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lasvegasexh1019.htm

Exhibit 10.19

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE  SECURITIES ARE 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, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER  SAID  ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

Principal Amount: $32,500.00                                                                                                                                                                                                                                                                             Issue Date: August 8, 2014

Purchase Price: $32,500.00

 

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, LAS VEGAS RAILWAY EXPRESS, INC., a Delaware corporation (hereinafter called the "Borrower"), hereby promises to pay to the order of KBM WORLDWIDE, INC., a New York corporation, or registered assigns (the "Holder") the sum of $32,500.00 together with any interest as set forth herein, on May 12, 2015 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes due and payable , whether at maturity or upon acceleration or by prepayment or otherwise. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default Interest"). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock, $0.0001 par value per share (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term "business day" shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the "Purchase Agreement").

 

  

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This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1 Conversion Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article 111) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non­ assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price") determined as provided herein (a "Conversion") ; provided , however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder , except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days' prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the "Notice of Conversion"), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the "Conversion Date"). The term "Conversion Amount" means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder's option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder's option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

  

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1.2  Conversion Price.

(a) Calculation of Conversion Price. The conversion price (the "Conversion Price") shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower 's securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 61% multiplied by the Market Price (as defined herein) (representing a discount rate of 39%). "Market Price" means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. "Trading Price" means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the "OTCBB") as reported by a reliable reporting service ("Reporting Service") designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the "pink sheets" by the National Quotation Bureau, Inc. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. "Trading Day" shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

  

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(b) Conversion   Price   During   Major   Announcements.  Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower  (i) makes a public announcement that it intends to consolidate or merge with any other  corporation (other than a merger in which the Borrower  is the surviving or continuing  corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the  assets of the Borrower or (ii) any person , group or entity (including the Borrower) publicly  announces a tender offer to purchase 50% or more of the Borrower 's Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii)  is  hereinafter  referred  to as the   "Announcement Date"), then  the Conversion  Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price  Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion  Price Termination Date, the Conversion Price shall be determined as set forth in this Section  1.2(a). For purposes hereof, "Adjusted Conversion Price Termination Date" shall mean, with  respect to any proposed transaction or tender offer (or takeover scheme) for which a public  announcement as contemplated by this Section l.2(b) has been made, the date upon which the  Borrower (in the  case of clause  (i) above)  or the person, group  or  entity  (in  the  case  of  clause (ii)  above)  consummates  or  publicly  announces  the termination  or  abandonment of  the proposed transaction or tender  offer (or takeover  scheme) which caused this Section 1 .2(b) to become operative.

1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the "Reserved Amount "). The Reserved Amount shall be increased from time to time in accordance with the Borrower 's obligations hereunder . The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable . In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes . The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

  

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If, at any time the Borrower does not maintain the Reserved Amount it will be considered  an Event of Default under  Section  3.2 of the  Note.

1.4  Method of Conversion .

(a) Mechanics of Conversion . Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section l.4(b), surrendering this Note at the principal office of the Borrower.

(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted . The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion . In the event of any dispute or discrepancy, such records of the Borrower shall,prima facie , be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph , following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(c) Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder's account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(d) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the "Deadline ") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.

 

  

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(e) Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion , the Holder shall be deemed to be the holder ofrecord of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion , and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion . If the Holder shall have given a Notice of Conversion as provided herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim , recoupment, limitation or termination , or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion . The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m ., New York, New York time, on such date.

(f) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion , provided the Borrower is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system.

(g) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder 's right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this  Note.  The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated  damages provision contained in this Section 1.4(g) are justified.

 

  

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1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv) such shares are transferred to an "affiliate" (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Except as otherwise provided in the Purchase Agreement (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate :

 

"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE 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, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (In UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR

 

  

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OTHER   LOAN  OR FINANCING ARRANGEMENT SECURED   BY THE SECURITIES."

 

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transaction s, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration , such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.6 Effect of Certain Events.

(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation , merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. "Person " shall mean any individual, corporation, limited liability company, partnership , association, trust or other entity or organization.

(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization , reorganization , or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion , such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation , provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable , thirty (30) days prior written notice (but in any event at least fifteen ( 15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation , exchange of shares, recapitalization , reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations , mergers, sales, transfers or share exchanges.

  

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(c) Ad justment Due to Distribution. Ifthe Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower's shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution "), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution , to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution .

(d) Ad justment Due to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Borrower issues or sells, or in accordance with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration per share received by the Borrower in such Dilutive Issuance.

The Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon the exercise of such Options" is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.

