Exhibit
10.56


 


CoroWare,
Inc.


A
Delaware Corporation


 


10%
CONVERTIBLE NOTE


 


THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE
SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTNE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT
AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.


 


	lli961.90	Date:
    October 5, 2011


 


FOR
VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set
forth herein to the order of Premier IT Solutions (a Texas corporation) (“Holder”) or his assignee, in lawful
money of and within the United States of America and in immediately available funds, the principal sum of $$21,961.90 (the “Principal
Amount”), together with accrued and unpaid interest thereon, in the manner set forth herein. Borrower further agrees to pay
interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”)
on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount
has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of
365 day or 366 day year, as the case may be, for the actual number of days elapsed.


 


1.
Principal Repayment. The outstanding Principal Amount and interest shall be payable on March 5, 2012 (“Repayment Date”),
unless otherwise converted in accordance with Section 2 below.


 


2.
Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice
of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable
that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below.


 


2.1
Conversion into the Borrower’s Common Stock


 


(a)
The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the
occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time
until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice
of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default,
as the case may be, into fully paid and non-assessable shares of common stock of the Borrower as such stock exists on the date of issuance
of this Note, at the conversion price as defined in Section 2.l(b) hereof (the “Conversion Price”). Upon delivery
to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request
for conversion (the date of giving such notice of conversion being a “Conversion Date”), the Borrower shall issue
and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion
of the Note converted in accordance with the foregoing. The number of shares of Common Stock to be issued upon each conversion of this
Note shall be detennined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion
Price, and then multiplied by One Hundred Fifteen Percent (115%).


 




    	 



     


    

 


(b)
Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be the average closing bid prices for
the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the
Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.


 


(c)
The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:


 


A.
Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially
all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject
to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of
the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such
consolidation, merger, sale or conveyance.


 


B.
Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or
a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest
thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as
would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or
other change.


 


C.
Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately
reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each
such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.


 


D.
Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or
a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price
of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.


 


2.2
Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.l(a) hereof. Upon
partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder,
be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.


 




    	 



     


    

 


2.3
Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with
that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of
the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion
Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation l3d-3 thereunder.


 


3.
Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Holder in United States dollars to such
bank account as shall be designated by Holder in immediately available funds or as otherwise specified to Borrower in writing, except
if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest,
and thereafter to the outstanding principal balance hereof.


 


4.
Default. The following events shall each be an “Event of Default” under this Note:


 


A.
Bankruptcy or insolvency of Borrower;


 


B.
Borrower’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any
accrued interest or other amounts due under this Note after the same becomes due and payable; and


 


C.
Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written
notice hereof is received by Borrower from Holder.


 


Upon
the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder
may, at the option of Holder, become immediately due and payable to Holder, provided, however, that upon the occurrence of an Event of
Default described in this Section 4, all indebtedness of Borrower to Holder shall become immediately due and payable without any action
of Holder. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate
on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.


 


5.
Covenants.


 


A.
Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.


 


B.
Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of
the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of
this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that
Borrower has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the
Borrower, and Borrower’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.


 


C.
Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization,
rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at
all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform
with all valid requirements of all governmental authorities relating to the conduct of the business of the Borrower, the failure of which
would have a material adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep
in force all material licenses, permits and agreements necessary to the conduct of its businesses.


 




    	 



     


    

 


D.
Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and
condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly
and advantageously conducted at all times.


 


E.
Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and
governmental charges against it Or against any of its properties, upon the respective dates when due, except to the extent that such
taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.


 


F.
Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes
subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material
adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and
by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with
all applicable laws, rules and regulations of all governmental authorities.


 


6.
Waiver. TO THE FULLEST EXTENT PERMITIED BYLAW, LENDER AND BORROWER AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL
(I) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED
INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (II) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A TI.JRYTRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (III) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY LENDER AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE
LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED
IN ALL INSTANCES. BORROWER WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS
NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMITATIONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS HERBBY WAIVED TO THE FULLEST EXTENT
PERMITTED BYLAW.


 


7.
Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, Holder shall be entitled to receive and
Borrower agrees to pay all costs of enforcement and collection incurred by Holder, including, without limitation, reasonable attorney’s
fees relating thereto.


 




    	 



     


    

 


8.
Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been
given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified
mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national
standing, addressed to the address indicated below:


 


If
to the Borrower, at:


 


CoroWare,
Inc.


1410
Market Street


Suite
200


Kirkland,
WA 98033


Attention: President


Phone: 800-641-2676


Fax
: 425-818-8990


 


If
to the Holder, at:


 


Premier
IT Solutions


80
I East Campbell Road, Suite # 310


Richardson, TX - 75081


Attn:
President


Phone: 972-231-4747


Fax
: 972-231-4862


 


or
at any address specified by Borrower or Holder in writing.


 


9.
Expenses. The Borrower shall pay all expenses of the Holder in connection with the preparation of this Note or other documents executed
in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel,
accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel
or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, provided that Borrower
shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the
rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Holder in connection with the waiver or amendment
of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration,
default, collection in connection with the Holder’s exercise, preservation or enforcement of any of its rights, remedies or options
hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting,
consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs
relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses
shall, until paid, bear interest at the rate applicable to principal hereunder.


 


10.
No Waivers of Holder’s Rights. No failure or delay by the Holder in exercising any right, power or privilege hereunder or under
any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and
remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.


 


11.
Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument
signed by the Holder and, in the case of amendments, by the Borrower.


 




    	 



     


    

 


12.
Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Holder and their respective
successors and assigns; provided that neither the Borrower nor the Holder may assign or transfer its rights or obligations hereunder.


 


13.
Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect
the validity or enforceability of the remaining portions of it.


 


14.
Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall
not be construed to modify the meaning of such sections or subsections.


 


15.
Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of
the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein
and therein.


 


THIS
NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE
THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.


 


	COROWARE,
    INC.	 
	 	 	 
	By:	/s/
    Lloyd T. Spencer	 
	Name:	Lloyd
    T. Spencer	 
	Title:	President
    and CEO	 
	Date:	October
    5, 2011	 
	 	 	 
	HOLDER	 
	 	 
	By:	 	 
	Name:	 Vasu Devalla	 
	Title:	Vice
    President	 
	Date:	October
    5, 2011	 


 




    	 



     


    

 


NOTICE
OF CONVERSION


 


(To
be executed by the Holder in order to convert the Note)


 


The
undersigned hereby elects to convert $__________ of the principal and $__________ of the interest due on the Note issued by
COROWARE, INC. on ____________________, 201_ into shares of common stock of COROWARE, INC. (the “Company”) according to
the conditions set forth in such Note, as of the date written below.


 


Date
of Conversion: ________________________________________________________________________________


 


Conversion
Price: _________________________________________________________________________________


 


Shares
To Be Delivered: _____________________________________________________________________________


 


Signature: _______________________________________________________________________________________


 


Print
Name: ______________________________________________________________________________________


 


Address:. _______________________________________________________________________________________


 





_______________________________________________________________________________________________