CoroWare, INC. A Delaware Corporation 10% CONVERTIBLE NOTE
Exhibit 10.79
CoroWare, INC.
A Delaware Corporation
10% CONVERTIBLE NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
| 67.042.46 | Date: April 2, 2011 | Note#l |
FOR VALUE RECEIVED, CoroWare, Inc., a Delaware corporation (“Borrower”), hereby unconditionally promises to pay as set forth herein to the order of ▇▇▇▇▇▇ ▇▇▇▇▇▇ (“Holder”) or his assignee, in lawful money of and within the United States of America and in immediately available funds, the principal sum of$67,042.46 (the “Principal Amount”), together with accrued and unpaid interest thereon, in the manner Set forth herein. ▇▇▇▇▇▇▇▇ further agrees to pay interest on the Principal Amount at the compounded rate per annum of 10% (ten per cent, the “Stated Interest Rate”) on the outstanding Principal Amount. Interest shall be calculated from and including the date of this Note until such Principal Amount has been repaid in full or until the Note has been converted. Interest shall be paid annually and shall be calculated on the basis of 365 day or 366 day year, as the case may be, for the actual number of days elapsed.
1. Principal Repayment. The outstanding Principal Amount and interest shall be payable on May 2, 2011 (“Repayment Date”), unless otherwise converted in accordance with Section 2 below.
2. Conversion Rights. At any time during the term of this Note, the Holder may deliver a written notification (the “Notice of Conversion”) to the Borrower setting forth the portion of the principal amount of the Note and/or interest due and payable that the Holder exercises its conversion rights with respect thereto, subject to the terms and provisions set forth below.
2.1 Conversion into the Borrower’s Common Stock
(a) The Holder shall have the right, but not the obligation, from and after the Borrower’s receipt of an Notice of Conversion or the occurrence of any Event of Default, as the case may be, provided the conditions of Section 2.1 have been fulfilled, and then at any time until this Note is fully paid, to convert the principal portion of this Note and/or interest due and payable set forth in each such Notice of Conversion or the entire principal portion of this Note and/or interest due and payable following the occurrence or an Event of Default, as the case may be, into fully paid and nonassessable shares of common stock of the Borrower as such stock exists on the date of issuance of this Note, at the conversion price as defined in Section 2.l(b) hereof (the “Conversion Price”). Upon delivery to the Borrower of a Notice of Conversion substantially in the form attached to this Note, giving the Holder’s written request for conversion (the date of giving such notice of conversion being a “Conversion Date’’), the Borrower shall issue and deliver to the Holder within three (3) business days from the Conversion Date that number of shares of Common Stock for the portion of the Note con erted in accordance with the foregoing. The number of shares of Common Stock to be issued upon e conversion of this Note shall be determined by dividing that portion of the principal of the Note to be converted and interest, if any, by the Conversion Price, and then multiplied by One Hundred Fifteen Percent (115%}.
(b) Subject to adjustment as provided in Section 2.1(c) hereof, the Conversion Price per share shall be the average closing bid prices for the Common Stock on the principal trading exchange or market for the Common Stock, the “Principal Market”) where the Common Stock is listed or traded, for the five (5) trading days prior to but not including the Conversion Date.
(c) The Conversion Price described above shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:
▇. ▇▇▇▇▇▇, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other person or entity, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassjfication, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.
C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.
D. Stock Sale. If, prior to conversion of the entirety of this Note, the Borrower enters into any agreement to sell its Common Stock or a convertible instrument that converts into its Common Stock prior to conversion of this Note at a price less than the Conversion Price of this Note, then the Conversion Price of any outstanding principal and interest of this Note shall be reset to the price of that offering.
2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part as described in Section 2.l(a) hereof. Upon partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have been converted or paid.
2.3 Maximum Conversion. The Holder shall not be entitled to convert on a Conversion Date that amount of the Notes in connection with that number of shares of Common Stock which would be in excess the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on a Conversion Date, and (ii) the number of shares of Common Stock issuable upon the conversion of the Notes with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision 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, and Regulation 13d-3 thereunder.
3. Place of Payment; Application of Payments. All amounts payable hereunder shall be payable to Lender in United States dollars to such bank account as shall be designated by Lender in immediately available funds or as otherwise specified to Borrower in writing, except if converted as per Section 2 above. Payment on this Note shall be applied first to any expenses of collection, then to accrued interest, and thereafter to the outstanding principal balance hereof.
4. Default. The following events shall each be an “Event of Default” under this Note:
A. Bankruptcy or insolvency of ▇▇▇▇▇▇▇▇;
▇. ▇▇▇▇▇▇▇▇’s failure to pay any of the Principal Amount due under this Note on the date the same becomes due and payable, or any accrued interest or other amounts due under this Note after the same becomes due and payable; and
C. Breach of any material covenant or agreement contained in this Note and such breach remains uncured for a period of 15 days after written notice hereof is received by Borrower from Lender.
Upon the occurrence of an Event of Default, the unpaid Principal Amount, all unpaid accrued interest thereon and all other amounts owing hereunder may, at the option of ▇▇▇▇▇▇, become immediately due and payable to Lender, provided, however, that upon the occurrence of an Event of Default described in this Section 4, all indebtedness of Borrower to Lender shall become immediately due and payable without any action of Lender. Effective upon an Event of Default that is not cured for a period of 30 days after such Event of Default, the interest rate on this Note shall increase to 5% per annum in excess of the Stated Interest Rate.
