Document:

f8k021214ex4i_codesmart.htm

Exhibit 4.1

 

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

 

CodeSmart Holdings, Inc.

 

Convertible Note

 

	
Issuance Date:  February 19, 2014

	
Original Principal Amount:   $250,000

	
Note No. ITEN-1

	
Consideration Paid at Close:   $50,000

 

FOR VALUE RECEIVED, CodeSmart Holdings, Inc., a Florida corporation (the "Company"), hereby promises to pay to the order of Black Mountain Equities, Inc. or registered assigns (the "Holder") the amount set out above as the Original Principal Amount (as reduced pursuant to the amount of consideration actually paid by the Holding and the terms hereof, including redemption, conversion or otherwise, the "Principal") when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest ("Interest") on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the "Issuance Date") until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).

 

The Original Principal Amount is $250,000 (two hundred fifty thousand) plus accrued and unpaid interest and any other fees.  The Consideration is $225,000 (two hundred twenty five thousand) payable by wire transfer (there exists a $25,000 original issue discount (the “OID”)).  The Holder shall pay $50,000 of Consideration upon the initial closing of this Note.  The Holder may pay additional Consideration to the Company in such amounts and at such dates as Holder may choose in its sole discretion. For purposes hereof, the term “Outstanding Balance” means the Original Principal Amount, as reduced or increased, as the case may be, pursuant to the terms hereof for conversion, breach hereof or otherwise, plus any accrued but unpaid interest, collection and enforcements costs, and any other fees or charges incurred under this Note. The Principal Sum due to Holder shall be prorated based on the Consideration paid by Holder (plus an approximate 10% Original Issue Discount that is prorated based on the Consideration paid by the Holder as well as any other interest or fees) such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note.

 

  

  

  

 

(1)           GENERAL TERMS

 

(a)           Payment of Principal.  The "Maturity Date" shall be one year from the date of each payment of Consideration, as may be extended at the option of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.

 

(b)           Interest.  A one-time interest charge of twelve percent (12%) (“Interest Rate”) shall be applied on the Issuance Date to the Original Principal Sum. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.

 

(c)           Security.  This Note shall not be secured by any collateral or any assets pledged to the Holder

 

(2)           EVENTS OF DEFAULT.

 

(a)           An “Event of Default”, wherever used herein, means any one of the following events which is continuing and has not been cured within 10 business days (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i)          The Company's failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company's failure to pay any redemption payments or amounts hereunder) or any other Transaction Document;

 

(ii)          A Conversion Failure as defined in section 3(b)(ii)

 

(iii)         The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 61 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;

 

  

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(iv)        The Company or any subsidiary of the Company shall default in any of its obligations under any other Note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $100,000, whether such indebtedness now exists or shall hereafter be created; and

 

(v)         The Common Stock is suspended or delisted for trading on the Over the Counter Bulletin Board market (the “Primary Market”).

 

(vi)        The Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer.

 

(vii)       The Company loses its status as “DTC Eligible.”

 

(viii)      The Company shall become late or delinquent in its filing requirements under Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the “1934 Act”) as a fully-reporting issuer registered with the Securities & Exchange Commission.

 

(b)           Upon the occurrence of any Event of Default, the Outstanding Balance shall immediately increase to 120% of the Outstanding Balance immediately prior to the occurrence of the Event of Default (the “Default Effect”). The Default Effect shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action.

 

(3)           CONVERSION OF NOTE.  This Note shall be convertible into shares of the Company's Common Stock, on the terms and conditions set forth in this Section 3.

 

(a)           Conversion Right.  Subject to the provisions of Section 3(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below).  The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion.  If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share.  The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of this Note.

 

  

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(i)           "Conversion Amount" means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.

 

(ii)          "Conversion Price" shall equal the lesser of (a) $1.25 or (b) 65% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.

 

(b)           Mechanics of Conversion.

 

(i)           Optional Conversion.  To convert any Conversion Amount into shares of Common Stock on any date (a "Conversion Date"), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the "Conversion Notice") to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the "Share Delivery Date"), the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) (for which the Holder shall provide an opinion from its counsel that is reasonable acceptable to the Company) and provided that the Transfer Agent is participating in the Depository Trust Company's ("DTC") Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder's or its designee's balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted.  The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.

