EXHIBIT 10.21
THIS NOTE HAS BEEN ISSUED
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF FEDERAL AND
STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
TRANSFERRED WITHOUT
COMPLIANCE WITH SUCH REQUIREMENTS OR A WRITTEN OPINION
OF
COUNSEL ACCEPTABLE TO THE
OBLIGOR THAT SUCH TRANSFER WILL NOT RESULT IN ANY
VIOLATION OF SUCH LAWS OR
AFFECT THE LEGALITY OF ITS ISSUANCE.
CONVERTIBLE PROMISSORY NOTE
$1,000,000
January 7, 2005
FOR VALUE RECEIVED, the undersigned, Adsero Corp., a
Delaware
corporation with offices at
11 Tanager Ave., Toronto, Ontario, M4G 3P9 (the
"Obligor"), hereby promises
to pay to the order of Westminster Capital, Inc.
(the "Holder"), with offices
at 9665 Wilshire Blvd., M-10, Beverly Hills, Ca.,
90212, the principal sum of
One Million US dollars ($1,000,000) payable as set
forth below. The Obligor also
promises to pay to the order of the Holder
interest on the principal
amount hereof at a rate per annum equal to three and
nine tenths percent (3.9%),
which interest shall be payable at such time as the
principal is due hereunder.
Interest shall be calculated on the basis of the
year of 365 days and for the
number of days actually elapsed. Any amounts of
interest and principal not
paid when due, including upon an Event of Default (as
hereinafter defined), shall
bear interest at the maximum rate of interest
allowed by applicable law.
The payments of principal and interest hereunder
shall be made in currency of
the United States of America that at the time of
payment shall be legal tender
therein for the payment of public and private
debts.
This Note shall be subject to the following additional terms
and
conditions:
1.
Payments. Interest and principal due on this Note are payable no
later
than January 1, 2008 (the "Maturity Date"); provided however, that
the
parties may mutually agree to extend the terms of this Note beyond
the
Maturity Date. In the event that any payment to be made hereunder
shall
be or become due on Saturday, Sunday or any other day which is a
legal
bank holiday under the laws of Canada or the United States such
payment
shall be or become due on the next succeeding business day and
interest
shall accrue during such extension of time
2.
Optional Prepayment. The Obligor and the Holder understand and
agree
that the principal amount of this Note plus all accrued interest
due
thereon may be prepaid, after July 1, 2005, by the Obligor, in
its
discretion, at any time prior to the Maturity Date. Obligor
will
provide 10 business days written notice to Holder for prepayment
during
which time Holder will have the option to convert under clause 3
below
by providing written notice within the 10 business day
period,
otherwise Obligor will pay the full amount outstanding
including
accrued interest and principal.
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3.
Conversion into Common Stock. At any time after July 1, 2005,
the
Holder may, at its sole option, convert the total unpaid principal
and
interest hereunder into common shares of the Obligor at the rate
of
$0.50 for each common share. In addition for each common share
issued
upon conversion, the Holder will also receive one warrant. Each
warrant
entitles the Holder to purchase one common share of the Obligor
for
$1.50 per share at any time prior to July 1, 2008. The Holder
shall
provide written notice to Obligor of its intention to convert to
the
fax number 416-467-7173 attention CFO. In addition if after
this
conversion the Holder wishes to exercise any warrants, the notice
would
be faxed to the same fax number noted above.
If prior to July 1, 2005 the Obligor issues any stock, options
or
warrants for less than $0.50 per common share, than the
conversion
price under this clause will be adjusted to this new price offered.
In
addition the conversion rate under this clause will be adjusted to
give
effect to any stock splits, stock dividends, or any other
share
reorganizations which occur prior to the conversion of the note
under
this clause.
Acopy of the warrant which will be issued is attached as schedule
A.
The Obligor hereby agrees to include, where allowable, the shares
which
would be issued under both the note and warrants, if converted, in
the
next registration statement to be filed, which the Obligor expects
to
be filed no later than March 31, 2005.
4. No
Waiver. No failure or delay by the Holder in exercising any
right,
power or privilege under the Note shall operate as a waiver thereof
nor
shall any single or partial exercise thereof preclude any other
or
further exercise thereof or the exercise of any other right, power
or
privilege. The rights and remedies herein provided shall be
cumulative
and not exclusive of any rights or remedies provided by law. No
course
of dealing between the Obligor and the Holder shall operate as a
waiver
of any rights by the Holder.
5.
Waiver of Presentment and Notice of Dishonor. The Obligor and
other
parties that may be liable under this Note hereby waive
presentment,
notice of dishonor, protest and all other demands and notices
in
connection with the delivery, acceptance, performance or
enforcement of
this Note.
6.
Place of Payment. All payments of principal of this Note and
the
interest due hereon shall be made to Holder at the address
appearing
above or at such other address as the Holder may designate in
writing.
