Document:

ex42.htm

Exhibit 4.2

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

	Principal Amount: $42,500.00 	 	 	 Issue Date: July 24, 2013
	Purchase Price: $42,500.00	 	 	 
	 	 	 	 

 

CONVERTIBLE PROMISSORY NOTE

FOR VALUE RECEIVED, FOREX INTERNATIONAL TRADING CORP., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ASHER ENTERPRISES, INC., a Delaware corporation, or registered assigns (the “Holder”) the sum of $42,500.00 together with any interest as set forth herein, on April 29, 2014 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.  This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).  Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed.  All payments due hereunder (to the extent not converted into common stock, $0.00001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America.  All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note.  Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date.  As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.  Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

 

 

  

1

  

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

The following terms shall apply to this Note:

ARTICLE I.  

CONVERSION RIGHTS

1.1 Conversion Right.  The Holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III) pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price  (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock.  For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver).  The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).  The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Borrower’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2 Conversion Price.

(a) Calculation of Conversion Price.  The Conversion Price shall be the greater of: (i) the Variable Conversion Price (as defined herein) and (ii) the Fixed Conversion Price (as defined herein) (subject, in each case, to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).  The "Variable Conversion Price" shall mean 58% multiplied by the Market Price (as defined herein)(representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the last complete Trading Day prior to the Conversion Date.  “Trading Price” means, for any security as of any date, the closing bid price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCBB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the OTCBB is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc.  If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.  “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. Fixed Conversion shall mean $0.00009.

 

 

  

2

  

 

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

1.3 Authorized Shares.  The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement.  The Borrower is required at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”).  The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Purchase Agreement.  The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.  In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes.  The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

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

1.4 Method of Conversion.

(a) Mechanics of Conversion.  Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

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

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

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

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

 

  

3

  

 

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

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

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

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

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

1.6 Effect of Certain Events.

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

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

 

  

4

  

 

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

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

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

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

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

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

1.7 Trading Market Limitations.  Unless permitted by the applicable rules and regulations of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum number of shares of Common Stock that the Borrower can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum Share Amount”), which shall be 9.99% of the total shares outstanding on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date hereof.  Once the Maximum Share Amount has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

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

 

  

5

  

 

1.9 Prepayment.   Notwithstanding anything to the contrary contained in this is thirty (30) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Optional Prepayment Amount”) equal to 112%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning  on the date which is thirty-one (31) days following the issue date and ending on the date which is sixty (60) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Second Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Second Optional Prepayment Amount”) equal to 121%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Second Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

Notwithstanding anything to the contrary contained in this Note, at any time during the period beginning  on the date which is sixty-one (61) days following the issue date and ending on the date which is ninety (90) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Third Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Third Optional Prepayment Amount”) equal to 126%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Third Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is ninety-one (91) day from the issue date and ending one hundred twenty (120) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Fourth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fourth Optional Prepayment Amount”) equal to 131%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fourth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred twenty-one (121) day from the issue date and ending one hundred fifty (150) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Fifth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Fifth Optional Prepayment Amount”) equal to 136%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Fifth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

  

6

  

 

Notwithstanding any to the contrary stated elsewhere herein, at any time during the period beginning on the date that is one hundred fifty-one (151) day from the issue date and ending one hundred eighty (180) days following the issue date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9.  Any Optional Prepayment Notice shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice.  On the Optional Prepayment Date, the Borrower shall make payment of the Sixth Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date.  If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash (the “Sixth Optional Prepayment Amount”) equal to 141%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.  If the Borrower delivers an Optional Prepayment Notice and fails to pay the Sixth Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.9.

 

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

 

ARTICLE II.

 CERTAIN COVENANTS

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

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

2.3 Borrowings.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, (a) create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any other person, firm, partnership, joint venture or corporation, except by the endorsement of negotiable instruments for deposit or collection, or (b) suffer to exist any liability for borrowed money, except any borrowings that does not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.