 

  

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(ii)          Company's Failure to Timely Convert.  If within three (3) Trading Days after the Company's receipt of the facsimile or email copy of a Conversion Notice and the Holder’s counsel’s Rule 144 opinion the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (a "Conversion Failure"), the Original Principal Amount of the Note shall increase by $1,000 per day until the Company issues and delivers a certificate to the Holder or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder's conversion of any Conversion Amount (under Holder’s and Company’s expectation that any penalty amounts will tack back to the Issuance Date). The Company will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned to the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the original date of the Note).

 

(iii)        DWAC/FAST Eligibility.  If the Company fails for any reason to deliver to the Holder the Shares by DWAC/FAST electronic transfer (such as by delivering a physical stock certificate), or if there is a Conversion Failure as defined in Section 3(b)(ii), and if the Holder incurs a Market Price Loss, then at any time subsequent to incurring the loss the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Market Price Loss and the Company must make the Holder whole by either of the following options at Holder’s election:

 

Market Price Loss = [(High trade price for the period between the day of conversion and the day the shares clear in the Holder’s brokerage account) x (Number of shares receivable from the conversion)] – [(Net Sales price realized by Holder) x (Number of shares receivable from the conversion)].

 

Option A – Pay Market Price Loss in Cash. The Company must pay the Market Price Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.

 

Option B – Add Market Price Loss to Principal Sum. The Company must pay the Market Price Loss by adding the Market Price Loss to the balance of the Principal Sum (under Holder’s and the Company’s expectation that any Market Price Loss amounts will tack back to the Issuance Date).

 

In the case that conversion shares are not deliverable by DWAC/FAST electronic transfer an additional 5% discount to the Conversion Price will apply.

 

(iv)        DTC Eligibility. If the Company fails to maintain its status as “DTC Eligible” for any reason, the Principal Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be redefined to equal the lesser of (a) $0.80 or (b) 50% of the lowest trade occurring during the twenty five (25) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.

 

  

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(v)         Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note.  The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.

 

(c)            Limitations on Conversions or Trading.

 

(i)           Beneficial Ownership.  The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest.    Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof (“Ownership Limitation”), the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder.  If the Holder has delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Note. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.  In the event that Holder elects to convert any or all portion of the Note on Maturity Date and the Conversion Shares to be issued as a result of such Conversion may cause the Holder’s beneficial ownership to exceed the Ownership Limitation (the “Maturity Date Conversion”), then Holder shall agree that the Maturity Date shall be automatically extended and the Company shall not be deemed in default hereunder until such date that all Conversion Shares under such elected Maturity Date Conversion have been issued to the Holder subject to the foregoing Ownership Limitation.

 

  

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(d)            Other Provisions.

 

(i)          Share Reservation.  The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within five (5) Business Days following the receipt by the Company of a Holder's notice that such minimum number of Underlying Shares is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least 1,000,000 shares of Common Stock for conversion.

 

(ii)         Prepayment.  At any time within the 90 day period immediately following the Issuance Date, the Company shall have the option, upon 10 business days’ notice to Holder, to pre-pay the entire remaining outstanding principal amount of this Note in cash, provided that (i) the Company shall pay the Holder 150% of the Outstanding Balance, (ii) such amount must be paid in cash on the next business day following such 10 business day notice period, and (iii) the Holder may still convert this Note pursuant to the terms hereof at all times until such prepayment amount has been received in full.  Except as set forth in this Section the Company may not prepay this Note in whole or in part.

 

(iii)         Terms of Future Financings.  So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder.  The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.

 

(iv)        All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.

 

(v)         Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company's failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

 

(4)           PIGGYBACK REGISTRATION RIGHTS.  The Company shall include on the next registration statement the Company files with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note.  Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

 

(5)           REISSUANCE OF THIS NOTE.

 

(a)           Assignability. The Company may not assign this Note.  This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s approval.

 

  

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(b)           Lost, Stolen or Mutilated Note.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.

