Contract

Exhibit 4.1

THIS NOTE AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED 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 OR AN OPINION OF COUNSEL SATISFACTORY TO THE MAKER THAT SUCH REGISTRATION IS NOT REQUIRED.

XXXXXXX’S MARINE GROUP, INC.

8% Convertible Promissory Note

$ September 3, 2021

The Convertible Note (this “Note”) has been issued in accordance with exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Agreement and Plan of Merger and Reorganization, dated as of even date herewith (the “Merger Agreement”), among Brownie’s Marine Group, Inc., a Florida corporation (the “Maker”), Submersible Acquisition, Inc., a Florida corporation and wholly-owned subsidiary of the Maker, Submersible Systems, Inc., a Florida corporation (the “Company”) and the shareholders of Submersible Systems, Inc. This Note is one of two (2) convertible notes issued pursuant to the Merger Agreement (the other note, the “Other Convertible Note”). Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Merger Agreement.

Section 1. Principal and Interest. FOR VALUE RECEIVED, the Maker promises to pay to ______________________________, a Florida limited liability company (the “Holder”), on September 3, 2024 (the “Maturity Date”) the principal sum of ________________________ 00/100 Dollars ($_________), together with accrued and unpaid interest thereon at the rate of eight percent (8%) per annum (computed on the basis of a 365-day year and the actual days elapsed).

Notwithstanding anything contained herein to the contrary, within thirty days after each quarter commencing on the first full quarter after the Closing Date ending on December 31, 2021, the Maker shall pay the Holder, as a reduction of the outstanding principal amount hereunder, an amount equal to half (50%) of the operating income of the Surviving Corporation. For purposes of this Note, operating income shall be defined as net income before interest, taxes, depreciation, and amortization (but expressly excluding any overhead cost allocation applied to Submersible Systems, Inc.) by the Maker.

Interest at the rate of eight percent (8%) per annum (computed on the basis of a 365-day year and the actual days elapsed) shall be paid at the end of each three-month period commencing September 30, 2021 in shares of Common Stock of the Maker. The number of shares to be issued to Holder shall be based on the amount of interest due on said date divided by the VWAP for the 180 days prior to (i) the date the parties’ binding term sheet for the Merger is executed and delivered or (ii) the Closing Date of the Merger Agreement, whichever results in a lower VWAP (the “Conversion Rate”). The shares issued by Maker in lieu of cash payments representing interest on this Note shall hereinafter be referred to as “Interest Shares.”

All payments due hereunder shall be made in lawful money of the United States.

Section 2. Paying Agent and Registrar. Initially, the Maker shall act as paying agent and registrar. The Maker may change any paying agent or registrar by giving the Holder not less than five (5) business days’ written notice of its election to do so, specifying the name, address, telephone number and facsimile number of the paying agent or registrar.

Section 3. Prepayment. The principal hereunder and any and all interest accrued thereon may be prepaid by the Maker in whole or in part at any time without premium or penalty.

Section 4. Conversion. At the election of the Holder given at any time prior to the Maturity Date, the principal amount of, together with accrued interest on, this Note may be convertible, in whole or in part, into shares of common stock, par value $0.0001 per share, of the Maker, (the “Common Stock”) at the Conversion Rate of principal and/or interest so converted (the “Conversion Shares”). Upon delivery to the Maker of a completed Notice of Conversion, in the form attached hereto, Maker shall issue and deliver to the Holder as promptly as practicable after receipt of such Notice of Conversion that number of Conversion Shares for the portion of this Note converted in accordance with the foregoing. The Holder shall not have rights as a shareholder of Maker with respect to unconverted portions of this Note. However, the Holder will have all the rights of a shareholder of Maker with respect to the Conversion Shares when issued.

