CONVERTIBLE NOTE
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 THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
|
CONVERTIBLE
NOTE
FOR
VALUE
RECEIVED, bioMETRX, Inc., a Delaware Corporation (hereinafter called
"Borrower"), hereby promises to pay to __________________,
(the
"Holder") or its registered assigns or successors in interest or order, without
demand, the sum of [______] Dollars ($_________) (“Principal Amount”), with
simple and unpaid interest thereon, 24 months from closing date of June __,
2006
(the "Maturity Date"), if not sooner paid.
This
Note
has been entered into pursuant to the terms of a Securities Purchase Agreement
between the Borrower, the Holder and certain other holders (the “Other Holders”)
of convertible promissory notes (the “Other Notes”), dated of even date herewith
(the “Subscription Agreement”), and shall be governed by the terms of such
Securities Purchase Agreement. Unless otherwise separately defined herein,
all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Securities Purchase Agreement. The following terms shall apply to this
Note:
ARTICLE
I
INTEREST;
AMORTIZATION
1.1. Interest
Rate.
Subject
to Section 5.7 hereof, interest payable on this Note shall accrue at a rate
per
annum (the "Interest Rate") of eight percent (8%). Interest on the Principal
Amount shall accrue from the date of this Note and shall be payable quarterly.
The Company shall issue the first year’s interest to the Holder in shares of
Common Stock at the Closing Date.
1.2 Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
which, if susceptible to cure is not cured within twenty (20) days, otherwise
then from the first date of such occurrence, the annual interest rate on this
Note shall (subject to Section 5.7) automatically be increased to fifteen
percent (15%).
ARTICLE
II
CONVERSION
REPAYMENT
2.1. No
Effective Registration.
Notwithstanding anything to the contrary herein, no amount payable hereunder
may
be
paid in
shares
of Common
Stock by
the Borrower without the Holder’s consent unless (a) either (i) an effective
current Registration Statement covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144(k) of the
1933 Act, and (b) no Event of Default hereunder (or
an
event that with the passage of time or the giving of notice could become an
Event of Default),
exists
and is continuing, unless such event or Event of Default is cured within any
applicable cure period or is otherwise waived in writing by the Holder in whole
or in part at the Holder's option.
2.2. Optional
Redemption of Principal Amount.
Provided that (i) an Event of Default or an event which with the passage of
time
or the giving of notice could become an Event of Default has not occurred,
whether or not such Event of Default has been cured, and (ii) an
effective current Registration Statement covering the shares of Common Stock
to
be issued upon conversion of the Notes exists,
the
Borrower will have the option of prepaying the outstanding Principal amount
of
this Note ("Optional Redemption"), in whole or in part, by paying to the Holder
a sum of money equal to one hundred and twenty percent (125%) of the Principal
amount to be redeemed, together with accrued but unpaid interest thereon and
any
and all other sums due, accrued or payable to the Holder arising under this
Note
or any Transaction Document through the Redemption Payment Date as defined
below
(the "Redemption Amount"). Xxxxxxxx’s election to exercise its right to prepay
must be by notice in writing (“Notice of Redemption”). The Notice of Redemption
shall specify the date for such Optional Redemption (the "Redemption Payment
Date"), which date shall be no sooner than ten (10) days after the date of
the
Notice of Redemption (the "Redemption Period"). A Notice of Redemption shall
not
be effective with respect to any portion of the Principal Amount for which
the
Holder has a pending election to convert, or for conversions initiated or made
by the Holder during the Redemption Period if the Redemption Period is based
on
thirty days prior notice. On the Redemption Payment Date, the Redemption Amount,
less any portion of the Redemption Amount against which the Holder has exercised
its conversion rights, shall be paid in good funds to the Holder. In the event
the Borrower fails to pay the Redemption Amount on the Redemption Payment Date
as set forth herein, then (i) such Notice of Redemption will be null and void,
(ii) Borrower will have no right to deliver another Notice of Redemption, and
(iii) Borrower’s failure may be deemed by Holder to be a non-curable Event of
Default. A Redemption Notice may be given only at a time a Registration
Statement is effective. A Notice of Redemption may not be given nor may the
Borrower effectuate a Redemption without the consent of the Holder, if at any
time during the Redemption Period an Event of Default or an Event which with
the
passage of time or giving of notice could become an Event of Default (whether
or
not such Event of Default has been cured), has occurred or the Registration
Statement registering the Registrable Securities is not effective each day
during the Redemption Period.
2.3. Mandatory
Conversion.
