for value received, hereby promises to pay to XXXXXXXXXXX XXXXX or
registered assigns, the sum of Two Hundred Fifty Thousand Dollars ($250,000), or
such lesser amount as shall then equal the outstanding principal amount hereof
on the terms and conditions set forth hereinafter. The principal hereof and any
unpaid accrued interest hereon, as set forth below, shall be due and payable on
October 14, 2004. Payment for all amounts due hereunder shall be made by mail to
the registered address of the Holder.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. Unless the context otherwise requires, certain terms
used herein shall be ascribed the following meanings:
(a) "Company" shall mean xXxxxxxxxxx.xxx, Inc., and any corporation
that shall succeed to, or assume the obligations of, the Company under this
Note.
(b) "Holder," when the context refers to a holder of this Note,
shall mean any person who shall at the time be the registered holder of this
Note.
2. Interest. Until all outstanding principal and interest on this Note
shall have been paid in full, interest shall be payable from the date of this
Note on the outstanding principal balance of this Note, at the rate of eight
percent (8%) per annum (the "Initial Interest Rate") or such lesser amount of
interest as may be required to satisfy legal requirements. In the event that any
portion of the principal amount of this Note is not paid in full when such
amount becomes due and payable, interest at the Initial Interest Rate shall
continue to accrue on the balance of any unpaid principal until such balance is
paid. The Company has the option of paying interest on this Note either in cash
or shares of Company common stock at the Conversion Price described in Section
5.
3. Events of Default. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default"), the
Holder of this Note may, so long as such condition exists, declare the entire
unpaid principal and accrued interest hereon immediately due and payable, by
notice in writing to the Company, subject to Section 14 hereof.
(a) Default in the payment of the principal and interest of this
Note when due and payable if such default continues for forty-five (45) days
after the Holder has given the Company written notice of such default; or
(b) The institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or release under the federal Bankruptcy Act,
or any other applicable federal or state law, or the consent by it to the filing
of any such petition or the appointment of a receiver, liquidator, assignee,
trustee or other similar official of the Company, or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company in furtherance of any such
action; or
(c) If, within thirty (30) days after the commencement of an action
against the Company (and service of process in connection therewith on the
Company) seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder affecting the operations or the business of
the Company stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the properties of
the Company, such appointment shall not have been vacated; or
4. Prepayment. Subject to the conversion rights of Section 5, the Note
or any portion thereof may be prepaid ("redeemed") at the election of the
Company, as a whole or from time to time in part, at any time, upon not less
than thirty (30) days' advance written notice, at 100% of the principal amount
thereof at the time together with accrued interest. Any notice of redemption
shall state: (1) the date of redemption; (2) the redemption price; (3) if less
than all of the outstanding Note is to be redeemed, the amount of the partial
redemption, and (4) the place or places where Note is to be surrendered for
payment of the redemption price. Notice of redemption having been given as
aforesaid, the Note so to be redeemed shall, on the redemption date, become due
and payable, and from and after the date such Note shall cease to bear interest.
5. Conversion.
(a) Voluntary Conversion. Any Holder of this Note has the right, at
the Holder's option, prior to payment in full of the principal balance of this
Note, to convert this Note, in accordance with the provisions of this Section 5,
in whole or in part, into common stock of the Company (the "Common Stock"). The
number of shares of Common Stock into which this Note may be converted
("Conversion Shares") shall be determined by dividing the aggregate remaining
principal balance together with all accrued interest to the date of conversion
by the Conversion Price (as defined below) in effect at the time of such
conversion. The Conversion Price shall be equal to seventy percent (70%) of the
average closing bid price for the ten (10) trading days immediately preceding
the Conversion Date.
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(b) Compliance with Securities Laws. The Holder of this Note, by
acceptance hereof, acknowledges that the shares of Common Stock to be issued
upon conversion thereof are being acquired solely for the Holder's own account
and not as a nominee for any other part, and for investment, and that the Holder
will not offer, sell or otherwise dispose of any shares of Common Stock to be
issued upon conversion thereof except under circumstances that will not result
in a violation of the Act or any state securities laws. Upon conversion of this
Note, the Holder shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of Common Stock issued upon
conversion are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale. All shares of Common Stock issued upon conversion
thereof shall be stamped or imprinted with a legend in substantially the
following form (in addition to any legend required by state securities laws):
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED. SUCH
SHARES MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR UNDER SAID ACT OR OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED. COPIES OF THE AGREEMENT RESTRICTING THE TRANSFER OR SALE OF THESE
SHARES MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE COMPANY.
FOR FLORIDA RESIDENTS: THESE SECURITIES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE FLORIDA
SECURITIES ACT, BY REASON OF SPECIFIC EXEMPTIONS THEREUNDER RELATING OT THE
LIMITED AVAILABILITY OF THE OFFERING. THESE SECURITIES CANNOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF TO ANY PERSON OR ENTITY UNLESS THEY ARE
SUBSEQUENTLY REGISTERED OR EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY,
THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA
SECURITIES ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE
OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF
VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER,
OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SAID PURCHASER, WHICHEVER OCCURS LATER.
(c) Notice of Conversion Pursuant to Section 5(a). If the Holder is
electing to convert pursuant to Section 5(a), before the Holder shall be
entitled to convert this Note into shares of Common Stock, the Holder shall
surrender this Note at the office of the Company and shall give at least ten
(10) days' advance written notice by mail, postage prepaid, to the Company at
its principal corporate office of the election to convert the same, and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Company shall, as soon as
practicable thereafter, issue and deliver at such office to the Holder of this
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Note a certificate or certificates for the number of shares of Common Stock to
which the Holder of this Note shall be entitled as aforesaid.