2.4 Sale of Assets.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business except when  any sale, lease or disposition is done for fair consideration and does not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934.  Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.5 Advances and Loans.  So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business (c) that does not render the Borrower a "Shell" company as defined in Rule 12b-2 under the Securities Exchange Act of 1934 or (d) not in excess of $100,000.

 

ARTICLE III.  

EVENTS OF DEFAULT

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

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

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

 

 

  

7

  

 

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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

 

  

8

  

 

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

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

ARTICLE IV. 

MISCELLANEOUS

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

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

If to the Borrower, to:

FOREX INTERNATIONAL TRADING CORP.

400 Continental Boulevard - Suite 600

El Segundo, CA 90245

Attn: ERIK KLINGER, Chief Executive Officer

facsimile:

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

Fleming PLLC

Attn: Steven Fleming

49 Front Street, Suite #206

Rockville Centre, New York 11570

If to the Holder:

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attn: Curt Kramer, President

facsimile: 516-498-9894

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

Naidich Wurman Birnbaum & Maday, LLP

80 Cuttermill Road, Suite 410

Great Neck, NY 11021

Attn: Bernard S. Feldman, Esq.

facsimile: 516-466-3555

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

 

  

9

  

 

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

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

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

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

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

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

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

 

 

  

10

  

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this July 24, 2013.

	 	FOREX INTERNATIONAL TRADING CORP.	 
	 	 	 	 
	
 

	
By: 

	/s/ ERIK KLINGER	 
	 	 	ERIK KLINGER	 
	 	 	Chief Executive Officer	 
	 	 	 	 

  

  

11

  

          

EXHIBIT A

NOTICE OF CONVERSION

The undersigned hereby elects to convert $_________________ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of FOREX INTERNATIONAL TRADING CORP., a Nevada corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of July 24, 2013 (the “Note”), as of the date written below.  No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

	
  

	
[ ]

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

Name of DTC Prime Broker:

Account Number:

	
  

	
[  ]

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

ASHER ENTERPRISES, INC.

1 Linden Pl., Suite 207

Great Neck, NY. 11021

Attention: Certificate Delivery

(516) 498-9890

Date of Conversion:      _____________

Applicable Conversion Price:      $____________

Number of Shares of Common Stock to be Issued

    Pursuant to Conversion of the Notes:    ______________

Amount of Principal Balance Due remaining

    Under the Note after this conversion:     ______________

ASHER ENTERPRISES, INC.

By:_____________________________

Name: Curt Kramer

Title: President

Date:  ______________

1 Linden Pl., Suite 207

Great Neck, NY. 11021

 

 

 

 

 

 

12Exhibit 10.1

 

Black Ridge Oil & Gas, Inc.

 

STOCK OPTION AGREEMENT

(2012 Amended and Restated Stock Incentive
Plan)

 

Black Ridge Oil &
Gas, Inc. (the "Company"), pursuant to the 2012 Amended and Restated Stock Incentive Plan (as such plan may be
amended and/or restated, the "Plan"), hereby grants to Optionee listed below ("Optionee"), an
option to purchase the number of shares of the Company's Common Stock ("Shares") set forth below, subject to the
terms and conditions of the Plan and this Stock Option Agreement. Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Stock Option Agreement.

 

BACKGROUND

 

A.          Employee is serving as an associate for the Company
and the Company desires to award Employee for his or her services to the Company; and

 

B.          The Company has adopted the 2012 Amended and Restated
Stock Incentive Plan (the “Plan”) pursuant to which shares of common stock, $0.001 par value, of the Company have been
reserved for issuance under the Plan.

