CONVERTIBLE PROMISSORY NOTE
EXHIBIT
10.2
NEITHER
THIS CONVERTIBLE NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE “SECURITIES
LAWS”) AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR
ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH SUCH SECURITIES LAWS AND UNTIL
THE
ISSUER THEREOF SHALL HAVE RECEIVED AN OPINION FROM COUNSEL ACCEPTABLE TO IT
THAT
THE PROPOSED DISPOSITION WILL NOT VIOLATE ANY APPLICABLE SECURITIES LAWS.
TRANSFER OF THIS CONVERTIBLE NOTE IS ALSO RESTRICTED BY THE CONVERTIBLE NOTES
PURCHASE AGREEMENT REFERRED TO HEREIN.
THE
PAYMENT AND PERFORMANCE OF THIS CONVERTIBLE NOTE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THAT CERTAIN CONVERTIBLE NOTES PURCHASE AGREEMENT ENTERED INTO
AS
OF APRIL 10, 2007, AS AMENDED BY THAT CERTAIN AMENDMENT TO CONVERTIBLE NOTES
PURCHASE AGREEMENT DATED JUNE 19, 2007, BY THE HOLDER AND
ISSUER.
CERTIFICATE
NO: 3
CONVERTIBLE
PROMISSORY NOTE
|
$4,000,000.00
|
June
19, 2007
|
FOR
VALUE RECEIVED,
Wits
Basin Precious Minerals Inc., a corporation organized and existing under the
laws of the State of Minnesota (“Issuer”),
hereby unconditionally promises to pay to the order of China Gold LLC, a Kansas
limited liability company, or its successors and assigns (the “Holder”)
on or
before September 17, 2007, subject to extension as set forth below (the
“Maturity
Date”),
the
principal sum of up to Four Million Dollars and 00/100 Cents ($4,000,000.00)
(the “Principal”),
together with accrued and unpaid interest thereon, as provided herein, from
the
date set forth in Section
3
below
until fully paid (the “Indebtedness”),
all
without relief from valuation or appraisement laws. This Convertible Promissory
Note (the “Note”)
is
issued pursuant to that certain Convertible Notes Purchase Agreement dated
as of
April 10, 2007, as amended by that certain Amendment to Convertible Notes
Purchase Agreement dated June 19, 2007, by and between Issuer and Holder (as
amended, modified, or replace from time to time, the “Convertible
Notes Purchase Agreement”).
The
Maturity Date may be extended for additional periods of thirty (30) days, but
in
no event later than December 31, 2007, upon the written request of Issuer,
provided that at the time of the original Maturity Date defined above and the
last day of any extension period that certain Agreement and Plan of Merger
dated
April 20, 2007 by and among Issuer, Easyknit Enterprises Holdings Limited and
Race Merger, Inc. (as the same may be amended from time to time, the
“Merger
Agreement”)
has
not been terminated by the parties thereto. In the event the Merger Agreement
is
terminated after the original Maturity Date defined above, the Indebtedness
shall become due and payable upon the expiration of fifteen (15) days following
Issuer’s receipt of written notice of Holder calling such Indebtedness due and
payable due to the termination of the Merger Agreement.
1. Payment
of Principal and Interest.
Subject
to acceleration, earlier required payment, in cash or by conversion, as provided
for elsewhere in this Note, the Convertible Notes Purchase Agreement or any
of
the other agreements, documents, and instruments relating to any of the
Indebtedness or any security therefor that are required by the Convertible
Notes
Purchase Agreement to be executed and delivered to or for the benefit of Holder
(collectively, together with this Note and the Convertible Notes Purchase
Agreement, the “Investment
Documents”),
the
principal balance of this Note, and any accrued and unpaid interest thereon,
shall be due and payable at the earlier of (i) the Maturity Date or (ii) such
time Issuer and/or Issuer’s majority-owned subsidiaries receive cumulative
financing from one or more third parties in the aggregate amount of at least
$50,000,000 from and after the date of this Note (a “Substantial
Financing”).
