Exhibit 10.3
THIS NOTE AND THE COMMON EQUITY
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON EQUITY ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH
REGISTRATION REQUIREMENTS.
AMENDED AND RESTATED SECURED
CONVERTIBLE NOTE
$10,000,000
Original Date: April 24,
2009
Amended and Restated Date: July 24,
2009
New York, New York
FOR VALUE RECEIVED, PA LLC, a
Delaware limited liability company (together with its successors,
the “ Maker ”) promises to pay to PetroTech
Holdings, Corp., (the “ Payee ”) at c/o Laurus
Capital Management, LLC, 335 Madison Avenue, 10
th Floor, New York, New York 10017, or at such
other place as may be designated in writing by the holder of this
Convertible Note, the principal sum (the “ Principal
Amount ”) of TEN MILLION DOLLARS and 00/100 Dollars
($10,000,000), which sum shall be payable in lawful money of the
United States of America, together with interest that shall accrue
on the unpaid principal balance computed from the date hereof at
twelve percent (12.0%) per annum on June 30, 2012 (the
“ Maturity Date ”) Interest shall be calculated
on the basis of the actual number of days elapsed over a year of
360 days and shall be paid in full by Payee on repayment of the
Principal Amount under this Note.
This Convertible Note combines and
amends and restates in its entirety (and is given in substitution
for and not in satisfaction of) each of (i) that certain
Convertible Demand Note dated as of April 24, 2009 issued by
Maker to Payee (as amended, restated, modified and/or supplemented
from time to time) and (ii) that certain Secured Convertible
Demand Note dated as of May 11, 2009 issued by Maker to Payee
(as amended, restated, modified and/or supplemented from time to
time).
1. DEFINITIONS.
“ Common Stock ”
shall mean the shares of stock representing the Parent’s
common stock, $0.001 par value per share.
“ Conversion Shares
” shall mean the shares of Common Stock to be issued upon
conversions of principal, interest or fees hereunder and in
accordance with the terms hereof.
“ Exchange Act ”
shall mean the Securities Exchange Act of 1934, as
amended.
“ Fixed Conversion
Price ” shall mean $5.43.
“ Parent ” shall
mean PetroAlgae Inc., a Delaware corporation.
“ Principal Market
” means the NASD Over The Counter Electronic Bulletin Board,
NASDAQ Capital Market, NASDAQ National Market System, American
Stock Exchange or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market
for the Common Stock).
2. USE OF PROCEEDS. The proceeds of
the loan made pursuant to this Convertible Note shall be used by
Maker solely for working capital purposes.
3. OPTIONAL REDEMPTION IN CASH. The
Maker may prepay this Convertible Note (“ Optional
Redemption ”) by paying to the Payee a sum of money equal
to the Principal Amount outstanding at such time together with
accrued but unpaid interest thereon and any and all other sums due,
accrued or payable to the Payee arising under this Convertible Note
(the “ Redemption Amount ”) outstanding on the
Redemption Payment Date (as defined below). The Maker shall deliver
to the Payee a written notice of redemption (the “ Notice
of Redemption ”) specifying the date for such Optional
Redemption (the “ Redemption Payment Date ”),
which date shall be no sooner than ten (10) business days
after the date of the Notice of Redemption (the “
Redemption Period ”). A Notice of Redemption shall not
be effective with respect to any portion of this Convertible Note
for which the Payee has previously delivered a Notice of Conversion
(as hereinafter defined) or for conversions elected to be made by
the Maker pursuant to Section 5 during the Redemption Period.
The Redemption Amount shall be determined as if the Payee’s
and Maker’s, as applicable, conversion elections had been
completed immediately prior to the date of the Notice of
Redemption. On the Redemption Payment Date, the Redemption Amount
must be paid in good funds to the Payee. In the event the Maker
fails to pay the Redemption Amount on the Redemption Payment Date
as set forth herein, then such Redemption Notice will be null and
void.
4. MAKER’S PAYMENT OF INTEREST
ON OPTIONAL INTEREST PAYMENT DATES.
a. Subject to the restrictions set
forth below in this Section 4, commencing on June 1, 2009
and on the first business day of each succeeding September,
December and March thereafter (each, an “ Optional
Interest Payment Date ”) through the Maturity Date, the
Maker shall have the right, but not the obligation, to pay all
accrued and unpaid interest as of such Optional Interest Payment
Date through the issuance by Parent of fully paid and
non-assessable shares of Common Stock to the Payee at a price per
share equal to the greater of (i) the volume weighted average
price of the Common Stock for the fifteen (15) days
immediately prior to the applicable Optional Interest Payment Date
and (ii) the Fixed Conversion Price (the “ Interest
Conversion Price ”).
