Document:

helix_8k-ex1001.htm

 

Exhibit 10.1

 

NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT, dated as of August 12, 2011 (this “Agreement”), is entered into by and between Helix Wind, Corp., a Nevada corporation (the “Company”), with its principal executive office at 13125 Danielson Street, San Diego, CA 92064, and St. George Investments, LLC, an Illinois limited liability company, its successors or assigns (the “Buyer”), with its principal executive office at 303 East Wacker Drive, Suite 1200, Chicago, Illinois 60601.

W I T N E S S E T H:

WHEREAS, the Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration for offers and sales to accredited investors afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act; and

WHEREAS, the Buyer wishes to acquire from the Company, and the Company desires to issue and sell to the Buyer the Note (as defined hereafter), which Note will be convertible into shares of Common Stock, $0.0001 par value, of the Company (the “Common Stock”), upon the terms and subject to the conditions of the Note, this Agreement and the other Transaction Documents (as defined hereafter).

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           CERTAIN DEFINITIONS.   As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

“Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

“Buyer’s Counsel” means Carman Lehnhof Israelsen LLP.

“Buyer Control Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Buyer pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined hereafter).

“Certificate of Incorporation” means the certificate of incorporation, articles of incorporation or other charter document (howsoever denominated) of the Company, as amended to date.

“Closing Date” means the date of the closing of the purchase and sale of the Note.

“Company Control Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.

“Company Counsel” means Steven James Davis, a Professional Corporation.

“Company’s SEC Documents” means the Company’s filings on the SEC’s EDGAR system.

 

 

  

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“Conversion Date” means the date a Holder submits a Notice of Conversion, as provided in the applicable Note (as defined hereafter).

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Notes and/or in payment of accrued interest, as contemplated in the Notes.

“Delivery Date” has the meaning ascribed to it in the applicable Note (with respect to Conversion Shares).

“Helix Sub” means Helix Wind, Inc., a Nevada corporation and wholly owned subsidiary of the Company.

“Holder” means the Person holding the relevant Securities at the relevant time.

“Last Audited Date” means March 31, 2011.

“Material Adverse Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be expected to (a) adversely affect the legality, validity or enforceability of the Notes or any of the Transaction Documents, (b)  have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its subsidiaries, taken as a whole, or (c) adversely impair the Company’s ability to perform fully on a timely basis its material obligations under any of the Transaction Documents or the transactions contemplated thereby.

“Maturity Date” has the meaning ascribed to it in the applicable Note.

“Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

“Principal Trading Market” means (a) NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX or OTCQB, or (g) such other market on which the Common Stock is principally traded at the relevant time, but shall not include the “pink sheets.”

“Rule 144” means (i) Rule 144 promulgated under the 1933 Act or (ii) any other similar rule or regulation of the SEC that may at any time permit Holder to sell securities of the Company to the public without registration under the 1933 Act.

“Securities” means the Notes and the Shares.

“Shares” means the shares of Common Stock representing any or all of the Conversion Shares.

“State of Incorporation” means Nevada.

“Subsidiary” means, as of the relevant date, any subsidiary of the Company (whether or not included or identified in the Company’s SEC Documents) whether now existing or hereafter acquired or created.

“Trading Day” means any day during which the Principal Trading Market shall be open for business.

  

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“Transaction Documents” means (i) this Agreement, (ii) the Note (as defined hereafter), (iii) the Consolidated Note (as defined hereafter), (iv) a Consent to Entry of Judgment by Confession substantially in the form attached hereto as Annex I (“Confession of Judgment”), (v) the Secretary’s Certificate substantially in the form attached hereto as Annex II, (vi) two irrevocable transfer agent instruction letters substantially in the form attached hereto as Annex III (each a “Transfer Agent Letter”), (vii) the Security Agreement substantially in the form attached hereto as Annex IV (“Security Agreement”), (viii) Guaranty for Helix Sub substantially in the form attached hereto as Annex V (“Guaranty”), (ix) the Security Agreement for Helix Sub substantially in the form attached hereto as Annex VI (“Helix Sub Security Agreement”), (x) Consent to Entry of Judgment by Confession for Helix Sub substantially in the form attached hereto as Annex X (“Helix Sub Confession of Judgment”), and (xi) all other certificates, documents, agreements, resolutions and instruments delivered to any party under or in connection with this Agreement.

“Transfer Agent” means, at any time, the transfer agent for the Company’s Common Stock.

“Wire Instructions” means the Company wire instructions set forth on Annex VII.

2.           AGREEMENT TO PURCHASE; NET PURCHASE PRICE; CLOSING.

a.           Purchase.

(i)           Subject to the terms and conditions of this Agreement and the other Transaction Documents, the undersigned Buyer hereby agrees to loan to the Company the Net Purchase Price (as defined hereafter) set forth on the Buyer’s signature page of this Agreement.

(ii)           The obligation to repay the loan from the Buyer shall be evidenced by the Company’s issuance of a Secured Convertible Promissory Note to the Buyer in the principal amount of $49,297.50 substantially in the form attached hereto as Annex VIII (the “Note”).  The Note shall provide for a Conversion Price (as defined in the Note), which price may be adjusted from time as provided in the Note, and shall be secured by the Security Agreement and guarantied by Helix Sub, pursuant to the Guaranty, which Guaranty will be secured by all of Helix Sub’s assets pursuant to the Helix Sub Security Agreement.

(iii)           In exchange for the Original Promissory Notes (as defined below), and as an inducement to Lender to enter into this Agreement, the Company agrees to issue a Consolidated Secured Convertible Promissory Note to Buyer in the principal amount of $525,856.91 substantially in the form attached hereto as Annex IX (the “Consolidated Note”), for the purpose of replacing the following promissory notes previously issued by the Company in favor of the Buyer (collectively, the “Original Promissory Notes”): (i) Convertible Promissory Note dated March 31, 2011, in the original principal amount of $65,000, (ii) Convertible Promissory Note dated April 15, 2011, in the original principal amount of $65,000, (iii) Convertible Promissory Note dated April 30, 2011, in the original principal amount of $65,000, (iv) Convertible Promissory Note dated May 18, 2011, in the original principal amount of $65,000, and (v) Convertible Promissory Note dated May 31, in the original principal amount of $65,000. The Note and the Consolidated Note are sometimes collectively referred to as the “Notes”. The Consolidated Note shall be secured by the Security Agreement and guarantied by Helix Sub pursuant to the Guaranty, which Guaranty will be secured by all of Helix Sub’s assets pursuant to the Helix Sub Security Agreement. The principal balance of the Consolidated Note reflects all accrued and unpaid interest owed under the Original Promissory Notes. At Closing, the Buyer will exchange the Original Promissory Notes for the Consolidated Note. The Company and Buyer agree that upon surrender, the Original Promissory Notes shall be cancelled and the amount owed to Buyer under the Original Promissory Notes shall be evidenced by the Consolidated Note. The Company hereby acknowledges and agrees that each of the Original Promissory Notes was subject to two separate Trigger Events (as defined in each applicable Original Promissory Note), resulting in (i) a Balance Adjustment (as defined in each applicable Original Promissory Note) of 25% each, and (ii) an increase in the interest rate from 6% to 15%.

  

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b.           Closing; Delivery of Transaction Documents. The sale and purchase of the Note and the exchange of the Original Promissory Notes for the Consolidated Note shall take place at a closing (the “Closing”) to be held at the offices of the Buyer on the Closing Date pursuant to Section 7 hereof.  Subject to the terms and conditions of this Agreement, including without limitation subsection (d) below, at the Closing the Company will deliver to the Buyer the Transaction Documents required under Section 9 hereof against receipt by the Company of the Net Purchase Price.

c.           Net Purchase Price.  The Note carries an original issue discount of $10,222.50 (the “OID”).  In addition, the Company agrees to pay $5,000 to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and other transaction costs incurred in connection with the purchase and sale of the Notes (the “Transaction Expenses”).  The Transaction Expenses shall be added to the principal balance of the Note such that the “Net Purchase Price” shall be $34,075.00, computed as follows: $49,297.50 less the OID less the Transaction Expenses.

d.           Method of Payment.  Payment of the Net Purchase Price shall be made to the Company in immediately available funds of the United States as provided in the Wire Instructions.

3.           BUYER REPRESENTATIONS AND WARRANTIES.  The Buyer represents and warrants to the Company, as of the date hereof and as of the Closing Date, as follows:

a.           Binding Obligation.  The Transaction Documents to which the Buyer is a party, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Buyer.  This Agreement has been executed and delivered by the Buyer, and this Agreement is, and each of the other Transaction Documents to which the Buyer is a party, when executed and delivered by the Buyer (if necessary), will be valid and binding obligations of the Buyer enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

b.           Access to Information.  The Buyer acknowledges that the Company has offered the Buyer access to the corporate records and accounts of the Company and to all information in its possession relating to the Company, has made its officers and representatives available for interview by the Buyer, and has furnished the Buyer with all documents and other information required for the Buyer to make an informed decision with respect to the purchase of the Notes.

c.           Accredited Investor Status.  The Buyer is an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act.

4.           COMPANY REPRESENTATIONS AND WARRANTIES.   The Company represents and warrants to the Buyer as of the date hereof and as of the Closing Date that:

a.           Rights of Others Affecting the Transactions.  There are no preemptive rights of any stockholder of the Company, as such, to acquire the Notes or the Shares.  No other party has a currently exercisable right of first refusal which would be applicable to any or all of the transactions contemplated by the Transaction Documents.