Issuer
shall make all payments payable in cash under this Note in lawful money of
the
United States. All payments paid by Issuer to Holder under this Note and under
the other Investment Documents shall be applied in the following order of
priority: (a) to amounts, other than principal and interest, due to Holder
pursuant to this Note for all costs of collection of any kind, including
reasonable attorneys’ fees and expenses; (b) to accrued but unpaid interest on
this Note; and (c) to the unpaid principal balance of this Note. If Issuer
makes
any payment of principal, interest or other amounts upon the Indebtedness by
check, draft, or other remittance, Holder shall not be deemed to have received
such payment until Holder actually receives the payment instrument.
2. Additional
Conditional Consideration.
In the
event this Note is paid in full by Issuer in cash or other immediately available
funds, whether pursuant to a Substantial Financing, Prepayment of the entire
outstanding balance of this Note, or at the Maturity Date (but not upon the
conversion or other satisfaction of this Note), Holder shall, subject to the
limitations of Section 7.6, have the right to purchase, from the date of such
payment in full until the earlier of (i) immediately prior to the Merger (as
defined in Section 7.3) or (ii) five (5) years from the date such payment,
up to
4,000,000 shares of Issuer’s common stock at a price per share of $1.00 (the
“Purchase
Right”).
In
the
event the issuance of a Purchase Right is required pursuant to the terms of
this
Section 2, Issuer shall deliver to Holder an option agreement, with standard
terms and conditions as agreed upon by Issuer and Holder, evidencing Holder’s
purchase rights as set forth herein. Issuer shall provide, as reasonably
practicable, Holder notice of the proposed time of effectiveness of a
Substantial Financing or Merger within a reasonable time prior to such proposed
effectiveness. The provisions of Section 8 shall apply as practicable to any
such purchase rights arising from this Section to avoid any inequity to Issuer
and Holder.
3. Calculation
of Interest.
Interest shall accrue on the outstanding principal balance at the end of each
day on which any amount is outstanding under this Note at the rate of 8.25%
(the
“Interest
Rate”)
per
annum. Interest shall be calculated on a basis of the actual number of days
elapsed over a year of 365 days, commencing as of the date hereof.
4. Prepayment.
This
Note may be prepaid in cash or other immediately available funds, in whole
or in
part, by Issuer at any time and from time to time, without premium or penalty
(a
“Prepayment”).
5. Waiver.
Payment
of principal and interest due under this Note shall be made without presentment
or demand. The Issuer and all others at any time liable directly or indirectly
(including, without limitation, the Issuer, any co-makers, endorsers, sureties
and guarantors, all of which are referred to herein as “Parties”),
severally waive presentment, demand and protest, notice of protest, demand,
and
dishonor, and nonpayment of this Note, and all diligence in collection and
agree
to pay all costs of collection when incurred, including reasonable attorneys’
fees, and to perform and comply with each of the covenants, conditions,
provisions, and agreements of the Issuer contained in every instrument now
evidencing the Indebtedness. No release by Holder of any security for payment
of
the Indebtedness or any modification or restructuring in respect of any lien
or
security interest held or at any time obtained or acquired by Holder for payment
of such Indebtedness shall operate to release, discharge, impair or alter the
liability of any Party liable at any time directly or indirectly for payment
of
such Indebtedness.
6. Renewal
and Modification.
Issuer
further agrees that the Indebtedness may be from time to time, extended,
renewed, modified, rearranged, or evidenced by one or more other notes or
obligations in substitution for this Note and upon and for such term or terms
agreed to by Issuer and Holder in writing, and with or without notice to other
Parties. Issuer agrees that upon and after such extension, renewal,
modification, rearrangement, substitution, or other change in form of the
Indebtedness, each of the other Parties shall remain liable in respect of the
Indebtedness so renewed, extended, modified, rearranged, or otherwise evidenced
in the same capacity and to the same extent as prior thereto. No release or
discharge (in whole or in part) of any Party hereto by Holder shall in any
manner impair, release, discharge, or alter the liability of any other
Party.
7. Conversion.
7.1 Optional
Conversion.
Subject
to the limitations set forth in Section 7.6 hereof, from and after the
expiration of one hundred twenty (120) days from the date hereof, at any time
while any portion of the Principal or accrued and unpaid interest under this
Note is outstanding, the Holder shall have the right, at the Holder’s option, to
convert (an “Optional
Conversion”)
all or
any portion of the unpaid Principal and accrued interest under this Note (the
“Conversion
Amount”)
into
the number of shares of Issuer’s common stock (the “Common
Stock”)
computed by dividing the Conversion Amount by a conversion price of $1.00 per
share (the “Conversion
Price”).
