CONVERTIBLE PROMISSORY NOTE
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$300,000.00
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Dated:
As of October 31,
2007
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FOR
VALUE RECEIVED, the undersigned, Universal
Bioenergy North America, Inc., a Nevada corporation
("
Maker "),
hereby promises to pay to the order of Mortensen
Financial Limited ("
Holder ")
the principal sum of Three Hundred Thousand Dollars ($300,000) (the
“
Principal Amount ”),
on
or by October 31, 2010 (the "
Maturity Date "),
plus
accrued and unpaid interest as set forth below.
1.
On
April 30, 2008 and
October 31, 2008, Maker shall pay to Holder all accrued and
unpaid interest on the then unpaid principal balance of this
promissory note (this "
Note ").
Beginning
on April 30, 2009, and semiannually thereafter to and including
October 31, 2010, Maker shall pay to Holder semiannual installments
of principal, each in the amount of Seventy Five Thousand Dollars
(US$75,000), each such installment of principal to be accompanied
by payment of all accrued and unpaid interest on the then unpaid
principal balance of this Note.
The
unpaid principal amount of this Note shall become immediately due
and payable upon the Maturity Date. Principal shall be payable in
lawful money of the United States of America in immediately
available funds, without any deduction, setoff or counterclaim, at
the address of Holder specified herein.
1.
Principal
and interest shall be payable in lawful money of the United
States of America in immediately available funds, without any
deduction, setoff or counterclaim, at the address of Holder
specified herein.
2.
The
unpaid principal amount and accrued interest of this Note
shall become immediately due and payable upon the Maturity
Date. Principal and interest shall be payable in lawful money
of the United States of America in immediately available
funds, without any deduction, setoff or counterclaim, at the
address of Holder specified herein. This
Note shall bear interest on the unpaid principal amount hereof
commencing on the date hereof at a rate of 6.5% per
annum. Upon
the occurrence and during the continuance of an Event of
Default, interest shall accrue on the unpaid principal amount
of this Note, from the date of such default until the earlier
of the date the principal sum is paid in full or, if
applicable, the date such default is cured, at the rate of 15%
per annum (but not higher than the applicable maximum rate
provided by law). Accrued
interest on the outstanding principal amount of this Note
shall be payable on the Maturity Date ,
unless accelerated as a result of the occurrence of an Event
of Default as set forth below.
3.
The
principal amount of this Note may be prepaid, at the option of
Maker, in whole at any time, together with all accrued
interest upon fifteen (15) days prior written notice to
Holder.
4.
(a)
Conversion. It
is anticipated that Maker will enter into an agreement
(“Purchase Agreement”) with another company which
has shares traded on the an electronic quotation system or
other public market (“Public Company”) whereby, in
exchange for the majority of the issued and outstanding shares
of Public Company, Public Company will acquire (by asset or
stock acquisition, merger or otherwise) Maker and the current
directors of Maker will, upon closing of the transactions
contemplated by the Purchase Agreement (the
“Closing”), become the directors and officers of
Public Company. At any time prior to the Maturity Date, this
Note shall, at the option of the Holder, be convertible
into:
(i) shares of Maker's common stock, share (the “Private
Stock"); or (ii) if following the Closing, shares of common
stock of Public Company (“Public Company Stock”
and together with Private Stock, “Common Stock”),
on the terms and
conditions set forth herein .
Notwithstanding
anything contained in this Note to the contrary, Holder shall
have the option, by written notice to Maker, at any time on or
prior to the Maturity Date, to convert this Note into that
number of fully paid and non-assessable shares of Common Stock
determined by dividing all of the unpaid principal due on this
Note as of the date of conversion by the result of: (i)
the average
bid price of the Common Stock of the Maker over the five days
prior to the conversion date as
quoted on the OTC Bulletin Board or such other trading
platform that the Common Stock is traded on the conversion
date; multiplied by (ii) 75%.
(b)
Issuance
of Securities on Conversion. As soon as practicable after
conversion of this Note, Maker, at its expense, will cause to
be issued in the name of and delivered to the Holder of this
Note, a certificate or certificates representing the number of
fully paid and nonassessable shares of Common Stock to which
Holder shall be entitled on such conversion. No fractional
shares will be issued on conversion of this Note. If Holder
would otherwise be entitled to a fractional share, Holder
shall receive a cash payment equal to the per share price of
the Common Stock (subject to adjustment, as applicable)
multiplied by the fractional share the Holder would otherwise
be entitled to receive.
(c)
Termination of Rights .
All rights with respect to this Note shall terminate upon (i) the
issuance of shares of Common Stock (as applicable) upon conversion
of this Note pursuant to this Section 4; or (ii) upon payment,
whether or not this Note has been surrendered. Notwithstanding the
foregoing, the Holder agrees to surrender this Note to Maker for
cancellation as soon as is practicable following conversion of this
Note.
5.
This
Note, the Working Capital Note and any ancillary documents
entered into in connection therewith, each as amended,
extended or modified from time to time, are
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