  

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b.           Status.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Incorporation and has the requisite corporate power to own its properties and to carry on its business as now being conducted.  The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have or result in a Material Adverse Effect.  The Company has registered its stock under Section 12(g) of the Securities and Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant to Section 13 or Section 15(d) of the 1934 Act.   The Company has taken no action designed to terminate, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act, nor has the Company received any notification that the SEC is contemplating terminating such registration.  The Common Stock is quoted on the Principal Trading Market.  The Company has received no notice, either oral or written, with respect to the continued eligibility of the Common Stock for quotation on the Principal Trading Market, and the Company has maintained all requirements on its part for the continuation of such quotation. The Company has not, in the twelve (12) months preceding the date hereof, received notice from the Principal Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Principal Trading Market. The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

c.           Authorized Shares.

 

 

(i)           Other than as set forth in the Company’s SEC Documents, there are no outstanding securities which are convertible into or exchangeable for shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some event in the future.

(ii)           All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable.  After considering the Share Reserve (as defined herein) and all other commitments that may require the issuance of Common Stock, the Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares on the Closing Date, were all of the Notes fully converted on that date.

(iii)         The Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued on conversion of, or in payment of interest on any of the Notes in accordance with their respective terms, will have been duly and validly issued, fully paid and non-assessable, free from all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description, and will not subject the Holder thereof to personal liability by reason of being such Holder.

d.           Transaction Documents and Stock.  This Agreement and each of the other Transaction Documents, and the transactions contemplated hereby and thereby, have been duly and validly authorized by the Company.  This Agreement has been duly executed and delivered by the Company and this Agreement is, and the Note and the Consolidated Note, and each of the other Transaction Documents, when executed and delivered by the Company (if necessary), will be, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

  

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e.           Non-contravention.  The execution and delivery of this Agreement and each of the other Transaction Documents by the Company, the issuance of the Securities in accordance with the terms hereof, and the consummation by the Company of the other transactions contemplated by this Agreement, the Notes, and the other Transaction Documents do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the Certificate of Incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock except as herein set forth, or (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, except such conflict, breach or default which would not have or result in a Material Adverse Effect.

f.           Approvals.  No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the issuance and sale of the Securities to the Buyer as contemplated by this Agreement, except such authorizations, approvals and consents that have been obtained.

g.           Filings; Financial Statements.  None of the Company’s SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading.  The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the SEC under the 1934 Act on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension.  As of their respective dates, the financial statements of the Company included in the Company’s SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

h.           Absence of Certain Changes.  Since the Last Audited Date, there has been no Material Adverse Effect, except as disclosed in the Company’s SEC Documents. Since the Last Audited Date, except as provided in the Company’s SEC Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or transferred any other material tangible assets, or canceled any material debts owed to the Company by any third party or material claims of the Company against any third party, except in the ordinary course of business consistent with past practices; (v) waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi) made any increases in employee compensation, except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions of their employment.

  

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i.           Full Disclosure.  There is no fact known to the Company or that the Company should know after having made all reasonable inquiries (other than conditions known to the public generally or as disclosed in the Company’s SEC Documents) that has not been disclosed in writing to the Buyer that would reasonably be expected to have or result in a Material Adverse Effect.

j.           Absence of Litigation.  There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Documents, except as disclosed in the Company’s SEC Documents.  The Company is not aware of any valid basis for any such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect. There are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which it or any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

k.           Absence of Events of Default. Neither the Company nor any of its Subsidiaries is in violation of or in default with respect to (i) its certificate of incorporation or Bylaws or other organizational documents, each as currently in effect, or any material judgment, order, writ, decree, statute, rule or regulation applicable to such entity; or (ii) any material mortgage, indenture, agreement, instrument or contract to which such entity is a party or by which it or any of its properties or assets are bound (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), except such breach or default which would not have or result in a Material Adverse Effect.

l.           Absence of Certain Company Control Person Actions or Events.  Other than as set forth in the Company’s SEC Documents, none of the following has occurred during the past five (5) years with respect to a Company Control Person:

(i)           A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for, the business or property of such Company Control Person, or any partnership in which he or she was a general partner at or within two years before the time of such filing, or any corporation or business association of which he or she was an executive officer at or within two years before the time of such filing;

(ii)           Such Company Control Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(iii)         Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:

(1)           acting, as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, any other Person regulated by the Commodity Futures Trading Commission (“CFTC”) or engaging in or continuing any conduct or practice in connection with such activity;

  

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(2)           engaging in any type of business practice; or

(3)           engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

(iv)           Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such Company Control Person to engage in any activity described in subsection (3) immediately above, or to be associated with Persons engaged in any such activity; or

(v)           Such Company Control Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended, or vacated.

m.           No Undisclosed Liabilities or Events.  The Company has no liabilities or obligations other than those disclosed in the Transaction Documents or the Company’s SEC Documents or those incurred in the ordinary course of the Company’s business since the Last Audited Date, or which individually or in the aggregate, do not or would not have a Material Adverse Effect.  No event or circumstance has occurred or exists with respect to the Company or its properties, business, operations, condition (financial or otherwise), or results of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed.  There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (i) change the Certificate of Incorporation or by-laws of the Company, each as currently in effect, with or without stockholder approval, which change would reduce or otherwise adversely affect the rights and powers of the stockholders of the Common Stock or (ii) materially or substantially change the business, assets or capital of the Company, including its interests in Subsidiaries.

n.           No Integrated Offering.  Neither the Company nor any of its Affiliates nor any Person acting on its or their behalf has, directly or indirectly, made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale of the Securities as contemplated hereby.

o.           Dilution.  Each of the Company and its executive officers and directors is aware that the number of shares issuable on conversion of the Notes or pursuant to the other terms of the Transaction Documents, may have a dilutive effect on the ownership interests of the other stockholders (and Persons having the right to become stockholders) of the Company.  The Company specifically acknowledges that its obligations to issue the Conversion Shares upon conversion of the Notes are binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other stockholders of the Company, and the Company will honor such obligations, including honoring every Notice of Conversion (as contemplated by the Notes), unless the Company is subject to an injunction (which injunction was not sought by the Company) prohibiting the Company from doing so.

  

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p.           Fees to Brokers, Placement Agents and Others. The Company has taken no action which would give rise to any claim by any Person for brokerage commission, placement agent or finder’s fees or similar payments by Buyer relating to this Agreement or the transactions contemplated hereby.  Except for such fees arising as a result of any agreement or arrangement entered into by the Buyer without the knowledge of the Company (a “Buyer’s Fee”), Buyer shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this subsection that may be due in connection with the transactions contemplated hereby.  The Company shall indemnify and hold harmless each of Buyer, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses suffered in respect of any such claimed or existing fees (other than a Buyer’s Fee).

q.           Disclosure.  All information relating to or concerning the Company set forth in the Transaction Documents or in the Company’s public filings with the SEC or otherwise provided by or on behalf of the Company to the Buyer, is true and correct in all material respects and the Company has not omitted to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.  No event or circumstance has occurred or exists with respect to the Company or its business, properties, prospects, operations or financial conditions, which under applicable law, rule or regulation, requires public disclosure or announcement by the Company.

r.           Confirmation.  The Company agrees that, if, to the knowledge of the Company, any events occur or circumstances exist prior to the payment of the Net Purchase Price to the Company which would make any of the Company’s representations or warranties set forth herein materially untrue or materially inaccurate as of such date, the Company shall immediately notify the Buyer in writing prior to such date of such fact, specifying which representation, warranty or covenant is affected and the reasons therefor.

 

s.           Title. The Company and its Subsidiaries, if applicable, own and have good and marketable title in fee simple absolute to, or a valid leasehold interest in, all their respective real properties and good title to their other respective assets and properties, subject to no liens except as have been disclosed to the Buyer.

 

t.           Intellectual Property.

 

(i)           Ownership.  The Company owns or possesses or can obtain on commercially reasonable terms sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, processes and similar proprietary rights (“Intellectual Property”) necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material Adverse Effect.  Except for agreements with its own employees or consultants, standard end-user license agreements, support/maintenance agreements and agreements entered in the ordinary course of the Company’s business, all of which have been made available for review by the Buyer, there are no outstanding options, licenses or agreements relating to the Intellectual Property, and the Company is not bound by or a party to any options, licenses or agreements with respect to the Intellectual Property of any other person or entity.  The Company has not received any written communication alleging that the Company has violated or, by conducting its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company aware of any basis therefor.  The Company is not obligated to make any payments by way of royalties, fees or otherwise to any owner or licensor of or claimant to any Intellectual Property with respect to the use thereof in connection with the present conduct of its business other than in the ordinary course of its business.  There are no agreements, understandings, instruments, contracts, judgments, orders or decrees to which the Company is a party or by which it is bound which involve indemnification by the Company with respect to infringements of Intellectual Property, other than in the ordinary course of its business.

  

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(ii)            No Breach by Employees.  The Company is not aware that any of its employees is obligated under any contract or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently conducted.  Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.  The Company does not believe it is or will be necessary to use any inventions of any of its employees made prior to their employment by the Company of which it is aware.

5.           CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a.           Covenants and Acknowledgements of Buyer.

(i)           Transfer Restrictions.  The Buyer acknowledges that (1) the Securities may not be transferred until (A) the Registration Statement is filed and deemed effective, or (B) the Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; and (2) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Securities under circumstances in which the seller, or the Person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder.

(ii)           Restrictive Legend.  The Buyer acknowledges and agrees that, until such time as the relevant Shares have been registered under the 1933 Act, and may be sold in accordance with the effective Registration Statement, or until such Shares can otherwise be sold without restriction, whichever is earlier, the certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

(iii)           Shorting.  So long as any amounts remain owing under any of the Notes, neither the Buyer nor any of its Affiliates shall engage in any short sales of, or sell put options or similar instruments with respect to, the Common Stock.  Notwithstanding the above, if the Buyer elects to receive shares of Common Stock in payment of the Company’s obligations under the Notes, the Buyer may sell shares of Common Stock against delivery of the Conversion Shares, pursuant to Section 6.

