TAO MINERALS, LTD. Convertible Note Due Date: as set forth herein
Dated: April
4, 2008
NEITHER
THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
| No. 0001 |
$125,000
|
TAO
MINERALS, LTD.
Convertible
Note
Due
Date: as set forth herein
This Convertible Note (the “Note”) is issued by
Tao Minerals, Ltd.., a Nevada corporation
(the “Obligor”), to
Outboard Investments Ltd. (the “Holder”), pursuant to
that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”) dated April 4, 2008. Capitalized terms not
otherwise defined herein shall have the meaning ascribed thereto in the
Securities Purchase Agreement.
FOR VALUE RECEIVED, the
Obligor hereby promises to pay to the Holder or its successors and assigns the
principal sum of One Hundred and Twenty Five Thousand ($125,000)
together with accrued but unpaid interest on April 4, 2011 (the “Maturity Date”), in
accordance with the following terms:
Interest. Interest
shall accrue on the outstanding principal balance hereof at an annual rate equal
to ten percent (10%). Interest shall be calculated on the basis of a
360-day year and the actual number of days elapsed, to the extent permitted by
applicable law. Interest hereunder will be paid quarterly in arrears
to the Holder or its assignee (as defined in Section 5) in whose name this
Note is registered on the records of the Obligor regarding registration and
transfers of Notes (the “Note
Register”).
Right of
Redemption. The Obligor at its option shall have the right,
with three (3) business days advance written notice (the “Redemption Notice”),
to redeem a portion or all amounts outstanding under this Note prior to the
Maturity Date. The Obligor shall deliver to the Holder the Redemption
Amount on the third (3rd)
business day after the Redemption Notice.
Notwithstanding
the foregoing in the event that the Obligor has elected to redeem a portion of
the outstanding principal amount and accrued interest under this Note the Holder
shall be permitted to convert all or any portion of this Note during such three
business day period.
1
This Note is subject to the following
additional provisions:
Section
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration of transfer or
exchange.
Section
2. Events of
Default.
(a) An
“Event of
Default”, wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(i) Any
default in the payment of the principal of, interest on or other charges in
respect of this Note, free of any claim of subordination, as and when the same
shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise);
(ii) The
Obligor shall fail to observe or perform any other covenant, agreement or
warranty contained in, or otherwise commit any breach or default of any
provision of this Note (except as may be covered by Section 2(a)(i) hereof) or
any Transaction Document (as defined in Section 5) which is not cured
with in the time prescribed, including without limitation Obligor’s obligation
to timely deliver shares of Common Stock upon conversion of this Note and
exercise of the Warrant;
(iii) The
Obligor or any subsidiary of the Obligor shall commence, or there shall be
commenced against the Obligor or any subsidiary of the Obligor under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Obligor or any subsidiary of the Obligor commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Obligor or any
subsidiary of the Obligor or there is commenced against the Obligor or any
subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 61 days; or the Obligor or any
subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or the
Obligor or any subsidiary of the Obligor suffers any appointment of any
custodian, private or court appointed receiver or the like for it or any
substantial part of its property which continues undischarged or unstayed for a
period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
makes a general assignment for the benefit of creditors; or the Obligor or any
subsidiary of the Obligor shall fail to pay, or shall state that it is unable to
pay, or shall be unable to pay, its debts generally as they become due; or the
Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its
debts; or the Obligor or any subsidiary of the Obligor shall by any act or
failure to act expressly indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Obligor
or any subsidiary of the Obligor for the purpose of effecting any of the
foregoing;
2
(iv) The
Obligor or any subsidiary of the Obligor shall default in any of its obligations
under any other Note or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced any indebtedness
for borrowed money or money due under any long term leasing or factoring
arrangement of the Obligor or any subsidiary of the Obligor in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
(v) The
Obligor or any subsidiary of the Obligor shall be a party to any Change of
Control Transaction (as defined in Section 5);
(vi) The
Obligor shall fail for any reason to deliver Common Stock certificates to a
Holder prior to the fifth (5th)
Trading Day after a Conversion Date or the Obligor shall provide notice to the
Holder, including by way of public announcement, at any time, of its intention
not to comply with requests for conversions of this Note in accordance with the
terms hereof; and
(b) During
the time that any portion of this Note is outstanding, if any Event of Default
has occurred and shall continue for a period of ten (10) days after a notice of
such default has been delivered by the Holder to the Obligor (the “Notice Period”), the
full principal amount of this Note, together with interest and other amounts
owing in respect thereof, to the date of acceleration shall become at the
Holder's election, immediately due and payable in cash, provided however, the Holder
may request (but shall have no obligation to request) payment of such amounts in
Common Stock of the Obligor. In addition to any other remedies, the
Holder shall have the right (but not the obligation) to convert this Note at any
time after (x) an Event of Default or (y) the Maturity Date at the Conversion
Price then in-effect. The Holder need not provide and the Obligor
hereby waives any presentment, demand, protest or other notice of any kind, and
the Holder may immediately and without expiration of any grace period (other
than the Notice Period) enforce any and all of its rights and remedies hereunder
and all other remedies available to it under applicable law. Such declaration
may be rescinded and annulled by Xxxxxx at any time prior to payment hereunder.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon
