Contract
THIS
NOTE AND THE STOCK INTO WHICH IT IS CONVERTIBLE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF THE UNITED
STATES
OF AMERICA (THE "ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
("STATE ACT"). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN
CONNECTION
WITH, THE SALE OF DISTRIBUTION THEREOF,
AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED
FOR VALUE, DIRECTLY OR INDIRECTLY, IN
THE
ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND COMPLIANCE
WITH APPLICABLE STATE ACTS, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE ACTS, THE
AVAILABILITY
OF WHICH ARE ESTABLISHED BY MEANS OF AN OPINION TO SUCH EFFECT
IN
FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY AND RENDERED BY
LEGAL COUNSEL SATISFACTORY TO THE COMPANY.
GLOBAL
IT HOLDINGS, INC.
SERIES
A 6.5% CONVERTIBLE PROMISSORY NOTE
| 1. |
Promise
to Pay FOR
VALUE RECEIVED, GLOBAL IT HOLDINGS, INC, a Nevada
corporation (the "Company") promises
to pay, in lawful money of the United States of America, to the
order of Advantage Fund I, LLC or assignee (the "Holder"), at
Aventura, Florida or at such other
place as Holder shall from time to time direct, on or before December
31,
2004, the principal amount
of Two Hundred and Fifty Thousand Dollars and no cents ($250,000.00)
plus
interest on the
unpaid principal balance thereof at a rate of Six and one-half percent
(6.5%) per year from the date
hereof until paid in full. Interest on this note shall be computed
on a
365/365 simple interest basis,
that is, by applying the ratio of the annual interest rate by the
number
of days in the year times,
outstanding principal balance times the actual number of days that
the
principal balance is outstanding.
This Note shall be payable interest-only, in arrears, on the last
day of
each calendar months,
commencing upon the first such date subsequent to the date of execution
hereof, and due and payable in full, principal and interest, twenty-four
months from the date hereof. At the option of
the Holder, the interest payable may be paid in cash or convertible
into
common stock in accordance
with Section 3, herein provided, however, that in no event shall
the
Holder be entitled to
convert this Debenture for a number of shares of Common Stock in
excess of
that number of shares
of Common Stock which, upon giving effect to such conversion, would
cause
the aggregate number
of shares of Common Stock beneficially owned by the Holder and its
affiliates to exceed 4.99%
of the outstanding shares of the Common Stock following such conversion.
All payments shall
be applied first to accrued, unpaid interest, next to any collection
costs, and the remainder against
principal. This note may be not be redeemed by the Company prior
to its
due date without the
express permission of the Holder. The Company at its option shall
have the
right to redeem the Note as set forth
below.
|
| 2. |
Default.
The
Company shall be in default under this Note upon the occurrence of
any of
the following
events:
|
| 2.1 |
The
Company fails to timely perform any of its obligations under, or
otherwise
breaches any
covenants or warranties of this
Note;
|
| 2.2 |
Any
statement, representation, or warranty made by the Company or its
agents
to Holder shall
prove to have been false or materially misleading when made;
and/or,
|
| 2.3 |
The
Company shall become insolvent, or unable to meet its obligations
as they
become due,
or shall file or have filed against it, voluntarily or involuntarily,
a
petition under the United
States Bankruptcy Code or shall procure or suffer the appointment
of a
receiver for any substantial portion of its properties, or shall
make an
assignment for benefit of creditors,
or shall initiate or have initiated against it, voluntarily or
involuntarily, any act, process, or proceedings under any insolvency
law
or other statute or law providing for the modifications
or adjustment of the rights of
creditors.
|
1
Upon
any event of default, Xxxxxx may declare the entire unpaid principal balance
of
this Note
and all accrued unpaid interest immediately due, without notice, and the Company
agrees to pay such amount immediately in such event. In the event of default,
the Company agrees
to pay all of Xxxxxx's costs of collection, including attorney's fees; this
shall include legal
expenses for the bankruptcy proceedings or insolvency proceedings (including
efforts to modify or vacate any automatic stay or injunction), court costs,
appeals, post-judgement collection
expenses and any other amount provided by law. The parties intend this provision
to
be given the most liberal construction possible and to apply to any
circumstances in which such party reasonably incurs expenses. No delay or
omission on the part of any Holder hereof
in exercising any right or option herein given to such Holder shall impair
such
right or
option or be considered as a waiver thereof or acquiescence in any default
hereunder. The
Company hereby waives any applicable statue of limitations, presentment, demand
for payment,
protest and notice of dishonor.
| 3 |
Conversion.