 

(6)           NOTICES.  Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change.  Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

 

The addresses for such communications shall be:

 

If to the Company, to:

 

275 Seventh Avenue, 7th Floor

New York, NY 10022

Attn:  Ira Shapiro

Email: ishapiro@codesmartgroup.com

 

      With a copy to:

Ofsink LLC

900 Third Avenue, 5th Floor

New York, NY 10022

Attn: Darren Ofsink

 

  

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If to the Holder:

 

Black Mountain Equities

 

                                                                                                      

 

                                                                                                      

 

                                                                                                       

 

Attn:

Email:

 

(7)           APPLICABLE LAW AND VENUE. This Note shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of laws thereof.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or in the federal courts located in the city and county of San Diego, in the State of California. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.

 

(a)           WAIVER.  Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

 

(8)           TRADING ACTIVITIES. Neither the Holder nor its affiliates has an open short position in the Common Stock and the Holder agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales (as defined in Rule 200 of Regulation SHO under the 1934 Act) of or hedging transactions with respect to the Common Stock.

 

(9)           HOLDER’S INVESTMENT REPRESENTATION

 

(a)           the Holder  is an accredited investor (as that term is defined in Rule 501(a)(1) of Regulation D of the Securities Act of 1933,   as amended (“1933 Act”);

 

(b)           The Holder understands that the Note and the shares of Common Stock  that are issuable upon conversion of the Note (the “Securities”) are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Borrower is relying upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility of the Holder to acquire the Securities.

 

  

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(c)           The Holder and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Borrower and materials relating to the offer and sale of the Securities which have been requested by the Holder or its advisors.  The Holder and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Borrower.  The Holder understands that its investment in the Securities involves a significant degree of risk.

 

(d)           The Holder understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

 

(e)           The Holder understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) pursuant to an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Borrower, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Holder who agrees to sell or otherwise transfer the Securities only in accordance with this Section 16(e) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”) which is set forth on an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Borrower; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Borrower nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

 

[Signature Page Follows]

 

  

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IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.

 

	 	
COMPANY:

	 
	 	 	 
	 	
CODESMART HOLDINGS, INC.

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	Ira Shapiro	 
	 	Title: 	Chief Executive Officer	 

 

	 	
HOLDER:

	 
	 	 	 
	 	
BLACK MOUNTAIN EQUITIES, INC.

	 
	 	 	 	 
	 	
By: 

	 	 
	 	Name:	 
	 	Title:	 

 

[Signature Page to Convertible Note No. ITEN-1]

 

  

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EXHIBIT A

	
NOTICE OF CONVERSION

	 	 	 	 	 	 	 
	
[Company Contact, Position]

	  	  	  	  	  	  
	
[Company Name]

	  	  	  	  	  	  	  
	
[Company Address]

	  	  	  	  	  	  	  
	
[Contact Email Address}

	  	  	  	  	  	  

 

The undersigned hereby elects to convert a portion of the $________ Convertible Note _______ issued to Black Mountain Equities, Inc. on ____________ into Shares of Common Stock of ____________ according to the conditions set forth in such Note as of the date written below.

 

By accepting this notice of conversion, you are acknowledging that the number of shares to be delivered represents less than 5% (five percent) of the common stock outstanding.  If the number of shares to be delivered represents more than 4.99% of the common stock outstanding, this conversion notice shall immediately automatically extinguish and debenture Holder must be immediately notified.

 

	
Date of Conversion:

	  	  
	
Conversion Amount:

	  	  
	
Conversion Price:

	  	  
	
Shares to be Delivered:

	  	  
	  	  	  	  	  	  	  	  	  
	
Shares delivered in name of:

	  	  	  	  	  	  
	
BLACK MOUNTAIN EQUITIES, INC.

 

	
Signature:

	 	 
	 	By:	 	 
	 	
Title:f8k021214ex4ii_codesmart.htm

Exhibit 4.2

 

THESE SECURITIES, I. E., THIS DEBENTURE AND THE CONVERSION SHARES, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS DEBENTURE AND THE CONVERSION SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS DEBENTURE OR THE CONVERSION SHARES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY HOLDER), IN A GENERALLY ACCEPTABLE FORM THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

 

CONVERTIBLE DEBENTURE

 

FOR VALUE RECEIVED, CodeSmart Holdings, Inc., a Florida corporation (the “Borrower”), promises to pay to Group 10 Holdings LLC (the “Holder”) or its registered assigns or successors in interest, the sum of Fifty Five Thousand Dollars ($55,000), together with all accrued interest thereon, on the first anniversary from the Effective Date, as hereinafter defined (the “Maturity Date”), if not sooner paid.

