Exhibit 10.01
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Execution Copy
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS (COLLECTIVELY, THE
"ACTS"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
ALL APPLICABLE ACTS OR UNLESS AN
OPINION OF COUNSEL IS DELIVERED TO THE
ISSUER IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
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U.S. $250,000
December 22, 2005
FOR VALUE RECEIVED, RemoteMDX, Inc., a Utah corporation (the
"Company"), hereby promises to pay to the
order of Clydesdale Partners, LLC (the
"Lender"), or its successors or assigns, subject to this Note's conversion
pursuant to Section 1, on the earlier to
occur of (a) February 28, 2006, (b) the
initial closing of the Company's
contemplated sale (a
"Contemplated Sale") of a
class of stock to be designated as Series C
Convertible Preferred
Stock, $.0001
par value per share ("Series C Preferred"),
or (c) an Event of
Acceleration (as
hereinafter defined) (the "Maturity Date"), the principal amount of U.S.
$250,000 (the "Principal Amount"), together
with any accrued and unpaid interest
on the Principal Amount under this
convertible promissory
note (this "Note") at
the per annum rate of 8% (calculated on the
basis of a 365 day year), compounded
weekly, for the period beginning on the date hereof and
continuing
until the
Principal Amount shall have become due and payable or this Note having been
converted in full.
Except as otherwise
expressly provided in Section 3 hereof, all
payments of principal and interest on this Note shall be
in cash, in such
coin
or currency of the United States of America as at the time
of payment shall
be
legal tender for payment of public and
private debts.
Payments of principal and
interest are to be made by wire transfer to
the account designated in writing by
the Lender and provided to the Company not
less than three
business days
prior
to the date payment is due or at such other place as the Lender shall have
notified the Company in writing at least
three business days before such payment
is due. All payments under this Note shall be paid by the Company without
withholding or deduction of any tax or
other charge. For
purposes of this Note,
a business day shall be any day other
than a Saturday, Sunday or any day in
which the banking and commercial
lending institutions are generally closed to
the public. Interest on this Note shall be
paid within 5 days of the end of each
calendar month until the Maturity Date.
1. Conversion.
1.1 Optional Conversion.
(a) The outstanding
Principal Amount under this Note, plus
any accrued but unpaid interest thereon shall be convertible in whole or in
part, at Lender's sole option,
into shares of Series
C Preferred Stock in
the
Contemplated Sale, at a conversion price equal
to the price per share of Series
C Preferred Stock sold in the Contemplated Sale (the "Conversion Price"),
subject to adjustment in accordance with
Section 4 hereof.
(b) The Company
covenants and agrees
that so long as this
Note is outstanding and the Contemplated Sale has occurred, the Company shall
have authorized and reserved a sufficient
number of shares of Series C Preferred
Stock to enable the Lender to convert
this Note into Series
C Preferred Stock.
The Company agrees that its issuance of this Note shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the
necessary certificates for shares upon the
conversion of this Note.
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1.2 Procedure. Subject
to the terms hereof, the Lender may effect
the conversion of this Note, in whole or in part,
at any time, or from time to
time, by the surrender of this Note, together with an executed notice of
conversion (the "Notice of Conversion") in the form attached
hereto as Exhibit
A, to the Company at it usual address.
The person in whose
name any certificate
representing shares or securities shall be
issuable upon conversion of this Note
shall be deemed to have become the holder
of record of, and shall be treated for
all purposes as the record holder of, the shares or securities issuable
hereunder (and such shares or securities shall be deemed to have been
issued)
immediately prior to the close of business on
the date or dates upon which such
surrender is made. In the event only a portion of
this Note is
converted, the
Company shall at its sole expense and as promptly as practicable, issue a
replacement Note in identical form but in a Principal Amount equal to the
portion of the Principal Amount not so converted
and deliver such
replacement
Note as directed by the Lender.
As used in this Note,
the term "person"
means
any individual or any corporation,
partnership, trust, limited liability company
or other entity or organization of any
kind.