6. Delivery of Stock Certificates. As promptly as practicable after the
conversion of this Note, the Company at its expense will issue and deliver to
the Holder of this Note a certificate or certificates for the number of full
shares of Common Stock issuable upon such conversion.
7. Mechanics and Effect of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of this Note. In lieu of the Company
issuing any fractional shares to the Holder upon the conversion of this Note,
the Company shall pay to the Holder the amount of outstanding principal and
accrued interest that is not so converted, such payment to be in the form as
provided below. Upon the conversion of this Note pursuant to Section 5(a) above,
the Holder shall surrender this Note, duly endorsed, at the principal office of
the Company. At its expense, the Company shall, as soon as practicable
thereafter, issue and deliver to such Holder at such principal office a
certificate or certificates for the number of shares of such Common Stock to
which the Holder shall be entitled upon such conversion (bearing such legends as
are required by the Subscription Agreement and applicable state and federal
securities laws in the opinion of counsel to the Company), together with any
other securities and property to which the Holder is entitled upon such
conversion under the terms of this Note, including a check payable to the Holder
for any cash amounts payable as described above. Such conversion shall be deemed
to have been made immediately prior to the close of business on the date of such
surrender of this Note, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
Upon conversion of this Note, the Company shall be forever released from all its
obligations and liabilities under this Note, except ten (10) days after the date
of such conversion, any interest accrued and unpaid or unconverted to and
including the date of such conversion, and no more.
8. Adjustments to Conversion Price.
(a) In the event the Company should at any time or from time to
time after the date of issuance hereof fix a record date for the effectuation of
a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of this Note shall be appropriately decreased so that the number of shares
of Common Stock issuable upon conversion of this Note shall be increased in
proportion to such increase of outstanding shares.
(b) If the number of shares of Common Stock outstanding at any time
after the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price for this Note shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion hereof shall be
decreased in proportion to such decrease in outstanding shares.
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(c) Upon the occurrence of each adjustment of the Conversion Price
pursuant to this Section 8, the Company shall promptly compute such adjustment
in accordance with the terms hereof and prepare and furnish to the Holder a
certificate setting forth the facts upon which such adjustment is based and a
copy of its audited financial statements for such fiscal year.
9. Notices of Record Date, etc. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right;
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of all
or substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, the Company will mail to the holder of this Note at
least fifteen (15) days prior to the earliest date specified therein, a notice
specifying:
i. The date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right; and
ii. the approximate date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
stockholders entitled to vote thereon.
10. Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available, out of its authorized but unissued shares
of Common Stock and solely for the purpose of effecting the conversion of the
Notes, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Notes; and if at any time the number
of authorized but unissued shares of Common Stock (and shares of its Common
Stock for issuance on conversion of such Common Stock) shall not be sufficient
to effect the conversion of the entire outstanding principal amount of this
Note, in addition to such other remedies as shall be available to the holder of
this Note, the Company will use its best efforts to take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
11. Assignment. Subject to the restrictions on transfer described in
Section 13 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
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12. Waiver and Amendment. Any provision of this Note may be amended,
waived or modified upon the approval of the Company and the Holders of a
majority of the outstanding principal amount of all then outstanding Notes
issued pursuant to the Subscription Agreement.
13. Transfer of this Note or Securities Issuable on Conversion Hereof.
With respect to any offer, sale or other disposition of this Note or securities
into which such Note may be converted, the Holder will give written notice to
the Company prior thereto, describing briefly the manner thereof, together with
a written opinion of such Holder's counsel reasonably satisfactory to Company
and its counsel, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under any federal or state law
then in effect). Promptly upon receiving such written notice and opinion, the
Company, as promptly as practicable, shall notify such Holder that such Holder
may sell or otherwise dispose of this Note or such securities, all in accordance
with the terms of the notice delivered to the Company. If a determination has
been made pursuant to this Section 13 that the opinion of counsel for the Holder
is not reasonably satisfactory to the Company, the Company shall so notify the
Holder promptly after such determination has been made. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
14. Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telegraphed or mailed by registered or
certified mail, or overnight air courier, postage prepaid, at the respective
addresses of the parties as set forth herein. Any party hereto may by notice so
given, change its address for future notice hereunder. Notice shall conclusively
be deemed to have been given when personally delivered or when deposited in the
mail or with an air courier or telegraphed in the manner set forth above and
shall be deemed to have been received when delivered.
15. No Shareholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a shareholder in respect of meetings of
shareholders for the election of directors of the Company or any other matters
or any rights whatsoever as a shareholder of the Company; and no dividends or
interest shall be payable or accrued in respect of this Note or the interest
represented hereby or the Conversion Shares obtainable hereunder until, and only
to the extent that, this Note shall have been converted.
16. Replacement of Note. On receipt 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, on delivery of an indemnity agreement
reasonably satisfactory in form and substance to the Company or, in the case of
mutilation, on surrender and cancellation of this Note, the Company at its
expense shall execute and deliver, in lieu of this Note, a new note of like
tenor and amount.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida excluding that body of law
relating to conflict of laws.
18. Heading; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Note.
Except as otherwise indicated, all references herein to Sections refer to
Sections hereof.
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IN WITNESS WHEREOF, the Company has caused this Note to be issued this
___th day of May 2004.
xXxxxxxxxxx.xxx, INC.,
a Nevada corporation
By:
----------------------------
Xxxx Xxxxxx, President
Name of Holder:
Address:
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#319109
5/13/04
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