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SECURED CONVERTIBLE PROMISSORY NOTE

Convertible Promissory Note

SECURED CONVERTIBLE PROMISSORY NOTE | Document Parties: PLATINUM RESEARCH ORGANIZATION, INC. | Alpina GenPar, Inc | ALPINA LENDING, LP | Platinum Intellectual Property, LP | Platinum IP Management, Inc | PRO OPERATIONS, LP You are currently viewing:
This Convertible Promissory Note involves

PLATINUM RESEARCH ORGANIZATION, INC. | Alpina GenPar, Inc | ALPINA LENDING, LP | Platinum Intellectual Property, LP | Platinum IP Management, Inc | PRO OPERATIONS, LP

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Title: SECURED CONVERTIBLE PROMISSORY NOTE
Governing Law: Nevada     Date: 9/26/2008
Industry: Software and Programming     Sector: Technology

SECURED CONVERTIBLE PROMISSORY NOTE, Parties: platinum research organization  inc. , alpina genpar  inc , alpina lending  lp , platinum intellectual property  lp , platinum ip management  inc , pro operations  lp
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Exhibit 4.1

THE SECURITIES REPRESENTED BY THIS PROMISSORY NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. SUCH SECURITIES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED HEREIN.

SECURED CONVERTIBLE PROMISSORY NOTE

 

 

 

 

 

$

1,500,000.00

  

September 22, 2008

FOR VALUE RECEIVED, the undersigned, PLATINUM RESEARCH ORGANIZATION, INC. , a Delaware corporation (“ PRO ”), PRO OPERATIONS, L.P. , a Texas limited partnership (“ PRO LP ”), and PLATINUM INTELLECTUAL PROPERTY, L.P. , a Texas limited partnership (“ PIP LP ”) (collectively on a joint and several basis, the “ Borrower ”), hereby makes this promissory note (this “ Note ”) and promises to pay to the order of ALPINA LENDING, L.P., a Nevada limited partnership (“ Alpina ” or the “ Agent ”), on its own behalf and as agent for those persons listed on Schedule 1 attached hereto (collectively, the “ Lenders ”), the principal sum of One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) or, if greater or less, the aggregate principal amount of all advances made to Borrower by the Agent on behalf of the Lenders, as shown on Schedule 2 attached hereto (as the same is modified from time to time by Agent), together with interest on the unpaid balance thereof at the rate hereinafter provided, both principal and interest payable as hereinafter provided in lawful money of the United States of America, at the address of Agent as set forth in this Note, or at such other place as from time to time may be designated by the holder of this Note.

It is hereby acknowledged that (a) the Agent, The Fairmount Company, R.T. Vanderbilt, Steven Kidwell and Melinda J. Bickers are each Lenders under this Note, (b) the Lenders have appointed the Agent as their administrative agent, pursuant to that certain Agency Agreement and Assignment of Participation Interest in Platinum Research Organization, Inc. and Platinum Intellectual Property, L.P. Note (the “ Agency Agreement ”) dated the date of this Note, (c) the Lenders have given the Agent their authority and permission to enter into this Note and the other Loan Documents on their behalf, and (d) the Lenders have authorized and instructed the Agent to lend such funds as may be borrowed by Borrower pursuant to this Note, subject to the terms and conditions of this Note and the Agency Agreement.

Lenders have previously advanced $192,775 (the “ Bridge Loan ”) to Borrower prior to the date of this Note. The Bridge Loan, and all accrued but unpaid interest thereon, shall be deemed principal outstanding under this Note. The Initial Advance shall be offset by an amount equal to the Bridge Loan.

Unless otherwise defined herein, capitalized terms used in this Note shall have the meanings given to such terms in the Schedule of Definitions attached hereto as Schedule 3 .


1. Commitment Fee; Advances .

(a) Advances . Concurrently with the execution of this Note and assuming all conditions precedent have been met as set forth in Section 11, the Agent shall advance on behalf of the Lenders the principal sum of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) (the “ Initial Advance ”), less the amount of the Bridge Loan. In addition to the Initial Advance, upon the terms and conditions set forth herein, Borrower may borrow an additional Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) (the “ Second Traunche ” and together with the Initial Advance, the “ Commitment ”) under this Note. This Note is not a revolver and thus, Borrower may not borrow, repay, and reborrow the principal of this Note.

