SENIOR SECURED CONVERTIBLE NOTE
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED
FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ADVANCE NANOTECH, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
| Principal Amount: $___________ |
Issue
Date: December ___,
2007
|
FOR
VALUE
RECEIVED, ADVANCE NANOTECH, INC., a Delaware corporation (hereinafter called
“Borrower” or the “Company”), hereby promises to pay to
________________________________,
___________________________________________________________________ (the
“Holder”), with an address of ________________, ___________, _______ ___________
(and telecopier number of ____________), or order, without demand, the sum
of
_______________________________________ Dollars ($__________), with simple
and
unpaid interest thereon, on December____, 2010 (the “Maturity Date”), if not
paid sooner.
This
Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such Subscription Agreement.
Unless otherwise separately defined herein, all capitalized terms used in this
Note shall have the same meaning as is set forth in the Subscription Agreement.
The following terms shall apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payment
Grace Period.
The
Borrower shall have a ten (10) business day grace period to pay any monetary
amounts due under this Note, after which grace period and during the pendency
of
an Event of Default (as defined in Article III) a default interest rate of
eighteen percent (18%) per annum shall apply to the amounts owed
hereunder.
1.2. Interest
Rate.
(a) Simple
interest payable on this Note shall accrue at the annual rate of eight percent
(8%). Interest will be payable on December 31, 2007 and on the last business
day
of each calendar quarter thereafter and on the Maturity Date, accelerated or
otherwise, when the principal and remaining accrued but unpaid interest shall
be
due and payable, or sooner as described below.
(b) Interest
will be payable in cash, or at the election of the Borrower, in shares of Common
Stock; provided, that such shares of Common Stock are registered at the time
of
issuance. Interest paid in shares of Common Stock shall be paid in full shares
only, with any fractional share rounded up to the next whole share. The issuance
of such shares of Common Stock shall be valued at 90% of the average per share
Market Price for the ten (10) Trading Day period ending three business days
preceding the earlier of (i) the date on which the interest payment is made
and
(ii) the later of (A) the date on which the interest payment becomes due and
(B)
if paid after the due date, the date of payment. Each interest payment paid
in
shares of Common Stock shall be mailed to the holder of record of this Note
as
notices pursuant hereto are to be delivered to such holder.
(c) As
used
herein, “Market Price” means, with respect to any applicable security as of any
applicable date, (i) the last closing bid price of such security on whichever
national securities exchange or trading market (including, without limitation,
the Nasdaq and the OTC Bulletin Board) is the principal trading market where
such security is listed by the Company for trading (the “Principal Market”), as
reported by Bloomberg, or (ii) if the Principal Market should operate on an
extended hours basis and does not designate the closing bid price, then the
last
bid price of such security prior to the commencement of extended trading hours
on the applicable date, but in no event later than 4:30:00 p.m., New York local
time, as reported by Bloomberg, or (iii) if no last bid price is reported for
such security by Bloomberg, the average of the bid prices, on the one hand,
and
the ask prices, on the other hand, of all market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). The applicable trading market for such calculation,
whether it is the Principal Market or the “pink sheets”, is hereafter referred
to as the “Trading Market”. The Company shall make all determinations pursuant
to this paragraph in good faith. In the absence of any available public
quotations for the Common Stock, the Board of Directors of the Company shall
determine in good faith the fair value of the Common Stock, which determination
shall be set forth in a certificate by the Secretary of the Company. As used
herein, “Trading Day” means a day on which the principal Trading Market with
respect to the Common Stock is open for the transaction of
business.
1.3. Conversion
Privileges.
The
Conversion Privileges set forth in Article II shall remain in full force and
effect immediately from the date hereof and until this Note is paid in full
regardless of the occurrence of an Event of Default. This Note shall be payable
in full on the Maturity Date, unless previously converted into Common Stock
in
accordance with Article II hereof.
1.4 Change
of Control.
