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Exhibit 10.2
 
THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED.  NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER.
 

W2 ENERGY, INC.
CONVERTIBLE PROMISSORY NOTE

 

 

$25,000.00
March 30, 2009

 
FOR VALUE RECEIVED, W2 Energy, Inc., a Nevada corporation, its assigns and
successors (the “Company”), hereby promises to pay to the order of Access
Capital Fund I, LLC, a Nevada limited liability company, or its assigns (the
“Holder”), in immediately available funds, the total principal sum of Twenty
Five Thousand Dollars ($25,000.00).  The principal hereof and any unpaid accrued
interest thereon shall be due and payable on or before 5:00 p.m., Mountain
Standard Time, on the date which is nine (9) months from the date hereof (the
“Maturity Date”) (unless such payment date is accelerated as provided in Section
9 hereof).  Payment of all amounts due hereunder shall be made at the address of
the Holder provided for in Section 10 hereof.  Interest shall accrue at the rate
of ten percent (10%) per annum on this Note from the date hereof and shall
continue to accrue until all unpaid principal and interest is paid in full.

1.           HISTORY OF THE LOAN.  This Note is being delivered to Holder as
consideration under a Securities Purchase Agreement of even date herewith.

2.           PREPAYMENT.  The Company may, at its option, at any time and from
time to time, prepay all or any part of the principal balance of this Note, at a
prepayment price equal to One Hundred Thirty Percent (130%) of the
then-outstanding principal and interest, provided that concurrently with each
such prepayment the Company shall pay accrued interest on the principal, if any,
so prepaid to the date of such prepayment.

3.           CONVERSION.
 
3.1           Conversion Rights; Conversion Date; Conversion Price.  The Holder
shall have the right, at its option, at any time from and after the date hereof,
to convert the principal amount of this Note, or any portion of such principal
amount, into that number of fully paid and nonassessable shares of the Company’s
common stock (the “Common Stock”) (as such shares shall then be constituted)
determined pursuant to this Section 3.1.  The number of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing
the Conversion Amount (as defined below) by the Conversion Price, which shall be
equal to fifty percent (50%) of the closing bid price for the Common Stock on
the trading day immediately preceding the conversion (the “Conversion
Price”).  Each election will be noticed by a Notice of Conversion, substantially
in the form attached hereto as Exhibit A, delivered to the Company by the Holder
by facsimile, or other reasonable means of communication, dispatched prior to
5:00 p.m., Mountain Standard Time and in accordance with the terms of Section
10.  The term “Conversion Amount” means, with respect to any conversion of this
Note, the sum of (1) the principal amount of this Note to be converted in such
conversion, plus (2) accrued and unpaid interest, if any, on such principal
amount at the interest rates provided in this Note to the Conversion Date.
 
 
 
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3.2           Method of Conversion.

(a)           The Common Stock underlying the conversion of this Note shall be
held by an Escrow Agent (the “Escrow Agent”) pursuant to an Escrow Agreement of
even date herewith.

(b)           Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the Holder shall
not be required to physically surrender this Note to the Company or Escrow Agent
unless the entire unpaid principal amount of this Note is so converted.  Rather,
records showing the principal amount converted (or otherwise repaid) and the
date of such conversion or repayment shall be maintained on a ledger
substantially in the form of Annex I attached hereto (a copy of which shall be
delivered to the Company and Escrow Agent with each Notice of Conversion).  It
is specifically contemplated that the Holder shall act as the calculation agent
for conversions and repayments.  In the event of any dispute or discrepancies,
such records maintained by the Holder shall be controlling and determinative in
the absence of manifest error.  The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following a conversion of a portion of this Note, the principal
amount represented by this Note will be the amount indicated on Annex I attached
hereto (which may be less than the amount stated on the face hereof).

(c)            Upon receipt by the Company or Escrow Agent of a Notice of
Conversion, the Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion and the outstanding principal amount and the
amount of accrued and unpaid interest on this Note shall be reduced to reflect
such conversion, and, unless the Company defaults on its obligations under
Section 9, all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the Common Stock
or other securities, cash or other assets, as herein provided, on such
conversion.  If the Holder shall have given a Notice of Conversion as provided
herein, the Company’s obligation to issue and deliver the certificates for
shares of Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
person or any action by the Holder to enforce the same, any failure or delay in
the enforcement of any other obligation of the Company to the Holder of record,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder of any obligation to the Company, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with such conversion.  The
date of receipt (including receipt via facsimile) of such Notice of Conversion
shall be the Conversion Date so long as it is received before 5:00 p.m.,
Mountain Standard Time, on such date.
 
 
 
 
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4.           CONVERSION LIMITATION.  Notwithstanding Section 3 above, the Holder
may not convert any outstanding amounts due under this Note if at the time of
such conversion the amount of common stock issued for the conversion, when added
to other shares of Company common stock owned by the Holder or which can be
acquired by Holder upon exercise or conversion of any other instrument, would
cause the Holder to own more than nine and nine-tenths percent (9.9%) of the
Company’s outstanding common stock.  The restriction described in this paragraph
may be revoked upon sixty-one (61) days prior notice from Holder to the
Company.  For purposes of this section, beneficial ownership shall be determined
in accordance with Rule 13d-3 of the Exchange Act and Regulations 13 D-G
thereunder, except as otherwise provided in this Section.