 

  

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Additionally, the Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the "price per share for which Common Stock is issuable upon such conversion or exchange" is determined by dividing (i) the total amount, if any, received or receivable by the Borrower as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

(e) Purchase Rights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the "Purchase Rights") pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f) Notice of Ad justments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.7 Trading  Market  Limitations.    Unless  permitted  by  the  applicable rules  and regulations  of the principal  securities  market  on  which  the  Common  Stock  is  then  listed or traded,  in no  event shall the Borrower  issue upon  conversion  of or  otherwise  pursuant to this Note  and the other Notes  issued pursuant  to the Purchase  Agreement more  than the maximum number of shares of Common  Stock that  the Borrower  can  issue  pursuant  to  any  rule  of the principal  United  States  securities  market  on  which  the  Common  Stock  is then traded (the "Maximum Share Amount"), which shall be 4.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable  adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common  Stock occurring  after the  date  hereof. Once the Maximum Share Amount has been issued, if the Borrower fails to  eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange,  interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower's abi lity to issue shares of Common Stock in excess of the Maximum Share Amount,  in  lieu  of  any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

1.8 Status  as   Shareholder.    Upon  submission  of  a  Notice  of  Conversion by  a Holder,  (i)  the shares  covered  thereby  (other  than  the  shares,  if any, which  cannot be  issued because their issuance would exceed such Holder's allocated portion of the Reserved  Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder's  rights  as  a Holder  of such  converted  portion  of this Note  shall  cease  and terminate, excepting only the right to receive  certificates  for such  shares  of  Common  Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note.   Notwithstanding the foregoing, if a Holder has not received certificates for all shares  of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with  respect to a conversion of any portion of this Note for any reason, then (unless the Holder  otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower)  the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable , return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation , (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower 's failure to convert this Note.

 

  

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1.9 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the Issue Date and ending on the date which is thirty (30) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full , in accordance with this Section 1.9. Any notice of prepayment hereunder (an "Optional Prepayment Notice ") shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the "Optional Prepayment Date"), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Optional Prepayment Amount") equal to 110%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is thirty-one (31) days following the Issue Date and ending on the date which is sixty (60) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice . On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one(1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Second Optional Prepayment Amount") equal to 115%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning on the date which is sixty-one (61) days following the Issue Date and ending on the date which is ninety (90) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full , in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice . On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Third Optional Prepayment Amount") equal to 120%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

  

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Notwithstanding any to the contrary stated elsewhere herein , at any time during the period beginning on the date that is ninety-one (91) day from the Issue Date and ending one hundred twenty (120) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. Ifthe Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Fourth Optional Prepayment Amount ") equal to 125%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one ( 121) day from the Issue Date and ending one hundred fifty (150) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1 .9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Fifth Optional Prepayment Amount ") equal to 130%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. Ifthe Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one (151) day from the Issue Date and ending one hundred eighty (180) days following the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (I) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the "Sixth Optional Prepayment Amount") equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof. Ifthe Borrower delivers an Optional Prepayment Notice and fails to pay the Sixth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1 .9.

 

  

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After the expiration of one hundred eighty (180) following the date of the Note, the Borrower shall have no right of prepayment.

ARTICLE II. CERTAIN COVENANTS

2.1 Distributions on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders' rights plan which is approved by a majority of the Borrower's disinterested directors.

2.2 Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder's written consent redeem , repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3 Borrowings. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder's written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date hereof and of which the Borrower has informed Holder in writing prior to the date hereof, (b) indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings , the proceeds of which shall be used to repay this Note.

  

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2.4 Sale of Assets . So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder 's written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business . Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.5 Advances   and  Loans.    So  long  as  the  Borrower  shall  have any  obligation under this Note, the Borrower shall not, without the Holder 's written consent, lend  money, give credit or make advances to any person, firm, joint venture  or corporation,  including, without limitation , officers, directors, employees, subsidiaries and affiliates of the  Borrower, except loans, credits  or  advances  (a)  in  existence  or  committed  on  the date  hereof and which the Borrower has informed Holder in writing prior to the  date  hereof, (b)  made in the ordinary course of business or (c) not in excess of $100,000.

ARTICLE  III.   EVENTS  OF DEFAULT

If any of the following events of default (each, an "Event of Default") shall occur:

 

3.1 Failure   to  Pay  Principal   or  Interest.   The  Borrower  fails  to  pay the  principal hereof or interest thereon when due on  this Note, whether  at maturity,  upon acceleration or otherwise.

3.2 Conversion and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronicall y or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion . It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower 's transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

 

  

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3.3 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.

3.4 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement) , shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.5 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed .

3.6 Judgments . Any money judgment , writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $50,000, and shall remain unvacated , unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings , voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the American Stock Exchange .

  

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3.9 Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10 Liquidation . Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business .

3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower 's ability to continue as a "going concern" shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12 Maintenance of Assets. The failure by Borrower to maintain any material intellectual property rights, personal , real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13 Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.

3.14 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fai ls to provide, prior to the effective date of such replacement , a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.

3.16 Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements , in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder . "Other Agreements" means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

  

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Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN) ; MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Borrower by such Holders (the "Default Notice"), and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3, 1 hereof), the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value" of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the "Default Amount") and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived , together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

 

  

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If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

ARTICLE IV. MISCELLANEOUS

4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid , (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid , addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

  

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If to the Borrower, to:

 

LAS VEGAS RAILWAY EXPRESS, INC.

