Exhibit 10.16

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF
THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

US $90,000.00

 

VERUS INTERNATIONAL, INC.

4% CONVERTIBLE NOTE

DUE JULY 22, 2021

 

FOR VALUE RECEIVED, VERUS INTERNATIONAL, INC. (the “Company”) promises to pay to
the order of [___] and its authorized successors and permitted assigns
(“Holder”), the principal amount of Ninety Thousand Dollars (U.S. $90,000.00) on
July 22, 2021 (“Maturity Date”) and to pay interest on the principal amount
outstanding hereunder at the rate of 4% per annum commencing on July 22, 2020
(“Issuance Date”). This Note shall contain an original issue discount (“OID”) of
$15,000 such that the purchase price of this Note shall be $75,000. The interest
will be paid to the Holder in whose name this Note is registered on the records
of the Company regarding registration and transfers of this Note. The principal
of, and interest on, this Note are payable at [___], and if changed, last
appearing on the records of the Company as designated in writing by the Holder
hereof from time to time. The Company will pay each interest payment and the
outstanding principal due upon this Note on or prior to the Maturity Date, less
any amounts required by law to be deducted or withheld, to the Holder of this
Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check or wire
transfer shall constitute a payment of outstanding principal hereunder and shall
satisfy and discharge the liability for principal on this Note to the extent of
the sum represented by such check or wire transfer. Interest shall be payable in
cash or in Common Stock (as defined below) pursuant to Section 4(b) herein.

 

This Note is subject to the following additional provisions:

 

1. This Note is exchangeable for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same. No service charge will be made for such registration or transfer or
exchange, except that Holder shall pay any tax or other governmental charges
payable in connection therewith. To the extent that Holder subsequently
transfers, assigns, sells or exchanges any of the multiple lesser denomination
notes, Holder acknowledges that it will provide the Company with opinions of
counsel as provided for in Section 2(f) of the Securities Purchase Agreement by
the between the Company and the Holder dated July 22, 2020.

 

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2. The Company shall be entitled to withhold from all payments any amounts
required to be withheld under applicable laws.

 

3. This Note may be transferred or exchanged only in compliance with the
Securities Act of 1933, as amended (the “Act”), applicable state securities laws
and Sections 2(f) of the Securities Purchase Agreement. Any attempted transfer
to a non-qualifying party shall be treated by the Company as void. Prior to due
presentment for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on the Company’s
records as the owner hereof 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. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the
requirements set forth in Section 4(a), and any prequalified prospective
transferee of this Note, also is required to give the Company written
confirmation that this Note is being converted (“Notice of Conversion”) in the
form annexed hereto as Exhibit A. The date of receipt (including receipt by
telecopy) of such Notice of Conversion shall be the conversion date (the
“Conversion Date”). All notices of conversion will be accompanied by an opinion
of counsel, at the cost of the Buyer.

 

4. (a) During the first 6 months this Note is in effect, the Holder of this Note
is entitled, at its option, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock
(the “Common Stock”) at a price (“Conversion Price”) for each share of Common
Stock at fixed price of $0.10 per share. After the 6th monthly anniversary, the
Conversion Price shall be equal to 63% of the lowest closing price of the Common
Stock as reported on the National Quotations Bureau OTC Markets exchange which
the Company’s shares are traded or any exchange upon which the Common Stock may
be traded in the future (“Exchange”), for the twenty prior trading days
including the day upon which a Notice of Conversion is received by the Company
or its transfer agent (provided such Notice of Conversion is delivered by fax or
other electronic method of communication to the Company or its transfer agent
after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to
include the same day closing price). If the shares have not been delivered
within 3 business days, the Notice of Conversion may be rescinded. Such
conversion shall be effectuated by the Company delivering the shares of Common
Stock to the Holder within 3 business days of receipt by the Company of the
Notice of Conversion. Accrued but unpaid interest shall be subject to
conversion. No fractional shares or scrip representing fractions of shares will
be issued on con- version, but the number of shares issuable shall be rounded to
the nearest whole share. To the extent the Conversion Price of the Company’s
Common Stock closes below the par value per share, the Company will take all
steps necessary to solicit the consent of the stockholders to reduce the par
value to the lowest value possible under law. The Company agrees to honor all
conversions submitted pending this increase. In the event the Company
experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 53% instead of 63% while that “Chill” is in effect. In no event shall the
Holder be allowed to effect a conversion if such conversion, along with all
other shares of Company Common Stock beneficially owned by the Holder and its
affiliates would exceed 9.9% of the outstanding shares of the Common Stock of
the Company. The conversion discount, look back period and other terms will be
adjusted on a ratchet basis if the Company offers a more favorable conversion
discount, interest rate, (whether through a straight discount or in combination
with an original issue discount), look back period or other more favorable term
to another party for any financings while this Note is in effect).