The
Conversion Price shall be subject to adjustment from time to time pursuant
to
Section 8 hereof.
7.2 Effect
and Procedure of Optional Conversion.
An
Optional Conversion shall occur pursuant to the terms of this Note by Holder’s
delivery to Issuer at its principal office a notice of Optional Conversion
identifying the amount of the Optional Conversion (a “Notice
of Optional Conversion”)
(by
facsimile or other reasonable means of communication) prior to 5:00 p.m. local
time in Minneapolis, Minnesota on the Conversion Date. Holder shall not be
required to physically surrender this Note to Issuer unless the entire unpaid
Principal amount of this Note, together with accrued and unpaid interest, is
so
converted or otherwise paid in full. The Holder and Issuer shall maintain
records showing the Principal and accrued and unpaid interest under the Note
so
converted and the dates of such conversions or shall use such other method,
reasonably satisfactory to the Holder and Issuer, so as not to require physical
surrender of this Note upon each such Optional Conversion. In the event of
any
dispute or discrepancy, such records of Issuer shall be controlling and
determinative in the absence of manifest error. Notwithstanding the foregoing,
if any portion of this Note is converted as aforesaid, the Holder may not
transfer this Note unless the Holder first physically surrenders this Note
to
Issuer, whereupon Issuer will forthwith issue and deliver upon the order of
the
Holder a new note of like tenor, registered as the Holder (upon payment by
the
Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid Principal and any unpaid and accrued interest
of
this Note. The Holder and any assignee, by acceptance of this Note, acknowledge
and agree that, by reason of the provisions of this paragraph, following
conversion of a portion of this Note, the unpaid and unconverted Principal
amount of this Note may be less than the amount stated on the face hereof.
Upon
receipt of any Notice of Optional Conversion, Issuer shall, within five (5)
Business Days, issue and deliver to such Holder at the address designated by
such Holder a certificate or certificates for the number of shares of Common
Stock the Holder shall be entitled to upon such Optional Conversion (bearing
such legends as are required by applicable state and federal securities laws
in
the opinion of counsel to Issuer). The person or persons entitled to receive
the
shares of Common Stock issuable upon such Optional Conversion shall be treated
for all purposes as the record holder or holders of such shares of Common Stock
as of the Conversion Date. Upon Optional Conversion of all or a portion of
this
Note, Issuer will be forever released from all of its obligations and
liabilities under this Note with regard to that portion of the Principal and
accrued interest being converted, including without limitation the obligation
to
pay such portion of the Principal and accrued interest.
7.3
Automatic
Conversion.
All
unpaid Principal and accrued and unpaid interest on this Note shall be
automatically converted (an “Automatic
Conversion”),
effective immediately prior to the effective date of Issuer’s proposed merger
transaction with Easyknit Enterprises Holdings Limited (the “Merger”),
into
the number of shares of Common Stock computed by dividing such outstanding
amount by the then current Conversion Price.
7.4
Effect
and Procedure of Automatic Conversion.
Upon
Automatic Conversion, Issuer will be forever released from all of its
obligations and liabilities to Holder under this Note, including without
limitation the obligation to pay the principal amount and accrued interest
under
the Note. Upon Holder’s surrender of this Note to Issuer at its principal
office, Issuer shall, at its expense and as soon as practicable thereafter,
issue and deliver to Holder one or more certificates representing that number
of
shares of Common Stock to which Holder is entitled, or, as applicable capital
stock of the surviving company to the Merger pursuant to Section
7.3
hereof
(in any case, bearing such legends as are required by applicable state and
federal securities laws in the opinion of counsel to Issuer). The Automatic
Conversion of this Note shall be deemed to have been made immediately prior
to
the effective time of the Merger, and the person or persons entitled to receive
Common Stock upon such conversion shall be treated for all purposes as the
record holder(s) of such Common Stock as of such date.
7.5
No
fractional shares.
