THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES LAWS OF
ANY STATE (COLLECTIVELY, THE "LAWS"). THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF EITHER (I) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES
UNDER THE APPLICABLE LAWS OR (II) AN OPINION
OF COUNSEL IN FORM, SUBSTANCE AND
SCOPE REASONABLY ACCEPTABLE TO THE
ISSUER, TO THE EFFECT THAT SUCH REGISTRATION
IS NOT REQUIRED DUE TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE APPLICABLE LAWS.
THIS NOTE IS SUBJECT TO THE TERMS OF
THE SUBORDINATION AGREEMENT DATED DECEMBER
1, 2004 (THE "SUBORDINATION AGREEMENT") IN FAVOR OF SILICON
VALLEY BANK (THE
"SENIOR LENDER"), AND THE RIGHTS AND REMEDIES
HEREUNDER AND UNDER THE SECURITY
AGREEMENT, AS DEFINED BELOW, ARE SUBORDINATE TO THOSE OF THE SENIOR
LENDER.
DATE: DECEMBER 1, 2004
$400,000.00
RAPIDTRON,
INC.
15% SECURED CONVERTIBLE PROMISSORY NOTE
DUE MARCH 31, 2005
This
15% Secured Convertible Promissory Note (the "Note") is issued
by
Rapidtron, Inc., a corporation duly organized and validly
existing under the
laws of the State of Nevada
(the "Company"), pursuant to that certain Securities
Purchase Agreement (the "Agreement") entered into
concurrently herewith by and
between the Company and Oceanus Value Fund, L.P.
1. Payment
Obligation.
For value received, the Company promises
to
-------------------
pay to Oceanus Value Fund, L.P. or its permitted successors and assigns
(collectively, the "Holder"), (i) the principal
amount of Four Hundred Thousand
Dollars ($400,000) (to which may be added any liquidated
damages that accrue
pursuant to the terms of the Agreement or the Registration
Rights Agreement
referenced below) and (ii) interest on the principal
amount outstanding at the
rate of fifteen percent (15%) per annum, compounded
annually. The
principal
amount of this Note, together
with all accrued and unpaid interest, shall be due
and payable in full on March 31, 2005 (the
"Maturity Date"). Interest on this
Note in the amount of Fifteen Thousand Dollars
($15,000) shall be pre-paid by
the Company upon execution hereof (which
pre-payment shall be non-refundable);
thereafter, interest in the amount of Five Thousand
Dollars ($5,000) shall be
paid at the end of each thirty (30) day period
(the "Interest Payment Date")
that this Note remains outstanding after February 28, 2005 (prorated for
a
partial period and any reductions in principal
<PAGE>
amount). Accrual of interest on the
outstanding principal amount shall commence
on the date hereof and shall continue until full payment
of the outstanding
principal amount has been made or duly provided
for. Payments on this Note are
payable to the Holder in whose name this Note
(or one or more successor Notes)
is registered on the records of the
Company regarding registration and transfer
of this Note (the "Note Register"); provided, however, that the
Company's
obligation to a transferee of this Note arises
only if such transfer, sale or
other disposition is made in accordance with the terms and
conditions of the
Agreement. The Company has the right at any time, upon at least three
(3)
business days prior written
notice to the Holder, to redeem or prepay all or any
portion of this Note for an amount equal to
one hundred five percent (105%) of
the principal amount being redeemed or prepaid, plus all accrued and
unpaid
interest on the portion being redeemed or prepaid; the
Company shall have no
right to redeem or prepay any portion of this Note except pursuant to
the
foregoing.
2. Provisions as to
Payment. Payments on
this Note are payable in
------------------------
immediately available funds
in currency of the United States of America at the
address last appearing on the
Note Register of the Company as designated in
writing by the Holder hereof
from time to time. The
Company shall pay the
amount required by this Note
on the Maturity Date or applicable Interest Payment
Date (as the case may be),
less any amounts required by law to be deducted or
withheld, to the Holder of
this Note appearing of record as of the fifth
business day (as defined in
the Agreement) prior to the Maturity Date or
applicable Interest Payment
Date, as the case may be, in each case addressed to
such Holder at the last
address appearing on the Note Register. The forwarding
of such funds shall
constitute full payment of the amount then required to
be
paid under this Note and
shall satisfy and discharge the liability for such
amount to the extent of the
sum represented by such payment plus any amounts so
deducted or withheld.
