Exhibit 10.42

 

CONVERTIBLE PROMISSORY NOTE

 

November 14, 2016 U.S. $185,000.00

 

FOR VALUE RECEIVED, Omagine, Inc., a Delaware corporation (“Borrower”), promises
to pay to St. George Investments LLC, a Utah limited liability company, or its
successors or assigns (“Lender”), $185,000.00 and, if applicable, any interest,
fees, charges, and late fees on the date that is six (6) months after the
Purchase Price Date (the “Maturity Date”). This Convertible Promissory Note
(this “Note”) is issued and made effective as of November 14, 2016 (the “Closing
Date”). This Note is issued pursuant to that certain Note Purchase Agreement
dated November 14, 2016, as the same may be amended from time to time, by and
between Borrower and Lender (the “Purchase Agreement”). Certain capitalized
terms used herein are defined in Attachment 1 attached hereto and incorporated
herein by this reference.

 

This Note carries an OID of $30,000.00. In addition, Borrower agrees to pay
$5,000.00 to Lender to cover Lender’s legal fees, accounting costs, due
diligence, monitoring and other transaction costs incurred in connection with
the purchase and sale of this Note (the “Transaction Expense Amount”), all of
which Transaction Expense Amount is included in the initial principal balance of
this Note. The purchase price for this Note shall be $150,000.00 (the “Purchase
Price”), computed as follows: $185,000.00 initial principal balance, less the
OID, less the Transaction Expense Amount. The Purchase Price shall be payable by
Lender by wire transfer of immediately available funds.

 

1.            Prepayment; Interest.

 

1.1.          Interest. No interest shall accrue on the Outstanding Balance of
this Note unless and until an Event of Default (as defined below) occurs.
Immediately following the occurrence of any Event of Default, interest shall
automatically accrue on the Outstanding Balance beginning on the date the
applicable Event of Default occurred at an interest rate equal to the lesser of
22% per annum or the maximum rate permitted under applicable law. Interest
calculated hereunder shall be computed on the basis of a 360-day year comprised
of twelve (12) thirty (30) day months, shall compound daily and shall be payable
in accordance with the terms of this Note.

 

1.2.         Prepayment. Borrower may repay this Note in whole or in part at any
time without penalty.

 

2.            Security. This Note is unsecured.

 

3.            Conversion.

 

3.1.         Conversions. Lender has the right at any time following an Event of
Default, at its election, to convert (each instance of conversion is referred to
herein as a “Conversion”) all or any part of the Outstanding Balance into shares
(“Conversion Shares”) of fully paid and non-assessable common stock, $0.001 par
value per share (“Common Stock”), of Borrower as per the following conversion
formula: the number of Conversion Shares in the relevant Conversion shall be
equal to the amount of the Outstanding Balance being converted in such
Conversion (the “Conversion Amount”) divided by the Conversion Price (as defined
below). Conversion notices in the form attached hereto as Exhibit A (each, a
“Conversion Notice”) may be effectively delivered to Borrower by facsimile,
email, mail, overnight courier, or personal delivery, and all Conversions shall
be cashless and not require further payment from Lender. Borrower shall deliver
the Conversion Shares from any Conversion to Lender in accordance with Section 8
below.

 

 

 

 

