EXHIBIT 10.7
CONVERTIBLE SECURED PROMISSORY NOTE
ISSUE
AMOUNT
U.S. $50,000
FACE
AMOUNT
U.S. $60,000
INTEREST
RATE
20% per year
ISSUANCE
DATE
April 30, 2009
FOR VALUE RECEIVED, Vital Products, Inc., a Delaware corporation
(the
"Company"), hereby promises to pay The Cellular Connection Ltd., an
Ontario
corporation, (the "Holder") the Face Amount, subject to further
adjustment as
described below, in such amounts, at such times and on such terms
and
conditions as are specified herein (this "Note").
Article 1. Advancement and Fees
The Holder agrees to pay forty-seven thousand five hundred dollars
($47,500)
to the Company upon the issuance of this Note as an inducement
fee. In
addition, the Company agrees to pay two thousand five hundred
dollars ($2,500)
in document fees associated with this Note. Such amounts
shall be considered
fees and will not be applied to principal or interest.
Article 2. Maturity
The Face Amount of this Note is payable April 30, 2010 (the
"Maturity
Date").
Notwithstanding any provision to the contrary in this Note, the
Company may
pay in full to the Holder the Face Amount, or any balance remaining
thereof,
in readily available funds at any time and from time to time
without penalty
("Prepayment").
Article 3. Interest
The outstanding Face Amount of the Note shall increase by 20%
on
April 30, 2010. The outstanding Face Amount of the Note shall
increase by
another 20% on April 29, 2011 and again on each one year
anniversary of
April 29, 2011 until the Note has been paid in full.
Article 4. Collateral
The Holder may elect to secure a portion of the Company's assets
not to
exceed 200% of the Face Amount of the Note, including, but not
limited to,
accounts receivable, cash, marketable securities, equipment,
building, land
or inventory (the "Collateral").
Article 5. Defaults and Remedies
Article 5.1. Events of Default
An "Event of Default" or "Default" occurs if the Company does not
pay the
Face Amount of this Note within five (5) business days after the
Maturity
Date.
Upon the occurrence of an Event of Default, the Holder may:
* Transfer any or all of the Collateral into its name, or into the
name of
its nominee or nominees;
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* Exercise all corporate rights with respect to the Collateral,
including,
without limitation, all rights of conversion, exchange,
subscription or any
other rights, privileges or options pertaining to any shares of the
Collateral
as if it were the absolute owner thereof, including, but without
limitation,
the right to exchange, at its discretion, any or all of the
Collateral upon
the merger, consolidation, amalgamation, reorganization,
recapitalization or
other readjustment of the Company thereof, or upon the exercise by
the Company
of any right, privilege or option pertaining to any of the
Collateral, and, in
connection therewith, to deposit and deliver any and all of the
Collateral
with any committee, depository, transfer agent, registrar or other
designated
agent upon such terms and conditions as it may determine, all
without liability
except to account for property actually received by it; and
* Subject to any requirement of applicable law including, for
greater
certainty, the Personal Property Security Act (Ontario), sell,
assign and
deliver the whole or, from time to time, any part of the Collateral
at the
time held by the Holder, at any private sale or at public auction,
with or
without demand, advertisement or notice of the time or place of
sale or
adjournment thereof or otherwise (all of which are hereby waived,
except such
notice as is required by applicable law and cannot be waived), for
cash or
credit or for other property for immediate or future delivery, and
for such
price or prices and on such terms as the Pledgee in its sole
discretion may
determine, or as may be required by applicable law.
Article 5.2 Conversion Privilege
(a) The Holder shall have the right to convert the Note into shares
of the
Company's common stock (the "Common Stock") at
any time prior to the
Maturity Date. The number of shares of
Common Stock issuable upon the
conversion of the Note shall be determined
pursuant to Article 5.3. Any
fractional shares that occur as a result of
conversion shall be rounded up
or down, as the case may be, to the nearest
whole share.
(b) In the event all or any portion of the Note remains outstanding
on the
Maturity Date (the "Residual Amount"), the
unconverted portion of such Note
will automatically be converted into shares of
Common Stock on such date in
the manner set forth in Article 5.3.
Article 5.3 Conversion Procedure.