Section 5. Adjustment of Number of Shares Issuable Upon Conversion. In the event that Maker shall, after the date of issuance of this Note: (i) pay a stock dividend or make a distribution in shares of its capital stock (whether shares of its Common Stock or of capital stock of any other class); (ii) subdivide its outstanding shares of Common Stock; (iii) combine its outstanding shares of Common Stock into a smaller number of shares; or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, the number of shares issuable upon conversion of this Note shall be adjusted so that the Holder shall be entitled to receive the number of shares of capital stock of the Maker which the Holder would have owned immediately following such action had this Note been converted immediately prior thereto, and the number of shares issuable upon conversion of this Note shall thereafter be subject to further adjustment pursuant to this Section 5. An adjustment made pursuant to this Section 5 shall become effective retroactively immediately after the record date in the case of a dividend or distribution and shall become effective immediately upon the effective date in the case of a subdivision, combination or reclassification. If there occurs any reorganization, recapitalization, reclassification, merger, or statutory conversion to another form of business entity involving the Maker in which the Common Stock is converted into or exchanged for other securities (other than a transaction covered in the first sentence of this Section 5), then the Holder will receive upon conversion of this Note, in lieu of the Conversion Shares immediately theretofore issuable upon conversion of this Note, at the aggregate Conversion Rate in effect prior thereto, the kind and amount of other securities receivable upon such reorganization, recapitalization, reclassification, merger, or statutory conversion to another form of business entity, by the holders of the number of Conversion Shares for which this Note could have been converted immediately prior to such reorganization, recapitalization, reclassification, merger, or statutory conversion to another form of business entity.

Section 6. Reservation of Shares. Maker shall reserve and keep available out of its authorized common stock that number of shares equal to the number of Conversion Shares and Interest Shares issuable upon conversion of all outstanding amounts under this Note.

Section 7. Offset. The principal amount due under this Note shall be reduced, pro rata with the principal amounts due under the Other Convertible Note issued in connection herewith, by the amount of Damages, if any, to the Purchaser Indemnified Parties under Section 6.2 of the Merger Agreement, but only if and to the extent that the Holder’s liability for indemnification under Article VI of the Merger Agreement and the amount of the Damages incurred by the Purchaser Indemnified Parties for which the Holder is so liable thereunder have been (x) agreed to in writing by the Holder or (y) determined by a final, non-appealable judgment of a court of competent jurisdiction binding on the Holder. In addition, the principal amount due under this Note shall be reduced, pro rata with the principal amount due under the Other Convertible Note issued in connection herewith, by an amount equal to any non-operational deterioration to the Company’s cash balances in any form, including, without limitation, distributions, payroll, payments of any kind to the Company’s Members or non-employees of the Company, or payments of payroll to the Company’s employees inconsistent with that of average prior periods, and such amount will be deducted dollar-for-dollar from the principal amount of due under this Note, and the principal amount due under the Other Convertible Note issued in connection herewith, on a pro-rata basis, without limitation.

Section 8. Leak-Out. The Holder further agrees not to lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly (each a “Transfer”), any Conversion Shares or any Interest Shares, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any such shares, whether any such transaction is to be settled by delivery of securities, in cash or otherwise, except as follows:

(a) Up to twelve-and-a-half percent (12.5%) of the Consideration Shares, the Conversion Shares and Interest Shares (collectively, the “Shares”) and may be Transferred after a holding period of six (6) months after the Closing Date;

(b) Up to twenty-five percent (25%) of the Shares may be sold after a holding period of nine (9) months after the Closing Date;

(c) Up to seventy-five percent (75%) of the Shares may be sold after a holding period of twenty-four (24) months after the Closing Date; and

(d) Up to one hundred percent (100%) of the shares may be sold after a holding period of thirty-six (36) months after the Closing Date.

Notwithstanding the foregoing, the foregoing provision may be waived by the Maker, upon written request by the Holder, if the securities of the Maker is trading on either the NYSE American or Nasdaq, and has a rolling 30-day average trading volume of 50,000 shares per day; provided, however, that (i) only up to five percent (5%) of the previous days total volume can be sold in one day by the Holder; and (ii) the Holder can only sell through executing trades “On the Offer.”

Section 9. Events of Default. An Event of Default is defined as follows: (i) failure by the Maker to pay interest and/or principal under the Note when due, which failure shall continue unremedied for fifteen (15) or more days after notice of such failure has been given to the Maker; or (ii) if the Maker files for relief under the United States Bankruptcy Code (the “Bankruptcy Code”) or under any other state or federal bankruptcy or insolvency law, or files an assignment for the benefit of creditors, or if an involuntary proceeding under the Bankruptcy Code or under any other federal or state bankruptcy or insolvency law is commenced against the Maker, and has not been resolved in a period of thirty (30) days after such commencement.

Upon the occurrence of an Event of Default, the entire indebtedness with accrued interest thereon due under this Note shall, at the option of the Holder, become immediately due and payable.

Section 10. Representations.