 

The following terms and conditions shall apply to this Convertible Debenture (the “Debenture”):

 

ARTICLE I

INTEREST & AMORTIZATION

 

1.1           Contract Rate. Subject to Sections 4.1 and 5.7 hereof, interest payable on this Debenture shall accrue at a rate per annum equal to 12% (Twelve Percent) and shall be computed on the basis of a 365-day year.

 

1.2          Consideration. The principal sum of this Debenture Fifty Five Thousand Dollars ($55,000) plus accrued and unpaid interest and any other fees. The purchase price paid by Holder for the Debenture, which is the consideration received by Borrower for the Debenture, is Fifty  Thousand Dollars($50,000) payable by wire transfer or other immediately available funds. Thus, as of the date hereof, there exists a Five Thousand Dollars ($5,000) Original Issue Discount (the “OID”). Interest shall accrue and be payable on the full principal amount of the Debenture, inclusive of the OID, and payment of the full principal amount (inclusive of OID) shall be required regardless of time and manner of payment or prepayment by Borrower. Upon conversion, Holder shall receive credit for the full principal amount converted (inclusive of the OID).

 

1.3           Payments. Payment of the aggregate principal amount outstanding under this Debenture (the “Principal Amount”), together with all accrued interest thereon shall be made on the Maturity Date.

 

  

  

  

 

1.4           Prepayment Option. Subject to the approval of the Holder for prepayments after 180 days, the Borrower may prepay in cash all or any portion of the Principal Amount of this Debenture and accrued interest thereon, with a premium, as set forth below (each a “Prepayment Premium”), upon ten (10) days prior written notice to the Holder. The Holder shall have the right to convert all or any portion of the Principal Amount and accrued interest thereon in accordance with Article II hereof during such ten (10) day notice period. The amount of such prepayment premium shall be determined by multiplying that portion of the Principal Amount and accrued interest to be converted, if any, by the then applicable prepayment percentage (the “Prepayment Percentage”). The Prepayment Percentage shall be as follows: (i) 25% (Twenty Five percent) if there is a Prepayment at any time 30 (Thirty) days after the Effective Date; (ii) 35% (Thirty Five Percent) if there is a Prepayment at any time 31 days until 179 days after the Effective Date; and (iii) 45% (Forty Five Percent), if there is a Prepayment at any time 180 days after the Effective Date.

 

ARTICLE II

CONVERSION REPAYMENT

 

2.1.           Optional Conversion. Subject to the terms of this Article II, the Holder shall have the right, but not the obligation, at any time after 180 days from the Effective Date and until the Maturity Date, or thereafter during an Event of Default, to convert all or any portion of the outstanding Principal Amount, accrued interest and fees due and payable thereon into fully paid and nonassessable shares of Common Stock of the Borrower (the “Common Stock”) at the Conversion Price (as defined below). The shares of Common Stock to be issued upon such conversion are herein referred to as the “Conversion Shares.”

 

2.2.           Calculation of Conversion Price. The conversion price (the “Conversion Price”) shall be subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events. Subject to Section 4.6 hereof, the Conversion Price shall mean the Lesser of Sixty Five Percent (65%) multiplied by the lowest closing bid price of the twenty (20) trading days prior to the conversion, which represents a discount rate of Thirty Five Percent (35%) OR Eighty-Five Cents (0.85). The closing bid price on the Over-the-Counter Bulletin Board or applicable trading market (the “OTC Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e., Bloomberg) or, if the OTC Market 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.

 

  

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2.3.           Conversion Limitation. Notwithstanding anything contained herein to the contrary, the number of Conversion Shares that may be acquired by the Holder upon conversion of this Debenture (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), does not exceed 4.99% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. By written notice to the Company, the Holder may increase, decrease or waive the provisions of this Section 2.3 as to itself but any such waiver will not be effective until the 61st (Sixty first) day after delivery thereof.

