SENIOR SECURED CONVERTIBLE NOTE
"AMOUNT"
League City, Texas
____, 2008
FOR VALUE RECEIVED,
Momentum Biofuels,
Inc., a Colorado
corporation
("MMBI")
and
Momentum Biofuels,
Inc., a
Texas
corporation
("MMBI-Texas")(together, "Borrower"), 2600 South Shore Blvd, Suite 100,
League
City, TX 77573 (the
"Borrower"),
promises to pay to the order of "NAME"
at
"ADDRESS" (the
"Holder") or at such other place as Holder may from time
to
time designate in writing, the principal sum of "AMOUNT"
($AutoMergeField)
in lawful money of the United States of America, together with interest on so
much thereof
as is from
time to time outstanding at the rate hereinafter
provided, and payable as hereinafter provided.
This note is one of a series of notes, designated the Senior Secured
Convertible Notes
(individually
referred to herein as
a "Note," the series of
notes is referred to herein collectively as the "Notes"), aggregating up to
$600,000 issued by the Borrower. All the Notes shall rank pari
passu in respect
to payment of principal and interest and upon any dissolution, liquidation or
winding-up of
Borrower, or either of them. The holders of the Notes shall
be
referred to as the "Lenders." As used herein, the term "Majority of
the Lenders"
means a majority in interest of the Holders of the Notes.
1. Interest
Rate. The unpaid balance of this Note shall bear
interest at the
rate of ten percent (10%) per annum, simple interest.
2. Payment/Maturity Date. Interest will be payable quarterly on the
first day of
the months of
August, November, February, and May. The total outstanding
principal balance
hereof, together with
accrued and unpaid interest, shall be
paid on May 1, 2013.
3. Payment in Kind.
Interest will be payable in cash.
4. Default Interest
and Attorney Fees.
Upon declaration of a valid default
hereunder, the balance
of the principal
remaining unpaid, interest accrued
thereon, and all other
costs, and fees shall bear interest at the rate of
eighteen percent
(18%) per annum from the date of default. In the event of
default, the Borrower and all other parties liable hereon agree to
pay all costs
of collection,
including reasonable
attorneys' fees. In addition, if Borrower
defaults in any of the covenants set forth in paragraph 11,
Borrower will
issue
Holder one warrant
to purchase one share of MMBI's common stock ("Penalty
Warrant") for each $.25 principal amount of the Note. The Penalty
Warrants will
be exercisable for seven years from the date of default at an
exercise price per
share of the closing
bid price of MMBI's
common stock on the
date of default,
and shall have customary anti-dilution rights (for stock splits,
stock dividends
and sales of substantially all the company's assets), and piggyback
registration
rights.
5. Security Agreement. This Note is secured by all of the assets
and property of
Borrower (the "Property"), in accordance with the terms of a
Security Agreement
(the "Security Agreement") and other documents evidencing such
security interest
between the Borrower and the Holder (with the Security Agreement,
the "Security
Documents.").
6. Interest
Calculation. Daily
interest shall be
calculated on a 365-day year
and the actual number of days in each month.
<PAGE>
7.
Conversion.
(a)
Holder may convert the
balance of the Note,
or any portion
thereof,
and all accrued
interest into shares
of MMBI's common
stock at any
time at the Conversion Price of $0.40 per share.
(b)
Upon any
recapitalization or restructuring or other adjustment of MMBI
capital structure
in which the
number of shares of
common stock is
adjusted, increased or
decreased, or
otherwise modified,
or in the
event of a spin-off or
other distribution
of assets, or merger or
acquisition, then the
number and type of
shares or other
securities
into which the principal amount and accrued interest of
this Note may
be converted shall
likewise be changed so
that this Note and accrued
interest is thereafter convertible into the number of shares of
common
stock or other securities of MMBI which the Holder would have
received
had the Holder
converted the
entire principal amount and accrued
interest under this Note into common stock of MMBI immediately prior
to such recapitalization, restructuring or other event.