6650 Via Austi Parkway - Suite 140

Las Vegas, NV 89119

   Attn: MICHAEL BARRON, Chief Executive Officer facsimile:

  With a copy by fax only to (which copy shall not constitute notice): [enter name oflaw firm]

 

  Attn: [attorney name] [enter address line 1] [enter city, state, zip]

facsimile: [enter fax number]

If to the Holder:

 

KBM WORLDWIDE, INC.

80 Cuttermill Road - Suite 410 

Great Neek, NY 11021

Attn: Seth Kramer, President

e-mail: info@kbmworldwide.com

  With a copy by fax only to (which copy shall not constitute notice):

           Naidich Wurman Birnbaum & Maday, LLP

Attn: Bernard S. Feldman, Esq. facsimile: 516-466-3555

e-mail: dyork@nwbmlaw.com

4.3 Amendments . This Note and any provision hereof may only be amended  by an instrument in writing signed by the Borrower and the Holder. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4 Assignability. This Note shall be binding upon the Borrower and  its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited investor" (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this  Note  may be pledged as collateral in connection with a bona fide margin account or other  lending arrangement.

4.5 Cost   of   Collection.    If default  is  made  in  the  payment  of  this   Note,  the Borrower shall pay the Holder hereof costs of collection, including reasonable  attorneys'  fees.

4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to  jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party  its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid  or  unenforceable  under  any  applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified  to  conform  with  such  statute  or  rule  of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability  of  any  other  provision  of  any  agreement.  Each  party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices  to  it under  this Agreement  and  agrees that such service shall constitute good and sufficient  service  of  process  and  notice  thereof. Nothing contained herein shall be deemed to limit in any way  any right  to  serve process  in any other manner permitted  by  law.

 

  

19

  

4.7 Certain Amounts . Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Purchase   Agreement.   By  its  acceptance  of this Note,  each party  agrees  to be bound by the applicable terms of the Purchase Agreement.

4.9 Notice of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower 's shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation , dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution , right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.

  

20

  

 

4.10 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly , the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein , to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

IN WITNESS  WHEREOF, Borrower  has  caused  this Note  to be  signed  in its name by its duly authorized officer this August 8, 2014.

LAS VEGAS RAILWAY EXPRESS, INC.

By: /s/ Michael Barron

Michael Barron

Chief Executive Officer

  

21

  

 

EXHIBIT A - NOTICE OF CONVERSION

 

The undersigned  hereby elects to convert  $                                                                                   principal amount of the Note (defined below) into that number of shares of Common Stock to be issued  pursuant  to  the conversion of the Note ("Common Stock") as set forth below, of LAS VEGAS RAILWAY EXPRESS, INC., a Delaware corporation (the "Borrower") according to the conditions of the convertible note of the Borrower dated as of August 8, 2014 (the "Note"), as of the date written below . No fee will be charged to the Holder for any conversion , except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

	
  

	
[ ] The Borrower shall electronically transmit  the  Common  Stock issuable pursuant  to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system ("DWAC  Transfer").

 

	
  

	
Name of DTC Prime Broker: Account Number:

 

	
  

	
[  ]    The undersigned  hereby requests  that the Borrower  issue a certificate  or certificates   for the number of shares of Common Stock set forth below (which numbers are based on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

 

KBM WORLDWIDE, INC.

 

80 Cutterrnill Road - Suite 410

 

Great Neck, NY 1 1021 Attention: Certificate Delivery

 

e-mail: info@kbmworldwide.com

Date of Conversion:

Applicable Conversion Price:                                                              $               

Number of Shares of Common Stock to be Issued

 

Pursuant to Conversion of the Notes:                                                                                  

 Amount of Principal Balance Due remainin

 

Under the Note after this conversion :                                                                                      

  KBM WORLDWIDE, INC.

By:                                                 _ Name: Seth Kramer

Title:           President

 

Date:     

 

 

22lasvegasexh1020.htm

Exhibit 10.20

NEITHER THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE BORROWER UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TANSFERRED OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.

15% CONVERTIBLE NOTE

MATURITY DATE OF

MARCH 23, 2015

$44,679,43 SEPTEMBER 23, 2014 “THE “ISSUANCE DATE”

 

 

FOR VALUE RECEIVED, Las Vegas Railway Express, Inc., a Delaware Corporation (the "Company") doing business in Las Vegas, NV hereby promises  to pay  to the order of JSJ Investments  Inc., an accredited investor  and Texas Corporation, or  its assigns  (the  "Holder")  the  principal  amount  of  Forty-Four  Thousand Six Hundred  &  Seventy-Nine

dollars and  Forty­ Three  cents  ($44.679.43), on demand  of  the  Holder  at  any  time on or after  March  23 . 2015 (the "Maturity  Date"), and to pay interest  on  the  unpaid principal balance hereof at  the  rate of Fifteen Percent  (15%)  per annum (the “Interest  Rate") from   the  date  hereof  (the “Issuance  Date")  until the  same  becomes   due  and  

payable  Whether at maturity or   upon acceleration or by prepayment or otherwise: provided.  that  any amount of principal or  interest on this Note which is not paid when  due  shall  bear  interest  at  such  rate  on  the  unpaid principal balance  hereof   plus  Default interest  from  the  due  date thereof  until the same is paid in full.   Interest shall 

commence accruing on the issuance Date. shall be computed on the  basis of  a  365-day  year  and  the  actual number  of  days  elapsed  and shall accrue  daily  and. after  the  Maturity  Date, compound quarterly.

