CONVERTIBLE PROMISSORY NOTE
Exhibit
4.1
NEITHER
THIS NOTE, THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE, OR THE SECURITIES
WHICH MAY BE ISSUED TO THE HOLDER OF THIS NOTE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN
RELIANCE UPON THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS PROVIDED BY REGULATION S UNDER THE SECURITIES ACT OF
1933,
AS AMENDED AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, HYPOTHECATED,
OR
OTHERWISE DISPOSED OF WITHOUT COMPLIANCE WITH SUCH REQUIREMENTS OR A WRITTEN
OPINION OF COUNSEL ACCEPTABLE TO THE OBLIGOR THAT SUCH TRANSFER WILL NOT RESULT
IN ANY VIOLATION OF SUCH LAWS OR AFFECT THE LEGALITY OF THEIR
ISSUANCE.
| US$500,000 |
March
30th,
2007
|
FOR
VALUE RECEIVED,
the
undersigned, True North Energy Corporation, a Nevada corporation (the
"Obligor"), hereby promises to pay to the order of EH&P Investments AG (the
"Holder"), the principal sum of Five Hundred Thousand Dollars ($500,000) payable
as set forth below. The Obligor also promises to pay to the order of the Holder
interest on the principal amount hereof at a rate of 8% per annum, which
interest shall be payable as set forth below. Interest shall be calculated
on
the basis of the year of 365 days and for the number of days actually elapsed.
The payments of principal and interest hereunder shall be made in coin or
currency of the United States of America which at the time of payment shall
be
legal tender therein for the payment of public and private debts.
This
Note
shall be subject to the following additional terms and conditions:
1. Payments.
Subject
to prior conversion or acceleration, all principal due hereunder shall be
payable in one (1) installment on March 30th,
2010
(the “Maturity Date”). Subject to prior conversion or acceleration, interest
shall be payable semi-annually. The first such interest payment shall be due
the
first day of the first month following 180 days from the date of this Note.
Subsequent interest payments will be due and payable on the first day of the
month every six months thereafter. Notwithstanding the foregoing, the final
interest payment shall be due and payable on the Maturity Date. In the event
that any payment to be made hereunder shall be or become due on Saturday, Sunday
or any other day which is a legal bank holiday under the laws of the State
of
Texas, such payment shall be or become due on the next succeeding business
day.
2. Prepayment.
The
Obligor and the Holder understand and agree that the principal amount of this
Note together with all accrued interest due thereon can be prepaid by Obligor
at
any time without penalty, commencing April 30th,
2007.
3. Conversion.
(a) In
the
event the Obligor completes an offering (the “Offering”) of US$10,000,000 or
more of equity or debt securities within 90 days of the date of this Note (the
“Offering Completion Date”), this Note, including any accrued and unpaid
interest, shall be automatically exchanged for and converted into like share
or
securities issued by the Obligor in the Offering on the same terms that such
like shares or securities are purchased by subscribers in the Offering. The
amount of like shares or securities so issued shall be based on the amount
of
principal and interest converted. The Holder shall effect the conversion by
promptly surrendering this Note to the Obligor. Upon receipt of the Note, the
Obligor will deliver or shall cause to be delivered the like shares or other
securities of the Obligor issuable upon conversion.
(b) Upon
a
conversion involving common stock of the Obligor, the Obligor shall not be
required to issue stock certificates representing fractions of shares, but
may
either make a cash payment in respect of any final fraction of a share or round
up to the next whole share of common stock.
(c) The
issuance of securities of the Obligor upon conversion of this Note shall be
made
without charge to the Holder for any documentary stamp or similar taxes that
may
be payable in respect of the issue or delivery of a certificate for such
securities, provided that the Obligor shall not be required to pay any tax
that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the
original Holder.
(d) Any
and
all notices or other communications or deliveries to be provided by the Holder
hereunder, shall be in writing and delivered personally, by facsimile, sent
by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to the attention of the Chief
Executive Officer of the Obligor at the facsimile number or address of the
principal place of business of the Obligor. Any and all notices or other
communications or deliveries to be provided by the Obligor hereunder shall
be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to the Holder at the facsimile number or address of the
Holder appearing on the books of the Obligor, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder.
(e) Upon
receipt by Obligor of evidence reasonably satisfactory to Obligor of the loss,
theft, destruction or mutilation of this Note, and, in the case of loss, theft
or destruction, of any indemnification undertaking by the Holder to the Obligor
in customary form and, in the case of mutilation, upon surrender and
cancellation of this Note, Obligor shall execute and deliver to the Holder
a new
Note.
4. Warrants.
In
the
event an offering is not completed by the Offering Completion Date, common
stock
purchase warrants (the “Warrants”) of the Obligor shall be issued to the Holder.
