NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE...
NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES
ACT”), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
THIS NOTE DOES NOT REQUIRE PHYSICAL
SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A
RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE
OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE
PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.
10% SECURED CONVERTIBLE NOTE DUE
DECEMBER 31, 2009
OF
ABAZIAS, INC.
|
Original Principal Amount: Up to
$500,000
Issuance Date: August
12, 2008
|
Tampa, Florida
|
For Value
Received, ABAZIAS INC. a
corporation duly organized and existing under the laws of the State of Delaware
(the “Corporation”), hereby promises to pay to the order
of OMNIRELIANT HOLDINGS, INC., or its registered assigns or
successors-in-interest (“Holder”) the principal sum of up Five Hundred
Thousand Dollars (U.S. $500,000.00), together with all accrued but unpaid
interest thereon, no later than December 31, 2009 ( the “Maturity
Date”) to the extent such
principal amount and interest has not been repaid or converted into the
Corporation’s Common Stock, par value $0.001 per share (the “Common
Stock”), in accordance with
the terms hereof. The $500,000.00 shall be disbursed to the
Corporation from the Holder in accordance with the following funding schedule:
$250,000 on August 14, 2008 and $250,000 on or before September 14, 2008.
Interest on the unpaid and unconverted
principal balance hereof shall accrue at the rate of 10% per annum from the date
of original issuance hereof (the “Issuance
Date”) until the same
becomes due and payable on the Maturity Date, or such earlier date upon
acceleration or by conversion, redemption or repayment in accordance with the
terms hereof or of the other Agreements. Interest on this Note shall
accrue daily commencing on the Issuance Date and shall be computed on the basis
of a 360-day year, 30-day months and actual days elapsed and shall be payable in
accordance with Section 1 hereof. Unless otherwise agreed or required
by applicable law, payments will be applied first to any unpaid collection
costs, then to unpaid interest and fees and any remaining amount to
principal.
All payments of principal and interest
on this Note shall be made in lawful money of the United States of America by
wire transfer of immediately available funds to such account as the Holder may
from time to time designate by written notice in accordance with the provisions
of this Note or by company check. This Note may not be prepaid in
whole or in part except as otherwise provided herein. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day (as defined below), the same shall instead be due on the next
succeeding day which is a Business Day.
For purposes hereof the
following terms shall have the meanings ascribed to them
below:
“Bankruptcy
Event” means any of the
following events: (a) the Corporation or any subsidiary commences a case or
other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction relating to the Corporation or any subsidiary thereof;
(b) there is commenced against the Corporation or any subsidiary any such case
or proceeding that is not dismissed within 60 days after commencement; (c) the
Corporation or any subsidiary is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered; (d)
the Corporation or any subsidiary suffers any appointment of any custodian or
the like for it or any substantial part of its property that is not discharged
or stayed within 60 days; (e) the Corporation or any subsidiary makes a general
assignment for the benefit of creditors; (f) the Corporation or any subsidiary
fails to pay, or states that it is unable to pay or is unable to pay, its debts
generally as they become due; (g) the Corporation or any subsidiary calls a
meeting of its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (h) the Corporation or any subsidiary, by any act
or failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or other action for
the purpose of effecting any of the foregoing.
-1-
“Business
Day” shall mean any day
other than a Saturday, Sunday or a day on which commercial banks in the City of
New York are authorized or required by law or executive order to remain
closed.
“Conversion
Price” shall equal the
greater of (i) $.50 or (ii) the closing bid price of the
Corporation’s shares of Common Stock on the date of
the Conversion.
“Convertible
Securities” means any
convertible securities, warrants, options or other rights to subscribe for or to
purchase or exchange for, shares of Common Stock.
“Exchange
Act” shall mean the
Securities Exchange Act of 1934, as amended.
“Per
Share Selling Price” shall
include the amount actually paid by any Person for each share of Common Stock in
a sale or issuance by the Corporation. In the event a fee is paid by
the Corporation in connection with such transaction directly or indirectly to
such Person being sold or issued such securities or its affiliates, any such fee
shall be deducted from the selling price pro rata to all shares sold in the
transaction to arrive at the Per Share Selling Price. A sale of
shares of Common Stock shall include the sale or issuance of rights, options,
warrants or convertible, exchangeable or exercisable securities under which the
Corporation is or may become obligated to issue shares of Common Stock, and in
such circumstances the Per Share Selling Price of the Common Stock covered
thereby shall also include the exercise, exchange or conversion price thereof
(in addition to the consideration received by the Corporation upon such sale or
issuance less the fee amount as provided above). In case of any such
security issued in a Variable Rate Transaction or an MFN Transaction, the Per
Share Selling Price shall be deemed to be the lowest conversion or exercise
price at which such securities are converted or exercised or might have been
converted or exercised in the case of a Variable Rate Transaction, or the lowest
adjustment price in the case of an MFN Transaction, over the life of such
securities. If shares are issued for a consideration other than cash, the Per
Share Selling Price shall be the fair value of such consideration as determined
in good faith by independent certified public accountants mutually acceptable to
the Corporation and the Purchaser.