(c)
The Holder may not
convert any portion of
this Note, or be
forced to
convert any portion of this Note, to the extent such conversion
would
result in the Holder
beneficially owning (as determined in accordance
with Section 13(d) of
the Exchange Act and the rules thereunder) in
excess of 4..999% of the then issued and outstanding shares of MMBI
common stock,
including shares
issuable upon
conversion of the Note
held by the Holder
after application
of this paragraph; provided,
however, that upon a holder of this Note providing MMBI with
sixty-one
(61) days prior notice (the "Waiver Notice") that such holder waives
this subparagraph 7(d) with regard to any or all shares of MMBI
common
stock issuable upon
conversion of this Note, this Section 7(d) shall
be of no force or effect with regard to those shares of MMBI common
stock referenced in the Waiver Notice; provided, further, that this
provision shall be of
no further force or effect during the sixty-one
(61) days immediately
preceding the expiration of the term of this
Note.
(d)
The Holder may not
convert any portion of
this Note, or be
forced to
convert any portion of this Note, to the extent such conversion
would
result in the Holder
beneficially owning (as determined in accordance
with Section 13(d) of
the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of MMBI
common stock,
including shares
issuable upon
conversion of the Note
held by the Holder
after application
of this paragraph; provided,
however, that upon a holder of this Note providing MMBI with
sixty-one
(61) days prior notice (the "Waiver Notice") that such holder waives
this subparagraph 7(d) with regard to any or all shares of MMBI
common
stock issuable upon
conversion of this Note, this Section 7(d) shall
be
of no force or effect
with regard to those
shares of MMBI
common
stock referenced in the Waiver Notice; provided, further, that this
provision shall be of
no further force or effect during the sixty-one
(61) days immediately
preceding the expiration of the term of this
Note.
8. Anti-Dilution.
If at any time before
this Note is paid in full or converted
in full the MMBI (a) sells its common stock, or securities
convertible into
its
common stock,
at a price (or an
equivalent
conversion
price) lower than
the
Conversion Price set forth in paragraph 7 of this Note; or (b)
reduces the price
at which any of its convertible securities or warrants (other than
this Note and
the Warrant issued at the same time as this Note) may be converted
or exercised,
the Conversion
Price will be reduced to the price of the common stock (or
equivalent conversion
price) in such subsequent transaction or transactions or
reductions.
<PAGE>
9. Prepayment.
This Note may be
prepaid in whole or part upon 30 days written
notice. If this Note
is prepaid before May 1, 2010, MMBI will issue the holder
of the Note a warrant (a "Prepayment Warrant") to purchase one share of
MMBI's
common stock
for each $1.00 principal amount of the Note. The Prepayment
Warrants will be
exercisable for seven
years from the date the Note is paid at
an exercise price per share equivalent to the closing bid price of
MMBI's common
stock on the date of payment, and shall have customary
anti-dilution rights (for
stock splits,
stock dividends and sales of substantially all the company's
assets), and piggyback registration rights
10. Costs of Collection. Borrower agrees that if, and as
often as, this Note is
placed in the hands of an attorney for collection or to defend or
enforce any of
Holder's rights hereunder or under any instrument securing payment
of this Note,
as the result of Borrower being in actual default or actual breach
of any of the
covenants herein,
Borrower shall pay to
Holder its reasonable
attorneys' fees
and all court
costs and other expenses incurred in connection therewith,
regardless of whether a lawsuit is ever commenced or whether, if
commenced, the
same proceeds to judgment or not. Such costs and expenses shall
include, without
limitation, all costs,
reasonable
attorneys'
fees, and expenses
incurred by
Holder in connection with any insolvency, bankruptcy, reorganization,
foreclosure, deed in
lieu of foreclosure or similar proceedings involving
Borrower or any
endorser, surety,
guarantor,
or other person liable
for this
Note which in any way affect the exercise by Holder of its rights
and remedies
under this Note, or any other document or instrument securing, evidencing, or
relating to the indebtedness eviden