Provided an Event of Default has not occurred, unless such Event of Default
has
been cured at least twenty (20) days prior to the delivery of written notice
by
Borrower as hereinafter described, then, commencing after the Actual Effective
Date, the Borrower will have the option by written notice to the Holder (“Notice
of Mandatory Conversion”) of compelling the Holder to convert all or a portion
of the outstanding and unpaid principal of the Note and accrued interest,
thereon, into Common Stock at the Conversion Price then in affect (“Mandatory
Conversion”). The Notice of Mandatory Conversion, which notice must be given on
the first day following a consecutive ten (10) day trading period during which
the closing bid price for the Company’s Common Stock as reported by Bloomberg,
LP for the Principal Market shall be more than $2.50 each day and the daily
average trading volume is not less than 100,000 shares. The date the Notice
of
Mandatory Conversion is given is the “Mandatory Conversion Date.” The Notice of
Mandatory Conversion shall specify the aggregate principal amount of the Note
which is subject to Mandatory Conversion, which amount may not exceed in the
aggregate, for all Holders who received Notes similar in term and tenure as
this
Note, the dollar volume of Common Stock traded on the Principal Market during
the seven (7) trading days immediately preceding the Mandatory Conversion Date.
Mandatory Conversion Notices must be given proportionately to all Holders of
Notes who received Notes similar in term and tenure as this Note. The Borrower
shall reduce the amount of Note principal and interest subject to a Notice
of
Mandatory Conversion by the amount of Note Principal and interest for which
the
Holder had delivered a Notice of Conversion to the Borrower during the twenty
(20) trading days preceding the Mandatory Conversion Date. Each Mandatory
Conversion Date shall be a deemed Conversion Date and the Borrower and the
Holder will be required to comply with Section 2.1 above.
2
ARTICLE
III
CONVERSION
RIGHTS
3.1. Holder's
Conversion Rights.
Subject
to Section 3.2, the Holder shall have the right, but not the obligation at
all
times, to convert all or any portion of the then aggregate outstanding Principal
Amount of this Note, into shares of Common Stock, subject to the terms and
conditions set forth in this Article III at the rate of $1.00 per share of
Common Stock (“Fixed Conversion Price”) as same may be adjusted pursuant to this
Note and the Subscription Agreement. The Holder may exercise such right by
delivery to the Borrower of a written Notice of Conversion pursuant to Section
3.3.
3.2. Conversion
Limitation.
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
3.2 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 3.2, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder may
allocate decide whether to convert a Note or exercise Warrants to achieve an
actual 4.99% ownership position.
3
3.3. Mechanics
of Xxxxxx's Conversion.
(a) In
the
event that the Holder elects to convert any amounts outstanding under this
Note
into Common Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion (a "Notice of Conversion") to
the
Borrower, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and amounts being converted.
The original Note is not
required
to be surrendered to the Borrower
until
all sums due under the Note have been paid. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records. Each date on which a Notice of Conversion
is
delivered or telecopied to the Borrower in accordance with the provisions hereof
shall be deemed a "Conversion Date." A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A.
(b) Pursuant
to the terms of a Notice of Conversion, the Borrower will issue instructions
to
the transfer agent accompanied by an opinion of counsel, if so required by
the
Borrower's transfer agent and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting
the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "Delivery Date"). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such shares of Common Stock, unless the Holder provides the Borrower
written instructions to the contrary. Notwithstanding
the foregoing to the contrary, the Borrower or its transfer agent shall only
be
obligated to issue and deliver the shares to the DTC on the Holder’s behalf via
DWAC (or certificates free of restrictive legends) if the registration statement
providing for the resale of the shares of Common Stock issuable upon the
conversion of this Note is effective and the Holder has complied with all
applicable securities laws in connection with the sale of the Common Stock,
including, without limitation, the prospectus delivery requirements. In the
event that Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the Conversion Shares
by the Delivery Date.
3.4. Conversion
Mechanics.
(a) The
number of shares of Common Stock to be issued upon each conversion of this
Note
pursuant to this Article III shall be determined by dividing that portion of
the
Principal Amount and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price.
4
(b) The
Fixed
Conversion Price and number and kind of shares or other securities to be issued
upon conversion 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,
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.
If the
Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in the Securities Purchase Agreement), prior to the complete conversion
or payment of this Note, for a consideration less than the Fixed Conversion
Price that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Fixed Conversion Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Fixed Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option 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 Fixed Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the Securities Purchase
Agreement.
