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EXHIBIT 10.2
EXHIBIT A
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FORM OF CONVERTIBLE NOTE
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF
THE COMPANY THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES
ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE
SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT,
DATED AS OF THE
DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT
ITS PRINCIPAL
EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG
THE PARTIES,
INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE
CONVERSION RIGHTS
OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT,
PREPAYMENT AND
REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF
DEFAULT FOLLOWING
WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE
ACCELERATED.
No. 1 $3,530,000
CONVERTIBLE NOTE
OF
MEMS USA, INc.
MEMS USA, Inc., a Nevada corporation (together with its
successors, the
"Company"), for value received hereby promises to pay to:
GCA STRATEGIC INVESTMENT FUND LIMITED
(the "Holder") and registered assigns, the principal sum of
Three Million Five
Hundred Thirty Thousand ($3,530,000) or, if less, the principal
amount of this
Note then outstanding, on the Maturity Date by wire transfer of
immediately
available funds to the Holder in such coin or currency of the
United States of
America as at the time of payment shall be legal tender for the
payment of
public and private debts. The Maturity Date is October 27,
2009.
Upon an Event of Default, and until such Default has been cured,
interest
shall accrue at a rate of 18% per annum ("Default Interest").
All payments of
principal and interest hereunder shall be made for the benefit
of the Holder
pursuant to the terms of the Agreement (hereafter defined).
This Convertible Note (this "Convertible Note") is issued by the
Company
pursuant to that certain Securities Purchase Agreement dated as
of the date
hereof between the Company and the Purchaser named therein (the
"Agreement").
The Agreement contains certain additional agreements among the
parties with
respect to the terms of this Convertible Note, including,
without limitation,
provisions which (A) limit the conversion rights of the Holder,
(B) specify
voluntary and mandatory redemption rights and obligations and
(C) specify Events
of Default following which the remaining balance due and owing
hereunder may be
accelerated. All such provisions are an integral part of this
Convertible Note
and are incorporated herein by reference. This Convertible Note
is transferable
and assignable to one or more Persons, in accordance with the
limitations set
forth in the Agreement.
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The Company shall keep a register (the "Register") in which
shall be
entered the names and addresses of the registered holder of this
Convertible
Note and particulars of this Convertible Note held by such
holder and of all
transfers of this Convertible Note. References to the Holder or
"Holders" shall
mean the Person listed in the Register as registered holder of
such Convertible
Notes. The ownership of this Convertible Note shall be proven by
the Register.
This Note is secured by a Deed to Secure Debt (the "Deed") and
Security
Agreement dated October 27, 2006 made by the Company and Holder
creating a
security interest in favor of Holder in certain of the Company's
real properties
described in the Deed.
The Deed contains certain additional agreements among the
parties with
respect to the terms of this Note, including, without
limitation, provisions
which (A) specify voluntary and mandatory repayment, prepayment
and (B) specify
Events of Default following which the remaining balance due and
owing hereunder
may be accelerated. All such provisions are an integral part of
this Note and
are incorporated herein by reference.
1. CERTAIN TERMS DEFINED. All terms defined in the Agreement and
not
otherwise defined herein shall have for purposes hereof the
meanings provided
for in the Agreement.
2. COVENANTS. The Company covenants and agrees to observe and
perform each of
its covenants, obligations and undertakings contained in the
Agreement, which
obligations and undertakings are expressly assumed herein by the
Company and
made for the benefit of the holder hereof.
3. PAYMENT OF PRINCIPAL.
3.1 PREPAYMENT OF NOTE. For so long as no Event of Default shall
have
occurred and is continuing and the Company is not in receipt of
a Notice
of Conversion from the Holder of the Note, the Company may, at
its option,
prepay, in whole or in part, this Convertible Note for a
pre-payment price
(the "Prepayment Price") equal to the greater of (i) 110% of
the
outstanding principal amount of the Note plus all accrued and
unpaid
interest if any, and any outstanding liquidated damages, if any,
and (ii)
(x) the number of Common Shares into which the Notes are then
convertible,
times (y) the average VWAP of the Common Shares for the five (5)
trading
days immediately prior to the date that the Note is called for
redemption,
plus accrued and unpaid interest. Any partial prepayment of
the
Convertible Note, at any time after issuance, shall be credited
to the
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principal amount of the Convertible Note on a dollar for dollar
basis. The
Company shall not be entitled to send any notice of prepayment
and begin
the prepayment procedure unless it has (i) the appropriate
Prepayment
Price, in cash, available in a demand or other immediately
available
account in a bank or similar financial institution or equivalent
means
acceptable to Holder or (ii) immediately available credit
facilities, in
the amount of the appropriate Prepayment Price, with a bank or
similar
financial institution on the date the prepayment notice is sent
to the
Holders of this Convertible Note. Provided, however, the Company
will
process any Notice of Conversion received prior to the issuance
of a
notice of prepayment; and further provided that, after a notice
of
prepayment has been issued, the Holder may issue a Notice of
Conversion
which will not be honored unless the Company fails to make the
prepayment
payment when due. In the event of such failure, the Notice of
Conversion
will be honored as of the date of the Notice of Conversion.