 

	
1.  

	
Payments of Principal and Interest.

 

	
a.  

	
Payment of Principal.   Upon the Maturity Date, this  note has a cash redemption  premium  of  150% of  the principal amount  only  upon approval  and acceptance  by JSJ  Investments  Inc. This  provision only  may  be exercised  if  the  consent  of  the  Holder  1s  obtained.  The principal  balance  of  this  Note shall be paid to  the Holder hereof on demand

 

	
b.  

	
Default Interest. Any  amount  of  principal  on  this Note which  is  not paid when  due shall bear Fifteen Percent  (15%) interest  per annum  from the date  thereof  until the same is paid ("Default Interest ") and the Holder, at the Holder’s sole discretion, may include any accrued but unpaid default interest in the Conversion Amount.

 

	
c.  

	
General Payment Provisions.  This  Note shall be made in lawful money of  the  United States of America  by check  to such account  as the Holder  may from  time  to time designate by written Notice to the Company  in accordance  with  the  provisions  of  this  Note.   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 and, in the case of any interest payment date which is not the date on which this Note is paid in full. the extension of  the due date thereof  shall  not be taken into account  for  purposes  of  determining  the amount of  interest  due  on such  date.  For purposes of this Note. "Business Day" shall mean any day other than a Saturday. Sunday  or  a day on which commercial banks  in the State of Texas are authorized or required by law or executive order to remain closed.

 

2. Conversion of Note. At any time prior to the Maturity Date, or after the Maturity Date, the Conversion Amount of this Note shall be convertible into shares of the Company’s common stock, share (the “Common Stock”), on the terms and conditions set forth in this Paragraph 2.

a. Certain Defined Terms. For purposes of this Note. the following terms shall have the following meanings:

 

 

  

1

  

 

 

	
i.  

	
"Conversion Amount" means the sum of (A) the principal amount of this Note to be converted with respect to which this determination is being made, (B) Interest; and (C) Default interest, if any, on unpaid interest and principal, if so included at the Holder’s sole discretion.

 

	
ii.  

	
"Conversion Price" means the lower of: (i) a 45% discount to the average of the three lowest daily trading prices for the previous twenty (20) trading days to the date of Conversion: or (ii) a 45% discount to the average of the three lowest daily trading prices for the previous twenty (20) trading days before the date that this note was executed.

 

	
iii.  

	
"Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

	
iv.  

	
"Shares" means the Shares of the Company into which any balance on this Note may be converted upon submission of a Conversion Notice.

 

	
b.  

	
Holder's Conversion Rights.  At any time or times on or after the Issuance Date. the  Holder shall be entitled to  convert  all  of  the  outstanding  and  unpaid principal  amount  of  this  Note  into  fully paid  and  non-assessable shares of Common Stock in accordance with the stated Conversion Price.

 

	
c.  

	
Fractional Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion: if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company  shall round such fraction of a share of Common Stock up to the nearest whole share

 

	
d.  

	
Conversion Amount.  The  Conversion  Amount  shall  be converted  pursuant  to Rule 144(b)(1)(ii) and Rule 144(d)(l)(ii) as promulgated by  the  Securities  and  Exchange  Commission under  the Securities  Act  of  1933, as amended, into free trading shares at the Conversion Price.

 

	
e.  

	
Mechanics of Conversion. The conversion of this Note shall be conducted in the following manner:

 

	
i.  

	
Holder's Conversion Requirements. To  convert  this  Note  into shares  of  Common  Stock  on  any date set  forth in the Conversion Notice by the Holder  (the “Conversion Date”) the  Holder  hereof shall  transmit  by email, facsimile or  otherwise  deliver, for  receipt on or prior to 11:59 p.m., Eastern Time on such date or on the next business day, a copy of a fully executed Notice of conversion in the form attached hereto as Exhibit I (the "Conversion Date") to the Company.

 

	
ii.  

	
Company's Response.  Upon  receipt  by  the  Company  of  a  copy  of  a  Conversion  Notice, the Company  shall as soon as practicable, but in no event  later  than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of   such   Conversion   Notice   to   such   Holder  indicating that   the   Company   will   process   such Conversion Notice  in accordance with the  terms  herein. Within two (2) Business Days after the date of the Conversion Confirmation. the Company  shall have issued and electronically  transferred the shares  to  the  Broker indicated  in  the  Conversion  Notice; should  the  Company  be  unable  to transfer  the  shares  electronically, it shall,  within two (2)  Business  Days  after  the  date  of  the Conversion Confirmation, have surrendered  to  FedEx  for  delivery  the next  day  to the  address  as specified in  the  Conversion  Notice, a  certificate, registered in  the  name  of  the  Holder, for the number of shares of Common Stock to which the Holder shall be entitled.

 

	
iii.  

	
Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

	
iv.  

