UNITED STATES OF AMERICA STATE OF TEXAS QI SYSTEMS, INC.
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NUMBER
2007-01
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$
150,000.00
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UNITED
STATES OF AMERICA
STATE
OF
TEXAS
QI
SYSTEMS, INC.
On
this
date of September
5, 2006 for
good
and valuable consideration, QI SYSTEMS, INC., a Nevada corporation, (hereinafter
collectively called the "COMPANY"), hereby grants a ten
(10)
day
period for the below named party to enter into a subordinated Capital Note
loan
agreement with the COMPANY as follows:
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Name:
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Xxxxx
and Xxxxxxxx Xxxxxx
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|
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Address:
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0000
Xxxxx Xxxxxx
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City:
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San
Clemente
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State/Prov:
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CA
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Zip/Postal:
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92672
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Country:
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USA
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or
registered assigns (hereafter called the “Holder”), agrees to loan the COMPANY,
in legal tender of the United States of America, the principal sum of One
Hundred Fifty Thousand Dollars ($150,000.00), with interest at the rate of
ten
percent
(10%) calculated annually from September 7, 2006 (“date of issuance”) of this
Capital Note to the earlier of maturity or payment in full if paid before
maturity. The date of issuance shall be the last day the Holder has to deliver
the principal sum to the Company in a form (wire transfer or certified check
made out to “QI Systems, Inc.”) which the Company shall deposit into their bank
account(s), such delivery giving effect to this Capital Note agreement as
defined herein.
Unless
this Capital Note has been converted, as provided below, the principal sum
remaining and all accrued interest thereon shall be due and payable, in full,
five
(5) years
from the
date of issuance (the “maturity date”).
All
payments shall be paid to the registered owner of this Capital Note as of the
date of payment and no proration shall be required.
1
The
indebtedness of the COMPANY evidenced by this Capital Note, including the
principal and any interest thereon, shall be subordinate and junior in right
of
payment of its obligations to its other creditors, whether now outstanding
or
hereafter incurred, (except as to any obligation of the COMPANY ranking on
a
parity with or junior to this Capital Note) so that in case of any insolvency
proceedings, receivership, conservatorship, reorganization, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings relating
to
the COMPANY or any liquidation or winding-up of the COMPANY, whether voluntary
or involuntary, all such obligations (other than those above excepted) shall
be
entitled to be paid in full before any payment shall be made on account of
the
principal of, or interest on, this Capital Note. In the event of any such
proceeding, after payment in full of all sums owing with respect of such prior
obligations, the Holder of this Capital Note, together with the holders of
any
obligations of the COMPANY ranking on a parity with this Capital Note, shall
be
entitled to be paid from the remaining assets of the COMPANY the unpaid
principal thereof and any interest thereon before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock of the COMPANY or any obligations of the COMPANY ranking
junior to this Capital Note. Subject to the payment in full of all such prior
obligations, the Holder of this Capital Note shall be subrogated to the rights
of the holders of such prior obligations to receive payments or distributions
of
cash, property or securities of the COMPANY applicable to such prior
obligations.