 

		I.	NOTICE OF STOCK OPTION GRANT

 

	Optionee:	 	Michael Eisele
	 	 	 
	Date of Stock Option Agreement:	 	August 1, 2013
	 	 	 
	Date of Grant:	 	August 1, 2013
	 	 	 
	Vesting Commencement Date:	 	August 1, 2013
	 	 	 
	Exercise Price per Share:	 	$.64
	 	 	 
	Total Number of Shares Granted:	 	165,000 Shares
	 	 	 
	Total Exercise Price:	 	$105,600
	 	 	 
	Term/Expiration Date:	 	July 31, 2023
	 	 	 
	Type of Option:	x	  Incentive Stock Option	 	Non-Qualified Stock Option
	 	 	 	 	 

 

Vesting Schedule: This Option shall
vest and become exercisable only to the extent that all, or any portion thereof, has vested. Except as otherwise provided herein,
the Option shall vest in five (5) annual installments, commencing one year from the Date of Grant, as noted above, and continuing
on the next four (4) anniversaries thereof (hereinafter referred to singularly as a “Vesting Date” and collectively
as “Vesting Dates”), until the Option is fully vested, as set forth in the following schedule:

 

	No. of Shares to be Vested	 	Vesting Date
	 	 	 
	33,000	 	August 1, 2014
	 	 	 
	33,000	 	August 1, 2015
	 	 	 
	33,000	 	August 1, 2016
	 	 	 
	33,000	 	August 1, 2017
	 	 	 
	33,000	 	August 1, 2018

 

    	1

    	 

    

 

		II.	AGREEMENT

 

1.          Grant of Option.
The Company hereby irrevocably grants from the Plan to Optionee an Option to purchase the number of Shares set forth in the
Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the "Exercise Price"). Notwithstanding
anything to the contrary anywhere else in this Stock Option Agreement, the Option is subject to the terms, definitions and provisions
of the Plan adopted by the Company, which is incorporated herein by reference.

 

If designated in the Notice of Grant as
an Incentive Stock Option, this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code;
provided, however, that to the extent that the aggregate Fair Market Value of stock with respect to which Incentive Stock
Options (within the meaning of Code Section 422, but without regard to Code Section 422(d)), including the Option, are exercisable
for the first time by Optionee during any calendar year, exceeds $100,000, such options shall be treated as not qualifying under
Code Section 422, but rather shall be treated as Non-Qualified Stock Options to the extent required by Code Section 422. The rule
set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For
purposes of these rules, the Fair Market Value of stock shall be determined as of the time the option with respect to such stock
is granted.

 

 2.          Exercise of Option. This Option is exercisable as follows:

 

(a)          Right to Exercise.

 

(i)          This Option shall be exercisable cumulatively according to the Vesting Schedule set forth in the Notice of Grant. For purposes
of this Stock Option Agreement, Shares subject to this Option shall vest as provided in the Vesting Schedule set forth in the Notice
of Grant.

 

(ii)         This Option may not be exercised for a fraction of a Share.

 

(iii)        In the event of Optionee's death, disability or other termination of Optionee's status as an employee, officer or Board
Member, the exercisability of the Option is governed by Section 7 below and the Termination Provisions set forth in the Notice
of Grant.

 

(iv)        In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in the Notice
of Grant.

 

(b)          Method of Exercise.
This Option shall be exercisable by written Notice (substantially in the form attached as Exhibit A). The Notice must state
the number of Shares for which the Option is being exercised, and such other representations and agreements with respect to such
Shares as may be required by the Company pursuant to the provisions of the Plan. The Notice must be signed by Optionee and shall
be delivered in person or by certified mail to the Secretary of the Company. The Notice must be accompanied by payment of the Exercise
Price plus payment of any applicable withholding tax. This Option shall be deemed to be exercised upon receipt by the Company
of such written Notice accompanied by the Exercise Price and payment of any applicable withholding tax. No Shares shall be issued
pursuant to the exercise of an Option unless such issuance and such exercise comply with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which the Option is exercised with respect to such Shares.

 

3.          Optionee's Representations.
If the Shares purchasable pursuant to the exercise of this Option have not been registered under the Securities Act or any applicable
state laws at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment Representation Statement in the form attached
hereto as Exhibit B and shall make such other written representations as are deemed necessary or appropriate by the Company
and/or its counsel.