(b) Agent and Lenders Commitment . Provided that the terms and conditions of this Note have been met on and as of the date of this Note and on and as of the date of each future advance, if any, Agent on behalf of the Lenders has committed to advance, in the aggregate, up to One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) in principal to Borrower hereunder. No advance(s) shall be made which cause the aggregate outstanding principal balance of this Note to exceed One Million Five Hundred Thousand Dollars ($1,500,000.00).

(c) Procedure for Second Traunche . Borrower shall request an advance for the Second Traunche under this Note by providing the Agent with a written request for such advance, by no later than 10:00 a.m. Dallas, Texas time, three (3) business days prior to the date the advance is requested, executed by the Chief Executive Officer of Borrower. Borrower’s notice shall (i) state that Borrower has successfully run and passed an industry IVA sequence engine test, and (ii) be accompanied by a certificate executed by the Chief Executive Officer of Borrower in which the Chief Executive Officer certifies that all representations and warranties contained in this Note and the other Loan Documents are, and will be as of the date of the requested advance of the Second Traunche, true and correct in all respects, and further certifying that Borrower is, and will be as of the date of the requested advance, in compliance with all covenants, conditions and agreements in this Note and the other Loan Documents. The Agent shall approve Borrower’s request and advance the Second Traunche within three (3) business days of the Agent’s receipt of Borrower’s notice so long as (i) following the advance of the Second Traunche, no more than $1,500,000 in principal has been advanced under this Note, (ii) no Event of Default has occurred under this Note, and (iii) no “default” or “event of default” has occurred under any Loan Document which defines either such term with respect to the Borrower, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document.

(d) Escrow . Borrower acknowledges that Agent may make any and all advances through an escrow agent to its choosing and a related escrow account.

 

2


2. Payment of Principal and Interest .

(a) Maturity Date . Subject to any rights of acceleration provided in this Note and any other Loan Document, the principal amount of this Note, together with all accrued and unpaid interest thereon, shall be due and payable on February 11, 2011 (as may be extended pursuant to the terms of this Note, the “ Maturity Date ”).

(b) Payment of Interest . Interest on the unpaid principal balance of this Note shall accrue on a monthly basis, compound on an annual basis and shall be due and payable in a single installment on the Maturity Date, on which date all unpaid principal and accrued interest on this Note shall be due and payable.

(c) Optional Prepayment . Provided any payments then due under this Note have been paid (principal, interest, or otherwise), the unpaid principal amount of, and any accrued but unpaid interest on, this Note may be prepaid in whole or in part, from time to time prior to the Maturity Date, upon no less than 14 days’ prior written notice to Agent which states the amount of the intended prepayment, which amount shall be $25,000 or a higher multiple thereof; provided , however , that Agent shall be entitled to convert all or part of the amount of such noticed prepayment to Common Stock in Borrower, by giving notice to Borrower of its intent to convert in accordance with Section 4 hereof during the 14 day notice period.

(d) Payments . All payments due on this Note shall be payable in lawful money of the United States of America, at the principal office of the Agent at 7161 S. Eastern Ave., Suite 3A, Las Vegas, Nevada 89119-4675, by no later than 2:00 p.m., Las Vegas, Nevada time, on the date such payment is due. If any payment due under this Note is scheduled or otherwise would be due on a Saturday or Sunday, or on a holiday recognized and observed by banks in Las Vegas, Nevada, then Borrower shall have until the next business day to make such payment. All payments shall be made by cashier’s or certified check or wire transfer of immediately available funds.

(e) Application of Payments . Unless otherwise agreed to in writing or otherwise required by applicable law, payments will be applied first to unpaid accrued interest, then to principal, and any remaining amount to any unpaid collection costs and other charges; provided , however , that upon delinquency of payment or other Event of Default under this Note, Agent reserves the right to apply payments among principal, interest, collection costs and other charges, at its discretion.

