Document:

THIS NOTE AND THE UNDERLYING SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE “ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE.

GB SCIENCES, INC.

8% Convertible Promissory Note

$2,765,000.00April 23, 2019 (the “Issue Date”) 

 

FOR VALUE RECEIVED, GB SCIENCES, INC., a Nevada corporation (the “Company”) with its principal executive office at 3550 W. Teco Avenue, Las Vegas NV 89118, promises to pay to the order of ILIAD RESEARCH AND TRADING, L.P., a Utah limited partnership (the “Payee” or the “Holder of this Note”) or registered assigns, the principal amount of Two Million Seven Hundred Sixty-Five Thousand Dollars ($2,765,000.00), together with all interest, fees and charges accrued hereunder (the “Outstanding Balance”), on April 22, 2020 (the “Maturity Date”).  

This 8% Convertible Promissory Note (this “Note”) carries an original issue discount of $250,000.00. In addition, the Company agrees to pay $15,000.00 to the Payee to cover the Payee’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 amount is fully earned and included in the initial principal balance of this Note. The purchase price for this Note shall be $2,500,000.00 (the “Purchase Price”), computed as follows: $2,765,000.00 original principal balance, less the original issue discount, less the Transaction Expense Amount. The Purchase Price shall be payable by delivery to the Company of a wire transfer of immediately available funds in the amount of the Purchase Price.

Each payment by the Company pursuant to this Note shall be made without set-off or counterclaim and in immediately available funds. The Company (i) waives presentment, demand, protest or notice of any kind in connection with this Note and (ii) agrees to pay to the Holder of this Note, on demand, all costs and expenses (including reasonable and documented legal fees and expenses) incurred in connection with the enforcement and collection of this Note.

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This Note has been issued to the Payee pursuant to a Note Purchase Agreement (the “Note Purchase Agreement”) entered into between the Company and the Payee dated as of the date hereof.  Unless otherwise defined in this Note, capitalized terms used herein shall have the meanings set forth in the Note Purchase Agreement.

1.Principal Repayment 

A.Optional Prepayment.  Subject to 1B below, the Company may only prepay this Note:  

(i)during such time as the Conversion Shares (as defined below) issuable upon conversion of this Note are then subject to an effective registration statement under the Securities Act of 1933, as amended, and the registration statement covering the Conversion Shares has been effective for a period of at least 90 days; or 

(ii)if the Company provides the Payee with thirty (30) days prior written notice of such prepayment, during which time the Payee may convert this Note in accordance with Section 5, and such prepayment is accompanied by a payment equal to 10% of the amount of the principal and interest being prepaid. 

B.Notice of Prepayment.  Before the Company shall be permitted to prepay this Note pursuant to 1A(i) hereof, the Company shall provide thirty (30) days prior notice to the Payee of its intent to make such prepayment, which notice shall state the date and amount of such prepayment (the “Prepayment Date”).  The Payee shall have the option at any time prior to the Prepayment Date to elect to convert this Note pursuant to Section 5 below. 

2.Computation of Interest. 

A.Base Interest Rate.  Subject to Sections 2B and 2C below, the Outstanding Balance of this Note shall bear interest at the rate of eight (8%) percent per annum. All interest calculations 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. 

B.Default Interest.  Upon the occurrence and during the continuance of an Event of Default (as defined below), the rate of interest applicable to the Outstanding Balance shall be increased to fifteen percent (15%) per annum. In addition, upon the occurrence of an Event of Default, the Outstanding Balance shall automatically be increased by ten percent (10%). 

C.Maximum Rate.  In the event that it is determined that, under the laws relating to usury applicable to the Company or the indebtedness evidenced by this Note (“Applicable Usury Laws”), the interest charges and fees payable by the Company in connection herewith or in connection with any other document or instrument executed and delivered in connection herewith cause the effective interest rate applicable to the indebtedness evidenced by this Note to exceed the maximum rate allowed by law (the “Maximum Rate”),  

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then such interest shall be recalculated for the period in question and any excess over the Maximum Rate paid with respect to such period shall be credited, without further agreement or notice, to the Outstanding Balance outstanding hereunder to reduce said balance by such amount with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Payee had agreed to accept such extra payment(s) as a premium-free prepayment. All such deemed prepayments shall be applied to the principal balance payable at maturity. In no event shall any agreed-to or actual exaction as consideration for this Note exceed the limits imposed or provided by Applicable Usury Laws in the jurisdiction in which the Company is resident applicable to the use or detention of money or to forbearance in seeking its collection in the jurisdiction in which the Company is resident.

3.Covenants of Company. 

