Contract
Exhibit
4.1
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO AIRTRAX, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
Principal Amount
$__________ Issue
Date: May __, 2008
SECURED CONVERTIBLE
NOTE
FOR VALUE RECEIVED, AIRTRAX, INC., a
New Jersey corporation (hereinafter called “Borrower”), hereby promises to pay
to ___________________ (the “Holder”) ____________ ($________), on October __,
2008 at the offices of Grushko & Xxxxxxx, P.C. 000 Xxxxx xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000 (the “Maturity Date”), if not retired sooner.
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payment Grace
Period. The Borrower shall have a three(3) day grace period to
pay any monetary amounts due under this Note, after which grace period and
during the pendency of any other Event of Default (as defined below) a default
interest rate of fifteen percent (15%) per annum shall apply to the amounts owed
hereunder.
1.2 Conversion
Rights. The Conversion Rights set forth in Article II shall
remain in full force and effect from the date hereof and until the Note is paid
in full or otherwise satisfied regardless of the occurrence of an Event of
Default. The Note shall be payable in full on the Maturity Date,
unless previously converted into Common Stock in accordance with Article II
hereof; provided, that if an Event of Default has occurred, the Holder may
extend the Maturity Date up to an amount of time equal to the pendency of the
Event of Default. Such extension must be on notice in
writing.
1.3 Interest
Rate. Simple interest payable on this Note shall accrue
at the annual rate of eight percent (8%) and be payable monthly commencing June
30, 2008, and on the Maturity Date, accelerated or otherwise, when the principal
and remaining accrued but unpaid interest shall be due and payable, or sooner as
described below.
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the principal and any interest due under
this Note into Shares of the Borrower's Common Stock, $0.001 par value per
(“Common Stock”) as set forth below.
2.1. Conversion into the
Borrower's Common Stock.
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(a) The
Holder shall have the right from and after the date of the issuance of this Note
and then at any time until this Note is fully paid, to convert any outstanding
and unpaid principal portion of this Note subject to the availability of
adequate shares of the Company’s common stock being available for issue
(“Adequate Authorized Shares”), at the election of the Holder (the date of
giving of such notice of conversion being a "Conversion Date") into fully paid
and nonassessable shares of Common Stock as such stock exists on the date of
issuance of this Note, or any shares of capital stock of Borrower into which
such Common Stock shall hereafter be changed or reclassified, at the conversion
price as defined in Section 2.1(b) hereof (the "Conversion Price"), determined
as provided herein. Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto, Borrower shall issue
and deliver to the Holder within three (3) business days after the Conversion
Date (such fifth day being the “Delivery Date”) that number of shares of Common
Stock for the portion of the Note converted in accordance with the
foregoing. At the election of the Holder, the Borrower will deliver
accrued but unpaid interest on the Note, if any, through the Conversion Date
directly to the Holder on or before the Delivery Date. The number of
shares of Common Stock to be issued upon each conversion of this Note shall be
determined by dividing that portion of the principal of the Note to be converted
by the Conversion Price.
(b) Subject
to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
share shall be $0.05 subject to adjustment as described herein.
(c)
The Conversion Price and number and kind of shares or other securities to be
issued upon conversion determined pursuant to Section 2.1(a), shall be subject
to adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
X. Xxxxxx, Sale of Assets,
etc. If the Borrower at any time shall consolidate with or
merge into or sell or convey all or substantially all its assets to any other
corporation, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
such number and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply to
successive transactions of a similar nature by any such successor or
purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or
conveyance.
B. Reclassification,
etc. If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes that may be issued or outstanding, this Note,
as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock immediately prior to such
reclassification or other change.
C. Stock Splits, Combinations
and Dividends. If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a
dividend is paid on the Common Stock in shares of Common Stock, the Conversion
Price shall be proportionately reduced in case of subdivision of shares or stock
dividend or proportionately increased in the case of combination of shares, in
each such case by the ratio which the total number of shares of Common Stock
outstanding immediately after such event bears to the total number of shares of
Common Stock outstanding immediately prior to such event..
