Exhibit 4.1
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND MAY NOT
BE
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH NOTE MAY
BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
Bluegate Corporation
10% Convertible Promissory Note
DATED:
August __, 2005
PRINCIPAL AMOUNT (US$): $ _________
FOR VALUE RECEIVED, Bluegate
Corporation, a Nevada corporation (the "Company"),
hereby promises to pay to ________________________,
residing at
______________________________ or registered assigns (the "Payee" or "Holder")
upon due presentation and surrender of
this promissory note (the "Note") on the
Repayment Date (as hereinafter defined) the principal amount of
_________________________________
($___________),
and accrued interest
thereon
as hereinafter provided.
1. PAYMENT OF PRINCIPAL AND
INTEREST; METHOD OF PAYMENT.
1.1 Payment. Payment of the principal and accrued interest on this
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Note shall be
made in such coin or currency of the United States of America
as at the time of payment shall be legal
tender for the payment of public
and private
debts. Interest (computed for the actual number of days elapsed
on the basis of a year consisting of 365 days) on
the unpaid portion of
said
principal amount from time to time outstanding
shall be paid by the
Company
at the rate of ten percent (10%) per
annum (the "Stated Interest
Rate").
The Interest will accrue and be added to the then
outstanding
principal
amount of the Notes, daily. The principal shall be due and
payable
on the Repayment Date, which payment shall be made only upon
presentation
and surrender of this Note to the
Company at its address set
forth
herein. The Company will pay or cause to be
paid all principal and
interest
becoming due hereon by check sent to the Holder's above address
or
to such other address as the Holder may designate for
such purpose from
time
to time by written notice to the Company.
<PAGE>
1.2 Repayment Date.
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(a) For purposes hereof, unless sooner repaid by the Company,
the
"Repayment Date"
shall mean the earlier
of the following dates:
(i) the date which is within five (5) days of receipt of funds
by
the Company
of any offering, raising gross proceeds to the
Company of
at least $1,000,000 or (ii) the date which is one
hundred and
eighty (180) days after the above-stated
issuance
date of this Note (the "Initial Six Month Term").
(b) The Company may, by written notice to
the Holder within ten (10)
days prior
to the end of the Initial Six-Month Term and
the
delivery to the Holder of the Notes a number of warrants equal
to
50% of the number of shares underlying
the Note (as provided in
Section 2.1), extend
the Repayment Date for an additional ninety
(90) days (the "First Extension Period"); provided, however,
that
the Company may, by
written notice to the Holder within ten (10)
days prior
to the end of the First Extension Period and
the
delivery to
the Holder of the Note an additional number of
warrants equal to 50% of the number of shares underlying the
Note
(as
provided in Section 2.1), extend the Repayment Date
for a
second ninety (90) day period (the "Second Extension Period"),
in
which case
all principal and any accrued and unpaid
interest
thereon shall
be due and payable on the last day of
the Second
Extension Period.
2. CONVERSION AT THE ELECTION OF THE HOLDER.
2.1 This Note may be converted at the option of the
Holder at any time,
including without
limitation,
after Holder receives
notice from the
Company of
its intent to prepay this Note.
Conversion by the Holder
shall require
written notice to the Company duly executed and
delivered by the Holder, together with the original of this Note.
Upon
delivery of
such conversion notice
to the Company, the Company shall
convert the
unpaid principal balance of this Note and all
interest
accrued thereon
into such number of shares of Common Stock of
the
Company, equal
to the unpaid
principal plus accrued interest thereon
divided by
$0.75 per share (subject to adjustment, as
provided in
Section 8.6,
the "Conversion Price").
2.2 Upon issuance of the Note, the Company will deliver to the
Holder
warrants equal to 100%
of the number of shares of Common Stock of the
Company, equal
to the unpaid
principal plus accrued interest thereon
divided by
$0.75 per share (subject to adjustment, as
provided in
Section 8.6),
within five (5)
business days of receipt of conversion
notice.
3. RANKING OF NOTE.
3.1 Senior to all Debt. The Company, for itself, its
successors and
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assigns,
covenants and agrees,
and the Payee and each successive Holder by
acceptance
of this Note, likewise
covenants and agrees that the payment of
the principal of and interest on this Note is senior to all other
<PAGE>
Indebtedness
except for up to $150,000 in principal
amount of senior debt
secured by
accounts receivable issued by the Company. The Company
covenants
and agrees that
it will not incur any additional pari passu debt unless the
Notes
have been converted.
