EXHIBIT 10.16 

 

INTERESTS REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE INTERESTS ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED HEREUNDER
AND PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.

 

MIDWEST ENERGY EMISSIONS CORP.

 

12.0% UNSECURED CONVERTIBLE PROMISSORY NOTE

 

Lewis Center, Ohio

Date: __________

No. MEEC-CN-2018-__

 

THIS UNSECURED CONVERTIBLE PROMISSORY NOTE (the “Note”) is one of a duly
authorized issue of promissory notes of Midwest Energy Emissions Corp., a
corporation duly organized and existing under the laws of the State of Delaware
having its principal address at 670 D Enterprise Drive, Lewis Center, Ohio 43035
(the “Company”), designated as its 12.0% Unsecured Convertible Promissory Notes
in the aggregate principal amount not exceeding Three Million Five Hundred
Thousand Dollars ($3,500,000) (the “Notes”). The Notes will be issued under and
pursuant to the terms and provisions of a Subscription Agreement or Debt
Exchange Agreement entered into by the Company with the original purchaser
therein who is referred to in this Note as the original holder (the “Original
Holder”). This Note is subject to all of the terms and provisions thereunder, to
which reference is hereby made for the terms and provisions thereof.

 

FOR VALUE RECEIVED, the Company promises to pay to _________________________,
with an address at ______________________________, email: _________________, or
permitted assigns (the “Holder”), the principal sum of U.S. $______________ on
_______________, 2023 (the “Maturity Date”), and to pay interest on the
principal sum outstanding under this Note (the “Outstanding Principal Amount”),
at the rate of 12.0% per annum due and payable semi-annually in arrears on the
1st day of January and July of each year (each an “Interest Payment Date”), with
the first such payment due on January 1, 2019, subject to Section 1 hereof.
Accrual of interest shall commence on the first day to occur after the date
hereof and shall continue until payment in full of the Outstanding Principal
Amount and all interest hereunder has been made. The principal of and interest
on this Note are payable in such coin or currency of the United States of
America as of the time of payment is legal tender for payment of public and
private debts.

 

  1

 

 

This Note is subject to the following additional provisions:

 

1. Payment.

 

(a) Interest. Payment of interest on this Note, including any default interest,
shall be made to the Holder on or before the close of business on the Interest
Payment Date (or if the Interest Payment Date is not a Business Day, then the
first Business Day after the Interest Payment Date) in the year of the relevant
payment dates, and shall be deemed made when mailed to his address as last
reported to the Company. Where required, calculations and respective interest on
this Note will be made on the basis of a 360 day year consisting of 12 months,
30 days each and, in the case of an uncompleted month, the actual number of days
elapsed. In the event that this Note is converted into Common Stock as provided
in Section 3 hereof, interest will be paid up to but not including (i) the date
of the Company’s receipt of the Conversion Notice with respect to a voluntary
conversion by the Holder provided in Section 3(b) hereof, or (ii) the Forced
Conversion Date with respect to a Forced Conversion provided in Section 3(c)
hereof.

 

(b) Principal. Payment of the full Outstanding Principal Amount of this Note
shall be made on the Maturity Date (or if the Maturity Date is not a Business
Day, then the first Business Day after the Maturity Date) to the Holder at his
address as last reported to the Company and shall be deemed made when received.

 

2. Prepayment. Except as otherwise set forth below, the Company may, without
premium or penalty, at any time commencing one (1) year from the date hereof,
prepay all or a portion of the Outstanding Principal Amount of this Note
provided that such prepayment is accompanied by accrued and unpaid interest,
including any default interest, on the Outstanding Principal Amount, calculated
as of the date of prepayment (the “Prepayment Interest”). Notice of prepayment
(the “Prepayment Notice”) shall be provided no less than thirty (30) days before
the prepayment date to each Holder of Notes to be prepaid at such Holder’s
address as last reported to the Company. The Company may issue a subsequent
Prepayment Notice only after the expiration of a period of ninety (90) days from
the end of the thirty (30) day notice period of the last Prepayment Notice. On
and after the prepayment, interest ceases to accrue on the portion of the Notes
called for prepayment.

 

3. Conversion.

 

(a) Defined Terms. For purposes of this Section 3, the terms listed below shall
have the respective meanings set forth below:

 

(i) “Closing Price” means, on any particular date, the closing price of the
Common Stock as recorded by the principal Trading Market on which the Common
Stock is then listed or quoted.

 

(ii) “Trading Day” means a day on which the principal Trading Market is open for
trading.