All payments under
this Note shall be credited first to
reimburse the Holder for any
cost or expense reimbursable hereunder, then to the
payment of accrued interest,
and third to the payment of principal.
3. Withholding.
The
Company shall be entitled to withhold from all
-----------
payments of principal or
interest pursuant to this Note any amounts required to
be withheld under applicable
provisions of the United States income tax or other
applicable laws at the time
of such payments.
4. Transfer of
Note; Opinion of Counsel; Legend.
--------------------------------------------
(a) This
Note has been issued subject to investment
representations
of the original Holder and
may be transferred or exchanged only in compliance
with the Securities Act of
1933, as amended (the "1933 Act") and applicable
state securities laws. Prior
to presentment of this Note for transfer, the
Company and any agent of the
Company may treat the person in whose name this
Note is duly registered on
the Note Register as
the Holder hereof for the
purpose of receiving payments
as herein provided and for all other purposes,
whether or not this Note be
overdue, and neither the Company nor any such agent
shall be affected or bound by
notice to the contrary.
(b) The Holder
understands and acknowledges by its acceptance hereof
that (i) this
<PAGE>
Note has not been, and is not
being, registered under the 1933 Act or any state
securities laws, and may not
be offered for sale, sold, assigned or transferred
unless (A) subsequently
registered thereunder or (B) the Holder shall have
delivered to the Company an
opinion of counsel, reasonably satisfactory in form,
substance and scope to the
Company, to the effect that this Note may be sold,
assigned or transferred
pursuant to an exemption from such registration and (ii)
neither the Company nor any
other person is under any obligation to register
this Note under the 1933 Act
or any state securities laws or to comply with the
terms and conditions of any
exemption thereunder.
5. Conversion Upon
Default.
-----------------------
(a) If (and only if)
this Note is not paid in full by the Maturity Date
(a "Payment Default"), the
Holder of this Note shall be entitled, at its option
at any time prior to such
Payment Default being cured, to convert all or a
portion of the outstanding
principal amount of this Note and any accrued and
unpaid interest and/or
liquidated damages accrued under this Note, the
Agreement
and/or the Registration
Rights Agreement as of the Conversion Date (as defined
below), into shares of the
Company's $0.001 par value common stock (the "Common
Stock") at a conversion price
(the "Conversion Price") for each share of Common
Stock equal to the lesser of
(i) $0.33 per share or (ii) eighty percent (80%) of
the lowest closing
bid price for the
Common Stock (as reported by Bloomberg) in
any of the five (5) trading
days immediately preceding the Conversion Date.
(b) After a Payment
Default, any conversion of this Note shall be
achieved by submitting to the
Company the fully completed form of conversion
notice attached hereto as
Exhibit I (a "Notice of Conversion"), executed by the
Holder of this Note
evidencing such Holder's intention to convert this Note or
a
specified portion hereof
(including any designated accrued and unpaid interest
and/or liquidated damages). A
Notice of Conversion may be submitted via
facsimile to the Company at
the telecopy number for the Company provided in the
Agreement (or at such other
number as specified in advance of such conversion in
writing by the Company). A
Notice of Conversion may also be submitted by mail.
The Company and the Holder
shall each keep records with respect to the portion
of this Note then being
converted and all portions previously converted. Upon
receipt by the Holder of the
requisite Conversion Shares, the outstanding
principal amount of this Note
shall then (and only then) be reduced by the
amount specified in the
Notice of Conversion resulting in such Conversion
Shares. The Company may, from
time-to-time, but is not required to, (i) instruct
the Holder to surrender this
Note along with the Notice of Conversion for the
purposes of making a notation
thereon as to the amount of principal being
converted or (ii) cancel this
Note and issue a new Note in the same form with
the principal amount of such
Note reduced by the amount converted. Such new or
annotated Note shall be
delivered to the Holder within three (3) business days
after such Holder's surrender
to the Company. No fractional shares or scrip
representing fractions of
shares will be issued on conversion, but the number of
shares issuable shall be
rounded up to the nearest whole share. The date on
which a Notice of Conversion
is given (the "Conversion Date") shall be deemed to
be either the date on which
the Com