3.2 Indebtedness. "Indebtedness" means:
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(a) any liability of the Company (i) for borrowed money, or
(ii)
evidenced by
a note, debenture, bond or other instrument of
indebtedness
(including, without
limitation,
a purchase money
obligation), given
in connection with the acquisition of
property, assets
or services, (iii) for the payment of
rent or
other amounts relating
to capitalized lease obligations, or (iv)
trade accounts
payable and trade credit;
(b) any liability of others described in the preceding clause
(a)
which the Company has
guaranteed or which is otherwise its legal
liability; and
(c) any modification,
renewal, extension, replacement or refunding of
any such liability described in the preceding clauses (a) and
(b)
except that
Indebtedness.
4. REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.
The Company
represents and warrants to the Holder that the Company:
(a) is a corporation duly organized, validly existing and in
good
standing under
the laws of the State of Nevada;
(b) has all requisite power and authority
and all necessary licenses
and permits to own and operate its properties and to carry on
its
business as
now conducted and as presently proposed to be
conducted, the failure of which would not have a material
adverse
effect on the business, operations, properties,
liabilities or
condition (financial
or otherwise) of the Company; and
(c) has adequate authority, power and legal right to enter into,
execute and deliver the Note. On execution and delivery, the
Note
will be a legal, valid and binding obligation of the
Company
enforceable in
accordance
with its terms.
<PAGE>
5. EVENTS OF DEFAULT.
It shall be an "Event
of Default" with respect to this Note upon
the occurrence
and continuation uncured of any of the
following events:
5.1 Default in Payment, Etc.
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(a) A default in the
payment of any interest or principal payments on
this Note that
continues uncured for fifteen (15) days after due
date and notice is received from Holder; or
(b) default
in the performance, or breach, of any
other covenant of
the Company
in this Note and continuance of such default or
breach uncured
for a period of three (3) days after
receipt of
notice as to such breach or after the Company knew or should
have
known of such breach.
5.2 Bankruptcy.
The entry of a decree or order by a court having
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jurisdiction
adjudging the Company bankrupt or insolvent, or
approving a
petition
seeking
reorganization, arrangement, adjustment or composition of
or in respect of the Company, under Federal bankruptcy law, as
now or
hereafter
constituted, or any other applicable Federal or state
bankruptcy,
insolvency
or other similar law,
and the continuance of any such decree or
order
unstayed and in effect for a period of sixty (60) days; or
the
commencement
by the Company of a voluntary case under
Federal bankruptcy
law,
as now or hereafter constituted, or any
other applicable Federal or
state
bankruptcy, insolvency, or other similar law, or the consent by it
to
the institution of bankruptcy or
insolvency proceedings against it, or the
filing
by it of a petition or answer or
consent seeking reorganization or
relief
under Federal bankruptcy law or any other applicable Federal
or
state
law, or the consent by it to the filing of
such petition or to the
appointment
of a receiver, liquidator, assignee,
trustee, sequestrator or
similar official
of the Company or of any substantial part of its property,
or the making by it of an assignment for
the benefit of creditors, or the
admission
by it in writing of its inability to
pay its debts generally as
they
become due, or the taking of corporate action by the Company
in
furtherance of any such action.
6. REMEDIES UPON DEFAULT.
6.1 Acceleration.
Upon an Event of Default and at any
time during the
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continuation
thereof, the Holder, by notice in writing given to the
Company,
may declare the entire
principal and any accrued interest of this
Note
then outstanding to be
due and payable immediately, and upon any such
declaration
the same shall become and be due and payable
immediately,
anything
herein contained to the contrary notwithstanding.
6.2 Proceedings
and Actions. During the continuation of any
Event of
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Default,
the Holder may institute such actions or
proceedings in law or
equity
as it shall deem
expedient for the protection of its rights and may
prosecute
and enforce its claims
against all assets of the Company, and in
connection
with any such action
or proceeding shall be entitled to receive
from
the Company payment of
the principal amount of this Note plus accrued
interest
to the date of payment plus reasonable expenses
of collection
including,
without limitation, attorney's fees and expenses.
<PAGE>
7. RESTRICTIONS ON
TRANSFER.
The Holder
acknowledges that he
has been advised by the Company
that this Note have
not been registered under the Act, that
they are being issued on the basis of the statutory
exemption provided
by section 4(2) of the Act and/or
Regulation D promulgated thereunder relating to transactions
by an issuer not involving any public offering, and that the
Company's
reliance thereon is based in part upon the
representations made
by the Holder in the Subs
