THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER
APPLICABLE SECURITIES LAWS AND MAY NOT BE TRANSFERRED ABSENT REGISTRATION
THEREUNDER OR AN APPLICABLE EXEMPTION THEREFROM.
MAGNITUDE INFORMATION SYSTEMS, INC.
10% BRIDGE LOAN NOTE
DUE APRIL 24, 2007
$50,000.00 Branchburg, New Jersey
January 24, 2006
Magnitude Information Systems, Inc., a Delaware corporation (the
"Company"), for value received hereby promises to pay to _____________,
("Holder"), the principal sum of FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00)
on April 24, 2007, 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 at the rate of 1% per month on the principal
amount of $50,000.00, accruing from January 24, 2007, or so much thereof as
shall be outstanding at maturity, plus an origination fee of $5,000.00 and a
grant of shares, in accordance with Section 3 below, also due at maturity.
Events of Default.
In case one or more of the following "Events of Default" shall have
occurred and be continuing:
default in the due and punctual payment of the principal, the accrued interest
and origination fee due under this Note upon maturity; or
a decree or order by a court shall have been entered adjudging the Company a
bankrupt or insolvent, or appointing a receiver or trustee for the affairs or
assets of the Company, and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or
the Company shall institute proceedings to be adjudicated a voluntary bankrupt,
or shall consent to the filing of any such petition or to the appointment of a
receiver or trustee or shall make an assignment for the benefit of creditors.
Except in the cases under 1(b) or 1(c), if, for whatsoever reason, the Company
fails to pay all of the principal, accrued interests and origination fee upon
maturity, this Note and the payment obligations hereunder shall be automatically
extended for an additional 90 days and the Company shall issue five hundred
thousand (500,000) shares of its common stock to the Holder as a penalty (the
"penalty shares"), subject, however, to postponement as provided in Section 2(c)
below.
2. Stock Grant and Convertibility.
(a) The Company, as partial consideration for the loan upon which
this Note is based, shall deliver to the Holder a stock grant of five hundred
thousand (500,000) shares of the common stock of the Company at the maturity
date.
(b) The Holder hereof shall have the option to convert part or all
of the outstanding principal balance, accrued interest and origination fee into
shares of the common stock of the Company at maturity at a conversion rate that
is the lower of (i) $.05 per share, or (ii) the investment rate utilized in any
private placement consummated anytime following the date of this Note and
continuing until maturity.
(c) The issuance of the stock grant at maturity, (a) above, the
issuance of any shares pursuant to the exercise by the Holder of his election to
convert at maturity , (b) above, and the issuance of the penalty shares at
maturity shall not be made at the time of maturity if the Company has a public
offering in registration with the Securities and Exchange Commission under the
Securities Act, in which event the stock grant, the issuance of any shares
through the exercise of the Holder's right of conversion and the issuance of the
penalty shares shall be postponed until the 31st day following the date the
subject registration statement has been declared effective or withdrawn.
3. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New Jersey, without regard to the conflicts of
laws principles thereof. Venue for any action pursuant hereto shall be in the
appropriate state or federal court in New Jersey.
4. Miscellaneous
(a) Prior to due presentment for registration of transfer of this
Note, the Company may deem and treat the registered holder hereof as the
absolute owner of the Note (whether or not the Note shall be overdue and
notwithstanding any notes of ownership or writing hereof made by anyone other
than the Company), for the purpose of receiving payment of or on account of the
principal hereof (and premium, if any) and interest hereon, for the conversion
hereof and for all other purposes, and the Company shall not be affected by any
notice to the contrary. All such payments or conversions shall be valid and
effectual to satisfy and discharge the liability upon the Note to the extent of
the sum or sums so paid, or the conversions so made.
(b) No recourse shall be had for the payment of the principal of (or
premiums, if any) or the interest on the Note, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, stockholder, officer or
director, as such, past, present or future, of the Company or of any successor
corporation, either directly or through the Company or otherwise, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment, or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
MAGNITUDE INFORMATION SYSTEMS, INC.
BY:
----------------------------
Xxxxxx Xxxxxx, President and
Chief Executive Office