7.
Events of Default. The entire unpaid principal amount of this Note
and
the interest due hereon shall forthwith become and be due and
payable,
without presentment, demand, protest or other notice of any kind,
all
of which are hereby expressly waived, if any one or more of
the
following events (herein called "Events of Default") shall
have
occurred (for any reason whatsoever and whether such happening
shall be
voluntary or involuntary or come about or be effected by operation
of
law or pursuant to or in compliance with any judgement, decree or
order
of any court or any order, rule or regulation of any administrative
or
governmental body ):
(a) if the
Obligor shall:
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(i) admit in
writing its inability to pay its debts
generally as they become due;
(ii)
file a petition in bankruptcy or petition to take
advantage of any insolvency act;
(iii) make
assignment for the benefit of creditors;
(iv)
consent to the appointment of a receiver of the whole
or any substantial part of its property;
(v) on a
petition in bankruptcy filed against it, be
adjudicated a bankrupt;
(vi)
file a petition or answer seeking reorganization or
arrangement under the Federal bankruptcy laws or any
other applicable law or statute of Canada or any
province thereof or of the United States of America
or any state, district or territory thereof;
(b) if a court
of competent jurisdiction shall enter an order,
judgment, or decree appointing, without the consent of
the
Obligor, a receiver of the whole or any substantial part
of
the Obligor's property;
(c) if, under
the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction
shall
assume custody or control of the whole or any substantial
part
of Obligor's property; or
(d) if the
Obligor sells or otherwise transfers all or
substantially all of its assets.
8.
Remedies. In case any one or more of the Events of Default
specified in
Section 7 hereof shall have occurred and be continuing, the Holder
may
proceed to protect and enforce its rights whether by suit and/or
equity
and/or by action of law, whether for the specific performance of
any
covenant or agreement contained in this Note or in aid of the
exercise
of any power granted in this Note, or the Holder may proceed to
enforce
the payment of all sums due upon the Note or enforce any other
legal or
equitable right of the Holder.
9.
Costs and Expenses. Each of the parties shall bear their own
legal
expenses in connection with this Note. In the event Obligor
defaults on
its obligations hereunder, the Holder shall be entitled to recover
all
of its reasonable attorney's fees and costs incurred in enforcing
its
rights hereunder.
10.
Amendments. No amendment, modification or waiver of any provision
of
this Promissory Note nor consent to any departure by the Obligor
there
from shall be effective unless the same shall be in writing and
signed
by Holder and then such waiver or consent shall be effective only
in
the specific instance and for the purpose for which
given.
11. Governing
Law. This Promissory Note shall be deemed to be a
contract
made under the laws of New York and shall be governed and construed
in
accordance with the laws of said state without giving effect
to
principles of conflicts of law.
12. Headings
and Construction. The headings of the paragraphs of this
Promissory Note are inserted for convenience of reference only
and
shall not be deemed to constitute a part hereof. Words used herein
of
any gender shall be construed to include any other gender
where
appropriate and words used herein which are either singular or
plural
shall be construed to include the other where
appropriate.
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13. Successors
and Assigns. The provisions hereof shall be binding upon
and
shall insure to the benefit of Obligor and Holder and their
respective
successors and assigns.
14. Partial
Invalidity. If any provision of this Promissory Note is held
to
be invalid or unenforceable, such invalidity or unenforceability
shall
not invalidate this Promissory Note as a whole but this Promissory
Note
shall be construed as though it did not contain the
particular
provision or provisions held to be invalid or unenforceable, and
the
rights and obligations of the parties shall be construed and
enforced
only to such extent as shall be permitted by law.
IN WITNESS WHEREOF, the
OBLIGOR has signed this Note as of the 7th day of
January, 2005.
OBLIGOR:
Adsero Corp.
By: /s/
William Smith
---------------------------------------
Name: William Smith, CFO, Secretary, Treasurer
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NEITHER THIS WARRANT NOR THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HAVE
BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER ANY STATE SECURITIES
LAW. IN ADDITION, SUCH SECURITIES MAY NOT BE SOLD,
PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE
REGISTRATION
STATEMENT COVERING THE
SECURITIES UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS, (ii) THE COMPANY FIRST
RECEIVES AN OPINION FROM AN ATTORNEY, REASONABLY
ACCEPTABLE TO THE COMPANY,
STATING THAT THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT
AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR
(iii) THE TRANSFER IS MADE
PURSUANT TO RULE 144 PROMULGATED UNDER THE ACT.
No. ___
________ shares of Common Stock
Dated: ________,
200__
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
ADSERO CORP.
