THIS
SECURED CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), NOR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES
LAWS AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNLESS
(I) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAW
REQUIREMENTS HAVE BEEN MET OR (II) THE COMPANY RECEIVES AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND THE
REGISTRATION OR QUALIFICATION REQUIREMENTS OF APPLICABLE STATE
SECURITIES LAWS ARE AVAILABLE.
COMMERCE PLANET,
INC.
SECURED CONVERTIBLE
PROMISSORY NOTE
DATED: September __,
2008
DUE: March 31,
2009
FOR VALUE
RECEIVED, COMMERCE PLANET, INC., a Utah corporation (the “
Company ”) with an address at 30 S. La Patera Lane,
Goleta, CA 93117, hereby promises to pay to the order of MORLEX,
INC., a Colorado corporation (the “ Payee ”) or
its registered assigns (together with the Payee, the “
Holder ”), the sum of Two Hundred Thousand Dollars
($200,000.00) or such lesser amount as shall then be outstanding
hereunder.
Effective as of September 16, 2008, the Company
and its Subsidiaries, Legacy Media LLC (“ Legacy
”) and Consumer Loyalty Group LLC (“ Consumer
”) have entered into an asset purchase agreement (the “
Purchase Agreement ”) with the Payee and its
Subsidiary Superfly Advertising, Inc. (“ Superfly
”). Unless otherwise defined in this Note, all capitalized
terms used herein shall have the same meaning as is defined in the
Purchase Agreement.
The following is a statement of the rights of
the Holder of this Note and the conditions to which this Note is
subject, and to which the Holder hereof, by the acceptance of this
Note, agrees:
1. Maturity Date and Payment
.
(a) The entire outstanding principal amount of this
Note shall be due and payable, together with all interest accrued
hereon, on the earliest to occur of (i) March 31, 2009, (ii) the
Closing of the transactions contemplated by the Purchase Agreement,
or (iii) the termination of the Purchase Agreement by any one or
more parties thereto (the “ Maturity Date
”).
(b) On the Closing Date and simultaneously with the
Closing of the transactions contemplated by the Purchase Agreement,
the entire unpaid principal amount of this Note and all interest
accrued hereon shall be forgiven and deemed part of the cash
portion of the Purchase Price, all as contemplated by Section
3.1(b) of the Purchase Agreement.
2. Interest . This Note shall bear interest at the annual
rate of six percent (6%) which shall accrue and be added to the
outstanding principal amount of this Note, and shall be payable on
the Maturity Date. Notwithstanding the foregoing, if this Note
shall not be paid or satisfied in full on the Maturity Date, this
Note shall bear interest, commencing on the Maturity Date, at the
rate of ten percent (10%) per annum until repaid (all such accrued
interest collectively, the “ Penalty Interest ”)
which shall be due and payable as and when accrued.
3.
Prepayment
. The Company shall not have the
right to prepay this Note in whole or in part prior to the Maturity
Date, without the prior written consent or approval of the
Holder.
4.
Events of Default
. If any of the events specified in this
Section 3 shall occur (herein individually referred to as an
“ Event of Default ”) and shall not have been
cured within ten Business Days after written notice of such default
has been given by the Holder to the Company, the Holder of the Note
may, so long as such condition exists, declare the entire principal
and unpaid accrued interest hereon immediately due and
payable:
4.1
Default in the payment of the
principal amount of this Note and all accrued interest when due on
the Maturity Date; provided, however, that the notice and cure
period provided in Section 4 above shall not apply to this Section
4.1; or
4.2
(a) The institution by the Company of proceedings to
be adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against it or
the filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any
other applicable federal or state law, or the consent by it to the
filing of any such petition or the appointment of a receiver,
liquidator, assignee, trustee or other similar official of the
Company, as applicable, or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Company in furtherance of
any such action; and
(b)
if, within sixty (60) days after
the commencement of an action against the Company (and service of
process in connection therewith on the Company) seeking any
bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of
the Company, as applicable, or all orders or proceedings thereunder
affecting the operations or the business of the Company, as
applicable, stayed, or if the stay of any such order or proceeding
shall thereafter be set aside, or if, within sixty (60) days after
the appointment without the consent or acquiescence of the Company,
as applicable, of any trustee, receiver or liquidator of the
Company, as applicable, or of all or any substantial part of the
properties of the Company, such appointment shall not have been
vacated.
