THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR
THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (C) IF
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT,
DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM
THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN
ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT
LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT
AND REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF
DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING
HEREUNDER MAY BE ACCELERATED.
No. 5 $150,000.00
LAKOTA TECHNOLOGIES, INC.
8% Convertible Note due August 24, 2001
LAKOTA TECHNOLOGIES, INC., a Colorado corporation (together
with its successors, the "Company"), for value received hereby
promises to pay to Xxx X. Xxxxxxxxxx or his registered assigns, the
principal sum of One Hundred Fifty Thousand Dollars ($150,000.00)
or, if less, the principal amount of this Note then outstanding, on
the Maturity Date to the Holder in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay
interest, monthly in arrears from September 30, 1999, on (i) the
last day of each calendar month of each year until the Maturity
Date, commencing October 31, 1999 (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each an
"Interest Payment Date"), (ii) the Maturity Date, (iii) each
Conversion Date, as hereafter defined, and (iv) the date the
principal amount of the Convertible Notes shall be declared to be or
shall automatically become due and payable, on the principal sum
hereof outstanding in like coin or currency, at the rates per annum
set forth below, from the most recent Interest Payment Date to which
interest has been paid on this Convertible Note, or if no interest
has been paid on this Convertible Note, from the date of this
Convertible Note until payment in full of the principal sum hereof
has been made.
The interest rate shall be eight percent (8%) per annum (the
"Interest Rate") or, if less, the maximum rate permitted by
applicable law. Past due amounts (including interest, to the extent
permitted by law) will also accrue interest at the Interest Rate
plus 2% per annum or, if less, the maximum rate permitted by
applicable law, and will be payable on demand ("Default Interest").
Interest on this Convertible Note will be calculated on the basis of
a 360-day year of twelve 30 day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder
pursuant to the terms of the Agreement (hereafter defined). Except
as otherwise provided in this Convertible Note, the interest payable
on each Interest Payment Date shall be added to the outstanding
principal amount of this Convertible Note on such date and
thereafter be considered part of the outstanding principal amount.
The Company may elect to pay the interest payable on any Interest
Payment Date in cash, provided it gives the registered holder
written notice of such election at least five (5) Business Days
prior to the applicable Interest Payment Date and pays the same by
such date. On each Conversion Date, interest shall be paid in
shares of Common Stock on the portion of the principal balance of
the Convertible Note then being converted. The number of shares of
Common Stock issued as interest shall be determined by dividing the
dollar amount of interest due on the applicable Interest Payment
Date by the Conversion Price or Default Conversion Price then in
effect.
This Convertible Note (this "Convertible Note") is one of a
duly authorized issuance of $750,000 original aggregate principal
amount of Convertible Notes of the Company referred to in that
certain Securities Purchase Agreement dated as of the date hereof
between the Company and the Purchasers named therein (the
"Agreement"). The Agreement contains certain additional agreements
among the parties with respect to the terms of this Convertible
Note, including, without limitation, provisions which (A) limit the
conversion rights of the Holder, (B) specify voluntary and mandatory
repayment, prepayment and redemption rights and obligations and (C)
specify Events of Default following which the remaining balance due
and owing hereunder may be accelerated. All such provisions are an
integral part of this Convertible Note and are incorporated herein
by reference. This Convertible Note is transferable and assignable
to one or more Persons, in accordance with the limitations set forth
in the Agreement.
The Company shall keep a register (the "Register") in which
shall be entered the names and addresses of the registered holder of
this Convertible Note and particulars of this Convertible Note held
by such holder and of all transfers of this Convertible Note.
References to the Holder or "Holders" shall mean the Person listed
in the Register as the registered holder of such Convertible Notes.
The ownership of this Convertible Note shall be proven by the Register.
1. Certain Terms Defined. All terms defined in the
Agreement and not otherwise defined herein shall have for purposes
hereof the meanings provided for in the Agreement.
2. Covenants. Unless the Majority Holders otherwise
consent in writing, the Company covenants and agrees to observe and
perform each of its covenants, obligations and undertakings
contained in the Agreement, which obligations and undertakings are
expressly assumed herein by the Company and made for the benefit of
the holder hereof.
3. Payment of Principal. The Company shall repay the
remaining unpaid balance on this Convertible Note on the Maturity
Date. The Company may, and shall be obligated to, prepay
all or a portion of this Convertible Note on the terms specified in
the Agreement.