Section
3. Conversion.
(a) Conversion at Option of
Holder.
(i) This
Note shall be convertible into shares of Common Stock at the option of the
Holder, in whole or in part at any time and from time to time, after the
Original Issue Date (as defined in Section 5) (subject to the
limitations on conversion set forth in Section 3(b) hereof). The
number of shares of Common Stock issuable upon a conversion hereunder equals the
quotient obtained by dividing (x) the outstanding amount of this Note to be
converted by (y) the Conversion Price (as defined in Section
3(b)(i)). The Obligor shall deliver Common Stock certificates
to the Holder prior to the Fifth (5th)
Trading Day after a Conversion Date.
(ii) Notwithstanding
anything to the contrary contained herein, if on any Conversion
Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in shares of Common
Stock; (2) the Common Stock is not listed or quoted for trading on the OTC or on
a Subsequent Market; or (3) the Obligor has failed to timely satisfy its
conversion, and the Obligor is unable to remedy any of the foregoing within 20
business days, then, at the option of the Holder, the Obligor, in
lieu of delivering shares of Common Stock pursuant to Section 3(a)(i), shall
deliver, within three (3) Trading Days of each applicable Conversion Date, an
amount in cash equal to the product of the outstanding principal amount to be
converted plus any interest due therein divided by the Conversion Price, chosen
by the Holder, and multiplied by the average closing price of the
stock from date of the conversion notice till the date that such cash payment is
made.
3
Further,
if the Obligor shall not have delivered any cash due in respect of conversion of
this Note or as payment of interest thereon by the fifth (5th)
Trading Day after the Conversion Date, the Holder may, by notice to the Obligor,
require the Obligor to issue shares of Common Stock pursuant to Section 3(c), except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of
such Holder demand. Any such shares will be subject to the provisions of this
Section.
(iii) The
Holder shall effect conversions by delivering to the Obligor a completed notice
in the form attached hereto as Exhibit A (a “Conversion
Notice”). The date on which a Conversion Notice is delivered
is the “Conversion
Date.” Unless the Holder is converting the entire principal amount
outstanding under this Note, the Holder is not required to physically surrender
this Note to the Obligor in order to effect conversions. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of
this Note plus all accrued and unpaid interest thereon in an amount equal to the
applicable conversion. The Holder and the Obligor shall maintain records showing
the principal amount converted and the date of such conversions. In the event of
any dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
(b) Certain Conversion
Restrictions.
(i) The
Holder may not convert this Note or receive shares of Common Stock as payment of
interest hereunder to the extent such conversion or receipt of such interest
payment would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules promulgated thereunder) in excess of 4.9% of the then
issued and outstanding shares of Common Stock, including shares issuable upon
conversion of, and payment of interest on, this Debenture held by such Holder
after application of this Section. Since the Holder will not be
obligated to report to the Obligor the number of shares of Common Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 4.9% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular 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 principal amount of this
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a
principal amount of this Debenture that, without regard to any other shares that
the Holder or its affiliates may beneficially own, would result in the issuance
in excess of the permitted amount hereunder, the Obligor shall notify the Holder
of this fact and shall honor the conversion for the maximum principal amount
permitted to be converted on such Conversion Date in accordance with the periods
described in Section
3(a)(i) and, at the option of the Holder, either retain any principal
amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder by
issuing to the Holder a new debenture representing such excess principal
amount. The provisions of this Section may be waived by a Holder (but
only as to itself and not to any other Holder) upon not less than 65 days prior
notice to the Obligor. Other Holders shall be unaffected by any such
waiver.