“Principal
Amount” shall refer to the
sum of (i) the original principal amount of this Note, (ii) all accrued but
unpaid interest hereunder, and (iii) any default payments owing under the
Agreements but not previously paid or added to the Principal
Amount.
“Principal
Market” shall mean the OTC
Bulletin Board or such other principal market or exchange on which the Common
Stock is then listed for trading.
“Securities
Act” shall mean the
Securities Act of 1933, as amended.
“Trading
Day” shall mean a day on
which there is trading on the Principal Market.
“Underlying
Shares” means the shares of
Common Stock into which this Note are convertible (including interest or
principal payments in Common Stock as set forth herein) in accordance with the
terms hereof.
The following terms and conditions shall
apply to this Note:
Section
1. Interest
Payments. Subject to and in accordance
with the terms of this Section 1, on each Interest Payment Date the Corporation
shall pay to the Holder all interest accrued to date on the entire outstanding
principal amount of this Note (“Interest
Amount”). On
such Interest Payment Date the Corporation shall pay to the Holder an amount
equal to such Interest Amount in satisfaction of such
obligation.
-2-
Section
2. Conversion.
(a)(i)
Voluntary
Conversion Right. Subject to the terms hereof
and restrictions and limitations contained herein, the Holder shall have the
right, at such Holder’s option, at any time after (i) the sale of substantially all
of the assets of the Company to the Holder and provided this Note has not been
repaid ; or (ii) an Event of Default;, and from time to time to convert the
outstanding Principal Amount under this Note in whole or in part by delivering
to the Corporation a fully executed notice of conversion in the form of
conversion notice attached hereto as Exhibit
A (the “Conversion
Notice”), which may be
transmitted by facsimile or electronic transmission.
(a)(ii) Post-Asset
Sale Conversion. In the event the
Corporation sells substantially all of its assets to the Holder and provided this Note
has not been repaid, this
Note shall automatically
convert into outstanding
shares of the Corporation
as follows; (i) If the Company consummates a merger or acquisition with a
company that was introduced to the Company by the Holder, this Note shall automatically convert
into twenty five percent (25%) of the outstanding shares of the
Corporation, on a fully
diluted basis at the time of Conversion.
(b)
Common Stock
Issuance upon Conversion. Stock
Certificates The
Corporation will deliver to the Holder not later than two (2) Trading Days after
the Conversion Date, a certificate or certificates representing the number of
shares of Common Stock being acquired upon the conversion of this
Note.
(c)
Conversion
Price Adjustments.
(i)
Reserved.
(ii) Stock Dividends,
Splits and Combinations. If the Corporation or any
of its subsidiaries, at any time while this Note are outstanding (A) shall pay a
stock dividend or otherwise make a distribution or distributions on any equity
securities (including instruments or securities convertible into or exchangeable
for such equity securities) in shares of Common Stock, (B) subdivide outstanding
Common Stock into a larger number of shares, or (C) combine outstanding Common
Stock into a smaller number of shares, then the Conversion Price shall be
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding before such event and the denominator of which shall
be the number of shares of Common Stock outstanding after such event. Any
adjustment made pursuant to this Section 2(c)(ii) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision or
combination.
(iii) Distributions. If the Corporation or any of its
subsidiaries, at any time while this Note are outstanding, shall distribute to
all holders of Common Stock evidences of its indebtedness or assets or cash or
rights or warrants to subscribe for or purchase any security of the Corporation
or any of its subsidiaries (excluding those referred to in Section 2(c)(i)
above), then concurrently with such distributions to holders of Common Stock,
the Corporation shall distribute to holders of this Note the amount of such
indebtedness, assets, cash or rights or warrants which the holders of Notes
would have received had all their Notes been converted into Common Stock at the
Conversion Price.
(iv) Common Stock
Issuances. For a
period commencing on the date of the Note and continuing at any time while the
Note is outstanding, if the
Corporation or any of its subsidiaries (A) issues or sells any Common Stock or
Convertible Securities, or (B) directly or indirectly effectively reduces the
conversion, exercise or exchange price for any Convertible Securities which are
currently outstanding (other than pursuant to terms existing on the date
hereof), at or to an effective Per Share Selling Price (the “Lower Per Share
Selling Price”) which is less than the then applicable Conversion Price, then in
each such case, the Conversion Price in effect immediately prior to such issue
or sale or record date shall be automatically reduced effective concurrently
with such issue or sale to the Lower Per Share Selling Price
(which figure shall be appropriately and equitably adjusted as provided herein
for stock splits, stock dividends, and similar events).