D. Share
Issuance. So long as this Note is outstanding, if the
Borrower shall issue or agree to issue any shares of Common Stock for a
consideration less than the Conversion Price in effect at the time of such
issue, then, and thereafter successively upon each such issue, the Conversion
Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security carrying the right to convert
such security into shares of Common Stock or of any warrant, right or option to
purchase Common Stock shall result in an adjustment to the Conversion Price upon
the issuance of the above-described security and again upon the issuance of
shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion
Price. The reduction of the Conversion Price described in this
paragraph is in addition to other rights of the Holder described in this
Note.
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(d) Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment.
2.2. Method of
Conversion. This Note may be converted by the Holder in whole
or in part as described in Section 2.1(a) hereof. Upon partial
conversion of this Note, a new Note containing the same date and provisions of
this Note shall, at the request of the Holder, be issued by the Borrower to the
Holder for the principal balance of this Note and interest which shall not have
been converted or paid.
2.5. Maximum
Conversion. The Holder shall not be entitled to convert on a
Conversion Date that amount of the Note in connection with that number of shares
of Common Stock which would be in excess of the sum of (i) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion
Date. For the purposes of the provision to the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3
thereunder. Subject to the foregoing, the Holder shall not be limited
to aggregate conversions of only 4.99% and aggregate conversion by the Holder
may exceed 4.99%. The Holder shall have the authority and obligation
to determine whether the restriction contained in this Section 2.5 will limit
any conversion hereunder and to the extent that the Holder determines that the
limitation contained in this Section applies, the determination of which portion
of the Notes are convertible shall be the responsibility and obligation of the
Holder. The Holder may waive the conversion limitation described in
this Section 2.3, in whole or in part, upon and effective after 61 days prior
written notice to the Borrower to increase such percentage to up to
9.99%. The Holder may allocate which of the equity of the Borrower
deemed beneficially owned by the Holder shall be included in the 4.99% amount or
up to 9.99% amount as described above.
ARTICLE
III
EVENT OF DEFAULT
The
occurrence of any of the following events of default (“Event of Default”) after
the date hereof shall, at the option of the Holder hereof, make all sums of
principal and interest then remaining unpaid hereon and all other amounts
payable hereunder immediately due and payable, upon demand, without presentment,
or grace period, all of which hereby are expressly waived, except as set forth
below:
3.1 Failure to Pay Principal or
Interest. The Borrower fails to pay any installment of
Principal Amount, interest or other sum due under this Note or any Transaction
Document when due and such failure continues for a period of three (3) business
days after the due date.
3.2 Breach of
Covenant. The Borrower breaches any material covenant or other
term or condition of this Note in any material respect.
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3.3 Breach of Representations
and Warranties. Any material representation or warranty 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 as of the date made and as of the date hereof.
3.4 Receiver or
Trustee. The Borrower or any Subsidiary of Borrower shall make
an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for them or for a substantial part of their
property or business; or such a receiver or trustee shall otherwise be
appointed.
3.5 Judgments. Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any Subsidiary of Borrower or any of their property or other assets
for more than One Hundred Thousand Dollars ($100,000), and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45)
days.
3.6 Non-Payment. Other
than as set forth on Schedule 3.6, the Borrower shall have received a notice of
default, which remains uncured for a period of more than twenty (20) days, on
the payment of any one or more debts or obligations aggregating in excess of One
Hundred Thousand Dollars (US $100,000.00) beyond any applicable grace
period;
3.5 Bankruptcy. Bankruptcy,
insolvency, reorganization or liquidation proceedings or other proceedings or
relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or
against the Borrower or any Subsidiary of Borrower and if instituted against
them are not dismissed within forty-five (45) days of initiation.
3.6 Delisting. Delisting
of the Common Stock from any Principal Market; failure to comply with the
requirements for continued listing on a Principal Market for a period of seven
consecutive trading days; or notification from a Principal Market that the
Borrower is not in compliance with the conditions for such continued listing on
such Principal Market.