4
(c) Conversion Price and
Adjustments to Conversion Price.
(i) The
Holder shall be entitled to convert, at its sole option, at any time a portion
or all amounts of principal and interest due and outstanding under this Note
into shares of the Obligor’s Common Stock at a price equal to fifty (50%)
percent of the of the average of the volume weighted average price of the shares
of the Obligor’s common Stock during the five trading days immediately preceding
the Conversion Date as quoted by Bloomberg, LP (the “Conversion
Price”). The Conversion Price may be adjusted pursuant to the
other terms of this Note.
(ii) If
the Obligor, at any time while this Note is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares of
its Common Stock or any other equity or equity equivalent securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a
larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Obligor, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If
the Obligor, at any time while this Note is outstanding, shall issue rights,
options or warrants to all holders of Common Stock (and not to the Holder)
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the Conversion Price, then the Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of shares
of the Common Stock (excluding treasury shares, if any) outstanding on the date
of issuance of such rights or warrants (plus the number of additional shares of
Common Stock offered for subscription or purchase), and of which the numerator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants, plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at the Conversion Price. Such adjustment shall
be made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights, options or warrants. However, upon the expiration of any
such right, option or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Conversion Price pursuant to
this Section, if any such right, option or warrant shall expire and shall not
have been exercised, the Conversion Price shall immediately upon such expiration
be recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.
5
(iv) Except
in the case of an Exempt Issuance (as such term is defined in the Securities
Purchase Agreement), if the Obligor or any subsidiary thereof, as applicable, at
any time while this Note is outstanding, shall issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock (“Common Stock
Equivalents”) entitling any Person to acquire shares of Common Stock, at
a price per share less than the Conversion Price (if the holder of the Common
Stock or Common Stock Equivalent so issued shall at any time, whether by
operation of purchase price adjustments, reset provisions, floating conversion,
exercise or exchange prices or otherwise, or due to warrants, options or rights
per share which is issued in connection with such issuance, be entitled to
receive shares of Common Stock at a price per share which is less than the
Conversion Price, such issuance shall be deemed to have occurred for less than
the Conversion Price), then, at the sole option of the Holder, the Conversion
Price shall be reduced to the price (calculated to the nearest one hundredth of
a cent) determined by multiplying the Conversion Price in effect immediately
prior thereto by a fraction, the numerator of which shall be the sum of (i) the
number of shares of Common Stock outstanding immediately prior to such issuance,
and (ii) the number of shares of Common Stock which the aggregate consideration
received (or to be received, assuming exercise or conversion in full of such
rights, warrants and convertible securities) for the issuance of such additional
shares of Common Stock would purchase at the Conversion Price, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an
issuance is made. The Obligor shall notify the Holder in writing, no
later than three (3) business days following the issuance of any Common Stock or
Common Stock Equivalent subject to this Section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section shall
be made as a result of issuances and exercises of options to purchase shares of
Common Stock issued for compensatory purposes pursuant to any of the Obligor's
stock option or stock purchase plans.
(v) If
the Obligor, at any time while this Note is outstanding, shall distribute to all
holders of Common Stock (and not to the Holder) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security, then in
each such case the Conversion Price at which this Note shall thereafter be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Closing Bid Price determined as of the record date mentioned above,
and of which the numerator shall be such Closing Bid Price on such record date
less the then fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith.