 

2.4.           Mechanics of Holder’s Conversion. Subject to Section 2.3 hereof, this Debenture will be converted by the Holder in part from time to time after the Issue Date, by submitting to the Borrower and/or the transfer agent of record a notice of conversion (“Notice of Conversion”) (whether by facsimile, as a Portable Document (PDF) file sent by electronic mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time). On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount, accrued interest and fees as entered in its records and shall provide written notice thereof to the Borrower on the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied in accordance with the provisions hereof shall be deemed a Conversion Date (the “Conversion Date”). A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A. Pursuant to the terms of the Notice of Conversion, Borrower shall issue instructions to the transfer agent within two (2) business days from the receipt of the Notice of Conversion and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by physical delivery or crediting the account of the Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system within two (2) business days after receipt by Borrower of the Notice of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set forth herein, the conversion privilege shall be deemed to have been exercised, and the Conversion Shares issuable upon such conversion shall be deemed to have been issued, upon the date of receipt by Borrower of the Notice of Conversion. The Holder shall be treated for all purposes as the record holder of such Common Stock, unless the Holder provides Borrower written instructions to the contrary.

 

  

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2.5.           Late Payments. The Borrower understands that a delay in the delivery of the shares of Common Stock in the form required pursuant to this Article II beyond the Delivery Date could result in economic loss to the Holder. As compensation to the Holder for such loss through willful or deliberate hindrances on the part of the Borrower, the Borrower agrees to pay late fees to the Holder for late issuance of such shares in the form required pursuant to this Article II upon conversion of the Debenture, in the amount equal to One Thousand U.S Dollars ($1,000) per business day after the Delivery Date. The Borrower shall pay any fees incurred under this Section in immediately available funds upon demand and such fees shall also be eligible to be converted into Conversion Shares as set forth in this Article II.

 

2.6            Conversion Mechanics. The number of shares of Common Stock to be issued upon each conversion of this Debenture shall be determined by dividing that portion of the Principal Amount and interest and fees to be converted, if any, by the then applicable Conversion Price.

 

2.7           Authorized and Reserved Shares. The Borrower represents and warrants and covenants and agrees that upon issuance, the Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Borrower agrees that its issuance of this Debenture 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 Debenture. At all times during which this Debenture is outstanding, the Borrower shall reserve from its authorized and unissued shares of Common Stock a sufficient number of shares to provide for the issuance of the Conversion Shares. The Borrower agrees that it will take all such reasonable actions as may be necessary to assure that the Conversion Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the applicable trading market upon which the Common Stock may be listed. The Borrower agrees to reserve Five Million (5,000,000) shares of Common Stock from its authorized and unissued shares

 

2.8            Issuance of New Debenture. Upon any partial conversion of this Debenture, a new Debenture containing the same date and provisions of this Debenture shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Debenture and interest which shall not have been converted or paid. Subject to the provisions of Article III, the Borrower will pay no costs, fees or any other consideration to the Holder for the production and issuance of a new Debenture.

 

2.9           Fractional Shares. No fractional shares shall be issued upon the conversion of this Debenture. As to any fraction of a share which Holder would otherwise be entitled to upon such conversion, the Borrower shall round up to the next whole share.

 

  

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2.10         Par Value; Further Assurances.

 

(a)           The Borrower covenants that during the period that the Principal Amount of the Debenture and any accrued interest and fees thereon remain outstanding, it will ensure that the par value of any Conversion Shares shall not exceed the amount payable therefor upon such exercise immediately prior to such exercise. The Borrower further covenants that it shall take all appropriate actions, including, without limitation, amending its articles or certificate of incorporation and any other voluntary action, such as calling a meeting of shareholders to approve any such amendment, to ensure that the amount payable for any Conversion Shares shall at all times exceed the par value thereof by at least Four Hundred Percent (400%).

 

(b)           Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its articles or certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Debenture, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Debenture against impairment. Without limiting the generality of the foregoing, the Borrower will (a) not increase the par value of any Conversion Shares above the amount payable therefor upon such exercise immediately prior to such exercise, (b) take all such action as may be necessary or appropriate in order that the Borrower may validly and legally issue fully paid and nonassessable Conversion Shares upon the exercise of this Debenture and (c) use its commercially best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Borrower to perform its obligations under this Debenture.