 

    	2

    	 

    

 

4.          Lock-Up Period.
Optionee hereby agrees that, if so requested by the Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the Company under the Securities Act or any applicable
state laws, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period
(or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration statement of the Company filed under
the Securities Act; provided, however, that such restriction shall apply only to the first registration statement of the
Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market Standoff Period and these restrictions shall be
binding on any transferee of such Shares.

 

5.          Method of Payment.
Payment of the Exercise Price shall be payable in US dollars by any of the following, or a combination thereof, at the election
of Optionee:

 

(a)          cash;

 

(b)          uncertified or certified check, bank draft; or

 

(c)          with the consent of the Board,

 

 (i)          by delivery of shares of Common Stock in payment of all or any part of the option price, which shares shall be valued for this purpose at the Fair Market Value (as such term is defined in the Plan) on the date such option is exercised; or;

 

 (ii)         by instructing the Company to withhold from the shares of Common Stock issuable upon exercise of the stock option shares of Common Stock in payment of all or any part of the exercise price and/or any related withholding tax obligations, which shares shall be valued for this purpose at the Fair Market Value or in such other manner as may be authorized from time to time by the Board (Cashless Exercise);

 

All shares that shall be purchased
upon the exercise of the Option as provided herein shall be fully paid and non-assessable.

 

6.          Restrictions on Exercise. If the issuance of Shares upon such exercise or if the method of payment for such shares
would constitute a violation of any applicable federal or state securities or other law or regulation, then the Option may not
be exercised. The Company may require Optionee to make any representation and warranty to the Company as may be required by any
applicable law or regulation before allowing the Option to be exercised.

 

7.          Termination of
Relationship. If Optionee ceases to be a Board Member, Officer or Employee for any reason other than death, disability or
termination for cause, Optionee shall have the right to exercise the Option at any time within twelve (12) months after the date
Optionee ceased to be a Non-Employee Director or Employee to the extent of the full number of shares exercisable by Optionee on
the date he or she ceased to be a Non-Employee Director or Employee, and the unvested portion shall not vest and all of Optionee’s
rights to such unvested parts of the Option shall terminate. Upon the expiration of such twelve (12) month period, or, if earlier,
upon the expiration date of the Options as set forth above, the Options shall terminate and become null and void.

 

8.          Non-Transferability
of Option. This Option may not be transferred in any manner except by will or by the laws of descent or distribution. It may
be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of Optionee.

 

9.          Term of Option.
This Option may be exercised only within the term set forth in the Notice of Grant.

 

    	3

    	 

    

 

10.         Restrictions
on Shares. Optionee hereby agrees that Shares purchased upon the exercise of the Option shall be subject to such terms and
conditions as the Administrator shall determine in its sole discretion, including, without limitation, restrictions on the transferability
of Shares, the right of the Company to repurchase Shares, the right of the Company to require that Shares be transferred in the
event of certain transactions, a right of first refusal in favor of the Company with respect to permitted transfers of Shares,
tag-along rights and take-along rights. Such terms and conditions may, in the Administrator's sole discretion, be contained in
the Exercise Notice with respect to the Option or in such other agreement as the Administrator shall determine and which Optionee
hereby agrees to enter into at the request of the Company.

 

11.         No Right to
Employment. Nothing in the Plan or in this Stock Option Agreement shall confer upon Optionee any right to serve or continue
as an Employee, Director or Consultant of the Company or any Parent or Subsidiary, or shall interfere with or restrict in any
way the rights of the Company or any Parent or Subsidiary, which are hereby expressly reserved, to discharge Optionee at any time
for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written employment agreement
between Optionee and the Company or any Parent or Subsidiary.

 

 

This Stock
Option Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which shall
constitute one document.

 

	 	Black Ridge Oil & Gas, Inc.
	 	