	
Timely Response by Company. Upon receipt by Company of a Conversion Notice. Company shall respond in a timely manner to Holder by provision within two business days of the Shares requested in the Conversion Notice

 

 

  

2

  

 

	
v.  

	
Penalty for Delinquent Response. If Company  fails  to deliver  for  whatever  reason (including any neglect or  failure by, e.g., the Company, its counsel or  the  transfer  agent) to  Holder  the Shares as requested  in a Conversion Notice and within three business days of the receipt thereof. there shall accrue  a  penalty  of  Additional Shares  due  to  Holder  equal  to  25%  of  the  number  stated in the  Conversion  Notice  beginning  on  the  Fourth  business  day  after  the  date  of  the  Notice The Additional Shares  shall  be issued and the amount  of  the  Note retired will not be reduced  beyond that stated in the Conversion Notice.  Each additional 5 business days beyond the Fourth business day after the date of this Notice shall accrue an additional 25% penalty for delinquency, without any  corresponding  reduction  in the amount  due  under  the  Note, for  so  long as  Company  fails  to provide the Shares so demanded.

 

	
vi.  

	
Conversion Right Unconditional. If the Holder shall provide a Notice of Conversion as provided herein, the Company's obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counter claim, recoupment, or alleged breach by the Holder of any obligation to the Company.

 

	
vii.  

	
Transfer Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Convertible Note and processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the conversion, The Holder will deduct legal fees in the amount of $2.000 from the principal payment of the Convertible Note. The Holder will deduct advisory fees due Anubis Capital Partners in the amounts of $4.500 from the principal payment of the Convertible Note.

 

 

	
3.  

	
Other Rights of Holders:  Reorganization, Reclassification, Consolidation,  Merger or Sale.  Any   recapitalization, reorganization, reclassification, consolidation, merger,  sale  of  all  or  substantially  all  of  the  Company's  assets  to another  Person or  other  transaction which is  effected  in such  a way  that  holders  of  Common  Stock are entitled to receive (either directly or  upon subsequent  liquidation) stock, securities or assets with  respect to or in exchange  for Common Stock is referred to herein as "Organic Change." Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company is not a surviving entity, the  Company  will  secure  from  the Person purchasing such  assets or  the  successor  resulting  from such Organic  Change (in each case, the  "Acquiring Entity”)  a  written  agreement (in  form  and  substance  reasonably  satisfactory  to  the  holder)  to  deliver  to  Holder in exchange  for this Note, a security of  the Acquiring Entity  evidenced  by a written instrument substantially similar in form and substance  to this Note, and reasonably  satisfactory  to the Holder. Prior to the consummation of any other Organic  Change, the  Company  shall  make appropriate provision (in form and  substance  reasonably  satisfactory  to the  Holders  of  a  majority  of the  Conversion  Amount  of  the  Notes  then  outstanding)  to  ensure  that  each  of  the Holders will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of  Common  Stock  immediately theretofore  acquirable and  receivable  upon  the  conversion of  such  Holder's  Note. such  shares  of  stock, securities  or  assets  that  would  have  been issued  or  payable  in  such  Organic  Change  with respect  to  or in  exchange  for  the  number  of  shares  of  Common  Stock  which  would have  been  acquirable  and receivable  upon  the  conversion of  such  Holder's  Note as  of  the  date of  such  Organic  Change  (without  taking into account any limitations or restrictions on the convertibility of the Note). All provisions of this Note must be included to the satisfaction of Holder in any new Note created pursuant to this section.

 

	
4.  

	
Representations and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holders the following.

 

	
a.  

	
Organization, Good Standing and Qualification.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted.  The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

 

	
b.  

	
Authorization.  All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement. The Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this agreement, Valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Notes have been authorized or will be authorized prior to the issuance of such shares.

 

 

  

3

  

 

 

	
c.  

	
Fiduciary Obligations. The  Company  hereby  represents  that it tends to  use  the  proceeds  of  the  Notes primarily  for  the operations  of  its  business  and not  for  any personal, family,  or  household  purpose.  The Company hereby represents that its board of directors. In the exercise of its  fiduciary duty, has approved the  execution  of this  Agreement  based  upon  a  reasonable belief that   the  loan  provided  for  herein  is appropriate  for   the  Company after  reasonable inquiry concerning  its  financial objectives  and  financial situation.

 

	
5.  

	
Covenants of the Company. So long as the Company shall have any obligations under this Note, the Company shall not without the Holder's written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property, or other securities) on share of capital stock solely in the form of additional shares of Common Stock.

 

	
a.  

	
So long as the Company shall have any obligations under this Note, the Company shall not without the Holder's written consent redeem, repurchase, or otherwise acquire (whether for cash or in exchange for property or other securities) in any one transaction or series of transactions any shares of capital stock of the Company or any warrants, rights, or options to acquire any such shares.

 

	
b.  

	
So  long  as  the  Company  shall have any  obligations  under  this  Note. the  Company  shall  not  without  the Holder's written consent  incur any liability  for  borrowed money. except  (a)  borrowings  in existence as  of this  date  and  of  which  the  Company  has informed  the  Holder in writing  before  the  date  hereof  or  (b) indebtedness to trade creditors or  financial institutions incurred in the ordinary course of business.

