EXHIBIT 4.1
SECURED CONVERTIBLE PROMISSORY NOTE
$750,000
October 28, 2005
FOR VALUE
RECEIVED, the
undersigned, EL
CAPITAN PRECIOUS METALS, INC., a
Nevada corporation (the "Maker"), hereby promises to pay to the order of
Whitebox Intermarket Partners, L.P., a British Virgin Islands limited
partnership, or its assigns (the "Payee"), at such place as the Payee may
designate in writing, the principal sum of Seven Hundred
Fifty Thousand Dollars
($750,000), under the terms set forth
herein.
1. Interest. The unpaid principal balance hereof from time to time
outstanding
shall bear interest from the date hereof at the rate
of eight percent (8%) per
annum.
2. Payment of Interest and Principal. The principal and interest hereof is
payable as follows:
(a) On
each of November 25 and December 25, 2005, and on each of January
25, February 25, March 25 and April 25, 2006, payments of $5,000.00,
representing accrued, but unpaid,
interest on the
outstanding principal balance
hereof, shall be due and payable.
(b) The
entire outstanding
principal amount of the Note together with all
accrued, but unpaid, interest shall thereafter be due in full in a balloon
payment on April 28, 2007 (the "Scheduled
Maturity Date").
(c) Maker
cannot prepay this
Note prior to the
Scheduled Maturity
Date
without Payee's prior written consent,
except as provided in
this Section 2(c).
On May 25, 2006, and on the 25th day of each of the
following 11 months,
Maker
may, at its election, prepay a portion of this Note
(with all payments
applied
first to accrued, but unpaid, interest and
then to principal) by the issuance of
shares of its $0.001 par value common stock
(the "Common Stock"),
as follows (a
"Monthly Stock Prepayment"):
(i) To make a Monthly
Stock Prepayment as of
any particular
date
above, the Maker must give the Payee
written notice not less than 30
calendar
days prior to the intended Monthly Stock
Prepayment date of the dollar amount of
the intended prepayment. After application of the limitations below, the
prepayment must be for at least $50,000,
but cannot exceed $100,000. Once having
given such notice, the Maker is required to make the
particular
Monthly Stock
Prepayment in accordance with, and subject to the
limitations of, this
Section
2(c).
(ii) The number of shares of Common Stock which may be issued to
pay
all or any portion of a particular Monthly Stock Prepayment amount may not
exceed the lesser of (i) 15% of the
aggregate number of
traded shares of Common
Stock reported on the Nasdaq System (or if
not then traded on the Nasdaq System,
on the OTC Bulletin Board as reported by bigcharts.com, or if this service is
discontinued, such other reporting service
acceptable to Payee) for the trading
days in the 30 calendar days immediately
preceding such Monthly Stock Prepayment
date or (ii) the greatest number of shares
of Common Stock which,
when added to
the number of shares of Common Stock
"Beneficially
Owned" (within the meaning
set forth in subsection 3(c) below) by Payee, would not cause Payee to
Beneficially Own more than 4.99% of the Maker's
outstanding
Common Stock.
In
computing under this Section 2(c)(ii) the aggregate number of traded shares
during any time period, the Maker shall exclude (i) shares sold by or for
the
account or at the direction of the Maker,
officers or directors
of Maker or any
members of their immediate families or any affiliates of
Maker and (ii) shares
determined solely by Payee (for which Payee shall so inform the Maker in
writing) to represent unlawful or
potentially unlawful sales.
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(iii) Maker may make a Monthly Stock Prepayment only if, at the
time
of such payment, Maker has in effect a registration statement on Form S-3 or
SB-2 with the U.S. Securities and Exchange
Commission (the "SEC") and applicable
state securities laws covering the original
issuance of such shares by the Maker
or the resale of such shares by the Payee
(the "Registration Statement").
(iv) The per-share
value of the Common Stock as of a specified
Monthly Stock Prepayment date for the purposes of this Section 2(c) is 85%
(rounded to the nearest $.01) of the average (rounded to the nearest
$.01) of
the high closing bid prices of Maker's
Common Stock on the
Nasdaq System (or if
not then traded on the Nasdaq System, then
on the OTC Bulletin Board as reported
by bigcharts.com, or if this service is discontinued, such other reporting
service acceptable to Payee) for the trading days
during the 30 calendar
days
immediately preceding the particular
Monthly Stock Prepayment date.
(v) Payment by Common
Stock shall be deemed
to be made by Maker by
giving written notice to the Payee of the
number of shares being issued in such
payment, and the Maker's calculation of the
per-share market value under Section
2(c)(iv) above; provided that certificates
representing
those shares are
(and
they shall be) delivered to Payee within 20 calendar days of the date of the
particular Monthly Stock Prepayment.
3. Conversion.
(a) At any
time prior to the payment of this Note in full (including
during the notice period prior to any Monthly
Stock Prepayment by the Maker),
the Payee may give the Maker
written notice (the "Payee's Notice") of its
intention to convert all or any portion of the outstanding principal and/or
accrued but unpaid interest on this Note
into shares of the Maker's Common Stock
based on a conversion rate of $0.50 per share (the
"Conversion
Rate"). Upon
receipt of the Payee's notice, the Maker shall immediately
cause certificates
representing these shares to be delivered to
Payee within 20 calendar days of,
and Payment shall be deemed to have been
made on, the date of such notice.
(b)
The Conversion Rate shall be adjusted proportionally for any
subsequent stock dividend or split, stock combination or other similar
recapitalization, reclassification or reorganization of or affecting Maker's
Common Stock. Subject to Section 4, in case of
any consolidation
or merger to
which the Maker is a party other than a merger or consolidation in which the
Maker is the continuing corporation, or in case of any sale, transfer
or other
disposition to another corporation of all or substantially all of the Maker's
assets, or in the case of any statutory exchange of securities with another
corporation (including any exchange
effected in connection
with a merger of a
third corporation into the Maker),
then instead of
receiving shares of Maker's
Common Stock, Payee shall have the right thereafter to receive the kind and
amount of shares of stock and other securities and property which the Payee
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange,
sale or transfer had the same portion
of this Note been converted immediately prior to the effective date of such
consolidation, merger, statutory exchange, sale or transfer and, in any
such
case, if necessary, appropriate adjustment shall be made in the
application of
the provisions set