5
(c) Whenever
the Conversion Price is adjusted pursuant to Section 3.4(b) 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.
3.5. Reservation.
During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than
one
hundred
seventy-five
percent
(175%)
of the
number of shares to provide for the issuance of Common Stock upon the full
conversion of this Note.
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully
paid and
non-assessable. Xxxxxxxx agrees that its issuance of this Note shall constitute
full authority to its officers, agents, and transfer agents who are charged
with
the duty of executing and issuing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the conversion of this
Note.
3.6 Issuance
of Replacement Note.
Upon
any partial conversion of this Note, a replacement Note containing the same
date
and provisions of this Note shall,
at the
written request of the Holder, be
issued
by the Borrower to the Holder for the outstanding Principal Amount of this
Note
and accrued interest which shall not have been converted or paid, provided
Xxxxxx has surrendered an original Note to the Company. In the event that the
Holder elects not to surrender a Note for reissuance upon partial payment or
conversion, the Holder hereby indemnifies the Borrower against any and all
loss
or damage attributable to a third-party claim in an amount in excess of the
actual amount then due under the Note.
ARTICLE
IV
EVENTS
OF DEFAULT
The
occurrence of any of the following events of default ("Event of Default") 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:
4.1 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 five (5) business days after the due
date.
4.2 Breach
of Covenant.
The
Borrower breaches any material covenant or other term or condition of the
Securities Purchase Agreement, this Note or Transaction Document in any material
respect and such breach, if subject to cure, continues for a period of ten
(10)
business days after written notice to the Borrower from the Holder.
4.3 Breach
of Representations and Warranties.
Any
material representation or warranty of the Borrower made herein, in the
Securities Purchase Agreement, Transaction Document 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
as of
the date made and the Closing Date.
6
4.4 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.
4.5 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 $25,000
and shall remain unvacated, unbonded or unstayed for a period of forty-five
(45)
days.
4.6 Non-Payment.
The
Borrower shall have received a notice of default, which remains uncured for
a
period of more than twenty (20) business days, on the payment of any one or
more
debts or obligations aggregating in excess of $25,000 beyond any applicable
grace period;
4.7 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 sixty (60) days
of
initiation.
4.8 Delisting.
Failure
of the Common Stock to be quoted or listed on the Principal Market; failure
to
comply with the requirements for continued listing on the Bulletin Board for
a
period of seven consecutive trading days; or notification from the Bulletin
Board or any Principal Market that the Borrower is not in compliance with the
conditions for such continued listing on the Principal Market.
4.9 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.
4.10 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 or the Securities Purchase Agreement, and,
if
requested by Borrower, a replacement Note,
and
such failure continues for a period of five (5) business days after the due
date.
4.11 Non-Registration
Event.
The
occurrence of a Non-Registration Event as described in the Securities Purchase
Agreement.
4.12 Reverse
Splits.
The
Borrower effectuates a reverse split of its Common Stock without twenty days
prior written notice to the Holder.
4.13 Cross
Default.
A
default by the Borrower of a material term, covenant, warranty or undertaking
of
any Transaction Document or other agreement to which the Borrower and Holder
are
parties, or the occurrence of a material event of default under any such other
agreement which is not cured after any required notice and/or cure
period.
7
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)
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.
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, without regard to conflicts
of laws
principles that would result in the application of the substantive laws of
another jurisdiction. 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 of New York. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of this
Note is invalid or unenforceable under any applicable statute or rule of law,
then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute
or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the Borrower's obligations to Holder,
to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
8
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. Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party
against
the other.
5.9 Redemption.
This
Note may not be redeemed or called without the consent of the Holder except
as
described in this Note.
5.10 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 the rights
of a
shareholder of the Borrower with respect to the Shares of Common Stock to be
received 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 June, 2006.
bioMETRX, Inc. | ||
|
|
|
By: | ||
Name: |
||
Title: |
WITNESS: | |||
|
|||
9
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 bioMETRX, Inc. (the "Borrower") on
June ____, 2006 into Shares of Common Stock of the Borrower according to the
conditions set forth in such Note, as of the date written below.
Date
of
Conversion:_________________________________________________________________
Conversion
Price:______________________________________________________________________
Number
of
Shares of Common Stock Beneficially Owned on the Conversion Date:
Less
than 5% of the outstanding Common Stock of Borrower
Shares
To
Be
Delivered:_________________________________________________________________
Signature:_________________________________________________________________
Print
Name:________________________________________________________________
Address:__________________________________________________________________
_________________________________________________________________________
10