Document:

f10q0611ex4viii_integenvi.htm

EXHIBIT 4.8

INTEREST ONLY 6 MONTH TERM NOTE WITH BALLOON PAYMENT

$250,000.00 Chicago, Illinois

APRIL 12, 2010

FOR VALUE RECEIVED, the undersigned, Integrated Environmental Technologies, Ltd., a corporation duly organized under the laws of Nevada with principal offices at 4235 Commerce Street Little River, South Carolina 29566 (hereinafter referred to as either "Borrower" or "Maker"), hereby promises to pay to the order of Ian L. Erdos, as Trustee of the RHI Family Trust, whose principal office is at 4730 N. Leamington, Chicago, Illinois 60630 (Lender), or at such other place as the holder hereof from time to time may designate in writing, the principal sum of TWO HUNDRED FIFTY THOUSAND AND NO/100THS DOLLARS ($250,000.00) (the “Loan”) in lawful money of the United States of America, together with interest on the balance of principal remaining from time to time unpaid at the Interest Rate (hereinafter defined), such principal and interest to be paid to the holder in monthly installments in the following manner:

 

(a) Interest. Commencing as of May 1, 2010, Borrower shall pay interest to Lender on the outstanding and unpaid principal amount of the Loan at a per annum rate equal to the base margin rate charged by Fidelity Investments plus 3.25%, currently at the overall rate of 9.825%. Any change in the interest rate resulting from a change in the Fidelity Margin Base Rate shall become effective as of the opening of business on the day on which such change in the Fidelity    Margin Base Rate shall become effective.  Interest shall be calculated on the basis of a year of 360 days from the actual number of days elapsed. Interest shall be   paid in immediately available funds on the first day of each month and at maturity at the Principal Office. Any principal amount not paid when due (at maturity, by acceleration, or otherwise) shall bear interest thereafter until paid in full, payable  on demand, at a rate that shall be ten percent (10%) above the rate that would otherwise be applicable.

 

(b) On November 1, 2010 (the “Maturity Date”) a final payment of all accrued but unpaid interest, and a final payment of all unpaid principal evidenced hereby and all other sums then due to the holder hereof in immediately available funds.

 

(c) Loan Fee. As more fully set forth in the Promissory Note Agreement, Borrower shall pay a Loan Fee at the time of the distribution of funds to Maker.

 

All such payments on account of the indebtedness evidenced by this Note (the "Indebtedness") shall be applied first to interest on the unpaid principal balance at the Interest Rate, secondly to all other sums due the holder hereunder, and the remainder to reduce unpaid principal.

 

As used in this Note, the term "Interest Rate" shall be as defined in paragraph (a) above.  Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days.

 

Repayment of this Note may be secured by various Loan Documents (as such term  is defined in that certain Loan Agreement (the "Loan Agreement") of even date herewith between Maker and Lender and which attaches to and becomes a part of this Note  herewith), including, without limitation, Assignment of Rents and Leases (the "Assignment"), Security Agreement (the "Security Agreement"), and certain Uniform Commercial Code Financing Statements (the "Financing Statements") each of even date herewith or a date subsequent hereto if later requested by Lender to be executed for the benefit of Lender.  The Security Agreement and Financing Statements encumber personal property, accounts receivable, other rights to payment and general intangibles of Maker.  The loan is further secured by the Loan Documents as defined in the Loan Agreement.

 

Maker shall have the right to prepay this Note at any time in part or whole. Any and all prepayments shall be accompanied by payment of all accrued and unpaid interest on this Note to the date of the prepayment.  No partial prepayment shall operate   to defer or reduce the scheduled payments of principal of or interest on this Note.  No amount prepaid may be borrowed again.

 

Interest after maturity (whether by acceleration or otherwise) shall be paid on the unpaid balance at the rate of Ten Percent (10%) per annum plus the Interest Rate (the "Default Rate").

 

If any installment of principal or interest due hereunder, shall become overdue for a period in excess of five (5) days, Maker shall, in addition to any other charges provided for hereunder, pay to the holder hereof a "late charge" of $250, in order to defray part of the increased cost of collection occasioned by any late payments, as liquidated damages and not as a penalty.

 

Maker hereby authorizes Lender to charge any account of the Maker at any financial institution for the payment when due of all amounts payable under this Note.

 

  

  

  

AND IT IS HEREBY EXPRESSLY AGREED by Maker that time is of the essence hereof, and if (i) any default occurs in any payment of principal or interest hereunder on    any date on which any such payment becomes due and such default continues for five (5) days after written notice thereof to Maker, or (ii) any default occurs in the performance or observance of any term or agreement or condition contained in this Note and such default continues for said five (5) days after written notice thereof (provided that if Maker is diligently proceeding to cure the aforesaid default Maker shall be given an additional ten  (10) days to cure the same but in no event longer than twenty (20) days from the giving of notice), or (iii) if a default occurs under any Loan Document which is not cured within the time period expressly provided therefor, (each of the foregoing referred to herein as an "Event of Default") then at the option of the holder hereof:

 

(a)                 the holder hereof may collect interest on the entire unpaid balance of said principal sum computed at a rate of interest on a daily basis from the date of such Event of Default until such Event of Default is cured by Maker at the Default Rate; and

 

(b) the holder may, in addition, declare the entire unpaid balance of said  principal sum, with interest accrued thereon, and other sums due from Maker hereunder and under the Mortgage, to be immediately due and payable, with notice as provided for herein; and

 

(c) the holder may, in addition, pursue each and every other right, remedy and power under this Note, the Loan Agreement, and the other Loan Documents including, without limitation, the Mortgage and all other instruments related hereto and thereto and at law and in equity.

