THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“SECURITIES ACT”), AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (II) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT ONLY
UPON THE PAYEE FIRST HAVING OBTAINED A WRITTEN OPINION OF
MAKER’S COUNSEL, OR OTHER COUNSEL ACCEPTABLE TO MAKER, THAT
THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE “BLUE
SKY” OR OTHER SIMILAR SECURITIES LAW.
CONVERTIBLE PROMISSORY
NOTE
|
$______,000
|
September 2,
2008
|
FOR VALUE RECEIVED, SMF Energy
Corporation , a Delaware corporation (“
Maker ”), promises to pay to the order of
_________________ or his/ her/ its assigns
(“ Payee ”),
at such place as the Payee may designate in writing, in lawful
money of the United States of America, the principal sum of
______________________ Thousand Dollars ($____,000).
1.
Principal
Payments . The principal amount of this promissory note
(the “ Note ” and, collectively with
substantially identical promissory notes of Maker, the “
Notes ”), together with any accrued but
unpaid interest, shall be due and payable on September 1, 2010
(the “ Due Date
”). The outstanding principal balance of this Note may be
prepaid by Maker prior to maturity as provided in Section 4 of this
Note.
2.
Interest
.
The outstanding principal balance of
this Note shall accrue interest at a fixed rate of twelve percent
(12%). Interest shall be calculated on the basis of a 360-day year.
Accrued interest on this Note shall be paid semi-annually, on each
March 1 and September 1, beginning March 1, 2009, until the
outstanding principal balance of this Note is paid in
full.
3.
Interest Method of
Payment; Application .
(a) All payments (including any prepayments) shall
be made on the due date thereof by wire transfer of immediately
available funds to such bank account as Payee may from time to time
designate in writing. All cash payments of interest shall be made
on the due date thereof by check drawn on a United States bank.
Payments (including all prepayments) received by Payee on this Note
shall be applied first to the payment of accrued and unpaid
interest and only thereafter to the outstanding principal balance
of this Note.
(b) In the event the interest provisions hereof or
any exactions provided for herein shall result, because of the
reduction of principal, or for any reason at any time during the
life of this loan, in an effective rate of interest which, for any
month, transcends the limit of the usury or any other law
applicable to the loan evidenced hereby, all sums in excess of
those lawfully collectible as interest for the period in question
shall, without further agreement or notice between or by any party
hereto, be applied to reduction of the outstanding principal
balance upon receipt of such moneys by Payees hereof, with the same
force and effect as though the payment had specifically designated
such extra sums to be so applied to principal.
4.
Redemption and
Prepayment .
(a)
Optional Redemption
. At any time after the date of
this Note, Maker shall have the option to redeem this Note, in
whole or in part, without prepayment penalty or premium, except
that, if such pre-payment is proposed to be made before the first
anniversary of the issuance of the Note, then a prepayment penalty
equal to one percent (1%) of the principal amount being redeemed
shall also be paid. In addition to the principal amount being
pre-paid and the pre-payment penalty, if any, Maker shall also pay
any accrued but unpaid interest on the entire outstanding principal
balance of this Note at the time of redemption.
(b)
Notice to Payee
. At least fifteen (15) days
but not more than sixty (60) days (the
“ Payee Notice Period ”) before a
redemption date, Maker shall mail or cause to be mailed a notice of
redemption to Payee. The notice shall state:
(ii) the redemption price;
(iii) that this Note called for redemption must be
surrendered to Maker to collect the redemption price;
and
(iv) that, unless Maker defaults in making such
redemption payment, interest on this Note called for redemption
ceases to accrue on the redemption date.
(c)
Effect of Notice of
Redemption . This Note
will become irrevocably due and payable on the redemption date at
the redemption price. A notice of redemption may not be
conditional. If the redemption is only a partial redemption, then
only the redeemed portion shall become due and payable on the
redemption date.
(d)
Conversion Prior to Redemption or
Merger . During the Payee
Notice Period, the Payee may elect to convert any portion of the
outstanding principal or the accrued but unpaid interest of this
Note into common stock of Maker in accordance with Section 5 hereof
rather than permit the Note to be redeemed
(e)
Note Redeemed or Converted in
Part . If less than the
entire principal amount of this Note is redeemed or converted,
Maker will deliver to Payee, at Maker’s expense, a new
promissory note in the same form of this Note in an amount equal in
principal to the unredeemed and unconverted portion of this Note
not more than thirty (30) days after such partial conversion or
redemption.
(a)
Optional Conversion
. The unpaid principal amount of
this Note and the accrued but unpaid interest thereon is
convertible by the holder hereof into shares (“
Shares ”) of Maker’s common stock
(“ Common Stock
”) at $0.65 per share (the “ Conversion
Price ”).
(b) Upon conversion of this Note, certificates for
the Shares so purchased shall be delivered to Payee within three
(3) business days of the Maker’s actual receipt of this
original Note and a completed Notice of Conversion in substantially
the same form attached hereto as Exhibit A .
(c) The number and kind of securities purchasable
upon the conversion of this Note and the Conversion Price shall be
subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(i) In case of any reclassification or change of
outstanding securities of the Common Stock (other than a change in
par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), or
in case of any merger of Maker with or into another corporation
(other than a merger with another corporation in which Maker is a
continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon
conversion of this Note), or in case of any sale of all or
substantially all of the assets of Maker, Payee shall have the
right upon conversion of this Note to receive, in lieu of Shares of
Common Stock theretofore issuable upon conversion of this Note, the
kind and amount of shares of stock, other securities, money and
property receivable upon such reclassification, change or merger by
the holder of one share of Common Stock. These provisions shall
similarly apply to successive reclassifications, changes, mergers
and transfers.
(ii) If Maker at any time while this Note remains
outstanding and unexpired shall subdivide or combine its Common
Stock, the Conversion Price shall be proportionately adjusted. In
the case of a subdivision, the Conversion Price shall be
proportionately decreased and the number of Shares shall be
proportionately increased. In the case of a combination, the
Conversion Price shall be proportionately increased and the number
of Shares shall be proportionately decreased.
(iii) If Maker at any time while this Note is
outstanding and unexpired shall pay a dividend or other
distribution with respect to Common Stock or any other equity
interest in Maker which is payable in Common Stock (except any
distribution specifically provided for in the foregoing paragraph
(i) or (ii)) then the Conversion Price and the number of Shares
into which this Note may be converted shall be adjusted, from and
after the date of determination of stockholders entitled to receive
such dividend or distribution to that price determined by
multiplying the Conversion Price in effect immediately prior to
such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution and (b) the
denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or
distribution.
(iv) When there is an adjustment in the Conversion
Price and a corresponding increase in the