No
fractional shares shall be issued upon any conversion of this Note. In lieu
of
any fractional share of Common Stock to which Holder would otherwise be
entitled, an amount in cash equal to such fraction multiplied by the fair market
value of a share of Common Stock, such fair market value to be determined as
follows (as applicable): (a) if the Common Stock is traded on an exchange or
is
quoted on The NASDAQ National Market, NASDAQ SmallCap Market or the OTC Bulletin
Board, then the average closing or last sale prices, respectively, reported
for
the date of conversion; (b) if the Common Stock is traded in the
over-the-counter market, then the average of the closing bid and asked prices
reported on the date of conversion; or (c) if the Common Stock is not publicly
traded and there has been no Qualifying Sale, then fair market value of such
stock will be determined by Issuer’s board of directors, acting in good faith
utilizing customary business valuation criteria and methodologies (without
discount for lack of marketability or minority interest).
7.6
Limitation
of Conversion of Note or Exercise of Purchase Right.
Except
with respect to a conversion pursuant to Section
7.3
hereof,
Holder may not convert any or all of the outstanding balance of this Note or
exercise any Purchase Right set forth in Section 2 during the time period and
to
the extent that the shares of Common Stock that Purchaser could acquire upon
such conversion or exercise would cause the Beneficial Ownership (as defined
below) of Common Stock held by Holder and its Affiliates (as defined in the
Convertible Notes Purchase Agreement) to exceed 4.99%. The parties shall compute
“Beneficial Ownership" of Common Stock in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended. Holder will, at the request of
Issuer, from time to time, notify Issuer of Holder’s computation of Holder’s
Beneficial Ownership. By written notice to Issuer, Holder may waive the
provisions of this Section 7.6, but any such waiver will not be effective until
the 61st day after delivery thereof. Nothing herein shall preclude Holder or
its
Affiliates from disposing of a sufficient number of other shares of Common
Stock
beneficially owned by Holder or its Affiliates so as to thereafter permit the
conversion of this Note or exercise of the Purchase Right.
8. Conversion
Price Adjustments.
8.1 Adjustment
for Stock Splits or Combinations.
In the
event of: (a) the payment of dividends on any of Issuer’s capital stock payable
in Common Stock or securities convertible into or exercisable for Common Stock;
(b) the subdivision of Issuer’s outstanding shares of Common Stock into a
greater number of shares; or (c) the combination of Issuer’s outstanding shares
of Common Stock, by reclassification or otherwise; then the Conversion Price
shall be adjusted proportionately to reflect the reduction or increase in the
value of each share of Common Stock.
8.2 Notice
of Adjustment.
Upon
any adjustment of the Conversion Price, Issuer shall give written notice thereof
within thirty (30) days, by first-class mail, postage prepaid, addressed to
Holder as shown on Issuer’s books, which notice shall state the adjusted
Conversion Price and set forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
8.3 Effect
of Reorganization, Reclassification, Merger, Etc.
If at
any time Issuer: (a) reorganizes its capital stock (other than by the issuance
of shares of Common Stock in subdivision of outstanding shares of Common Stock,
and other than by a share combination, as provided for in Section
8.1);
(b)
consolidates or merges with another corporation, or sells, conveys, leases
or
otherwise transfers all or substantially all of its property to any other
corporation or entity, which transaction is effected in a manner such that
the
holders of Common Stock shall be entitled to receive cash, stock, securities,
ownership interest, or assets with respect to or in exchange for Common Stock;
or (c) pays a dividend or makes any other distribution upon any class of its
capital stock, which dividend or distribution is payable in Issuer securities
or
other Issuer property (other than cash); then, as a part of such transaction,
lawful provision shall be made so that Holder shall have the right thereafter
to
receive, upon conversion of this Note, the number of shares of stock, ownership
interests, or other securities or property of the Issuer or of the successor
corporation or entity resulting from such transaction, or of the corporation
or
entity to which the Issuer property has been sold, conveyed, leased or otherwise
transferred, as the case may be, which Holder would have been entitled to
receive upon transaction if this Note had been converted immediately prior
thereto. In any such case, appropriate adjustments (as determined by the
Issuer’s board of directors) shall be made in the application of the provisions
set forth in this Note (including an adjustment to the Conversion Price) so
that
the provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares, ownership interests, or other
property thereafter deliverable upon the conversion of this Note as if the
Note
had been converted immediately prior to such transaction and Holder had carried
out the terms of the exchange as provided for by such transaction. The Issuer
shall not effect any such capital reorganization, consolidation, merger or
transfer unless, upon or prior to the consummation thereof, the successor
corporation(s) or entity(ies) to which Issuer property has been sold, conveyed,
leased or otherwise transferred shall assume by written instrument the
obligation to deliver to Holder such shares of stock, ownership interests,
securities, cash, or property which Holder is entitled to receive under the
foregoing provisions of this Section
8.3.