  

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(iv)           Confession of Judgment.  The Buyer agrees it will not file a Confession of Judgment unless and until an Event of Default or a Trigger Event (as defined in the Notes) under a Note has occurred; provided, however, that upon such an Event of Default or Trigger Event, the Buyer shall be entitled to immediately file such Confession in an ex parte fashion.

b.           Covenants, Acknowledgements and Agreements of the Company.  As a condition to the Buyer’s obligation to purchase the Securities contemplated by this Agreement, and as a material inducement for the Buyer to enter into this Agreement and the other Transaction Documents, until all of the Company’s obligations hereunder and all of the Notes are paid and performed in full, or within the timeframes otherwise specifically set forth below, the Company shall comply with the following covenants:

 

(i)           Filings.  From the date hereof until the date that is six (6) months after all the Conversion Shares either have been sold by the Buyer, or may permanently be sold by the Buyer without any restrictions pursuant to Rule 144, (the “Registration Period”), the Company shall  timely make all filings required to be made by it under the 1933 Act, the 1934 Act, Rule 144 or any United States state securities laws and regulations thereof applicable to the Company or by the rules and regulations of the Principal Trading Market, and such reports shall conform to the requirement of the applicable laws, regulations and government agencies, and, unless such filing is publicly available on the SEC’s EDGAR system (via the SEC’s web site at no additional charge), the Company shall provide, upon written request, a copy thereof to the Buyer promptly after such filing.  The Company shall furnish to the Buyer, upon written request, so long as the Buyer owns any Notes or Common Stock, promptly upon request, (1) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (2) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (3) such other information as may be reasonably requested to permit the Buyer to sell such securities pursuant to Rule 144 without registration.

(ii)           Reporting Status.  So long as the Buyer beneficially owns any of the Notes and for at least twenty (20) Trading Days thereafter, the Company shall file all reports required to be filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its control to ensure that adequate current public information with respect to the Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination.

(iii)           Listing.  The Common Stock shall be listed or quoted for trading on any of (1) NYSE Amex, (2) the New York Stock Exchange, (3) the Nasdaq Global Market, (4) the Nasdaq Capital Market, (5) the OTC Bulletin Board, or (6) the OTCQX or OTCQB. The Company shall promptly secure the listing of all of the Conversion Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall maintain such listing of all securities from time to time issuable under the terms of the Transaction Documents.  The Company will comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Principal Trading Market and/or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or any successor thereto, as the case may be, applicable to it at least through the date which is sixty (60) days after the later of the date on which (1) all of the Notes have been converted, or (2) all of the Notes have been paid in full.

(iv)           Use of Proceeds.  The Company will use the net proceeds received hereunder only for the purpose of paying the applicable filing fees to the Nevada Secretary of State in connection with increasing the number of the Company’s authorized shares to one billion shares.

  

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(v)           Publicity, Filings, Releases, Etc.  Each of the parties agrees that it will not disseminate any information relating to the Transaction Documents or the transactions contemplated thereby, including issuing any press releases, holding any press conferences or other forums, or filing any reports (collectively, “Publicity”), without giving the other party reasonable advance notice and an opportunity to comment on the contents thereof.  Neither party will include in any such Publicity any statement or statements or other material to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement is legally required to be included.  In furtherance of the foregoing, the Company will provide to the Buyer’s Counsel drafts of the applicable text of the first filing of a current report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K (or equivalent SB forms), as the case may be, intended to be made with the SEC which refers to the Transaction Documents or the transactions contemplated thereby as soon as practicable (but at least two (2) Trading Days before such filing will be made) and will not include in such filing (or any other filing filed before then) any statement or statements or other material to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement, such statement is legally required to be included.  Notwithstanding the foregoing, each of the parties hereby consents to the inclusion of the text of the Transaction Documents in filings made with the SEC (but any descriptive text accompanying or part of such filing shall be subject to the other provisions of this subsection).  Notwithstanding, but subject to, the foregoing provisions of this  provision, the Company will, within four business days after the Closing Date, promptly issue a press release and file a current report on Form 8-K or, if appropriate, a quarterly or annual report on the appropriate form, describing the terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and approved by Buyer and attaching the material Transaction Documents as exhibits to such filing.

(vi)           FINRA Rule 5110. In the event the Corporate Financing Rule 5110 (“FINRA Rule 5110”) of FINRA is or becomes applicable to the transactions contemplated by the Transaction Documents or to the sale by a Holder of any of the Securities, then the Company shall, to the extent required by such rule, timely make any filings and cooperate with any broker or selling stockholder in respect of any consents, authorizations or approvals that may be necessary for FINRA to timely and expeditiously permit the Holder to sell the Securities.

(vi)           Keeping of Records and Books of Account. The Company shall keep and cause each Subsidiary, if any, to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and such Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

(vii)           Corporate Existence.  The Company shall (a) do all things necessary to preserve and keep in full force and effect its corporate existence, including, without limitation, all licenses or similar qualifications required by it to engage in its business in all jurisdictions in which it is as of the date hereof so engaged, (b) continue to engage in business of the same general type as conducted as of the date hereof, and (c) continue to conduct its business substantially as now conducted or as otherwise permitted hereunder.

(viii)           Taxes.  The Company shall pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid, might reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and the Company has maintained adequate reserves with respect thereto in accordance with GAAP.

  

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(ix)           Compliance. The Company shall comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations and requirements applicable to it (collectively, “Requirements”) of all governmental bodies, departments, commissions, boards, companies or associations insuring the premises, courts, authorities, officials or officers which are applicable to the Company, its business, operations, or any of its properties, except where the failure to so comply would not have a Material Adverse Effect on the Company or any of its properties; provided, however, that nothing provided herein shall prevent the Company from contesting in good faith the validity or the application of any Requirements.

(x)           Litigation.  From and after the date hereof and until all of the Company’s obligations hereunder and all of the Notes are paid and performed in full, the Company shall notify the Buyer in writing, promptly upon learning thereof, of any litigation or administrative proceeding commenced or threatened against the Company involving a claim in excess of $100,000.

(xi)           Performance of Obligations.  The Company shall promptly and in a timely fashion perform and honor all demands, notices, requests and obligations that exist or may arise under the Transaction Documents.

 

 (xii)           Authorized Shares.  The Company shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the full conversion of all of the Notes multiplied by 1.5 (the “Share Reserve”). If at any time the Share Reserve is insufficient to effect the full conversion of the Notes, the Company shall immediately increase the Share Reserve accordingly. If the Company does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, the Company shall call and hold a special meeting of the stockholders within thirty days of such occurrence, for the sole purpose of increasing the number of shares authorized. The Company’s management shall recommend to the Company’s stockholders to vote in favor of increasing the number of authorized shares of Common Stock.  Management shall also vote all of its shares in favor of increasing the number of authorized shares of Common Stock.

(xiii)           Investor Information.  Upon written request, the Company shall promptly furnish the Buyer with the names and other identifying information of each party with which the Company has completed a financing transaction including, without limitation, any person or entity to whom the Company has issued or sold any debt, equity, option, warrant or other security of any kind during the five year period immediately preceding the request.

 

(xiv)           Certain Negative Covenants of the Company.  From and after the date hereof and until all of the Company’s obligations hereunder and all of the Notes are paid and performed in full, the Company shall not:

 

1.           Incur any new indebtedness for borrowed money without the prior written consent of the Buyer; provided, however, the Company may incur obligations under trade payables in the ordinary course of business consistent with past practice without the consent of the Buyer; or

2.           Grant or permit any security interest (or other lien or other encumbrance) in or on any of its assets except as incurred in the ordinary course of business; or

  

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3.           Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate of the Company, or amend or modify any agreement related to any of the foregoing, except on terms that are no less favorable, in any material respect, than those obtainable from any person or entity who is not an Affiliate of the Company; or

4.           Enter into any financing transaction (including issuing promissory notes or selling equity, warrants, convertible notes or other instruments convertible into or exchangeable for Common Stock, equity or equity-like instruments to any person or entity) without giving the Buyer at least ten (10) days notice of such prospective financing transaction (the “Transaction Notice”) and the pre-emptive right to provide such financing on substantially the same terms upon notice thereof to the Company within five (5) days of receiving the Transaction Notice; or

5.           Settle any debt for Common Stock with any other party in a transaction which may rely on, be based upon or structured in accordance with Sections 3(a)(9) or 3(a)(10) of the 1933 Act; or

6.           Arrange or facilitate the sale or exchange of any existing securities of the Company, including without limitation warrants, options, convertible debt instruments, or other securities convertible into or exchangeable for shares of Common Stock or other equity of the Company (“Existing Securities”), held by any party other than the Buyer. The Company further covenants not to enter into any debt settlement agreement or similar agreement or arrangement with any party other than the Buyer to settle or exchange Existing Securities for share of Common Stock or other equity of the Company.

