Contract
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.
FOR
VALUE
RECEIVED, bioMETRX, Inc., a Delaware Corporation (hereinafter called
"Borrower"), hereby promises to pay to Xxxxxx Xxxxxx, (the "Holder") or
his
assigns
or successors in interest or order, without demand, the sum of Four Hundred
Thousand Dollars ($400,000) (“Principal Amount”), with simple and unpaid
interest thereon, 9 months from closing date of August __, 2007 (the "Maturity
Date"), if not sooner paid.
ARTICLE
I
INTEREST;
AMORTIZATION
1.1. Interest
Rate. Subject
to Section 4.7 hereof, interest payable on this Note shall accrue at a rate
per
annum (the "Interest Rate") of ten percent (10%). Interest on the Principal
Xxxxxx shall accrue from the date of this Note and shall be due
and
payable
beginning
at the start of the fourth (4th) month after issuance and be due and payable
on
the first of every month thereafter until the Note is paid in full. The
Holder
shall
have the option to accept payment
of
interest in shares of the Company’s common stock
(“Common
Stock”).
The
number of shares will be based on the “market value” of the Common
Stock.
The
Market Value will be determined by averaging the closing price of the Company’s
common stock for the ten (10) trading days, immediately prior to the
interest
payment date.
1.2
Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
provided
that such default is not cured within ten (10) days of notice of default,
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 sixteen
percent
(16%).
ARTICLE
II
CONVERSION
RIGHTS
2.1. Holder's
Conversion Rights.
Subject
to Section 2.2, 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 II 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 2.3.
2.2 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
2.2 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 2.2, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder
may
decide
whether to convert a Note or exercise Warrants to achieve an actual 4.99%
ownership position.
2.3. 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.
2.4. Conversion
Mechanics.
(a) The
number of shares of Common Stock to be issued upon each conversion of this
Note
pursuant to this Article II 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.
(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.
(c) Whenever
the Conversion Price is adjusted pursuant to Section 2.4(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.
2.5. Reservation.
During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than one
hundred
percent
(100%)
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.
2.6. 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
III
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:
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 five ten (10)
days
after the due date.
3.2 Breach
of Covenant.
The
Borrower breaches any material covenant or other term or condition of this
Note
or Transaction Documents in any material respect and such breach, if subject
to
cure, continues for a period of ten (10) days
after written notice to the Borrower from the Holder.
3.3 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.
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 $50,000 and shall remain unvacated, unbonded or unstayed for
a
period of forty-five (45) days
or in
any event later than five (5) days prior to the date of any proposed sale
thereunder.
3.6 Non-Payment.
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
$50,000 beyond any applicable grace period;
3.7 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.
3.8 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.
3.9 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.
| 3.10 |
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 if requested by Borrower,
a
replacement Note, and such failure continues for a period of five
(5)
business days after the due date.
|
| 3.11 |
Cross
Default.
An
Event of Default (as defined herein and in the Holder’s Warrants and
Registration Rights Agreement respectively) in any other Note or
Warrant
issued by the Company to the Holder pursuant to any other agreement
between the parties currently existing or in the future shall constitute
an Event of Default, where a ‘Cross Default’ means a default by the
Company of a material term, covenant, warranty or undertaking of
any of
the documents or other agreement to which the Company and Holder
are
parties, including but not limited to the Notes, the Common Stock
Purchase
Warrants, Warrant Amendments, Registration of Rights Agreement and
Royalty
Agreement 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
|
ARTICLE
IV
ADDITIONAL
CONSIDERATION
4.1 Common
Stock. As consideration for providing the loan evidenced by this Note the
Company shall issue to the Holder within five (5) business days from the date
of
closing 87,500 shares of its common stock.
4.2
Warrants. In addition to the common stock discussed in Section 4.1 the Company
shall issue the Holder 87,500 Common Stock Purchase Warrants (“Warrants”),
within seven (7) days of closing of this Agreement. The Warrants shall have
a
term of four (4) years and shall be exercisable of a price of $1.00 per share.
The Company shall also amend any and all warrants currently held by the holder,
within 15 days of closing so as to extend the exercise date by an additional
four (4) years and reset the exercise price of these warrants to $1.00 per
share.
4.3
Collateral.
The
Company or an affiliate/subsidiary of the Company shall pledge 500,000 shares
of
the Company’s common stock as collateral for the loan within five (5) business
days from the date of closing 87,500 shares of its common stock.
.
The
shares will be deposited and held in escrow by the Holder’s
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 upon
receipt.
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, each located in the County
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.
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 August, 2007.
| bioMETRX, Inc. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title: | ||
WITNESS:
______________________________________
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
August ____, 2007 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:_________________________________________________________________________
_________________________________________________________________________