8.4 Subsequent
Issuance or Sale of Common Stock.
(a) In
the
event Issuer shall issue, after the date hereof and while this Note remains
outstanding (a “Dilutive
Issuance”),
(i)
any additional shares of Common Stock or other class of the Issuer’s common
stock (“Additional
Shares”)
or
(ii) options, warrants or other securities that can, by their terms, be
converted into Common Stock or other classes of Issuer’s common stock
(“Additional
Option Shares”)
for
consideration per share less than the Conversion Price, the Conversion Price
shall automatically be adjusted to a price (calculated to the nearest cent)
determined by dividing:
(i)
an
amount equal to the sum of (x) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Conversion Price,
(y)
the number of shares of Common Stock issuable upon conversion or exchange of
any
obligations or of any shares of stock of Issuer outstanding immediately prior
to
such issue or sale multiplied by the Conversion Price, and (z) an amount equal
to the aggregate “consideration actually received” by Issuer pursuant to such
Dilutive Issuance, by
(ii)
the
sum of the number of shares of Common Stock outstanding immediately after such
issue or sale and the number of shares of Common Stock issuable upon conversion
or exchange of any obligations or of any shares of stock of Issuer outstanding
immediately after such issue or sale.
Issuer
shall immediately notify the holder of such adjusted Conversion
Price.
(b) If
Issuer
shall sell and issue shares of Common Stock or other class of Issuer’s common
stock, or rights, options, warrants, or convertible securities containing the
right to subscribe for or purchase shares of Common Stock or other class of
Issuer’s common stock, for consideration consisting, in whole or in part, of
property other than cash or its equivalent, then in determining the total
consideration per share paid to Issuer for the purposes of this Section
8.4,
the
board of directors of Issuer shall determine, in its discretion, the fair value
of said property and such determination, if made in good faith, shall be binding
upon the Holder.
For
purposes of this Section
8.4,
the
following provisions will be applicable:
(A) In
the
case of an issue or sale for cash of shares of Common Stock, the “consideration
actually received’” by Issuer relating to a Dilutive Issuance therefore shall be
deemed to be the amount of cash received in such Dilutive Issuance, before
deducting therefrom any commissions or expenses paid by Issuer.
(B) In
case
of a Dilutive Issuance (otherwise than upon conversion or exchange of
obligations or shares of stock of Issuer) of additional shares of Common Stock
for a consideration other than cash or a consideration partly other than cash,
the amount of the consideration other than cash received by Issuer for such
shares, then the board of directors shall determine, in its discretion, the
fair
the value of such consideration, which, if made in good faith, shall be binding
upon the Holder.
(C) In
case
of a Dilutive Issuance by Issuer in any manner of any rights to subscribe for
or
to purchase shares of Common Stock, or any option for the purchase of shares
of
Common Stock or stock convertible into Common Stock, all shares of Common Stock
or stock convertible into Common Stock to which the holders of such rights
or
options shall be entitled to subscribe for or purchase pursuant to such rights
or options shall be deemed “outstanding” as of the date of the offering of such
rights or the granting of such options, as the case may be, and the minimum
aggregate consideration named in such rights or options for the shares of Common
Stock or stock convertible into Common Stock covered thereby, plus the
consideration, if any, received by Issuer for such rights or options, shall
be
deemed to be the “consideration actually received” by Issuer (as of the date of
the offering of such rights or the granting of such options, as the case may
be)
for the issuance of such shares.