3.2 PAYMENT ON MATURITY DATE. The Company shall repay the
remaining
unpaid balance of this Convertible Note on the Maturity
Date.
4. CONVERSION.
4.1 CONVERSION OF CONVERTIBLE NOTE. Subject to Section 5 hereof,
the
Holder shall have the right, at its option, at any time from and
after the
date of this Convertible Note, to convert the outstanding
principal amount
of the Convertible Note. This Convertible Note shall be
convertible into
that number of fully paid and nonassessable shares of Common
Stock (as
such shares shall then be constituted) determined pursuant to
this Section
4.1. The number of shares of Common Stock to be issued upon
each
conversion of this Convertible Note shall be determined by
dividing the
Conversion Amount (as defined below) by the Conversion Price in
effect on
the date (the "Conversion Date") a Notice of Conversion is
delivered to
the Company, as applicable, by the Holder by facsimile or other
reasonable
means of communication dispatched prior to 5:00 p.m., E.S.T. The
term
"Conversion Amount" means, with respect to any conversion of
this
Convertible Note, the sum of (1) the principal amount of this
Convertible
Note to be converted in such conversion plus (2) accrued and
unpaid
interest, if any, on such principal amount at the interest rates
provided
in this Convertible Note to the Conversion Date plus (3) Default
Interest,
if any, on the interest referred to in the immediately preceding
clause
(2) plus (4) at the Holder's option, any amounts owed to the
Holder
pursuant to Section 4.3 hereof, Section 10.1 of the Agreement or
Section
10.4 of the Agreement.
4.2 CONVERSION PRICE. At the option of the Holder, any portion
or all of
the outstanding principal amount of this Convertible Note shall
be
converted into a number of shares of Common Stock at the
conversion price
(the "Conversion Price") equal to 85% of the volume weighted
average
prices ("VWAP"), as reported on Bloomberg, L.P., for the five
(5) trading
days immediately prior to the date of the related notice of
conversion.
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For the period up to and including the 30th day following the
Effective Date of
the Registration Statement (the "Initial Pricing Period"), the
Conversion Price
will not be less than 85% of the average of the volume weighted
average prices
("VWAP"), as reported by Bloomberg, for the five (5) trading
days immediately
prior to the Closing Date (the "Floor Conversion Price"), nor
greater than 110%
of the average of the VWAP, as reported by Bloomberg, for the
five (5) trading
days immediately prior to the Closing Date (the "Ceiling
Conversion Price"). For
the ninety (90) day period following the Initial Pricing Period
and each
successive ninety (90) day period thereafter (each a "Reset
Period"), the Floor
Conversion Price shall be reduced by an amount equal to 40% of
the lesser of (i)
the Floor Conversion Price and (ii) the closing bid price as
reported by
Bloomberg on the trading day immediately following the Initial
Pricing Period or
Reset Period, as the case may be, and the Ceiling Conversion
Price shall be
increased by an amount equal to 40% of the lesser of (y) the
current Ceiling
Conversion Price and (z) the closing bid price as reported by
Bloomberg on the
trading day immediately following the Initial Pricing Period or
Reset Period as
the case may be.
The Notes will provide for adjustment of the Conversion Price
upon events such
as the subdivision or consolidation of the Common Shares,
etc.
4.3 AUTHORIZED SHARES.
(a) Consistent with Section 7.11 of the Agreement, the Company
(i)
shall promptly irrevocably instruct the Company's transfer agent
to issue
certificates for the Common Stock issuable upon conversion of
this
Convertible Note and (ii) agrees that its issuance of this
Convertible
Note shall constitute full authority to its officers and agents
who are
charged with the duty of executing stock certificates to execute
and issue
the necessary certificates for shares of Common Stock in
accordance with
the terms and conditions of this Convertible Note.
(b) If at any time the Holder submits a Notice of Conversion
and
(x) the Company does not have sufficient authorized but unissued
shares of
Common stock available to effect such conversion in full in
accordance
with Arti
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