CONVERTIBLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"),
OR THE SECURITIES LAWS OF ANY STATE AND IT MAY NOT BE SOLD,
TRANSFERRED, PLEDGED
OR HYPOTHECATED
UNLESS IT HAS BEEN SO
REGISTERED
OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
AdZone Research, Inc.
CONVERTIBLE NOTE DUE Sept. 22, 2008
$700,000
ADZONE
RESEARCH, INC. (the "Company"), for value received, hereby
promises
to pay to The Burns Family Trust, or permitted assigns (the
"Holder"), on
Sept.
22, 2008 (the "Maturity Date"), the principal sum of ($700,000).
With pre-paid
interest of 14% per annum. Interest shall be prepaid out of principle
with the
company receiving a net of $504,000 upon investment.
1.
Prepayment
The
Company shall have the right to prepay all or any part of the
principal amount of
this Note, together
with accrued interest
thereon through
the date of prepayment (except as provided in the following
sentence),
without
penalty, either (x) in
cash or (y) by
delivery to the Holder
of the number of
shares of capital stock of the Company into which the principal amount of this
Note to be so prepaid would then be convertible as provided
Section 3 below.
In
the event that the
Company determines
to prepay this Note in cash, it shall
provide the Holder with at least 10 days advance notice of such prepayment in
order to afford the Holder the opportunity, prior to such
prepayment, to convert
this Note into capital stock of the Company pursuant to Section 3
below.
2. Events
of Default
Any of the
following shall constitute an Event of Default hereunder
("Event of Default"):
(a) the Company
shall fail to make any payment of principal or
interest when due hereunder;
(b) the Company shall
become insolvent or
admits its inability
to
pay its debts as they become due, or any proceeding shall be instituted by the
Company seeking
relief on its
behalf as debtor, or to adjudicate it to be
bankrupt or insolvent,
or seeking
liquidation,
reorganization,
arrangement,
adjustment or
composition or other relief with respect to it or its debts
under
any law relating
to bankruptcy, insolvency or reorganization or relief of
debtors or any similar law now or hereafter in effect, or seeking
appointment of
a receiver, trustee,
liquidator, custodian
or other similar official for it or
for any part of its
property, or the Company shall consent by answer or
otherwise to any such
relief or to the institution of any such proceeding
against it;
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(c) any proceeding is instituted against the Company seeking to
have
an order for relief
entered against it as debtor or to adjudicate it to be
bankrupt or insolvent,
or seeking
liquidation,
reorganization,
arrangement,
adjustment or
composition or other relief with respect to it or its debts
under
any law relating
to bankruptcy, insolvency or reorganization or relief of
debtors or any similar law now or hereafter in effect, or seeking
appointment of
a receiver, trustee,
custodian, liquidator
or other similar official for it or
for any part of its
property which
either (i) results in
any such entry of an
order for relief,
adjudication of bankruptcy or insolvency or issuance or entry
of any other order
having a similar
effect or (ii) remains
undismissed for a
period of forty-five (45) days;
(d) a receiver,
trustee, liquidator,
custodian or other similar
official is appointed for any part of the Company's assets; or
(e) any assignment is made for the benefit of the Company's
creditors.
The entire
unpaid principal
balance of this Note,
together with interest
accrued thereon, shall become immediately due and payable (i)
automatically upon
the occurrence
of any Event of
Default described
in clauses
(b) through (e)
above, or (ii)
immediately
upon written notice
from the Holder to the Company
upon the occurrence of any Event of Default described in clause (a)
above.
3.
Conversion
This Note
shall be convertible on the terms set forth below into shares
of
the Company's Common Stock, $.001 par value (the "Conversion
Stock").
(a) The Company shall
use its reasonable
efforts in good faith
to
take such corporate
and other action as may be required to authorize and permit
the issuance and delivery of the Conversion Stock upon prepayment or
conversion
of this Note in accordance with its terms, including, without limitation, the
amendment of the Company's Certificate of Incorporation.
Holder shall have
the
right, at its option,
at any time and from
time to time, to convert all or any
part of this Note into
the number of fully
paid and nonassessable shares of
Conversion Stock of
the Company equal to the quotient obtained by dividing (A)
the principal
amount of the Note
then being converted
by (B) the
Conversion
Price (as defined
below), as last
adjusted and then in effect. The conversion
price per share at which shares of Conversion Stock shall be issuable upon
conversion of this
Note shall be at the
lesser of (a) one half (1/2) of the
trading value (closing
bid price) of the common stock at the time of conversion
or (b) .06 (six cents). These shares are to be included
for registration in any
of the Company's
future "Form SB-2" or any registration statement to be filed
with the Securities and Exchange Commission within the next twelve
months. The
certificates that
represent these Common Stock shares shall be
issued legend
free and delivered to the Holder within 5 (five) business days of the effective
date of the Company's
registration, (in each
case, the "Conversion Price"), as
adjusted pursuant to paragraph (c) below. The Holder may exercise
the conversion
right pursuant to this paragraph (a)