(D) In
case
of a Dilutive Issuance by Issuer in any manner of any obligations or of any
shares of stock of Issuer that shall be convertible into or exchangeable for
Common Stock, all shares of Common Stock issuable upon the conversion or
exchange of such obligations or shares shall be deemed issued as of the date
such obligations or shares are issued, and the amount of the “consideration
actually received” by Issuer for such additional shares of Common Stock shall be
deemed to be the total of (X) the amount of consideration received by Issuer
upon the issuance of such obligations or shares, as the case may be, plus (Y)
the minimum aggregate consideration, if any, other than such obligations or
shares, receivable by Issuer upon such conversion or exchange, except in
adjustment of dividends.
(E) The
amount of the “consideration actually received” by Issuer upon the issuance of
any rights or options referred to in subparagraph (C) above or upon the issuance
of any obligations or shares which are convertible or exchangeable as described
in subparagraph (D) above, and the amount of the consideration, if any, other
than such obligations or shares so convertible or exchangeable, receivable
by
Issuer upon the exercise, conversion or exchange thereof shall be determined
in
the same manner provided in subparagraphs (A) and (B) above with respect to
the
consideration received by Issuer in case of the issuance of additional shares
of
Common Stock; provided,
however,
that if
such obligations or shares of stock so convertible or exchangeable are issued
in
payment or satisfaction of any dividend upon any stock of Issuer other than
Common Stock, the amount of the “consideration actually received” by Issuer upon
the original issuance of such obligations or shares or stock so convertible
or
exchangeable shall be deemed to be the value of such obligations or shares
of
stock, as of the date of the adoption of the resolution declaring such dividend,
as determined by the board of directors of Issuer at or as of that date. On
the
expiration of any rights or options referred to in subparagraph (C), or the
termination of any right of conversion or exchange referred to in subparagraph
(D), or any change in the number of shares of Common Stock deliverable upon
exercise of such options or rights or upon conversion of or exchange of such
convertible or exchangeable securities, the Conversion Price shall forthwith
be
readjusted to such Conversion Prices as would have obtained had the adjustments
made upon the issuance of such options, rights or convertible or exchangeable
securities been made upon the basis of the delivery of only the number of shares
of Common Stock actually delivered or to be delivered upon the exercise of
such
rights or options or upon the conversion or exchange of such
securities.
9. Events
of Default.
Any one
or more of the following events shall constitute an event of default (each,
an
“Event
of Default”)
under
this Note: (a) Issuer fails to timely pay as and when due any monetary
obligation under this Note in accordance with the terms hereof; (b) Issuer’s
assignment for the benefit of creditors, or filing of a petition in bankruptcy
or for reorganization or to effect a plan or arrangement with creditors; (c)
Issuer’s application for, or voluntary permission of, the appointment of a
receiver of trustee for any or all Company property; (d) any action or
proceeding described in the foregoing paragraphs (b) or (c) is commenced against
Issuer and such action or proceeding is not vacated within sixty (60) days
of
its commencement; (e) Issuer’s dissolution or liquidation; and (f) an event of
default under any other Investment Document shall have occurred.
10. Rights
and Remedies.
Upon
the occurrence, and during the continuation, of an Event of Default (a) all
Indebtedness and all other amounts due and owing under this Note shall (at
the
option of Holder) immediately become due and payable without demand and without
notice to Issuer, (b) Holder shall have all rights, powers and remedies set
forth in the Investment Documents, as well as any and all rights and remedies
available to it under any applicable law or as otherwise provided at law or
in
equity; (c) Issuer shall pay to Holder, in addition to the sums stated above,
the costs of collection, regardless of whether litigation is commenced,
including reasonable attorneys’ fees; and (d) notwithstanding any other
provision of this Note, during the period of existence of such Event of Default,
upon written notice from Holder, interest on the Indebtedness shall accrue
and
be paid, not at the Interest Rate, but at a default interest rate that is equal
to 11.25% per annum.
Holder
may employ an attorney to enforce its rights and remedies hereunder and Issuer
hereby agrees to pay Holder’s reasonable attorneys’ fees and other reasonable
expenses, including reasonable expenses relating to any assistance provided
by
Holder to Issuer in resolving such defaults and amounts incurred by Holder
in
exercising any of Holder’s rights and remedies upon an Event of Default.