-3-
The foregoing provisions of this
subsection shall not apply to issuances or sales of (x) Common Stock upon conversion, exercise
or exchange of Convertible Securities outstanding on the issuance date hereof in
accordance with the terms in effect on such issuance date, (y) Common Stock or
Convertible Securities under the Corporation’s duly adopted stock option and
bonus plans for employees and directors, or (z) Common Stock or Convertible
Securities issued in a merger/acquisition transaction to which the
Corporation is a party. For the purposes of the
foregoing adjustments, in the case of the issuance of any Convertible
Securities, the maximum number of shares of Common Stock issuable upon exercise,
exchange or conversion of such Convertible Securities shall be deemed to be
outstanding, provided that no further adjustment shall be made upon the actual
issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities. For purposes of this Section 2(c)(iv), if an event
occurs that triggers more than one of the above adjustment provisions, then only
one adjustment shall be made and the calculation method which yields the
greatest downward adjustment in the affected Conversion Price shall be
used.
(v) Rounding of
Adjustments. All
calculations under this Section 2 or Section 1 shall be made to 4 decimal places
for dollar amounts or the nearest 1/100th of a share, as the case may
be.
(vi) Notice of
Adjustments. Whenever any
affected Conversion Price is adjusted pursuant to Section 2(c)(i), (ii) or (iii)
above, the Corporation shall promptly deliver to each holder of this Note, a
notice setting forth the affected Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, provided
that any failure to so provide such notice shall not affect the automatic
adjustment hereunder.
(c)
Reservation
and Issuance of Underlying Securities. The Corporation covenants
that it will at all times reserve and keep available out of its authorized and
unissued Common Stock solely for the purpose of issuance upon conversion of this
Note (including repayments in stock), free from preemptive rights or any other
actual contingent purchase rights of persons other than the holders of this
Note, not less than such number of shares of Common Stock as shall be issuable
(taking into account the adjustments under this Section 2) upon the conversion
of this Note hereunder in Common Stock (including repayments in
stock). The Corporation covenants that all shares of Common Stock
that shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid, nonassessable and freely tradable.
(d)
Cancellation. After all of the Principal
Amount (including accrued but unpaid interest and default payments at any time
owed on this Note) have been paid in full or converted into Common Stock, this
Note shall automatically be deemed canceled and the Holder shall promptly
surrender the Note to the Corporation at the Corporation’s principal executive
offices.
Section
3. Security for
the Note.
This Note is secured by the security
interest as set forth in the Security Agreement. This Note is subject to all
of the terms and conditions
thereof including, but not limited to, the remedies specified
therein.
Section
4. Defaults
and Remedies.
(a)
Events of
Default. An
“Event
of Default” is: (i) a
default in payment of any amount due hereunder which default continues for more
than five (5) Business Days after the due date thereof; (ii) a default in the
timely issuance of Underlying Shares upon and in accordance with terms hereof,
which default continues for five (5) Business Days after the Corporation has
received written notice informing the Corporation that it has failed to issue
shares or deliver stock certificates within the fifth day following the
Conversion Date; (iii) failure by the Corporation for fifteen (15) days after
written notice has been received by the Corporation to comply with any material
provision of any of this Note, (including without limitation the failure to
issue the requisite number of shares of Common Stock upon conversion hereof;
(iv) a material breach by the Corporation of its representations or warranties
in the Security Agreement
; (v) any default after any
cure period under, or acceleration prior to maturity of, any mortgage, indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any indebtedness for money borrowed by the Corporation for in
excess of $200,000 or for money borrowed the repayment of which is guaranteed by
the Corporation for in excess of $200,000, whether such indebtedness or
guarantee now exists or shall be created hereafter;
(b)
Remedies. If an Event of Default
occurs and is continuing with respect to any of this Note, the Holder may
declare all of the then outstanding Principal Amount of this Note and all other
Notes held by the Holder, including any interest due thereon, to be due and
payable immediately, except that in the case of an Event of Default arising from
events described in clauses (v) and (vi) of Section 4(a), this Note shall become
due and payable without further action or notice.
-4-
Section
5. Notice
Procedures. Any
and all notices or other communications or deliveries to be provided by the
Holder hereunder, including, without limitation, any Conversion Notice, shall be
in writing and either (i) emailed or (ii) delivered personally, by confirmed
facsimile, or by a nationally recognized overnight courier service to the
Corporation at the facsimile telephone number or address of the Corporation
specified in the Security Agreement. Any and all notices or other
communications or deliveries to be provided by the Corporation hereunder shall
be in writing and either (x) emailed or (y) delivered personally,
by facsimile, or by a nationally recognized overnight courier service addressed
to the Holder at the facsimile telephone number or address of the Holder
appearing on the books of the Corporation, or if no such facsimile telephone
number or address appears, at the principal place of business of the Holder. Any
notice or other communication or deliveries hereunder shall be deemed delivered
(i) upon receipt, when emailed or delivered personally, (ii) when sent by
facsimile, upon receipt if received on a Business Day prior to 5:00 p.m.