3.2.         Conversion Price. Subject to the adjustments set forth herein, the
conversion price (the “Conversion Price”) for each Conversion shall be equal to
60% (the “Conversion Factor”) multiplied by the average of the three (3) lowest
daily VWAPs for the Common Stock during the twenty (20) Trading Days immediately
preceding the applicable Conversion. Additionally, if at any time after the
occurrence of an Event of Default, Borrower is not DWAC Eligible, then the
then-current Conversion Factor will automatically be reduced by 5% for all
future Conversions. If at any time after the occurrence of an Event of Default,
the Conversion Shares are not DTC Eligible, then the then-current Conversion
Factor will automatically be reduced by an additional 5% for all future
Conversions. Finally, in addition to the Default Effect, if any Major Default
occurs concurrent with or after the occurrence of an Event of Default (other
than an Event of Default for failure to pay the Outstanding Balance on the
Maturity Date), the Conversion Factor shall automatically be reduced for all
future Conversions by an additional 5% for each of the first three (3) Major
Defaults that occur after the occurrence of such Event of Default (for the
avoidance of doubt, each occurrence of any Major Default shall be deemed to be a
separate occurrence for purposes of the foregoing reductions in Conversion
Factor, even if the same Major Default occurs three (3) separate times). For
example, the first time Borrower is not DWAC Eligible, the Conversion Factor for
future Conversions thereafter will be reduced from 60% to 55% for purposes of
this example. Following such event, the first time the Conversion Shares are no
longer DTC Eligible, the Conversion Factor for future Conversions thereafter
will be reduced from 55% to 50% for purposes of this example. If, thereafter,
there are three (3) separate occurrences of a Major Default pursuant to Section
4.1(a), then for purposes of this example the Conversion Factor would be reduced
by 5% for the first such occurrence, and so on for each of the second and third
occurrences of such Major Default. For the avoidance of doubt and
notwithstanding anything to the contrary contained in this Note or in any of the
Transaction Documents, the parties hereby agree that if any shares of Common
Stock cannot be electronically transferred via DWAC and DTC procedures solely
because of the existence of a 144 Event (as such term is defined in Attachment 1
– Definitions) with respect to such shares of Common Stock, then such Common
Stock relevant to such 144 Event shall not be deemed to be either (a) not DWAC
Eligible, or (b) not DTC Eligible solely because of such 144 Event and, absent
any other impediment to DWAC Eligibility or DTC Eligibility, such Common Stock
shall at all times and in all cases and respects be deemed to be DWAC Eligible
and DTC Eligible.

 

4.           Defaults and Remedies.

 

4.1.         Defaults. The following are events of default under this Note
(each, an “Event of Default”): (a) Borrower fails to pay any principal,
interest, fees, charges, or any other amount when due and payable hereunder; (b)
Borrower fails to deliver any Conversion Shares in accordance with the terms
hereof; (c) a receiver, trustee or other similar official shall be appointed
over Borrower or a material part of its assets and such appointment shall remain
uncontested for twenty (20) days or shall not be dismissed or discharged within
sixty (60) days; (d) Borrower becomes insolvent or admits in writing its
inability to pay, its debts as they become due, subject to applicable grace
periods, if any; (e) Borrower makes a general assignment for the benefit of
creditors; (f) Borrower files a petition for relief under any bankruptcy,
insolvency or similar law (domestic or foreign); (g) an involuntary bankruptcy
proceeding is commenced or filed against Borrower and such proceeding shall
remain uncontested for twenty (20) days or shall not be dismissed or discharged
within sixty (60) days; (h) Borrower defaults or otherwise fails to observe or
perform any covenant of Borrower as specifically set forth in Section 4 of the
Purchase Agreement; (i) any representation or warranty made by Borrower to
Lender herein or in any Transaction Document in connection with the issuance of
this Note is false or misleading in any material respect when made; (j) the
occurrence of a Fundamental Transaction without Lender’s prior written consent;
(k) Borrower fails to maintain the Transfer Agent Reserve as required under the
Purchase Agreement or to add shares to the Transfer Agent Reserve as required
under the Purchase Agreement within three (3) Trading Days of Borrower’s receipt
of a written notice from Lender requesting an increase in the Transfer Agent
Reserve; (l) Borrower effectuates a reverse split of its Common Stock without
twenty (20) Trading Days prior written notice to Lender; (m) any money judgment,
writ or similar process is entered or filed against Borrower or any subsidiary
of Borrower or any of its property or other assets for more than $100,000.00,
and shall remain unvacated, unbonded or unstayed for a period of twenty (20)
calendar days unless otherwise consented to by Lender; (n) Borrower fails to be
DWAC Eligible; or (o) Borrower breaches any covenant or other term or condition
contained in any Other Agreements.

 