Holder’s rights and remedies under this Note and the other Investment Documents
shall be cumulative. Holder shall have all other rights and remedies not
inconsistent herewith as provided under the Uniform Commercial Code as in effect
in the State of Kansas, or otherwise by law, or in equity. No exercise by Holder
of one right or remedy shall be deemed an election, and no waiver by Holder
of
any Event of Default shall be deemed a continuing waiver. No delay by Holder
shall constitute a waiver, election, or acquiescence by it.
11. Revival
and Reinstatement of Note.
To the
extent that any payment to Holder or any payment or proceeds of any collateral
received by Holder in reduction of the Indebtedness is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to
a trustee, to Issuer (or Issuer’s successor) as a debtor-in-possession, or to a
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then the portion of the Indebtedness intended
to
have been satisfied by such payment or proceeds shall remain due and payable
hereunder, be evidenced by this Note, and shall continue in full force and
effect as if such payment or proceeds had never been received by Holder whether
or not this Note has been marked “paid” or otherwise canceled or satisfied or
has been delivered to Issuer, and in such event Issuer shall be immediately
obligated to return the original Note to Holder and any marking of “paid” or
other similar marking shall be of no force and effect.
12. Authority.
Issuer
warrants and represents that the persons or officers who are executing this
Note
and the other Investment Documents on behalf of Issuer have full right, power
and authority to do so, and that this Note and the other Investment Documents
constitute valid and binding documents, enforceable against Issuer in accordance
with their terms, and that no other person, entity, or party is required to
sign, approve, or consent to, this Note.
13. Governing
Law; Consent to Forum.
This
Note shall be governed by the laws of the State of Kansas without giving effect
to any choice of law rules thereof; provided,
however,
that if
any of the collateral securing the Indebtedness shall be located in any
jurisdiction other than Kansas, the laws of such jurisdiction shall govern
the
method, manner and procedure for foreclosure of Holder’s security interest, lien
or mortgage upon such collateral and the enforcement of Holder’s other remedies
in respect of such collateral to the extent that the laws of such jurisdiction
are different from or inconsistent with the laws of Kansas. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, ISSUER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE COURT LOCATED WITHIN XXXXXXX COUNTY, KANSAS OR FEDERAL
COURT IN THE DISTRICT OF KANSAS, AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
CERTIFIED OR REGISTERED MAIL AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
UPON ACTUAL RECEIPT THEREOF. ISSUER WAIVES ANY OBJECTION TO JURISDICTION AND
VENUE OF ANY ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT
TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. ISSUER FURTHER AGREES
NOT TO ASSERT AGAINST HOLDER (EXCEPT BY WAY OF A DEFENSE OR COUNTERCLAIM IN
A
PROCEEDING INITIATED BY HOLDER) ANY CLAIM OR OTHER ASSERTION OF LIABILITY WITH
RESPECT TO THIS NOTE, THE OTHER INVESTMENT DOCUMENTS, HOLDER’S CONDUCT OR
OTHERWISE IN ANY JURISDICTION OTHER THAN THE FOREGOING
JURISDICTIONS.
14. WAIVER
OF JURY TRIAL AND COUNTERCLAIMS.
TO THE
FULLEST EXTENT PERMITTED BY LAW, AND AS SEPARATELY BARGAINED-FOR CONSIDERATION
TO HOLDER, ISSUER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH HOLDER ALSO
WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR IN ANY COUNTERCLAIM OF ANY KIND
ARISING OUT OF OR OTHERWISE RELATING TO THIS NOTE, THE INDEBTEDNESS, THE
COLLATERAL SECURING THE INDEBTEDNESS, OR THE HOLDER’S CONDUCT IN RESPECT OF ANY
OF THE FOREGOING.
15. Transfer
of Note.
Issuer
shall not transfer any obligations hereunder without Holder’s prior written
consent, which may be withheld in Holder’s sole and absolute discretion. With
the prior written consent of Issuer, which shall not be unreasonably withheld,
conditioned, or delayed, Holder may participate, sell, assign, transfer or
otherwise dispose of all or any portion of its interest in this Note (including
Holder’s rights, title, interests, remedies, powers and duties hereunder) to a
purchaser, participant, any syndicate, or any other Person (each, a
“Note
Purchaser”).
