Contract
THIS
NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT
IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES
ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING THE
SECURITIES REPRESENTED HEREBY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE
SECURITIES ACT. THIS
NOTE MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER AGENT AS A CONDITION
PRECEDENT TO THE SALE, PLEDGE, HYPOTHECATION OR ANY OTHER TRANSFER OF ANY
INTEREST IN ANY OF THE SECURITIES REPRESENTED BY THIS
NOTE.
ORGANIC
TO GO FOOD CORPORATION
CONVERTIBLE
PROMISSORY NOTE
|
$2,000,000.00
|
September
5, 0000
|
Xxxxxxx,
Xxxxxxxxxx
FOR
VALUE
RECEIVED, Organic To Go Food Corporation, a Delaware corporation (the
“Company”)
promises to pay to X.Xxxxxx L.P., a limited partnership organized under the
laws
of the Bahamas (“Investor”),
or
its registered assigns, in lawful money of the United States of America the
principal sum of Two Million Dollars ($2,000,000.00), payable in shares of
common stock, par value $0.001 (“Common
Stock”),
of
the Company on March 17, 2010 (the “Maturity
Date”)
in
accordance with the terms hereof. This Note is one of the “Notes” issued
pursuant to the Note and Warrant Purchase Agreement, dated as of June 1, 2008
(as amended, modified or supplemented, the “Note
and Warrant Purchase Agreement”)
between the Company and the Investor (as defined in the Note and Warrant
Purchase Agreement).
Capitalized
terms not otherwise defined herein shall have the meaning set forth in the
Note
and Warrant Purchase Agreement.
The
following is a statement of the rights of Investor and the conditions to which
this Note is subject, and to which Investor, by the acceptance of this Note,
agrees:
1. Definitions.
As used
in this Note, the following capitalized terms have the following
meanings:
(a) “Adjusted
Closing Price” has
the
meaning given in Section
2(c)(ii).
(b) “Base
Amount” has
the
meaning given in
Section 2(c)(i).
(c) “Change
in Control” shall
mean: (1) the consummation of the sale, transfer, conveyance or other
disposition (including any merger, reorganization or consolidation) in one
or a
series of related transactions of the voting equity securities of the Company
or
a similar transaction (or transactions) such that immediately following such
transaction (or transactions) any “person” or related “group” of “persons” (as
such terms are used in Sections 13(d) and 14(d)(2) of the Exchange
Act) (other than the Company or an Affiliate of the Company) beneficially owns
more than fifty percent (50%) of the total voting equity securities of the
Company outstanding immediately after such transaction; (2) the sale or
transfer of all or substantially all of the assets of the Company to another
entity which is not an Affiliate of the Company; or (3) the consummation of
a merger or consolidation of the Company with any other entity that is not
an
Affiliate of the Company, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at
least
fifty percent (50%) of the total voting power of the voting securities of the
Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation.
(d) “Pre-Sale
Trading Price” has
the
meaning given in Section 2(f)(iii)
(e) “Trading
Day”
means
(i) a day on which the Common Stock is traded on a Trading Market (other than
the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock
is
traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or
(iii) if the Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over-the-counter market as reported by the
Pink Sheets LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then
Trading Day shall mean a Business Day.
2. Conversion.
(a) Automatic
Conversion. The
outstanding principal amount of this Note shall automatically convert into
shares of Common Stock upon the earliest to occur of the following:
(i) the
Maturity Date; or
(ii) subject
to Section
2(f)
below,
the date upon which the closing price of the Common Stock on the Trading Market
it is listed or quoted on is and has been $3.00 per share (subject to
adjustments in accordance with Section
3)
or more
on each Trading Day during a period of 60 consecutive calendar days preceding
such date.
Upon
such
conversion of this Note, the Investor hereby agrees to deliver the original
of
this Note (or a notice to the effect that the original Note has been lost,
stolen or destroyed and an agreement acceptable to the Company whereby the
holder agrees to indemnify the Company from any loss incurred by it in
connection with this Note) for cancellation; provided,
however,
that
upon satisfaction of the conditions set forth in this Section 2(a),
this
Note shall be deemed converted and of no further force and effect, whether
or
not it is delivered for cancellation as set forth in this sentence.