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4.2.         Remedies. At any time and from time to time after the occurrence of
any Event of Default, Lender may accelerate this Note by written notice to
Borrower, with the Outstanding Balance becoming immediately due and payable in
cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time
following the occurrence of any Event of Default, Lender may, at its option,
elect to increase the Outstanding Balance by applying the Default Effect
(subject to the limitation set forth below) via written notice to Borrower
without accelerating the Outstanding Balance, in which event the Outstanding
Balance shall be increased as of the date of the occurrence of the applicable
Event of Default pursuant to the Default Effect, but the Outstanding Balance
shall not be immediately due and payable unless so declared by Lender (for the
avoidance of doubt, if Lender elects to apply the Default Effect pursuant to
this sentence, it shall reserve the right to declare the Outstanding Balance
immediately due and payable at any time and no such election by Lender shall be
deemed to be a waiver of its right to declare the Outstanding Balance
immediately due and payable as set forth herein unless otherwise agreed to by
Lender in writing). Notwithstanding the foregoing, upon the occurrence of any
Event of Default described in clauses (c), (d), (e), (f) or (g) of Section 4.1,
the Outstanding Balance as of the date of acceleration shall become immediately
and automatically due and payable in cash at the Mandatory Default Amount,
without any written notice required by Lender. For the avoidance of doubt,
Lender may continue making Conversions at any time following an Event of Default
until such time as the Outstanding Balance is paid in full. Borrower further
acknowledges and agrees that Lender may continue making Conversions following
the entry of any judgment or arbitration award in favor of Lender until such
time that the entire judgment amount or arbitration award is paid in full.
Borrower agrees that any judgment or arbitration award will, by its terms, be
made convertible into Common Stock. Any Conversions made following a judgment or
arbitration award shall be made pursuant to the following formula: the amount of
the judgment or arbitration award being converted divided by 80% of the lowest
daily VWAP in the ten (10) Trading Days immediately preceding the date of
Conversion. In such event, Borrower and Lender agree that it is their
expectation that any such judgment amount or arbitration award that is converted
will tack back to the Purchase Price Date for purposes of determining the
holding period under Rule 144. Borrower and Lender agree and stipulate that any
judgment or arbitration award entered against Borrower shall be reduced by
$1,000.00 and such $1,000.00 shall become the new Outstanding Balance of this
Note and this Note shall expressly survive such judgment or arbitration award.
Additionally, following the occurrence of any Event of Default, Borrower may, at
its option, pay any Conversion in cash instead of Conversion Shares by paying to
Lender on or before the applicable Delivery Date (as defined below) a cash
amount equal to the number of Conversion Shares set forth in the applicable
Conversion Notice multiplied by the highest daily VWAP of the Common Stock that
occurs during the period beginning on the date the applicable Event of Default
occurred and ending on the date of the applicable Conversion Notice. In
connection with acceleration described herein, Lender need not provide, and
Borrower hereby waives, any presentment, demand, protest or other notice of any
kind, and Lender may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such acceleration may be rescinded and
annulled by Lender at any time prior to payment hereunder and Lender shall have
all rights as a holder of the Note until such time, if any, as Lender receives
full payment pursuant to this Section 4.2. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereon.
Nothing herein shall limit Lender’s right to pursue any other remedies available
to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to Borrower’s failure to
timely deliver Conversion Shares upon Conversion of the Notes as required
pursuant to the terms hereof.

 

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5.           Unconditional Obligation; No Offset. Borrower acknowledges that
this Note is an unconditional, valid, binding and enforceable obligation of
Borrower not subject to offset, deduction or counterclaim of any kind. Borrower
hereby waives any rights of offset it now has or may have hereafter against
Lender, its successors and assigns, and agrees to make the payments or
Conversions called for herein in accordance with the terms of this Note.

 

6.          Waiver. No waiver of any provision of this Note shall be effective
unless it is in the form of a writing signed by the party granting the waiver.
No waiver of any provision or consent to any prohibited action shall constitute
a waiver of any other provision or consent to any other prohibited action,
whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent or commit a party to provide a waiver or consent in the future
except to the extent specifically set forth in writing.

 

7.           Effect of Certain Events.

 

7.1.         Adjustment Due to Distribution. If Borrower shall declare or make
any distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to Borrower’s stockholders in
cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then Lender shall be entitled, upon any
conversion of this Note after the date of record for determining stockholders
entitled to such Distribution, to receive the amount of such assets which would
have been payable to Lender with respect to the shares of Common Stock issuable
upon such conversion had Lender been the holder of such shares of Common Stock
on the record date for the determination of stockholders entitled to such
Distribution.

 

7.2.         Adjustments for Stock Split. Notwithstanding anything herein to the
contrary, any references to share numbers or share prices shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar
transaction.