4.1 Conversion of Convertible Note. The Holder shall
have the right, at its option, at any time from and after the
earlier to occur of (x) September 1, 1999, or (y) the date the
Registration Statement has been declared effective by the Securities
and Exchange Commission, to convert the principal amount of this
Convertible Note, or any portion of such principal amount, into that
number of fully paid and nonassessable shares of Common Stock (as
such shares shall then be constituted) determined pursuant to this
Section 4.1. The number of shares of Common Stock to be issued upon
each conversion of this Convertible Note shall be determined by
dividing the Conversion Amount (as defined below) by the Conversion
Price in effect on the date (the "Conversion Date") a Notice of
Conversion is delivered to the Company by the Holder by facsimile or
other reasonable means of communication dispatched prior to 5:00
p.m., New York Time. The term "Conversion Amount" means, with
respect to any conversion of this Convertible Note, the sum of (1)
the principal amount of this Convertible Note to be converted in
such conversion plus (2) accrued and unpaid interest, if any, on
such principal amount at the interest rates provided in this
Convertible Note to the Conversion Date plus (3) Default Interest,
if any, on the interest referred to in the immediately preceding
clause (2); the term "Conversion Price" means 75% of the Market
Price; the term "Default Conversion Price" means 35% of the Market
Price; and the term "Market Price" means the closing bid price of a
share of Common Stock as reported by the National Association of
Securities Dealers Electronic Bulletin Board ("OTC Bulletin Board")
for the trading day immediately preceding the date of receipt by the
Company of Notice of Conversion. If on any Conversion Date the
Common Stock is not listed or traded on the OTC Bulletin Board, the
Market Price shall be determined by reference to the Nasdaq Stock
Market or the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg, L.P., or
the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau,
Inc. If the closing bid price cannot be calculated for such
security on such date on any of the foregoing bases, the closing bid
price of such security on such date shall be the fair market value
as mutually determined by the Company and the Holders of a majority
in interest of Convertible Notes being converted for which the
calculation of the closing bid price is required in order to
determine the Conversion Price or Default Conversion Price of such
Convertible Notes.
4.2 Irrevocable Instructions to Transfer Agent.
Consistent with Section 7.10 of the Agreement, the Company
(i) shall promptly irrevocably instruct its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Convertible Note and (ii) agrees that its issuance of this
Convertible Note shall constitute full authority to its officers and
agents who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common
Stock in accordance with the terms and conditions of this
Convertible Note.
4.3 Method of Conversion
(a) Notwithstanding anything to the contrary set forth herein, upon
conversion of this Convertible Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender
this Convertible Note to the Company unless the entire unpaid
principal amount of this Convertible Note is so converted. Rather,
records showing the principal amount converted (or otherwise repaid)
and the date of such conversion or repayment shall be maintained on
a ledger substantially in the form of Annex A attached hereto (a
copy of which shall be delivered to the Company or transfer agent
with each Notice of Conversion). It is specifically contemplated
that the Company hereof shall act as the calculation agent for
conversions and repayments. In the event of any dispute or
discrepancies, such records maintained by the Company shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Convertible Note,
acknowledge and agree that, by reason of the provisions of this
paragraph, following a conversion of a portion of this Convertible
Note, the principal amount represented by this Convertible Note will
be the amount indicated on Annex A attached hereto (which may be
less than the amount stated on the face hereof).
(b) The Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property
on conversion of this Convertible Note in a name other than that of
the Holder (or in street name), and the Company shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder's account) requesting the issuance thereof shall
have paid to the Company the amount of any such tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
(c) Upon receipt by the Company of a Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this
Convertible Note shall be reduced to reflect such conversion, and,
unless the Company defaults on its obligations under this Article 4,
all rights with respect to the portion of this Convertible Note
being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets,
as herein provided, on such conversion. If the Holder shall have
given a Notice of Conversion as provided herein, the Company's
obligation to issue and deliver the certificates for shares of
Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the
recovery of any judgment against any person or any action by the
Holder to enforce the same, any failure or delay in the enforcement
of any other obligation of the Company to the Holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the Holder of any obligation to the
Company, and
irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with such conversion. The date of receipt (including
receipt via telecopy) of such Notice of Conversion shall be the
Conversion Date so long as it is received before 5:00 p.m., New York
Time, on such date.
5. Miscellaneous. This Convertible Note shall be deemed
to be a contract made under the laws of the State of New York, and
for all purposes shall be governed by and construed in accordance
with the laws of said State. The parties hereto, including all
guarantors or endorsers, hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and assent
to extensions of the time of payment, or forbearance or other
indulgence without notice. The Company hereby submits to the
exclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York state court
sitting in New York City for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in
an inconvenient forum. The Company hereby irrevocably waives any and
all right to trial by jury in any legal proceeding arising out of or
relating to this Convertible Note. Notwithstanding anything to the
contrary in the foregoing, at the election of the Holder, any
dispute between the Holder and the Company may be arbitrated, rather
than litigated in the courts, before and in accordance with the
rules of the American Arbitration Association in New York City. The
Company agrees to submit to and participate in any such arbitration.
The Holder of this Convertible Note by acceptance of this
Convertible Note agrees to be bound by the provisions of this
Convertible Note which are expressly binding on such Holder.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: August 24, 1999
LAKOTA TECHNOLOGIES, INC.
/s/Xxx Xxxxxxxx
ANNEX A
CONVERSION AND REPAYMENT LEDGER
[TABLE]
EXHIBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to
Convert the Convertible Note)
The undersigned hereby irrevocably elects to convert $ of the above
Convertible Note into shares of Common Stock of Lakota Technologies,
Inc. ("Company") according to the conditions set forth
in such Convertible Note, as of the date written below.
If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date of Conversion
Applicable Conversion Price
Signature
[Print Name of Holder and Title of Signer]
Address:
SSN or EIN:
Shares are to be registered in the following name:
Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or delivered to the following account:
Account Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or delivered to the following account:
Account Name:
Address:
Tel:
