CONVERTIBLE NOTE
FOR
VALUE
RECEIVED, bioMETRX, Inc., a Delaware corporation (hereinafter called
"Borrower"), hereby promises to pay to _____________, with an address at
______________________ __________________________(the "Holder") or order,
without demand, the sum of _______________
________________________________________________
($_____________).
This
Note
is issued in lieu of the payment in cash of liquidated damages due to Holder
from Borrower for the period of July 14, 2006 through March 31, 2007 (the
“Liquidated Damages”), under the terms of the Subscription Agreement dated as of
June 29, 2006 between the Holder and the Borrower (the “Subscription
Agreement”). The Liquidated Damages shall be paid with shares of common stock
received upon conversion of this Note (the “Shares”), such that the Liquidated
Damages shall be deemed to be paid in full when this Note is fully converted.
The following terms shall apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
The
Holder shall have the right to convert the principal due under this Note into
Shares of the Borrower's Common Stock, $.001 par value per share (“Common
Stock”) as set forth below.
1.1. Conversion
into the Borrower's Common Stock.
(a) The
Holder shall have the right from and after the date of the issuance of this
Note
and then at any time until this Note is fully paid, to convert any outstanding
and unpaid principal portion of this Note, at the election of the Holder (the
date of giving of such notice of conversion being a "Conversion Date") into
fully paid and nonassessable shares of Common Stock as such stock exists on
the
date of issuance of this Note, or any shares of capital stock of Borrower into
which such Common Stock shall hereafter be changed or reclassified, at the
conversion price as defined in Section 1.1(b) hereof (the "Conversion Price"),
determined as provided herein. Upon delivery to the Borrower of a completed
Notice of Conversion, a form of which is annexed hereto, Borrower shall issue
and deliver to the Holder within three (3) business days from the Conversion
Date (such third day being the “Delivery Date”) that number of shares of Common
Stock for the portion of the Note converted in accordance with the foregoing.
The number of shares of Common Stock to be issued upon each conversion of this
Note shall be determined by dividing that portion of the principal of the Note
to be converted, by the Conversion Price.
(b) Subject
to adjustment as provided in Section 1.1(c) hereof, the Conversion Price per
share shall be $1.00.
(c)
The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion determined pursuant to Section 1.1(a), 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 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 that may be issued or outstanding, this Note, as to the unpaid
principal portion thereof 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. So long as this Note is outstanding, if the Borrower shall offer,
issue or agree to issue any shares of Common Stock for a consideration less
than
the Conversion Price in effect at the time of such issue, then, and thereafter
successively upon each such issue, the Conversion Price shall be automatically
reduced to such other lower issue price. For purposes of this adjustment, the
subsequent issuance of any security carrying the right to convert such security
into shares of Common Stock or of any warrant, right or option to purchase
Common Stock shall result in an adjustment to the Conversion Price upon the
issuance of the above-described security 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 Conversion Price described in this paragraph is in addition
to
other rights of the Holder described in this Note.
(d) Whenever
the Conversion Price is adjusted pursuant to Section 1.1(c) above, the Borrower
shall promptly mail or fax to the Holder a notice setting forth the Conversion
Price after such adjustment and setting forth a statement of the facts requiring
such adjustment (the “Adjustment Notice”). Notwithstanding the requirement of
the Borrower to send the Adjustment Notice, the adjusted Conversion Price shall
be effective immediately upon the issuance of Common Stock or securities
carrying the right to convert into or purchase common stock as described in
the
immediately preceding paragraph regardless of whether the Borrower complies
with
its requirement herein to send the Adjustment Notice.
(e) 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.
1.2 Method
of Conversion.
This
Note may be converted by the Holder in whole or in part as described in Section
1.1(a) hereof. Upon partial conversion of this Note, a new Note containing
the
same date and provisions of this Note shall, at the request of the Holder,
be
issued by the Borrower to the Holder for the principal balance of this Note
which shall not have been converted or paid.
2
1.3 Mandatory
Conversion.
Commencing after the actual effective date of the Registration Statement
described in Article 3 hereunder that includes the shares underlying this Note,
the Borrower will have the option by written notice to the Holder (“Notice of
Mandatory Conversion”) of compelling the Holder to convert all or a portion of
the outstanding and unpaid principal of the Note thereon, into Common Stock
at
the Conversion Price then in affect (“Mandatory Conversion”). The Notice of
Mandatory Conversion, which notice must be given on the first day following
a
consecutive ten (10) day trading period during which the closing price for
the
Company’s Common Stock as reported by Bloomberg, LP for the Principal Market
shall be more than $2.00 each day with an average daily volume in excess of
150,000 shares. The date the Notice of Mandatory Conversion is given is the
“Mandatory Conversion Date.” The Notice of Mandatory Conversion shall specify
the aggregate principal amount of the Note which is subject to Mandatory
Conversion. Mandatory Conversion Notices must be given proportionately to all
Holders of Notes who received Notes similar in term and tenure as this Note.
The
Borrower shall reduce the amount of Note principal subject to a Notice of
Mandatory Conversion by the amount of Note Principal for which the Holder had
delivered a Notice of Conversion to the Borrower during the twenty (20) trading
days preceding the Mandatory Conversion Date. Each Mandatory Conversion Date
shall be a deemed Conversion Date and the Borrower will be required to deliver
the Common Stock issuable pursuant to a Mandatory Conversion Notice in the
same
manner and time period as described in Section 1.2 above.
1.4 Maximum
Conversion.
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
2.3 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 2.3, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder may
allocate which of the equity of the Borrower deemed beneficially owned by the
Holder shall be included in the 4.99% amount described above and which shall
be
allocated to the excess above 4.99%.
ARTICLE
II
REGISTRATION
AND LIQUIDATED DAMAGES
2. Registration
Rights.
The
registration rights granted to the Holder pursuant to the Registration Rights
Agreement are hereby granted to the Holder in connection with the Shares.
3
ARTICLE
III
EVENT
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 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 or, if required, a replacement
Note.
3.2 Reservation
Default.
Failure
by the Borrower to have reserved for issuance upon conversion of the Note a
sufficient number of shares of Common Stock to permit the Holder to fully
convert this Note.
3.3 Failure
to Provide 144 Opinion. When Shares are eligible for sale under Rule 144 of
the
Securities Act of 1933 (“Rule 144”), failure by the Borrower’s counsel to
provide a legal opinion authorizing the removal of the restrictive legend from
such Shares and providing such opinion to the Borrower’s transfer agent in a
timely manner but in no event later than three (3) business days after receiving
notice of such sale.
ARTICLE
IV
MISCELLANEOUS
4.1 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.
4.2 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 (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Borrower to: 000
Xxxxx
Xxxxxxxx, Xxxxx 000, Xxxxxxx, XX 00000, and (ii) if to the Holder, to the name,
address and telecopy number set forth on the front page of this
Note.
4
4.3 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.
4.4 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.
4.5 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.
4.6 Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of New York. 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,
County of New York. Both parties and the individual signing this Agreement
on
behalf of the Borrower agree to submit to the jurisdiction of such courts.
The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs.
4..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.
4.8 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 all the rights
of a shareholder of the Borrower with respect to the shares of Common Stock
to
be received by Holder 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 ______, 2006
By:________________________________
Name:
Title:
WITNESS:
______________________________________
5
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 due on the
Note
issued by _______________________________ on December ___, 2006 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:______________________________________________________________________
Shares
To
Be
Delivered:_________________________________________________________________
Signature:____________________________________________________________________________
Print
Name:__________________________________________________________________________
Address:_____________________________________________________________________________
____________________________________________________________________________