6.           TRANSFER AGENT INSTRUCTIONS.

a.           The Company warrants that, with respect to the Securities, other than the stop transfer instructions to give effect to Section 5(a)(i) hereof, it will give the Transfer Agent no instructions inconsistent with instructions to issue Common Stock from time to time upon conversion of the Notes in such amounts as specified from time to time by the Company to the Transfer Agent, bearing the restrictive legend specified in Section 5(a)(ii) of this Agreement prior to registration of the Shares under the 1933 Act, registered in the name of the Buyer or its nominee and in such denominations to be specified by the Holder in connection therewith.  Except as so provided, the Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the other Transaction Documents.  Nothing in this Section shall affect in any way the Buyer’s obligations and agreement to comply with all applicable securities laws upon resale of the Securities.  If the Buyer provides the Company with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the Buyer of any of the Securities in accordance with clause (1)(B) of Section 5(a)(i) of this Agreement is not required under the 1933 Act or upon request from a Holder while an applicable Registration Statement is effective, the Company shall (except as provided in clause (2) of Section 5(a)(i) of this Agreement) permit the transfer of the Securities and, in the case of the Conversion Shares, as may be applicable, use its best efforts to cause the Transfer Agent to promptly electronically transmit to the Holder via the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program such Conversion Shares.  In the event the Transfer Agent is not participating in the DTC/DWAC program or the Conversion Shares are not otherwise transferable via the DTC/DWAC program, then the Company shall instruct the Transfer Agent to issue one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.  In the event the Company’s transfer agent is not DWAC eligible on any Conversion Date or the Conversion Shares are not transferable via the DTC/DWAC program, and consequently the Company issues Conversion Shares pursuant to the Notice of Conversion in certificated rather than electronic form, then in such event if the closing bid price of the Common Stock on the Principal Trading Market is lower on the date of delivery of the certificates to the Buyer than on the Conversion Date, such difference in the closing bid prices, multiplied by the number of Conversion Shares, shall be added to the principal balance of the applicable Note.

  

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b.

(i)           The Company understands that a delay in the delivery of Shares, whether on conversion of a Note and/or in payment of accrued interest beyond the relevant Delivery Date (as defined in the applicable Note) could result in economic loss to the Holder.  As compensation to the Holder for such loss, in addition to any other available remedies at law or equity, the Company agrees to pay late payments to the Holder for late delivery of the Shares in accordance with the following schedule (where “No. Business Days Late” is defined as the number of Trading Days beyond two (2) Trading Days after the Delivery Date):

	  	
Late Payment for Each $10,000 of

	
No. Business Days Late

	
Principal or Interest Being Converted

	  	  
	
1

	
$100

	
2

	
$200

	
3

	
$300

	
4

	
$400

	
5

	
$500

	
6

	
$600

	
7

	
$700

	
8

	
$800

	
9

	
$900

	
10

	
$1,000

	
>10

	
$1,000 + $200 for each Business Day Late beyond 10 days

The amount of any payments incurred under this Section 6(b) shall be automatically added to the principal balance of the applicable Note and the Company shall pay any such payments in immediately available funds upon demand. Nothing herein shall limit the Holder’s right to pursue actual damages for the Company’s failure to issue and deliver the Shares to the Holder within a reasonable time.  Furthermore, in addition to any other remedies which may be available to a Holder, in the event that the Company fails for any reason to effect delivery of such Shares within two (2) Trading Days after the Delivery Date, the Holder will be entitled to revoke the relevant Notice of Conversion by delivering a notice to such effect to the Company prior to the Holder’s receipt of the relevant Shares, whereupon the Company and the Holder shall each be restored to their respective positions immediately prior to delivery of such Notice of Conversion or Notice of Exercise, as the case may be; provided, however, that any payments contemplated by this Section 6(b) which have accrued through the date of such revocation notice shall remain due and owing to the Holder notwithstanding such revocation.

(ii)           If, by the tenth Trading Day after the  relevant Delivery Date, the Company fails for any reason to deliver the Shares, but at any time after the Delivery Date, the Holder purchases, in an arm’s-length open market transaction or otherwise, shares of Common Stock (the “Covering Shares”) in order to make delivery in satisfaction of a sale of Common Stock by the Holder (the “Sold Shares”), which delivery such Holder anticipated to make using the shares to be issued upon such conversion or exercise (a “Buy-In”), the Holder shall have the right to require the Company to pay to the Holder, in addition to and not in lieu of  the amounts contemplated in other provisions of the Transaction Documents, including, but not limited to, the provisions of the immediately preceding Section 6(b)(i)), the Buy-In Adjustment Amount (as defined hereafter).  The “Buy-In Adjustment Amount” is the amount equal to the number of Sold Shares multiplied by the excess, if any, of (1) the Holder’s total purchase price per share (including brokerage commissions, if any) for the Covering Shares over (2) the net proceeds per share (after brokerage commissions, if any) received by the Holder from the sale of the Sold Shares.  The Company shall pay the Buy-In Adjustment Amount to the Holder in immediately available funds immediately upon demand by the Holder.  By way of illustration and not in limitation of the foregoing, if the Holder purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required to pay to the Holder will be $1,000.

  

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c.            The Company shall assume any fees or charges of the Transfer Agent or Company Counsel regarding (i) the removal of a legend or stop transfer instructions with respect to the Securities, and (ii) the issuance of certificates or DTC registration to or in the name of the Holder or the Holder’s designee or to a transferee as contemplated by an effective Registration Statement.  Notwithstanding the foregoing, it shall be the Holder’s responsibility to obtain all needed formal requirements (specifically: medallion guarantee and prospectus delivery compliance) in connection with any electronic issuance of shares of Common Stock.

d.           The Holder of a Note shall be entitled to exercise its conversion privilege with respect to such Note, as the case may be, notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”).  In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of such Holder’s exercise privilege.  The Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of such Note. The Company agrees, without cost or expense to such Holder, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.

7.           CLOSING DATE.  The Closing Date shall occur on the date which is the first Trading Day after each of the conditions contemplated by Sections 8 and 9 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.  Closing of the purchase and sale of the Note, which the parties anticipate shall occur concurrently with the execution of this Agreement, shall occur at the offices of the Buyer and shall take place no later than 3:00 P.M., Eastern Time, or on such day or such other time as is mutually agreed upon by the Company and the Buyer.

8.           CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL AT THE CLOSING.  The Buyer understands that the Company’s obligation to sell the Note to the Buyer and deliver the Consolidated Note pursuant to this Agreement on the Closing Date is conditioned upon and subject to the fulfillment of all of the following conditions, any of which may be waived in whole or in part by the Company:

a.           The execution and delivery of this Agreement and, as applicable, the other Transaction Documents by the Buyer on or before such Closing Date;

b.           Delivery by the Buyer by the Closing Date of good funds as payment in full of an amount equal to the Net Purchase Price in accordance with this Agreement;

c.           Surrender of the Original Promissory Notes to the Company;

  

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d.           The accuracy on the Closing Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on such date, and the performance by the Buyer on or before such date of all covenants and agreements of the Buyer required to be performed on or before such date; and

e.           There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

9.           CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE AT THE CLOSING.  The Buyer’s obligation to purchase the Note is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all of the following conditions, any of which may be waived in whole or in part by the Buyer:

a.           The execution and delivery of this Agreement and, as applicable, the other Transaction Documents by the Company and all other necessary parties (including without limitation those documents required to be signed by Helix Sub) on or before the Closing Date;

b.           Without limiting the generality of the requirement in the immediately preceding subsection, the delivery by the Company of:

(i)           the Note, duly executed by the Company;

(ii)           the Consolidated Note, duly executed by the Company;

(iii)         a Transfer Agent Letter for each of the Note and the Consolidated Note, duly executed by the Company and acknowledged by the Transfer Agent;

(iv)        a Confession of Judgment for each of the Note and the Consolidated Note, duly executed by the Company;

(v)         the Secretary’s Certificate;

(vi)        a Security Agreement for the Note and the Consolidated Note, duly executed by the Company;

(vii)       a Guaranty for each of the Note and the Consolidated Note, duly executed by Helix Sub;

(viii)      a Helix Sub Security Agreement for the Note and the Consolidated Note, duly executed by Helix Sub; and

(ix)         a Confession of Judgment for each of the Note and the Consolidated Note, duly executed by Helix Sub.

c.           On the Closing Date, each of the Transaction Documents executed by the Company on or before such date shall be in full force and effect and the Company shall not be in default thereunder;

d.           The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement and the other Transaction Documents, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date;

  

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e.           There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained;

f.           From and after the date hereof to and including the Closing Date, each of the following conditions will remain in effect: (i) the trading of the Common Stock shall not have been suspended by the SEC or on the Principal Trading Market; (ii) trading in securities generally on the Principal Trading Market shall not have been suspended or limited; (iii) no minimum prices shall been established for securities traded on the Principal Trading Market; and (iv) there shall not have occurred any Material Adverse Effect;

g.           Except for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions, the Company shall have obtained (i) all governmental approvals required in connection with the lawful sale and issuance of all of the Securities, and (ii) all third party approvals required to be obtained by the Company in connection with the execution and delivery of the Transaction Documents by the Company or the performance of the Company’s obligations thereunder; and

i.           All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident to such transactions shall be reasonably satisfactory in substance and form to the Buyer.

10.           INDEMNIFICATION.

a.           The Company agrees to defend, indemnify and forever hold harmless the Buyer and its officers, directors, employees, and agents, and each Buyer Control Person (the “Buyer Parties”) from and against any losses, claims, damages, liabilities or expenses incurred (collectively, “Damages”), joint or several, and any action in respect thereof to which the Buyer, its partners, Affiliates, officers, directors, employees, and duly authorized agents, and any such Buyer Control Person becomes subject, resulting from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Company contained in this Agreement, as such Damages are incurred.  The Buyer Parties with the right to be indemnified under this Section (the “Indemnified Parties”) shall have the right to defend any such action or proceeding with attorneys of their own selection, and the Company shall be solely responsible for all costs and expenses related thereto.  If the Indemnified Parties opt not to retain their own counsel, the Company shall defend any such action or proceeding with attorneys of its choosing at its sole cost and expense, provided that such attorneys have been pre-approved by the Indemnified Parties, which approval shall not be unreasonably withheld, and provided further that the Company may not settle any such action or proceeding without first obtaining the written consent of the Indemnified Parties.

b.           The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar rights of the Buyer Parties against the Company or others, and (ii) any liabilities the Company may be subject to.

