Exhibit 99.1
CONVERTIBLE PROMISSORY
NOTE
$1,870,000 PLUS INTEREST
DUE & PAYABLE
DOCUMENT
B-08102009
THIS NOTE AND THE SHARES
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
SHARES ISSUABLE UPON CONVERSION OF HIS NOTE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT OR APPLICABLE EXEMPTION OR SAFE
HARBOR PROVISION.
FOR VALUE RECEIVED, on the
Effective Date, as defined below, MPhase Technologies, Inc. as
Obligor ("Borrower,” or “Obligor”), hereby
promises to pay to the Lender (“Lender” or “
Holder”), as defined below, the Principal Sum, as defined
below, along with the Interest Rate, as defined below, according to
the terms herein.
The "Effective Date" shall
be:
August 10,
2009
The "Lender" shall
be:
JMJ Financial / Its
Principal, or Its Assignees
The "Principal Sum" shall
be:
$1,870,000 (one million
eight hundred seventy thousand US Dollars); Subject to the
following: accrued, unpaid interest shall be added to the Principal
Sum.
The
“Consideration” shall be:
$1,700,000 (one million
seven hundred thousand US dollars) in the form of the Secured &
Collateralized Promissory Note Document C-08102009 (including
Security & Collateral Agreement).
The "Interest Rate" shall
be:
12% one-time interest
charge on the Principal Sum. No interest or principal payments are
required until the Maturity Date, but both principal and interest
may be included in conversion prior to maturity
date.
The "Conversion Price"
shall be the following price:
As applied to the
Conversion Formula set forth in 2.2, 75% (seventy-five percent) of
the lowest trade price in the 20 trading days previous to the
conversion; as applies to MPhase Technologies, Inc. voting common
stock.
The "Maturity Date" is the
date upon which the Principal Sum of this Note, as well as any
unpaid interest shall be due and payable, and that date shall
be:
August 10,
2012
The
“Prepayment Terms” shall be:
Prepayment is not
permitted, unless approved by Holder in writing.
ARTICLE 1 PAYMENT-RELATED
PROVISIONS
1.1 Interest Rate. Subject
to the Holder's right to convert, interest payable on this Note
will accrue interest at the Interest Rate and shall be applied to
the Principal Sum.
ARTICLE 2 CONVERSION
RIGHTS
The Holder will have the
right to convert the Principal Sum and accrued interest under this
Note into Shares of the Borrower's Common Stock as set forth
below.
2.1
Conversion Rights and Cashless Exercise. Subject to the terms set
forth in Section 2.7, the Holder will have the right at its
election from and after the Effective Date, and then at any time,
to convert all or part of the outstanding and unpaid Principal Sum
and accrued interest into shares of fully paid and nonassessable
shares of common stock of MPhase Technologies, Inc. (as such stock
exists on the date of issuance of this Note, or any shares of
capital stock of MPhase Technologies, Inc. into which such stock is
hereafter changed or reclassified, the "Common Stock") as per the
Conversion Formula set forth in Section 2.2. Any such conversion
shall be cashless, and shall not require further payment from
Holder. Unless otherwise agreed in writing by both the Borrower and
the Holder, at no time will the Holder convert any amount of the
Note into common stock that would result in the Holder owning more
than 4.99% of the common stock outstanding of MPhase Technologies,
Inc. Shares from any such conversion will be delivered to Holder
within 2 (two) business days of conversion notice delivery (see
3.1) via 10:30am priority overnight delivery service (see Section
2.6) .
2.2. Conversion Formula.
The number of shares issued through conversion is the conversion
amount divided by the conversion price.
# Shares = Conversion
Amount
Conversion
Price
2.3 Conversion Formula
Adjustments. The Conversion Formula described in Sections 2.2 and
the number and kind of shares or other securities to be issued upon
conversion is subject to adjustment upon any of the events as
described in 2.3.1 to 2.3.3, or any other event as mutually agreed
in writing by both the Holder and Borrower. The adjustment due to
any of the described events shall be: The result of the Conversion
Formula described in 2.2 above shall be multiplied by (2) two, such
that the number of shares calculated in the Conversion Formula
would be doubled.
2.3.1. Merger, Consolidation or Sale of Assets.
If the Borrower at any time consolidates with or merges into, or
sells or conveys all or substantially all of its assets to, any
other entity, the unpaid Principal Sum of this Note and accrued
interest thereon will thereafter be deemed to evidence the right to
purchase such number and kind of shares or other securities and
property as would have been issuable or distributable, on account
of such consolidation, merger, sale or conveyance, upon or with
respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger,
sale or conveyance. The foregoing provision will similarly apply to
successive transactions of a similar nature by any such successor
or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Note will apply to such securities
of such successor or purchaser after any such consolidation,
merger, sale or conveyance.
2.3.2. Reclassification. If
the Borrower at any time, by reclassification or otherwise, changes
the Common Stock into the same or a different number of securities
of any class or classes, the unpaid Principal Sum of this Note and
accrued interest thereon will thereafter be deemed to evidence the
right to purchase such number