 

8.           Method of Conversion Share Delivery. On or before the close of
business on the fifth (5th) Trading Day following the date of delivery of a
Conversion Notice (the “Delivery Date”), Borrower shall, provided it is DWAC
Eligible at such time, deliver or cause its transfer agent to deliver the
applicable Conversion Shares electronically via DWAC to the account designated
by Lender in the applicable Conversion Notice. If Borrower is not DWAC Eligible,
it shall deliver to Lender or its broker (as designated in the Conversion
Notice), via reputable overnight courier, a certificate representing the number
of shares of Common Stock equal to the number of Conversion Shares to which
Lender shall be entitled, registered in the name of Lender or its designee. For
the avoidance of doubt, Borrower has not met its obligation to deliver
Conversion Shares by the Delivery Date unless Lender or its broker, as
applicable, has actually received the certificate representing the applicable
Conversion Shares no later than the close of business on the relevant Delivery
Date pursuant to the terms set forth above. Moreover, and notwithstanding
anything to the contrary herein or in any other Transaction Document, in the
event Borrower or its transfer agent refuses to deliver any Conversion Shares to
Lender on grounds that such issuance is in violation of Rule 144 under the
Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver or cause
its transfer agent to deliver the applicable Conversion Shares to Lender with a
restricted securities legend, but otherwise in accordance with the provisions of
this Section 8. In conjunction therewith, Borrower will also deliver to Lender a
written opinion from its counsel or its transfer agent’s counsel opining as to
why the issuance of the applicable Conversion Shares violates Rule 144.

 

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9.           Conversion Delays. If Borrower fails to deliver Conversion Shares
in accordance with the timeframe stated in Section 8, Lender, at any time prior
to selling all of those Conversion Shares, may rescind in whole or in part that
particular Conversion attributable to the unsold Conversion Shares, with a
corresponding increase to the Outstanding Balance (the parties’ expectation
being that any returned amount will tack back to the Purchase Price Date for
purposes of determining the holding period under Rule 144). In addition, for
each Conversion, in the event that Conversion Shares are not delivered by the
sixth Trading Day (inclusive of the day of the Conversion), a late fee equal to
the greater of (a) $500.00 and (b) 2% of the applicable Conversion Share Value
rounded to the nearest multiple of $100.00 (but in any event the cumulative
amount of such late fees for each Conversion shall not exceed 200% of the
applicable Conversion Share Value) will be assessed for each day after the fifth
Trading Day (inclusive of the day of the Conversion) until Conversion Share
delivery is made; and such late fee will be added to the Outstanding Balance
(such fees, the “Conversion Delay Late Fees”). For illustration purposes only,
if Lender delivers a Conversion Notice to Borrower pursuant to which Borrower is
required to deliver 100,000 Conversion Shares to Lender and on the Delivery Date
such Conversion Shares have a Conversion Share Value of $20,000.00, then in such
event a Conversion Delay Late Fee in the amount of $500.00 per day (the greater
of $500.00 per day and $20,000.00 multiplied by 2%, which is $400.00) would be
added to the Outstanding Balance of the Note until such Conversion Shares are
delivered to Lender. For purposes of this example, if the Conversion Shares are
delivered to Lender twenty (20) days after the applicable Delivery Date, the
total Conversion Delay Late Fees that would be added to the Outstanding Balance
would be $10,000.00 (20 days multiplied by $500.00 per day). If the Conversion
Shares are delivered to Lender one hundred (100) days after the applicable
Delivery Date, the total Conversion Delay Late Fees that would be added to the
Outstanding Balance would be $40,000.00 (100 days multiplied by $500.00 per day,
but capped at 200% of the Conversion Share Value).

 

10.          Ownership Limitation. Notwithstanding anything to the contrary
contained in this Note or the other Transaction Documents, if at any time Lender
shall or would be issued shares of Common Stock under any of the Transaction
Documents, but such issuance would cause Lender (together with its affiliates)
to beneficially own a number of shares exceeding 4.99% of the number of shares
of Common Stock outstanding on such date (including for such purpose the shares
of Common Stock issuable upon such issuance) (the “Maximum Percentage”), then
Borrower must not issue to Lender shares of Common Stock which would exceed the
Maximum Percentage. For purposes of this section, beneficial ownership of Common
Stock will be determined pursuant to Section 13(d) of the 1934 Act. The shares
of Common Stock issuable to Lender that would cause the Maximum Percentage to be
exceeded are referred to herein as the “Ownership Limitation Shares”. Borrower
will reserve the Ownership Limitation Shares for the exclusive benefit of
Lender. From time to time, Lender may notify Borrower in writing of the number
of the Ownership Limitation Shares that may be issued to Lender without causing
Lender to exceed the Maximum Percentage. Upon receipt of such notice, Borrower
shall be unconditionally obligated to immediately issue such designated shares
to Lender, with a corresponding reduction in the number of the Ownership
Limitation Shares. Notwithstanding the forgoing, the term “4.99%” above shall be
replaced with “9.99%” at such time as the Market Capitalization is less than
$10,000,000.00. Notwithstanding any other provision contained herein, if the
term “4.99%” is replaced with “9.99%” pursuant to the preceding sentence, such
increase to “9.99%” shall remain at 9.99% until increased, decreased or waived
by Lender as set forth below. By written notice to Borrower, Lender may
increase, decrease or waive the Maximum Percentage as to itself but any such
waiver will not be effective until the 61st day after delivery thereof. The
foregoing 61-day notice requirement is enforceable, unconditional and
non-waivable and shall apply to all affiliates and assigns of Lender.