-2-
(b) Optional
Conversion. Subject
to Sections
2(d) and 2(e)
below,
if this Note has not been converted pursuant to Section
2(a),
then
all, but not less than all, of the outstanding principal amount of this Note
shall be convertible into shares of Common Stock at the option of the Investor
any time before the Maturity Date. Before the Investor shall be entitled to
convert this Note into shares of Common Stock under this Section
2(b),
the
Investor shall surrender this Note, duly endorsed, at the office of the Company
and shall give written notice to the Company at its principal corporate office,
of the election to convert the same pursuant to this Section
2(b),
and
shall state the name in which the certificate for shares of Common Stock are
to
be issued. The Company shall, as soon as practicable thereafter, issue and
deliver at such office to Investor a certificate for the number of shares of
Common Stock to which Investor shall be entitled upon conversion (bearing such
legends as are required by the Note and Warrant Purchase Agreement and
applicable state and federal securities laws in the opinion of counsel to the
Company) and any other securities and property to which Investor is entitled
upon such conversion under the terms of this Note. The conversion shall be
deemed to have been made immediately prior to the close of business on the
date
of the surrender of this Note, and the Person entitled to receive the shares
of
Common Stock upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock as of such date.
(c) Conversion
Calculation.
The
number of shares of Common Stock the Investor is entitled to receive upon
conversion of this Note in accordance with this Section
2
shall be
determined as follows:
(i) Except
as
otherwise provided in Section
2(c)(ii),
the
Investor shall receive such number of shares of Common Stock as determined
by
the following formula (the “Base
Amount”):
A/10,000,000*4,333,333
where:
A
= the
principal amount of this Note.
For
example, for a Note with a principal amount of $5,000,000, the Investor would
receive 2,166,667 shares of Common Stock calculated as follows:
|
Investment
amount
|
$ | 5,000,000 | ||
|
Divided
by total investment
|
$
|
10,000,000
|
||
|
Percent
of total investment
|
50
|
%
|
||
|
Multiplied
by total shares for $10MM
|
4,333,333
|
|||
|
Shares
issued for $5MM investment
|
2,166,667
|
(ii)
If this
Note is converted on the Maturity Date and the average closing price of the
Common Stock on the Trading Market it is listed or quoted on during the ten
(10)
Trading Days ending three (3) days before the date of conversion (the
“Adjusted
Closing Price”)
is less
than $3.00 (subject to adjustment in accordance with Section
3 and
subject to Section 2(f)),
then
the Investor shall receive such number of shares of Common Stock as determined
by the following formula:
-3-
A*3/(B*.70)
where:
A
= the
Base Amount; and
B
= the
Adjusted Closing Price.
For
example, if the Adjusted Closing Price is $2.95, the Investor would receive
3,147,700 shares of Common Stock calculated as follows:
|
Base
Amount
|
2,166,667
|
|||
|
Multiplied
by 3
|
3.00
|
|||
|
6,500,000
|
||||
|
Divided
by 70% of the Adjusted Closing Price
|
2.065
|
|||
|
Adjusted
number of shares
|
3,147,700
|
(d) Conversion
upon a Change in Control.
Upon
the occurrence of a Change in Control in the Company, the principal balance
of
this Note shall be due and payable immediately in cash plus accrued and
unpaid interest at the rate of 25% per annum, compounded on an annual
basis.
(e) Event
of Default. If
an
Event of Default shall occur, then at the election of the Investor, upon a
notice to the Company (a) this Note shall be immediately converted into shares
of Common Stock pursuant to the formula detailed in Section
2(c)(ii)
(where
“B” equals the closing price of the Common Stock on the date of the Event of
Default), or (b) the principal balance of this Note plus accrued and unpaid
interest at the rate of 25% per annum, compounded on an annual basis,
shall become due and payable immediately in cash.
(f) Price
Manipulation.
(i) In
case
the Company or any of its Subsidiaries or Affiliates, or any of the
directors or officers of the Company or their Affiliates, purchase shares
of Common Stock of the Company or cause others to purchase shares of Common
Stock of the Company and, during the next full three (3) Trading Days
following any such purchase the stock price rises above $3.00 per
share, then principal balance of this Note shall be due and payable
immediately in cash plus accrued and unpaid interest at the rate of
50% per annum, compounded on an annual basis.
(ii) In
case
the Investor engages in any activity designed to manipulate the trading price
of
the Common Stock or sells shares of Common Stock beneficially owned by the
Investor, or over which the Investor has dispositive control, (A) more than
two (2) times every three (3) months or more than seven (7) times in the
aggregate during the period beginning on the Initial Closing Date and ending
on
the Maturity Date, or (B) in blocks of less than 250,000 shares of Common Stock
per sale, then this Note will automatically convert into shares of Common Stock
pursuant to the formula set forth in Section
2(c)(i).