3. Interest Rate and Computation .

(a) Interest Rate . This Note will bear interest at the rate equal to the variable “prime rate” from time to time published in the Money Rates column of The Wall Street Journal plus three percent (3%) per annum, accrued monthly and compounded annually. Under no circumstances shall this Note at any point in time accrue interest at a rate in excess of the Maximum Rate (as defined below).

 

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(b) Default Rate . Following the occurrence and during the continuation of (i) the failure of the Borrower to pay in full on the date due, in such manner as is provided in this Note, any payment obligations hereunder, or (ii) the occurrence of an Event of Default under this Note, or (iii) a “default” or “event of default” occurs under any other Loan Document which defines either such term, the principal balance of this Note which is thus delinquent (which may be the entire principal balance of this Note in circumstances where this Note is mature or has been accelerated due to an Event of Default under this Note or a “default” or “event of default” under any other Loan Document or for another reason) shall bear interest at the Maximum Rate, automatically and without the necessity of notice, until such delinquent amount is paid or such breach or default is otherwise cured to the satisfaction of Agent. As used in this Note, the term “ Maximum Rate ” shall mean the lesser of (i) eighteen percent (18%), or (ii) the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by the Agent in accordance with the applicable laws of the State of Nevada (or applicable United States federal law to the extent that it permits the Agent to contract for, charge, take, receive or reserve a greater amount of interest than under Nevada law), taking into account all fees and charges, if any, contracted for, charged, received, taken or reserved by the Agent in connection with the transaction relating to this Note and the Indebtedness evidenced by this Note and other Loan Documents which are treated as interest under applicable law made in connection with the loan evidenced by this Note and the other Loan Documents.

4. Conversion .

(a) Conversion Right . At any time starting six months after the date of this Note and ending on the date that the full and final payment of all amounts due under this Note is paid, in the sole discretion of the Agent, the Agent may convert all or part of the outstanding principal balance of this Note, and all or part of any accrued but unpaid interest thereon, into Common Stock, par value $.001 per share (the “ Common Stock ”), of PRO. Agent may convert outstanding Note principal only, accrued and unpaid interest only, or both outstanding principal and accrued but unpaid interest in any combination desired by Agent, in its discretion. The conversion price with respect to this Note is $0.18 for one (1) share of Common Stock, subject to adjustment in accordance with the terms of Section 5 hereof (the “ Conversion Price ”). Accordingly, if the Agent decided to convert $500,000 in Note principal (without interest) to Common Stock and none of the events named in Section 5 requiring an adjustment had occurred, then upon conversion of $500,000 in Note principal, Lenders would receive an aggregate of Two Million Seven Hundred Seventy Seven Thousand Seven Hundred Seventy Eight (2,777,778) shares of Common Stock in PRO, and the outstanding principal balance would automatically be reduced by $500,000.

 

4


(b) Exercise of Conversion Right . To exercise its conversion rights from time to time, the Agent shall give PRO written notice of its intent to convert this Note in whole, or the portion specified in the notice. The notice shall also state the name or names of the Lenders (or their respective designees) to which shares of Common Stock should be issued and the number of shares of Common Stock which should be issued to each such Lender (or such Lender’s designee). Closing of the conversion shall occur no later than the seventh (7 th ) day following the date of the Agent’s written notice at the Agent’s office, or at such other place as agreed to by the Agent. At the closing of the conversion, Lenders shall be deemed automatically admitted as shareholders of PRO with respect to the Common Stock being received on conversion without any further action on Agent’s or Lenders’ or PRO’s part and PRO shall deliver to Agent certificate(s) representing the number of shares Common Stock acquired by Lenders, and the dollar amount of the Note which was converted shall be deemed a payment on the Note in such amount. Each conversion shall be deemed to have been effected on the date of the notice of the conversion, and the Common Stock into which the portion of the Note was converted shall be deemed issued as of such date.

(c) Qualified Public Offering . Immediately prior to PRO’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, covering the offer and sale of Common Stock for the account of Borrower in which the net proceeds of Borrower are equal to or greater than Ten Million and No/100 Dollars ($10,000,000.00) (before deduction of underwriters’ commissions and expenses) (“ Qualified Public Offering ”), the Agent, in its sole discretion, may convert all or part of the outstanding principal balance of this Note, and all or part of any accrued but unpaid interest thereon, into Common Stock of PRO in connection with such Qualified Public Offering.