In either case the adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so distributed or
such subscription rights applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
6
(vi) In
case of any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities
of the Company, cash or property, the Holder shall have the right thereafter to,
at its option, (A) convert the then outstanding principal amount,
together with all accrued but unpaid interest and any other amounts then owing
hereunder in respect of this Note into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of the Common
Stock following such reclassification or share exchange, and the Holder of this
Note shall be entitled upon such event to receive such amount of securities,
cash or property as the shares of the Common Stock of the Obligor into which the
then outstanding principal amount, together with all accrued but unpaid interest
and any other amounts then owing hereunder in respect of this Note could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Obligor to prepay the outstanding
principal amount of this Note, plus all interest and other amounts due and
payable thereon. The entire prepayment price shall be paid in
cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
(vii) The
Obligor shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock issuable upon conversion
of all outstanding amounts under this Note; and within three (3) Business Days
following the receipt by the Obligor of a Holder's notice that such minimum
number of Underlying Shares is not so reserved, the Obligor shall promptly
reserve a sufficient number of shares of Common Stock to comply with such
requirement.
(viii) All
calculations under this Section 3 shall be rounded up
to the nearest $0.001 or whole share.
(ix) Whenever
the Conversion Price is adjusted pursuant to Section 3 hereof, the Obligor
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(x) If
(A) the Obligor shall declare a dividend (or any other distribution) on the
Common Stock; (B) the Obligor shall declare a special nonrecurring cash dividend
on or a redemption of the Common Stock; (C) the Obligor shall authorize the
granting to all holders of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Obligor shall be required in connection with
any reclassification of the Common Stock, any consolidation or merger to which
the Obligor is a party, any sale or transfer of all or substantially all of the
assets of the Obligor, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property; or (E) the Obligor shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of the Obligor; then, in each case, the Obligor shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Note, and shall cause to be mailed to the Holder at its last address as it shall
appear upon the stock books of the Obligor, at least twenty (20) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice. The Holder is entitled to convert this Note during
the 20-day calendar period commencing the date of such notice to the effective
date of the event triggering such notice.
7
(xi) In
case of any (1) merger or consolidation of the Obligor or any subsidiary of the
Obligor with or into another Person, or (2) sale by the Obligor or any
subsidiary of the Obligor of more than one-half of the assets of the Obligor in
one or a series of related transactions, a Holder shall have the right to
exercise any rights under Section 2(b), if Obligor
fails, at the option of the Holder, (A) to permit the Holder to convert the
aggregate amount of this Note then outstanding into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale, and such
Holder shall not be entitled upon such event or series of related events to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of this Note could have been
converted immediately prior to such merger, consolidation or sales would have
been entitled, or (B) in the case of a merger or consolidation, to require the
surviving entity to issue to the Holder a convertible Note with a principal
amount equal to the aggregate principal amount of this Note then held by such
Holder, plus all accrued and unpaid interest and other amounts owing thereon,
which such newly issued convertible Note shall have terms identical (including
with respect to conversion) to the terms of this Note, and shall be entitled to
all of the rights and privileges of the Holder of this Note set forth herein and
the agreements pursuant to which this Notes were issued. In the case
of clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible Notes shall be based upon the amount
of securities, cash and property that each share of Common Stock would receive
in such transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(xii) Notwithstanding
anything to the contrary herein, no adjustment shall be made hereunder in
connection with an Exempt Adjustment.
(d) Other
Provisions.
(i) The
Obligor covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of
issuance upon conversion of this Note and payment of interest on this Note, each
as herein provided, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder, not less than such number of
shares of the Common Stock as shall (subject to any additional requirements of
the Obligor as to reservation of such shares set forth in this Note) be issuable
(taking into account the adjustments and restrictions of Sections 2(b) and 3(c)) upon
the conversion of the outstanding principal amount of this Note and payment of
interest hereunder. The Obligor covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly and validly authorized, issued
and fully paid.
8
(ii) The
issuance of certificates for shares of the Common Stock on conversion of this
Note shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issue or delivery
of such certificate, provided that the Obligor shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and
delivery of any such certificate upon conversion in a name other than that of
the Holder of such Note so converted and the Obligor shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Obligor the amount of
such tax or shall have established to the satisfaction of the Obligor that such
tax has been paid.
(iii) Nothing
herein shall limit a Holder's right to pursue actual damages or declare an Event
of Default pursuant to Section
2 herein for the Obligor 's failure to deliver certificates representing
shares of Common Stock upon conversion within the period specified herein and
such Holder shall have the right to pursue all remedies available to it at law
or in equity including, without limitation, a decree of specific performance
and/or injunctive relief, in each case without the need to post a bond or
provide other security. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other Section hereof or
under applicable law.