 

	
c.  

	
So  long  as  the  Company  shall  have any  obligations  under  this  Note, the  Company  shall  not  without  the Holder's written  consent sell, lease, or  otherwise  dispose  of  a  significant  portion  of  its  assets  outside  the ordinary  course  of  business.   Any  consent  to  the  disposition  of  any  assets  may  be  conditioned  upon  a specified use of the proceeds thereof.

 

 

	
6.  

	
Issuance of Common Stock Equivalents.  If the Company, at any   time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly. Common Stock ("Convertible Securities"), other than the Note. or any  rights or  warrants or  options  to  purchase any  such  Common  Stock  or Convertible Securities. shall be issued or  sold (collectively. the "Common  Stock  Equivalents") and the aggregate of  the  price per share  for which Additional Shares of  Common  Stock may be issuable thereafter pursuant to such  Common Stock Equivalent. plus  the consideration received  by  the  Company  for  issuance  of  such  Common  Stock  Equivalent  divided  by  the number  of  shares  of  Common  Stock  issuable  pursuant  to  such  Common  Stock  Equivalent  (the  "Aggregate  Per Common  Share Price") shall be less  than the applicable Conversion Price then in effect, or if, after any such issuance of  Common  Stock  Equivalents.  The price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and  such  price as  so  amended  shall make  the  Aggregate  Per  Share  Common Price be less than the applicable Conversion Price in effect at  the time of  such amendment or adjustment. then  the applicable  Conversion  Price  upon  each  such  issuance  or  amendment  shall  be  adjusted  on  the  basis that  (1)  the maximum number of  Additional Shares of  Common Stock  issuable pursuant  to all such  Common Stock  Equivalents shall be deemed to have been issued (whether or not such Common Stock  Equivalents are actually  then exercisable. convertible  or  exchangeable in whole or in part) as of  the earlier of (A) the date on which the Company shall enter into a firm contract  for  the  issuance of  such Common  Stock  Equivalent, or (B) the date of  actual  issuance of  such Common  Stock  Equivalent.  No adjustment of  the  applicable  Conversion Price shall be made  under  this  subsection (vii) upon the issuance of any Convertible Security which is  issued pursuant  to  the exercise of any warrants or  other subscription or  purchase  rights  therefor. if  any adjustment shall  previously have been made to  the exercise price of such warrants then  in effect  upon the issuance  of  such  warrants or  other  rights  pursuant  to  this subsect ion (vii). No adjustment  shall be  made  to  the  Conversion  Price upon the issuance  of  Common  Stock  pursuant  to the exercise. conversion  or  exchange  of  any  Convertible  Security or  Common  Stock  Equivalent  where  an  adjustment  to  the Conversion  Price was  made as  a  result of  the  issuance  or  purchase  of  any  Convertible Security  or  Common  Stock Equivalent.

 

	
  

	
7. Reservation of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Note, such number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount of the Note then outstanding. The initial number of shares of Common Stock reserved for conversions of the Notes shall be calculated as twice the number of shares necessary to convert the entire value of the Note on the day it was executed, and each increase in the number of shares so reserved shall be allocated pro rata among the Holders of the Note based on the principal and interest amount of the Notes held by each Holder at the time of issuance of the Notes or increase in the number of reserved shares, as the case may be. In the event a Holder shall sell or otherwise transfer any of such Holder's Note, each transferee shall be allocated a pro rata portion of the number of reserved shares of Common Stock reserved for such transferor. Any shares of Common Stock reserved and allocated to any Person which ceases to hold any Note shall be allocated to the remaining Holders, pro rata based on the principal amount of the Note then held by such Holders.

 

 

  

4

  

 

	
8.  

	
Voting Rights. Holders of this Note shall have no voting rights, except as required by law.

 

 

	
9.  

	
Reissuance of Note.  In  the  event  of  a  conversion  or  redemption  pursuant  to  this  Note  of  less  than all  of  the Conversion  Amount  represented  by  this Note, the Company  shall promptly  cause  to  be  issued and delivered  to  the Holder. upon  tender  by  the  Holder  of  the  Note converted  or  redeemed, a new  note of  like  tenor  representing the remaining principal amount of this Note which has not been so converted or redeemed and which is in substantially the same form as this Note.as set forth above.

 

 

	
10.  

	
Default and Remedies.

 

	
a.  

	
Event of Default. An  " Event  of  Default " is:  ( i)  default  for   ten  (10)  days in  payment  of  interest  or Default  Interest  on  this  Note: (ii)  default  in payment  of  the  principal amount  of  this  Note when  due:  (iii) failure by the Company for  thirty (30) days after Notice to it to comply with any other  material provision of this Note: (iv) breach of any covenants, warranties, or representations by the Company herein: (v) cessation of  operations  by  the  Company  or  a  material  subsidiary : (vi)  if  the  Company  pursuant  to  or  within  the meaning of any Bankruptcy Law; (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an  involuntary case; (C) consents  to  the  appointment of  a  Custodian of  it  or  for  all  or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that  it is generally unable to pay  its debts as the same become due: or  (vi) a court of  competent jurisdiction enters an order or decree under any Bankruptcy Law that: (I) is for relief against the Company in an involuntary case: (2) appoints a Custodian of  the Company or for all or substantially all of its property; or (3) orders the liquidation of  the Company  or any subsidiary, and the order or  decree remains unstayed and in effect for  thirty (30) days. The Term "Bankruptcy Law" means title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors, the term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

 

	
b.  

