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JUNIOR CONVERTIBLE NOTE
$740,000.00
Houston,
Texas
August 21, 2008 FOR VALUE RECEIVED, the undersigned, REMOTE
KNOWLEDGE, INC., a Delaware corporation (“Borrower”),
hereby promises to pay to the order of ____________
(“Lender”), at its designated office, in lawful money
of the United States of America, the principal sum of
_________________________, or such lesser amount as is advanced
hereunder, together with interest thereon at the rate set forth
below. 1. (a) All principal outstanding under this Note
from and after the date of this Note shall bear interest prior to
maturity at a rate equal to the lesser of (i) the Maximum Rate and
(ii) twelve percent (12%) per annum.
(b) If an Event of Default has
occurred all principal outstanding under this Note shall bear
interest at the lesser of (i) the Maximum Rate and (ii) eighteen
percent (18%) per annum. 2. Interest on the
indebtedness evidenced by this Note shall be computed on the basis
of a year of 360 days and the actual number of days elapsed
(including the first day but excluding the last day) unless such
calculation would result in a usurious rate in which case interest
shall be calculated on the basis of a year of 365 or 366 days, as
the case may be. 3. Principal of and interest on this
Note shall be due and payable on the Maturity Date except as
otherwise provided herein. 4. Lender agrees to fund
this Note to Borrower in accordance with the express terms hereof
in one or more advances. Borrower may not reborrow any
portion of this Note which is repaid hereunder. 5. This
Note is issued pursuant to the terms of the Credit Agreement (as
hereinafter defined) and is entitled to the benefits of the Credit
Agreement.
6. (a) At
any time and from time to time, Lender may elect, upon not less
than seventy-five (75) days notice to Borrower, at its sole
discretion, by written notice to Borrower, to convert or exchange
all or any part of the amounts outstanding under this Note and any
accrued and unpaid interest thereon into Borrower common stock
(“Conversion Interests”) as reflected
below. Each $0.04 of the outstanding balance of this
Note (the “Conversion Price”) may be converted into or
exchanged for one (1) share of Borrower common stock based on
62,500,000 outstanding shares of Borrower stock (the “Common
Stock”) on a fully diluted basis. The Conversion Price
shall be subject to adjustment from time to time as hereinafter
provided in order to prevent the dilution of Lender’s right
to acquire shares of Borrower’s Common Stock
hereunder. Upon each adjustment of the Conversion Price,
Lender shall thereafter be entitled to acquire, at the Conversion
Price resulting from such adjustment, the number of shares of the
Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares of
Common Stock purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Conversion Price
resulting from such adjustment. 1
The Conversion Price shall be subject to adjustment from
time to time as follows:
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(i)
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Stock Splits and Combinations. If Borrower effects a subdivision
of the Common Stock, the Conversion Price in effect immediately
before such subdivision shall be proportionately
decreased. If Borrower shall at any time or from time to
time after the date hereof combine the Common Stock into a smaller
number of shares, the Conversion Price in effect immediately before
such combination shall be proportionately increased.
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(ii)
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Common Stock Dividends and Distributions. If Borrower makes a
dividend or other distribution payable in additional shares of
Common Stock, in each such event, the Conversion Price shall be
decreased by multiplying the Conversion Price then in effect by a
fraction, the numerator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time
of such issuance and the denominator of which is the total number
of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance plus the number of shares of Common
Stock issuable in payment of such dividend or distribution.
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(iii)
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Capital Reorganizations. If there is a capital reorganization of
Common Stock, provision shall be made so that Lender shall
thereafter be entitled to receive upon the exercise hereof the
number of shares of Common Stock deliverable upon exercise
immediately prior to such event would have been entitled as a
result of such capital reorganization.
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(iv)
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Other Adjustment. In the event of any other event or
circumstance which results in any increase in or other change to
the issued and outstanding shares of the Common Stock of the
Borrower from and after the date hereof, including without
limitation, any public or private offering of securities by the
Borrower and any issuance of securities in connection with any
merger, acquisition, disposition or other similar transaction, such
that Lender’s right to acquire such shares of Common Stock
will be diluted as a percentage of Borrower’s outstanding
shares of Common Stock following such event or circumstance, the
Conversion Price shall be adjusted as necessary in order to prevent
any such dilution.
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Notwithstanding the foregoing, no adjustment in the
Conversion Price shall be made in connection with or as a result of
any dilutive issuance of common shares related to a compensatory
issuance of common shares to the employees or directors of Borrower
as approved by Borrower’s board of directors. All
election notices, once given by the Lender, shall be revocable
until the date ten (10) days prior to the date the election is
effected. Borrower hereby agrees to take all action and
to execute, deliver and file such documents or instruments,
including, without limitation, amendments to its charter and
constituent documents, as may be required in order to give effect
to Lender’s conversion rights under this paragraph.
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(b) To the extent of Borrower’s delivery to
the Lender of the number of Conversion Interests into which this
Note, whether in whole or in part, is convertible pursuant to the
election made above (together with the cash payment in lieu of any
fractional share of Conversion Interests as contemplated below),
such delivery will be deemed to satisfy Borrower’s obligation
to pay the principal amount of this Note and the accrued and unpaid
interest. At Borrower’s option, all the accrued
and unpaid interest related to any such converted principal amount
shall be payable in cash by Borrower in lieu of any Conversion
Interests. (c) No conversion shall result in the
issuance of fractional shares of Conversion
Interests. If Lender would otherwise be entitled to a
fractional share, then Borrower shall pay to the Lender an amount
equal to the conversion value of such fractional share unless the
Lender has elected to maintain its commitment under this Note.
(d) Upon any conversion of this Note into Conversion
Interests, Borrower shall, at its expense, deliver to Lender as
soon as practicable a certificate representing the number of
Conversion Interests to which Lender is entitled as provided in
paragraph (a) above at which time Lender shall surrender this Note
to Borrower if all the outstanding principal hereof and accrued
interest thereon is being converted or exchanged. In the
event Lender elects to convert or exchange less than all of the
outstanding principal of and accrued interest on this Note, the
unconverted portion of such principal and interest shall remain
outstanding and Borrower shall promptly issue a replacement
promissory note evidencing such outstanding amount in exchange for
the Note. Irrespective of the date of issuance and
delivery of any certificates with respect thereto, shares or units
of Conversion Interests purchased by conversion as provided herein
shall be, and deemed to be, issued to Lender as the record owner of
such shares as of the close of business on the date on which this
Note shall have been
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