A.Affirmative Covenants.  The Company covenants and agrees that, so long as this Note shall be outstanding, unless it has otherwise obtained the prior written consent of the Payee, it will perform the obligations set forth in this Section 3A: 

(i)Taxes and Levies.  The Company (and each of its subsidiaries) will promptly pay and discharge all taxes, assessments, and governmental charges or levies imposed upon the Company or upon its income and profits, or upon any of its property, before the same shall become delinquent, as well as all claims for labor, materials and supplies which, if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Company shall not be required to pay and discharge any such tax, assessment, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings; 

(ii)Maintenance of Existence.  The Company (and each of its subsidiaries) will do or cause to be done all things reasonably necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and comply with all laws applicable to the Company, except where the failure to comply would not have a material adverse effect on the Company; 

(iii)Maintenance of Property.  The Company (and each of its subsidiaries) will at all times reasonably maintain, preserve, protect and keep its property used or useful in the conduct of its business in good repair, working order and condition (ordinary wear and tear excepted), and from time to time make all needful and proper repairs, renewals, replacements and improvements thereto as shall be reasonably required in the conduct of its business; 

(iv)Insurance.  The Company (and each of its subsidiaries) will, to the extent necessary for the operation of its business, keep adequately insured by financially sound reputable insurers, all property of a character usually insured by similar corporations and carry such other insurance as is usually carried by similar corporations; 

(v)Maintenance of Teco Facility.  The Company will cause its subsidiaries as applicable, to hold and maintain all duly issued certificates and licenses necessary  

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to operate its cannabis cultivation and production facility at 3550 W. Teco Avenue, Las Vegas, Nevada (the “Teco Facility”) in accordance with all Nevada Legal Requirements;

(vi)Books and Records.  The Company (and each of its subsidiaries) will at all times keep true and correct books, records and accounts reflecting all of its business affairs and transactions in accordance with GAAP. Such books and records shall be open at reasonable times and upon reasonable notice to the inspection of the Payee or its agents;  

(vii)Notice of Certain Events.  The Company (and each of its subsidiaries) will give prompt written notice (with a description in reasonable detail) to the Payee of the occurrence of any Event of Default or any event which, with the giving of notice or the lapse of time, would constitute an Event of Default; and 

(viii)Breach of Note Purchase Agreement Covenants. The Company shall comply with all of the covenants set forth in the Note Purchase Agreement. 

(ix)Compliance with Laws.  The Company will comply, and cause each subsidiary, to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (“Law”), other than U.S. Federal Law governing the production and sale of cannabis. 

B.Negative Covenants.  The Company covenants and agrees that, so long as this Note shall be outstanding, unless it has otherwise obtained the prior written consent of the Payee, it will perform the obligations set forth in this Section 3B: 

(i)Liquidation, Dissolution.  The Company will not (and will not permit any of its subsidiaries to) liquidate or dissolve, consolidate with, or merge into or with, any other corporation or other entity, except that any wholly-owned subsidiary may merge with another wholly-owned subsidiary or with the Company (so long as the Company is the surviving corporation and no Event of Default shall occur as a result thereof); provided, however, such prior written consent shall not be required in connection with the consummation of any merger or change of control transaction which results in prepayment of the Note pursuant to the terms of this Note;  

(ii)Redemptions.  The Company will not redeem or repurchase any outstanding equity and/or debt securities of the Company (or its subsidiaries), except for repurchases of unvested or restricted shares of Common Stock, at cost, from employees, consultants or members of the Board of Directors of the Company (the “Board of Directors”)  pursuant to repurchase options of the Company (1) currently outstanding or (2) hereafter entered into pursuant to a stock option plan or restricted stock plan approved by the Company’s Board of Directors; 

(iii)Indebtedness.  Company will hereafter not create, incur, assume or suffer to exist, contingently or otherwise, any indebtedness which is not expressly subordinate in all respects to this Note, provided, that this covenant shall not apply to (A) capitalized leases,  

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purchase money indebtedness (secured solely by Liens on the equipment or assets leased or purchased), (B) accounts payable, (C) other accrued expenses incurred by the Company in the ordinary course of business; or (D) indebtedness set forth on Schedule 3B(iv) to which this Note is expressly subordinate;

(iv)Negative Pledge. Other than with respect to this Note, the Company will not (nor will it permit its subsidiaries to) hereafter create, incur, assume or suffer to exist any mortgage, pledge, hypothecation, assignment, security interest, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any financing lease) (each, a “Lien”) upon any of its property, revenues or assets, whether now owned or hereafter acquired, except any of the following (collectively, “Permitted Liens”): 

(a)Liens granted to secure indebtedness incurred (i) to finance the acquisition (whether by purchase or capitalized lease) of tangible assets or (ii) under equipment leases or purchase money indebtedness, but in each case, only on the assets acquired with the proceeds of such indebtedness; 

(b)Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; 

(c)Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; 

(d)Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds;  

(e)judgment Liens in existence less than 30 days after notice of the entry thereof is forwarded to the Company or with respect to which execution has been stayed; and 

(f)Liens set forth set forth on Schedule 3B(v). 