	
Remedies.  If an Event of Default occurs and is continuing, the holder of this Note may declare all of this Note, including   any   interest   and   Default   Interest   and   other   amounts   due, to be due   and   payable immediately.

 

 

	
  

	
11.  Vote to Change the Terms of this Note. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and holders of a majority of the aggregate Conversion Amount of the Notes then outstanding.

 

 

	
  

	
12.  Lost or Stolen Note.  Upon  receipt  by  the  Company  of  evidence  satisfactory  to  the  Company  of  the  loss, theft, destruction or  mutilation of this  Note, and, in the case of  loss, theft  or destruction, of an indemnification undertaking by the Holder  to  the Company  in a  form  reasonably  acceptable  to  the  Company  and, in the case of  mutilation, upon surrender and cancellation of the Notes, the Company shall execute and deliver a new  Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount into Common Stock.

 

 

  

5

  

 

	
13.  

	
Payment of Collection, Enforcement and Other Costs.  If: (i) this  Note is placed in the  hands  of  an  attorney  for collection or  enforcement  or is collected or enforced  through any  legal proceeding; or (ii) an attorney  is retained to represent  the  Holder  of  this  Note in any  bankruptcy, reorganization, receivership  or  other  proceedings  affecting creditors’ rights  and  involving  a  claim  under  this  Note.  then  the  Company  shall  pay  to  the  Holder all  reasonable attorneys'  fees, costs and expenses  incurred in connection therewith, in addition to all other amounts due hereunder.

 

 

	
14.  

	
Cancellation. After all principal and accrued interest at any time owed on thin Note has been paid in full, this note shall automatically be deemed canceled. shall be surrendered  to the Company for cancellation and shall not be reissued

 

 

	
15.  

	
Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and Notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.

 

 

	
16.  

	
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 laws  of  the State of Texas, without  giving  effect  to  provisions  thereof  regarding conflict  of  laws. Each  party  hereby irrevocably submits  to  the non-exclusive jurisdiction of  the state and federal courts sitting in Texas  for  the adjudication of any dispute hereunder or  in connect ion  herewith  or  with  any  transaction contemplated  hereby  or  discussed  herein, and  hereby  irrevocably waives, and agrees  not  to  assert in any  suit, action  or  proceeding, any  claim  that it is  not  personally  subject  to  the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that  the venue of  such suit, action or  proceeding is improper. Each party  hereby irrevocably waives  personal  service of  process and consents  to  process  being served  in any  such  suit. action  or  proceeding  by sending  by certified  mail or  overnight courier a copy  thereof  to such party at the address  for such  Notices  to it under  this Agreement  and agrees that  such service shall constitute good and  sufficient  service of  process and Notice thereof.  Nothing contained herein shall be deemed  to limit in any way  any  right  to  serve  process  in any  manner  permitted  by  law.  EACH  PARTY  HEREBY IRREVOCABLY  W AVES  ANY  RIGHT  IT  MA Y  HAVE,  AND  AGREES  NOT  TO  REQUEST, A  JURY  TRIAL FOR THE ADJUDICATION  OF ANY  DISPUTE HEREUNDER  OR  IN CONNECTION HEREWITH OR  ARISING  OUT OF THIS AGREEMENT  OR ANY TRANSACTION  CONTEMPLATED  HEREBY.

 

 

	
  

	
17.  Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and  in addition  to  all  other  remedies  available  under  this  Note, at  law  or in  equity (including a decree  of  specific  performance  and/or  other  injunctive  relief),  and  no remedy  contained  herein shall be deemed  a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a Holder's right  to pursue  actual  damages  for  any failure  by  the  Company  to  comply  with  the  terms  of  this  Note.  The  Company covenants  to each Holder of  Notes that  there shall be no characterization  concerning  this  instrument other  than as expressly  provided  herein. Amounts set forth or provided for herein with respect to payments, conversion and  the like (and the computation thereof) shall be the amounts  to be received by the Holder  thereof and shall not, except as expressly  provided herein, be subject to any other obligation of the Company (or the performance thereof).

 

 

	
  

	
18.Specific Shall Not Limit General; Construction.  No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any person as the drafter hereof.

 

 

  

6

  

 

	
  

	
19.  Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder  shall operate as a waiver  thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

 

 

	
20.  

	
Partial Payment. In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration actually paid by lender such that the company is only required to repay the amount funded and the company is not required to repay any unfunded portion of this note.

 

 

	
21.  

	
Entire Agreement.  This Agreement constitutes  the full and entire understanding and agreement  between the parties with  regard to  the  subjects  herein  None of  the  terms of  this Agreement  can be waived or  modified, except  by an express agreement signed by the Parties.