The Warrants will be exercisable for a period of three years commencing on
the
date of issuance of the Warrants. The number of shares of common stock of the
Obligor issuable upon exercise of the Warrants and the exercise price will
be
calculated based upon the average closing price of the Obligor’s common stock
for the 20 business days preceding the date of this Note (the “Average Price”).
The number of shares which the Holder will be entitled to purchase upon exercise
of the Warrants shall be calculated by dividing the principal amount of this
Note by the Average Price. Any fractional shares resulting from said calculation
will be rounded up to the next whole share. The exercise price of the Warrants
shall be 140% of the Average Price. By way of example, if the Average Price
is
$2.00, the Warrant exercise price will be $2.80.
5. No
Waiver.
No
failure or delay by the Holder in exercising any right, power or privilege
under
the Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
No course of dealing between the Obligor and the Holder shall operate as a
waiver of any rights by the Holder.
6. Waiver
of Presentment and Notice of Dishonor.
The
Obligor and all endorsers, guarantors and other parties that may be liable
under
this Note hereby waive presentment, notice of dishonor, protest and all other
demands and notices in connection with the delivery, acceptance, performance
or
enforcement of this Note.
7. Place
of Payment.
All
payments of principal of this Note and the interest due hereon shall be made
at
such place as the Holder may from time to time designate in
writing.
8. Events
of Default.
The
entire unpaid principal amount of this Note and the interest due hereon shall,
at the option of the Holder exercised by written notice to the Obligor forthwith
become and be due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, if any one or
more
of the following events (herein called "Events of Default") shall have occurred
(for any reason whatsoever and whether such happening shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to
or
in compliance with any judgement, decree or order of any court or any order,
rule or regulation of any administrative or governmental body) and be continuing
at the time of such notice:
(a)
if
default shall be made in the due and punctual payment of the interest and/or
principal of this Note when and as the same shall become due and payable,
whether at maturity, or by acceleration or otherwise, and such default have
continued for a period of five (5) business days following Obligor’s receipt of
written notice from Obligor advising of such default;
(b) if
the
Obligor shall:
| (i) |
admit
in writing its inability to pay its debts generally as they become
due;
|
| (ii) |
file
a petition in bankruptcy or petition to take advantage of any insolvency
act;
|
| (iii) |
make
assignment for the benefit of creditors;
|
| (iv) |
consent
to the appointment of a receiver of the whole or any substantial part
of
its property;
|
| (v) |
on
a petition in bankruptcy filed against it, be adjudicated a
bankrupt;
|
| (vi) |
file
a petition or answer seeking reorganization or arrangement under the
Federal bankruptcy laws or any other applicable law or statute of the
United States of America or any State, district or territory thereof;
or
|
(c) if
the
court of competent jurisdiction shall enter an order, judgment, or decree
appointing, without the consent of the Obligor, a receiver of the whole or
any
substantial part of the Obligor's property, and such other, judgment or decree
shall not be vacated or set aside or stayed with ninety (90) days from the
date
of entry thereof;
(d) if,
under
the provisions of any other law for the relief or aid of debtors, any court
or
competent jurisdiction shall assume custody or control of the whole or any
substantial part of Xxxxxxx's property and such custody or control shall not
be
terminated or stayed within (90) days from the date of assumption of such
custody or control; and
(e) if
(i)
the Obligor sells, licenses, or otherwise transfers all or substantially all
of
its assets or (ii) merges with or into another entity in a change of control
transaction.
9. Remedies.
In case
any one or more of the Events of Default specified in Section 8 hereof shall
have occurred and be continuing, the Holder may proceed to protect and enforce
its rights whether by suit and/or equity and/or by action law, whether for
the
specific performance of any covenant or agreement contained in this Note or
in
aid of the exercise of any power granted in this Note, or the Holder may proceed
to enforce the payment of all sums due upon the Note or enforce any other legal
or equitable right of the Holder.
10. Severability.
In the
event that one or more of the provisions of this Note shall for any reason
be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Note, but this Note shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
11. Governing
Law
This
Note and the right and obligations of the Obligor and the Holder shall be
governed by and construed in accordance with the laws of the State of Texas.
Any
action to enforce this Note shall be in the federal or state courts of Texas
situated in Xxxxxx County.
IN
WITNESS WHEREOF,
True
North Energy Corporation has signed this Note as of the 30th day of March
2007.
| OBLIGOR: | ||
| TRUE NORTH ENERGY CORPORATION | ||
| |
|
|
| By: | /s/ Xxxxxxxxxxxx Xxxxxxx | |
|
Xxxxxxxxxxxx Xxxxxxx |
||
| Chief Financial Officer | ||