(v)Transactions with Affiliates.  The Company will not (and will not permit any of its subsidiaries to) enter into any transaction after the Issue Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, the purchase or sale of any security, the borrowing or lending of any money, or the rendering of any  

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service, with any person or entity affiliated with the Company or any of its subsidiaries (including officers, directors and shareholders owning five (5%) percent or more of the Company’s outstanding capital stock), except in the ordinary course of and pursuant to the reasonable requirements of its business and upon fair and reasonable terms not less favorable than would be obtained in a comparable arms-length transaction with any other person or entity not affiliated with the Company as determined by the Board of Directors in good faith.

(vi)Dividends.  The Company will not declare or pay any cash dividends or distributions on its outstanding capital stock. 

4.Events of Default. 

If any of the following events shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation by law or otherwise) (each, an “Event of Default”): 

(i)Non-Payment of Obligations.  The Company shall fail to make any required payment hereunder as and when the same shall become due and payable (whether by acceleration or otherwise); 

(ii)Non-Performance of Affirmative Covenants.  The Company shall default in the due observance or performance of any covenant set forth in Section 3A, which default shall continue uncured for ten (10) days; 

(iii)Non-Performance of Negative Covenants.  The Company shall default in the due observance or performance of any covenant set forth in Section 3B, and, if capable of cure, such default shall not have been cured within ten (10) days; 

(iv)Bankruptcy, Insolvency, Etc.  The Company (or any of its subsidiaries) shall: 

(a)in any legal document admit in writing its inability to pay its debts as they become due; 

(b)apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Company or any of its property, or make a general assignment for the benefit of creditors; 

(c)in the absence of such application, consent or acquiesce in, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Company or for any part of its property; 

(d)permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the  

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Company, and, if such case or proceeding is not commenced by the Company or converted to a voluntary case, such case or proceeding shall be consented to or acquiesced in by the Company or shall result in the entry of an order for relief; or

(e)take any corporate or other action authorizing, or in furtherance of, any of the foregoing; 

(v)Teco Facility.  Any subsidiary as applicable shall fail to hold any required provisional or permanent certificate (as applicable) under state or local law for the operation of the Teco Facility as an establishment to cultivate and sell cannabis; 

(vi)Cross-Default.  The Company shall default in the payment when due, after the expiration of any applicable grace period, of any amount payable under any other obligation of the Company for money borrowed in excess of $100,000; 

(vii)Cross-Acceleration.  Any other indebtedness for borrowed money of the Company (or any of its subsidiaries) in an aggregate principal amount exceeding $100,000 shall be duly declared to be or shall become due and payable prior to the stated maturity thereof or shall not be paid as and when the same becomes due and payable including any applicable grace period; 

(viii)Registration Default.  A Registration Default has occurred under the Note; or 

(ix)Other Breaches, Defaults.  The Company or any of its subsidiaries shall default or be in breach of any other term or provision of this Note, any other Transaction Document (as defined in the Note Purchase Agreement), in any material respect, for a period of ten (10) days, or any material representation or warranty made by the Company to the Payee in any Transaction Document shall be materially false or misleading. 

5.Conversion of Note. 

A.Optional Conversion.  The Holder of this Note shall have the option, at any time and from time to time, prior to the date on which the Company makes payment in full of the Outstanding Balance of this Note in accordance herewith, all accrued interest thereon and all other amounts due and payable thereunder to convert all or any portion of the Outstanding Balance of this Note plus all accrued and unpaid interest thereon (such Outstanding Balance and accrued and unpaid interest to be so converted the “Conversion Amount”) into shares of common stock, par value $0.0001 per share (“Common Stock”), of the Company at an initial conversion price per share equal to $0.17 per share (the “Conversion Price”), subject to adjustment as provided in subsection 5F below.  The shares of Common Stock issuable upon conversion of this Note at the Conversion Price are referred to herein as the “Conversion Shares.” 

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B.Conversion Limitation.  Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares which would exceed the difference between the number of shares of Common Stock beneficially owned by such Holder and 4.99% of the outstanding shares of Common Stock of the Company.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities and Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. The Holder may void the Conversion Share limitation described in this Section 5B upon 65 days prior notice to the Company. 

