Exhibit 10.2
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
New York, New York
$52,920.00
April 1, 2005
FOR VALUE
RECEIVED, CASTLE & MORGAN HOLDINGS, INC., a Delaware
corporation
(hereinafter called the "Company"), hereby
promises to pay to the order of the
holders listed on Schedule A attached
hereto or registered assigns
(collectively, the "Holder") the sum of
$52,290.00, on July 31, 2006 (the
"Maturity Date"), and to pay interest on
the unpaid principal balance hereof at
the rate of three percent (3%) (the
"Interest Rate") per annum from April 1,
2005 (the "Issue Date") until the same
becomes due and payable, whether at
maturity or upon acceleration or by
prepayment or otherwise.
This Note
evidences that certain obligation set forth in the Loan
Agreement dated as of February 26, 2005 by
and between the Company and Internet
Finance International Corporation ("Loan
Agreement"), which was assigned to the
Holder pursuant to an Allonge and
Assignment of Promissory Note dated as of
March 10, 2005. The terms of this Note
supercede in their entirety the terms of
the Loan Agreement.
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 at maturity. All payments due
hereunder (to the extent not converted
into common stock, $.001 par value per
share (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 Company 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.
This Note
is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not
be subject to preemptive rights or
other similar rights of shareholders of the
Company and will not impose personal
liability upon the holder thereof.
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 Company into
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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 Conversion Price
specified in the notice of
conversion, in the form attached hereto as
Exhibit A (the "Notice of
Conversion"), delivered to the Company by
the Holder in accordance with Section
1.4 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
Company 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.
1.2
Conversion Price. The Conversion Price shall be $0.025 per
share.
1.3
Authorized Shares. The Company covenants that during the period
the
conversion right exists, the Company will
reserve from its authorized and
unissued Common Stock a sufficient number
of shares, free from preemptive
rights, to provide for the issuance of
Common Stock upon the full conversion of
this Note. The Company is required at all
times to have authorized and reserved
two times the number of shares that is
actually issuable upon full conversion of
the Note based on the Conversion Price of
the Note. The Company represents that
upon issuance, such shares will be duly and
validly issued, fully paid and
non-assessable. In addition, if the Company
shall issue any securities or make
any change to its capital structure which
would change the number of shares of
Common Stock into which the Notes shall be
convertible at the Conversion Price,
the Company shall at the same time make
proper provision so that thereafter
there shall be a sufficient number of
shares of Common Stock authorized and
reserved, free from preemptive rights, for
conversion of the Note. The Company
(i) acknowledges that it has irrevocably
instructed its transfer agent to issue
certificates for the Common Stock issuable
upon conversion of this Note, and
(ii) agrees that its issuance of this Note
shall constitute full authority to
its officers and agents who are charged
with the duty of executing stock
certificates to execute and issue the
necessary certificates for shares of
Common Stock in accordance with the terms
and conditions of this Note.
If, at any
time a Holder of this Note submits a Notice of Conversion, and
the Company does not have sufficient
authorized but unissued shares of Common
Stock available to effect such conversion
in accordance with the provisions of
this Article I (a "Conversion Default"),
subject to Section 4.8, the Company
shall issue to the Holder all of the shares
of Common Stock which are then
available to effect such conversion. The
portion of this Note which the Holder
included in its Conversion Notice and which
exceeds the amount which is then
convertible into available shares of Common
Stock (the "Excess Amount") shall,
notwithstanding anything to the contrary
contained herein, not be convertible
into Common Stock in accordance with the
terms hereof until (and at the Holder's
option at any time after) the date
additional shares of Common Stock are
authorized by the Company to permit such
conversion. The Company shall use its
best efforts to authorize a sufficient
number of shares of Common Stock as soon
as practicable following the earlier of (i)
such time that the Holder notifies
the Company or that the Company otherwise
becomes aware that there are or likely
will be insufficient authorized and
unissued shares to allow full conversion
thereof and (ii) a Conversion Default. The
Company shall send notice to the
Holder of the authorization of additional
shares of Common Stock and the
Authorization Date.
1.4 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 Company 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 1.4(b), surrendering this Note at
the principal office of the Company.
(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 Company unless the entire
unpaid principal amount of this Note is so
converted. The Holder and the Company shall
maintain records showing the
principal amount so converted and the dates
of such conversions or shall use
such other method, reasonably satisfactory
to the Holder and the Company, so as
not to require physical surrender of this
Note upon each such conversion. In the
event of any dispute or discrepancy, such
records of the Company shall be
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controlling and determinative in the
absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note
is converted as aforesaid, the Holder
may not transfer this Note unless the
Holder first physically surrenders this
Note to the Company, whereupon the Company
will forthwith issue and deliver upon
the order of the Holder a new Note of like
tenor, registered as the Holder (upon
payment by the Holder of any applicable
transfer taxes) may request,
representing in the aggregate the remaining
unpaid principal amount of this
Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and
agree that, by reason of the provisions of
this paragraph, following conversion
of a portion of this Note, the unpaid and
unconverted principal amount of this
Note represented by this Note may be less
than the amount stated on the face
hereof.
(c) Payment of Taxes. The Company 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 Company 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 Company
the amount of any such tax or shall have
established to the satisfaction of the
Company that such tax has been paid.
(d) Delivery of Common Stock Upon Conversion. Upon receipt by
the
Company 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 1.4,
the Company 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.
(e) Obligation of Company to Deliver Common Stock. Upon receipt
by
the Company of a Notice of Conversion, the
Holder shall be deemed to be the
holder of record of the Common Stock
issuable upon such conversion, the
outstanding principal amount and the amount
of accrued and unpaid interest on
this Note shall be reduced to reflect such
conversion, and, unless the Company
defaults on its obligations under this
Article I, all rights with respect to the
portion of this Note being so converted
shall forthwith terminate except the
right to receive the Common Stock or other
securities, cash or other assets, as
herein provided, on such conversion. If the
Holder shall have given a Notice of
Conversion as provided herein, the
Company's obligation to issue and deliver the
certificates for Common Stock shall be
absolute and unconditional, irrespective
of the absence of any action by the Holder
to enforce the same, any waiver or
consent with respect to any provision
thereof, the recovery of any judgment
against any person or any action to enforce
the same, any failure or delay in
the enforcement of any other obligation of
the Company to the holder of record,
or any setoff, counterclaim, recoupment,
limitation or termination, or any
breach or alleged breach by the Holder of
any obligation to the Company, and
irrespective of any other circumstance
which might otherwise limit such
obligation of the Company to the Holder in
connection with such conversion. The
Conversion Date specified in the Notice of
Conversion shall be the Conversion
Date so long as the Notice of Conversion is
received by the Company before 6:00
p.m., New York, New York time, on such
date.
(f) Delivery of Common Stock by Electronic Transfer. In lieu of
delivering physical certificates
representing the Common Stock issuable upon
conversion, provided the Company's transfer
agent is participating in the
Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST")
program, upon request of the Holder and its
compliance with the provisions
contained in Section 1.1 and in this
Section 1.4, the Company shall use its best
efforts to cause its transfer agent to
electronically transmit the Common Stock
issuable upon conversion to the Holder by
crediting the account of Holder's
Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC")
system.
1.5
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 Company 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 Company who agrees
to sell or otherwise transfer the shares
only in accordance with this Section
1.5 and who is an Accredited Investor (as
defined in the applicable Federal
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Securities laws, rules and regulations).
Until such time as the shares of Common
Stoc