5.           INSTRUCTIONS TO TRANSFER AGENT. The Company undertakes and agrees
that no instruction other than the instructions referred to in Sections 5 and 6
will be given to its transfer agent for the Common Stock and that the Common
Stock issuable upon conversion of the Note otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Note and applicable law.  Nothing contained in this Section 5
shall affect in any way Holder’s obligations and agreement to comply with all
applicable securities laws upon resale of such Common Stock.

6.           SHARE ISSUANCES. The Escrow Agent shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of the Note to
Holder via express courier, within one (1) business day after receipt by the
Company and Escrow Agent of the Notice of Conversion (the “Delivery Date”).

7.           TRANSFERABILITY.  This Note shall not be transferred, pledged,
hypothecated, or assigned by the Company without the express written consent of
the Holder. In the event any third party acquires a controlling interest in the
Company or acquires substantially all of the assets of the Company (a
“Reorganization Event”), this Note will survive and become an obligation of the
party that acquires such controlling interest or assets.  In the event of a
Reorganization Event the Company agrees to make the party that acquires such
controlling interest or assets, aware of the terms of this Section and this
Note.  This Note may be transferred, pledged, hypothecated, or assigned by the
Holder in his sole discretion.

8.           RESERVATION AND LISTING OF SECURITIES.  The Company shall at all
times reserve and keep available out of its authorized shares of common stock,
solely for the purpose of issuance upon the conversion of this Note, such number
of shares of common stock as would be necessary to convert the entire amount due
and owing under the terms of this Note if Holder elected to convert said amount
under Section 3 hereof.

9.           DEFAULT.  The occurrence of any one of the following events shall
constitute an Event of Default:

(a)           The non-payment, when due, of any principal or interest pursuant
to this Note;

(b)           The material breach of any representation or warranty in this
Note.  In the event the Holder becomes aware of a breach of this Section 9(b),
the Holder shall notify the Company in writing of such breach and the Company
shall have five business days after notice to cure such breach;
 
 
 
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(c)           The breach of any covenant or undertaking, not otherwise provided
for in this Section 9;

(d)           The breach of any provision of the Securities Purchase Agreement
or Escrow Agreement executed by the Company and Holder on the date hereof.

(e)           The commencement by the Company of any voluntary proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
receivership, dissolution, or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or the adjudication of the Company as
insolvent or bankrupt by a decree of a court of competent jurisdiction; or the
petition or application by the Company for, acquiescence in, or consent by the
Company to, the appointment of any receiver or trustee for the Company or for
all or a substantial part of the property of the Company; or the assignment by
the Company for the benefit of creditors; or the written admission of the
Company of its inability to pay its debts as they mature; or

(f)           The commencement against the Company of any proceeding relating to
the Company under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, receivership, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, provided, however, that
the commencement of such a proceeding shall not constitute an Event of Default
unless the Company consents to the same or admits in writing the material
allegations of same, or said proceeding shall remain undismissed for 20 days; or
the issuance of any order, judgment or decree for the appointment of a receiver
or trustee for the Company or for all or a substantial part of the property of
the Company, which order, judgment or decree remains undismissed for 20 days; or
a warrant of attachment, execution, or similar process shall be issued against
any substantial part of the property of the Company.

Upon the occurrence of any Default or Event of Default, the Holder, may, by
written notice to the Company, declare all or any portion of the unpaid
principal amount due to Holder, together with all accrued interest thereon,
immediately due and payable, in which event it shall immediately be and become
due and payable, provided that upon the occurrence of an Event of Default as set
forth in paragraph (e) or paragraph (f) hereof, all or any portion of the unpaid
principal amount due to Holder, together with all accrued interest thereon,
shall immediately become due and payable without any such notice.

10.           NOTICES.  Notices to be given hereunder shall be in writing and
shall be deemed to have been sufficiently given if delivered personally or sent
by overnight courier, or by facsimile transmission.  Notice shall be deemed to
have been received on the date and time of personal or overnight delivery or
facsimile transmission, if received during normal business hours of the
recipient; if not, then on the next business day.
 
 
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Notices to the Company shall be sent to:  
W2 Energy, Inc.
26 Densley Avenue
Toronto, Ontario
Canada  M6M2R1
Attn:  Mike McLaren
Facsimile No.: (416) 248-2024

 
Notices to the Holder shall be sent to: 
Access Capital Fund I, LLC
2975 W. Executive Way, Suite 141
Lehi, Utah  84043
Attn:  Michael Southworth, Manager
Facsimile No.:  (___)____________

 
Notices to the Escrow Agent shall be sent as provided in the Escrow Agreement.

11.           REPRESENTATIONS AND WARRANTIES.  The Company hereby makes the
following representations and warranties to the Holder:

(a)           Organization, Good Standing and Power.  The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now
being conducted.

(b)           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and perform this Note and to issue
and sell this Note.  The execution, delivery and performance of this Note by the
Company, and the consummation by it of the Transactions contemplated hereby,
have been duly and validly authorized by all necessary corporate action.  This
Note when executed and delivered, will constitute a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general
application.