C.Mechanics of Conversion. 

(i)Before the Holder of this Note shall be entitled to convert this Note into shares of Common Stock pursuant to Section 5A, such holder shall give written notice to the Company in the form attached hereto as Annex A (“Conversion Notice”), at its principal corporate office, by email, facsimile or otherwise, of the election to convert the same and shall state therein the Conversion Amount and the name or names in which the certificate or certificates for shares of Common Stock are to be issued.  On or before the third (3rd) business day following the date of receipt of a Conversion Notice, the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Company’s transfer agent is participating in the Depository Trust Company's (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC, or (B) if the Company’s transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144.    

(ii)All Common Stock which may be issued upon conversion of the Note will, upon issuance, be duly issued, fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issuance thereof. 

D.Authorized Shares.  At all times the Company shall have authorized and shall have reserved a sufficient number of shares of Common Stock to provide for the conversion of the Outstanding Balance of this Note at the then effective Conversion Price.  Without limiting the generality of the foregoing, if, at any time, the Conversion Price is decreased, the number of shares of Common Stock authorized and reserved for issuance upon the conversion of this Note shall be proportionately increased. 

E.Failure to Timely Deliver Shares.  If within five (5) business days after the Company’s receipt of the facsimile or email copy of a Conversion Notice, the Company shall fail to issue and deliver to the Holder the number of shares of Common Stock to which the  

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Holder is entitled upon such Holder's conversion of this Note (a “Conversion Failure”), the Company shall pay to the Holder $1,000 per day until the Company issues and delivers a certificate to the Holder for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s conversion of any portion of the Outstanding Balance of this Note.  If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular Conversion Notice attributable to the unsold shares.

F.Anti-Dilution Provisions.  The Conversion Price in effect at any time and the number and kind of securities issuable upon the conversion of this Note shall be subject to adjustment from time to time upon the happening of certain events as follows: 

(i)In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Conversion Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action.  Such adjustment shall be made successively whenever any event listed above shall occur. 

(ii)Whenever the Conversion Price is adjusted pursuant to Subsection (i) above, the number of Conversion Shares issuable upon conversion of this Note shall simultaneously be adjusted by multiplying the number of Conversion Shares initially issuable upon conversion of this Note by the Conversion Price in effect on the date hereof and dividing the product so obtained by the Conversion Price, as adjusted. 

(iii)In case of any reorganization, reclassification or change of the Common Stock (including any such reorganization, reclassification or change in connection with a consolidation or merger in which the Company is the continuing entity), or any consolidation of the Company with, or merger of the Company with or into, any other entity (other than a consolidation or merger in which the Company is the continuing entity), or of any sale of the properties and assets of the Company as, or substantially as, an entirety to any other person or entity, this Note shall thereafter be convertible into the kind and amount of stock or other securities or property receivable upon such reorganization, reclassification, change, consolidation, merger or sale by a Holder of the number of shares of Common Stock into which this Note would have been converted prior to such transaction.  The provisions of this subsection (iii) shall similarly apply to successive reorganizations, reclassifications, changes, consolidations, mergers or sales immediately prior to such reorganization, reclassification, change, consolidation, merger or sale. 

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6.Amendments and Waivers. 

A.The provisions of this Note may from time to time be amended, modified or supplemented, if such amendment, modification or supplement is in writing and consented to by the Company and the Payee. 

B.No failure or delay on the part of the Payee in exercising any power or right under this Note shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right.  No notice to or demand on the Company in any case shall entitle it to any notice or demand in similar or other circumstances.  No waiver or approval by the Payee shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions.  No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. 

C.To the extent that the Company makes a payment or payments to the Payee, and such payment or payments or any part thereof are subsequently for any reason invalidated, set aside and/or required to be repaid by the Payee to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made by the Payee or such enforcement or setoff had not occurred. 

7.Miscellaneous. 

A.Parties in Interest.  All covenants, agreements and undertakings in this Note binding upon the Company or the Payee shall bind and inure to the benefit of its successors and permitted assigns of the Company and the Payee, respectively, whether so express or not. 

B.Governing Law.  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. 

C. Arbitration of Disputes. By its issuance or acceptance of this Note, each party agrees to be bound by the Arbitration Provisions set forth as an exhibit to the Note Purchase Agreement. 

D.Waiver of Jury Trial.  THE PAYEE AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED  

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HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE PAYEE OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE’S PURCHASING THIS NOTE.