 

(iii) “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
NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange, the OTCQX Market, the OTCQB Market,
or the OTC Pink Market, or any successors to any of the foregoing or such other
principal stock market or exchange on which the Common Stock is then traded for
the date in question.

 

  2

 

 

(b) Voluntary Conversion by Holder. At any time after six (6) months from the
date hereof, the Outstanding Principal Amount of this Note may be converted at
any time and from time to time in whole or in part, at the option of the Holder,
into shares of Common Stock. If this Note is called for prepayment, the Holder
may convert the Outstanding Principal Amount in whole or in part at any time
before the close of business on the fifth (5th) day prior to the prepayment
date. The initial conversion price shall be equal to $0.50 per share, subject to
adjustment as provided elsewhere herein (the “Conversion Price”). To determine
the number of shares of Common Stock issuable upon conversion of this Note,
divide the Outstanding Principal Amount to be converted by the Conversion Price
in effect on the conversion date. To convert this Note, the Holder must (1)
complete and sign the conversion notice in the form of Exhibit 1 hereto (the
“Conversion Notice”), (2) surrender this Note to the Company, (3) furnish
appropriate endorsements and transfer documents if required by the Company, and
(4) pay any transfer or similar tax if required. The Holder may convert a
portion of this Note if the portion is $1,000 or an integral multiple of $1,000.

 

(c) Forced Conversion of this Note at the Option of the Company. If at any time
after six (6) months from the date hereof, the Closing Price of the Common Stock
exceeds $1.00 per share (as adjusted for any stock dividend, stock split, stock
combination, reclassification or similar transaction) for ten (10) consecutive
Trading Days (the “Forced Conversion Measuring Period”), the Company shall have
the right to convert (the “Forced Conversion”) all of the Outstanding Principal
Amount of this Note into shares of Common Stock at the Conversion Price then in
effect. The Company may exercise its right to require conversion under this
Section 3(c) by delivering within five (5) Trading Days following the end of
such Forced Conversion Measuring Period a written notice thereof to all, but not
less than all, of the holders of the then outstanding Notes (the “Forced
Conversion Notice” and the date on which the Holders are given such notice is
referred to as the “Forced Conversion Notice Date”). The Forced Conversion
Notice shall be irrevocable. The Forced Conversion Notice shall state (i) the
date on which the Forced Conversion shall occur which shall be no less than
twenty (20) Trading Days and no more than thirty (30) Trading Days following the
Forced Conversion Notice Date (the “Forced Conversion Date”), and (ii) the
number of shares of Common Stock to be issued to such Holder on the Forced
Conversion Date. Upon the Forced Conversion Date, the Holder shall automatically
and without any act by the Company or the Holder be deemed to be the holder of
the shares of Common Stock as set forth therein and, whether or not the Holder
has surrendered this Note, the Holder shall cease to have any rights pursuant to
this Note (except with respect to any accrued and unpaid interest to be paid in
cash by the Company), but shall have all of the rights granted to it as a holder
of shares of Common Stock. To receive a certificate representing the shares of
Common Stock, the Holder shall (1) surrender this Note to the Company, and (2)
complete and sign the forced conversion statement in the form of Exhibit 2
hereto.

 

(d) Adjustment for Interest. No adjustment or allowance should be made for
interest on the principal amount of this Note surrendered for conversion, except
that upon conversion interest accrued but unpaid on the amount surrendered for
conversion shall be paid in cash.

 

(e) Fractional Shares. No fractional shares shall be issued upon conversion of
this Note. In place of a fractional share, the Company shall pay the holder of
this Note an amount in cash equal to the product of such fraction and the
Conversion Price.

 

  3

 

 

(f) Adjustment for Stock Dividends and Stock Splits. If the Company:

 

(i) pays a stock dividend or makes a distribution on its outstanding shares of
Common Stock in shares of its Common Stock;

 

(ii) subdivides its outstanding shares of Common Stock into a greater number of
shares; or

 

(iii) combines its outstanding shares of Common Stock into a smaller number of
shares;

 

then the conversion privilege and the Conversion Price in effect immediately
prior to such action shall be adjusted so that upon conversion the Holder may
receive the number of shares of capital stock of the Company which the Holder
would have owned immediately prior to such action. The adjustment shall become
effective immediately after the record date in the case of a stock dividend or
distribution and immediately after the effective date in the case of a
subdivision or combination. If after an adjustment a Holder upon conversion may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Conversion Price between
the classes of capital stock. After such allocation, the conversion privilege
and the Conversion Price of each class of capital stock shall thereafter be
subject to adjustment on terms comparable to those applicable to Common Stock in
this subsection.

