NEITHER
THIS SECURITY NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF
HAVE BEEN
REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE
SECURITIES
ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED AND
MAY
NOT BE
OFFERED, RESOLD,
PLEDGED OR TRANSFERRED
EXCEPT AS PERMITTED UNDER
THE ACT
PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM.
No. S-2005-1
US $250,000.00
AMERICAN PALLET LEASING, INC.
SECURED CONVERTIBLE PROMISSORY NOTE DUE SEPTEMBER 27, 2005
THIS Note is a
duly authorized
issuance of
$250,000.00 of AMERICAN PALLET
LEASING, INC., a corporation organized and
existing under the laws of the State
of Delaware and located at 425 Second
Street, S.E., Suite
600, Cedar Rapids, IA
52401 (the "Company") designated as its
Convertible Note.
FOR VALUE
RECEIVED, the Company promises to pay to BRITTANY CAPITAL
MANAGEMENT LIMITED, the registered holder hereof (the
"Holder"), the
principal
sum of two hundred fifty thousand and 00/100 Dollars (US $250,000.00) , plus
accrued interest in the amount of eight percent (8%) per year for all
outstanding principal on September 27, 2005
(the "Maturity Date"). The principal
plus accrued interest of this Note is
payable at the option of the Holder at any
time after the Maturity Date, in shares of
the Company's common stock, $.001 par
value per share ("Common Stock") as set forth below, or in United States
dollars, at the address last appearing on the Note Register of the Company as
designated in writing by the Holder. The Company will pay the outstanding
principal amount of this Note, plus accrued
interest, in cash on or before the
Maturity Date, less any amounts required by law to be deducted, to the
registered holder of this Note. The forwarding of such check or wire
transfer
shall constitute a payment hereunder and shall satisfy and discharge the
liability for principal on this Note to the
extent of the sum
represented by
such check or wire transfer plus any
amounts so deducted.
1
<PAGE>
This Note
is subject to the following additional provisions:
1.
The Note is issuable in denominations of Ten Thousand Dollars
(US$10,000) and integral multiples
thereof, provided that the number of
shares
to be issued upon conversion is a minimum of 3,000 (unless if at the time of
election to convert the number of shares of Common Stock issuable upon
conversion is less than 3,000).
The Note is
exchangeable for an equal aggregate
principal amount of Note of different
authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange.
1.A The
Company shall have the right to redeem
this Note at any time
by
providing written notice to the Holder by
making a cash payment to the Holder of
the outstanding principal amount of the Note
multiplied by a premium according
to the following schedule, plus all accrued interest:
108% of the
outstanding
principal amount if redeemed within 90 days
after the issuance date; 112% of the
outstanding principal amount if redeemed within 270 days after the
issuance
date; 115% of the outstanding principal amount if redeemed after
270 days after
the issuance date. Written notice to the Holder shall be
received at least 5
business days prior to the date of
redemption payment
("Redemption
Date"). If
the redemption payment is not made on or before the Redemption Date, the
redemption notice shall be rendered null and void and the Holder
thereafter
shall have the right to convert any portion
of the outstanding
principal of the
Note.
1.B This
Note is further guaranteed by the Guarantor pursuant to a
Limited
Recourse Guarantee, and secured pursuant to
a Stock Pledge Agreement, each dated
April 26, 2005 between the parties
whereby the
Guarantor has
guaranteed
this
Note and has granted to Holder a security
interest in
Collateral,
as defined
therein, to secure the payment of this Note. Such security interest may be
perfected by the filing of the applicable UCC statements in the appropriate
recording offices.
2. The
Holder of this Note is
entitled at any time after the Maturity
Date, at its option, subject to the following
provisions,
to convert all or
a
portion of the principal amount of this Note plus accrued
interest into
shares
of Common Stock at a conversion price for each share of Common
Stock equal to
the Current Market Price multiplied by eighty percent (85%) (the "Conversion
Price"). "Current Market Price" means the average of the three (3) lowest
closing bid prices for the Common Stock as
reported by Bloomberg,
LP or, if not
so reported, as reported on the over-the-counter market, for the ten (10)
trading days ending on the trading day immediately before the relevant
Conversion Date (as defined below).
The amount of shares
issuable pursuant to a
conversion shall equal the principal amount
(or portion thereof) of the Note to
be converted, plus accrued interest,
divided by the Conversion Price.
Conversion
shall be effectuated
by surrendering the
Note to the Company,
accompanied by or preceded by facsimile or
other delivery to the Company of the
form of conversion notice attached hereto as Exhibit A,
executed by the Holder
evidencing such Holder's intention to convert a specified
portion hereof. No
fractional shares of Common Stock or scrip
representing fractions of shares will
be issued on conversion, but the number of shares
issuable shall be
rounded to
the nearest whole share. The date on which notice of
conversion is given
(the
"Conversion Date") shall be deemed to be the date on
which the Holder faxes or
otherwise delivers the conversion notice
("Notice of Conversion"), substantially
in the form annexed hereto as Exhibit A, duly executed, to the Company.
Facsimile delivery of the Notice of
Conversion shall be accepted by the Company
at facsimile number (319) 247-2757 ATTN:
President.
Certificates
representing
Common Stock upon conversion will be delivered within three (3) business days
from the Conversion Date. ("Delivery
Date")
The
Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date (as
defined in this Section) could result
in economic loss to the Holder. As
compensation to the Holder for such loss, the
Company agrees to pay late payments to the Holder for late
issuance of Shares
upon Conversion, unless the delay is due to
causes beyond the reasonable control
of the Company or the Transfer Agent, in
accordance with the following schedule
(where "No. Business Days Late" refers to the number of
business days which is
beyond three (3)) business days after the
Delivery Date):(1)
2
<PAGE>
Late Payment For Each $10,000
of Note Principal or Interest
No. Business Days Late
Amount Being Converted
--------------------------------------------------------------------------------
1
$100
2
$200
3
$300
4
$400
5
$500
6
$600
7
$700
8
$800
9
$900
10
$1,000
>10
$1,000 +$200 for each
Business
Day Late beyond 10 days
The Company shall pay any payments
incurred under this Section in immediately
available funds upon demand as the Holder's
remedy for such delay.
Furthermore,
in addition to any other remedies
which may be available
to the Holder, in
the
event that the Company fails for any reason
to effect delivery of such shares of
Common Stock by close of business on the
Delivery Date,
unless such failure
is
due to causes beyond the Company's reasonable control or that of its
Transfer
Agent, the Holder will be entitled to
revoke the relevant
Notice of Conversion
by delivering a notice to such effect to
the Company, whereupon
the Company and
the Holder shall each be restored
to their respective positions immediately
prior to delivery of such Notice of Conversion; provided, however, that an
amount equal to any payments contemplated by this Section which have accrued
through the date of such revocation notice shall remain due and owing to the
Converting Holder notwithstanding such
revocation.
If, by the
relevant Delivery Date, the Company fails, unless such failure
is due to causes beyond the Company's
reasonable control or that of its Transfer
Agent, for any reason to deliver the
Shares to be issued upon conversion of the
Note and after such Delivery Date, the Holder of the Note being
converted (a
"Converting Holder") purchases, in an arm's-length open market
transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in sat