4.3
Default by the Company, Legacy
and/or Consumer in the observance of or performance of any other
term, covenant or agreement contained herein or any other agreement
by and among the Company, Legacy and/or Consumer on the one hand,
and Payee and or Superfly on the other hand, including, without
limitation, the Purchase Agreement, the Unconditional Guaranty
Agreement (as defined in the Purchase Agreement), the Pledge and
Security Agreement (as defined in the Purchase Agreement) and the
Voting Agreement (as defined in the Purchase Agreement); provided,
however, that in the event that the default is a default in payment
or reimbursement under any such agreement, the notice and cure
period provided in Section 4 above shall not apply.
If any Event of
Default has occurred and is continuing, the Holder of this Note may
at any time, at its or his option, by notice or notices to the
Company, declare this Note to be immediately due and payable. Upon
this Note becoming due and payable under this Section 4 (a
“ Default ”), such Note will forthwith mature
and the entire unpaid principal amount of such Note, plus all
accrued and unpaid interest thereon shall all be immediately due
and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. If any
Default or Event of Default has occurred and is continuing, the
Holder of this Note may proceed to protect and enforce the rights
of such Holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of the
rights of the Holder under this Note, or for an injunction against
a violation of any of the terms hereof, or in aid of the exercise
of any power granted hereby or thereby or by law or
otherwise.
5. Guaranty of Note; Collateral.
5.1 Payment and performance of this Note by the
Company is unconditional and irrevocably guaranteed by each of
Legacy and Consumer pursuant to the guaranty agreement annexed
hereto as Exhibit A and made a part hereof (the “
Guaranty ”).
5.2
As collateral to secure payment of
this Note and the obligations of Legacy and Consumer under the
Guaranty, Legacy and Consumer shall pledge to the Payee the
merchant accounts, including without limitation the credit card
reserve accounts, listed on Schedule 5.2 to the Purchase
Agreement (the “ Pledged Accounts ”), pursuant
to the pledge agreement annexed hereto as Exhibit B and made
a part hereof (the “ Pledge Agreement
”).
6.1
Upon the Maturity Date, if the
Company shall not have paid this Note in full, then and in such
event, the Holder of this Note shall have the right at the
Holder’s sole option, to convert all or any portion of this
Note (including accrued interest hereon), into Ten Million
(10,000,000) shares (the “ Conversion Shares ”)
of fully paid and non-assessable common stock, $0.001 par value per
share, of the Company (the “ Common Stock ”).
The number of Conversion Shares shall be subject to adjustment as
provided below.
6.2
Upon any such conversion pursuant
to this Section 6:
(a)
the Company shall issue and deliver
to the Holder stock certificates for the applicable number of
Conversion Shares into which this Note was converted and this Note
shall be deemed cancelled to the extent converted, and (b) if
the entire principal amount together with interest accrued thereon
of this Notes shall not have been converted, the Holder of this
Note shall receive from the Company, together with the applicable
number of Conversion Shares, a new Note in the appropriate
principal amount or cash as provided in Section 6.7.
6.3
If the Holder elects to convert
this Note into Common Stock, it shall, within ten (10) days prior
to or after the Maturity Date, surrender this Note at the principal
office of the Company and shall give written notice, in the form
annexed hereto as Exhibit C and made a part hereof, by
facsimile, certified or registered mail, postage prepaid (or any
other reasonable means of communication), to the Company at its
principal corporate office, of the election to convert the same
pursuant to Section 6.1 , and shall state therein the name
or names in which the certificate or certificates for Common Stock
are to be issued (the “ Conversion Notice ”).
The Company shall, as soon as practicable thereafter (but in no
event more than five (5) Business Days), issue and deliver at such
office to the Holder of this Note a certificate or certificates for
the number of Common Stock to which the Holder of this Note shall
be entitled as aforesaid. Such conversion shall be deemed to have
been made on the date of the Conversion Notice, and the person or
persons entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record
Hol
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