In
connection with any such disposition (and thereafter), Holder may, with adequate
safeguards of confidentiality in a manner satisfactory to Issuer, disclose
any
financial information Holder may have concerning Issuer to any such Note
Purchaser or potential Note Purchaser.
16. Further
Assurances.
Issuer
agrees to execute and deliver such further documents and to do such other acts
as Holder may request in order to effect or carry out the terms of this Note
and
the other Investment Documents and the due performance of Issuer’s obligations
hereunder and thereunder.
17. Relationship
to Security Agreement.
This
Note shall be entitled to the benefits of, shall be construed in accordance
with
any Security Agreement securing the Indebtedness.
18. Miscellaneous.
(a) Time
is
of the essence with respect to this Note.
(b) Issuer
hereby waives presentment, demand, protest, and notice of dishonor and protest.
No waiver of any right or remedy of the Holder under this Note shall be valid
unless in a writing executed by the Holder and any such waiver shall be
effective only in the specific instance and for the specific purpose given.
All
rights and remedies of the Holder of this Note shall be cumulative and may
be
exercised singly, concurrently, or successively.
(c) Unless
otherwise provided herein, any notice required or permitted to be given
hereunder shall be given by Issuer to the Holder or the Holder to the Company
in
accordance with the Convertible Notes Purchase Agreement.
(d) Any
provision of this Note that is prohibited or unenforceable in any jurisdiction
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof in that jurisdiction or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(e) This
Note
and the other Investment Documents collectively: (i) constitute the final
expression of the agreement between Issuer and Holder concerning the
Indebtedness; (ii) contain the entire agreement between Issuer and Holder
respecting the matters set forth herein and in the other Investment Documents;
and (iii) may not be contradicted by evidence of any prior or contemporaneous
oral agreements or understandings between Issuer and Holder. Neither this Note
nor any of the terms hereof may be terminated, amended, supplemented, waived
or
modified orally, but only by an instrument in writing executed by the party
against which enforcement of the termination, amendment, supplement, waiver
or
modification is sought.
(f) If
there
is a conflict between or among the terms, covenants, conditions or provisions
of
this Note and the other Investment Documents, then any term, covenant, condition
and/or provision that Holder may elect to enforce from time to time so as to
enlarge the interest of Holder in its security for the Indebtedness, afford
Holder the maximum financial benefits or security for the Indebtedness, and/or
provide Holder the maximum assurance of payment of the Indebtedness and the
Indebtedness in full, shall control. ISSUER ACKNOWLEDGES AND AGREES THAT IT
HAS
BEEN PROVIDED WITH SUFFICIENT AND NECESSARY TIME AND OPPORTUNITY TO REVIEW
THE
TERMS OF THIS NOTE AND EACH OF THE INVESTMENT DOCUMENTS WITH ANY AND ALL COUNSEL
IT DEEMS APPROPRIATE, AND THAT NO INFERENCE IN FAVOR OF, OR AGAINST, HOLDER
OR
ISSUER SHALL BE DRAWN FROM THE FACT THAT EITHER SUCH PARTY HAS DRAFTED ANY
PORTION OF THIS NOTE OR ANY OF THE INVESTMENT DOCUMENTS.
(g) The
terms
“include”, “including” and similar terms shall be construed as if followed by
the phrase “without being limited to.” The term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” Words of
masculine, feminine or neuter gender shall mean and include the correlative
words of the other genders, and words importing the singular number shall mean
and include the plural number, and vice versa. All article, section, schedule,
and exhibit captions are used for convenient reference only and in no way
define, limit or describe the scope or intent of, or in any way affect, any
such
article, section, schedule, or exhibit. Unless the context of this Note clearly
requires otherwise, references to the plural include the singular, references
to
the singular include the plural. Any reference in this Note or in the Investment
Documents to this Note or to any of the Investment Documents shall include
all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements thereto and thereof, as applicable.
An Event of Default shall “continue” or be “continuing” until such Event of
Default has been waived in writing by Holder or completely cured in accordance
with the terms of the applicable Investment Documents.
[The
remainder of this page is intentionally blank. Signature page
follows.]
IN
WITNESS WHEREOF,
Issuer
has executed and delivered this Note as of the date first stated
above.
|
ISSUER:
By:
Name:
Title:
|