  

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11.           SPECIFIC PERFORMANCE.  The Company and  the Buyer acknowledge and agree that irreparable damage would occur in the event that any provision of this Agreement or any of the other Transaction Documents were not performed in accordance with its specific terms or were otherwise breached.  It is accordingly agreed that the parties (including any Holder) shall be entitled to an injunction or injunctions, without (except as specified below) the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such other Transaction Document and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity; provided, however that the Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not fail or refuse to deliver the stock certificates and the related legal opinions, if any, or if there is a claim for a breach by the Company of any other provision of this Agreement or any of the other Transaction Documents, the Company shall not raise as a legal defense any claim that the Holder or anyone associated or affiliated with the Holder has violated any provision hereof or any other Transaction Document or has engaged in any violation of law or any other claim or defense, unless the Company has first posted a bond for one hundred fifty percent (150%) of the principal amount and, if relevant, then obtained a court order specifically directing it not to deliver said stock certificates to the Holder. The proceeds of such bond shall be payable to the Holder to the extent that the Holder obtains judgment or its defense is recognized.  Such bond shall remain in effect until the completion of the relevant proceeding and, if the Holder appeals therefrom, until all such appeals are exhausted.  This provision is deemed incorporated by reference into each of the Transaction Documents as if set forth therein in full.

 

12.           OWNERSHIP LIMITATION. If at any time after the Closing, the Buyer shall or would receive shares of Common Stock in payment of interest or principal under a Note or upon conversion of a Note, so that the Buyer would, together with other shares of Common Stock held by it or its Affiliates, hold by virtue of such action or receipt of additional shares of Common Stock a number of shares exceeding 9.99% of the number of shares of Common Stock outstanding on such date (the “9.99% Cap”), the Company shall not be obligated and shall not issue to the Buyer shares of Common Stock which would exceed the 9.99% Cap, but only until such time as the 9.99% Cap would no longer be exceeded by any such receipt of shares of Common Stock by the Buyer. The foregoing limitations are enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Buyer.

13.           GOVERNING LAW; MISCELLANEOUS.  The Company and the Buyer hereby agree that the provisions of this Section 13 shall apply to all of the Transaction Documents.

a.           Governing Law and Venue.  This Agreement shall be governed by and interpreted in accordance with the laws of the State of Illinois for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws.  Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of Cook or the state courts of the State of Illinois sitting in the County of Cook in connection with any dispute arising under this Agreement or any of the other Transaction Documents and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions or any claim that such venue of the suit, action or proceeding is improper.  Nothing in this subsection shall affect or limit any right to serve process in any other manner permitted by law.

b.           No Waiver.  Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

c.           Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.

d.           Pronouns.  All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may permit or require.

  

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e.           Counterparts.  This Agreement may be signed in one or more counterparts, each of which shall be deemed an original, but all of which together shall be deemed to constitute one instrument.  Facsimile and email copies of signed signature pages will be deemed binding originals.

f.           Headings.  The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

g.           Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

h.           Amendment.  This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.

i.           Entire Agreement.  This Agreement together with the other Transaction Documents constitute and contain the entire agreement between the Company and the Buyer and supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

j.           Currency.  All dollar amounts referred to or contemplated by this Agreement or any other Transaction Document shall be deemed to refer to US Dollars, unless otherwise explicitly stated to the contrary.

k.           Expenses.  The Company, without regard to whether any Closing is effectuated, will pay Buyer the Transaction Expenses, which the parties acknowledge shall be withheld by the Buyer at the Closing pursuant to Section 2(c) above; provided, however, that in the event a Closing does not occur for whatever reason, the Company shall promptly pay the Transaction Expenses to the Buyer in cash.  Except as provided in the immediately preceding sentence, the Company and the Buyer shall be responsible for paying such party’s own fees and expenses (including legal expenses) incurred in connection with the preparation and negotiation of this Agreement and the other Transaction Documents and the closing of the transactions contemplated hereby and thereby.

l.           Assignment by the Company.  Notwithstanding anything to the contrary herein, the rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Buyer, which consent may be withheld at the sole discretion of the Buyer; provided, however, that in the case of a merger, sale of substantially all of the Company’s assets or other corporate reorganization, the Buyer shall not unreasonably withhold, condition or delay such consent.

m.           Advice of Counsel. In connection with the preparation of this Agreement and all other Transaction Documents, each of the Company, its stockholders, officers, agents, and representatives acknowledges and agrees that the attorney that prepared this Agreement and all of the other Transaction Documents acted as legal counsel to the Buyer only.  Each of the Company, its stockholders, officers, agents, and representatives (i) hereby acknowledges that he/she/it has been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the other Transaction Documents with legal counsel of his/her/its choice, and (ii) either has sought such legal counsel or hereby waives the right to do so.

n.           No Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine of construction shall be applied for or against any party.

  

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o.           Attorney’s Fees.  In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other Transaction Documents, the Prevailing Party (as defined hereafter) shall be entitled to reasonable attorneys’ fees, court costs and collection costs in addition to any other relief to which such party may be entitled.  “Prevailing Party” shall mean the party in any litigation or enforcement action that prevails in the highest number of final rulings, counts or judgments adjudicated by a court of competent jurisdiction.

p.           Replacement of the Notes. Subject to any restrictions on or conditions to transfer set forth in the Notes, the Holder of a Note, at its option, may in person or by duly authorized attorney surrender the same for exchange at the Company’s chief executive office, and promptly thereafter and at the Company’s expense, except as provided below, receive in exchange therefor one or more new convertible promissory note(s), each in the principal requested by such Holder, dated the date to which interest shall have been paid on the Note so surrendered or, if no interest shall have yet been so paid, dated the date of the Note so surrendered and registered in the name of such person or persons as shall have been designated in writing by such holder or its attorney for the same principal amount as the then unpaid principal amount of the Note so surrendered. As applicable, upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of a Note and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b) in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new convertible promissory note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid principal amount of such Note and dated the date to which interest shall have been paid on such Note or, if no interest shall have yet been so paid, dated the date of such Note.

14.           NOTICES.  Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of (a) the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission, (b)  the fifth Trading Day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, (c) the third Trading Day after mailing by domestic or international express courier, with delivery costs and fees prepaid, or (d) when faxed or sent by electronic mail, upon confirmation of receipt, in each case, addressed to the other party thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days’ advance written notice similarly given to the other party hereto):

If to the Company:

Helix Wind, Corp.

c/o Kevin Claudio

13125 Danielson Street

San Diego, California  92064

If to the Buyer:

St. George Investments, LLC

Attn: John M. Fife

303 East Wacker Drive, Suite 1200

Chicago, Illinois  60601

  

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with a copy to (which shall not constitute notice):

Carman Lehnhof Israelsen LLP

Attn: Jonathan K. Hansen

4626 North 300 West, Suite 160

Provo, Utah 84604

Telephone: (801) 209-5558

15.           SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES.  The Company’s and the Buyer’s covenants, agreements, representations and warranties contained herein shall survive the execution and delivery of this Agreement and the other Transaction Documents at Closing and shall inure to the benefit of the Buyer and the Company and their respective successors and permitted assigns.

16.           CROSS DEFAULT.  Borrower has executed additional promissory notes in favor of Lender, including without limitation the following (“Other Indebtedness”): (a) Convertible Promissory Note dated July 1, 2011, in the principal amount of $72,500, (b) Secured Convertible Promissory Note dated July 15, 2011, in the principal amount of $65,000, (c) Secured Convertible Promissory Note dated August 1, 2011, in the principal amount of $65,000, and (d) Secured Convertible Promissory Note dated August 15, 2011, in the principal amount of $65,000. Any default under this Note, the Consolidated Note, any of the Transaction Documents, or any of the promissory notes constituting the Other Indebtedness shall result in a cross default of this Note, the Consolidated Note, the Transaction Documents, and the Other Indebtedness, thereby accelerating all amounts owing under this Note, the Consolidated Note, and the Other Indebtedness, and permitting Lender to immediately pursue all of its available rights and remedies, as applicable.

  

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IN WITNESS WHEREOF, each of the undersigned represents that the foregoing statements made by it above are true and correct and that it has caused this Agreement to be duly executed on its behalf (if an entity, by one of its officers thereunto duly authorized) as of the date first above written.

NET PURCHASE PRICE:        $34,075.00

 

 

	 	
THE COMPANY:

 

HELIX WIND, CORP.,

a Nevada corporation

 

By: /s/ James Tilton

Name: James Tilton

Title: Chief Operating Officer

THE BUYER:

ST. GEORGE INVESTMENTS, LLC,

an Illinois limited liability company

By: Fife Trading, Inc., Manager

 

     By: /s/ John Fife

John Fife, President

 

 

[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]

  

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ANNEX I                                  CONFESSION OF JUDGMENT

ANNEX II                                 UNANIMOUS WRITTEN CONSENT OF THE BOARD

ANNEX III                                TRANSFER AGENT LETTER

ANNEX IV                                SECURITY AGREEMENT

ANNEX V                                 GUARANTY

ANNEX VI                                HELIX SUB SECURITY AGREEMENT

ANNEX VII                              WIRE INSTRUCTIONS

ANNEX VIII                             NOTE

ANNEX IX                               CONSOLIDATED NOTE

ANNEX X                                HELIX SUB CONFESSION OF JUDGMENThelix_8k-ex1002.htm

 

Exhibit 10.2

	
$525,856.91

	
August 12, 2011

HELIX WIND, CORP.