 

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(b) Interest on any unpaid principal balance of this Note shall be paid at the
rate of 4% per annum. Interest shall be paid by the Company in Common Stock
(“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion
to the Company for Interest Shares based on the formula provided in Section 4(a)
above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of
this Note to the date of such notice.

 

(c) The Note may be prepaid with the following penalties:

 

Time Period   Payment Premium <=90 days after note issuance   105% of the sum of
principal plus accrued interest >90 days <=120 days after note issuance   110%
of the sum of principal plus accrued interest >120 days <= 150 days after note
issuance   115% of the sum of principal plus accrued interest >150 days <=180
days after note issuance   120% of the sum of principal plus accrued interest

 

This Note may not be prepaid after the 180th day. Such redemption must be closed
and funded within 3 days of giving notice of redemption of the right to redeem
shall be null and void. Any partial prepayments will be made in accordance with
the formula set forth in the chart above with respect to principal, premium and
interest.

 

(d) Upon (i) a transfer of all or substantially all of the assets of the Company
to any person in a single transaction or series of related transactions, (ii) a
reclassification, capital reorganization (excluding an increase in authorized
capital) or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any
consolidation or merger of the Company with or into another person or entity in
which the Company is not the surviving entity (other than a merger which is
effected solely to change the jurisdiction of incorporation of the Company and
results in a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock) (each of items (i), (ii) and
(iii) being referred to as a “Sale Event”), then, in each case, the Holder may
convert the unpaid principal amount of this Note (together with the amount of
accrued but unpaid interest) into shares of Common Stock immediately prior to
such Sale Event at the Conversion Price.

 

(e) In case of any Sale Event (not to include a sale of all or substantially all
of the Company’s assets) in connection with which this Note is not converted,
the Company shall cause effective provision to be made so that the Holder of
this Note shall have the right thereafter, by converting this Note, to purchase
or convert this Note into the kind and number of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of
the number of shares of Common Stock that could have been purchased upon
exercise of the Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions shall similarly
apply to successive Sale Events. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Company or successor person or entity acting in good faith.

 

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5. No provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, and
interest on, this Note at the time, place, and rate, and in the form, herein
prescribed.

 

6. The Company hereby expressly waives demand and presentment for payment,
notice of non-payment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, and diligence in taking any action to
collect amounts called for hereunder and shall be directly and primarily liable
for the payment of all sums owing and to be owing hereto.

 

7. The Company agrees to pay all costs and expenses, including reasonable
attorneys’ fees and expenses, which may be incurred by the Holder in collecting
any amount due under this Note.

 

8. If one or more of the following described “Events of Default” shall occur:

 

(a) The Company shall default in the payment of principal or interest on this
Note or any other note issued to the Holder by the Company; or

 

(b) Any of the representations or warranties made by the Company herein or in
any certificate or financial or other written statements heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Note, or the Securities Purchase Agreement under which this
Note was issued shall be false or misleading in any respect; or

 

(c) The Company shall fail to perform or observe, in any respect, any covenant,
term, provision, condition, agreement or obligation of the Company under this
Note or any other note issued to the Holder; or

 

(d) The Company shall (1) become insolvent (which does not include a “going
concern opinion); (2) admit in writing its inability to pay its debts generally
as they mature; (3) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; (4) apply for or consent to the appointment of
a trustee, liquidator or receiver for its or for a substantial part of its
property or business; (5) file a petition for bankruptcy relief, consent to the
filing of such petition or have filed against it an involuntary petition for
bankruptcy relief, all under federal or state laws as applicable; or

 

(e) A trustee, liquidator or receiver shall be appointed for the Company or for
a substantial part of its property or business without its consent and shall not
be discharged within sixty (60) days after such appointment; or

 

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(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company; or

 

(g) One or more money judgments, writs or warrants of attachment, or similar
process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall
be entered or filed against the Company or any of its properties or other assets
and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen
(15) days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; or

 

(h) Defaulted on or breached any term of any other note of similar debt
instrument into which the Company has entered and failed to cure such default
within the appropriate grace period; or

 

(i) The Company shall have its Common Stock delisted from a Trading Market or,
if the Common Stock trades on a Trading Market, then trading in the Common Stock
shall be suspended for more than ten (10) consecutive Trading Days (as defined
herein) or the Company ceases to file reports pursuant to the Securities
Exchange Act of 1934 with the SEC; or

 

(j) If a majority of the members of the Board of Directors of the Company on the
date hereof are no longer serving as members of the Board; or

 

(k) The Company shall not deliver to the Holder the Common Stock issuable upon
conversion of this Note (the “Conversion Shares”) pursuant to paragraph 4 herein
within three (3) business days of its receipt of a Notice of Conversion (the
“Share Delivery Date”),

 

(l) The Company shall not replenish the reserve set forth in Section 12, within
three (3) business days of the request of the Holder.