         

         

	 	By:	/s/ Kenneth DeCubellis
	 	Name:	Kenneth DeCubellis
	 	Title:	Chief Executive Officer

 

OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING AS A BOARD MEMBER OR EXECUTIVE OFFICER AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS STOCK OPTION AGREEMENT, NOR IN THE COMPANY'S 2012 AMENDED AND RESTATED STOCK
INCENTIVE PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION AS
A BOARD MEMBER OR EXECUTIVE OFFICER OF THE COMPANY OR ANY PARENT OR SUBSIDIARY, NOR SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S BOARD MEMBER OR EXECUTIVE OFFICER RELATIONSHIP AT ANY TIME, WITH OR WITHOUT
CAUSE AND WITH OR WITHOUT PRIOR NOTICE.

 

Optionee acknowledges
receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof. Optionee hereby
accepts this Option subject to all of the terms and provisions hereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions
of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator
upon any questions arising under the Plan or this Option. Optionee further agrees to notify the Company upon any change in the
residence address indicated below.

 

 

	Dated:	August 1, 2013	 	 	By:	 /s/ Michael Eisele
	 	 	 	 	Name:	Michael Eisele
	 	 	 	 	 	 
	 	 	 	 	Address:	 
	 	 	 	 	 	
        10275 Wayzata Blvd., Suite 310

        Minnetonka, MN 55305

 

    	4

    	 

    

 

EXHIBIT A

 

Black Ridge Oil & Gas, Inc.

 

2012 Amended and Restated Stock Incentive
Plan

 

EXERCISE NOTICE

 

 

Black Ridge Oil & Gas, Inc. Attention: Chief Financial Officer

 

1.          Exercise of Option.
Effective as of today, Michael Eisele, the undersigned ("Optionee"), hereby elects to exercise Optionee's
option to purchase _________ shares of the Common Stock (the "Shares") of Black Ridge Oil & Gas, Inc. (the
"Company") under and pursuant to the 2012 Amended and Restated Stock Incentive Plan (as such plan may be amended
and/or restated, the "Plan") and the Stock Option Agreement dated August 1, 2013 (the "Option Agreement"). 
Capitalized terms used herein without definition shall have the meanings given in the Option Agreement.

 

	 	Date of Grant:	August 1, 2013	 	 
	 	 	 	 	 
	 	Number of Shares as to which Option is Exercised:	_________	 	 
	 	 	 	 	 
	 	Exercise Price per Share:	$.64	 	 
	 	 	 	 	 
	 	Total Exercise Price:	__________	 	 
	 	 	 	 	 
	 	Certificate to be issued in name of:	 	 	 
	 	 	 	 	 
	 	Cash Payment delivered herewith:	 	$	 	 
	 	 	 	 	 
	Type of Option:	[x]  Incentive Stock Option	[  ]  Non-Qualified Stock Option	 	 
	 	 	 	 	 	 	 	 

2          Representations
of Optionee. Optionee acknowledges that Optionee has received, read and understood the Plan and the Option Agreement. Optionee
agrees to abide by and be bound by their terms and conditions.

 

3.          Rights as Stockholder.
Until the stock certificate evidencing such Shares is issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder
shall exist with respect to Shares subject to the Option, notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such stock certificate promptly after the Option is exercised.

 

No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 14
of the Plan. Optionee shall enjoy rights as a stockholder until such time as Optionee disposes of the Shares or the Company and/or
its assignee(s) exercises the Right of First Refusal or the Take-Along Right hereunder (each as defined below).  Upon
such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except the right to receive payment
for the Shares so purchased in accordance with the provisions of this Exercise Notice, and Optionee shall forthwith cause the certificate(s)
evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.

 

4.          Company's Right
of First Refusal. Before any Shares held by Optionee (including, for purposes of Sections 4 and 5 hereof, any permitted transferee
holding Shares) may be sold, pledged, assigned, hypothecated, transferred, or otherwise disposed of (including transfer by gift
or operation of law) (collectively, "Transfer" or "Transferred"), the Company or its assignee(s) shall
have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section 4 (the "Right
of First Refusal").