The Holder shall have conversion rights as follows (the "Conversion
Rights"):
|
| 3.1 |
Right
To Convert. Subject to subsection 3.3, this Note shall be convertible,
in
whole or in
part, at the option of the Holder, at any time after the date of
issuance
of this Note, and from time to time thereafter, at the office of
the
Company, into such number of fully paid and
non-assessable shares of Common Stock of the Company as is determined
as
follows:
|
The
Conversion Price per share shall be equal to the lesser of (1) the average
of
the
lowest of three day trading prices during the five trading days immediately
prior
to
the Conversion Date multiplied by .80, or (2) the average of the lowest of
three
day trading prices during the five trading days immediately prior to the
funding
date(s).
| 3.2 |
Mechanics
of Conversion. Before Holder shall be entitled to convert this Note,
in
whole or
in part, into shares of Common Stock, he shall surrender this Note
at the
office of the Company,
and shall give written notice in person, or by facsimile, mail, postage
prepaid, to
the Company at its principal corporate office, of Xxxxxx's election
to
convert the Note and
shall state therein the portion of the principal amount of the Note
to be
converted and the
name or names in which the certificate or certificates for shares
of
Common Stock are to
be issued, the address of such persons to be used for record purposes,
and
the address(s)
to which the certificate(s) should be delivered if different from
the
record address.
Such notice shall be on the form attached to this Note as Exhibit
'A'.
The
Company
shall as soon as practicable thereafter, issue and deliver to Holder,
or
to the nominee
or nominees of Holder, a certificate or certificates for the number
of
shares of Common
Stock to which Holder shall be entitled as aforesaid and, if less
than the
full principal
amount of the note is converted, a new Note representing the uncoverted
balance
which remains outstanding. Any interest accrued but unpaid on the
converted portion of the Note shall be paid upon conversion; any
interest
accrued but unpaid on the non-converted
portion of the Note shall be paid in due course under the replacement
Note.
Such conversion shall be deemed to have been made immediately prior
to the
close of business on the date of such surrender of the Note to be
converted, and the person or persons entitled to receive the shares
of
Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such
shares
of Common Stock
as of such date.
|
| 3.3 |
No
Impairment. The Company will not, by amendment of its Articles of
Incorporation or
through any reorganization, recapitalization, 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 to be observed
or
performed hereunder
by the Company, but will at all times in good faith assist in the
carrying
out of all
the provisions of this Section 3 and in the taking of all such action
as
may be necessary
or appropriate in order to protect the Conversion Rights of the Holder
against impairment.
|
2
| 3.4 |
No
Fractional Shares and Certificates as to Conversion. No fractional
shares
shall be issued
upon conversion of the Note, and the number of shares of Common Stock
to
be issued
shall be rounded to the nearest whole
share.
|
| 3.5 |
Notices
of Record Date. In the event of any taking by the Company of a record
of
the holders
of any class of securities for the purpose of determining the holders
thereof who are
entitled to receive any dividend or other distribution, any right
to
subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other
securities or property,
or to receive any other right, the Company shall mail to Holder,
at least
20 days prior
to the date specified therein, a notice specifying the date on which
any
such record is
to be taken for the purpose of such dividend, distribution, or right,
and
the amount and character
of such dividend, distribution, or right. In the case of rights to
acquire
any shares
of stock or any other class of securities or property, Company shall
grant
to Holder the same rights as if the Holder had converted his Note
upon the
Record Date.
|
| 3.6 |
Reservation
of Stock Issuable Upon Conversion. The
Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common
Stock solely
for the purpose of effecting the conversion of the Notes such number
of
shares of Common
Stock as shall from time to time be sufficient to effect the conversion
of
all outstanding
Notes; and if at any time the number of authorized but unissued shares
of
Common Stock shall not be sufficient to effect the conversion of
all
then-outstanding Notes,
in addition to such other remedies as shall be available to the Holder,
the Company
will take such corporate action as may, in the opinion of its counsel,
be
necessary
to increase its authorized but unissued shares of Common Stock to
such
number
of shares as shall be sufficient for such
purposes.
|
| 3.7 |
Notices.