 

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11.          Payment of Collection Costs. If this Note is placed in the hands of
an attorney for collection or enforcement prior to commencing arbitration or
legal proceedings, or is collected or enforced through any arbitration or legal
proceeding, or Lender otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note, then Borrower shall pay the
costs incurred by Lender for such collection, enforcement or action including,
without limitation, attorneys’ fees and disbursements. Borrower also agrees to
pay for any costs, fees or charges of its transfer agent that are charged to
Lender pursuant to any Conversion or issuance of shares pursuant to this Note.

 

12.          Opinion of Counsel. In the event that an opinion of counsel is
needed for any matter related to this Note, Lender has the right to have any
such opinion provided by its counsel. Lender also has the right to have any such
opinion provided by Borrower’s counsel.

 

13.         Governing Law; Venue. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of Utah, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Utah or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Utah. The provisions set forth in the Purchase Agreement
to determine the proper venue for any disputes are incorporated herein by this
reference.

 

14.          Resolution of Disputes.

 

14.1.       Arbitration of Disputes. By its acceptance of this Note, each party
agrees to be bound by the Arbitration Provisions (as defined in the Purchase
Agreement) set forth as an exhibit to the Purchase Agreement.

 

14.2.       Calculation Disputes. Notwithstanding the Arbitration Provisions, in
the case of a dispute as to any Calculation (as defined in the Purchase
Agreement), such dispute will be resolved in the manner set forth in the
Purchase Agreement.

 

15.         Cancellation. After repayment or conversion of the entire
Outstanding Balance, this Note shall be deemed paid in full, shall automatically
be deemed canceled, and shall not be reissued.

 

16.         Amendments. The prior written consent of both parties hereto shall
be required for any change or amendment to this Note.

 

17.         Assignments. Borrower may not assign this Note without the prior
written consent of Lender. This Note and any shares of Common Stock issued upon
conversion of this Note may be offered, sold, assigned or transferred by Lender
without the consent of Borrower.

 

18.         Time is of the Essence. Time is expressly made of the essence with
respect to each and every provision of this Note and the documents and
instruments entered into in connection herewith.

 

19.         Notices. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
the subsection of the Purchase Agreement titled “Notices.”

 

20.         Liquidated Damages. Lender and Borrower agree that in the event
Borrower fails to comply with any of the terms or provisions of this Note,
Lender’s damages would be uncertain and difficult (if not impossible) to
accurately estimate because of the parties’ inability to predict future interest
rates, future share prices, future trading volumes and other relevant factors.
Accordingly, Lender and Borrower agree that any fees, balance adjustments, or
other charges assessed under this Note are not penalties but instead are
intended by the parties to be, and shall be deemed, liquidated damages (under
Lender’s and Borrower’s expectations that any such liquidated damages will tack
back to the Purchase Price Date for purposes of determining the holding period
under Rule 144).

 

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21.         Waiver of Jury Trial. EACH OF LENDER AND BORROWER IRREVOCABLY WAIVES
ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE
RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY. THIS WAIVER EXTENDS TO ANY
AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY
APPLICABLE STATUTE, LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO
ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S
RIGHT TO DEMAND TRIAL BY JURY.

 

22.         Voluntary Agreement. Borrower has carefully read this Note and has
asked any questions needed for Borrower to understand the terms, consequences
and binding effect of this Note and fully understand them. Borrower has had the
opportunity to seek the advice of an attorney of Borrower’s choosing, or has
waived the right to do so, and is executing this Note voluntarily and without
any duress or undue influence by Lender or anyone else.

 

23.         Severability. If any part of this Note is construed to be in
violation of any law, such part shall be modified to achieve the objective of
Borrower and Lender to the fullest extent permitted by law and the balance of
this Note shall remain in full force and effect.

