THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT").
THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID
SECURITIES ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE
CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS
THAT
REGISTRATION IS NOT REQUIRED UNDER SAID SECURITIES ACT OR UNLESS
SOLD
PURSUANT TO RULE 144 OR REGULATION S UNDER SAID SECURITIES ACT.
SECURED CONVERTIBLE NOTE
Santa Monica, California
December 29, 2005
$556,306.53
FOR VALUE RECEIVED, DIGICORP, a Utah corporation (hereinafter
called the "Borrower"), hereby promises to pay to the order of
REBEL CREW
HOLDINGS, LLC or its registered assigns (the "Holder") the sum of
Five Hundred
Fifty-Six Thousand Three Hundred Six Dollars and Fifty-Three
Cents
($556,306.53), on December 29, 2010 (the "Maturity Date"), plus
simple interest
on the unpaid principal balance hereof at the rate of four and one
half percent
(4.5%). The issue date of this secured convertible note (the
"Note") is December
29, 2005. All payments due hereunder (to the extent not converted
into common
stock, $.001 par value per share, of the Borrower (the "Common
Stock") in
accordance with the terms hereof) shall be made in lawful money of
the United
States of America or, at the option of the Borrower, in whole or in
part, in
shares of Common Stock valued at the then applicable Conversion
Price (as
defined herein). All payments shall be made at such address as the
Holder shall
hereafter give to the Borrower by written notice made in accordance
with the
provisions of this Note. Whenever any amount expressed to be due by
the terms of
this Note is due on any day which is not a business day, the same
shall instead
be due on the next succeeding day which is a business day. As used
in this Note,
the term "business day" shall mean any day other than a Saturday,
Sunday or a
day on which commercial banks in the city of New York, New York are
authorized
or required by law or executive order to remain closed. Each
capitalized term
used herein, and not otherwise defined, shall have the meaning
ascribed thereto
in that certain Securities Purchase Agreement, dated December 29,
2005, pursuant
to which this Note was originally issued (the "Purchase
Agreement").
This Note is free from all taxes, liens, claims and encumbrances
with
respect to the issue thereof and shall not be subject to preemptive
rights or
other similar rights of shareholders of the Borrower and will not
impose
personal liability upon the holder thereof. The obligations of the
Borrower
under this Note shall be secured by that certain Security
Agreement, dated
December 29, 2005, by and between the Borrower and the Holder (the
"Security
Agreement").
<PAGE>
The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right from time
to
time, and at any time on or prior to the Maturity Date in respect
of the
remaining outstanding principal amount of this Note to convert all
or any part
of the outstanding and unpaid principal amount of this Note into
fully paid and
non-assessable shares of Common Stock, as such Common Stock exists
on the Issue
Date, or any shares of capital stock or other securities of the
Borrower into
which such Common Stock shall hereafter be changed or reclassified
at the
conversion price of $1.112614 per share (the "Conversion Price").
The number of
shares of Common Stock to be issued upon each conversion (a
"Conversion") of
this Note shall be determined by dividing the principal amount of
this Note or
portion thereof as indicated in the notice of conversion, in the
form attached
hereto as Exhibit A (the "Notice of Conversion"), by the applicable
Conversion
Price then in effect on the date specified in the Notice of
conversion delivered
to the Borrower by the Holder in accordance with Section 1.3 below;
provided
that the Notice of Conversion is submitted by facsimile (or by
other means
resulting in, or reasonably expected to result in, notice) to the
Borrower
before 5:00 p.m., New York, New York time on such conversion date
(the
"Conversion Date").
1.2 Authorized Shares. The Borrower covenants that during the
period
the conversion right exists, the Borrower will reserve from its
authorized and
unissued Common Stock a sufficient number of shares, free from
preemptive
rights, to provide for the issuance of Common Stock upon the full
conversion of
this Note. The Borrower represents that upon issuance, such shares
will be duly
and validly issued, fully paid and non-assessable. In addition, if
the Borrower
shall issue any securities or make any change to its capital
structure which
would change the number of shares of Common Stock into which the
Note shall be
convertible at the then current Conversion Price, the Borrower
shall at the same
time make proper provision so that thereafter there shall be a
sufficient number
of shares of Common Stock authorized and reserved, free from
preemptive rights,
for conversion of the outstanding Note. The Borrower agrees that
its issuance of
this 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 Note.
1.3 Method of Conversion.
(a) Mechanics of Conversion. Subject to Section 1.1, this Note
may be converted by the Holder in whole or in part at any time from
time to time
after the Issue Date, by: (i) submitting to the Borrower a Notice
of Conversion
(by facsimile or other reasonable means of communication dispatched
on the
Conversion Date prior to 5:00 p.m., New York, New York time); and
(ii) subject
to Section 1.3(b), surrendering this Note at the principal office
of the
Borrower.
(b) Surrender of Note Upon Conversion. Notwithstanding
anything to the contrary set forth herein, upon conversion of this
Note in
accordance with the terms hereof, the Holder shall not be required
to physically
surrender this Note to the Borrower unless the entire unpaid
principal amount of
this Note is so converted. The Holder and the Borrower shall
maintain records
showing the principal amount so converted and the dates of such
conversions or
shall use such other method, reasonably satisfactory to the Holder
and the
Borrower, so as not to require physical surrender of this Note upon
each such
conversion. In the event of any dispute or discrepancy, such
records of the
Borrower shall be controlling and determinative in the absence of
manifest
error. Notwithstanding the foregoing, if any portion of this Note
is converted
as aforesaid, the Holder may not transfer this Note unless the
Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will
forthwith issue and deliver upon the order of the Holder a new Note
of like
tenor, registered as the Holder (upon payment by the Holder of any
applicable
transfer taxes) may request, representing in the aggregate the
remaining unpaid
principal amount of this Note. The Holder and any assignee, by
acceptance of
this Note, acknowledge and agree that, by reason of the provisions
of this
paragraph, following conversion of a portion of this Note, the
unpaid and
unconverted principal amount of this Note represented by this Note
may be less
than the amount stated on the face hereof.
