Contract
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THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
NOTE
AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT
BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR
AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
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5%
SENIOR CONVERTIBLE NOTE
FOR
VALUE
RECEIVED, Xxxxxx Laser Inc., a Nevada Corporation (hereinafter called
"Borrower"), hereby promises to pay to _________________________ (the "Holder"),
or its registered assigns or successors in interest or order, without demand,
the sum of [_________] Dollars ($___________) (“Principal Amount”), with simple
and unpaid interest thereon, 36 months from closing date of March ___, 2007
(the
"Maturity Date"), if not sooner paid.
ARTICLE
I
INTEREST
1.1. Interest
Rate.
Subject
to Section 5.7 hereof, interest payable on this Note shall accrue at a rate
per
annum (the "Interest Rate") of five percent (5%). Interest on the Principal
Amount shall accrue from the date of this Note and shall be payable annually.
The Company shall issue the first year’s interest to the Holder twelve months
(12) following the date this note is Issued.
1.2 Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
which, if susceptible to cure is not cured within twenty (20) days, otherwise
then from the first date of such occurrence, the annual interest rate on this
Note shall (subject to Section 5.7) automatically be increased to ten percent
(10%) per annum.
ARTICLE
II
CONVERSION
RIGHTS
2.1. Holder's
Conversion Rights.
The
Holder shall have the right at all times, but not the obligation, to convert
all
or any portion of the then aggregate outstanding Principal Amount of this Note
plus accrued interest, into shares of Common Stock, subject to the terms and
conditions set forth in this Article III at the rate of $0.15 per share of
Common Stock (“Fixed Conversion Price”) as same may be adjusted pursuant to this
Note and the Subscription Agreement. The Holder may exercise such right by
delivery to the Borrower of a written Notice of Conversion pursuant to Section
3.2.
2.2. Mechanics
of Xxxxxx's Conversion.
(a) In
the event that the Holder elects to convert any amounts outstanding under this
Note into Common Stock, the Holder shall give notice of such election by
delivering an executed and completed notice of conversion (a "Notice of
Conversion") to the Borrower, which Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
amounts being converted. The original Note is not required to be surrendered
to
the Borrower until all sums due under the Note have been paid. On each
Conversion Date (as hereinafter defined) and in accordance with its Notice
of
Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records. Each date on which
a Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a "Conversion Date." A form of Notice
of Conversion to be employed by the Holder is annexed hereto as Exhibit
A.
(b) Pursuant
to the terms of a Notice of Conversion, the Borrower will issue instructions
to
the transfer agent accompanied by an opinion of counsel, if so required by
the
Borrower's transfer agent and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting
the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "Delivery Date"). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such shares of Common Stock, unless the Holder provides the Borrower
written instructions to the contrary. Notwithstanding the foregoing to the
contrary, the Borrower or its transfer agent shall only be obligated to issue
and deliver the shares to the DTC on the Holder’s behalf via DWAC (or
certificates free of restrictive legends) if the registration statement
providing for the resale of the shares of Common Stock issuable upon the
conversion of this Note is effective and the Holder has complied with all
applicable securities laws in connection with the sale of the Common Stock,
including, without limitation, the prospectus delivery requirements. In the
event that Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the Conversion Shares
by the Delivery Date.
2.3. Conversion
Calculations.
(a) The
number of shares of Common Stock to be issued upon each conversion of this
Note
pursuant to this Article III shall be determined by dividing that portion of
the
Principal Amount and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price.
(b) The
Fixed Conversion Price and number and kind of shares or other securities to
be
issued upon conversion 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 and accrued interest thereon, 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,
this Note, as to the unpaid principal portion thereof and accrued interest
thereon, 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.
If the
Borrower shall conduct any subsequent private placements or public offerings
of
Common Stock prior to the complete conversion or payment of this Note, for
a
consideration less than the Fixed Conversion Price that would be in effect
at
the time of such issue, then, and thereafter successively upon each such
issuance, the Fixed Conversion Price shall be reduced to such other lower issue
price.
(c) Whenever
the Conversion Price is adjusted pursuant to this section, the Borrower shall
promptly mail to the Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a statement of the facts requiring such
adjustment.
2.4. Reservation.
During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than one hundred fifty percent
(150%) 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.
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2.5 Issuance
of Replacement Note.
Upon
any partial conversion of this Note, a replacement Note containing the same
date
and provisions of this Note shall, at the written request of the Holder, be
issued by the Borrower to the Holder for the outstanding Principal Amount of
this Note and accrued interest which shall not have been converted or paid,
provided Xxxxxx has surrendered an original Note to the Company. In the event
that the Holder elects not to surrender a Note for reissuance upon partial
payment or conversion, the Holder hereby indemnifies the Borrower against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.
ARTICLE
III
EVENTS
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 Pay Principal or Interest.
The
Borrower fails to pay any installment of Principal Amount, interest or other
sum
due under this Note or any Transaction Document when due and such failure
continues for a period of ten (10) business days after the due
date.
3.2
Breach
of Covenant.
The
Borrower breaches any material covenant or other term or condition of this
Note
any material respect and such breach, if subject to cure, continues for a period
of ten (10) business days after written notice to the Borrower from the
Holder.
3.3
Breach
of Representations and Warranties.
Any
material representation or warranty of the Borrower made herein or in any
agreement, statement or certificate given in writing pursuant hereto or in
connection herewith or therewith shall be false or misleading in any material
respect as of the date made and the Closing Date.
3.4
Receiver
or Trustee.
The
Borrower or any Subsidiary of Borrower shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for them or for a substantial part of their property or business; or
such a receiver or trustee shall otherwise be appointed.
3.5
Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any subsidiary of Borrower or any of their property or other assets
for more than $25,000 and shall remain unvacated, unbonded or unstayed for
a
period of forty-five (45) days.
3.6
Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance
of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower or any Subsidiary of Borrower and if
instituted against them are not dismissed within sixty (60) days of
initiation.
3.7
Delisting.
Failure
of the Common Stock to be quoted or listed on the OTC Pink Sheets; failure
to
comply with the requirements for continued listing on the OTC Pink Sheets for
a
period of seven consecutive trading days; or notification from the OTC Pink
Sheets that the Borrower is not in compliance with the conditions for such
continued listing on the OTC Pink Sheets..
3.8 Stop
Trade.
An SEC
or judicial stop trade order or OTC Pink Sheets trading suspension with respect
to Borrower’s Common Stock that lasts for five or more consecutive trading
days.
3.9
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 requested by Xxxxxxxx, a replacement
Note, and such failure continues for a period of five (5) business days after
the due date.
3.10 Non-Registration
Event.
The
failure of the company to obtain an effective registration statement by the
earlier of twelve (12) months from the final closing date of this offering,
or
April 30, 2008.
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3.11 Reverse
Splits.
The
Borrower effectuates a reverse split of its Common Stock without twenty days
prior written notice to the Holder.
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)
4.3 Amendment
Provision.
The
term "Note" and all references 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 Jersey, without regard to conflicts of laws principles that would result
in the application of the substantive laws of another jurisdiction. 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 Jersey. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then
such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule
of
law. Any such provision which may prove invalid or unenforceable under any
law
shall not affect the validity or unenforceability of any other provision of
this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
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 Redemption.
This
Note may not be redeemed or called without the consent of the Holder except
as
described in this Note.
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4.9 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 the rights
of a
shareholder of the Borrower with respect to the Shares of Common Stock to be
received 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 March, 2007.
Xxxxxx
Laser Inc.
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By: | ||
Name:
Xxxxxxx X. Xxxxx
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Title: President
& CEO
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WITNESS:
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