CONVERTIBLE NOTE
NEITHER
THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE
BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE "SECURITIES")
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY
STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY
INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED: (i) IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (ii) IN THE
ABSENCE
OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE
ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT
OR; (iii) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE
144 UNDER THE 1933 ACT.
CONVERTIBLE
NOTE
Teaneck,
New Jersey
|
_____________________(the
"Issuance Date")
|
$____________.00
|
FOR
VALUE RECEIVED, Herborium
Group, Inc., a Nevada corporation (the "Company"),
hereby promises to pay to the order of _____________________
or his
registered assigns (the "Holder") the principal
amount of _____________________ and No/100 Dollars upon the earlier of (i)
upon
demand made any time after the date that is 12 months from initial issuance
of a
Note, (ii) the date upon which the Company completes the sale of Common Stock
(or like security) for aggregate gross proceeds of at least $1.5 million (a
“Qualified Financing”), or (iii) the closing of an acquisition of the Company,
whether by material merger, reorganization, sale of assets or other similar
material transaction (an “Acquisition”), (the "Maturity Date"), and
to
pay interest on the unpaid principal balance hereof at the rate of Ten percent
(10%) per annum from the
Issuance Date in accordance with the terms hereof or otherwise. The principal
balance of this Note shall be
payable pursuant to Paragraph 1. Interest on this Note shall accrue and be
payable pursuant to Paragraph 1.
Each
capitalized term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in the
Subscription Agreement, dated between
the Company and the Holder (the "Subscription
Document"),
pursuant
to which this convertible note (the "Note") was originally issued. The
term
"Note" and all reference thereto, as used throughout this instrument, shall
mean
this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented. This Note and
the
Other Notes (as hereinafter defined) issued by the Company on the Issuance
Date
pursuant to Subscription
Documents executed by the Company and purchasers of the Other Notes
(collectively, the
"Subscription
Documents") are
collectively referred to in this Note as the "Notes."
1
1.
Payments
of Principal and Interest.
(a) Payment
of Principal.
The
principal balance of this Note shall be paid to the Holder hereof
on
the Maturity Date. The Company shall pay or prepay pro-rata portion outstanding
principal balance
to the Holder, thirty (30) days after the semi-annual date, and/or subject
to
section (2).
(b) Payment
of Interest.
Interest on the unpaid principal balance of this Note shall accrue at a rate
of
Ten percent (10%) per annum commencing on the Issuance Date. Interest shall
be
computed on the
basis
of a 365-day year and actual days elapsed. Interest shall be paid in kind
semi-annually at a price equal to $0.025 per share.
Interest shall be due and payable semi-annually, in arrears.
(c) General
Payment Provisions.
All
payments of principal and interest on this Note shall
be
made in lawful money of the United States of America by check to such account
as
the Holder may from
time
to time designate by written notice to the Company in accordance with the
provisions of this Note. 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 and, in the case of any interest payment date which is not the date on
which
this Note is paid in full, the extension of the due date thereof shall not
be
taken into account for purposes of determining the amount
of
interest due on such date. For purposes of this Note, "Business
Day"
shall
mean any day other than
a
Saturday, Sunday or a day on which commercial banks in the State of New York
are
authorized or required by
law or
executive order to remain closed. No payments of principal or interest shall
be
made on any Note unless such payment is made pro-rata to all holders of the
Notes.
2.
Conversion
of Note.
At any
time six months after the Issuance Date, the principal and accrued interest
on
this Note may be convertible in whole or in part into shares of the Company's
common stock, par value $.001 per share (the "Common
Stock")
at the
option of the holder, on the terms and conditions set forth in this Paragraph
2.
(a) Certain
Defined Terms.
For
purposes of this Note, the following terms shall have the following
meanings:
(1) "Conversion
Amount" means
the
sum of (A) the principal amount of this Note
to
be converted with respect to which this determination is being made, (B) accrued
and unpaid interest,
if so included at the Holder's sole discretion and (c) Default Interest, if
any,
on unpaid interest and principal, if so included at the Holder's sole
discretion.
(2) "Conversion
Price" means
two
and a half cents ($0.025) or 20% discount on the price per share issued in
a
Qualified Financing.
(3) "Other
Notes" means
the
convertible notes, other than this Note, issued by the
Company pursuant to Subscription Documents.
(4) "Person"
means
an
individual, a limited liability company, a partnership, a
joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
(b) Xxxxxx's
Conversion Right.
The
Notes may be converted at the earlier of either (i) six months from the Issuance
Date, or; (ii) a Qualified Financing, or; (iii) the closing of an Acquisition.