Section
4. Notices. Any
notices, consents, waivers or other communications required or permitted to be
given under the terms hereof must be in writing and will be deemed to have been
delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one (1) trading day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
|
If
to the Company, to:
|
Tao
Minerals, Ltd.
|
|
Officina
624, Empresarial Mall Ventura, Cra.32#1B
|
|
|
Sur
51, Medellin, Columbia
|
|
|
Attention: Xxxxx
X. Xxxxxx, Chief Executive Officer
|
|
|
Telephone: ____________________
|
|
|
Facsimile: ____________________
|
|
|
If
to the Holder:
|
Xxxx
X. X’Xxxxx
|
|
Outboard
Investments Ltd.
|
|
|
BCM
Cape Building
Leeward
Highway Providenciales
Turks
and Caicos, BWI
Telephone:
__________________
Facsimile:
___________________
|
9
or at
such other address and/or facsimile number and/or to the attention of such other
person as the recipient party has specified by written notice given to each
other party three (3) business days prior to the effectiveness of such
change. Written confirmation of receipt (i) given by the recipient of
such notice, consent, waiver or other communication, (ii) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (iii) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section
5. Definitions. For
the purposes hereof, the following terms shall have the following
meanings:
“Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions are
authorized or required by law or other government action to close.
“Change of Control
Transaction” means the occurrence of (a) an acquisition after the date
hereof by an individual or legal entity or “group” (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Obligor, by
contract or otherwise) of in excess of fifty percent (50%) of the voting
securities of the Obligor (except that the acquisition of voting securities by
the Holder shall not constitute a Change of Control Transaction for purposes
hereof), (b) a replacement at one time or over time of more than one-half of the
members of the board of directors of the Obligor which is not approved by a
majority of those individuals who are members of the board of directors on the
date hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of
the assets of the Obligor or any subsidiary of the Obligor in one or a series of
related transactions with or into another entity, or (d) the execution by the
Obligor of an agreement to which the Obligor is a party or by which it is bound,
providing for any of the events set forth above in (a), (b) or (c).
“Closing Bid Price”
means the price per share in the last reported trade of the Common Stock on the
OTC or on the exchange which the Common Stock is then listed as quoted by
Bloomberg, LP.
“Common Stock” means
the common stock, par value $0.001, of the Obligor and stock of any other class
into which such shares may hereafter be changed or reclassified.
“Conversion Date”
shall mean the date upon which the Holder gives the Obligor notice of their
intention to effectuate a conversion of this Note into shares of the Company’s
Common Stock as outlined herein.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Original Issue Date”
shall mean the date of the first issuance of this Note regardless of the number
of transfers and regardless of the number of instruments, which may be issued to
evidence such Note.
“Person” means a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading Day” means a
day on which the shares of Common Stock are quoted on the OTC or quoted or
traded on such Subsequent Market on which the shares of Common Stock are then
quoted or listed; provided, that in the event that the shares of Common Stock
are not listed or quoted, then Trading Day shall mean a Business
Day.
“Transaction
Documents” means the Securities Purchase Agreement or any other agreement
delivered in connection with the Securities Purchase Agreement, including,
without limitation, the Registration Rights Agreement and Warrants of even date
herewith.
10
“Underlying Shares”
means the shares of Common Stock issuable upon conversion of this Note or as
payment of interest in accordance with the terms hereof.
Section
6. Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligations of the Obligor, which are absolute and unconditional, to pay the
principal of, interest and other charges (if any) on, this Note at the time,
place, and rate, and in the coin or currency, herein prescribed. This
Note is a direct obligation of the Obligor. This Note ranks pari passu with all
other Notes now or hereafter issued under the terms set forth herein.
As long as this Note is outstanding, the Obligor shall not and shall cause their
subsidiaries not to, without the consent of the Holder (which shall not be
unreasonably withheld), (i) amend its certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the Holder; (ii)
repay, repurchase or offer to repay, repurchase or otherwise acquire shares of
its Common Stock or other equity securities other than as to the Underlying
Shares to the extent permitted or required under the Securities Purchase
Agreement; or (iii) enter into any agreement with respect to any of the
foregoing.
