THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION
OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO INROB TECH LTD. THAT SUCH REGISTRATION IS NOT
REQUIRED.
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Principal $_________________
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Issue Date: November 15,
2006
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SECURED CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, INROB TECH LTD., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay
to __________________________________, Fax: ( ) ___________, (the
"Holder") or its registered assigns or successors in interest or
order, without demand, the sum of
____________________________________ ($________ ) (“Principal
Amount”), with simple and unpaid interest thereon, on
November 15, 2008 (the "Maturity Date"), if not sooner
paid.
This Note has been entered into pursuant to the
terms of a subscription agreement between the Borrower, the Holder
and certain other holders (the “Other Holders”) of
secured convertible promissory notes (the “Other
Notes”), dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein,
all capitalized terms used in this Note shall have the same meaning
as is set forth in the Subscription Agreement. The following terms
shall apply to this Note:
ARTICLE I
INTEREST; AMORTIZATION; SECURITY
AGREEMENT
1.1. Interest Rate . Subject to
Section 6.7 hereof, interest payable on this Note shall accrue at a
rate per annum (the "Interest Rate") of eight percent (8%).
Interest on the Principal Amount shall accrue from the date of this
Note and shall be payable, in arrears, together with Principal
Amount payments as described below and on the Maturity Date,
whether by acceleration or otherwise.
1.2. Minimum Monthly Principal Payments .
Amortizing payments of the outstanding Principal Amount and
interest of this Note shall commence on the third month anniversary
date of this Note and on the same day of each month thereafter
(each a “Repayment Date”) until the Principal Amount
and interest have been repaid in full, whether by the payment of
cash or by the conversion of such Principal amount and interest
into Common Stock pursuant to the terms hereof. Subject to Section
2.1 and Article 3 below, on each Repayment Date the Borrower shall
make payments to the Holder in the amount of 4.76 percent of the
initial Principal Amount, all interest accrued on the Note as of
the Repayment Date and any other amounts which are then owing under
this Note that have not been paid (collectively, the "Monthly
Amount"). All payments of cash or amounts converted into Common
Stock pursuant to this Note by the Holder or Borrower shall be
applied first against outstanding fees and damages, then against
accrued interest on the Principal Amount and then to Principal
Amounts of not yet due Monthly Amounts commencing with the Monthly
Amount next payable and then Monthly Amounts thereafter in reverse
chronological order. Any Principal Amount, interest and any other
sum arising under the Transaction Documents that remains
outstanding on the Maturity Date shall be due and payable on the
Maturity Date.
1.3.
Default Interest Rate
. Following the occurrence and
during the continuance of an Event of Default, which, if
susceptible to cure is not cured within ten (10) days, otherwise
then from the first date of such occurrence, the annual interest
rate on this Note shall (subject to Section 6.7) automatically be
increased to fifteen percent (15%).
ARTICLE
II
CONVERSION
REPAYMENT
2.1. Payment of Monthly Amount in Cash or Common
Stock . Subject to
Section 3.2 hereof, the Borrower, at the Borrower’s election,
shall pay the Monthly Amount (i) in cash in an amount equal to 115%
of the Principal Amount component of the Monthly Amount and 100% of
all other components of the Monthly Amount, within three (3)
business days after the applicable Repayment Date, or (ii) in
registered Common Stock at an applied conversion rate equal to the
lesser of (A) the Fixed Conversion Price (as defined in section 3.1
hereof), or (B) seventy-five percent (75%) of the average of the
closing bid price of the common stock as reported by Bloomberg L.P.
for the Principal Market for the five trading days preceding the
date a Notice of Conversion, if any, [as described in Section 3(a)]
is given to the Borrower by Holder after Borrower notifies Holder
of its election to pay the Monthly Amount with shares of Common
Stock pursuant to the following sentence. The Borrower must send
notice to the Holder by confirmed telecopier not later than 6:00
P.M., New York City time on the twenty-second trading day preceding
a Repayment Date notifying Holder of Borrower’s election to
pay the Monthly Redemption Amount in cash or Common Stock. The
Notice must state the amount of cash to be paid and include
supporting calculations. If the Borrower elects to pay the Monthly
Amount with Common Stock and if the Holder does not give Notice of
Conversion then the Repayment Date shall be deemed the Conversion
Date and the Conversion Price shall be the lessor of (A) the Fixed
Conversion Price (as defined in section 3.1 hereof) or (B) seventy
five (75%) of the average of the closing bid price for the five
trading days preceding the Repayment Date. Until fifteen (15)
trading days after notice is given by the Borrower that the
Borrower has elected to pay the Monthly Amount with Common Stock,
the holder may elect to defer such payment of Common Stock until
the Holder has elected to deliver a Notice of Conversion with
respect to such Monthly Amount. The Conversion Price with respect
to such deferred Monthly Amount shall be the Conversion Price set
forth above in subsection (ii) of this Section 2.1. Amounts paid
with shares of Common Stock must be delivered to the Holder as
described in Section 3.3(b). Elections by the Borrower must be made
to all Other Holders in proportion to the relative Note principal
held by the Holder and the Other Holders. If such notice is not
timely sent or if the Monthly Redemption Amount is not timely
delivered, then Holder shall have the right, instead of the
Company, to elect at any time from when such notice was required to
be given until the applicable Repayment Date whether to be paid in
cash or Common Stock. Such Holder’s election shall not be
construed to be a waiver of any default by Borrower relating to
non-timely compliance by Borrower with any of its obligations under
this Note. Borrower hereby notifies the Holder that until further
notice the Monthly Amount shall be paid to Holder with shares of
Common Stock.