 

All terms, conditions and agreements herein are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance hereof, or otherwise, shall the amount paid or agreed to be paid to the holders hereof for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful interest rate permissible under applicable laws.  If, from any circumstances whatsoever, fulfillment of any provision hereof shall involve transcending the limit of validity prescribed by law which a court of competent jurisdiction may deem applicable hereto, then ipso facto, the  obligation to be fulfilled shall be reduced to the limit of such validity, and if under any circumstances the holder hereof shall ever receive as interest an amount which would  exceed the highest lawful rate such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due hereunder and not the payment of interest.

 

Except as limited hereafter, the rights, remedies and powers of the holder hereof, as provided in this Note, the Loan Agreement or the other Loan Documents, in all other security documents given at any time to secure the payment hereof, are cumulative and concurrent, and may be pursued singly, successively or together against Maker, the   property described in the Mortgage, and any other security given at any time to secure the payment hereof, all at the sole discretion of the holder hereof.

 

Maker specifically acknowledges that the terms of the Promissory Note Agreement are incorporated herein as though fully set forth hereon and shall be deemed a part of this Note.

 

Except for any notices provided herein or in any of the other Loan Documents, Maker waives presentment for payment, demand, notice of nonpayment, notice of dishonor, protest of any dishonor, notice of protest and protest of this Note, and all other notices in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note, and except as limited hereafter, agrees that its liability shall be joint, several and unconditional and without regard to the liability of any other party and shall not be in any manner affected by any indulgence, extension of time, renewal, waiver or modification that may be granted by any holder hereof with respect to the payment or other provisions of this Note, and to the release of any collateral given to secure the payment hereof, or any part thereof, with or without substitution, and agree that additional makers or endorsers may become parties herewith without notice to Maker or such   endorsers and without affecting the liability of any of them hereunder.

 

No holder hereof shall, by any act of omission or commission be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof and then only to the extent specifically set forth herein.  A waiver of one event of default shall not be construed as continuing or as a bar to or waiver of such right, remedy or power on a subsequent event of default.

 

  

  

  

Notwithstanding any provision to the contrary contained in this Note or in any agreement securing or relating to the debt evidenced hereby, it is expressly provided that in no case or event whatsoever shall the aggregate of (i) all interest on the advanced and unpaid balance hereof, accrued or paid from the date hereof, and (ii) the aggregate of any other amounts accrued or paid pursuant hereto or to any such other agreement, which under applicable law are or may be deemed to constitute interest, ever exceed the maximum rate or amount of interest which could lawfully be contracted for, charged or received on the advanced and unpaid principal balance hereof plus any other pertinent indebtedness.  It is expressly stipulated and agreed that it is the intent of the Maker and the Bank to contract in strict compliance with the applicable usury laws from time to time in effect.  In furtherance of this stipulation, none of the terms of this Note, or of any related agreement shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the maximum rate permitted to be contracted for, charged or received by applicable law. If any term or provision of this Note or of any related agreement under any circumstances would require  the payment of any amount for the use, forbearance, or detention of money which, in  addition to all other amounts theretofore paid and constituting interest under the applicable law, would exceed the maximum rate of interest which could lawfully be charged under   such circumstances, then the amount which Maker or any other person liable therefor is obligated to pay in such circumstance, but only in such circumstance, is hereby  automatically reduced to the maximum amount which could lawfully be charged under applicable law. If under any circumstances the aggregate amounts paid hereon include amounts which by law are deemed interest which would exceed the maximum amount of interest which could lawfully have been contracted for, charged or received, Maker stipulates that such amounts will be deemed to have been paid as a result of an error on the part of both Maker and Bank, and the party receiving such excess payment shall, promptly upon receiving such payment or upon notice from Maker, refund the amount of such excess or, at the Bank's option, credit such excess against the unpaid principal balance hereof.  In addition, all sums paid or agreed to be paid to the holder hereof for the use, forbearance or detention of money shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the indebtedness represented hereby, in any manner provided or permitted by law to the end   that the actual rate of interest hereon shall never exceed the applicable maximum rate.  If, at the maturity or final payment hereof, whether by reason of acceleration or otherwise, the total of amounts theretofore paid in respect of the indebtedness represented hereby which is deemed interest under applicable law exceeds the amount of interest which might lawfully have been charged or collected thereon, then the amount of such excess shall be automatically applied to principal, and the amount payable upon such maturity or final payment shall be reduced accordingly.