 

(g) Reorganization, Reclassification, Consolidation, Merger or Sale. In the case
of any reclassification, capital reorganization, consolidation, merger, sale of
all or substantially all of the assets of the Company to another person or any
other change in the Common Stock of the Company, other than as a result of a
subdivision, combination, or stock dividend provided for in sub-clause (f)
hereof (any of which, a “Change Event”), then lawful provision shall be made,
and duly executed documents evidencing the same from the Company or its
successor shall be delivered to the Holder, such that the Holder shall have the
right at any time prior to the expiration of this Note to purchase, at a total
price equal to that payable upon the exercise of this Note (subject to the
adjustment of the Conversion Price as provided in this Section), the kind and
amount of shares of stock or other securities and property receivable in
connection with such Change Event by a holder of the same number of shares of
Common Stock as were purchasable by the Holder immediately prior to such Change
Event. Appropriate adjustments shall also be made to the Conversion Price, but
the aggregate Conversion Price shall remain the same. Notwithstanding anything
to the contrary contained herein, with respect to any Change Event, the Holder
shall have the right to elect prior to the consummation of such event or
transaction to give effect to the exercise its right to convert into Common
Stock and receive the securities and other consideration issued to holder of
Common Stock in the Change Event in lieu of giving effect to the provisions of
this Section.

 

(h) When Adjustment May be Deferred. No adjustment in the Conversion Price need
be made unless the adjustment would require an increase or decrease of at least
1% in the Conversion Price. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section shall be made to the nearest cent or to the nearest 1/100th
of a share, as the case may be.

 

(i) Voluntary Reduction. The Company from time to time may reduce the Conversion
Price by any amount for any period of time if the period is at least 20 days and
if the reduction is irrevocable during the period, provided, that in no event
may the Conversion Price be less than the par value of a share of Common Stock.

 

  4

 

 

(j) Notice of Adjustment. Whenever the Conversion Price is adjusted, the Company
shall promptly mail to the Holder a notice of the adjustment.

 

(k) Weighted Average Adjustment. If (i) the Company completes an equity or
equity-linked financing in the future whereby the Company issues shares of
Common Stock or shares of Common Stock issuable upon conversion of such
equity-linked securities (the “Additional Shares”) at a price per share less
than the Conversion Price then in effect (a “Diluting Issuance”) and (ii) this
Note is then still outstanding, the Conversion Price in effect immediately
before such Diluting Issuance shall be reduced, concurrently with such Diluting
Issuance, to a price (calculated to the nearest hundredth of a cent) determined
by multiplying the Conversion Price by a fraction:

 

(i) the numerator of which is the number of shares of Common Stock outstanding
immediately before such Diluting Issuance plus the number of shares of Common
Stock that the aggregate consideration received by Company for the Additional
Shares would purchase at the Conversion Price in effect immediately before such
Diluting Issuance, and

 

(ii) the denominator of which is the number of shares of Common Stock
outstanding immediately before such Diluting Issuance plus the number of
Additional Shares.

 

For purposes of clarity, the exercise shall be determined in accordance with the
following formula:

 

EP2 = EP1 x (A + B) / (A + C)

 

For purposes of the foregoing formula, the following definitions shall apply:

 

(i) “EP2” shall mean the Conversion Price in effect immediately after such
Diluting Issuance of Additional Shares;

 

(ii) “EP1” shall mean the Conversion Price in effect immediately prior to such
Diluting Issuance of Additional Shares;

 

(iii) “A” shall mean the number of shares of Common Stock outstanding and deemed
outstanding immediately prior to such Diluting Issuance of Additional Shares;

 

(iv) “B” shall mean the number of shares of Common Stock that would have been
issued if such Additional Shares had been issued at a price per share equal to
EP1 (determined by dividing the aggregate consideration received or receivable
by the Company in respect of such issue by EP1); and

 

(v) “C” shall mean the number of such Additional Shares issued in such
transaction.

