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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”). THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION S UNDER SAID
ACT.
CONVERTIBLE NOTE
Los
Angles, CA
FOR VALUE RECEIVED ,
EMVELCO CORP. ,
a Delaware corporation (hereinafter called the “
Borrower ”),
hereby promises to pay to the order of __________________ or
registered assigns (the “
Holder ”)
the sum of $___________, on May ____, 2010 (the
“Maturity Date ”),
and to pay interest on the unpaid principal balance hereof at the
rate of eight percent (8%) per annum from ___________, 2008 (the
“
Issue Date ”)
until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. If an Event of Default
exists, this Note shall bear interest at the maximum permitted rate
allowed by the State of Florida per annum from the due date thereof
until such time that the Event of Default is cured (“
Default Interest ”).
Interest shall commence accruing on the issue date, shall be
computed on the basis of a 365-day year and the actual number of
days elapsed and shall be payable on the Maturity Date. All
payments due hereunder (to the extent not converted into common
stock, $.0001 par value per share, of the Borrower (the
“
Common Stock ”)
in accordance with the terms hereof) shall be made in lawful money
of the United States of America. All payments shall be made at such
address as the Holder shall hereafter give to the Borrower by
written notice made in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note
is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day
and, in the case of any interest payment date which is not the date
on which this Note is paid in full, the extension of the due date
thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the
term “business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in that
certain Agreement and Plan of Exchange, dated May 1, 2008, pursuant
to which this Note was originally issued (the “
Purchase Agreement ”).
The
following terms shall apply to this Note:
ARTICLE I.
CONVERSION RIGHTS
1.1
Conversion Right
. The
Holder shall have the right from time to time, and at any time on
or prior to the Maturity Date to convert all or any part of the
outstanding and unpaid principal amount of this Note into fully
paid and non-assessable shares of Common Stock, as such Common
Stock exists on the Issue Date, or any shares of capital stock or
other securities of the Borrower into which such Common Stock shall
hereafter be changed or reclassified at the conversion price (the
“
Conversion Price ”)
determined as provided herein (a “
Conversion ”).
The number of shares of Common Stock to be issued upon each
conversion of this Note shall be determined by dividing the
Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of
conversion, in the form attached hereto as Exhibit A (the
“
Notice of Conversion ”),
delivered to the Borrower by the Holder in accordance with Section
1.3 below; provided that the Notice of Conversion is submitted by
facsimile (or by other means resulting in, or reasonably expected
to result in, notice) to the Borrower before 6:00 p.m., New York,
New York time on such conversion date (the “
Conversion Date ”).
The term “
Conversion Amount ”
means, with respect to any conversion of this Note, the sum of (1)
the principal amount of this Note to be converted in such
conversion
plus (2)
accrued and unpaid interest, if any, on such principal amount at
the interest rates provided in this Note to the Conversion
Date
plus (3)
Default Interest, if any, on the amounts referred to in the
immediately preceding clauses (1) and/or (2).
1.2
Conversion Price
.
The
Conversion Price shall be $1.00 (the “Conversion
Price”).
1.3
Method of Conversion
.
(a)
Mechanics of Conversion
. Subject
to Section 1.1, this Note may be converted by the Holder in whole
or in part at any time from time to time after the Issue Date, by
(A) submitting to the Borrower a Notice of Conversion (by
facsimile or other reasonable means of communication dispatched on
the Conversion Date prior to 6:00 p.m., New York, New York time)
and (B) subject to Section 1.3(b), surrendering this Note at
the principal office of the Borrower.
(b)
Surrender of Note Upon Conversion
. Notwithstanding
anything to the contrary set forth herein, upon conversion of this
Note in accordance with the terms hereof, the Holder shall not be
required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so
converted.
(c)
Payment of Taxes
. The
Borrower shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on
conversion of this Note in a name other than that of the Holder (or
in street name), and the Borrower shall not be required to issue or
deliver any such shares or other securities or property unless and
until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the
Holder’s account) requesting the issuance thereof shall have
paid to the Borrower the amount of any such tax or shall have
established to the satisfaction of the Borrower that such tax has
been paid.
(d)
Delivery of Common Stock Upon
Conversion
. Upon
receipt by the Borrower from the Holder of a facsimile transmission
(or other reasonable means of communication) of a Notice of
Conversion meeting the requirements for conversion as provided in
this Section 1.3, the Borrower shall issue and deliver or cause to
be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion
within two (2) business days after such receipt (and, solely in the
case of conversion of the entire unpaid principal amount hereof,
surrender of this Note) (such second business day being hereinafter
referred to as the “
Deadline ”)
in accordance with the terms hereof and the Purchase
Agreement.
1.4
Concerning the Shares
. The
shares of Common Stock issuable upon conversion of this Note may
not be sold or transferred unless (i) such shares are sold pursuant
to an effective registration statement under the Act or (ii) the
Borrower or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions)
to the effect that the shares to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration or
(iii) such shares are sold or transferred pursuant to Rule 144
under the Act (or a successor rule) (“
Rule 144 ”)
or (iv) such shares are transferred to an “affiliate”
(as defined in Rule 144) of the Borrower who agrees to sell or
otherwise transfer the shares only in accordance with this Section
1.4 and who is an Accredited Investor (as defined in the Purchase
Agreement). Except as otherwise provided in the Purchase Agreement
(and subject to the removal provisions set forth below), until such
time as the shares of Common Stock issuable upon conversion of this
Note have been registered under the Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of
securities as of a particular date that can then be immediately
sold, each certificate for shares of Common Stock issuable upon
conversion of this Note that has not been so included in an
effective registration statement or that has not been sold pursuant
to an effective registration statement or an exemption that permits
removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM,
SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN
COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144 OR REGULATION
S UNDER SAID ACT.”
1.5
Effect of Certain Events
.
(a)
Effect of Merger, Consolidation, Etc
. At
the option of the Holder, the sale, conveyance or disposition of
all or substantially all of the assets of the Borrower, the
effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the
Borrower is disposed of, or the consolidation, merger or other
business combination of the Borrower with or into any other Person
(as defined below) or Persons when the Borrower is not the survivor
shall either: (i) be deemed to be an Event of Default (as defined
in Article III) pursuant to which the Borrower shall be required to
pay to the Holder upon the consummation of and as a condition to
such transaction an amount equal to the Default Amount (as defined
in Article III) or (ii) be treated pursuant to Section 1.6(b)
hereof. “
Person ”
shall mean any individual, corporation, limited liability company,
partnership, association, trust or other entity or
organization.
(b)
Adjustment Due to Merger, Consolidation,
Etc
. If,
at any time when this Note is issued and outstanding and prior to
conversion of all of the Notes, there shall be any merger,
consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares
of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any
sale or conveyance of all or substantially all of the assets of the
Bor
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