PIPER ACQUISITION IV, INC. FORM OF 5% CONVERTIBLE NOTE
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE OR THE UNDERLYING SHARES OF COMMON STOCK UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.
No. _____
Issue Date: _____, 2011
PIPER ACQUISITION IV, INC.
FORM OF 5% CONVERTIBLE NOTE
FOR VALUE RECEIVED, PIPER ACQUISITION III, INC., a Nevada corporation (the “Company”), hereby promises to pay to the order of _______________________, or its assigns (the “Holder”), without demand, the sum of ______________ Dollars ($_________), with interest accruing at the rate described below.
This Note has been entered into pursuant to the terms of a Subscription Agreement among the Company and the holders of the Company Notes (as defined below), dated _____ __, 2010 (the “Agreement”), and shall be governed by the terms of such Agreement. Unless otherwise separately defined herein, all capitalized terms used in this Note shall have the same meaning as is set forth in the Agreement or the Confidential Private Placement Memorandum, dated January 18, 2011 (“Memorandum”, and collectively with the Agreement, the “Transaction Documents”).
ARTICLE I
Upon any conversion in part by the Holder in accordance with Article II, the Holder and the Company shall in good faith recalculate the outstanding Principal and the accrued but unpaid Interest payable with respect to the converted portion. Upon any full conversion by the Holder in accordance with Article II, all of the payments of Principal due hereunder shall terminate and no further due but unpaid Interest shall accrue; provided, however, upon the Effective Event (as defined below), all Interest owed by the Company to the Holder shall be forgiven. In the event that the Company is required to pay the Interest on the Maturity Date, the Company, in its sole election, may pay in cash or shares of common stock. If the Company pays in shares of common stock, the number of shares to be delivered shall be determined by dividing the amount of Interest owed by $1.25. All payments shall be applied first to Interest that has become due pursuant to this Note and remains unpaid and then to the outstanding Principal of this Note.
ARTICLE II
The Holder shall have the right to convert the Principal and accrued and unpaid Interest due under this Note into shares of the Company’s Common Stock, as set forth below.
2
(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, and accrued Interest on such portion, at the election of the Holder (the date of such conversion being a “Conversion Date”) into fully paid and non-assessable shares of Common Stock, as such stock exists on the date of this Note (such shares, the “Conversion Shares”), or any shares of capital stock of the Company into which such Common Stock shall hereafter be changed or reclassified, at the conversion price as defined in Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein. However, upon the registration statement to be filed with the Securities and Exchange Commission, which shall include the Conversion Shares, being declared effective (the “Effective Event”), the Principal due and owing under this Note shall be automatically converted into the Conversion Shares without any action by the Holder. Upon delivery to the Company of a completed Notice of Conversion, a form of which is annexed hereto, Company 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 Conversion Shares for the portion of the Principal, along with accrued but unpaid Interest, 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 and accrued Interest to be converted, by the Conversion Price. No fractional shares shall be issued for any payment of Interest due under this Note. As to any fraction of a share which Xxxxxx would otherwise be entitled to upon such payment of Interest, the Company shall round up to the next whole share. Each conversion hereof shall constitute the re-affirmation by the Holder that the representations and warranties contained in the Subscription Agreement are true and correct in all material respects with respect to the Holder as of the time of such conversion. 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 Company to the Holder for the remaining Principal balance of this Note and Interest which shall not have been paid.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be equal to $0.10.
(c) The Conversion Price and number and kind of shares of Common Stock or other securities to be issued upon conversion as determined pursuant to Section 2.1(a), shall be subject to adjustment from time to time upon the happening of certain events while this Note remains outstanding, as follows:
(i) Reorganization, Consolidation, Merger, etc.; Reclassification. In case at any time or from time to time, the Company shall effect any merger, reorganization, restructuring, reverse stock split, consolidation, sale of all or substantially all of the Company’s assets or any similar transaction or related transactions (each such transaction, a “Fundamental Change”), then, in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Note, on the conversion hereof, at any time after the consummation of such Fundamental Change, shall receive, in lieu of the Conversion Shares issuable on such conversion prior to such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation of a Fundamental Change if such Holder had so converted this Note, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 2.1(c)(iv).
3
If the Company 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 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.
(ii) Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Note after the effective date of such dissolution pursuant to this Article to a bank or trust company (a “Trustee”) as trustee for the Holder of this Note.
(iii) Intentionally left blank.
(iv) Intentionally left blank.
(v) Intentionally left blank.
(vi) Effectiveness of Adjustment. An adjustment to the Conversion Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.
(vii) Notice of Adjustment. Upon the happening of any event requiring an adjustment of the Conversion Price, the Company shall promptly give written notice thereof to the Holder at the address appearing in the records of the Company, stating the adjustments resulting from such event and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give such notice to the Holder or any defect therein shall not affect the legality or validity of the subject adjustment.
ARTICLE III
Each of the following events shall constitute a default by the Company under this Note:
4
(b) The Holder shall be entitled to recover from the Company all reasonable and documented expenses, attorneys’ fees and costs incurred therein or in the enforcement or collection of any judgment or award arising from such Event of Default.
ARTICLE IV
5
4.5 Governing Law, Consent to Jurisdiction. This Note shall be governed by and construed in accordance with the laws of the State of California. Any action brought by either party against the other concerning this Note shall be brought only in the state courts of California or in the federal courts located in the state of California. Both parties 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.
6
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed, as of the date first written above.
PIPER ACQUISITION IV, INC.
By:___________________________
Name:
Title:
8
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the Principal and accrued Interest with respect to such Principal of the Note issued by PIPER ACQUISITION IV, INC. on _________________, 20___ into shares of Common Stock of PIPER ACQUISITION IV, INC. according to the conditions set forth in such Note, as of the date written below.
Date of Conversion:
|
______________________
|
Conversion Price:
|
______________________
|
Common Stock To Be Delivered:
|
______________________
|
Signature:
|
_________________________________
|
Print Name:
|
_________________________________
|
Address:
|
_________________________________
_________________________________
_________________________________
|
9