 

    	A-1

    	 

    

 

(a)          Notice of Proposed Transfer. Optionee shall deliver to the Company a written notice (the "Notice")
stating: (i) Optionee's bona fide intention to sell or otherwise Transfer such Shares; (ii) the name of each proposed purchaser
or other transferee ("Proposed Transferee"); (iii) the number of Shares to be Transferred to each
Proposed Transferee; and (iv) the bona fide cash price or other consideration for which Optionee proposes to Transfer the
Shares (the "Offered Price"), and Optionee shall offer the Shares at the Offered Price to the Company or its assignee(s).

 

(b)          Exercise of Right of First Refusal.  Within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may elect in writing to purchase all, but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees. The purchase price will be determined in accordance with subsection (c) below.

 

(c)          Purchase Price. The purchase price (the "ROFR Purchase Price") for the Shares repurchased under
this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent
value of the non-cash consideration shall be determined by the Board in good faith.

 

(d)          Payment. Payment of the ROFR Purchase Price shall be made, at the option of the Company or its assignee(s), in cash
(by check), by cancellation of all or a portion of any outstanding indebtedness of Optionee to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof within thirty (30) days after receipt of the Notice
or in the manner and at the times set forth in the Notice.

 

(e)          Optionee's Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this Section, then Optionee may sell or otherwise Transfer
such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is
consummated within one hundred twenty (120) days after the date of the Notice and provided further that any such sale or other
Transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that (i) the
provisions hereof, including without limitation the provisions of Sections 4 and 5 shall continue to apply to the Shares in the
hands of such Proposed Transferee and (ii) that such Proposed Transferee will not transfer the Shares any other purchaser
or transferee unless such future purchase or transferee agrees in writing to be bound by the provisions hereof, including without
limitation the provisions of Sections 4 and 5 hereof. If the Shares described in the Notice are not Transferred to the Proposed
Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal as provided herein before any Shares held by the Holder may be sold or otherwise Transferred.

 

(f)          Exception for Certain Family Transfers.  Anything to the contrary contained in this Section 4 notwithstanding,
the Transfer of any or all of the Shares during Optionee's lifetime or on Optionee's death by will or intestacy to Optionee's Immediate
Family or a trust for the benefit of Optionee's Immediate Family shall be exempt from the Right of First Refusal.  As used
herein, "Immediate Family" shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister
or stepchild (whether or not adopted).  In such case, the transferee or other recipient shall receive and hold the Shares
so Transferred subject to the provisions hereof, including without limitation the provisions of Sections 4 and 5 hereof, and there
shall be no further Transfer of such Shares except in accordance with the terms hereof.

 

(g)          Termination of Right of First Refusal.  The Right of First Refusal shall terminate as to the Shares upon the
Public Trading Date of the Shares. For the purposes of the Stock Option Agreement and this Exercise Notice, the “Public Trading
Date” of the Shares is the date on which the Shares first become freely tradeable under the Securities Act of 1933, as amended
(the “Act”), either pursuant to Rule 144 or another provision of the Act. The holder of the Shares may apply to have
all restrictive transfer legends removed from the certificates evidencing the Shares without delivering a notice to the Company
pursuant to Section 4(a) of this Exercise Notice, provided that the request for legend removal is made at such times and in such
manner that removal is accomplished in compliance with the Act and the rules and regulations promulgated under the Act.

 

    	A-2

    	 

    

 

5.          Company Take-Along
Right.

 

(a)          Approved Sale.
If the Board shall deliver a notice to Optionee (a "Sale Event Notice") stating that the Board has approved a
sale of all or a portion of the Company (an "Approved Sale") and specifying the name and address of the proposed
parties to such transaction and the consideration payable in connection therewith, Optionee shall (i) consent to and raise no
objections against the Approved Sale or the process pursuant to which the Approved Sale was arranged, (ii) waive any dissenter's
rights and other similar rights, and (iii) if the Approved Sale is structured as a sale of securities, agree to sell Optionee's
Shares on the terms and conditions of the Approved Sale which terms and conditions shall treat all stockholders of the Company
equally (on a pro rata basis), except that shares having a liquidation preference may receive an amount of consideration equal
to such liquidation preference in addition to the consideration being paid to the holders of shares not having a liquidation preference. 
Notwithstanding the foregoing, the sale of the Shares in an Approved Sale shall be further subject to the terms of the Plan.