[Signature Page Follows]

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IN WITNESS WHEREOF, this 8% Convertible Promissory Note has been executed and delivered on the date specified above by the duly authorized representative of the Company.

 

GB SCIENCES, INC.

By: 

Name:  John C. Poss

Title:  CEO and Chairman

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ANNEX A

 

CONVERSION NOTICE 

 

The undersigned hereby elects to convert principal and/or interest under the 8% Senior Secured Convertible Promissory Note, issued as of April 22, 2019 (the “Note”) of GB Sciences, Inc., a Nevada corporation (the “Company”), into shares of common stock (the “Common Stock”), of the Company according to the conditions hereof and the Note, as of the date written below.  If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith.  No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts specified under Section 5B of the Note, as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.

 

Conversion calculations:

Date to Effect Conversion:  

 

Outstanding Balance of Note to be Converted: 

Number of shares of Common Stock to be issued: 

 

Signature: 

 

Name: 

 

Address for Delivery of Common Stock Certificates: 

 

 

 

 

Or

 

DWAC Instructions:

 

Broker No: 

 

Account No: 

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SCHEDULE 3B(iv)
INDEBTEDNESS

 

	Short-Term Notes Payable

	Face Value

	 

	Discount

	 

	Carrying Value

	Convertible Notes Payable to various investors

	 $      1,257,000 

	 

	 $           (564,929)

	 

	 $         692,071 

	Convertible Note Payable to CSW Ventures

	         1,500,000 

	 

	                     TBD 

	 

	                 TBD 

	Note Payable to William Moore and Brian Moore, current portion

	            233,333 

	 

	               (56,120)

	 

	            177,213 

	Note Payable - BCM Med

	            300,000 

	 

	                         - 

	 

	            300,000 

	Total Short-Term Notes Payable

	 $      3,290,333 

	 

	 $           (621,049)

	 

	 $      1,169,284 

	 

	 

	 

	 

	 

	 

	Long-Term Notes Payable

	 

	 

	 

	 

	 

	Note Payable to William Moore and Brian Moore, long-term

	 $         194,445

	 

	 $             (16,931)

	 

	 $         177,514 

	Total Long-Term Notes Payable

	 $         194,445 

	 

	 $             (16,931)

	 

	 $         177,514 

	 

	 

	 

	 

	 

	 

	Capital Lease Liability

	Liability

	 

	Monthly Payment

	 

	 

	Petroleum Drive

	 $     2,404,470 

	 

	                 $25,588.00 

	 

	 

	Teco

	 $     3,726,673 

	 

	                 $42,436.00 

	 

	 

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SCHEDULE 3B(v)
LIENS

 

Bob Bernhard & Associates Mechanical, LLC $666,651.03

 

Raygen Services, LLC $354,942.68

 

Less $500,000 paid in March 2019

 

Total $521,593.71 remaining

15vspc-ex101_6.htm

Exhibit 10.1

NEITHER THE ISSUANCE AND SALE OF THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144, RULE 144A OR OTHER EXEMPTION UNDER SAID ACT.  

THE TRANSFER OF THE SECURITIES REPRESENTED HEREBY IS PROHIBITED EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.   

 

VIASPACE INC.

SENIOR CONVERTIBLE PROMISSORY NOTE

 

		
	
$5,500.00
	
July 11, 2019

 

FOR VALUE RECEIVED, VIASPACE INC., a Nevada corporation (“Company”),  promises to pay to Kevin Schewe (“Holder”), or its registered assigns, in lawful money of the United States of America the principal sum of FIVE THOUSAND FIVE HUNDRED Dollars ($5,500.00), or such other amount as shall equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to eight percent (8.0%) per annum, computed on the basis of the actual number of days elapsed and a year of 365 days.  Unless converted into Common Stock of Company as set forth in Section 3 and/or Section 8 below, all unpaid principal, together with any then unpaid and accrued interest, shall be due and payable on the earlier of (i) July 11, 2020 (the “Maturity Date”), (ii) upon prepayment of all amounts due and payable under this Note in accordance with the terms hereof, or (iii) when, upon or after the occurrence of an Event of Default (as defined below), such amounts are declared due and payable by Holder or made automatically due and payable in accordance with the terms hereof.  Immediately prior to the issuance of this Note by Company, Holder acknowledges that it has delivered to Company the sum of FIVE THOUSAND FIVE HUNDRED Dollars ($5,500.00) reflecting the principal amount under this Note.  