Section
7. This
Note shall not entitle the Holder to any of the rights of a stockholder of the
Obligor, including without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
stockholders or any other proceedings of the Obligor, unless and to the extent
converted into shares of Common Stock in accordance with the terms
hereof.
Section
8. If
this Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a
new Note for the principal amount of this Note so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Note, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Obligor.
Section
9. No
indebtedness of the Obligor is senior to this Note in right of payment, whether
with respect to interest, damages or upon liquidation or dissolution or
otherwise. Without the Holder’s consent, the Obligor will not and
will not permit any of their subsidiaries to, directly or indirectly, enter
into, create, incur, assume or suffer to exist any indebtedness of any kind, on
or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits there from that is senior in
any respect to the obligations of the Obligor under this Note.
Section
10. This
Note shall be governed by and construed in accordance with the laws of the State
of New York, without giving effect to conflicts of laws thereof. Each
of the parties consents to the jurisdiction of the Courts of the State of New
York sitting in New York County, New York and the U.S. District Court for
the Southern District of New York in connection with any dispute arising under
this Note and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens to the
bringing of any such proceeding in such jurisdictions.
Section
11. If
the Obligor fails to comply with the terms of this Note, then the Obligor shall
reimburse the Holder promptly for all fees, costs and expenses, including,
without limitation, attorneys’ fees and expenses incurred by the Holder in any
action in connection with this Note, including, without limitation, those
incurred: (i) during any workout, attempted workout, and/or in connection with
the rendering of legal advice as to the Holder’s rights, remedies and
obligations, (ii) collecting any sums which become due to the Holder, (iii)
defending or prosecuting any proceeding or any counterclaim to any proceeding or
appeal; or (iv) the protection, preservation or enforcement of any rights or
remedies of the Holder.
Section
12. Any
waiver by the Holder of a breach of any provision of this Note shall not operate
as or be construed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Note. The failure of the Holder to
insist upon strict adherence to any term of this Note on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this Note. Any
waiver must be in writing.
11
Section
13. If
any provision of this Note is invalid, illegal or unenforceable, the balance of
this Note shall remain in effect, and if any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Obligor covenants
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would prohibit or
forgive the Obligor from paying all or any portion of the principal of or
interest on this Note as contemplated herein, wherever enacted, now or at any
time hereafter in force, or which may affect the covenants or the performance of
this indenture, and the Obligor (to the extent it may lawfully do so) hereby
expressly waives all benefits or advantage of any such law, and covenants that
it will not, by resort to any such law, hinder, delay or impeded the execution
of any power herein granted to the Holder, but will suffer and permit the
execution of every such as though no such law has been enacted.
Section
14. Whenever
any payment or other obligation hereunder shall be due on a day other than a
Business Day, such payment shall be made on the next succeeding Business
Day.
Section
15. THE
PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.
[REMAINDER
OF PAGE INTENTIONLLY LEFT BLANK]
IN WITNESS WHEREOF, the
Obligor has caused this Convertible Note to be duly executed by a duly
authorized officer as of the date set forth above.
|
By:/s/ Xxxxx X
Xxxxxx
|
|
|
Name: Xxxxx
X. Xxxxxx
|
|
|
Title:
President
|
12
EXHIBIT
“A”
NOTICE OF
CONVERSION
(To
be executed by the Holder in order to convert the Note)
|
TO:
|
The
undersigned hereby irrevocably elects to convert $ of the principal amount of
the above Note into Shares of Common Stock of Sub-Urban Industries, Inc.,
according to the conditions stated therein, as of the Conversion Date written
below.
|
Conversion
Date:
|
||
|
Applicable
Conversion Price:
|
||
|
Signature:
|
||
|
Name:
|
||
|
Address:
|
||
|
Amount
to be converted:
|
$
|
|
|
Amount
of Note unconverted:
|
$
|
|
|
Conversion
Price per share:
|
$
|
|
|
Number
of shares of Common Stock to be issued:
|
||
|
Please
issue the shares of Common Stock in the following name and to the
following address:
|
||
|
Issue
to:
|
||
|
Authorized
Signature:
|
||
|
Name:
|
||
|
Title:
|
||
|
Phone
Number:
|
||
|
Broker
DTC Participant Code:
|
||
|
Account
Number:
|
13