 

Optionee will take all necessary and desirable
lawful actions as directed by the Board and the stockholders of the Company approving the Approved Sale in connection with the
consummation of any Approved Sale, including without limitation, the execution of such agreements and such instruments and other
actions reasonably necessary to (A) provide the representations, warranties, indemnities, covenants, conditions, non-compete agreements,
escrow agreements and other provisions and agreements relating to such Approved Sale and, (B) effectuate the allocation and distribution
of the aggregate consideration upon the Approved Sale, provided, that this Section 5 shall not require Optionee to
indemnify the purchaser in any Approved  Sale for breaches of the representations, warranties or covenants of the Company
or any other stockholder, except to the extent (x) Optionee is not required to incur more than its pro rata share of such indemnity
obligation (based on the total consideration to be received by all stockholders that are similarly situated and hold the same class
or series of capital stock) and (y) such indemnity obligation is provided for and limited to a post-closing escrow or holdback
arrangement of cash or stock paid in connection with the Approved Sale.

 

(b)          Costs.
Optionee will bear Optionee's pro rata share (based upon the amount of consideration to be received) of the reasonable costs
of any sale of Shares pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all selling stockholders
of the Company and are not otherwise paid by the Company or the acquiring party. Costs incurred by Optionee on Optionee's own behalf
will not be considered costs of the transaction hereunder.

 

(c)          Share Delivery. At the consummation of the Approved Sale, Optionee shall, if applicable, deliver certificates representing
the Shares to be transferred, duly endorsed for transfer and accompanied by all requisite stock transfer taxes, if any, and the
Shares to be transferred shall be free and clear of any liens, claims or encumbrances (other than restrictions imposed by this
Agreement) and Optionee shall so represent and warrant.

 

(d)                
Termination of Company Take-Along Right. The Take-Along Right shall terminate as to the Shares upon the Public Trading
Date of the Shares, as defined in Section 4(g) of this Exercise Notice.

 

6.          Tax Consultation.
Optionee understands that Optionee may suffer adverse tax consequences as a result of Optionee's purchase or disposition of the
Shares.  Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection
with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice.

 

7.          Lock-Up Period.
Optionee hereby agrees that if so requested by the Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the Company under the Securities Act or any applicable
state laws, Optionee shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period
(or such longer period as may be requested in writing by the Managing Underwriter and agreed to in writing by the Company) (the
"Market Standoff Period") following the effective date of a registration statement of the Company filed under
the Securities Act; provided, that such restriction shall apply only to the first registration statement of the Company
to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act.  The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market Standoff Period.

 

    	A-3

    	 

    

 

8.          Restrictive Legends
and Stop-Transfer Orders.

 

(a)          Legends. Optionee
understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to
be placed upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required
by state or federal securities laws:

 

THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND SUCH LAWS OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.

 

THE SHARES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S)
AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED
AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE
SHARES UNTIL THE SHARES FIRST BECOME FREELY TRADEABLE IN OPEN MARKET TRANSACTIONS IN A PUBLIC TRADING MARKET UNDER THE ACT.

 

(b)          Stop-Transfer
Notices.  Optionee agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its
own securities, it may make appropriate notations to the same effect in its own records.

 

(c)          Refusal to Transfer.  The Company shall not be required (i) to transfer on its books any Shares that have
been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such
Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been
so transferred.

 

9.          Successors
and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this
Agreement shall inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

 

10.         Interpretation.
Any dispute regarding the interpretation of this Agreement shall be submitted by Optionee or by the Company forthwith to the Administrator,
which shall review such dispute at its next regular meeting.  The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Optionee.