 

If this Note is placed in the hands of any attorney for collection by civil action or otherwise, or to endorse its collection or to protect any security for its payment, Maker shall pay all reasonable costs of collection and litigation together with reasonable attorneys’ fees.

 

Maker warrants and represents to the Bank that the proceeds of this Note will be used solely for business or commercial purposes, and in no way will the proceeds be used for personal, family, or household purposes.

 

Any and all notices given in connection with this Note shall be deemed adequately given only if in writing and addressed to the party for whom such notices are intended at the address set forth below.  All notices shall be sent by personal delivery, Federal Express or other over-night messenger service, first class registered or certified mail, postage prepaid, return receipt requested or by other means at least as fast and reliable as first class mail.  A written notice shall be deemed to have been given to the recipient party on the earlier of (a) the date it shall be delivered to the address required by this Note; (b) the date delivery shall have been refused at the address required by this Note; or (c) with respect to notices sent by mail, the date as of which the postal service shall have indicated such notice to be undeliverable at the address required by this Note. Any and all notices referred to in this Note, or which either party desires to give to the other, shall be addressed as follows:

 

If to Maker:                                William E. Prince, CEO

Integrated Environmental Technologies, Ltd

4235 Commerce Street

Little River, South Carolina 29566

 

If to Lender:                                 RHl Family Trust

4730 North Leamington Chicago, Illinois 60630

Attn: Ian L. Erdos, Trustee

 

The above addresses may be changed by notice of such change, mailed as provided herein, to the last address designated.

 

Choice of Law, Jurisdiction.

 

(a) Choice of Law. This Note shall be governed by and construed in accordance with the laws of the State of Illinois and applicable laws of the United States of America.

 

(b) Exclusive Jurisdiction. Except as provided in subsection (c), Maker and Lender agree that all disputes between them arising out of, connected with,  related to, or incidental to the relationship established between them in connection with this Note, the Mortgage and the other Loan Documents, and whether arising in contract, tort, equity, or otherwise, may, in Lender's sole and exclusive discretion, be resolved by state or federal courts located in Cook County, Illinois, but each of Maker and Lender acknowledges that any appeals from those courts may have to be heard by a court located outside of Cook County, Illinois. Each party waives in all disputes any objection that it may have to the location of the court considering the dispute and accepts Cook County, Illinois.

 

  

  

  

(c)  Other Jurisdictions.  Maker agrees that Lender shall have the right to proceed against Maker in a court in any location to enable Lender realize or obtain maker's property or to enforce a judgment or other court order entered in favor of Lender. Maker agrees that it shall not assert any permissive counterclaims in any proceeding brought in accordance with this provision by Lender to realize on such property, or to enforce a judgment or other court order in favor of Lender. Maker waives any objection that it may have to the location of the court in which Lender has commenced a proceeding described in this subsection.

 

Maker hereby represents and warrants that it has had the opportunity to consult and conferred with competent legal counsel of its choice before executing this note and all other loan documents.  Maker further represents and warrants that it has read and understood the term of this Note and intends to be bound hereby.  In the event of an ambiguity or conflict in the terms hereof the rule of construction requiring resolution against the drafter of the document shall not be applied.

 

Waiver of Trial by Jury. MAKER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE ANY OTHER LOAN DOCUMENT OR ANY COURSE OF CONDUCT,    COURSE OF DEALINGS, STATEMENTS (WHETHER ORAL OR WRITTEN) OR     ACTIONS OF EITHER PARTY. MAKER HEREBY EXPRESSLY ACKNOWLEDGES THIS WAIVER IS A MATERIAL INDUCEMENT FOR BANK TO ACCEPT THIS NOTE AND TO MAKE THE LOAN EVIDENCED HEREBY AND BY THE OTHER LOAN DOCUMENTS.

 

MAKER HAS READ AND UNDERSTANDS THE FOREGOING AND ACKNOWLEDGES THAT MAKER IS GIVING UP MAKER'S RIGHT TO A JURY TRIAL BY INITIALING IN THE FOLLOWING SPACE:

 

IN WITNESS WHEREOF, the undersigned has delivered this Note as of the date set forth above.

 

Integrated Environmental Technologies, Ltd.

 

 

By:  /s/  William E. Prince                                                                

       William E. Prince, Chief Executive Officer

 

 

Witness:

 

By:  /s/  Marion C. Sofield                                                                

       Secretaryf10q0611ex4ix_integenvi.htm

EXHIBIT 4.9

THIS 10% CONVERTIBLE NOTE IS ISSUED IN EXCHANGE FOR THE CONVERTIBLE SUBORDINATED NOTE[S] ORIGINALLY ISSUED IN 2006 AND 2007 BY THE COMPANY TO HOLDERS WITHOUT ANY ADDITIONAL CONSIDERATION.  FOR PURPOSES OF RULE 144, THIS NOTE SHALL BE DEEMED TO HAVE BEEN ISSUED ON JUNE 15, 2007.

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION.  AS A RESULT, FOLLOWING ANY REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.

10% CONVERTIBLE NOTE DUE September 2, 2011

 

OF

 

INTEGRATED ENVIRONMENTAL TECHNOLOGIES LTD.