This Note is one of a series of notes (the “Notes”) having like tenor and effect (except for variations necessary to express the name of the holder, the principal amount of each of the Notes and 

the date on which each Note is funded) in an aggregate principal amount of up to $100,000 issued or to be issued by Company on or about the period from May 24, 2018 to May 24, 2019 (or such other period as agreed upon by the Company and the Holder) pursuant to the terms of a Loan Agreement, dated as of May 24, 2018, by and between Company and the Holder (or his designees) of the Notes (the “Loan Agreement”).  The Notes shall rank equally without preference or priority of any kind over one another, and all payments on account of principal and interest with respect to any of the Notes shall be applied ratably and proportionately on the outstanding Notes on the basis of the principal amount of the outstanding indebtedness represented thereby.  

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which Company by issuance of this Note, and Holder by the acceptance of this Note, agree:

1.Definitions.  As used in this Note, the following capitalized terms have the following meanings:

(a)“Common Stock” shall mean the Company’s Common Stock, par value $0.0001. 

(b) “Company” includes the corporation initially executing this Note and any Person which shall succeed to or assume the obligations of Company under this Note.

(c)“Conversion Notice” has the meaning given in Section 7(e) hereof.

(d)“Conversion Period” shall mean the period from the date of the Note and ending on the Maturity Date.  

(e)“Conversion Price” has the meaning given in Section 7(b) hereof

(f)“Event of Default” has the meaning given in Section 6 hereof.

(g)“Holder” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.  “Holders” shall mean the Persons collectively specified in the introductory paragraph of this Note and the other Notes or any Persons who shall at the time be the registered holders of this Note and the other Notes.

(h)“Majority Holders” shall mean Holders holding a majority of the aggregate principal amount of the Notes then outstanding.

(i)“Note” shall mean this Senior Convertible Promissory Note.

(j)“Obligations” shall mean and include all loans, advances, debts, liabilities and obligations owed by Company to Holder of every kind and description, now existing or hereafter arising under or pursuant to the terms of this Note including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by Company hereunder.

	

	
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(k)“Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

(l)“Prepayment Amount” has the meaning given in Section 3 hereof

(m)“Prepayment Notice” has the meaning given in Section 3 hereof.

(n)“Sale Transaction” shall mean a transaction or series of related transactions involving (i) the consolidation or merger of Company with another Person, (ii) a sale of all or substantially all of the assets of Company, (iii) a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of capital stock of Company, (iv) the consummation of a stock purchase agreement or other business combination with another Person whereby such other Person acquires more than the 50% of the outstanding capital stock of Company.

(o)“Securities Act” has the meaning given in Section 5(b) hereof.

(p)“Loan Agreement” has the meaning in the second introductory paragraph of this Note.

(q) “Successor Entity” has the meaning given in Section 10 hereof.

Capitalized term not otherwise defined shall have the meaning set forth in the Loan Agreement.

2.Interest.  Unless converted into Common Stock of Company as set forth in Section 8 below, or unless prepaid or converted as set forth in Section 3 below, accrued interest on this Note shall be payable on the Maturity Date.

3.Prepayment.  During the Conversion Period, Company may, at any time and from time to time, prepay all or any portion of the principal due under this Note, together with accrued interest, without penalty.  Company shall effect such prepayment by providing Holder twenty (20) days written notice prior to the date of such prepayment (such notice, a “Prepayment Notice”) indicating the amount of principal and accrued interest Company desires to prepay (the “Prepayment Amount”).  Notwithstanding the foregoing, Holder shall have 10 days following receipt of such Prepayment Notice to notify Company in writing of its election to convert the Prepayment Amount into shares of Common Stock, in which case such Prepayment Amount shall be converted into shares of Common Stock in accordance with the conversion procedures set forth in Section 8(e) hereof (provided that, with respect to conversions effected pursuant to this Section 3, any references to the Conversion Amount in Section 8(e) shall refer to the Prepayment Amount).  Should Holder elect to convert the Prepayment Amount into shares of Common Stock, the number of shares of Common Stock into which such Prepayment Amount will be converted shall be determined by dividing the Prepayment Amount by the then applicable Conversion Price.

	

	
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4.Representations and Warranties of Holder. Holder represents and warrants to Company as follows:

(a)Binding Obligation. Holder has full legal capacity, power and authority to execute and deliver this Note and to perform his obligations hereunder.  This Note is a valid and binding obligation of Holder, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

(b)Securities Law Compliance. Holder has been advised that this Note has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and, therefore, cannot be resold unless they are registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available.  Holder is aware that Company is under no obligation to effect any such registration with respect to this Note, or the Common Stock issuable or issued pursuant to the conversion of this Note, or to file for or comply with any exemption from registration.  Holder has not been formed solely for the purpose of making this investment and is purchasing this Note for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof.  Holder has such knowledge and experience in financial and business matters that Holder is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time.  