(A Delaware corporation)
FOR VALUE RECEIVED, Adsero Corp. ("Company"), hereby certifies
that
Westminster Capital, Inc.,
with offices at 9665 Wilshire Blvd., M-10, Beverly
Hills, Ca., 90212, or his,
her or its registered assigns ("Holder"), is
entitled, subject to the
terms set forth below, to purchase from the Company, at
any time or from time to time
during the three-year period commencing on
__________,200__ and expiring
on _______, 200__, Two million (2,000,000) shares
of Common Stock of the
Company ("Common Stock"), at a purchase price of $1.50
per share ("Exercise Price").
The number of shares of Common Stock purchasable
upon exercise of this
Warrant, and the purchase price per share, each as
adjusted from time to time
pursuant to the provisions of this Warrant, are
hereinafter referred to as
the "Warrant Shares" and the "Exercise Price,"
respectively.
1.
Exercise
1.1 Procedure
for Exercise. This Warrant may be exercised by the
Holder, in whole or in part,
by the surrender of this Warrant (with the Notice
of Exercise Form attached
hereto duly executed by such Holder) at the principal
office of the Company, or at
such other office or agency as the Company may
designate, accompanied by
payment in full, in lawful money of the United States,
of an amount equal to the
then applicable Exercise Price multiplied by the
number of Warrant Shares then
being purchased upon such exercise.
1.2 Cashless
Exercise. In lieu of paying the Exercise Price upon
exercise of this Warrant, the
Holder may elect to exercise this Warrant on a
cashless basis in which case
the number of Warrant Shares issued to the Holder
upon exercise of the Warrant
shall be reduced by the number of Warrant Shares
with an aggregate market
price as of the date of exercise equal to the aggregate
Exercise Price for the total
number of Warrant Shares which the Holder has
elected to exercise pursuant
to this Warrant, as specified in the Exercise
Notice.
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1.3 Date of
Exercise. Each exercise of this Warrant shall be
deemed to have been effected
immediately prior to the close of business on the
day on which this Warrant
shall have been surrendered to the Company. At such
time, the person or persons
in whose name or names any certificates for Warrant
Shares shall be issuable upon
such exercise shall be deemed to have become the
holder or holders of record
of the Warrant Shares represented by such
certificates.
1.4 Issuance
of Certificate. As soon as practicable after the
exercise of the purchase
right represented by this Warrant, the Company at its
expense will use its best
efforts to cause to be issued in the name of, and
delivered to, the Holder, or,
subject to the terms and conditions hereof, to
such other individual or
entity as such Holder (upon payment by such Holder of
any applicable transfer
taxes) may direct:
(i) a
certificate or certificates for the number of full shares
of
Warrant Shares to which such
Holder shall be entitled upon such exercise
(subject to Section 3
hereof), and
(ii)
in case such exercise is in part only, a new warrant or
warrants (dated the date
hereof) of like tenor, stating on the face or faces
thereof the number of shares
currently stated on the face of this Warrant minus
the number of such shares
purchased by the Holder upon such exercise as provided
in subsection 1.1
above.
2. Adjustments.
2.1 Split,
Subdivision or Combination of Shares. If the
outstanding shares of the
Company's Common Stock at any time while this Warrant
remains outstanding and
unexpired shall be subdivided or split into a greater
number of shares, or a
dividend in Common Stock shall be paid in respect of
Common Stock, the Exercise
Price in effect immediately prior to such subdivision
or at the record date of such
dividend shall, simultaneously with the
effectiveness of such
subdivision or split or immediately after the record
date
of such dividend (as the case
may be), shall be proportionately decreased. If
the outstanding shares of
Common Stock shall be combined or reverse-split into a
smaller number of shares, the
Exercise Price in effect immediately prior to such
combination or reverse split
shall, simultaneously with the effectiveness of
such combination or reverse
split, be proportionately increased. When any
adjustment is required to be
made in the Exercise Price, the number of shares of
Warrant Shares purchasable
upon the exercise of this Warrant shall be changed to
the number determined by
dividing (i) an amount equal to the number of shares
issuable upon the exercise of
this Warrant immediately prior to such adjustment,
multiplied by the Exercise
Price in effect immediately prior to such adjustment,
by (ii) the Exercise Price in
effect immediately after such adjustment.
2.2 Reclassification Reorganization, Consolidation or Merger. In
the
case of any reclassification
of the Common Stock (other than a change in par
value or a subdivision or
combination as provided for in subsection 2.1 above),
or any reorganization,
consolidation or merger of the Company with or into
another corporation (other
than a merger or reorganization with respect to which
the Company is the continuing
corporation and which does not result in any
reclassification of the
Common Stock), or a transfer of all or substantially all
of the assets of the Company,
or the payment of a liquidating distribution then,
as part of any such
reorganization, reclassification, consolidation, merger,
sale or liquidating
distribution, lawful provision shall be made so that the
Holder of this Warrant shall
have the right thereafter to
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receive upon the exercise
hereof, the kind and amount of shares of stock or
other securities or property
which such Holder would have been entitled to
rec
