THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER TFIE SECURJTIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE OFFERJNG OF THIS SECURITY...
Exhibit 10.1
THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER TFIE SECURJTIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. THE OFFERJNG OF THIS SECURITY AND THE SECURITIES
RECEIVABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REVIEWED OR
APPROVED BY ANY STATE’S SECURITIES ADMINISTRATOR. THIS SECURITY
AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR
UNLESS THE BORROWER RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO
COUNSEL FOR THE BORROWER STATING THAT REGISTRATION, QUALIFICATION
OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS.
THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN HEREIN.
CONVERTIBLE PROMISSORY NOTE
$750,000
October 19, 2004
FOR VALUE RECEIVED, DESERT MINING, INC. (“Borrower’), hereby promises to
pay to the order of Xxx Xxxxxx, (the “Lender”), having an address at 000 Xxxx Xxxx Xxxx, Xxx
Xxxxx, XX 00000, or at such other place as may be designated in writing by the holder, from
time to time in immediately available lawful money of the United States of America, the
principal sum of SEVEN HUNDRED FIFTY THOUSAND AND NO/l00 DOLLARS
($750,000.00). Unless converted, as provided hereafter, any outstanding balance of principle and
interest under this Note as of June 19, 2006, shall be immediately due and payable on that date.
The Borrower further promises to pay interest on the outstanding principal
amount of this Note from the date hereof until maturity at a rate per annum equal at all times to
six percent (6%) of the outstanding balance on the loan, said interest to accrue and be payable at
maturity. All computations of interest shall be made on the basis of a year of 365 or 366 days, as
the case may be, for the actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest is payable,
The Borrower further grants the Lender warrants to purchase 500,000 shares of
common stock of Borrower at a price of $1.50 per share. Such warrants may be exercised at any
time prior to expiration and include a cashless exercise provision. The warrants expire on April
19, 2007.
This Note shall be governed by the additional terms and conditions set forth below:
- Default
Events of Default. Each of the following shall constitute an event of default (“Event of
Default”) on the part of Borrower of its obligations under this Note;
A failure by Borrower to remit to Lender the principal or interest hereof as the
same becomes due;
Borrower makes an assignment for the benefit of creditors, or a petition in
bankruptcy or for reorganization or to effect a plan or arrangement with creditors, is filed
by Borrower;
Borrower applies for or voluntarily permits the appointment of a receiver or
trustee for any or all property or assets of Borrower;
Any of the foregoing actions or proceedings are commenced against Borrower
and such action or proceeding is not vacated within sixty (60) days of its commencement;
Borrower dissolves or liquidates;
Borrower breaches any of the provisions of this Note; or
Any of Borrower’s representations in this Note are not true and correct when
made.
Rights of Lender Pursuant to an Event of Default.
Upon any Event of Default, Lender may without further notice declare the entire
remaining principal sum of this Note, together with all interest accrued thereon,
immediately due and payable. Upon or after an Event of Default, Lender’s failure to
declare the entire remaining principal sum of this Note, together with all interest accrued
thereon, immediately due and payable shall not constitute a waiver by Lender of its right
to exercise the same at any other time.
Upon any Event of Default Lender may employ an attorney to enforce its rights
and remedies and Borrower, principal, surety, guarantor and endorsers of this Note
hereby agree to pay Lender’s reasonable attorneys’ fees and other reasonable expenses
incurred by Lender in exercising any of Lender’s rights and remedies upon default. The
rights and remedies of Lender as provided in this Note shall be cumulative and may be
pursued singly, successively, or together in the sole discretion of Lender, The failure to
exercise any such right or remedy shall not be a waiver or release of such rights or
remedies or the right to exercise any of them at another time.
From and after the date on which all sums owing on this Note become due and
payable, by acceleration or otherwise, all sums owing on this Note shall bear interest,
until all such sums are paid in full, at a default rate equal to eighteen percent (18%) per
annum (based on a 360-day year and a 30-day month). At such time as a judgment is
obtained for any amounts owing under this Note or any document or instrument securing this Note, interest shall continue to accrue on the amount of the judgment until paid, at
the rate of eighteen percent (18%) per annum.
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- Representations and Warranties.
Borrower represents and warrants to Lender that:
Borrower is a corporation duly organized and validly existing under the laws of the State
of Nevada, and has all requisite power and authority to own its property and assets and to carry
on its business;
The execution, delivery and performance of this Note has been duly authorized by
Borrower, and this Note is a valid and legally binding obligation of Borrower legally enforceable
against it in accordance with its terms;
Borrower has obtained all necessary consents, authorizations, approvals and orders
required on the part of Borrower in connection with the issuance of this Note;
The execution, delivery and performance of this Note does not conflict with the Articles
of Incorporation or Bylaws of Borrower, nor will it conflict with or result in a breach or default
under any oral or written agreement to which Borrower is a party;
To the knowledge of Borrower, Borrower is in all material respects in compliance with
all applicable federal, state and local laws, rules, regulations, ordinances and other mandates
material to the conduct of its business; and
There is not pending, nor to the knowledge of Borrower is there now threatened, any
judicial, administrative or arbitral action, claim, suit, proceeding or investigation or other
controversy which affects the validity or enforceability of this Note or any action taken or to be
taken in connection herewith or therewith or which if adversely determined, would have a
material and adverse effect on Borrower or its business, assets, operations or financial condition.