(c)Accredited Investor.  Holder is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D of the Securities Act, as presently in effect.  

(d)Restricted Securities.  Holder understands that this Note is a “restricted security” under the federal securities laws inasmuch as it is being acquired from Company in a transaction not involving a public offering and that under such laws and applicable regulations such Note may be resold without registration under the Securities Act only in certain limited circumstances.  In the absence of an effective registration statement covering the Note or an available exemption from registration under the Securities Act, the Note must be held indefinitely.  Holder represents that it is familiar with SEC Rule 144, and understands the resale limitations imposed thereby and by the Securities Act.

(e)Access to Information.  Holder acknowledges that Company has given Holder access to the corporate records and accounts of Company and to all information in its possession relating to Company, has made its officers and representatives available for interview by Holder, and has furnished Holder with all documents and other information required for Holder to make an informed decision with respect to the purchase of this Note.

5.Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:

(a)Failure to Pay.  Company shall fail to pay (i) when due any principal or interest payment on the due date hereunder or (ii) any other payment required under the terms of this 

	

	
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Note on the date due, and (in either case) such payment shall not have been made within twenty (20) days of Company’s receipt of Holder’s written notice to Company of such failure to pay; 

(b)Failure to Perform.  Company fails to perform any obligation under this Note and does not cure that failure within twenty (20) days of Company’s receipt of Holder’s written notice to Company of such failure to perform; or 

(c)Voluntary Bankruptcy or Insolvency Proceedings. Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated, (v) become insolvent (as such term may be defined or interpreted under any applicable statute), (vi) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) take any action for the purpose of effecting any of the foregoing; or

(d)Involuntary Bankruptcy or Insolvency Proceedings.  Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within thirty (30) days of commencement.

6.Rights of Holder upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 6(c) and 6(d)) and at any time thereafter during the continuance of such Event of Default, the Majority Holders may, by written notice to Company, declare all outstanding Obligations payable by Company under the Notes to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived.  Upon the occurrence or existence of any Event of Default described in Sections 6(c) and 6(d), immediately and without notice, all outstanding Obligations payable by Company under the Notes shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived.  In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right power or remedy permitted to him by law, either by suit in equity or by action at law, or both.

7.Conversion.

(a)Conversion.  Holder shall have the right to convert, at any time during the Conversion Period, all or any portion of the principal amount, together with any unpaid and accrued interest, then outstanding under this Note into fully paid and non-assessable shares of Common Stock at a conversion price per share equal to the Conversion Price (as defined below).  The number 

	

	
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of shares of Common Stock into which such principal and interest then outstanding under this Note will be converted shall be determined by dividing the amount of principal, together with all unpaid and accrued interest, then outstanding under this Note to be converted (the “Conversion Amount”) by the Conversion Price. The holder will not convert the note into a number of common shares that would exceed the number of available authorized common shares calculated as of the date of conversion as follows: the number of authorized shares of common stock less the number of issued and outstanding shares of common stock less the number of shares of common stock issuable under all other outstanding convertible instruments of the Company.

(b)Conversion Price.  Subject to Section 8(c), the “Conversion Price” shall be equal to twenty per cent (20%) of the Average Closing Price as reported by the principal trading exchange on which the Company’s Common Stock is traded for the twenty (20) trading days preceding the date of the Note. 

(c)Adjustments to Conversion Price.  The Conversion Price shall be subject to proportional adjustments for stock splits, stock dividends, combinations, consolidations, reclassifications and the like.

(d)Conversion Procedure.  Before Holder shall be entitled to convert the Conversion Amount then outstanding under this Note into shares of Common Stock, Holder shall surrender this Note at the office of this Company, and shall give written notice (a form of which is attached to this Note, the “Conversion Notice”) to Company at its principal corporate office, of the election to convert the same and shall state therein the total Conversion Amount.  Company shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such conversion unless (i) Holder executes and delivers to Company the Conversion Notice for the converted shares and (ii) this Note is delivered to Company.  Company shall, as soon as practicable after such delivery, issue and deliver certificates (bearing such legends as are required by applicable state and federal securities laws in the opinion of counsel to Company and required by this Note and the Loan Agreement), representing the number of fully paid and non-assessable shares of the Common Stock into which the Conversion Amount will be converted in accordance with the provisions herein, and a new promissory note having like tenor as this Note for the principal amount and interest then outstanding under this Note that are not being so converted.  Any conversion pursuant to this Section 8 shall be deemed to have been made immediately prior to the close of business on the date of Company’s receipt of the Conversion Notice, so that the rights of Holder under this Note to the extent of the Conversion Amount shall cease at such time and Holder shall be treated for all purposes as having become the record holder of such shares of Common Stock at such time.      