(d) Registration Rights . Should Agent exercise its conversion rights pursuant to this Section 4, the Company agrees to enter into a registration rights agreement with Agent and/or the applicable Lender(s) on commercially reasonable terms, which shall include, without limitation, piggyback registration rights and other provisions that are reasonable and customary for registration rights agreements generally.

5. Anti-Dilution Provisions . The Conversion Price shall be subject to adjustment from time to time upon the happening of any of the following events:

(a) Adjustment for Stock Splits and Combinations . If PRO shall at any time or from time to time after the date of this Note effect a subdivision of its outstanding Common Stock, the Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of all or any portion of the Note shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If PRO shall at any time or from time to time after the date of this Note combine the outstanding shares of Common Stock, the Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of all or any portion of the Note shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this subsection shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

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(b) Adjustment for Certain Dividends and Distributions . In the event PRO at any time or from time to time after the date of this Note shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction: (i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution. Notwithstanding the foregoing, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this subsection as of the time of actual payment of such dividends or distributions.

(c) Adjustments for Other Dividends and Distributions . In the event PRO at any time or from time to time after the date of this Note shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of PRO (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property, then and in each such event provision shall be made so that Agent shall receive upon conversion of all or any portion of the Note, in addition to the number of shares of Common Stock receivable thereupon, the kind and amount of securities of PRO, cash or other property which they would have been entitled to receive had the Note been converted into Common Stock on the date of such event and had Agent thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by it as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph.

(d) Issuances . If after the date of this Note and until the Note is paid or has been converted in its entirety, PRO issues to any investor or other Person other than Lenders, Common Stock or other equity securities of PRO, or any rights convertible into or options to purchase Common Stock or other equity securities of PRO (the “ New Issuance ”), for a price per share which is less than the Conversion Price then in effect (the initial Conversion Price being $0.18) (the “ Dilutive Price ”), then the Conversion Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of Common Stock outstanding on the date of the New Issuance plus the number of additional shares of Common Stock issued or offered for subscription or purchase in the

 

6


New Issuance, and of which the numerator shall be the number of shares of Common Stock outstanding on the date of such New Issuance plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by PRO in full of all consideration payable in connection with such New Issuance) would purchase at the Dilutive Price. Notwithstanding the foregoing or any other provision herein to the contrary, no adjustment to the Conversion Price will be required as a result of any issuance by PRO of any Common Stock, any other class of capital stock, or any other securities, options, rights, or warrants with respect thereto (A) pursuant to any stock option plan, restricted stock plan or other compensatory plan or arrangement with any officer, director, employee or consultant of PRO or any affiliated entity, (B) pursuant to or in connection with any agreement or understanding in effect on or before the date hereof, (C) pursuant to or in connection with any merger, consolidation, statutory share exchange, self tender offer for all or substantially all Common Stock, sale of all or substantially all of PRO’s assets or recapitalization of the Common Stock of PRO, or (D) to any vendor, customer or other person or entity with which PRO has or is attempting to develop a business relationship.

(e) Merger or Consolidation . In case of any merger or consolidation of PRO with any corporation or other entity, other than a consolidation or merger in which PRO is the surviving entity and which does not result in any reclassification or change of the outstanding Common Stock or Distributed Securities, this Note shall be automatically adjusted to represent the right to purchase at the Conversion Price the number of shares of Common Stock or other securities or assets that the Agent, on behalf of the Lenders, would have been entitled to receive if the Agent had converted this Note on behalf of the Lenders on or prior to the effective date of such merger or consolidation.

(f) Calculations . No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least $0.05 in such price; provided, however, that any adjustments that by reason of this subparagraph (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made. Notwithstanding any other provisions of this Section 5, PRO shall not be required to make any adjustment of the Conversion Price for the issuance of any Common Stock pursuant to any plan providing for the reinvestment of dividends or interest payable on securities of PRO and the investment of additional optional amounts in Common Stock under such plan. All calculations under this Section 5 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest one-tenth of a share (with .05 of a share being rounded upward), as the case may be.