(c)           Disclosure.  Neither this Note nor any other document, certificate
or instrument furnished to the Holder by or on behalf of the Company in
connection with the transactions contemplated by this Note contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not misleading.

(d)           Non-contravention. The execution and delivery by the Company of
this Note and the issuance of the securities, and the consummation by the
Company of the other transactions contemplated hereby and thereby, do not and
will not conflict with or result in a breach by the Company of any of the terms
or provisions of, or constitute a default (or an event which, with notice, lapse
of time or both, would constitute a default) under (i) the Articles of
Incorporation or Bylaws of the Company or its subsidiaries or (ii) any
indenture, mortgage, deed of trust or other material agreement or instrument to
which the Company or its subsidiaries is a party or by which its properties or
assets are bound, or any law, rule, regulation, decree, judgment or order of any
court or public or governmental authority having jurisdiction over the Company
or its subsidiaries or any of the Company’s or its subsidiaries’ properties or
assets, except as to (ii) above such conflict, breach or default which would not
have a Material Adverse Effect defined as “any change in or effect on the
business of the Company that, individually or in the aggregate (taking into
account all other such changes or effects), is, or is reasonably likely to be,
materially adverse to the business, assets, liabilities, financial condition or
results of operations of the Company, taken as a whole, except to the extent any
such change or effect results from or is attributable to changes in general
economic conditions or changes affecting the industry generally in which the
Company operates (provided that such changes do not affect the Company in a
materially disproportionate manner).”
 
 
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12.           CONSENT TO JURISDICTION AND SERVICE OF PROCESS.  The Company
consents to the jurisdiction of the courts of the State of Utah and of any state
and federal court located in the County of Salt Lake, Utah.  The Company hereby
irrevocably and unconditionally consents to the service of any and all process
in any such action or proceeding in such courts by the mailing of copies of such
process by certified or registered airmail at its address specified in the
Section 10 hereof.

13.           GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY THEREIN, WITHOUT GIVING EFFECT TO
THE RULES OR PRINCIPLES OF CONFLICTS OF LAW.

14.           ATTORNEYS FEES.  In the event the Holder hereof shall refer this
Note to an attorney to enforce the terms hereof, the Company agrees to pay all
the costs and expenses incurred in attempting or effecting the enforcement of
the Holder’s rights, including reasonable attorney's fees, whether or not suit
is instituted.

15.           CONFORMITY WITH LAW.  It is the intention of the Company and of
the Holder to conform strictly to applicable usury and similar
laws.  Accordingly, notwithstanding anything to the contrary in this Note, it is
agreed that the aggregate of all charges which constitute interest under
applicable usury and similar laws that are contracted for, chargeable or
receivable under or in respect of this Note, shall under no circumstances exceed
the maximum amount of interest permitted by such laws, and any excess, whether
occasioned by acceleration or maturity of this Note or otherwise, shall be
canceled automatically, and if theretofore paid, shall be either refunded to the
Company or credited on the principal amount of this Note.

16.           MODIFICATION; WAIVER.  No modification or waiver of any provision
of this Note or consent to departure therefrom shall be effective unless in
writing and approved by the Company and the Holder.  If any provision of this
Note shall be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Note or the validity or enforceability of this Note in any
other jurisdiction.  This Note supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
 
 
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IN WITNESS WHEREOF, the Company has signed and sealed this Note and delivered it
as of March 30, 2009.

“Company”
 
“Holder”
         
W2 Energy, Inc.,
 
Access Capital Fund I, LLC,
 
a Nevada corporation
 
a Nevada limited liability company
                  /s/            Michael McLaren   /s/            Michael
Southworth  
By:           Michael McLaren
 
By:           Michael Southworth
 
Its:           President
 
Its:           Manager
         

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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ANNEX I

CONVERSION AND REPAYMENT LEDGER

Date
Principal Balance
Interest Converted or Paid
Principal Converted or Paid
New Principal Balance
Company Initials
Holder Initials
March 30, 2009
$25,000.00
   
$25,000.00
                                                                               
                                                                               
                                                                               
                                           

 
 
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Exhibit A

Notice of Conversion

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $______________ of that
certain W2 Energy, Inc. Convertible Promissory Note dated March 30, 2009 into
shares of common stock of the Company according to the conditions set forth in
such Note, as of the date written below.

If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.

Date of Conversion:  ___________________________________________________

Applicable Conversion Price: _____________________________________________

Signature: ___________________________________________________________
[Print Name of Holder and Title of Signer]

Address: ____________________________________________________________
 
____________________________________________________________

SSN or EIN: __________________________________________________________

Shares are to be registered in the following name:

Name: ____________________________________________________
Address: __________________________________________________
Tel: ______________________________________________________
Fax: ______________________________________________________
SSN or EIN: ________________________________________________

Shares are to be sent or delivered to the following account:

Account Name: _____________________________________________
Address: __________________________________________________
Tel: ______________________________________________________
Fax: ______________________________________________________
SSN or EIN: ________________________________________________
 

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