THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR
THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (C) IF
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT,
DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM
THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN
ADDITIONAL AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT
LIMITATION, PROVISIONS WHICH (A) LIMIT THE CONVERSION RIGHTS OF THE
HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT, PREPAYMENT
AND REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF
DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING
HEREUNDER MAY BE ACCELERATED.
No. 1 $150,000.00
LAKOTA TECHNOLOGIES, INC.
8% Convertible Note due August 24, 2001
LAKOTA TECHNOLOGIES, INC., a Colorado corporation (together
with its successors, the "Company"), for value received hereby
promises to pay to Y.L. Xxxxxx or his registered assigns, the
principal sum of One Hundred Fifty Thousand Dollars ($150,000.00)
or, if less, the principal amount of this Note then outstanding, on
the Maturity Date to the Holder in such coin or currency of the
United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, and to pay
interest, monthly in arrears from September 30, 1999, on (i) the
last day of each calendar month of each year until the Maturity
Date, commencing October 31, 1999 (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each an
"Interest Payment Date"), (ii) the Maturity Date, (iii) each
Conversion Date, as hereafter defined, and (iv) the date the
principal amount of the Convertible Notes shall be declared to be or
shall automatically become due and payable, on the principal sum
hereof outstanding in like coin or currency, at the rates per annum
set forth below, from the most recent Interest Payment Date to which
interest has been paid on this Convertible Note, or if no interest
has been paid on this Convertible Note, from the date of this
Convertible Note until payment in full of the principal sum hereof
has been made.
The interest rate shall be eight percent (8%) per annum (the
"Interest Rate") or, if less, the maximum rate permitted by
applicable law. Past due amounts (including interest, to the extent
permitted by law) will also accrue interest at the Interest Rate
plus 2% per annum or, if less, the maximum rate permitted by
applicable law, and will be payable on demand ("Default Interest").
Interest on this Convertible Note will be calculated on the basis of
a 360-day year of twelve 30 day months. All payments of principal
and interest hereunder shall be made for the benefit of the Holder
pursuant to the terms of the Agreement (hereafter defined). Except
as otherwise provided in this Convertible Note, the interest payable
on each Interest Payment Date shall be added to the outstanding
principal amount of this Convertible Note on such date and
thereafter be considered part of the outstanding principal amount.
The Company may elect to pay the interest payable on any Interest
Payment Date in cash, provided it gives the registered holder
written notice of such election at least five (5) Business Days
prior to the applicable Interest Payment Date and pays the same by
such date. On each Conversion Date, interest shall be paid in
shares of Common Stock on the portion of the principal balance of
the Convertible Note then being converted. The number of shares of
Common Stock issued as interest shall be determined by dividing the
dollar amount of interest due on the applicable Interest Payment
Date by the Conversion Price or Default Conversion Price then in
effect.
This Convertible Note (this "Convertible Note") is one of a
duly authorized issuance of $750,000 original aggregate principal
amount of Convertible Notes of the Company referred to in that
certain Securities Purchase Agreement dated as of the date hereof
between the Company and the Purchasers named therein (the
"Agreement"). The Agreement contains certain additional agreements
among the parties with respect to the terms of this Convertible
Note, including, without limitation, provisions which (A) limit the
conversion rights of the Holder, (B) specify voluntary and mandatory
repayment, prepayment and redemption rights and obligations and (C)
specify Events of Default following which the remaining balance due
and owing hereunder may be accelerated. All such provisions are an
integral part of this Convertible Note and are incorporated herein
by reference. This Convertible Note is transferable and assignable
to one or more Persons, in accordance with the limitations set forth
in the Agreement.
The Company shall keep a register (the "Register") in which
shall be entered the names and addresses of the registered holder of
this Convertible Note and particulars of this Convertible Note held
by such holder and of all transfers of this Convertible Note.
References to the Holder or "Holders" shall mean the Person listed
in the Register as the registered holder of such Convertible Notes.
The ownership of this Convertible Note shall be proven by the Register.
1. CERTAIN TERMS DEFINED. All terms defined in the
Agreement and not otherwise defined herein shall have for purposes
hereof the meanings provided for in the Agreement.
2. COVENANTS. Unless the Majority Holders otherwise
consent in writing, the Company covenants and agrees to observe and
perform each of its covenants, obligations and undertakings
contained in the Agreement, which obligations and undertakings are
expressly assumed herein by the Company and made for the benefit of
the holder hereof.