(a) The Residual Amount may be converted, in whole or in part, any
time and
from time to time, prior to the Maturity
Date. Such conversion shall be
effectuated by surrendering to the Company, or
its attorney, the Note to
be converted together with a facsimile or
original of the signed notice
of conversion (the "Notice of
Conversion"). The date on which the Notice
of Conversion is effective ("Conversion Date")
shall be deemed to be the
date on which the Holder has delivered to the
Company a facsimile or
original of the signed Notice of Conversion, as
long as the original Note
to be converted is received by the Company
within five (5) business days
thereafter. At such time that the original
Note has been received by the
Company, the Holder can elect whether a
reissuance of the Note is
warranted, or whether the Company can retain the
Note as a continual
conversion by the Holder. Notwithstanding
the above, any Notice of
Conversion received on or after 4:00 P.M. EST
shall be deemed to have been
received the following business day (receipt
being via a confirmation of
the time such facsimile to the Company is
received).
<PAGE>
(b) Common Stock to be Issued - Upon any conversion of the Note,
and upon
receipt by the Company or its attorney of a
facsimile or original of the
Holder's signed Notice of Conversion, the
Company shall instruct its
transfer agent to issue stock certificates
without restrictive legends
or stop transfer instructions, if at that time
the aforementioned
registration statement described in Article 5.1
has been declared
effective (or with proper restrictive legends if
the registration
statement has not as yet been declared
effective), in such denominations
to be specified at conversion representing the
number of shares of Common
Stock issuable upon such conversion, as
applicable. In the event that
the Note is aged one year and deemed sellable
under Rule 144, the Company
shall, upon a Notice of Conversion, instruct the
transfer agent to issue
free trading certificates without restrictive
legends, subject to other
applicable securities laws. The Company is
responsible for all costs
associated with the issuance of the shares,
including, but not limited
to, fees associated with the opinion letter,
FedEx of the certificates
and any other costs that arise. The
Company shall act as registrar and
shall maintain an appropriate ledger containing
the necessary information
with respect to the Note. The Company
warrants that no instructions,
other than these instructions, have been given
or will be given to the
transfer agent and that the Common Stock shall
otherwise be freely resold,
except as may be set forth herein or subject to
applicable law.
(c) Conversion Rate - The Holder is entitled to convert the Note,
plus accrued
interest, anytime prior to the Maturity Date, at
75% of the average of the
lowest closing bid price during the fifteen (15)
trading days immediately
preceding the Conversion Date. No
fractional shares or script representing
fractions of shares will be issued upon
conversion, but rather the number
of shares issuable shall be rounded up or down,
as the case may be, to the
nearest whole share.
(d) Nothing contained in the Note shall be deemed to establish or
require the
payment of interest to the Holder at a rate in
excess of the maximum rate
permitted by governing law. In the event
that the rate of interest
required to be paid exceeds the maximum rate
permitted by governing law,
the rate of interest required to be paid
thereunder shall be automatically
reduced to the maximum rate permitted under the
governing law and such
excess shall be returned with reasonable
promptness by the Holder to the
Company.
(e) It shall be the Company's responsibility to take all necessary
actions
and to bear all such costs to issue the Common
Stock as provided herein,
including the responsibility and cost for
delivery of an opinion letter to
the transfer agent, if so required. The
Holder shall be treated as a
shareholder of record on the date Common Stock
is issued to the Holder. If
the Holder shall designate another person as the
entity in the name of
which the stock certificates issuable upon
conversion of the Note are to
be issued prior to the issuance of such
certificates, the Holder shall
provide to the Company evidence that either no
tax shall be due and payable
as a result of such transfer or that the
applicable tax has been paid by
the Holder or such person. Upon surrender of any
Notes that are to be
converted in part, the Company shall issue to
the Holder a new Note equal
to the unconverted amount, if so requested in
writing by the Holder.
<PAGE>
(f) Within five (5) business days after receipt of the
documentation referred
to above in Article 5.2, the Company shall
deliver a certificate for the
number of shares of Common Stock issuable upon
the conversion. In the
event the Company does not make delivery of the
Common Stock as instructed
by the Holder within five (5) business days
after the Conversion Date,
then in such event the Company shall pay to the
Holder one percent (1%)
in ca