 

  5

 

 

4. Events of Default. If one or more of the following events shall occur (each
an “Event of Default”):

 

(a) the nonpayment of any Outstanding Principal Amount, interest or other
payment under this Note when the same shall become due and payable;

 

(b) a final judgment or final judgments for the payment of money are entered by
a court of competent jurisdiction against the Company or any Subsidiary which
remains unpaid or unstayed and undischarged for a period (during which execution
shall not be effectively stayed) or 30 days after the date on which the right to
appeal has expired, provided, that, the aggregate of all such judgments exceeds
$2,000,000. For purposes of this Note, “Subsidiary” means any entity of which at
least a majority of capital stock (or equivalent) having ordinary voting power
in the election of directors or other governing body of such entity is owned by
the Company directly or indirectly through one or more subsidiaries;

 

(c) (i) the Company or any significant Subsidiary shall file a petition under
any bankruptcy, insolvency or similar law, or make an assignment for the benefit
of its creditors, or shall consent to or acquiesce in the appointment of a
receiver for all or a substantial part of its property; or (ii) a petition under
any bankruptcy, insolvency or similar law, or for the appointment of a receiver
with respect to all or a substantial part of the Company’s or any significant
Subsidiary’s property, shall be filed against the Company or any significant
Subsidiary and remain undismissed for at least 60 days; or

 

(d) a dissolution of the Company;

 

then, and so long as such Event of Default is continuing for a period of five
(5) calendar days in the case of non-payment under Section 4(a) and for a period
of ten (10) calendar days in the case of events under other subsections of
Section 4 (and the event which would constitute such Event of Default, if
curable, has not been cured), by written notice to the Company: (i) all amounts
then unpaid under this Note, including accrued but unpaid interest, shall
thereafter accrue and bear interest at the default rate of fifteen percent (15%)
per annum; and (ii) all obligations of the Company under this Note shall be
immediately due and payable (except with respect to any Event of Default set
forth in Section 4(c) hereof, in which case all obligations of the Company under
this Note shall automatically become immediately due and payable without the
necessity of any notice or other demand to the Company) without presentment,
demand, protest or any other action nor obligation of the Holder of any kind,
all of which are hereby expressly waived, and the Holder may exercise any other
remedies the Holder may have at law or in equity.

 

5. Status of Holder. The Company may treat the Original Holder of this Note as
the absolute owner of this Note for the purpose of making payments of principal
or interest and for all other purposes and shall not be affected by any notice
to the contrary unless this Note is transferred in accordance with the terms
hereof.

 

6. Securities Act Restrictions. This Note and the Common Stock issuable by the
Company upon conversion hereof have not been registered for sale under the
Securities Act of 1933, as amended (the “Act”), are deemed to be unregistered or
restricted securities, and neither this Note, the Common Stock nor any interest
in this Note or Common Stock may be sold, offered for sale, pledged or otherwise
disposed of without compliance with applicable securities laws.

 

  6

 

 

7. Expenses. The Company shall pay upon demand any and all reasonable expenses,
incurred or paid by the Holder following the occurrence of an Event of Default
in connection with collecting upon, or enforcing this Note, including, without
limitation, the expenses and reasonable fees of legal counsel, court costs and
the cost of appellate proceedings.

 

8. No Waiver of Rights. The Holder may, without notice, extend the time of
payment of this Note, postpone the enforcement hereof or grant any other
indulgence without affecting or diminishing the Holder’s right of recourse
against the Company, which right is hereby expressly reserved. The failure or
delay by the Holder in exercising any of its rights hereunder in any instance
shall not constitute a waiver thereof in that or any other instance. The Holder
may not waive any of its rights except by an instrument in writing signed by the
Holder.

 

9. Transfer of Note. Subject to the provisions of Section 6 hereof, this Note is
intended to be a negotiable instrument and may be transferred to any person or
entity by the (then) Holder hereof without the prior written consent of the
Company or any other person or entity. In the event of any such transfer, upon
due presentment for exchange of this Note, the Company will execute and deliver
in exchange a new Note or Notes, mutatis mutandis, equal in aggregate principal
amount to the then Outstanding Principal Amount. However, no such exchange shall
be required to entitle a transferee to enjoy all of the rights and benefits of
the Holder hereof. Each Note presented for exchange shall (if so required by the
Company) be duly endorsed by, or accompanied by a written instrument of transfer
in form reasonably satisfactory to the Company and duly executed by the Holder
or its attorney duly authorized in writing.

 

10. Notices. All notices or other communications given or made pursuant hereto
shall be in writing and shall be deemed to have been duly given or made if and
when (i) personally delivered, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable overnight courier service with charges prepaid, or (iv) transmitted by
confirmed facsimile or other electronic delivery. Notices shall be sent to the
Company at its principal place of business and to the Holder at the address set
forth at the outset of this Note, or at such other address as the Holder may
designate in a notice for that purpose.

 

11. Payments Unconditional. All payments under this Note shall be made without
defense, set-off or counterclaim, free and clear of and without deduction for
any taxes of any nature now or hereafter imposed.