Any
notice required by the provisions of this Section 3 to be given to
the
Holder
shall be deemed given if deposited in the United States mail, postage
prepaid and certified,
return receipt requested and addressed to Xxxxxx of record at his
address
appearing
on the books of the Company.
|
| 4 |
Redemption.
The
Company at its option shall have the right to redeem, with three
(3)
business days advance
written notice (the "Redemption
Notice"), a
portion or all outstanding convertible debenture. The
redemption price shall be one hundred twenty percent (120%) of the
amount
redeemed plus accrued interest.
|
| 5 |
Assignment.
Subject to the restrictions on transfer herein, the Holder may transfer
this Note in whole or
in part, in the event of partial transfer(s), the Company will exchange
this Note for new Notes as instructed
by the Holder equal to the total of this Note, by endorsement (by
the
Holder of this Note executing the form of assignment attached to
this Note
as Exhibit 'B')
and
delivery in the same manner as
any negotiable instrument transferable by endorsement and delivery.
Until
this Note is transferred on
the Company books, the Company may treat the registered Holder of
this
Note as the absolute owner
of this Note for all purposes, despite any notice to the contrary.
The
Company's obligations hereunder
may not be transferred without prior written consent of the Holder;
any
attempt to transfer without
consent shall be void ab
initio.
|
| 6 |
Restrictions
on Transfer. This Note and the stock into which it is convertible
have not
been registered under
the Securities act of 1933, as amended, of the United States of America
(the "Act") or the securities
laws of any sate of the United States ("State Act"). This Note and
the
stock into which it is convertible
have been acquired for investment and not with a view to, or in connection
with, the sale or distribution
thereof, and may not be offered, sold, pledged, hypothecated. Or
otherwise
transferred for value
directly or indirectly, in the absence of an effective registration
statement under the Act and compliance with applicable State Acts,
or
pursuant to an exemption from registration under the Act and
under applicable State Acts, the availability of which are established
by
means of an opinion to such
effect. In form and substance satisfactory to the Company and rendered
by
legal counsel satisfactory
to the Company. The
certificates representing the shares into which this Note is convertible
shall bear the foregoing legend.
|
| 7 |
Registration
of Underlying Stock & Penalties. The
Company agrees that within ninety days of the date of this Note,
the
Company shall file a registration statement with the Securities and
Exchange Commission
on form SB-2 or other applicable form to register 250% of the then
shares
to be issued upon conversion of the Notes. The registrations statement
shall call for, amongst other items more fully described therein,
the
Company to use its best efforts to have such registration statement
declared
effective at the earliest possible time. Should
such registration statement not be deemed effective
within one hundred and eighty days from the date of the date of the
funding of the Note, the Company
shall pay a penalty to the Holder in an amount equal to 2% of the
principal balance and any and
all accrued interest then outstanding per month or any part thereof,
until
such time as the registration
statement is declared effective. Company agrees to keep such registration
statement effective
until the maturity of the Note. Should
there come a time when the number of shares that have
been registered is less than 200% of the total number of shares to
be
issued upon conversion, the Company
agrees that it will amend such registration statement such that a
minimum
of 200% of the shares
to be issued upon conversion are on such registration
statement.
|
3
| 8 |
Replacement.
On
receipt of evidence reasonably satisfactory to the Company of the
loss,
theft, destruction
or mutilation of this Note and, in the event of such occurrence,
on
delivery of an indemnity agreement or bond reasonably satisfactory
in form
and amount to the Company or, in the case of mutilation, on surrender
and
cancellation of this Note, the Company at its expense will execute
and
deliver, in lieu of this Note, a new Note of like tenor. On surrender
of
this Note for exchange and subject to the provisions of this Note
on
compliance with the Securities Act, the Company, at its expense
will issue to or on the order of the Holder of this Note a new Note
or
Notes of like tenor, in the name
of that Holder or as that Holder (on payment by the Holder of any
applicable transfer taxes) may direct,
in the same total principal amount as this
Note.
|
| 9 |
Appointment
of Agent. The Company may, on written notice to the Holder of this
Note,
appoint an agent for the purposes of issuing Common Stock or other
securities on the conversion of this Note and of
replacing or exchanging this Note; and after that appointment occurs
any
such issuance, replacement,
or exchange shall be made at that office by that
agent.
|
| 10 |
Miscellaneous.
|
| 10.1 |
Amendment.
