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NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE
UPON CONVERSION HEREOF
HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE
RESTRICTED AND MAY
NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER
THE ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR
THEREFROM.
No. S-2005-1 US $250,000.00
AMERICAN PALLET LEASING, INC.
SECURED CONVERTIBLE PROMISSORY NOTE DUE SEPTEMBER 27, 2005
THIS Note is a duly authorized issuance of $250,000.00 of
AMERICAN PALLET
LEASING, INC., a corporation organized and existing under the
laws of the State
of Delaware and located at 425 Second Street, S.E., Suite 600,
Cedar Rapids, IA
52401 (the "Company") designated as its Convertible Note.
FOR VALUE RECEIVED, the Company promises to pay to BRITTANY
CAPITAL
MANAGEMENT LIMITED, the registered holder hereof (the "Holder"),
the principal
sum of two hundred fifty thousand and 00/100 Dollars (US
$250,000.00) , plus
accrued interest in the amount of eight percent (8%) per year
for all
outstanding principal on September 27, 2005 (the "Maturity
Date"). The principal
plus accrued interest of this Note is payable at the option of
the Holder at any
time after the Maturity Date, in shares of the Company's common
stock, $.001 par
value per share ("Common Stock") as set forth below, or in
United States
dollars, at the address last appearing on the Note Register of
the Company as
designated in writing by the Holder. The Company will pay the
outstanding
principal amount of this Note, plus accrued interest, in cash on
or before the
Maturity Date, less any amounts required by law to be deducted,
to the
registered holder of this Note. The forwarding of such check or
wire transfer
shall constitute a payment hereunder and shall satisfy and
discharge the
liability for principal on this Note to the extent of the sum
represented by
such check or wire transfer plus any amounts so deducted.
1
<PAGE>
This Note is subject to the following additional provisions:
1. The Note is issuable in denominations of Ten Thousand
Dollars
(US$10,000) and integral multiples thereof, provided that the
number of shares
to be issued upon conversion is a minimum of 3,000 (unless if at
the time of
election to convert the number of shares of Common Stock
issuable upon
conversion is less than 3,000). The Note is exchangeable for an
equal aggregate
principal amount of Note of different authorized denominations,
as requested by
the Holder surrendering the same. No service charge will be made
for such
registration or transfer or exchange.
1.A The Company shall have the right to redeem this Note at any
time by
providing written notice to the Holder by making a cash payment
to the Holder of
the outstanding principal amount of the Note multiplied by a
premium according
to the following schedule, plus all accrued interest: 108% of
the outstanding
principal amount if redeemed within 90 days after the issuance
date; 112% of the
outstanding principal amount if redeemed within 270 days after
the issuance
date; 115% of the outstanding principal amount if redeemed after
270 days after
the issuance date. Written notice to the Holder shall be
received at least 5
business days prior to the date of redemption payment
("Redemption Date"). If
the redemption payment is not made on or before the Redemption
Date, the
redemption notice shall be rendered null and void and the Holder
thereafter
shall have the right to convert any portion of the outstanding
principal of the
Note.
1.B This Note is further guaranteed by the Guarantor pursuant to
a Limited
Recourse Guarantee, and secured pursuant to a Stock Pledge
Agreement, each dated
April 26, 2005 between the parties whereby the Guarantor has
guaranteed this
Note and has granted to Holder a security interest in
Collateral, as defined
therein, to secure the payment of this Note. Such security
interest may be
perfected by the filing of the applicable UCC statements in the
appropriate
recording offices.
2. The Holder of this Note is entitled at any time after the
Maturity
Date, at its option, subject to the following provisions, to
convert all or a
portion of the principal amount of this Note plus accrued
interest into shares
of Common Stock at a conversion price for each share of Common
Stock equal to
the Current Market Price multiplied by eighty percent (85%) (the
"Conversion
Price"). "Current Market Price" means the average of the three
(3) lowest
closing bid prices for the Common Stock as reported by
Bloomberg, LP or, if not
so reported, as reported on the over-the-counter market, for the
ten (10)
trading days ending on the trading day immediately before the
relevant
Conversion Date (as defined below). The amount of shares
issuable pursuant to a
conversion shall equal the principal amount (or portion thereof)
of the Note to
be converted, plus accrued interest, divided by the Conversion
Price.
Conversion shall be effectuated by surrendering the Note to the
Company,
accompanied by or preceded by facsimile or other delivery to the
Company of the
form of conversion notice attached hereto as Exhibit A, executed
by the Holder
evidencing such Holder's intention to convert a specified
portion hereof. No
fractional shares of Common Stock or scrip representing
fractions of shares will
be issued on conversion, but the number of shares issuable shall
be rounded to
the nearest whole share. The date on which notice of conversion
is given (the
"Conversion Date") shall be deemed to be the date on which the
Holder faxes or
otherwise delivers the conversion notice ("Notice of
Conversion"), substantially
in the form annexed hereto as Exhibit A, duly executed, to the
Company.
Facsimile delivery of the Notice of Conversion shall be accepted
by the Company
at facsimile number (319) 247-2757 ATTN: President. Certificates
representing
Common Stock upon conversion will be delivered within three (3)
business days
from the Conversion Date. ("Delivery Date")
The Company understands that a delay in the issuance of the
Shares of
Common Stock beyond the Delivery Date (as defined in this
Section) could result
in economic loss to the Holder. As compensation to the Holder
for such loss, the
Company agrees to pay late payments to the Holder for late
issuance of Shares
upon Conversion, unless the delay is due to causes beyond the
reasonable control
of the Company or the Transfer Agent, in accordance with the
following schedule
(where "No. Business Days Late" refers to the number of business
days which is
beyond three (3)) business days after the Delivery Date):(1)
2
<PAGE>
Late Payment For Each $10,000
of Note Principal or Interest
No. Business Days Late Amount Being Converted
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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
The Company shall pay any payments incurred under this Section
in immediately
available funds upon demand as the Holder's remedy for such
delay. Furthermore,
in addition to any other remedies which may be available to the
Holder, in the
event that the Company fails for any reason to effect delivery
of such shares of
Common Stock by close of business on the Delivery Date, unless
such failure is
due to causes beyond the Company's reasonable control or that of
its Transfer
Agent, the Holder will be entitled to revoke the relevant Notice
of Conversion
by delivering a notice to such effect to the Company, whereupon
the Company 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 which
have accrued
through the date of such revocation notice shall remain due and
owing to the
Converting Holder notwithstanding such revocation.
If, by the relevant Delivery Date, the Company fails, unless
such failure
is due to causes beyond the Company's reasonable control or that
of its Transfer
Agent, for any reason to deliver the Shares to be issued upon
conversion of the
Note and after such Delivery Date, the Holder of the Note being
converted (a
"Converting 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 sa
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