The
Holder shall be required to request conversions in increments of $1,000
or
more. The Company shall not issue any fraction of a share of Common Stock upon
any conversion; if
such
issuance would result in the issuance of a fraction of a share of Common Stock,
the Company shall round such fraction of a share of Common Stock up to the
nearest whole share.
2
This
Note
also contains an automatic principal redemption feature which requires the
Company to escrow five percent (5%) of its gross revenues (the “Redemption
Funds”) in a separate bank account. To the extent the Company generates revenues
the holder of this Note shall receive re-payment of a portion of this Note
on a
semi-annual basis until such time that the total principal and any unpaid
interest has been repaid. The Redemption Funds will be distributed pro-rata
among the holders of the Notes within thirty (30) business days after the end
of
each semi-annual period. Redemption Funds paid to holders shall first be applied
to any unpaid principal.
(c) Conversion
Rate.
The
number of shares of Common Stock issuable upon conversion of a Conversion Amount
of this Note pursuant to Paragraph 2.(b) shall be determined according to the
following formula (the "Conversion
Rate"):
Conversion
Amount
Conversion
Price
The
Company will give prompt price notice to Note Holder concerning a financing
or
acquisition so that they will be able to decide whether to convert. The number
of shares into which the Notes are convertible will equal the quotient of the
converted principal and interest divided by the price per share issued in a
Qualified Financing or Acquisition at a twenty percent (20%) discount, or at
$0.025.
(d) Mechanics
of Conversion.
The
conversion of this Note shall be conducted in the following manner:
(1) Holder's
Delivery Requirements.
To
convert this Note into shares of Common Stock on any date set forth in the
Conversion Notice by the Holder (the "Conversion Date"), the Holder hereof
shall
(A) transmit by facsimile (or otherwise deliver), for receipt on or prior
to
11:59 p.m., Eastern Time on such date, a copy of a fully executed notice of
conversion in the form
attached hereto as Exhibit 2.(d)(1) (the "Conversion
Notice")
to the
Company; and (B) surrender
to a common carrier for delivery to the Company as soon as practicable following
the date of
the
Conversion Notice original of the Note being converted.
(2) Company's
Response.
Upon
receipt by the Company of a copy of a Conversion Notice, the Company shall
as
soon as
practicable,
but in no event later than five (5) Business Days after receipt of such
Conversion Notice, send, via facsimile and overnight courier, a confirmation
of
receipt of such Conversion Notice (the "Conversion
Confirmation") to
such
Holder indicating that the Company will process such Conversion Notice in
accordance with the terms
herein. Within fifteen (15) Business Days after the date of the Conversion
Confirmation, the Company
shall issue and surrender to a common carrier for delivery to the address as
specified in the Conversion
Notice, a certificate, registered in the name of the Holder, for the number
of
shares of Common Stock to which the Holder shall be entitled. If less than
the
full principal amount of this Note is submitted for conversion, then the Company
shall within fifteen (15) Business Days after receipt of the Note and at its
own
expense, issue and deliver to the Holder a new Note for the outstanding
principal amount not so converted; provided that such new Note shall be
substantially in the same form as this Note.
(3) Record
Holder.
The
person or persons entitled to receive the shares of Common
Stock issuable upon a conversion of this Note shall be treated for all purposes
as the record holder
or
holders of such shares of Common Stock on the Conversion Date.
(e) Taxes.
The
Company shall pay any and all taxes that may be payable with respect
to
the
issuance and delivery of Common Stock upon the conversion of Notes.
(f) Adjustments
to Conversion Price.
If the
Company at any time subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of
its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number
of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased.
3
3. Other
Rights of Holders.
These
events may constitute an acquisition, therefore Notes will either need to be
converted at a 20% discount or redeemed.
(a)
Reorganization,
Reclassification, Consolidation, Merger or Sale.
Any
recapitalization,
reorganization, reclassification, consolidation, merger, sale of all or
substantially all of the Company's
assets to another Person or other transaction which is effected in such a way
that holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change."
