EXHIBIT 10.7
FORM OF 12% CONVERTIBLE
NOTE
THE SECURITIES WHICH ARE REPRESENTED
BY THIS INSTRUMENT, AND THE SHARES OF COMMON STOCK ISSUABLE UPON
ITS CONVERSION, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. SUCH
SECURITIES HAVE BEEN OR WILL BE ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND NOT WITII A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
SOLD, TRANSFERRED, MADE SUBJECT TO A SECURITY INTEREST, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER SUCH STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL FOR THE COMPANY IS
RECEIVED THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR
LAWS.
ENLIGHTENED GOURMET, INC.
12% Convertible Note
Due October
2008
$
October ,
2006
ENLIGHTENED GOURMET, INC, a CONNECTICUT
corporation (herein called the "Borrower" or the "Company”),
for value received, hereby promises to pay to
(the
"Holder"), on the day of October, 2008 the
principal amount of
dollars
($
)
and
to
pay interest on such principal amount as set forth below.
1.
Note . This Secured Promissory Note (the
“Note” ) is issued by the Borrower. The
Holder is entitled to the benefits of this Note, and may enforce
the agreements of the Borrower contained herein and exercise the
remedies provided for hereby or otherwise available at law in
respect hereto, including with regard to any collateral provided
hereunder.
2.
Interest . The Borrower promises to pay interest (
“Interest” ) on the principal amount of
this Note at the rate of 12% per annum (the “Interest
Rate” ). Interest on this Note shall accrue
from and including the date of issuance through and until repayment
of the principal amount of this Note and payment of all Interest
shall be computed on the basis of a 365-day year. Interest
shall be paid and due on the earlier of (a) the maturity date of
the Note: or (b) on the date of the Conversion of this Note for any
portion of the Note converted. All payments of interest and
principal shall be in lawful money of the United States of America.
All payments shall be applied first to accrued interest and
thereafter to principal. All payments shall be made to the
Holder at the address for the Holder set forth above.
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Default Rate of Interest
. Notwithstanding the foregoing
provisions, but subject to applicable law, any overdue principal of
and overdue Interest on this Note shall bear interest, payable on
demand in immediately available funds, for each day from the date
payment thereof was due to the date of actual payment, at a rate
equal to the sum of (i) the Interest Rate and (ii) an additional 5%
per annum, and, upon and during the occurrence of an Event of
Default (as hereinafter defined), this Note shall bear interest,
from the date of the occurrence of such Event of Default until such
Event of Default is cured or waived, payable on demand in
immediately available funds, at a rate equal to the sum of (i) the
Interest Rate and (ii) an additional 5% per annum. Subject to
applicable law, any interest that shall accrue on overdue interest
on this Note as provided in the preceding sentence and shall not
have been paid in full on or before the next Interest Payment Date
to occur after the date on which the overdue interest became due
and payable shall itself be deemed to be overdue interest on this
Note to which the preceding sentence shall apply.
No Usurious Interest
. In the event that any interest
rate(s) provided for in this Note (or any other payment hereunder)
shall be determined to be unlawful, such interest rate(s) (or other
payment) shall be computed at the highest rate (or amount)
permitted by applicable law. Any payment by the Borrower of
any amount in excess of that permitted by law shall be considered a
mistake, with the excess being applied to the principal amount of
this Note without prepayment premium or penalty; if no such
principal amount is outstanding, such excess shall be returned to
Borrower.
3.
Optional Prepayment
. The Borrower, at its option, may
prepay all or any portion of the principal amount of this Note then
outstanding at any time prior to maturity upon not less than 15
days' written notice to the Holder. All optional
prepayments shall include payment of accrued Interest on the
entirety of the Note and any payment made shall be applied first to
all costs and expenses payable hereunder, then to payment of
default interest, if any, then to payment of the Interest, and
thereafter to principal. However, delivery of a notice of
prepayment shall not affect the right of the Holder to convert all
or any part of the amount to be prepaid in accordance with the
terms of this Note by delivering notice of conversion prior to the
date fixed for prepayment, and in that event the notice of
prepayment shall be ineffective as to the principal amount to be so
converted.