 

24.         Par Value Adjustments. If at any time Lender delivers a Conversion
Notice to Borrower and as of such date the Conversion Price would be less than
the Par Value, then, as liquidated damages, Company must pay to Lender the Par
Value Adjustment Amount in cash within one (1) Trading Day of delivery of the
applicable Conversion Notice (a “Par Value Adjustment”). If Borrower does not
deliver the Par Value Adjustment Amount as required, then such amount shall
automatically be added to the Outstanding Balance. The number of Conversion
Shares deliverable pursuant to any relevant Conversion Notice following a Par
Value Adjustment shall be equal to (a) the Conversion Amount, divided by (b) the
Par Value. In the event of a Par Value Adjustment, Lender will use a Conversion
Notice in substantially the form attached hereto as Exhibit B.

 

[Remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the
Closing Date.

 

  BORROWER:       Omagine, Inc.         By: /s/ Frank J. Drohan   Name: Frank J.
Drohan   Title: President - CEO

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

LENDER:

 

St. George Investments LLC

 

By: Fife Trading, Inc., Manager             By: /s/ John M. Fife       John M.
Fife, President  

 

[Signature Page to Convertible Promissory Note]

  

 

 

 

ATTACHMENT 1

DEFINITIONS

 

For purposes of this Note, the following terms shall have the following
meanings:

 

A1.        “Bloomberg” means Bloomberg L.P. (or if that service is not then
reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by Lender and reasonably
satisfactory to Borrower).

 

A2.        “Conversion Share Value” means the product of the number of
Conversion Shares deliverable pursuant to any Conversion multiplied by the daily
VWAP of the Common Stock on the Delivery Date for such Conversion.

 

A3.        “Default Effect” means multiplying the Outstanding Balance as of the
date the applicable Event of Default occurred by (a) 15% for each occurrence of
any Major Default, or (b) 5% for each occurrence of any Minor Default, and then
adding the resulting product to the Outstanding Balance as of the date the
applicable Event of Default occurred, with the sum of the foregoing then
becoming the Outstanding Balance under this Note as of the date the applicable
Event of Default occurred; provided that the Default Effect may only be applied
three (3) times hereunder with respect to Major Defaults and three (3) times
hereunder with respect to Minor Defaults; and provided further that the Default
Effect shall not apply to any Event of Default pursuant to Section 4.1(b)
hereof.

 

A4.        “DTC” means the Depository Trust Company or any successor thereto.

 

A5.        “DTC Eligible” means, with respect to the Common Stock, that such
Common Stock is eligible to be deposited in certificate form at the DTC, cleared
and converted into electronic shares by the DTC and held in the name of the
clearing firm servicing Lender’s brokerage firm for the benefit of Lender and
the parties hereby agree that if such Common Stock cannot be so deposited,
cleared, converted and held solely because of the necessity pursuant to Rule 144
under the Securities Act of 1933, as amended, for a restrictive legend to appear
on any stock certificate representing shares of the Common Stock and therefore
such Common Stock must be delivered in certificate form (a “144 Event”), then
such Common Stock relevant to such 144 Event shall not be deemed to be not DTC
Eligible solely because of such 144 Event and, absent any other impediment to
DTC Eligibility, such Common Stock shall at all times and in all cases and
respects be deemed to be DTC Eligible.

 

A6.        “DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer
program.

 

A7.        “DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

 

A8.        “DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at
DTC for full services pursuant to DTC’s operational arrangements, including
without limitation transfer through DTC’s DWAC system, (b) Borrower has been
approved (without revocation) by DTC’s underwriting department, (c) Borrower’s
transfer agent is approved as an agent in the DTC/FAST Program, (d) the
Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has
previously delivered all Conversion Shares to Lender via DWAC; and (f)
Borrower’s transfer agent does not have a policy prohibiting or limiting
delivery of the Conversion Shares via DWAC (the foregoing a, b, c, d, e and f
being the “DWAC Conditions”). Notwithstanding the foregoing sentence, the
parties hereby agree that if any shares of Common Stock cannot comport with or
meet the DWAC Conditions solely because of a 144 Event with respect to such
shares, then such Common Stock relevant to such 144 Event shall not be deemed to
be not DWAC Eligible solely because of such 144 Event and, absent any other
impediment to DWAC Eligibility, such Common Stock shall at all times and in all
cases and respects be deemed to be DWAC Eligible.

