Exhibit
10.1
NEITHER THIS
NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
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No. HM
-1
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Principal
Amount $
100,000
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Original Issue
Date: July __, 2009
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INVO BIOSCIENCE,
INC.
12% SENIOR SECURED CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, the Company
promises to pay to the order of ______or its registered assigns
(the “Investor” ), in United States Dollars, the
principal sum of $100,000, on the first to occur of (i)
one (1) year following the Original Issue Date (as defined below),
or (ii) the follow on financing of at least $2,500,000 (as defined
below), (in each case, the “Maturity Date” ),
and to pay interest to the Investor on the principal amount of this
Note outstanding in accordance with the provisions
hereof. All holders of Notes are referred to
collectively, as the “Investors.”
The Company shall have the right to prepay this Note,
in part or in whole, at any time and from time to time, without any
prepayment penalty or other fee. In the event that the
Maturity Date occurs on a date that is not a Business Day (as
defined below), then all payments due on such date shall be payable
on the next succeeding Business Day.
So long as this Note remains
outstanding, it is subject to the following additional
provisions:
1. Definitions
. In
addition to the terms defined elsewhere in this Note: (a)
capitalized terms that are used but not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement,
dated as of July __, 2009, among the Company and the Investors
identified therein (the “Purchase Agreement” ),
and (b) the following terms have the meanings indicated
below:
“Bankruptcy Event”
means any of the following
events: (a) the Company commences a proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company; (b) there is commenced
against the Company any such case or proceeding described in the
foregoing clause (a) that is not dismissed within sixty (60) days
after commencement; (c) by an order of a court of competent
jurisdiction, the Company is adjudicated insolvent or bankrupt; (d)
a custodian or receiver has been appointed for all or any
substantial part of its to the Company’s property, and such
custodian or receiver is not discharged or stayed within sixty
(60) days from the appointment date thereof; (e) under
applicable law, the Company makes a general assignment for the
benefit of creditors; (f) the Company calls in writing a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts; or (g) the Company, by any act or
failure to act, expressly in writing indicates its consent to or
approval of any of the foregoing or takes any corporate or other
action for the purpose of effecting any of the
foregoing.
“Business Day”
means any day except Saturday,
Sunday and any day that is a federal legal holiday or a day on
which banking institutions in the State of New York are authorized
or required by law or other governmental action to
close.
“Common Stock” means the common stock of the
Company, $0.0001 par value per share, and any securities into which
such common stock may hereafter be reclassified.
“Conversion
Date” means the
date a Conversion Notice together with the Conversion Schedule is
actually received by the Company in proper and completed form in
accordance with Section 6(a) of the Note.
“Conversion
Notice” means a
written notice in the form attached hereto as Exhibit A
.
“Conversion
Price” means $.10
per share.
“Default”
means any event or condition which
constitutes an Event of Default or that upon notice, lapse of time
or both would, unless cured or waived, become an Event of
Default.
“Event of
Default” means any
one of the following events (whatever the reason and whether it
shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental
body):
(i) any default in the
payment, when the same becomes due and payable, of principal under
or interest in respect of this Note;
(ii) the Company
experiences, an event of default (which has not been cured in
accordance with the terms thereof and is continuing) and
acceleration of payment obligations under, any currently existing
or hereafter arising material agreement, debenture (other than a
Note) or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced, any Indebtedness or under any long term leasing or
factoring arrangement, if the aggregate amount of the obligations
and liabilities of the Company under the Indebtedness in such
default exceeds $100,000 (each of the foregoing, a
“Material Debt Agreement” );
(iii) the
occurrence of a Bankruptcy Event; or
(iv) any
breach of any material covenant, agreement or representation and/or
warranty in any of the Transaction Documents (as described in the
Purchase Agreement)
“Follow-On-Financing”
shall mean the offer and sale of
securities of the Company.