4.
Collateral . Borrower has agreed to secure its obligations
to the Holder pursuant to the Note, by granting the Holder a
security interest in all of the Collateral hereinafter referred to.
In this regard, Borrower will provide Holder with a security
interest in all collateral itemized in the Security Agreement (pro
rata with other investors in this $1.5 million offering).
Additionally, Borrower will provide the Stock Escrow Agent
(as defined in the Stock Escrow Agreement being signed on or about
the same date as this Note) 30 Million (30,000,000) shares of The
Enlightened Gourmet Inc. common stock (the "Enlightened Gourmet
Common Stock") as collateral for conversion for the benefit of
Holders. Holder will have a security interest in that amount
of the stock as follows: (the quotient of amount of this note
divided by $1.5 Million) times 30 million. Such stock will be
unregistered but shall have registration rights in the event of a
Conversion, as provided elsewhere in Section 5(b) of this Note, and
until issued to the Holder upon conversion or default, will be
covered by a proxy giving voting rights over such shares to the
Borrower. Collectively, the Enlightened Gourmet Common Stock
and the collateral set forth in the Security Agreement are
hereinafter referred to as the "Collateral").
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Borrower acknowledges that it owns all
stock being tendered to the Escrow Agent and that all such shares
will be validly issued, fully paid and non-assessable and free from
all taxes, liens and charges. Borrower assigns, transfers and
grants to the Holder, as security for the payment, observance and
performance of all Borrower’s obligations under this
Agreement, a security interest in all of Borrower’s right,
title and interest in and to the Collateral.
Borrower further agrees that he will
undertake all steps necessary and cooperate with Holder and Escrow
Agent to undertake ensure the transferability and marketability of
such stock, including any legal opinions, providing timely
registration of the Collateral or otherwise that may be
requested.
5.
Conversion .
a.
This Note shall be convertible into
shares of Common Stock, par value $0.01 per share, of the Company
("Common Stock") at the Conversion Price as defined below, at the
option of the Holder in whole or in part, at any time, commencing
on the date of this Note. Any conversion under this Section
5(a) shall be for a minimum principal amount of $25,000.00 (unless
the face value of this note is less than $25,000 in which case
conversion shall be for the full amount of the note only).
The Holder shall effect conversions by surrendering the Note
to be converted to the Escrow Agent identified below, together with
a written request for conversion. A form for conversion is
provided as Schedule A hereto. Each request for conversion
shall specify the principal amount to be converted, and the date on
which such conversion is to be effected (the "Conversion Date").
Each request for conversion, once given, shall be
irrevocable. If the Holder is converting less than all of the
principal amount of this Note, the Company shall deliver to the
Holder a new Note for such principal amount as has not been
converted within two (2) Business Days of the Conversion Date.
b.
Not later than two (2) Business Days
after the Conversion Date, the Company will deliver to the Holder
(i) a certificate or certificates which shall be free of
restrictive legends and trading restrictions, representing the
number of shares of Common Stock being acquired upon the conversion
of this Note and (ii) a new Note in principal amount equal to the
principal amount of this Note not converted; provided ,
however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon
conversion of this Note, until either this Note is delivered for
conversion to the Company or the Holder notifies the Company that
such Note has been lost, stolen or destroyed and provides an
agreement reasonably acceptable to the Company to indemnify the
Company from any loss incurred by it in connection therewith, and
provided further , that if at the time of delivery of the
certificate or certificates referred to above there is not an
effective registration statement covering resale of the shares
being acquired upon conversion of the Note, then such certificate
or certificates shall bear an appropriate legend referring to the
registration requirements of the Securities Act of 1933; however,
in such event, the Company shall prepare and file with the
Securities and Exchange Commission within 90 days after the date of
the making of this note (as set forth in the first paragraph
hereof) a registration statement on Form SB-2 or S-1 or such other
form as is appropriate in order to register the Converted Shares.