 

Attachment 1 to Convertible Promissory Note, Page 1

 

 

 

 

A9.        “Fundamental Transaction” means that (a) (i) Borrower or any of its
subsidiaries other than Omagine LLC shall, directly or indirectly, in one or
more related transactions, consolidate or merge with or into (whether or not
Borrower or any of its subsidiaries is the surviving corporation) any other
person or entity, or (ii) Borrower or any of its subsidiaries other than Omagine
LLC shall, directly or indirectly, in one or more related transactions, sell,
lease, license, assign, transfer, convey or otherwise dispose of all or
substantially all of its respective properties or assets to any other person or
entity, or (iii) Borrower or any of its subsidiaries shall, directly or
indirectly, in one or more related transactions, allow any other person or
entity to make a purchase, tender or exchange offer, other than a purchase,
tender or exchange offer with respect to Omagine LLC, that is accepted by the
holders of more than 50% of the outstanding shares of voting stock of Borrower
(not including any shares of voting stock of Borrower held by the person or
persons making or party to, or associated or affiliated with the persons or
entities making or party to, such purchase, tender or exchange offer), or
(iv) Borrower or any of its subsidiaries shall, directly or indirectly, in one
or more related transactions, consummate a stock or share purchase agreement or
other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with any other person or
entity whereby such other person or entity acquires more than 50% of the
outstanding shares of voting stock of Borrower (not including any shares of
voting stock of Borrower held by the other persons or entities making or party
to, or associated or affiliated with the other persons or entities making or
party to, such stock or share purchase agreement or other business combination),
or (v) Borrower or any of its subsidiaries shall, directly or indirectly, in one
or more related transactions, reorganize, recapitalize or reclassify the Common
Stock, other than an increase in the number of authorized shares of Borrower’s
Common Stock, or (b) any “person” or “group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and
regulations promulgated thereunder) is or shall become the “beneficial owner”
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding voting
stock of Borrower.

 

A10.      “Major Default” means any Event of Default occurring under Sections
4.1(a), 4.1(h) or 4.1(k) of this Note.

 

A11.      “Mandatory Default Amount” means the greater of (a) the Outstanding
Balance divided by the Conversion Price on the date the Mandatory Default Amount
is demanded, multiplied by the VWAP on the date the Mandatory Default Amount is
demanded, or (b) the Outstanding Balance following the application of the
Default Effect.

 

A12.      “Market Capitalization” means a number equal to (a) the average VWAP
of the Common Stock for the immediately preceding fifteen (15) Trading Days,
multiplied by (b) the aggregate number of outstanding shares of Common Stock as
reported on Borrower’s most recently filed Form 10-Q or Form 10-K.

 

A13.      “Minor Default” means any Event of Default that is not a Major
Default.

 

A14.      “OID” means an original issue discount.

 

A15.      “Other Agreements” means, collectively, all existing and future
agreements and instruments between, among or by Borrower (or an affiliate) and
Lender (or an affiliate).

 

A16.      “Outstanding Balance” means as of any date of determination, the
Purchase Price, as reduced or increased, as the case may be, pursuant to the
terms hereof for payment, Conversion, offset, or otherwise, plus the Transaction
Expense Amount, accrued but unpaid interest, collection and enforcements costs
(including attorneys’ fees) incurred by Lender, transfer, stamp, issuance and
similar taxes and fees related to Conversions, and any other fees or charges
(including without limitation Conversion Delay Late Fees) incurred under this
Note.

 

A17.      “Par Value” means the par value of the Common Stock on any relevant
date of determination. The Par Value as of the Closing Date is $0.001.

 

A18.      “Par Value Adjustment Amount” means an amount calculated as follows:
(a) the number of Conversion Shares deliverable under a particular Conversion
Notice (prior to any Par Value Adjustment) multiplied by the Par Value, less (b)
the Conversion Amount (prior to any Par Value Adjustment), plus (c) $500.00. For
illustration purposes only, if for a given Conversion, the Conversion Amount was
$20,000.00, the Conversion Price was $0.0008 and the Par Value was $0.001 then
the Par Value Adjustment Amount would be $5,500.00 (25,000,000 Conversion Shares
($20,000.00/$0.0008) multiplied by the Par Value of $0.001 ($25,000.00) minus
the Conversion Amount of $20,000.00 plus $500.00 equals $5,500.00).

 

A19.      “Purchase Price Date” means the date the Purchase Price is received by
Borrower from Lender.

 

A20.      “Trading Day” means any day on which the New York Stock Exchange is
open for trading.

 

A21.      “VWAP” means the volume weighted average price of the Common stock on
the principal market for a particular Trading Day or set of Trading Days, as the
case may be, as reported by Bloomberg.