 

ARTICLE III

EVENTS OF DEFAULT

 

The occurrence of any of the following event, while this Debenture is outstanding, set forth in Article III, inclusive, shall be an “Event of Default;” provided that any Event of Default may be cured within a ten (10) business day period except as otherwise provided herein:

 

3.1           Failure to Pay Principal, Interest or Other Fees. Borrower fails to pay principal, interest or other fees hereon and such failure shall continue for a period of five (5) days following the date upon which any such payment was due.

 

3.2           Breach of Covenant. Borrower breaches any covenant or other term or condition of this Debenture in any material respect and such breach, if subject to cure, continues for a period of five (5) days after the occurrence thereof.

 

  

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3.3           Breach of Representations and Warranties. Any representation or warranty of Borrower made herein shall be false or misleading in any material respect.

3.4           SEC Filings. At any point while this note is outstanding, the Company is not current with or late on its reporting responsibilities under Section 13 of the Securities Exchange Act of 1934, including any required XBRL file along with such report, or, if the filing date of such report is properly extended pursuant to SEC Rule 12b-25, when the date of any such filing extension lapses, or any post-effective amendment to any SEC Registration Statement.

3.5           Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of 10 consecutive trading days, provided that Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Principal Market within 60 days of such notice. The “Principal Market” for the Common Stock shall include the OTC Bulletin Board, NASDAQ Capital Market, NASDAQ Global Market, NYSE Amex, or New York Stock Exchange (whichever of the foregoing is at the time the principal trading exchange or market for the Common Stock), or any securities exchange or other securities market on which the Common Stock is then being listed or traded.

 

3.6           SEC Reporting Status Matters.

 

(a)           Borrower indicates by check mark on the cover page of an SEC report filing that it has not (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

(b)           Borrower indicates by check mark on the cover page of an SEC report filing that it has not submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

(c)           Borrower indicates by check mark on the cover page of an SEC report filing that it is a shell company (as defined in Rule 12b-2 of the Exchange Act); or

 

(d)           Borrower files a Form 15 with the SEC to deregister its Common Stock.

 

  

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3.7           Receiver or Trustee. Each of the Borrower or its subsidiaries (“Subsidiaries”), if any, 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; or shall become insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any.

 

3.8           Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its Subsidiaries or any of their respective property or other assets for more than $100,000 in the aggregate for Borrower, and shall remain unvacated, unbonded or unstayed for a period of thirty (30) days.

 

3.9           Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any of its Subsidiaries (Federal law or applicable state law) which has not been dismissed within 60 days after its filing.

3.10          DTC Eligibility. The Borrower shall lose its status as “DTC Eligible” or the Borrower’s shareholders shall lose the ability to deposit (either electronically or by physical certificates, or otherwise) shares into the DTC System through a “deposit chill” or otherwise.

 

ARTICLE IV

DEFAULT RELATED PROVISIONS AND OTHER PRIVILEGES

 

4.1           Default Interest Rate. Following the occurrence and during the continuance of an Event of Default, interest on this Debenture shall automatically be instated at a rate of 18% per annum, effective as of the date of Issuance of this Debenture, which interest shall be payable in cash or Common Stock, at the option of the Borrower.

 

4.2           Default Penalty Payment. Following the occurrence and during the continuance of an Event of Default the Borrower agrees to pay a Penalty Payment to the Holder in the amount equal to Seven Hundred Fifty U.S. Dollars ($750) per business day commencing on the Eleventh (11th) day after the Event of Default occurs. The Borrower shall pay any fees incurred under this Section in immediately available funds upon demand and such fees shall also be eligible to be converted into Conversion Shares as set forth in this Article II.

  

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4.3           Conversion Privileges. The conversion privileges set forth in Article II shall remain in full force and effect immediately from the date hereof and until this Debenture is paid in full.

 

4.4           Cumulative Remedies. The remedies under this Debenture shall be cumulative.

 

4.5           Immediately Due and Payable. Upon the occurrence of an Event of Default, this Note shall become immediately due and payable at the option of Holder upon written notice of acceleration delivered to Borrower; provided tha such notice shall not be required for an Event of Default under Section 3.9 and , in such event, this Convertible Note shall become automatically due and payable without the need for Holder to give notice.

 

ARTICLE V

MISCELLANEOUS

 

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

 

5.2            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 FedEx or other reputable express courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below (v) sent via Email whereby a return Email confirming receipt has been delivered. 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 next 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:

 

CodeSmart Holdings, Inc. 