2.2. No Effective Registration
. Notwithstanding anything to the
contrary herein, no amount payable hereunder may be paid in shares
of Common Stock by the Borrower without the Holder’s consent
unless (a) either (i) an effective current Registration Statement
covering the shares of Common Stock to be issued in satisfaction of
such obligations exists, or (ii) an exemption from registration of
the Common Stock is available pursuant to Rule 144(k) of the 1933
Act, and (b) no Event of Default hereunder (or an event that with
the passage of time or the giving of notice could become an Event
of Default), exists and is continuing, unless such event or Event
of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at
the Holder's option.
2.3. Optional Redemption of Principal
Amount . Provided an
Event of Default or an event which with the passage of time or the
giving of notice could become an Event of Default has not occurred,
whether or not such Event of Default has been cured, the Borrower
will have the option of prepaying the outstanding Principal amount
of this Note ("Optional Redemption"), in whole or in part, by
paying to the Holder a sum of money equal to one hundred and twenty
percent (120%) of the Principal amount to be redeemed, together
with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note or
any Transaction Document through the Redemption Payment Date as
defined below (the "Redemption Amount"). Borrower’s election
to exercise its right to prepay must be by notice in writing
(“Notice of Redemption”). The Notice of Redemption
shall specify the date for such Optional Redemption (the
"Redemption Payment Date"), which date shall be thirty (30)
business days after the date of the Notice of Redemption (the
"Redemption Period"). A Notice of Redemption shall not be effective
with respect to any portion of the Principal Amount for which the
Holder has a pending election to convert, or for conversions
initiated or made by the Holder during the Redemption Period. On
the Redemption Payment Date, the Redemption Amount, less any
portion of the Redemption Amount against which the Holder has
exercised its conversion rights, shall be paid in good funds to the
Holder. In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date as set forth herein, then (i)
such Notice of Redemption will be null and void, (ii) Borrower will
have no right to deliver another Notice of Redemption, and (iii)
Borrower’s failure may be deemed by Holder to be a
non-curable Event of Default. A Redemption Notice may be given only
at a time a Registration Statement is effective. A Notice of
Redemption may not be given nor may the Borrower effectuate a
Redemption without the consent of the Holder, if at any time during
the Redemption Period an Event of Default or an Event which with
the passage of time or giving of notice could become an Event of
Default (whether or not such Event of Default has been cured), has
occurred or the Registration Statement registering the Registrable
Securities is not effective each day during the Redemption
Period.
ARTICLE
III
CONVERSION
RIGHTS
3.1. Holder's Conversion Rights
. Subject to Section 3.2, the Holder
shall have the right, but not the obligation at all times, to
convert all or any portion of the then aggregate outstanding
Principal Amount of this Note, into shares of Common Stock, subject
to the terms and conditions set forth in this Article III at the
rate of $0.25 per share of Common Stock (“Fixed Conversion
Price”) as same may be adjusted pursuant to this Note and the
Subscription Agreement. The Holder may exercise such right by
delivery to the Borrower of a written Notice of Conversion pursuant
to Section 3.3. After the occurrence of an Event of Default, the
Fixed Conversion Price shall be the lesser of the Fixed Conversion
Price or 75% of the average of the closing bid prices of the Common
Stock for the five trading days prior to a Conversion
Date.
3.2. Conversion Limitation . The Holder shall not be entitled to convert on
a Conversion Date that amount of the Note in connection with that
number of shares of Common Stock which would be in excess of the
sum of (i) the number of shares of common stock beneficially owned
by the Holder and its Affiliates on a Conversion Date, and (ii) the
number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this provision
is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its Affiliates of more than
4.99% of the outstanding shares of common stock of the Company on
such Conversion Date. Beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. Subject to the
foregoing, the Holder shall not be limited to aggregate conversions
of only 4.99% and aggregate conversions by the Subscriber may
exceed 4.99%. The Subscriber may waive the conversion limitation
described in this Section 7.3, in whole or in part, upon and
effective after 61 days prior written notice to the Company to
increase such percentage to up to 9.99%. The Subscriber may decide
whether to convert a Note or exercise Warrants to achieve an actual
4.99% or up to 9.99% ownership position as described
above.
3.3. Mechanics of Holder's Conversion
.
(a)
In the event that the Holder elects
to convert any amounts outstanding under this Note into Common
Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion (a "Notice of
Conversion") to the Borrower, which Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and amounts being converted. The original Note is
not required to be surrendered to the Borrower until all sums due
under the Note have been paid. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its
records. Each date on which a Notice of Conversion is delivered or
telecopied to the Borrower in accordance with the provisions hereof
shall be deemed a "Conversion Date." A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit
A.
(b)
Pursuant to the terms of a Notice
of Conversion, the Borrower will issue instructions to the transfer
agent accompanied by an opinion of counsel, if so required by the
Borrower's transfer agent and shall cause the transfer agent to
transmit the certificates representing the Conversion Shares to the
Holder by crediting the account of the Holder's designated broker
with the Depository Trust Corporation ("DTC") through its Deposit
Withdrawal Agent Commission ("DWAC") system within four (4)
business days after receipt by the Borrower of the Notice of
Conversion (the "Delivery Date"). In the case of the exercise of
the conversion rights set forth herein the conversion privilege
shall be deemed to have been exercised and the Conversion Shares
issuable upon such conversion shall be deemed to have been issued
upon the date of receipt by the Borrower of the Notice of
Conversion. The Holder shall be treated for all purposes as the
record holder of such shares of Common Stock, unless the Holder
provides the Borrower written instructions to the
contrary. Notwithstanding the