-4-
(iii) During
the three (3) months immediately prior to the Maturity Date, if the Investor
sells shares of Common Stock and, during the next full three (3) Trading Days
following any such sale the trading price of the Common Stock falls below the
trading price of the Common Stock immediately prior to such sale (the
“Pre-Sale
Trading Price”),
and
the Pre-Sale Trading Price is less than $3.00, then this Note will automatically
convert into shares of Common Stock pursuant to the formula set forth in
Section
2(c)(ii)
(where
“B” equals the pre-sale trading price); provided, however, if the Pre-Sale
Trading Price is $3.00 or more, then this Note will automatically convert into
shares of Common Stock pursuant to the formula set forth in Section
2(c)(i).
(g) Fractional
Shares; Interest; Effect of Conversion. No
fractional shares shall be issued upon conversion of this Note. Upon conversion
of this Note in full, the Company shall be forever released from all its
obligations and liabilities under this Note
3. Adjustments.
(a) Adjustments
for distributions, splits or subdivisions. In
the
event the Company at any time or from time to time after the date of issuance
hereof fixes a record date for the effectuation of a split or subdivision of
any
outstanding shares of Common Stock or the determination of holders of any shares
of Common Stock entitled to receive a distribution without payment of any
consideration by such holder, then, as of such record date (or the date of
such
distribution, split or subdivision if no record date is fixed), then the closing
price of the Common Stock referenced in Sections
2(a)(ii), 2(c)(ii) and 2(f) and
the
conversion formulas referenced in Section
2(c)(i) and 2(c)(ii)
shall be
adjusted appropriately.
(b) Adjustment
for Reclassification, Exchange and Substitution.
If
the
shares of Common Stock issuable upon the conversion of this Note are changed
into the same or a different number of shares or units of any class or classes
of capital stock, whether by recapitalization, reclassification, or otherwise,
then, and in any such event, the Investor shall have the right thereafter to
convert this Note into the kind and amount of such capital stock and property
receivable upon such reorganization, reclassification, or other change in
accordance with the number of shares of Common Stock into which this Note would
have been converted immediately prior to such reorganization, reclassification,
or change.
4. Successors
and Assigns.
Subject
to the restrictions on transfer described in the Note and Warrant Purchase
Agreement, the rights and obligations of the Company and Investor shall be
binding upon and benefit the successors, assigns, heirs, administrators and
transferees of the parties.
5. Waiver
and Amendment.
Any
provision of this Note may be amended, waived or modified upon the written
consent of the Company and the Investor.
-5-
6. Notices.
All
notices, requests, demands, consents, instructions or other communications
required or permitted hereunder shall in be in accordance with the notice
provisions set forth in the Note and Warrant Purchase Agreement.
7. Pari
Passu Notes.
Investor
acknowledges and agrees that the payment of all or any portion of the
outstanding principal amount of this Note and all interest hereon shall be
pari
passu in
right
of payment and in all other respects to the other Notes issued pursuant to
the
Note and Warrant Purchase Agreement or pursuant to the terms of such Notes.
In
the event the holder of this Note receives payments in excess of its pro rata
share of the Company’s payments to the holders of all of the Notes, then such
holder shall hold in trust all such excess payments for the benefit of the
holders of the other Notes and shall pay such amounts held in trust to such
other holders upon demand by such holders.
8. Usury.
In the
event any interest is paid on this Note which is deemed to be in excess of
the
then legal maximum rate, then that portion of the interest payment representing
an amount in excess of the then legal maximum rate shall be deemed a payment
of
principal and applied against the principal of this Note.
9. Waivers.
The
Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.
10. Governing
Law.
This
Note and all actions arising out of or in connection with this Note shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law provisions of the State of New York,
or
of any other state.
11. Arbitration.
Any
dispute, controversy, or claim arising in relation to this Note, including
with
regard to its validity, invalidity, breach, enforcement or termination, shall
be
resolved by binding arbitration in London, England, in accordance with the
rules
of arbitration which are in force in the United Kingdom on the date when the
notice of arbitration is submitted. The arbitrability of such dispute, claim
or
controversy shall also be determined in such arbitration. Such arbitration
proceeding shall be conducted in the English language before one (1) arbitrator
agreed to by the parties. Both the foregoing agreement of the parties to
arbitrate any and all such disputes, claims and controversies, and the results,
determinations, findings, judgments and/or awards rendered through any such
arbitration shall be final and binding on the parties hereto and may be
specifically enforced by legal proceedings.
[Signature
Page Follows]
-6-
The
Company has caused this Note to be issued as of the date first written
above.
|
Organic
To Go Food Corporation
a
Delaware corporation
By:__________________________________
Name:
Xxxxx Xxxxx
Title:
Chief Executive Officer
|
[Signature
page to Convertible Promissory Note]
