THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND HAS BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT.
NOVINT TECHNOLOGIES,
INC.
10% SENIOR SECURED CONVERTIBLE
PROMISSORY NOTE
Due December 4, 2010
FOR VALUE RECEIVED, the adequacy of which is
hereby acknowledged, Novint Technologies, Inc., a company organized
under the laws of the State of Delaware (the “ Company
”), hereby promises unconditionally to pay to
________________ (together with any assignee, “ Holder
”), in lawful money of the United States of America (“
Dollars ” or “ $ ”) and in
immediately available funds, the principal sum of
___________________ ($_____________) on the Maturity Date, as
hereinafter defined, and to pay interest on such principal amount
of this Senior Secured Convertible Promissory Note (the “
Note ”). Capitalized terms used but not
otherwise defined herein have the respective meanings given to such
terms in Section 11 hereof.
1.
Principal . Unless earlier repaid in full, the
entire unpaid principal amount of this Note shall be paid on the
Maturity Date. Promptly following the payment in full of
this Note, the Holder shall surrender this Note to the Company for
cancellation.
2.
Prepayment . The Company shall have the right
prior to the Maturity Date to repay all of the principal amount of
this Note and accrued but unpaid interest thereon and all other
sums due hereunder without premium or penalty.
3.
Allocation . Except as otherwise provided herein,
all payments made hereunder (whether in prepayment or otherwise)
shall be applied first against any sums incurred by the Holder for
the payment of any expenses in enforcing the terms of this Note,
then against any interest then due hereunder and finally against
principal.
4.
Interest . Interest on the Note shall accrue at a
rate of ten percent (10%) per annum from the date of this Note, and
shall be payable on the Maturity Date. The rate of
interest payable under the Note from time to time shall in no event
exceed the maximum rate, if any, permissible under applicable
law.
5.
Payments . All payments to be made by the Company
in respect of this Note shall be made in U.S. Dollars by wire
transfer to an account designated by the Holder by written notice
to the Company, subject to Section 6 hereof. If
the due date of any payment in respect of this Note would otherwise
fall on a day that is not a Business Day, such due date shall be
extended to the next succeeding Business Day. All
amounts payable under this Note shall be paid free and clear of,
and without reduction by reason of, any deduction, setoff, or
counterclaim.
(a)
Conversion Option. At any time during the term of this Note,
the principal amount of this Note, and all accrued and unpaid
interest, shall be convertible (in whole or in part), at the option
of the Holder (the “ Conversion Option ”), into
such number of fully paid and non-assessable shares of Common Stock
(the “ Conversion Rate ”) as is determined by
dividing (x) that portion of the outstanding principal balance and
accrued and unpaid interest under this Note that the Holder elects
to convert by (y) the Conversion Price (as defined in Section
6(b)(i) hereof) then in effect on the date on which the Holder
faxes a notice of conversion (the “ Conversion Notice
”), duly executed, to the Company (the “ Voluntary
Conversion Date ”) along with surrender of the original
of this Note. With respect to partial conversions of this Note, the
Company shall keep written records of the amount of this Note
converted as of each Conversion Date and, upon request, shall issue
a replacement note representing the remaining amount of principal
and accrued interest. For every two shares issued upon conversion
of this Note, Holder will receive a warrant to purchase one share
of Common Stock at an exercise price of $0.50 per share (the
“ Conversion Warrants ”). The Conversion
Warrants shall be exercisable for a term of five (5) years from the
Initial Closing Date.
(i)
The term “ Conversion Price ” shall mean $0.50
per share of Common Stock, as adjusted for stock splits, stock
combinations, and the like.
(ii)
Issue Taxes . The Company shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that
may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of this Note pursuant thereto;
provided , however , that the Company shall not be
obligated to pay any transfer taxes resulting from any transfer
requested by the Holder in connection with any such
conversion.
(iii)
Fractional Shares . No fractional shares of Common Stock
shall be issued upon conversion of this Note. In lieu of any
fractional shares to which the Holder would otherwise be entitled,
the Company shall round the fractional share to the nearest whole
share.
(iv)
Reservation of Common Stock . The Company shall at all times
when this Note shall be outstanding, reserve and keep available out
of its authorized but unissued Common Stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect
the conversion of this Note.
(v)
Regulatory Compliance . If any shares of Common Stock to be
reserved for the purpose of conversion of this Note require
registration or listing with or approval of any governmental
authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares
may be validly issued or delivered upon conversion, the Company
shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration,
listing or approval, as the case may be.
(c)
Adjustment for Stock Splits; Dividends . The
number and kind of securities purchasable upon the conversion of
this Note as well as the Conversion Price shall be subject to
adjustment from time to time upon the happening of any of the
following. In case the Company shall (i) pay a dividend
in shares of Common Stock or make a distribution in shares of
Common Stock to holders of its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater
number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock, or (iv)
issue any shares of its capital stock in a reclassification of the
Common Stock, then the number of shares of Common Stock purchasable
upon conversion of this Note immediately prior thereto shall be
adjusted so that the Holder shall be entitled to receive the kind
and number of underlying Common Stock of the Company which it would
have owned or have been entitled to receive had this Note been
converted in advance thereof. Upon each such adjustment of the kind
and number of underlying Common Stock of the Company which were
purchasable hereunder, the Holder shall thereafter be entitled to
purchase the number of underlying Common Stock resulting from such
adjustment at a Conversion Price per share obtained by multiplying
the Conversion Price per share in effect immediately prior to such
adjustment by the number of underlying Common Stock purchasable
pursuant thereto immediately prior to such adjustment and dividing
by the number of underlying Common Stock of the Company resulting
from such adjustment. An adjustment made pursuant to
this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if
any, for such event.
7.
Covenants of the Company .
(a)
Affirmative Covenants of the Company . Until all
principal and interest and any other amounts due and payable under
this Note have been paid in full, the Company shall:
(i)
provide prompt written notice to the Holder
of: (i) the occurrence of any Event of Default, or any
event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default hereunder, and (ii) any loss
or damage to any Collateral (as hereinafter defined) in excess of
$100,000;
(ii)
do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business and the
ownership of the Collateral;
(iii)
maintain, with financially sound and reputable insurance companies,
customary insurance for its insurable properties, including without
limitation, the Collateral, all to such extent and against such
risks, including fire, casualty, fidelity, business interruption
and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses
operating in the same or similar locations;
(iv) provide
30 days’ prior written notice of its registration of any
copyright with the United States Copyright Office and promptly
prepare and file such documentation as requested by Holder to
evidence Holder’s first priority security interest in such
copyrights;
(v) provide
prompt notice to Holder upon the occurrence of an adverse change in
the financial condition of the Company or reasonable belief that
such a change is imminent; and
(vi) maintain
the Collateral at the Company’s primary place of business and
in a format which can be accessed and retrieved by
Holder.
(b)
Negative Covenants of the Company . Until all
principal and interest and any other amounts due and payable under
this Note have been paid in full in cash, the Company shall
not:
(i) declare
or pay any cash dividends on any shares of any class of its capital
stock, or apply any of its property or assets to the purchase,
redemption or other retirement of, or set apart any sum for the
payment of any cash dividends on, or for the purchase, redemption
or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shares of any class of
its capital stock; or
(ii) sell,
transfer, lease or otherwise dispose (including pursuant to a
merger) of any asset with a value greater than $100,000, except
sales, transfers, leases and other dispositions of inventory, used,
obsolete or surplus equipment or other property and investments in
each case in the ordinary course of business.
8.
Transferability . This Note may be transferred by
the Holder to any person or entity provided that such transfer
complies with all applicable securities laws. Such
transfer may be made