Prior
to
the
consummation of any (i) Organic Change or (ii) other Organic Change following
which the Company is
not a
surviving entity, the Company will secure from the Person purchasing such assets
or the successor resulting
from such Organic Change (in each case, the "Acquiring
Entity")
a
written agreement (in form and substance
reasonably satisfactory to the holders of a majority of the Notes then
outstanding) to deliver to each Holder
in
exchange for this Note, a security of the Acquiring Entity evidenced by a
written instrument substantially similar in form and substance to this Note,
and
reasonably satisfactory to the Holders of a majority of the Conversion Amount
of
the Notes then outstanding. Prior to the consummation of any other Organic
Change, the Company shall make appropriate provision (in form and substance
reasonably satisfactory
to the Holders of a majority of the Conversion Amount of the Notes then
outstanding) to ensure that
each
of the Holders will thereafter have the right to acquire and receive in lieu
of
or in addition to (as the case
may
be) the shares of Common Stock immediately theretofore acquirable and receivable
upon the conversion of such Holder's Note, such shares of stock, securities
or
assets that would have been issued or payable
in such Organic Change with respect to or in exchange for the number of shares
of Common Stock which would have been acquirable and receivable upon the
conversion of such Holder's Note as of the date of
such
Organic Change (without taking into account any limitations or restrictions
on
the convertibility of the Note).
1. Out
of
State Execution.
The
Company and the Holder hereby acknowledge that this Note was
executed by the Company outside the State of New York and delivered to Holder
outside the State of New
York.
Further, the Holder acknowledges that the Holder took possession and custody
of
the Note outside the
State
of New York.
2. Reservation
of Shares.
The
Company shall at all times, so long as any principal amount of the
Notes
is outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for
the
purpose of effecting the conversion of the Notes, such number of shares of
Common Stock as shall at
all
times be sufficient to effect the conversion of all of the principal amount
of
the Notes then outstanding; provided
that the number of shares of Common Stock so reserved shall at no time be less
than one hundred ten percent (110%) of the number of shares of Common Stock
for
which the principal amount of the Notes are at any time convertible. The initial
number of shares of Common Stock reserved for conversions of the Notes
and
each increase in the number of shares so reserved shall be allocated pro rata
among the Holders of the Notes based on the principal amount of the Notes held
by each Holder at the time of issuance of the Notes or increase in the number
of
reserved shares, as the case may be. In the event a Holder shall sell or
otherwise transfer any of such Holder's Notes, each transferee shall be
allocated a pro rata portion of the number of reserved shares of Common Stock
reserved for such transferor. Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
Holders, pro rata based on the principal amount of the Notes then held by such
Holders.
3. Voting
Rights.
Holders
shall have no voting rights, except as required by law, including but
not
limited to the New York Business Corporation Act and as expressly provided
in
this Note.
4
4. Reissuance
of Note.
In the
event of a conversion or redemption pursuant to this Note of less than
all
of the Conversion Amount represented by this Note, the Company shall promptly
cause to be issued and
delivered to the Holder, upon tender by the Holder of the Note converted or
redeemed, a new note of like tenor
representing the remaining principal amount of this Note which has not been
so
converted or redeemed and
which
is in substantially the same form as this Note.
5. Defaults
and Remedies.
(a)
Events
of Default.
An
"Event
of Default" is:
(i)
default for thirty (30) days in
payment of interest or Default Interest on this Note; (ii) default in payment
of
the principal amount of this Note
when
due; (iii) failure by the Company for thirty (30) days after notice to it to
comply with any other material provision of this Note; (iv) if the Company
pursuant to or within the meaning of any Bankruptcy Law; (A) commences a
voluntary case; (B) consents to the entry of an order for relief against it
in
an involuntary case; (C) consents to the appointment of a Custodian of it or
for
all or substantially all of its property; (D) makes a general assignment for
the
benefit of its creditors; or (E) admits in writing that it is generally
unable to pay its debts as the same become due; or (vi) a court of competent
jurisdiction enters an order
or
decree under any Bankruptcy Law that: (I) is for relief against the Company
in
an involuntary case; (2)
appoints a Custodian of the Company or for all or substantially all of its
property; or (3) orders the liquidation of the Company or any subsidiary, and
the order or decree remains unstayed and in effect for thirty
(30) days. The Term "Bankruptcy
Law"
means Title I 1 , U.S. Code, or any similar Federal or State Law
for
the relief of debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator or similar official under any Bankruptcy Law.
(b)
Remedies.
If an
Event of Default occurs and is continuing, the Holder of this Note may
declare all of this Note, including any interest and Default Interest and other
amounts due, to be due and payable
immediately.
9. Vote
to Change the Terms of this Note.
This
Note and any provision hereof may only be amended by an instrument in writing
signed by the Company and holders of a majority of the aggregate Conversion
Amount of the Notes then outstanding.
10. Lost
or Stolen Note.
Upon
receipt by the Company of evidence satisfactory to the Company of
the
loss, theft, destruction or mutilation of this Note, and, in the case of loss,
theft or destruction, of an indemnification
undertaking by the Holder to the Company in a form reasonably acceptable to
the
Company and,
in
the case of mutilation, upon surrender and cancellation of the Notes, the
Company shall execute and deliver
a
new Note of like tenor and date and in substantially the same form as this
Note;
provided, however, the
Company shall not be obligated to re-issue a Note if the Holder
contemporaneously requests the Company to
convert such remaining principal amount into Common Stock.