Within
three (3) business days after the consummation of a Change of Control, the
Company will repurchase all of the then-outstanding Notes at a purchase price
in
cash equal to not less than, (a) if the Change of Control occurs on or before
90
days after the Effective Date, 125% of the aggregate principal amount of this
Note repurchased plus accrued and unpaid interest to the date of repurchase,
(b)
if the Change of Control occurs after 90 days and on or before 180 days after
the Effective Date, 112.5% of the aggregate principal amount of this Note
repurchased plus accrued and unpaid interest to the date of repurchase or (c)
if
the Change of Control occurs after 180 days and on or before 365 days after
the
Effective Date, 100% of the aggregate principal amount of this Note repurchased
plus accrued and unpaid interest to the date of repurchase. As used herein,
“Change of Control” means the occurrence of any of the following: (1) the direct
or indirect sale, lease, transfer, conveyance or other disposition, in one
transaction or a series of related transactions, of all or substantially all
of
the properties or assets of the Company to any “person” (as that term is used in
Section 13(d) of the 1934 Act); (2) the adoption of a plan relating to the
liquidation or dissolution of the Company; or (3) the consummation of any
transaction (including, without limitation, any merger or consolidation), the
result of which is that any “person” (as defined above), becomes the Beneficial
Owner, directly or indirectly, of more than 50% of the then-outstanding Common
Stock; provided, however, that a “person” shall not include any Subscriber. As
used herein, “Beneficial Owner” has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the 1934 Act, except that in calculating the
beneficial ownership of any particular “person” (as defined above), such
“person” will be deemed to have beneficial ownership of all securities that such
“person” has the right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable only after the
passage of time.
2
ARTICLE
II
CONVERSION
RIGHTS
The
Holder shall have the right to convert the principal due under this Note into
Shares of the Borrower's Common Stock, $.001 par value per share (“Common
Stock”) as set forth below.
2.1. Conversion
into the Borrower's Common Stock.
(a) The
Holder shall have the right from and after the Issue Date of the issuance of
this Note and then at any time until this Note is fully paid, to convert any
outstanding and unpaid principal portion of this Note, and accrued interest
if
any, at the election of the Holder (the date of giving of such notice of
conversion being a “Conversion Date”) into fully paid and nonassessable shares
of Common Stock as such stock exists on the date of issuance of this Note,
or
any shares of capital stock of Borrower into which such Common Stock shall
hereafter be changed or reclassified, at the conversion price as defined in
Section 2.1(b) hereof (the “Conversion Price”), determined as provided herein.
Upon delivery to the Borrower of a completed Notice of Conversion, a form of
which is annexed hereto, Borrower shall issue and deliver to the Holder within
three (3) business days after the Conversion Date (such third day being the
“Delivery Date”) that number of shares of Common Stock for the portion of this
Note converted in accordance with the foregoing. At the election of the Holder,
the Borrower will deliver accrued but unpaid interest on this Note in the manner
provided in Section 1.3 through the Conversion Date directly to the Holder
on or
before the Delivery Date (as defined in the Subscription Agreement). The number
of shares of Common Stock to be issued upon each conversion of this Note shall
be determined by dividing that portion of the principal of this Note and accrued
and unpaid interest to be converted, by the Conversion Price.
(b)
Subject
to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per
share shall be $0.25.
(c)
The
Conversion Price and number and kind of shares or other securities to be issued
upon conversion determined pursuant to Section 2.1(a), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
X. Xxxxxx,
Sale of Assets, etc.
If the
Borrower at any time shall consolidate with or merge into or sell or convey
all
or substantially all its assets to any other corporation, this Note, as to
the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase such number and kind of shares
or
other securities and property as would have been issuable or distributable
on
account of such consolidation, merger, sale or conveyance, upon or with respect
to the securities subject to the conversion or purchase right immediately prior
to such consolidation, merger, sale or conveyance. The foregoing provision
shall
similarly apply to successive transactions of a similar nature by any such
successor. Without limiting the generality of the foregoing, the anti-dilution
provisions of this Section shall apply to such securities of such successor
after any such consolidation, merger, sale or conveyance.
B. Reclassification,
etc.
If the
Borrower at any time shall, by reclassification or otherwise, change the Common
Stock into the same or a different number of securities of any class or classes
that may be issued or outstanding, this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence
the
right to purchase an adjusted number of such securities and kind of securities
as would have been issuable as the result of such change with respect to the
Common Stock immediately prior to such reclassification or other
change.