“Fundamental
Transaction” means
the occurrence of any of the following in one or a series of
related transactions: (i) the Company effects any merger or
consolidation of the Company with or into another Person (other
than a reincorporation and/or similar transaction), (ii) the
Company effects any sale of all or substantially all its assets,
(it being understood that a sale (but not a license (unless the
license results in the Company business and/or revenues resulting
substantially from licensing revenues)) of any patents related to
the Company’s technology shall constitute a Fundamental
Transaction) .or (iii) any Person acquires at least 50.01% of the
issued and outstanding voting stock of the Company.
“Indebtedness”
of any Person shall mean, without
duplication, (a) all obligations of such Person for borrowed money
or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, Notes, notes or
similar instruments, (c) all obligations of such Person upon which
interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements
relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred
purchase price of property or services (other than unsecured
accounts payable incurred in the ordinary course of business and no
more than ninety (90) days past the date of the invoice therefor),
(f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired
by such Person, whether or not the obligations secured thereby have
been assumed, (g) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements
that exceed amounts necessary to hedge the Company’s
cross-currency exposure, (h) all obligations of such Person as an
account party in respect of letters of credit and bankers’
acceptances, and (i) the Indebtedness of any partnership in which
such Person is a general partner.
“Original Issue Date”
has the meaning set forth on the
face of this Note.
“Person”
means an individual or corporation,
partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of
any kind.
“Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Underlying Shares”
means the Common Stock issuable upon
conversion of the Notes.
“Warrants” means the Common Stock purchase warrants issued
pursuant to the Purchase Agreement.
“Warrant
Shares” means the
shares of Common Stock issuable upon exercise of the
Warrants.
2. Interest
.
(a) The
Company shall pay interest in cash in United States dollars to the
Investor on the aggregate unconverted and then outstanding
principal amount of this Note at the rate of twelve percent (12%)
per annum. All interest shall accrue and be payable on
the maturity date, the interest will be payable in common stock
shares. Interest shall be compounding and shall be
calculated on the basis of a 360-day year for the actual number of
days elapsed and shall accrue daily commencing on the Original
Issue Date.
(b)
Maximum Rate . In the event that it is determined that,
under the laws relating to usury applicable to the Company or the
indebtedness evidenced by this Note (the “Applicable Usury
Laws” ), the interest charges and fees payable by the
Company in connection herewith or in connection with any other
document or instrument executed and delivered in connection
herewith cause the effective interest rate applicable to the
indebtedness evidenced by this Note to exceed the maximum rate
allowed by law (the “Maximum Rate” ), then such
interest shall be recalculated for the period in question and any
excess over the Maximum Rate paid with respect to such period shall
be credited, without further agreement or notice, to the principal
amount outstanding hereunder to reduce said balance by such amount
with the same force and effect as though the Company had
specifically designated such extra sums to be so applied to
principal and the Investor had agreed to accept such extra
payment(s) as a premium-free prepayment. All such deemed
prepayments shall be applied to the principal balance payable at
maturity. In no event shall any agreed-to or actual exaction as
consideration for this Note exceed the limits imposed or provided
by Applicable Usury Laws in the jurisdiction in which the Company
is resident applicable to the use or detention of money or to
forbearance in seeking its collection in the jurisdiction in which
the Company is resident and any funds received in excess of such
limits shall be so applied as provided herein or held in
trust.
3. Registration of
Notes . The Company shall register the Note upon
records maintained by the Company for that purpose (the
“Note Register” ) in the name of each record
Investor thereof from time to time. The Company may deem and treat
the registered Investor of this Note as the absolute owner hereof
for the purpose of any conversion hereof or any payment of interest
hereon, and for all other purposes, absent actual notice to the
contrary from such record Investor.
4. Registration of
Transfers and Exchanges . The Company shall register
the transfer of any portion of this Note in the Note Register upon
surrender of this Note to the Company at its address for notice set
forth herein. Upon any such registration or transfer, a new Note,
in substantially the form of this Note (any such new note, a
“New Note” ), evidencing the portion of this
Note so transferred shall be issued to the transferee and a New
Note evidencing the remaining portion of this Note not so
transferred, if any, shall be issued to the transferring Investor.
The acceptance of the New Note by the transferee thereof shall be
deemed the acceptance by such transferee of all of the rights and
obligations of a holder of a Note. The Company agrees
that its prior consent is not required for the transfer