(e)Fractional Shares; Effect of Conversion.  No fractional shares shall be issued upon conversion of this Note.  In lieu of Company issuing any fractional shares to Holder upon the conversion of this Note, Company shall pay to Holder an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence.  Upon conversion of this Note in full and the payment of the amounts specified in this Section 9(f), Company shall be forever released from all its obligations and liabilities under this Note.

	

	
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(f)Reservation of Stock Issuable Upon Conversion.  Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of this Note such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of this Note.

8.Reserved

9.Effect of Sale Transaction.  Upon the occurrence of any Sale Transaction, the Successor Entity (as defined below) shall succeed to, and be substituted for the Company (so that from and after the date of such Sale Transaction, the provisions of this Note referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Note with the same effect as if such Successor Entity had been named as the Company herein.  Upon consummation of the Sale Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon conversion of this Note at any time after the consummation of the Sale Transaction, in lieu of the shares of the Common Stock purchasable upon the conversion of the Notes prior to such Sale Transaction, such shares of common stock (or other securities, cash, assets or other property) of the Successor Entity.  The provisions of this Section shall apply similarly and equally to successive Sale Transactions and shall be applied without regard to any limitations on the conversion of this Note.  As used in this Section 10, “Successor Entity” means the Person, which may be the Company, formed by, resulting from or surviving any Sale Transaction, or the parent entity of such Person, as applicable.

10.Successors and Assigns.  Subject to the restrictions on transfer described in Sections 12 and 13 below, the rights and obligations of Company and Holder of this Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

11.Waiver and Amendment.  Any term of this Note may be amended or waived only with the written consent of Company and the Majority Holders; provided, however, that any such amendment or modification which by its terms would not apply equally to all holders of the Notes shall not be applicable to any holder whose rights under the Notes would be adversely affected by such amendment or modification in a different manner than other holders thereof without such adversely affected holder’s written consent.

12.Transfer of this Note or Securities Issuable on Conversion Hereof.  With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Holder will give written notice to Company prior thereto, describing briefly the manner thereof, together with a written opinion of Holder’s counsel, or other evidence if reasonably satisfactory to Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, if so requested, or other evidence, Company, as promptly as practicable, shall notify Holder that Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to Company.  If a determination has been made pursuant to this Section 12 that the opinion of counsel for Holder, or other evidence, is not reasonably satisfactory to Company, Company shall so notify Holder promptly after such determination has been made.  Each Note thus transferred and each certificate 

	

	
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representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for Company such legend is not required in order to ensure compliance with the Securities Act.  Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.  Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of Company.  Prior to presentation of this Note for registration of transfer, Company shall treat the registered Holder hereof as the owner and Holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and Company shall not be affected by notice to the contrary.

13.Notices.   Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one business day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be to the respective addresses or facsimile numbers of the parties as set forth in the Loan Agreement, or at such other address or facsimile number as such parties shall have furnished in writing.  

14.Usury. In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

15.Waivers. Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

16.Governing Law and Forum.  This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Colorado, United States of America, without regard to the conflicts of law provisions of the State of Colorado, or of any other state.  All disputes or controversies relating to or arising from this Note shall be adjudicated in the state and federal courts located in the state of Colorado.  EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS NOTE AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.  The Convention on Contracts for the International Sale of Goods shall not apply to this Note.

  

[Remainder of Page Intentionally Left Blank]

 

	

	
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IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date first written above and Holder agrees to the terms and conditions of this Note.

VIASPACE INC.

 

	
 
	
By:/S/ HARIS BASIT
	

Name: Haris Basit

Its: Vice Chairman of the Board

 

 

KEVIN SCHEWE

 

	
 
	
/S/ KEVIN SCHEWE
	

 

 

 

	

	
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NOTICE OF CONVERSION

 

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

 

The undersigned hereby elects to convert $5,500.00 of the principal and $0.00 of the interest due on the Note issued by VIASPACE Inc. on July 11, 2019 into Shares of Common Stock of VIASPACE Inc. (the “Borrower”) according to the conditions set forth in such Note, as of the date written below.

 

Date of Conversion:  July 11, 2019

Conversion Price: $0.000372

Shares To Be Delivered:  14,784,946

Signature:  /S/ KEVIN SCHEWE

Print Name:  Kevin Schewe

Address:  1000 Speer Blvd, Apt 1227, Denver, CO  80204

 

 

 

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