3
C. Stock
Splits, Combinations and Dividends.
If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Conversion Price shall be proportionately reduced
in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which
the
total number of shares of Common Stock outstanding immediately after such event
bears to the total number of shares of Common Stock outstanding immediately
prior to such event.
D. Share
Issuance.
So long
as this Note is outstanding, if the Borrower shall issue or agree to issue
any
shares of Common Stock except for the Excepted Issuances (as defined in the
Subscription Agreement) for a consideration less than the Conversion Price
in
effect at the time of such issue, then, and thereafter successively upon each
such issue, the Conversion Price shall be reduced to such other lower issue
price. For purposes of this adjustment, the issuance of any security carrying
the right to convert such security into shares of Common Stock or of any
warrant, right or option to purchase Common Stock shall result in an adjustment
to the Conversion Price upon the issuance of the above-described security and
again upon the issuance of shares of Common Stock upon exercise of such
conversion or purchase rights if such issuance is at a price lower than the
then
applicable Conversion Price. The reduction of the Conversion Price described
in
this paragraph is in addition to other rights of the Holder described in this
Note and the Subscription Agreement.
(d) Whenever
the Conversion Price is adjusted pursuant to Section 2.1(c) above, the Borrower
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring
such
adjustment.
(e) Borrower
will reserve from its authorized and unissued Common Stock the number of shares
of Common Stock during the time periods and in the amounts described in the
Subscription Agreement. Borrower represents that upon issuance, such shares
will
be duly and validly issued, fully paid and non-assessable. Xxxxxxxx agrees
that
its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and
issuing stock certificates to execute and issue the necessary certificates
for
shares of Common Stock upon the conversion of this Note.
(f) X. Xxxxxxxx
understands that a delay in the issuance of shares of Common Stock beyond the
Delivery Date could result in economic loss to the Holder. As compensation
to
the Holder for such loss, Xxxxxxxx agrees to pay late payments to the Holder
for
late issuance of such shares upon conversion, unless the delay is due to causes
beyond the reasonable control of Borrower and its transfer agent, in accordance
with the following schedule (where “No. Business Days Late” refers to the number
of business days which is beyond four (4) business days after the Delivery
Date):
4
|
Interest
|
No.
Business Days Xxxx
|
Xxxx
Payment For Each $10,000 of Amount Being Converted
|
|
|
1
|
$100
|
||
|
2
|
$200
|
||
|
3
|
$300
|
||
|
4
|
$400
|
||
|
5
|
$500
|
||
|
6
|
$600
|
||
|
7
|
$700
|
||
|
8
|
$800
|
||
|
9
|
$900
|
||
|
10
|
$1,000
|
||
|
>10
|
$1,000
+$200 for
each
business day
late
beyond 10 days
|
B. Borrower
shall make any payments incurred under this Section 2.1(f) in immediately
available funds upon demand as the Holder’s exclusive remedy (other than the
following provisions of this Section 2.1(f)B and the provisions of the
immediately following Section 2.1(f)C of this Note) for such delay. Furthermore,
in addition to any other remedies which may be available to the Holder, in
the
event that Borrower fails to effect delivery of such shares of Common Stock
by
the close of business on the Delivery Date, unless such failure is due to causes
beyond the reasonable control of Borrower and its transfer agent, the Holder
will be entitled to revoke the relevant notice of conversion by delivering
a
notice to such effect to Borrower, whereupon Borrower and the Holder shall
each
be restored to their respective positions immediately prior to delivery of
such
notice of conversion; provided, however, that an amount equal to any payments
contemplated by this Section 2.1(f) which have accrued through the date of
such
revocation notice shall remain due and owing to the Holder notwithstanding
such
revocation.