Issuance Date:  September 10, 2010

Issuance Date of Original Note for Which this Note Was Exchanged:  July 28, 2006-June 15, 2007

Original Principal Amount: $167,339                                                                                                                                          

This Note (“Note”) is a duly authorized Note of Integrated Environmental Technologies Ltd., a Nevada corporation having its principal place of business at 4235 Commerce Street, Little River, South Carolina (the “Company”), designated as the Company's 10% Convertible Notes Due September 2, 2011 (“Maturity Date”) in an aggregate principal amount of One Hundred Sixty-Seven Thousand Three Hundred Thirty-Nine U.S. Dollars (U.S. $167,339).

 

For Value Received, the Company hereby promises to pay to the order of Gemini Master Fund, Ltd. or its registered assigns or successors-in-interest (“Holder”) the principal sum of One Hundred Sixty-Seven Thousand Three Hundred Thirty-Nine U.S. Dollars (U.S. $167,339) together with all accrued but unpaid interest thereon, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid or converted into the Company's Common Stock, $0.001 par value per share (the “Common Stock”), in accordance with the terms hereof.  Interest on the unpaid principal balance hereof shall accrue at the rate of 10% per annum from the date of issuance hereof (the “Issuance Date”) until the same becomes due and payable on the Maturity Date, or such earlier date upon acceleration or by conversion or redemption in accordance with the terms hereof or of the other Agreements.  Interest on this Note shall accrue daily commencing on the Issuance Date and shall be computed on the basis of a 365-day year and actual days elapsed and shall be payable in accordance with Section 1 (intentionally deleted) hereof.  Notwithstanding anything contained herein, this Note shall bear interest on the due and unpaid Principal Amount from and after the occurrence and during the continuance of an Event of Default pursuant to Section 3(a) at the rate (the “Default Rate”) equal to the lower of eighteen (18%) per annum or the highest rate permitted by law.  Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid collection costs, then to unpaid interest and fees and any remaining amount to principal.

 

All payments of principal and interest on this Note shall be made in lawful money of the United States of America by wire transfer of immediately available funds to such account as the Holder may from time to time designate by written notice in accordance with the provisions of this Note or by Company check.  This Note may not be prepaid in whole or in part except as otherwise provided herein.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day.

 

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Exchange Agreement dated on or about the Issuance Date pursuant to which the Notes were originally issued (the “Exchange Agreement”). For purposes hereof the following terms shall have the meanings ascribed to them below:

 

“Bankruptcy Event” means any of the following events: (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City of New York are authorized or required by law or executive order to remain closed.

 

“Change in Control Transaction” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 20% or more of the Company's Common Stock), (ii) any person (as defined in Section 13(d) of the Exchange Act), together with its affiliates and associates (as such terms are defined in Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 35% of the Company's voting power, (iii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company's Board of Directors on the date thereof, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis, or (v) the Company enters into any agreement providing for an event set forth in (i), (ii), (iii) or (iv) above.

 

“Conversion Ratio” means, at any time, a fraction, of which the numerator is the entire outstanding Principal Amount of this Note, and of which the denominator is the Conversion Price as of the date such ratio is being determined.

 

“Conversion Price” shall equal the lesser of (a) $0.40 (the “Ceiling Price”) and (b) 80% of the average of the three (3) lowest daily VWAPs during the twenty (20) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.

 

“Convertible Securities” means any convertible securities, warrants, options or other rights to subscribe for or to purchase or exchange for, shares of Common Stock.

 

“Equity Conditions” shall mean (i) the resale of all Underlying Shares is covered by an effective registration statement which is not subject to any suspension or stop order (with a current and deliverable prospectus that is not subject at the time to any blackout or similar circumstance) or permitted pursuant to Rule 144(b)(1)(i) under the Securities Act; (ii) the Underlying Shares are listed, or approved for listing prior to issuance, on the American Stock Exchange, the New York Stock Exchange or the Nasdaq Global Select, Global or Capital Market, or the OTC Bulletin Board and are not subject to any trading suspension (nor shall trading generally have been suspended on such exchange or market), and the Company shall not have been notified of any pending or threatened proceeding or other action to delist or suspend the Common Stock on any of such markets on which the Common Stock is then traded or listed; (iv) the requisite number of shares of Common Stock shall have been duly authorized and reserved for issuance as required by the terms of the Exchange Agreement and this Note; (v) none of the Company or any direct or indirect subsidiary of the Company shall be subject to any Bankruptcy Event; and (vi) no Event of Default shall have occurred and be continuing under this Note.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

 

“Market Price” shall equal closing sale price per share of the Common Stock on the Principal Market on the Trading Day next preceding date on which such price is being determined.

 

“MFN Transaction” shall mean a transaction in which the Company issues or sells any securities in a capital raising transaction or series of related transactions (the “MFN Offering”) which grants to the investor (the “MFN Investor”) the right to receive additional securities based upon future capital raising transactions of the Company on terms more favorable than those granted to the MFN Investor in the MFN Offering.