 

Consolidated Secured Convertible Promissory Note

 

FOR VALUE RECEIVED, Helix Wind, Corp., a Nevada corporation (the “Borrower”), hereby promises to pay to St. George Investments, LLC, an Illinois limited liability company, its successor or assigns (the “Lender,” and together with the Borrower, the “Parties”), the principal sum of $525,856.91 (the “Principal Amount”) together with all accrued and unpaid interest thereon, fees incurred or other amounts owing hereunder, all as set forth below in this Consolidated Convertible Promissory Note (this “Note”). This Note is issued pursuant to that certain Note Purchase Agreement of even date herewith, entered into by and between the Borrower and the Lender (the “Purchase Agreement”).  Pursuant to the Purchase Agreement, this Note is issued in replacement of the following promissory notes previously issued by Borrower in favor of Lender (collectively, the “Original Promissory Notes”): (i) Convertible Promissory Note dated March 31, 2011, in the original principal amount of $65,000, (ii) Convertible Promissory Note dated April 15, 2011, in the original principal amount of $65,000, (iii) Convertible Promissory Note dated April 30, 2011, in the original principal amount of $65,000, (iv) Convertible Promissory Note dated May 18, 2011, in the original principal amount of $65,000, and (v) Convertible Promissory Note dated May 31, in the original principal amount of $65,000. Each of the Original Promissory Notes was subject to two separate Trigger Events (as defined in each applicable Original Promissory Note), resulting in (i) a Balance Adjustment (as defined in each applicable Original Promissory Note) of 25% each, and (ii) an increase in the interest rate from 6% to 15%.

 

1.           Principal and Interest Payments. Interest on the unpaid principal balance of this Note shall accrue at the rate of 15% per annum. Interest shall be computed on the basis of a 360-day year for the actual number of days elapsed. Notwithstanding any provision to the contrary herein, in no event shall the applicable interest rate at any time exceed the maximum interest rate allowed under applicable law.  If not sooner converted as provided below, the entire unpaid principal balance and all accrued and unpaid interest, if any, shall be due and payable on June 30, 2012 (the “Maturity Date”), which is six months from the date of issuance of the last Original Promissory Note. All payments owing hereunder shall be made in lawful money of the United States of America delivered to the Lender at the address furnished to the Borrower for that purpose. All payments shall be applied first to costs of collection, if any, then to accrued and unpaid interest, and thereafter to principal. For purposes hereof, the term “Outstanding Balance” means the sum of the outstanding principal balance of this Note and any accrued but unpaid interest, collection and enforcement costs, and any other fees and penalties incurred under this Note.

 

2.           Prepayment by the Borrower. The Borrower may, in its sole and absolute discretion, pay all or any portion of the Outstanding Balance at any time prior to the Maturity Date without penalty or premium.  For avoidance of doubt, Borrower does not have the discounted Prepayment Right as described and contemplated in the Original Promissory Notes.

 

3.           Conversion.

 

 

(a)           Optional Conversion. At any time or from time to time after the date of this Note and prior to payment in full of the Outstanding Balance, the Lender shall have the right, at the Lender’s option, to convert the Outstanding Balance, in whole or in part (the “Conversion Amount”), into common stock (the “Common Stock”) of the Borrower.  The number of shares of Common Stock to be issued upon such conversion shall be determined by dividing (i) the Conversion Amount by (ii) the lower of (1) 100% of the average volume-weighted average price of the Common Stock (the “VWAP”) for the three (3) trading days with the lowest VWAP during the twenty (20) trading days immediately preceding the date set forth on the Notice of Conversion (defined below), or (2) 50% of the lower of (A) the average VWAP over the five (5) trading days immediately preceding the date set forth in the Notice of Conversion or (B) the VWAP on the day immediately preceding the date set forth in the Notice of Conversion (the lower of the foregoing (1) and (2), the “Conversion Price”).  The trading data used to compute the VWAP shall be as reported by Bloomberg, LP (“Bloomberg”), or if such information is not then being reported by Bloomberg, then as reported by such other data information source as may be selected by the Lender.

 

  

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(b)           Conversion Mechanics. In order to convert this Note into Common Stock, the Lender shall give written notice to the Borrower at its principal corporate office or the notice address provided in the Purchase Agreement (which notice, notwithstanding anything herein to the contrary, may be given via facsimile, email, or other means in the discretion of the Lender) pursuant to a Notice of Conversion in substantially the form attached hereto as Exhibit A (the “Notice of Conversion”) of the election to convert the same pursuant to this Section.  Such Notice of Conversion shall state the Conversion Amount, the number of shares of Common Stock to which Lender is entitled pursuant to the Notice of Conversion (the “Conversion Shares”), and the account in which the shares of Common Stock are to be deposited (the “Lender Account”).  The Borrower shall immediately, but in no event later than three (3) days after receipt of a Notice of Conversion (the “Delivery Date”), deliver the Conversion Shares to the Lender Account.  Notwithstanding anything herein to the contrary, all such deliveries of Conversion Shares shall be electronic, via DWAC or DTC if Borrower is then eligible for such electronic delivery program.  In the event the Borrower fails to deliver the Conversion Shares on or before the Delivery Date, in addition to all other remedies available to the Lender hereunder and at law or in equity, a penalty equal to 1.5% of the Conversion Amount shall be added to the balance of this Note per day until such Conversion Shares are delivered.  The conversion shall be deemed to have been made immediately prior to the close of business on the date of the Notice of Conversion, and the person or entity entitled to receive the shares of Common Stock upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

(c)           No Fractional Shares. Conversion calculations pursuant to Section 3(a) shall be rounded up to the nearest whole share, and no fractional shares shall be issuable by the Borrower upon conversion of this Note. All shares issuable upon a conversion of this Note (including fractions thereof) shall be aggregated for purposes of determining whether such conversion would result in the issuance of a fractional share.

 

(d)           No Impairment.  The Borrower will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Borrower, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Lender against impairment.

 

  

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4.           Certain Adjustments. The number and class or series of shares into which this Note may be converted under Section 3 shall be subject to adjustment in accordance with the following provisions:

 

(a)           Computation of Adjusted Conversion Price.  Except as hereinafter provided, in case the Borrower shall at any time after the date hereof issue or sell any (i) shares of Common Stock or preferred shares convertible into Common Stock, or (ii) debt, warrants, options or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein referred to as “Equity Securities”), in each case for consideration (or with a conversion price) per common share less than the Conversion Price in effect immediately prior to the issuance or sale of such securities or instruments, or without consideration, other than Excepted Issuances (as defined below) then forthwith upon such issuance or sale, the Conversion Price shall (until another such issuance or sale) be reduced to the price (calculated to the nearest full cent) equal to the price (or conversion or exercise price) of any such securities or instruments. For the purposes of this Section 4, the term Conversion Price shall mean the Conversion Price per share set forth in Section 3(a) hereof, as adjusted from time to time pursuant to the provisions of this Section.

 

“Excepted Issuances” shall mean, collectively, (i) the Borrower’s issuance of securities in connection with strategic license agreements and other partnering arrangements so long as such issuances are not for the purpose of raising capital and in which holders of such securities or debt are not at any time granted registration rights, and (ii) the Borrower’s issuance of Common Stock or the issuances or grants of options to purchase Common Stock to employees, directors, and consultants, pursuant to plans which are constituted on the date of this Note.

 

For purposes of any computation to be made in accordance with this Section 4, the following provisions shall be applicable:

 

(i)           In case of the issuance or sale of any shares of Equity Securities for consideration part or all of which shall be cash, the amount of the cash consideration shall be deemed to be the amount of cash received by the Borrower for such shares (or, if shares of stock are offered by the Borrower for subscription, the subscription price, or, if either of such securities shall be sold to underwriters or dealers for public offering without a subscription price, the public offering price, before deducting therefrom any compensation paid or discount allowed in the sale, underwriting or purchase thereof by underwriters or dealers or other persons or entities performing similar services), or any expenses incurred in connection therewith and less any amounts payable to security holders or any affiliate thereof, including, without limitation, any employment agreement, royalty, consulting agreement, covenant not to compete, earnout or contingent payment right or similar arrangement, agreement or understanding, whether oral or written; all such amounts shall be valued at the aggregate amount payable thereunder whether such payments are absolute or contingent and irrespective of the period or uncertainty of payment, the rate of interest, if any, or the contingent nature thereof.

 

(ii)           In case of the issuance or sale (otherwise than as a dividend or other distribution on any stock of the Borrower) of shares of Equity Securities for a consideration part or all of which shall be other than cash, the amount of the consideration therefore other than cash shall be deemed to be the value of such consideration as determined in good faith by the Board of Directors of the Borrower.

 

  

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(iii)           Shares of Equity Securities issuable by way of dividend or other distribution on any capital stock of the Borrower shall be deemed to have been issued immediately after the opening of business on the day following the record date for the determination of stockholders entitled to receive such dividend or other distribution and shall be deemed to have been issued without consideration.

 

(iv)           The reclassification of securities of the Borrower other than shares of Equity Securities into securities including shares of Equity Securities shall be deemed to involve the issuance of such shares of Equity Securities for consideration other than cash immediately prior to the close of business on the date fixed for the determination of security holders entitled to receive such shares, and the value of the consideration allocable to such shares of stock shall be determined as provided in this Section 4.

 

(v)           The number of shares of Equity Securities at any one time outstanding shall include the aggregate number of shares issued or issuable (subject to readjustment upon the actual issuance thereof) upon the exercise of then outstanding options, rights, warrants, and convertible and exchangeable securities.