C. If,
by
the relevant Delivery Date, Borrower fails, unless such failure is due to causes
beyond the reasonable control of Borrower and its transfer agent, to deliver
the
shares of Common Stock to be issued upon conversion of this Note and after
such
Delivery Date, the Holder purchases, in an arm’s-length open market transaction
or otherwise, shares of Common Stock (the “Covering Shares”) in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder
(the
“Sold Shares”), which delivery such Converting Holder anticipated to make using
the shares to be issued upon such conversion (a “Buy-In”), the Converting Holder
shall have the right to require Borrower to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 2.1(f) hereof,
the
Buy-In Adjustment Amount (as defined below). The “Buy-In Adjustment Amount” is
the amount equal to the excess, if any, of (x) the Converting Holder’s total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by
the
Converting Holder from the sale of the Sold Shares. Borrower shall pay the
Buy-In Adjustment Amount to the Converting Holder in immediately available
funds
immediately upon demand by the Converting Holder. By way of illustration and
not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions)
of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for
net
proceeds of $10,000, the Buy-In Adjustment Amount which Borrower will be
required to pay to the Converting Holder will be $1,000.
5
D. In
lieu
of delivering physical certificates representing the Common Stock issuable
upon
conversion, provided Xxxxxxxx’s transfer agent is participating in the
Depository Trust Company (“DTC”) Fast Automated Securities Transfer program,
upon request of the Holder and its compliance with the provisions contained
in
this paragraph, so long as the certificates therefor do not bear a legend and
the Holder thereof is not obligated to return such certificate for the placement
of a legend thereon, Borrower shall use its reasonable best efforts to cause
its
transfer agent to electronically transmit the Common Stock issuable upon
conversion to the Holder by crediting the account of the Holder’s Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system.
2.2 Method
of Conversion.
This
Note may be converted by the Holder in whole or in part as described in Section
2.1(a) hereof and the Subscription Agreement. Upon partial conversion of this
Note, a new Note containing the same date and provisions of this Note shall,
at
the request of the Holder, be issued by the Borrower to the Holder for the
principal balance of this Note and interest which shall not have been converted
or paid.
2.3
Mandatory
Conversion.
Subject
to Section 2.4, (a) provided an Event of Default or an event which with the
passage of time or giving of notice could become an Event of Default has not
occurred, unless such Event of Default has been cured not less than twenty
(20)
days prior to the delivery of written notice by Xxxxxxxx as hereinafter
described, then, commencing after the Actual Effective Date, the Borrower will
have the option by written notice to the Holder (“Notice of Mandatory
Conversion”) of compelling the Holder to convert all or a portion of the
outstanding and unpaid principal of this Note and accrued interest, thereon,
into Common Stock at the Conversion Price then in affect (“Mandatory
Conversion”). The Notice of Mandatory Conversion, which notice, if given by the
Borrower at the Borrower’s sole election, can only be given on the first day
following any period of thirty (30) consecutive Trading Days (“Lookback Period”)
during which the Market Price for the Common Stock shall be greater than two
hundred fifty percent (250%) of the Conversion Price each such Trading Day
and
during which thirty (30) Trading Days, the average price/volume (i.e. shares
traded multiplied by bid price) as reported by Bloomberg LP for the Principal
Market is greater than $100,000. The date the Notice of Mandatory Conversion
is
given is the “Mandatory Conversion Date.” A Notice of Mandatory Conversion may
be given only in connection with Common Stock that has been included for resale
in an effective Registration Statement during the entire Lookback and continues
to be so included on the Mandatory Conversion Date. The Notice of Mandatory
Conversion shall specify the aggregate principal amount of this Note which
is
subject to Mandatory Conversion. Mandatory Conversion Notices must be given
proportionately to all Holders of Notes who received Notes similar in term
and
tenure as this Note. Each Mandatory Conversion Date shall be a deemed Conversion
Date and the Borrower will be required to deliver the Common Stock issuable
pursuant to a Mandatory Conversion Notice in the same manner and time period
as
described in Section 2.2 above.
2.4 Limitation
on Conversion.