- Conversion Right and Obligation. The Lender shall have the right, but not the
obligation, to convert all, or any part thereof, of the principal amount of the Note and accrued
interest thereon (the “Note Value”) into the number of shares (the “Conversion Shares”) of
Common Stock computed by dividing the Note Value by a per-share price equal to $130.
No Fractional Shares. No fractional shares of the Borrower’s Common Stock will
be issued upon conversion of this Note. In lieu of any fractional share to which the Lender
would otherwise be entitled upon conversion of this Note, the Borrower shall round the
Conversion Shares up to the nearest share.
Lender Conversion. In order to effect conversion, the Lender shall surrender this
Note, duly endorsed, at the principal offices of the Borrower, together with a written notice to the
Borrower of the Lender’s election to convert. At its expense, the Borrower will, as soon as
practicable thereafter, and in any event within ten (10) business days thereafter, issue and deliver
to Lender, a certificate or certificates for the number of shares of Common Stock to which
Lender is entitled upon such conversion (bearing the securities legend set forth on this Note and any other legends that may be required by applicable state or federal securities law in the opinion
of legal counsel for Borrower), together with any other securities or property to which the Lender
is entitled upon such conversion under the terms of this Note. Upon such conversion of the full
amount due under this Note, the Borrower will be released from all its obligations and liabilities
under this Note.
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When Conversion Effected. A conversion of this Note shall be deemed to have
been effected immediately prior to the close of business on the business day on which the Note
and the Notice of Conversion are delivered to the Borrower as provided above, and at such time,
the person in whose name any certificates for shares of Common Stock shall be issuable upon
conversion as provided herein shall be deemed to be the record holder of such shares of the
Common Stock as of such date for all purposes.
No Dilution or Impairment. The Borrower will not, by amendment of its Articles
of Incorporation or bylaws or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Note, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the Lender against dilution or other
impairment. Without limiting the generality of the foregoing, the Borrower (a) will not increase
tile par value of any shares of stock receivable on the exercise of this Note above the amount
payable therefor on such exercise, (b) will at all times reserve and keep available a number of its
authorized shares of Common Stock or such other securities as may be issuable on conversion of
this Note (and on the conversion or exercise of such other securities), free from all preemptive
rights thereon, which will be sufficient to permit the frill conversion of this Note, and (c) shall
take all such action as may be necessary or appropriate in order that said shares of Common
Stock (or such other securities) that may be issued pursuant to the conversion of this Note will,
upon issuance, be duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof. If at any time while this Note is outstanding
there shall be (i) a reorganization, (ii) a merger or consolidation of the Borrower with or into
another corporation in which the Borrower is not the surviving entity, or a reverse triangular
merger in which the Borrower is the surviving entity but the shares of the Borrower’s capital
stock outstanding immediately prior to the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash, or otherwise, or (iii) a sale or transfer of
the Borrower’s properties and assets as, or substantially as, an entirety to any other person, then,
as a part of such reorganization, merger, consolidation, sale or transfer, lawful provision shall be
made so that the holder of this Note shall thereafter be entitled to receive upon conversion, the
number of shares of stock or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a holder of the shares
deliverable upon conversion of this Note would have been entitled to receive in such
reorganization, consolidation, merger, sale or transfer if this Note had been converted
immediately before such reorganization, merger, consolidation, sale or transfer. The foregoing
provisions of this paragraph shall similarly apply to successive reorganizations, consolidations,
mergers, sales and transfers arid to the stock or securities of any other corporation that are at the
time receivable upon the conversion of this Note.
- Fees and Expenses.
Borrower and Lender shall each be responsible for their individual legal fees incurred in
making this note.
- Waiver of Protest, Presentment and Notice.
Borrower hereby waives protest, presentment, notice of dishonor, and notice of
acceleration of maturity and agrees to continue to remain bound for the payment of principal,
interest and all other sums due under this Note notwithstanding any change or changes by way of
any extension or extensions of time for the payment of principal and interest; and Borrower
waives all and every kind of notice of such change or changes and agrees that the same may be
made without notice or consent.
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- Governing Law.
This Note is and shall be deemed to be a contract entered into and made pursuant to the
laws of the State of Nevada (regardless of conflict of law principles or residence, location,
domicile, place of formation or business of Borrower or its constituent principals) and shall in all
respects be governed, construed, applied and enforced in accordance with the laws of said state.
- Severability.
To the extent any provision of this Note is prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remainder of this Note.
- Waiver.
No previous waiver and no failure or delay by Lender in acting with respect to the terms
of this Note shall constitute a waiver of any breach, default, or failure of condition
thereunder or the obligations secured thereby. Any waiver of any term of this Note, or of
any of the obligations secured thereby, must be made with the consent of both Borrower
and Lender and shall be limited to the express written terms of such waiver. In the event
of any inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by this Note, the terms of this Note shall prevail.
- Obligations Absolute.
The obligations of Borrower under this Note shall be absolute, and Borrower waives any
and all rights to offset, deduct or withhold any payments or charges due under this Note
for any reason whatsoever.
- Assignment.
Borrower may not assign, delegate, or otherwise transfer any of its rights or obligations
under this Note, whether by merger, consolidation, or other business combination,
without the prior written consent of Lender.
IN WITNESS WHEREOF, the undersigned has executed this Note on the day and year
first written above.
BORROWER
DESERT MINING, INC.
/s/ Xxxxx X. Xxxxxx
By:
Xxxxx X. Xxxxxx
Its:
President
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