 

(b)            Adjustment for Reorganization or Recapitalization. If, while this Note remains outstanding and has not been converted, there shall be a reorganization or recapitalization of the Borrower (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), all necessary or appropriate lawful provisions shall be made so that the Lender shall thereafter be entitled to receive upon conversion of this Note, the greatest number of shares of stock or other securities or property that a holder of the class of securities deliverable upon conversion of this Note would have been entitled to receive in such reorganization or recapitalization if this Note had been converted immediately prior to such reorganization or recapitalization, all subject to further adjustment as provided in this Section 4. If the per share consideration payable to the Lender for such class of securities in connection with any such transaction is in a form other than cash or marketable securities, then the value of such consideration shall be determined in good faith by the Borrower’s Board of Directors. The foregoing provisions of this subsection shall similarly apply to successive reorganizations or recapitalizations and to the stock or securities of any other corporation that are at the time receivable upon the conversion of this Note. In all events, appropriate adjustment shall be made in the application of the provisions of this Note (including adjustment of the conversion price and number of shares into which this Note is then convertible pursuant to the terms and conditions of this Note) with respect to the rights and interests of the Lender after the transaction, to the end that the provisions of this Note shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable or issuable after such reorganization or recapitalization upon conversion of this Note.

 

(c)            Adjustments for Split Subdivision or Combination of Shares.   If the Borrower at any time while this Note remains outstanding and unconverted, shall split or subdivide any class of securities into which this Note may be converted into a different number of securities of the same class, the number of shares of such class issuable upon conversion of this Note immediately prior to such split or subdivision shall be proportionately increased and the Conversion Price, and any other applicable prices for such class of securities shall be proportionately decreased. If the Borrower at any time while this Note, or any portion hereof, remains outstanding and unconverted shall combine any class of securities into which this Note may be converted, into a different number of securities of the same class, the number of shares of such class issuable upon conversion of this Note immediately prior to such combination shall be proportionately decreased and the Conversion Price, and any other applicable prices for such class of securities shall be proportionately increased.

 

  

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(d)            Adjustments for Dividends in Stock or Other Securities or Property. If, while this Note remains outstanding and unconverted, the holders of any class of securities as to which conversion rights under this Note exist at the time shall have received, or, on or after the record date fixed for the determination of eligible stockholders, shall have become entitled to receive, without payment therefor, other or additional stock or other securities or property (other than cash) of the Borrower by way of dividend, then and in each case, this Note shall represent the right to acquire, in addition to the number of shares of such class of security receivable upon conversion of this Note, and without payment of any additional consideration therefor, the amount of such other or additional stock or other securities or property (other than cash) of the Borrower that such holder would hold on the date of such conversion had it been the holder of record of the class of security receivable upon conversion of this Note on the date hereof and had thereafter, during the period from the date hereof to and including the date of such conversion, retained such shares and/or all other additional stock available by it as aforesaid during such period, giving effect to all adjustments called for during such period by the provisions of this Section 4.

 

(e)            No Change Necessary. The form of this Note need not be changed because of any adjustment in the number of shares of Common Stock issuable upon its conversion.

 

5.           Further Adjustments. In case at any time or, from time to time, the Borrower shall take any action that affects the class of securities into which this Note may be converted under Section 3, other than an action described herein, then, unless such action will not have a material adverse effect upon the rights of the Lender, the number of shares of such class of securities (or other securities) into which this Note is convertible shall be adjusted in such a manner and at such time as shall be equitable under the circumstances.

 

6.           Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment pursuant to Section 4 or Section 5, the Borrower at its sole expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to the Lender 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 Lender, furnish or cause to be furnished to the Lender a like certificate setting forth (i) such adjustments and readjustments, and (ii) the number and class of securities and the amount, if any, of other property which at the time would be received upon the conversion of this Note under Section 3.

 

  

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7.           Security. This Note is secured by that certain Security Agreement for Consolidated Note of even date herewith (the “Borrower Security Agreement”) executed by the Borrower in favor of the Lender encumbering certain assets of the Borrower, as more specifically set forth in the Borrower Security Agreement, all the terms and conditions of which are hereby incorporated into and made a part of this Note. Furthermore, the Borrower’s obligations under this Note are guarantied by Helix Wind, Inc., a Nevada corporation and subsidiary of the Borrower (“Guarantor”), pursuant to a separate Guaranty executed by Guarantor for the benefit of the Lender (the “Guaranty”). Such Guaranty is secured by a certain Security Agreement for Consolidated Note of even date herewith (the “Guarantor Security Agreement,” and together with the Borrower Security Agreement, the “Security Agreements”) executed by Guarantor in favor of the Lender encumbering certain assets of Guarantor, as more specifically set forth in the Guarantor Security Agreement.

 

8.           Change of Control.  In the event of (i) any transaction or series of related transactions (including any reorganization, merger or consolidation) that results in the transfer of 50% or more of the outstanding Common Stock of the Borrower, or (ii) a sale of all or substantially all of the assets of the Borrower to another person or entity, this Note shall be automatically due and payable. The Borrower will give the Lender not less than ten (10) business days prior written notice of the occurrence of any events referred to in this Section 8.

 

9.           Representations and Warranties of the Borrower.  In addition to the representations and warranties set forth in the Purchase Agreement, the Guaranty and the Security Agreements, which are incorporated herein, the Borrower hereby represents and warrants to the Lender that:

 

(a)           The Borrower understands and acknowledges that the number of Conversion Shares issuable upon conversion of this Note will increase in certain circumstances. The Borrower further acknowledges that its obligation to issue Conversion Shares upon conversion of this Note in accordance with its terms is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Borrower;

 

(b)           The Borrower’s Common Stock is registered under Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”);

 

(c)           The Borrower is subject to the reporting requirements of section 13 or 15(d) of the Exchange Act and has filed all required reports under section 13 or 15(d) of the Exchange Act during the 12 months prior to the date hereof (or for such shorter period that the issuer was required to file such reports); and

 

(d)           The issuance of this Note is duly authorized. Upon conversion in accordance with the terms of this Note, the Conversion Shares, when issued, will be validly issued, fully paid and non-assessable, free from all taxes, liens, claims, pledges, mortgages, restrictions, obligations, security interests and encumbrances of any kind, nature and description. The Borrower has reserved from its duly authorized capital stock the appropriate number of shares of Common Stock for issuance upon conversion of this Note as required by the terms of this Note.

 

  

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10.           Affirmative and Negative Covenants. In addition to the covenants set forth in the Purchase Agreement, the Guaranty and the Security Agreements, the Borrower covenants and agrees, while any amounts under this Note are outstanding, as follows:

 

(a)           The Borrower shall do all things necessary to preserve and keep in full force and effect its corporate existence, including, without limitation, all licenses or similar qualifications required by it to engage in its business in all jurisdictions in which it is at the time so engaged; and continue to engage in business of the same general type as conducted as of the date hereof; and  continue to conduct its business substantially as now conducted or as otherwise permitted hereunder;

 

(b)           The Borrower shall pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid, might reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and the Borrower has maintained adequate reserves with respect thereto in accordance with GAAP;

 

(c)           The Borrower shall comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations and requirements applicable to it (collectively, “Requirements”) of all governmental bodies, departments, commissions, boards, companies or associations insuring the premises, courts, authorities, officials or officers which are applicable to the Borrower or any of its properties, except where the failure to so comply would not have a material adverse effect on the Borrower or any of its properties; provided, however, that nothing provided herein shall prevent the Borrower from contesting the validity or the application of any Requirements;

 

(d)           The Borrower shall keep proper records and books of account with respect to its business activities, in which proper entries, reflecting all of their financial transactions, are made in accordance with GAAP;

 

(e)           From the date hereof until the date that is six months after all the Conversion Shares either have been sold by the Lender, or may permanently be sold by the Lender without any restrictions pursuant to Rule 144 (the “Registration Period”), the Borrower shall file with the Securities and Exchange Commission (the “SEC”) in a timely manner all required reports under section 13 or 15(d) of the Exchange Act, as amended, and such reports shall conform to the requirement of the Exchange Act and the SEC for filing thereunder;

 

(f)           The Borrower shall furnish to the Lender so long as the Lender owns Common Stock, promptly upon written request, (i) a written statement by the Borrower that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Borrower and such other reports and documents so filed by the Borrower, and (iii) such other information as may be reasonably requested to permit the Lender to sell such securities pursuant to Rule 144 without registration;

 

  

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(g)           During the Registration Period, the Borrower shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination;

 

(h)           On the date hereof, the Borrower shall reserve for issuance to the Lender the number of shares of its Common Stock that shall be necessary to effect the full conversion of this Note multiplied by 1.5, for issuance upon conversions of this Note (the “Share Reserve”). The Borrower represents that it has sufficient authorized and unissued shares of Common Stock available to create the Share Reserve after considering all other commitments that may require the issuance of Common Stock. The Borrower shall take all action reasonably necessary to at all times have authorized, and reserved for the purpose of issuance, such number of shares of Common Stock as shall be necessary to effect the full conversion of the Note multiplied by 1.5. If at any time the Share Reserve is insufficient to effect the full conversion of the Note, the Borrower shall increase the Share Reserve accordingly. If the Borrower does not have sufficient authorized and unissued shares of Common Stock available to increase the Share Reserve, the Borrower shall call and hold a special meeting of the stockholders within thirty (30) days of such occurrence, for the sole purpose of increasing the number of shares authorized. The Borrower’s management shall recommend to the stockholders to vote in favor of increasing the number of shares of Common Stock authorized. Management shall also vote all of its shares in favor of increasing the number of authorized shares of Common Stock;

 

(i)           The Common Stock shall be listed or quoted for trading on any of (i) NYSE Amex, (ii) the New York Stock Exchange, (iii) the Nasdaq Global Market, (iv) the Nasdaq Capital Market, (v) the OTC Bulletin Board, or (f) the OTCQX or OTCQB (each, a “Primary Market”). The Borrower shall promptly secure the listing of all shares of Common Stock representing any or all of the Conversion Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance), and shall maintain such listing of all such securities from time to time issuable under the terms of the Transaction Documents (as such term is defined in the Purchase Agreement);

 

(j)           The Borrower shall notify the Lender in writing, promptly upon learning thereof, of any litigation or administrative proceeding commenced or threatened against the Borrower involving a claim in excess of $100,000.00;

 

(k)           The Borrower shall use the proceeds from this for its business operations; and

 

(l)           The Borrower will not issue any instructions to Island Stock Transfer or any other transfer agent of the Company contrary to the instructions set forth in the Irrevocable Instructions to Transfer Agent of even date herewith given by the Borrower to Island Stock Transfer.