Notwithstanding the provisions of this Note or the Subscription Agreement,
in no
event (except (i) as specifically provided in this Note as an exception to
this
provision, (ii) while there is outstanding a tender offer for any or all of
the
shares of the Common Stock, or (iii) at the Holder’s option, on at least
sixty-five (65) days advance written notice from the Holder) shall the Holder
be
entitled to convert this Note, or shall the Borrower have the obligation to
issue shares upon such conversion of all or any portion of this Note to the
extent that, after such conversion the sum of (1) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares
of
Common Stock which may be deemed beneficially owned through the ownership of
the
nonconverted portion of this Note or other rights to purchase Common Stock
or
through the ownership of the unexercised portion of the Warrants (as defined
in
the Subscription Agreement) or other convertible securities), and (2) the number
of shares of Common Stock issuable upon the conversion of this Note with respect
to which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of
the
outstanding shares of Common Stock (after taking into account the shares to
be
issued to the Holder upon such conversion). For purposes of the proviso to
the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the 1934 Act, except as otherwise provided
in
clause (1) of such sentence. The Holder, by its acceptance of this Note, further
agrees that if the Holder transfers or assigns this Note to a party who or
which
would not be considered such an affiliate, such assignment shall be made subject
to the transferee’s or assignee’s specific agreement to be bound by the
provisions of this Section 2.4 as if such transferee or assignee were the
original Holder hereof.
6
ARTICLE
III
EVENT
OF DEFAULT
The
occurrence of any of the following events of default (“Event of Default”) shall,
at the option of the Holder hereof, make all sums of principal and interest
then
remaining unpaid hereon and all other amounts payable hereunder immediately
due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:
3.1 Failure
to Pay Principal or Interest.
The
Borrower fails to pay any installment of principal, interest or other sum due
under this Note when due and such failure continues for a period of ten (10)
business days after the due date. The ten (10) day period described in this
Section 3.1 is the same ten (10)) business day period described in Section
1.1
hereof.
3.2 Breach
of Covenant.
The
Borrower breaches any material covenant or other material term or condition
of
the Subscription Agreement or this Note in any material respect and such breach,
if subject to cure, continues for a period of fifteen (15) business days after
written notice to the Borrower from the Holder. Notwithstanding the forgoing,
this provision shall not apply to delayed registration under the Subscription
Agreement for which liquidated damages shall be the sole remedy.
3.3 Breach
of Representations and Warranties.
Any
material representation or warranty of the Borrower made herein or in the
Subscription Agreement shall be false or misleading in any material respect
as
of the date made and the Closing Date.
3.4 Receiver
or Trustee.
The
Borrower shall make an assignment for the benefit of creditors, or apply for
or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee shall otherwise
be appointed without the consent of the Borrower is not dismissed within sixty
(60) days of appointment.
3.5 Judgments.
Any
money judgment shall be entered or filed against Borrower or any of its property
or other assets for more than $250,000, and shall remain unpaid, unvacated,
unbonded or unstayed for a period of forty-five (45) days.
3.6 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any substantially similar
law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower and if instituted against
Borrower are not dismissed within sixty (60) days of initiation.
7
3.7 Delisting.
Failure
of the Common Stock to be listed for trading or quotation on a Principal Market
which includes the Bulletin Board or similar exchanges or markets for five
or
more consecutive Trading Days.
3.8 Non-Payment.
A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $250,000 for more than ninety (90) days after
the
due date, unless the Borrower is contesting the validity of such obligation
in
good faith.
3.9 Stop
Trade.
An SEC
or judicial stop trade order or Principal Market trading suspension that lasts
for ten or more consecutive Trading Days.
3.10 Failure
to Deliver Common Stock or Replacement Note.
Xxxxxxxx's failure to deliver Common Stock to the Holder pursuant to and in
the
form required by this Note and Sections 7 and 11 of the Subscription Agreement,
or, if required, a replacement Note more than seven (7) Business Days after
the
required delivery date of such Common Stock or Note.
3.11 Reservation
Default.
Failure
by the Borrower to have reserved for issuance upon conversion of this Note
the
amount of Common stock as set forth in this Note and the Subscription
Agreement.
3.12
Cross
Default.
A
default by the Borrower of a material term, covenant, warranty or undertaking
of
any other agreement to which the Borrower and Holder are parties, or the
occurrence of a material event of default under any such other third party
agreement which is not cured after any required notice and/or cure
period.
ARTICLE
IV
SECURITY
INTEREST
4. Security
Interest/Waiver of Automatic Stay.