11. Payment
of Collection, Enforcement and Other Costs.
If: (i)
this Note is placed in the hands of
an
attorney for collection or enforcement or is collected or enforced through
any
legal proceeding; or (ii) an
attorney is retained to represent the Holder of this Note in any bankruptcy,
reorganization, receivership or
other
proceedings affecting creditors' rights and involving a claim under this Note,
then the Company shall pay
to
the Holder all reasonable attorneys' fees, costs and expenses incurred in
connection therewith, in addition to all other amounts due
hereunder.
12. Cancellation.
After
all principal and accrued interest at any time owed on this Note has been
paid
in
full, this Note shall automatically be deemed canceled, shall be surrendered
to
the Company for cancellation and shall not be reissued.
13. Waiver
of Notice.
To the
extent permitted by law, the Company hereby waives demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default
or enforcement of this Note and the Securities Purchase Agreement.
5
14. Governing
Law.
This
Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this
Note shall be governed by,
the
laws of the State of New York, without giving effect to provisions thereof
regarding conflict of laws. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in
Miami
Dade County, New York, for the adjudication of any dispute hereunder or in
connection herewith or with
any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to
assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding
is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service
of
process and consents
to process being served in any such suit, action or proceeding by sending by
certified mail or overnight
courier a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
15. Remedies,
Characterizations, Other Obligations, Breaches and Injunctive Relief.
The
remedies
provided in this Note shall be cumulative and in addition to all other remedies
available under this Note,
at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and no remedy
contained herein shall be deemed a waiver of compliance with the provisions
giving rise to such remedy and nothing herein shall limit a Holder's right
to
pursue actual damages for any failure by the Company
to comply with the terms of this Note. The Company covenants to each Holder
of
Notes that there shall be no characterization concerning this instrument other
than as expressly provided herein. Amounts set forth or provided for herein
with
respect to payments, conversion and the like (and the computation thereof)
shall
be the amounts to be received by the Holder thereof and shall not, except as
expressly provided herein, be
subject to any other obligation of the Company (or the performance
thereof).
16. Specific
Shall Not Limit General; Construction.
No
specific provision contained in this Note shall
limit or modify any more general provision contained herein. This Note shall
be
deemed to be jointly drafted by the Company and all Holders and shall not be
construed against any person as the drafter hereof.
17. Failure
or Indulgence Not Waiver.
No
failure or delay on the part of this Note in the exercise of
any
power, right or privilege hereunder shall operate as a waiver thereof, nor
shall
any single or partial exercise
of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power
or
privilege.
(Signature
Page Follows)
6
IN
WITNESS WHEREOF, the
Company has caused this Note to be signed by Xx. Xxxxx Xxxxxxxxx, its Chief
Executive Officer, on and as of the Issuance Date.
|
Herborium
Group, Inc.
|
||
|
Xx.
Xxxxx Xxxxxxxxx
|
7
EXHIBIT
2.(d)(I)
CONVERSION
NOTICE
Reference
is made to the Convertible Note issued by Herborium Group, Inc. (the "Note").
In
accordance with and pursuant to the Note, the undersigned hereby elects to
convert a portion or all of the principal
balance of the Note, indicated below into shares of Common Stock, par value
$.001 per share (the "Common
Stock"), of the Company, by tendering the Note specified below as of the date
specified below.
|
Aggregate
Principal Amount to be converted:
|
||||||||
|
No(s).
of Note to be converted:
|
||||||||
|
Please
confirm the following information:
|
||||||||
|
Conversion
Amount:
|
||||||||
|
Conversion
Price:
|
||||||||
|
Number
of shares of Common Stock to be issued:
|
||||||||
|
Please
issue the Common Stock into which the Note is being converted in
the name
of the Holder of the Note and to the following address:
|
||||||||
|
Telephone
Number:
|
||||||||
|
Facsimile
Number:
|
||||||||
|
Authorization:
|
||||||||
|
By:
|
||||||||
|
Title:
|
||||||||
|
Dated:
|
||||||||
|
By:
|
||||||||
|
Please
issue a new Note(s) for the outstanding principal balance in the
name of
the Holder and to the following address:
______________________________________________________________________
|
||||||||
|
Outstanding
Principal Balance:
|
||||||||
|
Telephone
No.:
|
||||||||
|
Facsimile
No.: Authorization:
|
||||||||
|
By:
|
||||||||
|
Title:
|
||||||||
|
Dated:
|
||||||||
8
