EXHIBIT 10.4
SECURED PROMISSORY NOTE
Principal Amount:
$1,330,312.50 Issue Date: May 7, 2009
Purchase Price: $1,182,500.00
FOR
VALUE RECEIVED, CONVERTED ORGANICS INC., a Delaware corporation
(hereinafter called “Borrower”), hereby promises to pay
to IROQUOIS MASTER FUND LTD., 641 Lexington Avenue, 26th Floor, New
York, NY 10022, Fax: (212) 207-3452 (the
“Holder”), without demand, the sum of One Million Three
Hundred and Thirty Thousand Three Hundred and Twelve Dollars and
Fifty Cents ($1,330,312.50) (“Principal Amount”), on
November 7, 2009 (the “Maturity Date”), if not
paid sooner.
The
Principal Amount of this Note represents an original issue discount
of 12.5% (the “OID”) and this Note does not bear any
additional interest.
This
Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder dated of even date
herewith (the “Subscription Agreement”). Unless
otherwise separately defined herein, all capitalized terms used in
this Note shall have the same meaning as is set forth in the
Subscription Agreement. The following terms shall apply to this
Note:
ARTICLE I
GENERAL PROVISIONS
1.1
Default Interest Rate . The Borrower shall not have any
grace period to pay any monetary amounts due under this Note. After
the Maturity Date, accelerated or otherwise, and during the
pendency of an Event of Default (as defined in Article III) a
default interest rate of fifteen percent (15%) per annum shall
apply to the amounts owed hereunder.
ARTICLE II
PREPAYMENT AND EXTENSION
2.1.
Prepayment . This Note may be paid prior to the Maturity
Date, without penalty, upon three days written notice to
Holder.
2.2.
Mandatory Repayment . The entire Principal Amount and all
other sums due under and in connection with this Note and the
Transaction Documents shall be immediately due and payable out of
the net proceeds from the sale and issuance by the Borrower and/or
a Subsidiary of Borrower of debt and/or equity in a single or
series of offerings of such debt and/or equity for cash in excess
of $1,330,312.50.
ARTICLE III
EVENT OF DEFAULT
The
occurrence of any of the following events of default (“Event
of Default”) shall, at the option of the Holder hereof, make
all sums of principal and accrued interest then remaining unpaid
hereon and all other amounts payable hereunder immediately due and
payable, upon demand, without presentment or grace period, all of
which hereby are expressly waived, except as set forth
below:
3.1
Failure to Pay Principal . The Borrower fails to pay any
principal, or other sum due under this Note when due.
3.2
Breach of Covenant . The Borrower or any Subsidiary of
Borrower breaches any material covenant or other material term or
condition of the Subscription Agreement or this Note in any
material respect and such breach, if subject to cure, continues for
a period of five (5) business days after written notice to the
Borrower or any such Subsidiary of Borrower from the
Holder.
3.3
Breach of Representations and Warranties . Any material
representation or warranty of the Borrower or any Subsidiary of
Borrower made herein, in any Transaction Document, or in any
agreement, statement or certificate given in writing pursuant
hereto or in connection herewith or therewith shall be false or
misleading in any material respect as of the date made and as of
the Closing Date.
3.4
Liquidation . Any dissolution, liquidation or winding up of
Borrower or any operating Subsidiary of Borrower or any substantial
portion of its business.
3.5
Cessation of Operations . Any cessation of operations by
Borrower or any operating Subsidiary of Borrower for a period of 30
consecutive days.
3.6
Maintenance of Assets . The failure by Borrower or any
Subsidiary of Borrower to maintain any material intellectual
property rights, personal, real property or other assets which are
necessary to conduct its business (whether now or in the
future).
3.7
Receiver or Trustee . The Borrower or any Subsidiary of
Borrower shall make an assignment for the benefit of creditors, or
apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business; or
such a receiver or trustee shall otherwise be appointed.
3.8
[Reserved].
3.9
Bankruptcy . Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by the Borrower or any Subsidiary of Borrower or any
such proceeding shall be instituted against the Borrower or any
Subsidiary of Borrower, which proceedings are not, within sixty
(60) days after institution thereof discharged or stayed pending
appeal.
3.10
Delisting . Failure of the Borrower’s Common Stock to
be listed for trading or quotation on a Principal Market for ten
(10) or more consecutive days.
3.11
[Reserved].
3.12
Stop Trade . An SEC or judicial stop trade order or
Principal Market trading suspension with respect to the
Borrower’s Common Stock that lasts for seven (7) or more
consecutive trading days.
3.13
Reservation Default . The failure by the Borrower to have
reserved for issuance upon exercise of the Warrant at the exercise
price in effect at such time the number of shares of Common Stock
as required in the Subscription Agreement.
3.14
[Reserved].
3.15
[Reserved]
3.16
Event Described in Subscription Agreement . The occurrence
of an Event of Default as described in the Subscription Agreement
that, if susceptible to cure, is not cured during any designated
cure period.
3.17
Material Adverse Effect . The occurrence of any Material
Adverse Effect as defined in the Subscription Agreement as to
Borrower or any Subsidiary of Borrower.
3.18
Financial Statement Restatement . A restatement of any
financial statements filed by the Borrower with the Securities and
Exchange Commission for any date or period from two years prior to
the Issue Date of this Note and until this Note is no longer
outstanding, if the result of such restatement would, by comparison
to the unrestated financial statements, have constituted a Material
Adverse Effect.
3.19
Reverse Splits . The