This
Note is secured by a first priority security interest granted to the Collateral
Agent for the benefit of the Holder pursuant to a Security Agreement, as
delivered by Borrower to Holder.
ARTICLE
V
MISCELLANEOUS
5.1 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of Holder hereof 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. All
rights and remedies existing hereunder are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
5.2 Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur.
The
addresses for such communications shall be: (i) if to the Borrower to: Advance
Nanotech, Inc., 000 Xxxxxxxxx Xxxxxx, 00xx
Xxxxx,
Xxx Xxxx, XX, 00000, Attn:
Xxxxxx Xxxx,
telecopier: 000-000-0000,
with a
copy by telecopier only to: Xxxxxxx
Xxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX, 00000,
Attn:
Xxxxxxx
Xxxxxxxx Esq.,
telecopier:
000-000-0000,
and
(ii) if to the Holder, to the name, address and telecopy number set forth on
the
front page of this Note.
8
5.3 Amendment
Provision.
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. The Holder by acceptance
hereof confirms such Xxxxxx’s agreement to the terms and conditions set forth
herein.
5.4 Assignability.
This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and assigns.
5.5 Cost
of Collection.
If
default is made in the payment of this Note, Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys'
fees.
5.6 Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in the state courts of New
York
in the County of New York or in the federal courts located in the State and
County of New York. Subject to the foregoing, the parties to this Note hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum
non conveniens.
The
Company and Holder waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and costs. In
the
event that any provision of this Note or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute
or
rule of law, then such provision shall be deemed inoperative to the extent
that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability
of
any other provision of any agreement.
5.7 Maximum
Payments.
Nothing
contained herein shall be deemed to establish or require the payment of a rate
of interest or other charges in excess of the maximum permitted by applicable
law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum permitted by such law, any payments in excess
of
such maximum shall be credited against amounts owed by the Borrower to the
Holder pursuant to this Note and thus refunded to the Borrower.
5.8. Construction.
Each
party acknowledges that its legal counsel participated in the preparation of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against
the other.
9
5.9 Shareholder
Status.
The
Holder shall not have rights as a shareholder of the Borrower with respect
to
unconverted portions of this Note. However, the Holder will have the rights
of a
shareholder of the Borrower with respect to the Shares of Common Stock to be
received after delivery by the Holder of a Conversion Notice to the
Borrower.
5.10 Remedies.
This
Note shall be deemed an unconditional obligation of Borrower for the payment
of
money and, without limitation to any other remedies available to
Holder.
5.11 Non-Business
Days.
Whenever any payment to be made shall be due on a Saturday, Sunday or a public
holiday under the laws of the State of New York, such payment may be due on
the
next succeeding business day and such next succeeding day shall be included
in
the calculation of the amount of accrued interest payable on such
date.
5.12 Transfer
Agent.
The
Company covenants and agrees that, so long as any portion of this Note has
not
been converted, the Company will, upon reasonable request from the Holder,
direct the Company’s transfer agent to provide information to the Holder
relating to (i) the status of shares of Common Stock issued or claimed to be
issued to the Holder in connection with a Notice of Conversion, or (ii) the
number of outstanding shares of Common Stock of all stockholders of the Company
as of a current or other specified date.
[THIS
SPACE INTENTIONALLY LEFT BLANK]
10
IN
WITNESS WHEREOF,
Xxxxxxxx has caused this Note to be signed in its name by an authorized officer
as of the ____ day of December, 2007.
| ADVANCE NANOTECH, INC. | ||
| |
|
|
| By: | ||
|
|
||
|
Name:
Xxxxxx Xxxx
Title:
Chief Financial
Officer
|
||
11
NOTICE
OF CONVERSION
(To
be
executed by the Registered Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by Advance Nanotech, Inc. on December
___, 2007 into Shares of Common Stock of Advance Nanotech, Inc. (the “Borrower”)
according to the conditions set forth in such Note, as of the date written
below.
Date
of
Conversion:____________________________________________________________________
Conversion
Price:______________________________________________________________________
Shares
To
Be
Delivered:_________________________________________________________________
Signature:____________________________________________________________________________
Print
Name:__________________________________________________________________________
Address:_____________________________________________________________________________
____________________________________________________________________________