In the event that the Company fails to file a registration
statement within 90 days as set forth above; or fails to thereafter
act in good faith to prosecute the registration of the shares, the
Company shall be obligated to pay to the Holder additional
shares of the Company's Common Stock in an amount equal to
21.875 million multiplied by the quotient of the amount of this
note divided by $1,500,000.
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c.
Conversion Price.
(i)
The Conversion Price for this Note in
effect on any Conversion Date shall be at 5 cents ($0.05) per share
(the "Fixed Conversion Price").
(ii)
If the Company, at any time while this
Note is outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock
payable in shares of its capital stock (whether payable in shares
of its Common Stock or of capital stock of any class), (b)
subdivide outstanding shares of Common Stock into a larger number
of shares, (c) combine outstanding shares of Common Stock into a
smaller number of shares, or (d) issue by reclassification of
shares of Common Stock any shares of capital stock of the Company,
the Fixed Conversion Price then in effect shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock of the Company outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii)
If the Company, at any time while this
Note is outstanding, shall issue or sell shares of Common Stock, or
options, warrants or other rights to subscribe for or purchase
shares of Common Stock, (excluding shares of Common Stock issuable
upon exercise of options, warrants or conversion rights granted
prior to the date hereof) and at a price per share less than the
Fixed Conversion Price, the Fixed Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the
number of shares of Common Stock outstanding on the date of
issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of
which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such shares, options,
warrants or rights plus the number of shares which the aggregate
offering price of the total number of shares so offered would
purchase at such Fixed Conversion Price. Such adjustment
shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or
warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in
an adjustment in the Conversion Price pursuant to this Section
5(c)(iii) if any such right or warrant shall expire and shall not
have been exercised, the Fixed Conversion Price then in effect
shall immediately upon such expiration be recomputed and effective
immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section
5(c) after the issuance of such rights or warrants) had the
adjustment of the Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock
actually purchased upon the exercise of such rights or warrants
actually exercised. In no event shall the Fixed Conversion
price be greater than 5 cents ($0.05).
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(iv)
If the Company, at any time while this
Note is outstanding, shall distribute to all holders of Common
Stock evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred
to in Section 5(c)(iii) above) then in each such case the
Conversion Price at which this Note shall thereafter be convertible
shall be determined by multiplying the Fixed Conversion Price in
effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction
of which the denominator shall be the Fixed Conversion Price of
Common Stock determined as of the record date mentioned above, and
of which the numerator shall be such Fixed Conversion Price of the
Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of
Common Stock as determined by the Board of Directors in good faith;
provided , however that in the event of a
distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally
recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good faith
by the Holder; and provided , further , that the
Company, after receipt of the determination by such Appraiser shall
have the right to select an additional Appraiser, in which case the
fair market value shall be equal to the average of the
determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the
Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after
the record date mentioned above.
(v)
All calculations under this Section 5
shall be made to the nearest 1/1000th of a cent or the nearest
1/1000th of a share, as the case may be. Any calculation over
.005 shall be rounded up to the next cent or share and any
calculation less than .005 shall be rounded down to the previous
cent or share.
(vi)
Whenever the Fixed Conversion Price is
adjusted pursuant to Section 5(c)(ii), 5(c)(iii) or 5(c)(iv), the
Company shall within two (2) days after the determination of the
new Fixed Conversion Price mail and fax to the Holder, a notice
setting forth the Fixed Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such
adjustment.
(vii)
In case of any reclassification of the
Common Stock, any consolidation or merger of the Company with or
into another person, the sale or transfer of all or substantially
all of the assets of the Company or any compulsory share exchange
pursuant to which the Common Stock is converted into other
securities, cash or property, then the Holder shall have the right
thereafter to convert such Note only into the shares of stock and
other securities and property receivable upon or deemed to be held
by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange (except in
the event the property is cash, then the Holder shall have the
right to convert this Note and receive cash in the same manner as
other stockholders), and the Holder shall be entitled upon such
event to receive such amount of securities or property as the
shares of the Common Stock into which such Note could have been
converted immediately prior to such reclassific