b. Mechanics of Maker’s
Conversion . In the event that the Maker elects to convert
accrued and unpaid interest into Common Stock, the Maker shall give
no less than five (5) business days written notice of such
election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit A hereto
(appropriate completed) (“ Notice of Interest
Conversion ”) to the Payee and Parent and such Notice of
Interest Conversion shall provide a breakdown in reasonable detail
of the accrued and unpaid interest that are being converted. On
each Optional Interest Payment Date and in accordance with its
Notice of Interest Conversion, the Payee shall make the appropriate
reduction to the accrued and unpaid interest as entered in its
records and shall provide notice thereof to the Maker. Pursuant to
the terms of the Notice of Interest Conversion, the Parent will
issue instructions to the transfer agent within one
(1) business day of the date of the delivery to the Payee and
Parent of the Notice of Interest Conversion and shall cause the
transfer agent to transmit the certificates representing the
Conversion Shares to the Payee by crediting the account of the
Payee’s designated broker with the Depository Trust
Corporation (“ DTC ”) through its Deposit
Withdrawal Agent Commission (“ DWAC ”) system
within three (3) business days after receipt by the Payee and
Parent of the Notice of Interest Conversion (the “
Interest Conversion Delivery Date ”). In the case of
the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to
have been issued upon the date of receipt by the Payee and Parent
of the Notice of Interest Conversion. The Payee shall be treated
for all purposes as the record holder of the Interest Conversion
Shares, unless the Payee provides the Maker or Parent, written
instructions to the contrary.
c. Additional Interest Conversion
Mechanics . The number of shares of Common Stock to be issued
upon each conversion accrued and unpaid interest shall be
determined by dividing that portion of the interest to be converted
by the applicable Interest Conversion Price.
5. PAYEE’S CONVERSION
RIGHTS
a. Optional Conversion of
Payee . The Payee shall have the right, but not the obligation,
to convert all or any portion of the issued and outstanding
Principal Amount and/or accrued interest and fees due and payable
into fully paid and non-assessable shares of Common Stock at the
Fixed Conversion Price.
b. Mechanics of Payee’s
Conversion . In the event that the Payee elects to convert this
Convertible Note into Common Stock, the Payee shall give notice of
such election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit B hereto
(appropriate completed) (“ Notice of Conversion
”) to the Maker and Parent such Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and fees that are being converted. On each
Conversion Date (as hereinafter defined) and in accordance with its
Notice of Conversion, the Payee shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to
the Maker within two (2) business days after the Conversion
Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Maker and Parent, in accordance with the
provisions hereof shall be deemed a Conversion Date (the “
Conversion Date ”). Pursuant to the terms of the
Notice of Conversion, the Maker will
issue instructions to the transfer
agent within one (1) business day of the date of the delivery
to the Maker and Parent of the Notice of Conversion and shall cause
the transfer agent to transmit the certificates representing the
Conversion Shares to the Payee by crediting the account of the
Payee’s designated broker with the DTC through its DWAC
system within three (3) business days after receipt by the
Maker and Parent of the Notice of Conversion (the “ Payee
Conversion Delivery Date ” and together with the Interest
Conversion Delivery Date, the “ Delivery Dates ”
and each, a “ Delivery Date ”). In the case of
the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to
have been issued upon the date of receipt by the Maker and Parent
of the Notice of Conversion. The Payee shall be treated for all
purposes as the record holder of the Conversion Shares, unless the
Payee provides the Maker or Parent, written instructions to the
contrary.
c. Additional Conversion
Mechanics .
1. The number of shares of Common
Stock to be issued upon each conversion of this Convertible Note
shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the Fixed Conversion
Price.
2. The Fixed Conversion Price and
number and kind of shares to be issued upon conversion is subject
to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) 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 or any preferred stock issued in shares of Common Stock, the
Fixed Conversion Price, as the case may be, 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 or units of Common Stock
outstanding immediately prior to such event.
6. COVENANTS OF THE
PARENT.
a. During the period that conversion
rights exist hereunder, the Parent will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the full conversion of this
Convertible Note, including, without limitation, all interest that
may accrue hereunder over a three year term.
b. During the period the conversion
right exists, Parent covenants and agrees that (i) the number
of shares of Common Stock that may be issued upon conversion
hereunder will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances, (ii) all such
issued and outstanding shares of Common Stock will be issued in
compliance with applicable state and federal laws.
7. OTHER RELATED CONVERSION
PROVISIONS.
a. Issuance of New Note .
Upon any partial conversion of this Convertible Note, a new Note
containing the same date and provisions of this Convertible Note
shall, at the request of the Payee, be issued by the Maker to the
Payee for the principal balance of this Convertible Note and
interest which shall not have been converted or paid.
b. Rights of Equityholders .
The Payee shall not be entitled to vote or receive dividends or be
d