 

“Payment Date” shall mean the first day of each calendar month beginning on October 1, 2010 and the Maturity Date, provided that if any such day is not a Business Day, then such Payment Date shall mean the next succeeding day which is a Business Day.

 

“Per Share Selling Price” shall include the amount actually paid by third parties for each share of Common Stock in a sale or issuance by the Company.  In the event a fee is paid by the Company in connection with such transaction directly or indirectly to such third party or its affiliates, any such fee shall be deducted from the selling price pro rata to all shares sold in the transaction to arrive at the Per Share Selling Price.  A sale of shares of Common Stock shall include the sale or issuance of rights, options, warrants or convertible, exchangeable or exercisable securities under which the Company is or may become obligated to issue shares of Common Stock, and in such circumstances the Per Share Selling Price of the Common Stock covered thereby shall also include the exercise, exchange or conversion price thereof (in addition to the consideration received by the Company upon such sale or issuance less the fee amount as provided above).  In case of any such security issued in a Variable Rate Transaction or an MFN Transaction, the Per Share Selling Price shall be deemed to be the lowest conversion or exercise price at which such securities are converted or exercised or might have been converted or exercised in the case of a Variable Rate Transaction, or the lowest adjustment price in the case of an MFN Transaction, over the life of such securities.  If shares are issued for a consideration other than cash, the Per Share Selling Price shall be the fair value of such consideration as determined in good faith by independent certified public accountants mutually acceptable to the Company and the Purchaser.  In the event the Company directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, then the Per Share Selling Price shall equal such effectively reduced conversion, exercise or exchange price.

 

“Principal Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the Principal Amount.

 

“Principal Market” shall mean the OTC Bulletin Board or such other principal market or exchange on which the Common Stock is then listed for trading.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Trading Day” shall mean a day on which there is trading on the Principal Market.

 

“Underlying Shares” means the shares of Common Stock into which the Notes are convertible (including interest or principal payments in Common Stock as set forth herein) in accordance with the terms hereof.

 

“Variable Rate Transaction” shall mean a transaction in which the Company issues or sells, or agrees to issue or sell (a) any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional shares of, Common Stock either (x) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such debt or equity securities, (y) with a fixed conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock (but excluding standard stock split anti-dilution provisions), or (z) under a warrant exercisable for a number of shares based upon and/or varying with the trading prices of or quotations for the Common Stock at any time after the initial issuance of such warrant, or (b) any securities of the Company pursuant to an “equity line” structure which provides for the sale, from time to time, of securities of the Company which are registered for sale or resale pursuant to the 1933 Act (which for the purpose of this definition shall include a sale of the Company’s securities “off the shelf” in a registered offering, whether or not such offering is underwritten).

 

“VWAP” shall mean the daily dollar volume-weighted average sale price for the Common Stock on the Principal Market on any particular Trading Day during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" functions or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30 a.m., New York City Time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00 p.m., New York City Time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by the National Quotation Bureau, Inc.  If the VWAP cannot be calculated for such security on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined by the Company and the holders of at least a majority of the aggregate Principal Amount outstanding under the Notes.  All such determinations of VWAP shall to be appropriately and equitably adjusted in accordance with the provisions set forth herein for any stock dividend, stock split, stock combination or other similar transaction occurring during any period used to determine the Conversion Price (or other period utilizing VWAPs).

 

The following terms and conditions shall apply to this Note:

 

Section 1.  Intentionally deleted.

 

Section 2.  Conversion.

 

(a)  Conversion Right.  Subject to the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at such Holder's option, at any time and from time to time to convert the outstanding Principal Amount, and any accrued but unpaid interest thereon, under this Note in whole or in part by delivering to the Company a fully executed notice of conversion in the form of conversion notice attached hereto as Exhibit A (the “Conversion Notice”), which may be transmitted by facsimile.  Notwithstanding anything to the contrary herein, this Note and the outstanding Principal and Interest Amounts hereunder shall not be convertible into Common Stock to the extent that such conversion would result in the Holder hereof exceeding the limitations contained in, or otherwise violating the provisions of, Section 2(i) below.

 

(b)  Common Stock Issuance upon Conversion.

 

(i)  Conversion Date Procedures.  Upon conversion of this Note pursuant to Section 2(a) above, the outstanding Principal and Interest Amounts hereunder shall be converted into such number of fully paid, validly issued and non-assessable shares of Common Stock, free of any liens, claims and encumbrances and without any restrictions or legends, as is determined by dividing the outstanding Principal Amount being converted by the then applicable Conversion Price.

 

(ii)  The date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion Date”.  If the Holder is converting less than all of the outstanding Principal and Interest Amounts hereunder pursuant to a Conversion Notice, the Company shall promptly deliver to the Holder (but no later than Three Trading Days after the Conversion Date) a Note for such outstanding Principal Amount as has not been converted if this Note has been surrendered to the Company for partial conversion.  The Holder shall not be required to physically surrender this Note to the Company upon any conversion hereunder unless the full outstanding Principal Amount represented by this Note is being converted or repaid.  The Holder and the Company shall maintain records showing the outstanding Principal Amount so converted and repaid and the dates of such conversions or repayments or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon each such conversion or repayment.