275 Seventh Ave

7th Floor

New York, NY 10001

  

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With a copy to:

Ofsink, LLC

Attn: Darren Ofsink, Esq.

900 Third Avenue, 5th Floor

New York, NY 10022

 

If to the Holder:

 

Group 10 Holdings LLC 

Attn: Adam Wasserman 

11 Island Ave. #1108 

Miami Beach, FL 33139 

EIN # 32-0409845

 

No change in any of such addresses shall be effective insofar as notices under this Section 5.2 are concerned unless such changed address is located in the United States of America and notice of such change shall have been given to such other party hereto as provided in this Section 5.2.

 

5.3           Amendment Provision. Any term of this Debenture may be amended only with the written consent of the Holder and the Borrower. .The term “Debenture” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as it may be amended or supplemented.

 

5.4           Assignability. This Debenture shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may not be assigned by the Borrower without the prior written consent of the Holder, which consent may not be unreasonably withheld.

 

5.5           Prevailing Party and Costs. In the event any attorney is employed by any party with regard to any legal or equitable action, arbitration or other proceeding brought by such party for the enforcement of this Debenture or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Debenture, the prevailing party in such proceeding will be entitled to recover from the other party reasonable attorneys' fees and other costs and expenses incurred, in addition to any other relief to which the prevailing party may be entitled.

 

  

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5.6           Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This Debenture shall be governed by, and construed in accordance with, the internal laws of the State of Florida, without regard to principles of conflicts of law. HOLDER AND BORROWER WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS DEBENTURE OR ANY TRANSACTION CONTEMPLATED HEREIN, INCLUDING CLAIMS BASED ON CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER COMMON LAW OR STATUTORY BASES. Each party hereby submits to the exclusive jurisdiction of the state and federal courts located in the County of Miami-Dade, State of Florida. If the jury waiver set forth in this Section is not enforceable, then any dispute, controversy or claim arising out of or relating to this Debenture or any of the transactions contemplated herein will be finally settled by binding arbitration in Miami-Dade County, Florida in accordance with the then current Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules. The arbitrator shall apply Florida law to the resolution of any dispute, without reference to rules of conflicts of law or rules of statutory arbitration. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph. The expenses of the arbitration, including the arbitrator’s fees and expert witness fees, incurred by the parties to the arbitration, may be awarded to the prevailing party, in the discretion of the arbitrator, or may be apportioned between the parties in any manner deemed appropriate by the arbitrator. Unless and untilthe arbitrator decides that one party is to pay for all (or a share) of such expenses, both parties shall share equally in the payment of the arbitrator’s fees as and when billed by the arbitrator.

 

5.7           Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by Borrower to the Holder and thus refunded to the Borrower.

 

5.8           Construction. Borrower acknowledges that its legal counsel participated in the preparation of this Debenture and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Debenture to favor any party against the other.

 

5.9           Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of Borrower.

 

5.10         Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, Borrower shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed.

 

[signature page follows]

  

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IN WITNESS WHEREOF, Borrower has caused this Convertible Debenture to be signed in its name effective as of the 6th day of February 2014 (the “Effective Date”).

 

BORROWER:

 

CodeSmart Holdings, Inc.

 

	
By:

	  	  
	
Name:

	
Ira Shapiro

	  
	
Title:

	
CFO

	  

 

HOLDER:

 

Group 10 Holdings, LLC

 

	
By:

	/s/ Adam Wasserman	  
	
Name:

	
Adam Wasserman

	  
	
Title:

	
Managing Member

	  

 

  

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EXHIBIT A

NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the amounts owed under

the Convertible Debenture into Common Stock)

 

[NAME OF HOLDER]

[ADDRESS]

 

The undersigned hereby converts $                 due under the Convertible Debenture issued by                                                                             , Inc. (“Borrower”) dated as of                       __, 201_ by delivery of shares of Common Stock of Borrower on and subject to the conditions set forth in Article II of the Convertible Debenture.

 

1.             Date of Conversion                                                                                                        

 

2.             Shares To Be Delivered:                                                                                               

 

[NAME OF BORROWER]

 

By:         

Name: 

Title:

 

12

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