 

11.         Governing Law;
Severability. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada excluding
that body of law pertaining to conflicts of law.  Should any provision of this Agreement be determined by a court of law
to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.

 

    	A-4

    	 

    

 

12.         Notices.
Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its
address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time
to the other party.

 

13.         Further Instruments.
The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry
out the purposes and intent of this Agreement.

 

14.         Delivery of
Payment. Optionee herewith delivers to the Company the full Exercise Price for the Shares, as well as any applicable withholding
tax.

 

15.         Entire
Agreement. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan, the Option Agreement
and the Investment Representation Statement constitute the entire agreement of the parties and supersede in their entirety all
prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof.

 

	Accepted by:	 	Submitted by:
	 	 	 
	BLACK RIDGE OIL & GAS, INC.	 	OPTIONEE
	 	 	 
	By:	 	 	By:	 
	 	 	 	 	Michael Eisele
	 	 	 
	 	 	 
	
        Address: 10275 Wayzata Boulevard, Suite 310

          Minnetonka,
        MN 55305
	 	
        Address: 10275 Wayzata Boulevard, Suite 310

          Minnetonka,
        MN 55305

 

    	A-5

    	 

    

 

EXHIBIT B

 

INVESTMENT REPRESENTATION STATEMENT

 

	OPTIONEE	:	Michael Eisele
	 	 	 
	COMPANY	:	Black Ridge Oil & Gas, Inc.
	 	 	 
	SECURITY	:	Options to purchase Common Stock
	 	 	 
	AMOUNT	:	_________ shares
	 	 	 
	DATE	:	 

 

In connection with
the purchase of the above-listed shares of Common Stock (the "Securities") of Black Ridge Oil & Gas, Inc.
(the "Company"), the undersigned (the "Optionee") represents to the Company the following:

 

(a)                
Optionee is aware of the Company's business affairs and financial condition and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the Securities.  Optionee is acquiring these Securities
for investment for Optionee's own account only and not with a view to, or for resale in connection with, any "distribution"
thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act").

 

(b)                
Optionee acknowledges and understands that the Securities constitute "restricted securities" under the Securities
Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of Optionee's investment intent as expressed herein. Optionee understands that the
Securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such
registration is available.  Optionee further acknowledges and understands that the Company is under no obligation to register
the Securities.  Optionee understands that the certificate evidencing the Securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable state securities laws.

 

(c)                
Optionee is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act,
which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain conditions.  Rule 701 provides that if
the issuer qualifies under Rule 701 at the time of the grant of the Option to Optionee, the exercise will be exempt from registration
under the Securities Act.

 

In the event the Company becomes subject
to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
(or such longer period as any market stand-off agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144, including, in the case of an affiliate, (i) the
resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934), (ii) the availability of certain public information
about the Company, (iii) the amount of Securities being sold during any three (3) month period not exceeding the limitations
specified in Rule 144(e), and (iv) the timely filing of a Form 144, if applicable.

 

In the event that the Company does not
qualify under Rule 701 at the time of grant of the Option, then the Securities may be resold beginning ninety (90) days after
the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934
in certain limited circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than
six months  after the later of the date the Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144 and the availability of certain public information about the Company
(subject to certain exceptions); and, in the case of a sale of the Securities by an affiliate,  the satisfaction of the conditions
set forth in sections (i), (ii), (iii) and (iv) of the paragraph immediately above.

 

    	B-1

    	 

    

 

(d)                
Optionee further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied,
registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise
than pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do
so at their own risk. Optionee understands that no assurances can be given that any such other registration exemption will be available
in such event.

 

(e)                
Optionee understands and acknowledges that the Company will rely upon the accuracy and truth of the foregoing representations
and Optionee hereby consents to such reliance.

 

	 	Signature of Optionee:
	 	 
	 	 
	 Date: _________________	 
	 	Michael Eisele
	 	 

 

 

 

 

    	B-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00219-of-00352.parquet"}]]