EXHIBIT 10.2
THIS NOTE AND THE SECURITIES ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE " SECURITIES ACT "), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS AND UNTIL THIS NOTE AND/OR SUCH
SECURITIES ARE REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
CONVERTIBLE
PROMISSORY NOTE
$400,000
December __, 2005
FOR VALUE RECEIVED, the undersigned,
GABRIEL TECHNOLOGIES CORPORATION, a Delaware corporation ("
Maker "), promises to pay to the order of CTSL
INVESTMENT, LLC, an Iowa limited liability company (" Payee
"), the principal sum of Four Hundred Thousand Dollars ($400,000)
(the " Principal "), plus an amount equal to 150% of the
principal sum (the " Note Obligation "). All amounts
due under this Note shall be payable as and at such time or times
as are set forth in Paragraph 1 hereof. All payments on this
Note shall be due and payable in lawful money of the United States
of America at 675 South Fork Drive, Des Moines, Iowa 50263 (or such
other place as Payee may from time to time designate in
writing).
1. Payments . The Principal
and the Note Obligation shall become due and payable on December
31, 2006. Payment hereunder shall terminate the right to convert
this Note. This Note shall be prepayable by the
Maker as set forth in Paragraph 3 hereof.
2.
Events of Default and
Remedies . In the event
Maker fails to pay any amount due under this Note within ten
Business Days (as hereafter defined) after such amount is due, the
holder of this Note may (i) offset against this Note any sum or
sums owed by the holder hereof to Maker, or (ii) proceed to protect
and enforce his rights either by suit in equity and/or by action at
law, or by other appropriate proceedings, whether for the specific
performance of any covenant or agreement contained in this Note or
to enforce any other legal or equitable right of the holder of this
Note. As used herein, a " Business Day " is any day
other than a Saturday, Sunday or a legal holiday for financial
institutions in Omaha, Nebraska.
3.
Prepayments
. The Principal and Note Obligation
on this Note may be voluntarily prepaid in whole or in part at any
time prior to conversion of this Note in accordance with Section 4
hereof. At any time prior to payment of the Principal and
Note Obligation on this Note, the holder hereof shall have the
option of exercising its Optional Conversion rights under Section
4(a), and Maker shall have the option of exercising its Mandatory
Conversion rights under Section 4(c).
4.
Conversion .
(a)
Conversion by Payee
. Unpaid Principal and Note
Obligation on this Note shall be convertible at the option of Payee
or other holder hereof (the " Optional Conversion "), at any
time, in whole or in part, in lieu of and in satisfaction of such
unpaid Principal and unpaid Note Obligation. This Note shall
be convertible into that number of fully paid and nonassessable
shares of Common Stock (as defined in Section 5) as is equal to the
quotient of the unpaid Principal plus the unpaid Note Obligation
divided by the applicable Conversion Price (as defined in Section
5) in effect from time to time. Upon any Optional Conversion,
the outstanding Principal and unpaid Note Obligation due under this
Note shall be reduced in full by an amount equal to the number of
shares of Common Stock issued upon such conversion multiplied by
the applicable Conversion Price.
(b)
Conversion Procedures
. If Payee desires to convert this
Note into Common Stock, it shall surrender this Note to Maker at
its principal executive offices, accompanied by proper instruments
of transfer to Maker or in blank, accompanied by irrevocable
written notice (“Optional Conversion Notice”) to Maker
that Payee elects so to convert this Note and the name or names
(with address) in which a certificate or certificates for Common
Stock are to be issued. Maker shall, as soon as practicable
after such written notice and compliance with any other conditions
herein contained, deliver at such office to Payee, certificates for
the number of full shares of Common Stock to which it shall be
entitled. Such conversion shall be deemed to have been made
as of the date of such surrender of this Note, and the person or
persons entitled to receive Common Stock or other securities
deliverable upon conversion shall be treated for all purposes as
the record holder or holders thereof on such date.
(c)
Conversion by Maker
. Notwithstanding anything to the
contrary in this Note, up to the entire amount of the unpaid
Principal and Note Obligation on the Note may be converted at the
Maker’s election (“Mandatory Conversion”)
provided: (i) no event of default has occurred and is continuing;
(ii) the closing sales price of the Common Stock on its principal
trading market for ten consecutive trading days (the “Trading
Period”) is greater than 150% of the Maximum Conversion Price
on each trading day during the Trading Period; [and (iii) the
Common Stock issuable upon conversion of the then-outstanding
principal and unpaid Note Obligation are included for unrestricted
resale in a registration statement effective as of the date notice
is given by the Maker to the holder of its election to convert the
Note pursuant to this Section 4(c) (“Mandatory Conversion
Notice”) and through the date the shares issuable upon
Mandatory Conversion of the Note are delivered to such holder.]
The Mandatory Conversion Notice must be given no later
than the third trading day following the Trading Period. This Note
shall be convertible into that number of fully paid and
nonassessable shares of Common Stock (as defined in Section 5) as
is equal to the quotient of the unpaid Principal plus the unpaid
Note Obligation divided by the applicable Conversion Price (as
defined in Section 5) in effect from time to time. Upon any
Mandatory Conversion, the outstanding Principal and unpaid Note
Obligation due under this Note shall be reduced in full by an
amount equal to the number of shares of Common Stock issued upon
such conversion multiplied by the applicable Conversion Price.
If Maker desires to effect a Mandatory Conversion of all or
part of this Note into Common Stock, it shall provide the Mandatory
Conversion Notice to the holder of this Note. Maker shall,
within five Business Days thereafter, deliver to the holder of this
Note (in exchange therefor) certificates for the number of full
shares of Common Stock to which it shall be entitled. Such
conversion shall be deemed to have been made as of the date of the
Mandatory Conversion Notice, and the person or persons entitled to
receive Common Stock or other securities deliverable upon
conversion shall be treated for all purposes as the record holder
or holders thereof on such date.
(d)
Certain Adjustments
. The applicable Conversion Price
and the number of securities issuable upon conversion of this Note
shall be subject to adjustment from time to time as
follows:
(i)
In case Maker shall at any time after the
date hereof (1) pay a dividend or make a distribution on its
capital stock that is paid or made in shares of stock of Maker,
(2) subdivide its outstanding shares of Common Stock into a
greater number of shares or (3) combine its outstanding shares
of Common Stock into a smaller number of shares, then in each such
case the applicable Conversion Price in effect immediately prior
thereto and the securities issuable shall be adjusted retroactively
as provided below so that Payee thereafter shall be entitled to
receive the number of shares of Common Stock of Maker and other
shares and rights to purchase stock or other securities which Payee
would have owned or have been entitled to receive after the
happening of any of the events described above had this Note been
converted immediately prior to the happening of such event or any
record date with respect thereto. In the event of the
redemption of any shares referred to in clause (1), Payee shall
have the right to receive, in lieu of any such shares or rights,
any cash, property or securities paid in respect of such
redemption. An adjustment made pursuant to this
subparagraph (i) shall become effective immediately after the
record date in the case of a dividend or distribution and shall
become effective immediately after the effective date in the case
of a subdivision or combination.
(ii)
Whenever the Conversion Price is adjusted
as provided above, Maker shall compute the adjusted Conversion
Price in accordance herewith and mail to Payee a notice
stating that the Conversion Price has been adjusted and setting
forth the adjusted Conversion Price.
(iii)
In the event that at any time, as a
result of any adjustment mad