 

(iii)  Stock Certificates or DWAC.  The Company will deliver to the Holder not later than three (3) Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note.  In lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided the Company's transfer agent is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s (or such designee’s) prime broker with DTC through its Deposits and Withdrawal at Custodian (DWAC) program (provided that the same time periods herein as for stock certificates shall apply).  If in the case of any conversion hereunder, such certificate or certificates are not delivered to or as directed by the Holder by the fifth Trading Day after the Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return this Note tendered for conversion.  If the Company fails to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section 3(b) (free of any restrictions on transfer or legends) in accordance herewith, prior to the eighth Trading Day after the Conversion Date, the Company shall pay to the Holder as liquidated damages, in cash, an amount equal to 2% of the Principal Amount per month.

 

(c)  Conversion Price Adjustments.

 

(i)  Stock Dividends, Splits and Combinations.  If the Company or any of its subsidiaries, at any time while the Notes are outstanding (A) shall pay a stock dividend or otherwise make a distribution or distributions on any equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in shares of Common Stock, (B) subdivide outstanding Common Stock into a larger number of shares, or (C) combine outstanding Common Stock into a smaller number of shares, then each Affected Conversion Price (as defined below) shall be multiplied by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before such event and the denominator of which shall be the number of shares of Common Stock outstanding after such event.  Any adjustment made pursuant to this Section 2(c)(i) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

 

As used herein, the Affected Conversion Prices (each an “Affected Conversion Price”) shall refer to:  (i) the Conversion Price, (ii) the Ceiling Price, and (iii) each reported VWAP occurring on any Trading Day included in the period used for determining the Conversion Price, which Trading Day occurred before the record date in the case of events referred to in clause (A) of this subparagraph 2(c)(i) and before the effective date in the case of the events referred to in clauses (B) and (C) of this subparagraph 2(c)(i).

 

(ii)  Distributions.  If the Company or any of its subsidiaries, at any time while the Notes are outstanding, shall distribute to all holders of Common Stock evidences of its indebtedness or assets or cash or rights or warrants to subscribe for or purchase any security of the Company or any of its subsidiaries (excluding those referred to in Section 2(c)(i) above), then concurrently with such distributions to holders of Common Stock, the Company shall distribute to holders of the Notes the amount of such indebtedness, assets, cash or rights or warrants which the holders of Notes would have received had all their Notes been converted into Common Stock at the Conversion Price immediately prior to the record date for such distribution (without regard to any Ceiling Price).

 

(iii)  Common Stock Issuances.  Except for an Exempt Issuance (as defined below), in the event that the Company or any of its subsidiaries (A) issues or sells any Common Stock or Convertible Securities, or any warrants or other rights to subscribe for or to purchase or any options for the purchase of its Common Stock or (B) directly or indirectly effectively reduces the conversion, exercise or exchange price for any Convertible Securities which are currently outstanding, at or to an effective Per Share Selling Price which is less than the Ceiling Price, then in each such case, the Ceiling Price in effect immediately prior to such issue or sale or record date, as applicable, shall be automatically reduced effective concurrently with such issue or sale to equal such Per Share Selling Price.  For the purposes of the foregoing adjustments, in the case of the issuance of any Convertible Securities, the maximum number of shares of Common Stock issuable upon exercise, exchange or conversion of such Convertible Securities shall be deemed to be outstanding, provided that no further adjustment shall be made upon the actual issuance of Common Stock upon exercise, exchange or conversion of such Convertible Securities.  For purposes of this Section 2(c)(iii), if an event occurs that triggers more than one of the above adjustment provisions, then only one adjustment shall be made and the calculation method which yields the greatest downward adjustment in the Affected Conversion Price shall be used.  “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to employees, independent contractors, officers or directors of the Company pursuant to any stock or option plan duly adopted by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose, and (b) securities upon the exercise or exchange of or conversion of the Exchange Note.

 

(iv)  Rounding of Adjustments.  All calculations under this Section 2 or Section 1 (intentionally deleted) shall be made to 4 decimal places for dollar amounts or the nearest 1/100th of a share, as the case may be.

 

(v)  Notice of Adjustments.  Whenever any Affected Conversion Price is adjusted pursuant to Section 2(c)(i), (ii) or (iii) above, the Company shall promptly deliver to each holder of the Notes, a notice setting forth the Affected Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment, provided that any failure to so provide such notice shall not affect the automatic adjustment hereunder.

