NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT.
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February 23, 2009
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Up to
$1,000,000
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Irvine, California
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FOR VALUE
RECEIVED, T3 Motion, Inc. (the “Maker”), promises to
pay to the order of Ki Nam, at the offices of T3 Motion, Inc. (the
“Payee”, which term includes any subsequent holder
hereof), or at such other place as the Payee may designate, the
principal sum of the amount set forth on Schedule 1 as
adjusted from time to time but no greater than One Million Dollars
($1,000,000.00), together with interest on the unpaid principal
balance of this Note from time to time outstanding. The unpaid
principal balance hereof from time to time outstanding shall bear
interest at the rate of 10% per annum. Subject to the terms and
conditions hereof, all principal and interest due hereunder shall
be paid in one payment on the one-year anniversary of this Note
unless otherwise prepaid or delayed pursuant to the other terms of
this Note.
(a)
Interest . Interest on this Note shall be computed on the
basis of a year of 365 days for the actual number of days elapsed.
All payments by the Maker under this Note shall be in immediately
available funds. Notwithstanding any other provision of this Note
to the contrary, the payment of any principal, interest or other
obligation owing under this Note shall be deferred until the Maker
closes an equity or debt financing (or series of financings) of at
least $10 million in gross proceeds. This deferral shall apply even
if the Maker has suffered an “Event of Default” as
described herein.
(b)
Additional Principal . Maker may notify the Payee in writing
that Maker wishes to borrow additional funds from the Payee
pursuant to this Note. The Payee shall have the sole option of
making such loan. Any additional funds shall increase the principal
amount due under this Note and shall be evidenced by adjusting the
balance schedule set forth on Schedule 1 (“Balance
Schedule”) accordingly. Payee shall deliver the Balance
Schedule to Maker so that it may be updated.
2. Events
of Default . This Note shall become immediately due and payable
without demand upon the occurrence at any time of any of the
following events of default (individually, “an Event of
Default” and collectively, “Events of
Default”):
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(a)
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default in the payment or
performance of this or any other liability or obligation of the
Maker to the Payee, including the payment when due of any
principal, premium or interest under this Note; provided that there
shall be no default
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under this subsection (a) if Ki
Nam is the Chief Executive Officer, the Marker’s Board of
Directors has authorized such payment and the Maker has funds to
make such payment;
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(b)
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the
Maker shall have become insolvent or shall generally not pay its
debts as they mature or shall apply for, shall consent to, or shall
acquiesce in the appointment of a custodian, trustee or receiver
for the Maker or for a substantial part of the property thereof or,
in the absence of such application, consent or acquiescence, a
custodian, trustee or receiver shall be appointed for the Maker or
for a substantial part of the property thereof and such appointment
is not terminated or dismissed within thirty (30) days after
the appointment;
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(c)
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the
liquidation, termination of existence or dissolution of the
Maker;
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(d)
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the
institution against the Maker or any endorser or guarantor of this
Note of any proceedings under the United States Bankruptcy Code or
any other federal or state bankruptcy, reorganization,
receivership, insolvency or other similar law affecting the rights
of creditors generally, which proceeding is not dismissed within
thirty (30) days of filing; or
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(e)
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the
institution by the Maker or any endorser or guarantor of this Note
of any proceedings under the United States Bankruptcy Code or any
other federal or state bankruptcy, reorganization, receivership,
insolvency or other similar law affecting the rights of creditors
generally or the making by the Maker or any endorser or guarantor
of this Note of a composition or an assignment or trust mortgage
for the benefit of creditors.
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Upon the happening
of any Event of Default, this Note shall bear interest until paid
in full at an annual rate which is two (2) percentage points
above the rate per year specified in the first paragraph of this
Note. In no event shall any interest charged, collected or reserved
under this Note exceed the maximum rate then permitted by
applicable law and if any such payment is paid by the Maker, then
such excess sum shall be credited by the holder as a payment of
principal.
3.
Conversion Right . Maker shall notify Payee whenever it
conducts an Equity Financing Offer. During the pendency of an
Equity Financing Offer but prior to the earlier of (i) the closing
of the securities pursuant to the Equity Financing Offer or
(ii) withdrawal of such Equity Financing Offer to the
applicable offerees, the Payee shall be entitled to convert any
portion of the outstanding and unpaid Conversion Amount (as defined
below) into “Units” of Maker’s securities at the
Conversion Rate (as defined below).
(a)
“Conversion Rate” means the number of Units issuable
upon conversion of any Conversion Amount determined by dividing
(x) such Conversion Amount by (y) the Conversion
Price.
(b)
“Conversion Amount” means the portion of the principal
and interest of the Note to be converted, redeemed or otherwise
with respect to which this determination is being made.
(c)
“Conversion Price” means $1.65 per Unit.
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