THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF
1933, AS AMENDED (THE "ACT"), NOR ANY STATE SECURITIES LAWS AND
NEITHER THIS
NOTE NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH
RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS, OR (2) THE
CORPORATION RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS
NOTE, WHICH
COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE CORPORATION
, THAT THIS
NOTE MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE
MANNER
CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT OR
APPLICABLE STATE SECURITIES LAWS.
1STALERTS, INC.
(A DELAWARE CORPORATION)
CONVERTIBLE PROMISSORY NOTE
TOTAL NOTE: $__________
1STALERTS, INC., a Delaware corporation (the "CORPORATION"), for
value
received, promises to pay (subject to the conversion provisions set
forth
herein) to the order of _________________________________ (the
"HOLDER"), on
December 31, 2009 (the "DUE DATE"), upon presentation of this
Convertible
Promissory Note (the "NOTE"),
_____________________________________________
($____________) Dollars (the "PRINCIPAL AMOUNT"). The Note is
convertible into
shares of common stock (the "COMMON STOCK") of the Corporation as
provided below
in Section 2. This Note is issued in connection with the Asset
Purchase
Agreement, dated, by and between the Corporation and the Holder
(the "ASSET
PURCHASE AGREEMENT").
The Corporation covenants, promises and agrees as follows:
1. Interest. The unpaid principal balance from time to time
outstanding on
the Note shall bear interest at the rate of one (1) percentage
point per annum
above the Prime Rate (the "PRIME RATE") (the rate as published in
the "Money
Rates" table in The Wall Street Journal). The highest Prime Rate
will be chosen
if more than one is published. This rate may vary from time to time
based upon
corresponding increases and/or decreases in the Prime Rate.
Interest shall be
calculated on the basis of a 360-day year and actual number of days
elapsed,
payable at maturity. However, at no time shall the interest to be
paid by the
Corporation to the Holder exceed eighteen percent (18%) per annum.
2. Conversion.
2.1. Option to Convert. Subject to Section 2.2, the Holder shall
have the
right, at its option,
1
to convert, in whole or in part, subject to the terms and
provisions hereof, the
then outstanding balance of the Principal Amount of the Note into
shares of the
Corporation's common stock the number of shares to be determined by
dividing the
outstanding balance of the Principal Amount of the Note to be
converted by 70%
of the Market Price (as defined below) of the Corporation's common
stock on the
date of conversion (the "CONVERSION PRICE"), subject to adjustment
as provided
below in Section 6.
For the purposes of this Agreement, "MARKET PRICE" shall mean:
(i)
if the Corporation's common stock is listed, or admitted to
unlisted trading privileges on a national securities exchange, or
is traded on the Nasdaq National Market or the Nasdaq Small-Cap
Market, the last reported high bid price on each trading day of
any measurement period to which such Market Price relates, in
each case as officially reported by the principal securities
exchange on which the common stock is listed or admitted to
unlisted trading privileges or by the Nasdaq National Market or
Nasdaq Small-Cap Market, or
(ii) if the Corporation's common stock is not listed or admitted to
unlisted trading privileges, on any national securities exchange,
or traded on the Nasdaq National Market or Nasdaq Small-Cap
Market, but is traded on the OTC Bulletin Board of the Nasdaq
Stock Market, Inc. (the "OTCBB"), then the Market Price is the
last reported high bid price of the common stock reported by the
OTCBB; or
(iii) if the Corporation's common stock is not listed or admitted
to
unlisted trading privileges, on any national securities exchange,
or traded on the Nasdaq National Market, Nasdaq Small-Cap Market,
or the OTCBB but is traded in the over-the-counter market, then
the Market Price is the last reported high bid price of the
common stock reported by the National Quotation Bureau, Inc. or
similar bureau if the National Quotation Bureau, Inc. is no
longer reporting such information on the date of the event to
which such Market Price relates, and if no such prices are
reported on such date, then the average of the last so reported
high bid prices on the last five trading days on which such
prices are reported immediately preceding such date; or
(iv) if the Corporation's common stock is neither listed, nor
admitted
to unlisted trading privileges on a national securities exchange,
nor traded on the Nasdaq National Market or Nasdaq Small-Cap
Market, nor on the OTCBB, nor traded in the over-the-counter
market, then the fair market value of the common stock, not less
that the book value thereof, as of the date of the event to which
such Market Price relates, as determined in good faith (using
customary valuation methods) by the Board of Directors of the
Corporation, which determination shall be evidenced by a
resolution of the Board of Directors and based on the best
information available to it.
2
2.2 Vesting. Notwithstanding anything to the contrary contained in
this
Note, the Holder shall only have the right to convert, as set forth
in Section
2.1 above, concurrently with the Corporation effecting a public
sale, spin-off,
or other similar disposition of the shares of common stock of the
Corporation.
2.3. Exercise of Conversion Right. The conversion right shall be
exercised,
if at all, by surrender of the Note to the Corporation, together
with written
notice of election executed by the Holder, which may be in the form
which is
included with this Note (hereinafter referred to as the "CONVERSION
NOTICE") to
convert such Note or a specified portion thereof into the shares of
common stock
of the Corporation. Such notice shall be sent to the Corporation at
the address
set forth below in Section 10 hereof.
The date of conversion (the "DATE OF CONVERSION") shall be the date
on
which the Conversion Notice is received by the Corporation and the
person or
persons entitled to receive the shares issuable upon such
conversion shall be
treated for all purposes as the record Holder or Holders of such
shares on such
date.
2.4. Reservation of Shares. The Corporation shall at all times
reserve and
keep available, free from preemptive rights, unissued or treasury
shares, shares
of Common Stock sufficient to effect the conversion of this Note;
and, if at any
time, the number of authorized but unissued shares of Common Stock
shall not be
sufficient to effect the conversion of all then outstanding
principal of this
Note, the Corporation will take such corporate action as may be
necessary to
increase its authorized but unissued shares of Common Stock to such
number of
shares as shall be sufficient for such purpose.
2.5 Conversion Limitation. In no event shall the Holder be entitled
to
convert any portion of the Note in excess of that portion of the
Note upon
convers