Upon
the
occurrence and continuance of default, the principal of this Capital Note may
be
declared due and payable prior to its regular maturity. The COMPANY shall be
in
default under this INSTRUMENT upon the happening of any of the following events
or conditions:
(a)
Failure or omission(s) to pay, or other delinquency in the payment of, any
interest upon this Capital Note as and when the same shall become due and
payable, and continuance of such delinquency for a period of thirty (30) days;
or
(b)
Failure or omission(s) to pay, or other default in the payment of the principal
of this Capital Note as and when the same shall become due and payable either
upon redemption, by declaration or otherwise; or
(c)
If
the COMPANY becomes insolvent or unable to pay its debts as they mature or
makes
an assignment for the benefit of its creditors, or a proceeding is instituted
by
or against the COMPANY alleging that the COMPANY is insolvent or unable to
pay
its debts as they mature and such proceeding remains undismissed for ninety
(90)
days; or
(d)
Failure on the part of the COMPANY duly to observe or perform any of the
covenants or agreements on the part of the COMPANY contained in this Capital
Note for a period of ninety (90) days after the date on which the earliest
written notice of such failure, requiring the COMPANY to remedy the same, shall
have been given to the COMPANY by the Holder; or
(e)
If
the COMPANY shall, on a petition in bankruptcy or reorganization filed against
it, be adjudicated a bankrupt, or if a court of competent jurisdiction shall
enter an order or decree appointing, without the consent of the COMPANY, a
receiver of the COMPANY or of the whole or substantially all of its property,
or
approving a petition filed against it seeking reorganization or arrangement
of
the COMPANY under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof, and such
adjudication, order, or decree shall not be vacated or set aside or stayed
within ninety (90) days from the date of the entry thereof. If the COMPANY
shall
default, as defined herein, then and in each and every such case, unless the
principal of this Capital Note shall have already become due and payable, the
Holder, by notice in writing to the COMPANY, may declare the principal of this
Capital Note to be due and payable immediately, and upon such declaration the
same shall become and shall be immediately due and payable, anything in this
Capital Note contained to the contrary notwithstanding.
2
Capital
Note Convertibility Options and Conditions:
The
Holder of this Capital Note shall have the right, at any time during the term
of
this Agreement, to convert the principal and accrued but unpaid interest into
shares of the COMPANY’s Common Stock, such Common Stock to be issued with a Rule
144 Restrictive Sale Legend. The principal sum ($150,000.00) of this Capital
Note and the accrued but unpaid interest thereon shall be convertible into
Restricted Common Stock at a price of seven
cents ($0.07)
per share. In addition, for each share of Restricted Common Stock issued, the
Holder share receive 1.0 warrants to purchase one additional share of QI
Systems, Inc. Commons Stock at an exercise price of twenty cents ($0.20) per
share. The warrants will expire two (2) years from the date the Capital Note
is
converted.
Upon
conversion of this Capital Note into Restricted Common Stock of the COMPANY,
this Capital Note shall be deemed retired and not to be outstanding, and the
Holder of this Capital Note shall not be entitled to any other benefit except
to
receive the Restricted Common Stock entitled to above as a result of the
conversion.
This
Capital Note is subject to call and redemption at any time prior to its regular
maturity upon payment of the principal amount of this Capital Note, without
a
redemption premium or prepayment penalty.
Subject
to the transfer restrictions of federal and state securities laws, this Capital
Note is transferable on the books of the COMPANY, to be kept at the office
of
the COMPANY, by the registered owner hereof in person, or by an attorney duly
authorized in writing, upon surrender and cancellation of this Capital Note.
Upon any such transfer, a new registered Capital Note or Capital Notes of the
same issue and for the same aggregate original face amount shall be issued
to
the transferee in exchange therefor; provided, nevertheless, that the actual
liability of the COMPANY shall be limited to the actual unpaid principal amount
outstanding as of the date of transfer, together with any accrued but unpaid
interest thereon.
The
COMPANY may deem or treat the person in whose name this Capital Note shall
at
the time be registered as the absolute owner hereof for the purposes of transfer
and receiving payment of principal and/or interest as well as for all other
purposes whatsoever and the COMPANY shall not be affected by any notice to
the
contrary.
3
IN
WITNESS WHEREOF, the
COMPANY has caused this Capital Note to
be
executed by the signatures of its duly authorized officer(s).
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Holder
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QI
Systems, Inc.
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Signed:
/s/
Xxxxx X. Xxxxxx
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Signed:
/s/
Xxxxxx X XxXxxx Xx.
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Printed
Name: Xxxxx
Xxxxxx
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Printed:
Xxxxxx
X. XxXxxx Xx., CFO & COO
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Date:
9-6-06
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Date:
9-22-06
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Signed:
Xxxxxxxx
Xxxxxx
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Printed
Name: Xxxxxxxx
Xxxxxx
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Date:
9-6-06
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TRANSFER
RESTRICTION NOTICE
This
Capital Note has not been registered under the Securities Act of 1933.
Accordingly, this Capital Note may not be transferred unless subsequently
registered or unless, in the opinion of counsel satisfactory to the Company,
such registration is not required.
4