 

Then, or at any time thereafter, unless cured within five (5) Trading Days, and
in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option of the Holder and in the Holder’s sole
discretion, the Holder may consider this Note immediately due and payable,
without presentment, demand, protest or (further) notice of any kind (other than
notice of acceleration), all of which are hereby expressly waived, anything
herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately, and with- out expiration of any
period of grace, enforce any and all of the Holder’s rights and remedies pro-
vided herein or any other rights or remedies afforded by law. Upon an Event of
Default, interest shall accrue at a default interest rate of 24% per annum or,
if such rate is usurious or not permitted by current law, then at the highest
rate of interest permitted by law. In the event of a breach of Section 8(k) the
penalty shall be $250 per day the shares are not issued beginning on the 4th day
after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day after the conversion notice
was delivered to the Company.

 

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If the Holder shall commence an action or proceeding to enforce any provisions
of this Note, including, without limitation, engaging an attorney, then if the
Holder prevails in such action, the Holder shall be reimbursed by the Company
for its attorneys’ fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or proceeding.

 

For purposes of this Section 8, “Trading Day” means a day on which the principal
Trading Market is open for trading. “Trading Market” means any of the following
markets or exchanges on which the Common Stock is listed or quoted for trading
on the date in question: the OTC Markets, the NYSE American, the Nasdaq Capital
Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange (or any successors to any of the foregoing).

 

9. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Company fails for any reason to deliver to the Holder such certificate or
certificates by the Share Deliver Date, and if after such Share Delivery Date
the Holder is required by its brokerage firm to purchase (in an open market
transaction or otherwise), or the Holder’s brokerage firm otherwise purchases,
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A)
pay in cash to the Holder, if any, the amount by which (x) the Holder’s total
purchase price (including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that the Holder was entitled to receive from the conversion at
issue multiplied by (2) the actual sale price at which the sell order giving
rise to such purchase obligation was executed (including any brokerage
commissions) and (B) at the option of the Holder, either reissue (if
surrendered) this Note in a principal amount equal to the principal amount of
the attempted conversion (in which case such conversion shall be deemed
rescinded) or deliver to the Holder the number of shares of Common Stock that
would have been issued if the Company had timely complied with its delivery
requirements hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of this Note with respect to which the actual sale price of the
Conversion Shares (including any brokerage commissions) giving rise to such
purchase obligation was a total of $10,000 under clause (A) of the im- mediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company,
evidence of the amount of such loss.

 

10. In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability
of the remaining provisions of this Note will not in any way be affected or
impaired thereby.

 

11. Neither this Note nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the Company and the
Holder.

 

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12. The Company represents that it is not a “shell” issuer and that if it
previously has been a “shell” issuer that on the 180 day anniversary of the date
of this Note at least twelve (12) months would have passed since the Company has
reported Form 10 type information indicating it is no longer a “shell issuer.

 

13. The Company shall issue irrevocable transfer agent instructions reserving
170,068,000 shares of its Common Stock for conversions under this Note (the
“Share Reserve”). Upon full conversion of this Note, any shares remaining in the
Share Reserve shall be cancelled. The Company shall pay all transfer agent costs
and legal opinion fees associated with issuing and delivering the share
certificates to Holder. If such amounts are to be paid by the Holder, it may
deduct such amounts from the principal amount being converted. The Company
should at all times reserve a minimum of 250% of the amount of shares required
if the Note would be fully converted. The Holder may reasonably request
increases from time to time to reserve such amounts; provided, however, that the
total amount reserved shall in no event exceed 250% of the amount of shares
required if the Note would be fully converted. The Company will instruct its
transfer agent to provide the outstanding share information to the Holder in
connection with its conversions.

 

13. Intentionally Deleted.

 

14. If it shall be found that any interest or other amount deemed interest due
hereunder violates the applicable law governing usury, the applicable provision
shall automatically be revised to equal the maximum rate of interest or other
amount deemed interest permitted under applicable law. The Company covenants (to
the extent that it may lawfully do so) that it will not seek to claim or take
advantage of any law that would prohibit or forgive the Company from paying all
or a portion of the principal or interest on this Note.

 

15. This Note shall be governed by and construed in accordance with the laws of
New York applicable to contracts made and wholly to be performed within the
State of New York and shall be binding upon the successors and assigns of each
party hereto. The Holder and the Company hereby mutually waive trial by jury and
consent to exclusive jurisdiction and venue in the courts of the State of New
York or in the Federal courts sitting in the county or city of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an
executed counterpart to this Agreement shall be effective as an original.

 

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an
officer thereunto duly authorized.

 

Dated: July 22, 2020

 

  VERUS INTERNATIONAL, INC.         By:       Anshu Bhatnagar, Chief Executive
Officer

 

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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 the
above Note into _____________ shares of Common Stock (“Shares”) of VERUS
INTERNATIONAL, INC. 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:    

 

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