(Eastern Time), or on the first Business Day following such receipt if received
on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when
deposited with a nationally recognized overnight courier
service.
Section
6. General.
(a)
Payment of
Expenses. The
Corporation agrees to pay all reasonable charges and expenses, including
attorneys’ fees and expenses, which may be incurred by the Holder in
successfully enforcing this Note and/or collecting any amount due under this
Note.
(b)
Amendment. Neither this Note nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the Corporation and the Holder.
(c)
Assignment,
Etc. The Holder
may assign or transfer this Note to any transferee only with the prior written
consent of the Corporation, which may not be unreasonably withheld or delayed,
provided that (i) the Holder may assign or transfer this Note to any of such
Holder’s affiliates without the consent of the Corporation and (ii) upon
any Event of Default, the Holder may assign or transfer this Note without the
consent of the Corporation. The Holder shall notify the Corporation
of any such assignment or transfer promptly. This Note shall be binding upon the
Corporation and its successors and shall inure to the benefit of the Holder and
its successors and permitted assigns.
(d)
No
Waiver. No
failure on the part of the Holder to exercise, and no delay in exercising any
right, remedy or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by the Holder of any right, remedy or power
hereunder preclude any other or future exercise of any other right, remedy or
power. Each and every right, remedy or power hereby granted to the Holder or
allowed it by law or other agreement shall be cumulative and not exclusive of
any other, and may be exercised by the Holder from time to
time.
(e)
Governing
Law; Jurisdiction. THIS NOTE WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO ANY CONFLICTS OF LAWS
PROVISIONS THEREOF THAT WOULD DEFER TO THE SUBSTANTIVE LAWS OF ANOTHER
JURISDICTION. The Corporation irrevocably submits to the exclusive
jurisdiction of any State or Federal Court sitting in the State of Florida, County of Hillsborough, over any suit, action, or proceeding
arising out of or relating to this Note. The Corporation irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum. The Corporation
agrees that the service of process upon it mailed by certified or registered
mail (and service so made shall be deemed complete three days after the same has
been posted as aforesaid) or by personal service shall be deemed in every
respect effective service of process upon it in any such suit or
proceeding. Nothing herein shall affect Holder’s right to serve
process in any other manner permitted by law. The Corporation agrees
that a final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
-5-
(f)
Replacement
Notes. This Note
may be exchanged by Holder at any time and from time to time for a Note or Notes
with different denominations representing an equal aggregate outstanding
Principal Amount, as reasonably requested by Xxxxxx, upon surrendering the same.
No service charge will be made for such registration or exchange. In
the event that Xxxxxx notifies the Corporation that this Note has been lost,
stolen or destroyed, a replacement Note identical in all respects to the
original Note (except for registration number and Principal Amount, if different
than that shown on the original Note), shall be issued to the Holder, provided
that the Holder executes and delivers to the Corporation an agreement reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with the Note.
IN WITNESS
WHEREOF, the Corporation
has caused this Note to be duly executed on the day and in the year first above
written.
ABAZIAS, INC.
By: 
Xxxxx Xxxxxxxxx
Chief Executive
Officer
-6-
EXHIBIT A
FORM OF CONVERSION
NOTICE
(To be executed by
the Holder in order to convert
a Note)
Re: 10%
Convertible Note (“Note”) issued by ABAZIAS, INC. to OMNIRELIANT
HOLDINGS, INC. in the original principal amount of up to $500,000.00.
The undersigned hereby elects to convert
the aggregate outstanding Principal Amount (as defined in the Note) indicated
below of this Note into shares of Common Stock, par value $0.001 per share (the
“Common
Stock”), of ABAZIAS, INC.
(the “Corporation”) according to the conditions hereof, as
of the date written below. If shares are to be issued in the name of
a person other than undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and
opinions as reasonably requested by the Corporation in accordance
therewith.
No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any. The
undersigned represents as of the date hereof that, after giving effect to the
conversion of this Note pursuant to this Conversion Notice, the undersigned will
not exceed the “Restricted
Ownership Percentage”
contained in Section 2(i) of this Note. Capitalized terms used herein
and not otherwise defined shall have the meaning ascribed thereto in the
Note.
To the extent the undersigned intends to
sell the Underlying Shares issued to the undersigned upon conversion of this
Note pursuant to a Registration Statement, the undersigned agrees to comply with
all applicable prospectus delivery requirements under the 1933 Act with respect
to such sale.
Conversion
information:
Date to Effect
Conversion
Aggregate Principal
Amount
of Note Being
Converted
Number of Shares of Common Stock
to be Issued
Applicable Conversion
Price
Signature
Address
-7-