(a) The Holder represents that it is acquiring this Note for its own account as principal, not as a nominee or agent, for investment purposes only, and not with a view to, or for, resale, distribution or fractionalization thereof, in whole or in part, and no other Person has a direct or indirect beneficial interest in this Note or any portion thereof. The Holder represents that it does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participation rights to such Person or to any third party with respect to this Note.

(b) The Maker represents that the Holder has been granted piggyback registration rights with respect to the Conversion Shares and Interest Shares, as set forth in Section 5.9 of the Merger Agreement.

(c) The Maker represents that, upon issuance, all of the Conversion Shares and Interest Shares shall be duly authorized, validly issued, fully paid and nonassessable, and not issued in violation of any preemptive or similar rights. The Maker represents that, upon delivery to the Holder of the certificates representing the Conversion Shares and the Interest Shares, the Holder will acquire good and valid title to such Conversion Shares and Interest Shares, free and clear of any Encumbrances, other than restrictions under applicable securities laws.

Section 11. Notice. All notices or other communications required or permitted hereunder shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be deemed duly given (a) if by personal delivery, when so delivered, (b) if mailed, three (3) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid and addressed to the intended recipient as set forth below, or (c) if sent through an overnight delivery service in circumstances to which such service guarantees next day delivery, the day following being so sent:

(a) If to the Maker:

Brownie’s Marine Group, Inc.

0000 XX 00xx Xxxxxx, Xxxxx 0

Pompano Beach, Florida 33069

Attn: Xxxxxxxxxxx Xxxxxxxxx

Copy to:

The Xxxxx Law Group, P.C.

000 Xxxxx Xxxxxx, Xxxxx 000

New York, New York 10110

Attn: Xxxx Xxxxxxxxx, Esq.

(b) If to the Holder:

Copy to:

Any party may change the address to which notices and other communications hereunder are to be delivered by giving the other parties notice in the manner herein set forth.

Section 12. Rank; Subordination. All payments due under this Note shall rank pari passu with the Other Convertible Note.

Section 13. Governing Law. This Note shall be deemed to be made and governed, construed and enforced in accordance with the laws of the State of Florida, without giving effect to principles of conflicts of law. The Maker and the Holder hereby consent to and irrevocably submit to personal jurisdiction over each of them by the applicable State or Federal Courts of the State of Florida, County of Broward, in any action or proceeding, irrevocably waive trial by jury and personal service of any and all process and other documents and specifically consent that in any such action or proceeding, any service of process may be effectuated upon any of them by certified mail, return receipt requested, in accordance with Section 11 above.

Section 14. Severability; Amendment. The invalidity of any of the provisions of this Note shall not invalidate or otherwise affect any of the other provisions of this Note, which shall remain in full force and effect. This Note may be amended only with the written consent of the Holder and the Maker.

Section 15. Successors and Assigns. This Note may not be assigned or transferred by the Holder or the Maker without the prior written consent of the other party. Subject to the preceding sentence, the rights and obligations of the Maker and the Holder shall be binding upon and benefit the successors, permitted assigns, heirs, administrators and permitted transferees of the Holder and the Maker.

Counterparts. This Note may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature) or other commonly recognized transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

IN WITNESS WHEREOF, the parties have executed this Note as of the date first written above by its duly authorized officer.

	XXXXXXX’S MARINE GROUP, INC.
	By:
	Name:	Xxxxxxxxxxx Xxxxxxxxx
	Title:	Chief Executive Officer
	COMPANY
	By:
	Name:
	Title:

EXHIBIT A

NOTICE OF CONVERSION

The undersigned hereby elects to convert principal and all accrued interest thereon under the convertible note of Xxxxxxx’s Marine Group, Inc., a Florida corporation (the “Maker”), into shares of common stock (the “Common Stock”), of the Maker according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Maker in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock pursuant to any prospectus.

Conversion calculations:

Date to Effect Conversion: _______________________

Conversion Price: ______________________________

Principal Amount of Note to be Converted: ___________

Interest accrued on such principal under the Note: ______

Amount of Note to be Converted:___________________

Remaining Principal Balance of Note: ________________

Signature: _____________________________________

Name: ________________________________________

Address for Delivery of Common Stock Certificates:

 _____________________________________________

 _____________________________________________

Or

DWAC Instructions:

DTC No:________________

Account No:_____________

EIN: ________________