 

Attachment 1 to Convertible Promissory Note, Page 2

 

 

 

 

EXHIBIT A

 

St. George Investments LLC

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

Omagine, Inc. Date: __________________

Attn: Frank J. Drohan, CEO

136 Madison Avenue, 5th Floor

New York, New York 10016

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to Omagine, Inc., a Delaware
corporation (the “Borrower”), pursuant to that certain Convertible Promissory
Note made by Borrower in favor of Lender on November 14, 2016 (the “Note”), that
Lender elects to convert the portion of the Outstanding Balance set forth below
into fully paid and non-assessable shares of Common Stock of Borrower as of the
date of Conversion specified below. Said Conversion shall be based on the
Conversion Price set forth below. In the event of a conflict between this
Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form
of Conversion Notice to conform to the Note. Capitalized terms used in this
notice without definition shall have the meanings given to them in the Note.

 

A.Date of Conversion: ____________

B.Conversion #: ____________

C.Conversion Amount: ____________

D.Conversion Price: _______________

E.Conversion Shares: _______________ (C divided by D)

F.Remaining Outstanding Balance of Note: ____________*

 

* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement), the terms of which shall control in the event of any dispute between
the terms of this Conversion Notice and such Transaction Documents.

 

Please transfer the Conversion Shares electronically (via DWAC) to the following
account:

 

Broker:     Address:   DTC#:         Account #:         Account Name:        

 

To the extent the Conversion Shares are not able to be delivered to Lender
electronically via the DWAC system, deliver all such certificated shares to
Lender via reputable overnight courier after receipt of this Conversion Notice
(by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

 

Exhibit A to Convertible Promissory Note, Page 1

 

 

 

 

 Sincerely,

 

Lender:

 

St. George Investments LLC

 

By: Fife Trading, Inc., Manager             By:         John M. Fife, President
 

 

 

Exhibit A to Convertible Promissory Note, Page 2

 

 

 

 

EXHIBIT B

 

St. George Investments LLC

303 East Wacker Drive, Suite 1040

Chicago, Illinois 60601

 

Omagine, Inc. Date: __________________

Attn: Frank J. Drohan, CEO

136 Madison Avenue, 5th Floor

New York, New York 10016

 

CONVERSION NOTICE

 

The above-captioned Lender hereby gives notice to Omagine, Inc., a Delaware
corporation (the “Borrower”), pursuant to that certain Convertible Promissory
Note made by Borrower in favor of Lender on November 14, 2016 (the “Note”), that
Lender elects to convert the portion of the Outstanding Balance set forth below
into fully paid and non-assessable shares of Common Stock of Borrower as of the
date of Conversion specified below. Said Conversion shall be based on the
Conversion Price set forth below. In the event of a conflict between this
Conversion Notice and the Note, the Note shall govern, or, in the alternative,
at the election of Lender in its sole discretion, Lender may provide a new form
of Conversion Notice to conform to the Note. Capitalized terms used in this
notice without definition shall have the meanings given to them in the Note.

 

A.Date of Conversion: ____________

B.Conversion #: ____________

C.Conversion Amount: ____________

D.Par Value Adjustment Amount: _______________

E.Conversion Price: _______________ (Par Value)

F.Conversion Shares: _______________ (C divided by E)

G.Remaining Outstanding Balance of Note: ____________*

 

* Subject to adjustments for corrections, defaults, interest and other
adjustments permitted by the Transaction Documents (as defined in the Purchase
Agreement), the terms of which shall control in the event of any dispute between
the terms of this Conversion Notice and such Transaction Documents.

 

Please transfer the Conversion Shares electronically (via DWAC) to the following
account:

 

Broker:     Address:   DTC#:         Account #:         Account Name:        

 

To the extent the Conversion Shares are not able to be delivered to Lender
electronically via the DWAC system, deliver all such certificated shares to
Lender via reputable overnight courier after receipt of this Conversion Notice
(by facsimile transmission or otherwise) to:

 

_____________________________________

_____________________________________

_____________________________________

 

The Par Value Adjustment Amount must be paid in cash within one (1) Trading Day
of your receipt of this Conversion Notice.

 

Exhibit B to Convertible Promissory Note, Page 1

 

 

 

 

Sincerely,

 

Lender:

 

St. George Investments LLC

 

By: Fife Trading, Inc., Manager             By:         John M. Fife, President
 

 

Exhibit B to Convertible Promissory Note, Page 2