 

(vi)  Change in Control Transactions.  In case of any Change in Control Transaction, the Holder shall have the right thereafter to, at its option, (A) convert this Note, in whole or in part, at the Conversion Price into the shares of stock and other securities, cash and/or property receivable upon or deemed to be held by holders of Common Stock following such Change in Control Transaction, and the Holder shall be entitled upon such event to receive such amount of securities, cash or property as the shares of the Common Stock of the Company into which this Note could have been converted immediately prior to such Change in Control Transaction would have been entitled if such conversion were permitted, subject to such further applicable adjustments set forth in this Section 2 or (B) require the Company or its successor to redeem this Note, in whole or in part, at a redemption price equal to the greater of (i) 125% of the outstanding Principal Amount being redeemed and (ii) the product of (x) the average of the Market Price for the five (5) Trading Days immediately preceding the Holder's election to have its Notes redeemed and (y) the Conversion Ratio.  The terms of any such Change in Control Transaction shall include such terms so as to continue to give to the Holders the right to receive the amount of securities, cash and/or property upon any conversion or redemption following such Change in Control Transaction to which a holder of the number of shares of Common Stock deliverable upon such conversion would have been entitled in such Change in Control Transaction, and interest payable hereunder shall be in cash or such new securities and/or property, at the Holder’s option.  This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

 

(vii)  Notice of Certain Events.  If:

 

A.           the Company shall declare a dividend (or any other distribution) on its Common Stock; or

 

 

B.           the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or

 

C.            the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or

 

D.      the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share of exchange whereby the Common Stock is converted into other securities, cash or property; or

 

E.      the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;

 

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Note, and shall cause to be mailed to the Holder at its last address as it shall appear upon the books of the Company, on or prior to the date notice to the Company's stockholders generally is given, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange.

 

(d)  Reservation and Issuance of Underlying Securities.  The Company covenants that it will at all times reserve and keep available out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock), free from preemptive rights or any other actual contingent purchase rights of persons other than the holders of the Notes, not less than such number of shares of Common Stock as shall (subject to any additional requirements of the Company as to reservation of such shares set forth in the Exchange Agreement) be issuable (taking into account the adjustments under this Section 2 but without regard to any ownership limitations contained herein) upon the conversion of this Note hereunder in Common Stock (including repayments in stock).  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid, non-assessable and freely tradeable.

 

(e)  No Fractions.  Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the closing price of a share of Common Stock at such time.  If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock.

 

(f)  Charges, Taxes and Expenses.  Issuance of certificates for shares of Common Stock upon the conversion of this Note (including repayment in stock) shall be made without charge to the holder hereof for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for shares of Common Stock are to be issued in a name other than the name of the Holder, this Note when surrendered for conversion shall be accompanied by an assignment form; and provided further, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any such transfer.

 

(g)  Cancellation.  After all of the Principal Amount (including accrued but unpaid interest and default payments at any time owed on this Note) have been paid in full or converted into Common Stock, this Note shall automatically be deemed canceled and the Holder shall promptly surrender the Note to the Company at the Company’s principal executive offices.

 

(h)  Notices Procedures.  Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Conversion Notice, shall be in writing and delivered personally, by confirmed facsimile, or by a nationally recognized overnight courier service to the Company at the facsimile telephone number or address of the principal place of business of the Company as set forth in the Exchange Agreement.  Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or by a nationally recognized overnight courier service addressed to the Holder at the facsimile telephone number or address of the Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder.  Any notice or other communication or deliveries hereunder shall be deemed delivered (i) upon receipt, when delivered personally, (ii) when sent by facsimile, upon receipt if received on a Business Day prior to 5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt, when deposited with a nationally recognized overnight courier service.

 

(i)  Conversion Limitation.  Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon conversion pursuant to the terms hereof shall not exceed a number that, when added to the total number of shares of Common Stock deemed beneficially owned by such Holder (other than by virtue of the ownership of securities or rights to acquire securities (including the Notes) that have limitations on the Holder’s right to convert, exercise or purchase similar to the limitation set forth herein), together with all shares of Common Stock deemed beneficially owned at such time (other than by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) by the holder’s “affiliates” at such time (as defined in Rule 144 of the Act) (“Aggregation Parties”) that would be aggregated for purposes of determining whether a group under Section 13(d) of the Securities Exchange Act of 1934 as amended, exists, would exceed 4.9% of the total issued and outstanding shares of the Common Stock (the “Restricted Ownership Percentage”).  Each holder shall have the right (w) at any time and from time to time to reduce its Restricted Ownership Percentage immediately upon notice to the Company and (x) (subject to waiver) at any time and from time to time, to increase its Restricted Ownership Percentage immediately in the event of the announcement as pending or planned, of a Change in Control Transaction.

 

Section 3.  Defaults and Remedies.

 

(a)  Events of Default.  An “Event of Default” is:  (i) a default in payment of any amount due hereunder which default continues for more than 5 business days after the due date thereof; (ii) a default in the timely issuance of Underlying Shares upon and in accordance with terms hereof, which default continues for five Business Days after the Company has received written notice informing the Company that it has failed to issue shares or deliver stock certificates within the fifth day following the Conversion Date; (iii) failure by the Company for fifteen (15) days after written notice has been received by the Company to comply with any material provision of any of the Notes or the Exchange Agreement (including without limitation the failure to issue the requisite number of shares of Common Stock upon conversion hereof and the failure to redeem Notes upon the Holder’s request following a Change in Control Transaction pursuant to Section 2(c)(vi); (iv) a material breach by the Company of its representations or warranties in the Exchange Agreement; (v) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company for in excess of $100,000 or for money borrowed the repayment of which is guaranteed by the Company for in excess of $100,000, whether such indebtedness or guarantee now exists or shall be created hereafter; or (vi) if the Company is subject to any Bankruptcy Event.