 

12. Waiver of Demand, Presentment, etc.. The Company hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit 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 hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder. The Company agrees that, in the event of an Event of
Default, to reimburse the Holder for all reasonable costs and expenses
(including reasonable legal fees of one counsel) incurred in connection with the
enforcement and collection of this Note.

 

13. Usury Laws. Notwithstanding any other provisions of this Note, interest
under this Note shall not exceed the maximum rate permitted by law; and if any
amount is paid under this Note as interest in excess of such maximum rate, then
the amount so paid will not constitute interest but will constitute a prepayment
on account of the Outstanding Principal Amount. The Company will not assert,
plead (as a defense or otherwise) or in any manner whatsoever claim (and will
actively resist any attempt to compel it to assert, plead or claim) in any
action, suit or proceeding that any interest rate under this Note violates
present or future usury or other laws relating to the interest payable on any
indebtedness hereunder and will not otherwise avail itself (and will actively
resist any attempt to compel it to avail itself) of the benefits of any such
laws.

 

  7

 

 

14. Unsecured Obligation. This Note shall be an unsecured obligation of the
Company, ranking pari passu with all other unsecured obligations of the Company.

 

15. Headings. The headings in this Note are solely for convenience of reference
and shall not affect its interpretation.

 

16. Assignment. This Note is binding upon and shall inure to the benefit of the
parties hereto and their respective permitted successors and assigns. The
Company shall not be permitted to assign its obligations hereunder without the
prior written consent of the Holder.

 

17. Entire Agreement. Each of the parties hereby covenants that this Note is
intended to and does contain and embody herein all of the understandings and
agreements, both written and oral, of the parties hereby with respect to the
subject matter of this Note, and that there exists no oral agreement or
understanding, express or implied liability, whereby the absolute, final and
unconditional character and nature of this Note shall be in any way invalidated,
empowered or affected.

 

18. No Impairment. The Company will not, by amendment of its certificate of
incorporation or through reorganization, consolidation, merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Note against impairment.

 

19. Laws of the State of Delaware.

 

(a) This Note shall be deemed to be made in, governed by and interpreted under
and construed in all respects in accordance with the laws of the State of
Delaware, regardless of the place of domicile or residence of either party.

 

(b) For purposes of any proceeding involving this Note or any of the obligations
of the Company, the Company hereby submits to the non-exclusive jurisdiction of
the courts of the State of Delaware and of the United States having jurisdiction
in the State of Delaware, and agrees not to raise and waives any objection to or
defense based upon the venue of any such court or based upon forum non
conveniens. The Company agrees not to bring any action or other proceeding with
respect to this Note or with respect to any of its obligations hereunder in any
other court unless such courts of the State of Delaware and of the United States
determine that they do not have jurisdiction in the matter.

 

[signature page follows]

 

  8

 

 

[COMPANY SIGNATURE PAGE TO

12.0% UNSECURED CONVERTIBLE PROMISSORY NOTE]

 

IN WITNESS WHEREOF, the Company has caused this Note to be executed as of the
date set forth above.

 

  MIDWEST ENERGY EMISSIONS CORP.         By:

 

Name:

    Title:  

 

  9

 

 

EXHIBIT 1

 

CONVERSION NOTICE

 

The undersigned irrevocably exercises the option to convert U.S
$_________________ principal amount of the 12.0% Unsecured Convertible
Promissory Note (the “Note”) of Midwest Energy Emissions Corp. (the “Company”)
registered in the name of the undersigned into common stock, par value $0.001
per share, of the Company in accordance with the terms of the Note and directs
that the securities issuable upon conversion be issued and delivered to the
undersigned.

 

Dated: ______________________

 

 

 

 

Print Name of Holder

 

 

 

 

 

 

 

 

Signature and title (if applicable)

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Soc. Sec. or Tax ID No.

 

  10

 

 

EXHIBIT 2

 

FORCED CONVERSION STATEMENT

 

As a result of the forced conversion of the 12.0% Unsecured Convertible
Promissory Note (the “Note”) of Midwest Energy Emissions Corp. (the “Company”)
registered in the name of the undersigned into common stock, par value $0.001
per share, of the Company in accordance with the terms of the Note, the
undersigned hereby directs that the securities issuable upon conversion be
issued and delivered to the undersigned.

 

Dated: ______________________

 

 

 

 

Print Name of Holder

 

 

 

 

 

 

 

 

Signature and title (if applicable)

 

 

 

 

 

 

 

 

Address

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Soc. Sec. or Tax ID No.

  

 

11