 

 

	
22.  

	
Representations and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement. The Company further acknowledges that there have been no representations or warranties about future financing or subsequent transactions between the parties.

 

 

	
23.  

	
Notices. All Notices and other communications given or made to the Company pursuant hereto shall be in writing (including facsimile or similar electronic transmissions) and shall be deemed effectively given: (i) upon personal delivery, (ii) when sent by electronic mail or facsimile, as deemed received by the close of business on the date sent. (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery. All communications shall be sent either by email, or fax, or to the address specified on the signature page. The physical address, email address, and phone number provided on the signature page shall be considered valid pursuant to the above stipulations: should the Company's contact information change from that listed on the signature page, it is incumbent on the Company to inform the Holder.

 

 

	
24.  

	
Severability. If one  or  more provisions  of  this  Agreement  are  held to  be  unenforceable  under applicable law, such provision shall be excluded  from this Agreement  and  the rest of  the Agreement  shall be enforceable in accordance with its terms.

 

 

	
25.  

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

 

 

	
26.  

	
Successors and Assigns. This Agreement shall be binding upon successors and assigns.

 

 

 

  

7

  

 

IN WITNESS WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.

 

 

COMPANY: Las Vegas Railway Express, Inc.

 

SIGNATURE: /S/ Michael Barron

BY: Michael Barron

 

TITLE: CEO

 

 

   ADDRESS: 6650 Via Austi Pkwy # 140

      Laa Vegas, NV 89119

 

 

   E-MAIL: mbarron@vegasxtrain.com

 

SIGNATURE:

/s/ Sameer Hirji

 

Sameer Hirji, President JSJ Investments Inc.

2665 Villa Creek Drive. Suite 214

 

Dallas TX 75234 888-503·2599

 

  

8

  

 

Exhibit 1

 

Conversion Notice

Reference is made to the Convertible Note issued by Las Vegas Railway Express, Inc. (the "Note"), dated September  23, 2014 in  the  principal amount  of  $ 44.679.43  with  15%  interest. This note  currently  holds  a  principal balance  of  $44.679.43  and accrued  interest in the amount  of  $. The  features  of  conversion  stipulate a Conversion Price  

the lower of (i) a 45% discount  to  the  average  of  the  three  lowest  daily  trading  prices  for  the  previous  twenty  (20)  trading  days  to  the  date  of Conversion: or (ii) a 45% discount  to the average of the three lowest daily trading prices for the previous  twenty

(20) trading days before the date that  this note was executed, pursuant to the provisions of Section 2(a)(2)  in the Note.

 

In accordance with and pursuant to the Note, the undersigned hereby elects to convert $of the PRINCIPAL/IN TEREST balance of the Note, Indicated below into shares of Common Stock (the "Common Stock"), of the Company, by tendering the Note specified as of the date specified below.

Date of Conversion:   ___

 

Please confirm the following information: Conversion Amount   $ ____________________

 

Conversion Price: $ _____________________________ (     % discount from $__________)

 

Number of Common Stock to be issued: ______________________________________________________

 

 

Current issued/Outstanding: _________________________________________________________________________________________________________

 

 

PLEASE ISSUE THE COMMON STOCK INTO WHICH THE NOTE IS BEING CONVERTED IN THE NAME OF THE HOLDER OF THE NOTE AND TRANSFER THE SHARES ELECTRONICALLY TO:

 

[BROKER INFORMATION]

 

HOLDER AUTHORIZATION: JSJ INVESTMENTS INC.

 

2665 VILLA CREEK DRIVE, SUITE 214

 

DALLAS, TX 75234

 

888-503-2599

 

Tax ID 20-2122354

  Sameer Hirji. President

 

Date:

[Continued on Next Page)

 

  

9

  

 

PLEAS BE ADVISED, pursuant to Section 2(e)(2)  of  the  Note. "Upon receipt by the Company of a copy of the Conversion Notice, The Company  shall  as  soon  as  practicable, but in no  event  later  than  one  (1)  Business  Day  after  receipt  of  such Conversion  Notice, SEND,  VIA  EMAIL,  FACSIMILE  OR  OVERNIGHT  COURIER, A 

CONFIRMATION  OF  RECEIPT  OF  SUCH CONVERSION  NOTICE TO SUCH HOLDER INDICATING  THAT THE COMPANY  WILL  PROCESS SUCH CONVERSION  NOTICE In accordance with the terms herein. Within  two  (2)  Business  Days  after  the  date  of  the  Conversion  Confirmation.  the Company  shall have issued and 

electronically transferred the shares  to  the Broker indicated in the Conversion Notice; should the  Company  be unable  to  transfer  the  shares  electronically, they shall. within two  (2)  Business  Days  after  the  date  of  the Conversion Confirmation, have surrendered to  FedEx  for delivery  the next day  to the address  as  specified  in the

Conversion Notice, a  certificate, registered  in the  name of  the  Holder, for  the  number  of  shares  of  Common  Stock  to which  the  Holder shall be entitled."

 

  /s/ Michael Barron

 

Michael Barron

 

CEO

Las Vegas Railway Express. Inc.

 

10

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