 

(b)  Remedies.  If an Event of Default occurs and is continuing with respect to any of the Notes, the Holder may declare all of the then outstanding Principal Amount of this Note and all other Notes held by the Holder, including any interest due thereon, to be due and payable immediately, except that in the case of an Event of Default arising from events described in clauses (v) and (vi) of Section 3(a), this Note shall become due and payable without further action or notice.  In the event of such acceleration, the amount due and owing to the Holder shall be the greater of (1) 130% of the outstanding Principal Amount of the Notes held by the Holder (plus all accrued and unpaid interest, if any) and (2) the product of (A) the highest closing price for the five (5) Trading days immediately preceding the Holder’s acceleration and (B) the Conversion Ratio.  In either case the Company shall pay interest on such amount in cash at the Default Rate to the Holder if such amount is not paid within 7 days of Holder’s request.  The remedies under this Note shall be cumulative.

 

Section 4.  General.

 

(a)  Payment of Expenses.  The Company agrees to pay all reasonable charges and expenses, including attorneys' fees and expenses, which may be incurred by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.

 

(b)  Savings Clause.  In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.  In no event shall the amount of interest paid hereunder exceed the maximum rate of interest on the unpaid principal balance hereof allowable by applicable law.  If any sum is collected in excess of the applicable maximum rate, the excess collected shall be applied to reduce the principal debt.  If the interest actually collected hereunder is still in excess of the applicable maximum rate, the interest rate shall be reduced so as not to exceed the maximum allowable under law.

 

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

 

(d)  Assignment, Etc.  The Holder may assign or transfer this Note to any transferee only with the prior written consent of the Company, which may not be unreasonably withheld or delayed, provided that (i) the Holder may assign or transfer this Note to any of such Holder's affiliates without the consent of the Company and (ii) upon any Event of Default, the Holder may assign or transfer this Note without the consent of the Company.  The Holder shall notify the Company of any such assignment or transfer promptly.  This Note shall be binding upon the Company and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.

 

(e)  No Waiver.  No failure on the part of the Holder to exercise, and no delay in exercising any right, remedy or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Holder of any right, remedy or power hereunder preclude any other or future exercise of any other right, remedy or power.  Each and every right, remedy or power hereby granted to the Holder or allowed it by law or other agreement shall be cumulative and not exclusive of any other, and may be exercised by the Holder from time to time.

 

(f)  Governing Law; Jurisdiction.

 

(i)  Governing Law.  THIS NOTE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS OR PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

 

(ii)  Jurisdiction.  The Company irrevocably submits to the exclusive jurisdiction of any State or Federal Court sitting in the State of New York, County of New York, or San Jose, California, over any suit, action, or proceeding arising out of or relating to this Note.  The Company irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action, or proceeding brought in such a court and any claim that suit, action, or proceeding has been brought in an inconvenient forum.

 

The Company agrees that the service of process upon it mailed by certified or registered mail (and service so made shall be deemed complete three days after the same has been posted as aforesaid) or by personal service shall be deemed in every respect effective service of process upon it in any such suit or proceeding.  Nothing herein shall affect Holder's right to serve process in any other manner permitted by law.  The Company agrees that a final non-appealable judgment in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.

 

(iii)  NO JURY TRIAL.  THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE.

 

(g)  Replacement Notes.  This Note may be exchanged by Holder at any time and from time to time for a Note or Notes with different denominations representing an equal aggregate outstanding Principal Amount, as reasonably requested by Holder, upon surrendering the same.  No service charge will be made for such registration or exchange.  In the event that Holder notifies the Company that this Note has been lost, stolen or destroyed, a replacement Note identical in all respects to the original Note (except for registration number and Principal Amount, if different than that shown on the original Note), shall be issued to the Holder, provided that the Holder executes and delivers to the Company an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with the Note.

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on the day and in the year first above written.

 

Integrated Environmental Technologies, Ltd.

 

By:  /s/  Bill Prince                                            

Name: Bill Prince

Title:  President and CEO

 

 

FORM OF CONVERSION NOTICE

 

 

(To be executed by the Holder

 

in order to convert a Note)

 

 

Re:           Note (this “Note”) of Integrated Environmental Technologies Ltd. to Gemini Master Fund, Ltd. on or about September ___, 2010 in the original principal amount of $__________.

 

 

The undersigned hereby elects to convert the aggregate outstanding Principal Amount (as defined in the Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share (the “Common Stock”), of Integrated Environmental Technologies Ltd  (the “Company”) according to the conditions hereof, as of the date written below.  If shares are to be issued in the name of a person other than 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.  The undersigned represents as of the date hereof that, after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted Ownership Percentage” contained in Section 3(i) of this Note.

 

 

	
  

	
Conversion information:

 

Date to Effect Conversion

	
  

	
Aggregate Principal Amount of Note Being Converted

	
  

	
Aggregate Interest on Amount Being Converted

	
  

	
Number of Shares of Common Stock to be Issued

Applicable Conversion Price

Signature

Name

 

Address

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