 

11.           [Intentionally Deleted].

 

  

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12.           Default. If any of the events specified below shall occur (each, an “Event of Default”), (i) the Lender may by written notice to the Borrower declare the entire Outstanding Balance immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding; provided, however, that upon the occurrence or existence of any Event of Default described in Section 12(e) or (g), immediately and without notice, all outstanding obligations payable by the Borrower hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Transaction Documents to the contrary notwithstanding, (ii) the Lender may exercise default remedies under and according to the terms of this Note, the Guaranty and the Security Agreements, and (iii) the Outstanding Balance shall accrue interest at the rate of 15% per annum until this Note is repaid in full:

 

(a)           Failure to Pay. The Borrower’s failure to make any payment when due and payable under the terms of this Note including, without limitation, any payment of costs, fees, interest, principal or other amount due hereunder.

 

(b)           Failure to Deliver Shares. The Borrower’s failure to deliver the Conversion Shares as provided under Section 3(b) of this Note.

 

(c)           Breaches of Covenants. The Borrower or its subsidiaries, if any, shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Note, the Guaranty, the Security Agreements, or the other Transaction Documents (as defined in the Purchase Agreement).

 

(d)           Representations and Warranties. Any representation, warranty, certificate, or other statement (financial or otherwise) made or furnished by or on behalf of the Borrower to the Lender in writing included in this Note or in connection with any of the Transaction Documents, or as an inducement to the Lender to enter into this Note or any of the Transaction Documents, shall be false, incorrect, incomplete or misleading in any material respect when made or furnished or becomes false thereafter.

 

(e)           Failure to Pay Debts; Voluntary Bankruptcy. If any of the Borrower’s assets are assigned to its creditors, if the Borrower fails to pay its debts generally as they become due, or if the Borrower files any petition, proceeding, case or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, rule, regulation, statute or ordinance (collectively, “Laws and Rules”), or any other Law and Rule for the relief of, or related to, debtors.

 

(f)           Insufficient Authorized Shares. The Borrower’s failure to maintain sufficient authorized but unissued shares of Common Stock to honor the conversion of any note made by the Borrower in favor of the Lender, including without limitation this Note.

 

(g)           Involuntary Bankruptcy. If any involuntary petition is filed under any bankruptcy or similar Law or Rule against the Borrower, or a receiver, trustee, liquidator, assignee, custodian, sequestrator or other similar official is appointed to take possession of any of the assets or properties of the Borrower or any guarantor.

 

  

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(h)           Governmental Action. If any governmental or regulatory authority takes or institutes any action that will materially affect the Borrower’s financial condition, operations or ability to pay or perform the Borrower’s obligations under this Note.

 

(i)           Cross Default. If after the date of this Note, any default or an event which, with the passage of time or the giving of notice or both, would constitute a default, by Borrower, occurs on any note, indenture, purchase agreement, contract, agreement, or undertaking with respect to Lender or any affiliate of Lender, it being the intent of Borrower and Lender to cross default the Transaction Documents with any other loan from Lender to Borrower.

 

(j)           Collection Actions. If any party commences collection procedures of any kind whatsoever against Borrower or any Collateral (as defined in the Security Agreements).

 

13.           Ownership Limitation. Notwithstanding the provisions of this Note, if at any time after the date hereof, the Lender shall or would receive shares of Common Stock in payment of interest or principal under this Note or upon conversion of this Note, so that the Lender would, together with other shares of Common Stock held by it or its Affiliates, own or beneficially own by virtue of such action or receipt of additional shares of Common Stock a number of shares exceeding 9.99% of the number of shares of Common Stock outstanding on such date (the “9.99% Cap”), the Borrower shall not be obligated and shall not issue to the Lender shares of Common Stock which would exceed the 9.99% Cap, but only until such time as the 9.99% Cap would no longer be exceeded by any such receipt of shares of Common Stock by the Borrower. The foregoing limitations are enforceable, unconditional and non-waivable and shall apply to all Affiliates and assigns of the Lender.

 

14.           No Rights or Liabilities as Stockholder. This Note does not by itself entitle the Lender to any voting rights or other rights as a stockholder of the Borrower. In the absence of conversion of this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of the Lender, shall cause the Lender to be a stockholder of the Borrower for any purpose.

 

15.           Binding Effect. This Note shall be binding on the Parties and their respective heirs, successors, and assigns; provided, however, that the Borrower shall not assign its rights hereunder in whole or in part without the express written consent of the Lender. The Lender may assign this Note, in whole or in part, to any third party in its sole discretion without having to obtain the Borrower’s consent to such assignment.

 

16.           Governing Law; Venue. The terms of this Note shall be construed in accordance with the laws of the State of Illinois as applied to contracts entered into by Illinois residents within the State of Illinois which contracts are to be performed entirely within the State of Illinois.  With respect to any disputes arising out of or related to this Note, the Parties consent to the exclusive personal jurisdiction of, and venue in, the state courts in Illinois (or in the event of federal jurisdiction, the United States District Court for the Northern District of Illinois), and hereby waive, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdiction or to any claim that such venue of the suite, action or proceeding is improper.

 

  

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17.           Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of the Parties to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

 

18.            Attorneys’ Fees. If any action at law or in equity is necessary to enforce this Note or to collect payment under this Note, the Lender shall be entitled to recover reasonable attorneys’ fees directly related to such enforcement or collection actions.

 

19.            Amendments and Waivers; Remedies. No failure or delay on the part of a Party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a Party hereto at law, in equity or otherwise. Any amendment, supplement or modification of or to any provision of this Note, any waiver of any provision of this Note, and any consent to any departure by either Party from the terms of any provision of this Note, shall be effective (i) only if it is made or given in writing and signed by the Borrower and the Lender and (ii) only in the specific instance and for the specific purpose for which made or given.

 

20.           Notices. All notices, requests, demands, claims and other communications hereunder shall be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly given if it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient, as set forth in the Purchase Agreement. Any Party may send any notice, request, demand, claim or other communication hereunder to the intended recipient at the address set forth in the Purchase Agreement using any other means (including personal delivery, expedited courier, messenger service, facsimile, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient or receipt is confirmed electronically or by return mail.  Any Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in any manner herein set forth.

 

21.           Entire Agreement. This Note, together with the Guaranty, the Security Agreement and the other Transaction Documents, contains the complete understanding and agreement of the Borrower and Lender and supersedes all prior representations, warranties, agreements, arrangements, understandings, and negotiations. THIS NOTE, TOGETHER WITH THE GUARANTY, THE SECURITY AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY ALLEGED PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

22.           Lawful Interest. It being the intention of the Lender and the Borrower to comply with all applicable laws with regard to the interest charged hereunder, it is agreed that, notwithstanding any provision to the contrary in this Note or any other Transaction Document, no such provision, including without limitation any provision of this Note providing for the payment of interest or other charges, shall require the payment or permit the collection of any amount in excess of the maximum amount of interest permitted by law to be charged for the use or detention, or the forbearance in the collection, of all or any portion of the indebtedness evidenced by this Note or by any extension or renewal hereof (“Excess Interest”). If any Excess Interest is provided for, or is adjudicated to be provided for, in this Note or any other Transaction Document, then in such event:

 

  

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(a)           the provisions of this Section 22 shall govern and control;

 

(b)           the Borrower shall not be obligated to pay any Excess Interest;

 

(c)           any Excess Interest that the Lender may have received hereunder shall, at the option of the Lender, be (i) applied as a credit against the principal balance due under this Note or the accrued and unpaid interest thereon not to exceed the maximum amount permitted by law, or both, (ii) refunded to the Borrower, or (iii) any combination of the foregoing;

 

(d)           the applicable interest rate or rates shall be automatically subject to reduction to the maximum lawful rate allowed to be contracted for in writing under the applicable governing usury laws, and this Note and the Transaction Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in such interest rate or rates; and

 

(e)           the Borrower shall not have any action or remedy against the Lender for any damages whatsoever or any defense to enforcement of this Note or arising out of the payment or collection of any Excess Interest.

 

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IN WITNESS WHEREOF, the Borrower has executed this Note as of the date set forth above.

Exhibit

Exhibit A – Notice of Conversion

 

	 	
HELIX WIND, CORP.

By:   /s/ James Tilton

      Name: James Tilton

      Title:   Chief Operating Officer

 

 

 

ACKNOWLEDGED, ACCEPTED AND AGREED:

 

ST. GEORGE INVESTMENTS, LLC

 

By: Fife Trading, Inc., Manager

     By: /s/ John M. Fife 

           John M. Fife, President

 

 

[Signature page to Consolidated Convertible Promissory Note]

  

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EXHIBIT A

NOTICE OF CONVERSION

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