2
<PAGE>
(c) Delivery of Common Stock Upon Conversion. Upon receipt by
the Borrower from the Holder of a facsimile transmission (or other
reasonable
means of communication) of a Notice of Conversion meeting the
requirements for
conversion as provided in this Section 1.3, the Borrower shall
issue and deliver
or cause to be issued and delivered to or upon the order of the
Holder
certificates for the Common Stock issuable upon such conversion
within three (3)
business days after such receipt (and, solely in the case of
conversion of the
entire unpaid principal amount hereof, surrender of this Note)
(such third
business day being hereinafter referred to as the "Deadline") in
accordance with
the terms hereof and the Purchase Agreement (including, without
limitation, in
accordance with the requirements of Section 3(w) of the Purchase
Agreement that
certificates for shares of Common Stock issued on or after the
effective date of
the Registration Statement upon conversion of this Note shall not
bear any
restrictive legend).
(d) Obligation of Borrower to Deliver Common Stock. Upon
receipt by the Borrower of a Notice of Conversion, the Holder shall
be deemed to
be the holder of record of the Common Stock issuable upon such
conversion, the
outstanding principal amount and the amount of accrued and unpaid
interest on
this Note shall be reduced to reflect such conversion, and, unless
the Borrower
defaults on its obligations under this Article I, all rights with
respect to the
portion of this Note being so converted shall forthwith terminate
except the
right to receive the Common Stock or other securities, cash or
other assets, as
herein provided, on such conversion. If the Holder shall have given
a Notice of
Conversion as provided herein, the Borrower's obligation to issue
and deliver
the certificates for Common Stock shall be absolute and
unconditional,
irrespective of the absence of any action by the Holder to enforce
the same, any
waiver or consent with respect to any provision thereof, the
recovery of any
judgment against any person or any action to enforce the same, any
failure or
delay in the enforcement of any other obligation of the Borrower to
the holder
of record, or any setoff, counterclaim, recoupment, limitation or
termination,
or any breach or alleged breach by the Holder of any obligation to
the Borrower,
and irrespective of any other circumstance which might otherwise
limit such
obligation of the Borrower to the Holder in connection with such
conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion
Date so long as the Notice of Conversion is received by the
Borrower before 5:00
p.m., New York, New York time, on such date.
3
<PAGE>
(e) Delivery of Common Stock by Electronic Transfer. In lieu
of delivering physical certificates representing the Common Stock
issuable upon
conversion, provided the Borrower's transfer agent is participating
in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST")
program, upon request of the Holder and its compliance with the
provisions
contained in Section 1.1 and in this Section 1.3, the Borrower
shall use its
best efforts to cause its transfer agent to electronically transmit
the Common
Stock issuable upon conversion to the Holder by crediting the
account of
Holder's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission
("DWAC") system.
1.4 Concerning the Shares. The shares of Common Stock issuable
upon
conversion of this Note may not be sold or transferred unless: (a)
such shares
are sold pursuant to an effective registration statement under the
Securities
Act; (b) the Borrower or its transfer agent shall have been
furnished with an
opinion of counsel (which opinion shall be in form, substance and
scope
customary for opinions of counsel in comparable transactions) to
the effect that
the shares to be sold or transferred may be sold or transferred
pursuant to an
exemption from such registration; or (c) such shares are sold or
transferred
pursuant to Rule 144 under the Securities Act (or a successor rule)
("Rule
144"). Except as otherwise provided in the Purchase Agreement (and
subject to
the removal provisions set forth below), until such time as the
shares of Common
Stock issuable upon conversion of this Note have been registered
under the
Securities Act as contemplated by the Registration Rights Agreement
or otherwise
may be sold pursuant to Rule 144 without any restriction as to the
number of
securities as of a particular date that can then be immediately
sold, each
certificate for shares of Common Stock issuable upon conversion of
this Note
that has not been so included in an effective registration
statement or that has
not been sold pursuant to an effective registration statement or an
exemption
that permits removal of the legend, shall bear a legend
substantially in the
following form, as appropriate:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
SECURITIES
MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID SECURITIES
ACT, OR
AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY
FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS
NOT REQUIRED UNDER SAID SECURITIES ACT UNLESS SOLD PURSUANT TO RULE
144
OR REGULATION S UNDER SAID SECURITIES ACT."
The legend set forth above shall be removed and the Borrower
shall
issue to the Holder a new certificate therefor free of any transfer
legend if:
(a) the Borrower or its transfer agent shall have received an
opinion of
counsel, in form, substance and scope customary for opinions of
counsel in
comparable transactions, to the effect that a public sale or
transfer of such
Common Stock may be made without registration under the Securities
Act and the
shares are so sold or transferred; or (b) in the case of the Common
Stock
issuable upon conversion of this Note, such security is registered
for sale by
the Holder under an effective registration statement filed under
the Securities
Act or otherwise may