(g) Certificates as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 5, PRO at its expense shall, as promptly as reasonably practicable but in any event not later than 10 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to Agent a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Note is convertible) and

 

7


showing in detail the facts upon which such adjustment or readjustment is based. PRO shall, as promptly as reasonably practicable after the written request at any time of Agent (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of the Note.

6. Default . Each of the following events shall constitute an Event of Default under this Note (for purposes of clarity, the term “Borrower” shall mean any of PIP LP, PRO LP or PRO):

(a) The failure of the Borrower to pay, on or prior to the date due, any payments due under this Note (principal, interest, or otherwise), without the requirement of or benefit of any further notice or grace periods of any kind; or

(b) Any “default” or “event of default” occurs under any other Loan Document which defines either such term with respect to the Borrower, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document; or

(c) Borrower breaches or otherwise fails to duly observe, perform or comply with any covenant, agreement or provision of this Note or any other Loan Document for which it is obligated to observe, perform or comply with, and such failure remains unremedied for a period of thirty (30) days after notice of such failure is given by the Agent to Borrower; provided, that there shall be no remedy period for the covenants contained in Section 10(a)(vii) or Section 10(b); or

(d) Any representation or warranty made by Borrower in any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of when made, or any Loan Document at any time ceases to be valid, binding and enforceable for any reason other than its release or subordination by Lender; or

(e) the entry of a decree or order for relief by a court having jurisdiction in respect of Borrower in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Borrower or for any substantial part of its property, or ordering the winding up or liquidation of its affairs; or

(f) the commencement by Borrower of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law, or the consent by it to the appointment to or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Borrower for any substantial part of its property, or the making by it of any assignment for the benefit of creditors; or

 

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(g) the dissolution or termination of existence of the Borrower; or

(h) the merger or consolidation of Borrower with or into any corporation or other entity, whether or not Borrower is the surviving entity; or

(i) the sale or liquidation of all or substantially all of the assets of Borrower; or

(j) a Change in Control occurs that is not otherwise caused by Lender or its Affiliates; or

(k) any event occurs which has a Material Adverse Effect with respect to Borrower; or

(l) a final judgment(s) or final order(s) of a court of competent jurisdiction in excess of $100,000 is entered into against Borrower that remains uncontested or unappealed for a period of forty-five (45) days;

(m) any “default” or “event of default” shall occur under any credit agreement, loan agreement, promissory note, or other document evidencing indebtedness for borrowed money incurred by the Borrower, or any subordination agreement, security agreement, pledge agreement, deed of trust, or other security documents executed by Borrower in connection therewith (“default” and “event of default” having the meaning given to such terms in any of the agreements described above), including, without limitation, the indebtedness with the City of Seattle Retirement System (the “ SCERS Debt ”); or

(n) the failure of PRO LP to deliver on or before October 31, 2008 a certificate (or certificates) of the good standing (including tax good standing) of PRO LP in the State of Texas issued by the appropriate authorities of such jurisdiction.

7. Remedies upon Default .

(a) Upon the occurrence of an Event of Default, the Agent may (i) cause all of the principal and accrued but unpaid interest under this Note to become immediately due and payable without notice or demand or declaration of any kind, (ii) pursue such other rights or remedies (legal or equitable) against Borrower as the Agent on behalf of the Lenders may have under this Note, any other Loan Document or otherwise, or (iii) request Borrower to cause all payments due under the Note (principal, interest, and otherwise) to be converted into shares of Common Stock of Borrower in accordance with Section 4 hereof (Borrower shall comply with such conversion request within three (3) days after receiving notice of the request from the Agent).

 

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(b) Borrower and all other parties now or hereafter liable for payment hereof, whether as endorser, guarantor, surety or otherwise, severally waive presentment, demand, grace, diligence in collecting, protest and notice of every kind as to this Note and as to each, every and all payments due hereunder.

(c) If any Default shall occur and be continuing, Agent may protect and enforce its rights and the rights of Lenders under the Loan Documents by


 
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