2. Optional Prepayment. The Company shall have the right
to prepay the
Principal Amount and any accrued
interest thereon in whole without penalty
or
premium at any time. Upon any notice of
prepayment, Lender shall have the option
to convert all but not less than all of the
Principal Amount then outstanding
under this Note, plus any accrued but unpaid interest thereon, pursuant to
Section 1. Any prepayment amount shall be applied first to any accrued but
unpaid interest on the outstanding
Principal Amount and then to the
Principal
Amount.
3. Events of Acceleration.
The entire unpaid
Principal Amount and
accrued interest thereon shall
become immediately due and payable upon the
occurrence
of one or more of
the
following events (each an "Event of
Acceleration"):
(a)
the failure of the Company to pay when due any
Principal Amount or interest accrued thereon within five days
of the date such
payment is due;
(b) the Company
materially breaches
any representation or
warranty contained in this Note,
or fails to comply in
any material
respect,
with any of the terms or covenants of the
Note or any other
agreements entered
into by the Company in connection with the
Note;
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(c) the Company
(i) fails to make any payment when due
under the terms of any bond, debenture, note or other evidence of
indebtedness
or (ii) defaults in the observance or
performance of any other agreement, term
or condition contained in any such bond,
debenture,
note or other evidence
of
indebtedness or other material agreement of
the Company; provided, however, that
the fact that the Company has not yet filed
one or more registration statements
with the SEC pursuant to its commitments to
certain investors under the terms of
registration rights agreements disclosed or made reference to in
the Company's
Current Reports on Forms 8-K filed with
the SEC on November 2 and November 23,
2005, shall not constitute an Event of
Acceleration hereunder.
(d) the beginning of
involuntary
proceedings against
the
Company under federal bankruptcy law or under any
applicable
federal or state
bankruptcy, insolvency, or similar law, or the
beginning of proceedings seeking
the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the
Company or for any substantial part of
the Company's property, or the beginning of
proceedings seeking an order winding
up or liquidating the affairs of the Company and the continuance of such
proceedings for a period of thirty (30)
days;
(e) the beginning by the Company of a voluntary case under
federal bankruptcy law, or any other
applicable
federal or state
bankruptcy,
insolvency, or other similar law, or the consent by the Company to the
appointment of, or taking possession by, a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar
official) of the Company or
for any substantial part of the Company's property, or the Company making any
assignment for the benefit of creditors, or
the failure of the Company generally
to pay the Company's debts as they become
due, or the taking of formal action by
the Company in furtherance of any of the
foregoing;
(f) if any judgment against the Company or any garnishment,
attachment or other levy against the property of the Company for an
amount in
excess of Fifty Thousand Dollars ($50,000) in the aggregate
remains unpaid,
unstayed on appeal, undischarged, unbonded, or undismissed for a period of
thirty (30) days, unless covered by
insurance;
The Company shall give the Lender written notice of the occurrence of
any of the events set forth above in
Sections 3(a) through 3(h) promptly (but in
no event more than one business day) after
the occurrence of any of such events.
Upon the occurrence of any Event of Acceleration, interest shall begin
to accrue on any unpaid Principal Amount
and accrued interest at the rate of 15%
per annum (or such lesser amount as may not
be prohibited
by applicable
law),
compounded daily.
4. Certain Adjustments. The Conversion Price and the number and
type of
shares into which this Note may be
converted under Section 1.1(a) shall be
subject to adjustment in accordance with
the following provisions:
4.1 Adjustments for
Split, Subdivision or
Combination of Shares.
In the event the outstanding shares of
Series C Preferred Stock or Common Stock,
$.0001 par value per share ("Common Stock") shall be subdivided (by stock
dividend, stock split, or otherwise),
into a greater number
of shares of Series
C Preferred Stock or Common Stock,
the Conversion
Price then in effect
shall,
concurrently with the effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of Series C Preferred Stock
or
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of
Series C Preferred Stock or Common
Stock, the Conversion Price then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
4.2 Adjustments for Distributions. In the event the Company at
any
time or from time to time makes, or fixes a
record date for the determination of
holders of Series C Preferred Stock or Common Stock entitled to receive, any
distribution, provision shall be made so that the Lender
shall receive upon
conversion of the Note under Section 1, in addition to the
number of shares of
Series C Preferred Stock receivable thereupon, the amount of securities or
assets of the Company which the Lender wou