No supplement, modification, or amendment of this Note shall be binding
unless
executed in writing by all the parties
hereto.
|
| 10.2 |
Waiver.
No waiver of any of the provisions of this Note shall be deemed,
or shall
constitute,
a waiver of any other provision, whether or not similar, nor shall
any
waiver constitute
a continuing waiver. No waiver shall be binding unless executed in
writing
by the
party making the waiver. Neither the acceptance of any partial or
delinquent payment by
the Holder nor the Holder's failure to exercise any of its rights
or
remedies on default by
the Company shall be a waiver by the Holder of any default or the
Company
obligations
under this Note, or a waiver of any subsequent default by the
Company.
|
| 10.3 |
Timeliness.
Time is of the essence of this Note and each and all of its
provisions.
|
| 10.4 |
Notices.
Notices
given under this Note shall be in writing and shall be delivered
personally, by messenger, by certified U.S. mail, return receipt
requested, or by a common
overnight carrier delivery service. Notices
shall be deemed received upon receipt
of same. Notices to the Company shall be addressed to 0000 XX
000xx
Xxxxxx, Xxxxxxxxx
0, Xxxxxxxx, Xxxxxxx 00000. Notices to the Holder shall be directed
to
Xxxxxx at
the Holder's address of record on the Company's books. A party may
change
its address
for notice by giving written notice to the other party in accordance
with
this Section.
|
| 10.5 |
Governing
Law and Venue. This Note shall be construed in accordance with, and
governed
by, the laws of the State of New York, and any action or proceeding,
including arbitration,
brought by any party in which this Note is a subject shall be brought
in
New York.
|
| 10.6 |
Effect
of Headings. The headings of the sections of this Note are included
for
purposes of
convenience only, and shall not affect the construction or interpretation
of any of its provisions.
|
4
| 10.7 |
Invalidity.
Any provision of this Note which is invalid, void, or illegal, shall
not
affect, impair,
or invalidate any other provision of this Note, and such other provisions
of this Note
shall remain in full force and
effect.
|
| 10.8 |
Professional
Fees and Costs. If any legal or equitable action, arbitration, or
other
proceeding,
whether on the merits or on motion, are brought or undertaken, or
an
attorney is
retained to enforce this Note, or because of an alleged dispute,
breach,
default, or misrepresentation
in connection with any
of the provisions of this Note, then the successful
or prevailing party or parties in such undertaking (or the party
that
would prevail
if an action were brought) shall be entitled to recover reasonable
attorney's fees and
other professional fees and other costs incurred in such action,
proceeding or discussions,
in addition
to any other relief to which such party would be entitled.. The
parties
intend this provision be given the most liberal constructionn possible
and
to apply to
any circumstances in which such party reasonably incurs
expenses.
|
5
EXHIBIT
'A'
CONVERSION
NOTICE
| TO: |
Global
IT Holdings, Inc.
000
0xx Xxxxxx,
Xxxxx 0000
Xxx
Xxxx, XX 00000
Attn:
Corporate
Secretary
|
The
undersigned owner of this 6.5% Convertible Note due December 31, 2004 (the
"Note") issued by Global IT Holdings, Inc. (the "Company") hereby
irrevocably exercises its option to convert
$________ Principal
Amount of the Note into shares of Common Stock in accordance with the
terms
of
the Note. The undersigned hereby instructs the Company to convert the portion
of
the Note specified
above into _____________ shares
of
Common Stock Issued at Conversion in accordance with the
provisions of Article 3 of the Note. Attached hereto is the undersigned's
calculation for the Conversion Price.
The
undersigned directs that the Common Stock and certificates therefore deliverable
upon conversion,
the Note reissued in the Principal Amount not being surrendered for conversion
hereby, together with any check in payment for fractional Common Stock, be
registered in the name of and/or delivered
to the undersigned unless a different name has been indicated below. All
capitalized terms used and
not
defined herein have the respective meanings assigned to them in the Note.
The
conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time
the
rights of the undersigned as a Holder of the Principal Amount of the Note set
forth above shall cease
and
the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be registered
shall be deemed to have become the holder or holders of record of the Common
Shares represented
thereby and all voting and other rights associated with the beneficial ownership
of such Common
Shares shall at such time vest with such Person or Persons.
Date
and
time:
___________________________
Signature
Fill
in
for registration of Note:
Please
print name and address
(including
ZIP code number):
___________________________
___________________________
___________________________
6