3.7 Stop
Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower’s Common Stock that lasts for five
or more consecutive trading days.
3.8 Failure to Deliver Common
Stock or Replacement Note. Xxxxxxxx's failure to timely
deliver Common Stock to the Holder pursuant to and in the form required by this
Note, and, if requested by Xxxxxxxx, a replacement Note.
3.9 Cross
Default. A default by the Borrower of a term, covenant,
warranty or undertaking of any Transaction Document or other material agreement
to which the Borrower and Holder are parties, or the occurrence of an event of
default under any such other agreement which is not cured after any required
notice and/or cure period.
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ARTICLE
IV
SECURITY
INTEREST
4. Security Interest/Waiver of
Automatic Stay. This Note is secured by a security
interest granted to the Collateral Agent for the benefit of the Holder pursuant
to a Security Agreement, as delivered by Borrower to Holder. The
Borrower acknowledges and agrees that should a proceeding under any bankruptcy
or insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, “Loan Documents”) and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. TO THE EXTENT PERMITTED BY
LAW, THE BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY
11 U.S.C. SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY
ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION
OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION,
11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN
ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES
UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. The Borrower hereby
consents to any motion for relief from stay that may be filed by the Holder in
any bankruptcy or insolvency proceeding initiated by or against the Borrower
and, further, agrees not to file any opposition to any motion for relief from
stay filed by the Holder. The Borrower represents, acknowledges and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Holder nor any person acting on behalf of
the Holder has made any representations to induce this waiver, that the Borrower
has been represented (or has had the opportunity to he represented) in the
signing of this Note and the Loan Documents and in the making of this waiver by
independent legal counsel selected by the Borrower and that the Borrower has
discussed this waiver with counsel.
ARTICLE
V
MISCELLANEOUS
5.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of Holder hereof 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 privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
5.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be: (i) if to the Borrower to: Airtrax
Inc., 000x Xxxxxxx Xxxxxx Xxxxxxxxx XX 00000, with a copy by telecopier only to:
Xxxxxxxxx Xxxx Xxxxxxxx Xxxxxxx, Attn: Xxxxxxx X. Xxxxxxxx, Esq., telecopier:
(000) 000-0000, and (ii) if to the Holder, to the name, address and telecopy
number set forth on the front page of this Note, with a copy by telecopier only
to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000.
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5.3 Amendment
Provision. 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.
5.4 Assignability. This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns. The Borrower may not assign any of its obligations under
this Note without the consent of the Holder.
5.5 Cost of
Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
5.6 Governing
Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Any action brought
by either party against the other concerning the transactions contemplated by
this Agreement shall be brought only in the state courts of New York or in the
federal courts located in the state and county of New York. Both
parties and the individual signing this Agreement on behalf of the Borrower
agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs.
5.7 Maximum
Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum permitted by such law, any payments in excess of such maximum shall be
credited against amounts owed by the Borrower to the Holder and thus refunded to
the Borrower.
5.8 Shareholder
Status. The Holder shall not have rights as a shareholder of
the Borrower with respect to unconverted portions of this
Note. However, the Holder will have all the rights of a shareholder
of the Borrower with respect to the shares of Common Stock to be received by
Holder after delivery by the Holder of a Conversion Notice to the
Borrower.
IN WITNESS WHEREOF, Xxxxxxxx
has caused this Note to be signed in its name by an authorized officer as of the
___ day of May, 2008.
| AIRTRAX INC. | |||
|
|
By:
|
/s/ | |
| Name | |||
| Title | |||
Holder:
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NOTICE OF
CONVERSION
(To be
executed by the Registered Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by Airtrax Inc. on May __, 2008 into
Shares of Common Stock of Airtrax Inc. (the “Borrower”) according to the
conditions set forth in such Note, as of the date written below.
Date of
Conversion:____________________________________________________________________
Conversion
Price:______________________________________________________________________
Shares To
Be
Delivered:_________________________________________________________________
Signature:____________________________________________________________________________
Print
Name:__________________________________________________________________________
Address:_____________________________________________________________________________
____________________________________________________________________________
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