5. Covenants.
A. Use of Proceeds. The Borrower has used the net cash proceeds loaned to Borrower pursuant to this Note for working capital.
B. Compliance with Agreements. The Borrower shall perform and observe, or cause to be performed or observed, as the case may be, all of the provisions in its certificate of incorporation, its bylaws, and the obligations pursuant to the terms, agreements and covenants of this Note and all documents and agreements executed or delivered in connection with this Note. The Borrower expressly represents that ▇▇▇▇▇▇▇▇ has the full power and authority to deliver the Note, that the Note has been duly authorized, executed and delivered by the Borrower, and ▇▇▇▇▇▇▇▇’s obligations under the Note are legal, valid, binding and enforceable, absolute and unconditional.
C. Preservation of Corporate Existence and Business. The Borrower shall use best efforts to preserve intact its present business organization, rights and privileges and present goodwill and, to the best of its ability, its relationships existing with other parties and shall at all times cause to be done all things necessary to maintain, preserve, and renew its corporate existence and shall observe and conform with all valid requirements of au governmental authorities relating to the conduct of the business of the Borrower, the failure of which would have a material. Adverse effect upon the Borrower’s business or financial condition. The Borrower shall maintain and keep in force all material licenses, permits and agreements necessary to the conduct of its businesses.
D. Maintenance of Properties. The Borrower shall maintain and keep its properties, real and personal, in good repair, working order, and condition, and from time to time make all necessary or desirable repairs, renewals, and replacements, so that its business may be properly and advantageously conducted at all times.
E. Taxes and Other Obligations. The Borrower shall pay and discharge all taxes, assessments, interest and installments on mortgages and governmental charges against it or against any of its properties, upon the respective dates when due, except to the extent that such taxes, assessments, interest, installments and governmental charges are contested in good faith and by appropriate proceedings.
F. Compliance with Obligations, Laws, Etc. The Borrower shall comply with all of the obligations which it has incurred or to which it becomes subject pursuant to any contract or agreement, whether oral or written, express or implied, the breach of which might have a material adverse effect upon its business or financial condition, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and adequate reserves have been set aside on its books with respect thereto. The Borrower shall comply with all applicable laws, rules and regulations of all governmental authorities.
6. Waiver. TO THE FULLEST EXTENT PERMITIED BY LAW, ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇▇ AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (I) SEEK A JURY TRIAL IN ANY LAWSUlT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON; OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS OR THE DEALINGS OR THE RELATIONSHIP BETWEEN THEM, (11) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED OR (ID) MAKE ANY CLAIM FOR CONSEQUENTIAL, PUNITNE OR SPECIAL DAMAGES. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY ▇▇▇▇▇▇ AND BORROWER, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE LENDER NOR THE BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. ▇▇▇▇▇▇▇▇ WAIVES PRESENTMENT AND WRITTEN DEMAND FOR PAYMENT, NOTICE OF DISHONOR, PROTEST AND NOTICE OF PROTEST OF THIS NOTE. THE RIGHT TO PLEAD ANY AND ALL STATUTE OF LIMTTATTONS AS A DEFENSE TO ANY DEMANDS HEREUNDER IS ▇▇▇▇▇▇ WAIVED TO THE FULLEST EXTENT PERMITTED BY LAW.
7. Attorneys Fees; Collection Costs. If there has been an Event of Default by Borrower hereunder, ▇▇▇▇▇▇ shall be entitled to receive and ▇▇▇▇▇▇▇▇ agrees to pay all costs of enforcement and collection incurred by ▇▇▇▇▇▇, including, without limitation, reasonable attorney’s fees relating thereto.
8. Notices. Unless otherwise specified herein, all notices all notices hereunder shall be in writing and shall be deemed to have been given when delivered by hand, or on the third business day after properly deposited with the United States Postal Service) as certified mail, return receipt requested, postage prepaid, or on the first business day after properly deposited with an overnight courier of national standing, addressed to the address indicated below:
If to the Borrower, at:
CoroWare, (nc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Suite 200
Kirkland, WA 98033
Attention: President
If to the Lender, at:
▇▇▇▇▇▇ ▇▇▇▇▇▇
PO Pox 1374
▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Niagara-on-the-Lake, ON LOS I JO
or at any address specified by Borrower or Lender in writing.
9. Expenses. The Borrower shall pay all expenses of the Lender in connection with the preparation of this Note or other documents executed in connection therewith, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection wjtJ1 the obligations hereunder, provided that Borrower shall not have to pay any such expenses in excess of $1,000 and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder. The Borrower shall also pay all expenses of the Lender in connection with the waiver or amendment of this Note and the administration, default or collection of any amount due under this Note or other obligations or administration, default, collection in connection with the Lender’s exercise, preservation or enforcement of any of its rights, remedies or options hereunder, including, without limitation, fees of outside legal counsel or the allocated costs of in-house legal counsel, accounting, consulting, brokerage or other similar professional fees or expenses, and any fees or expenses associated with any travel or other costs relating to any appraisals or examinations conducted in connection with the obligations hereunder, and the amount of all such expenses shall, until paid, bear interest at the rate applicable to principal hereunder.
10. No Waivers of ▇▇▇▇▇▇’s Rights. No failure or delay by the Lender in exercising any right, power or privilege hereunder or under any other documents or agreements executed in connection herewith shall operate as a waiver thereof; nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies in this Note provided are cumulative and not exclusive of any rights or remedies otherwise provided by agreement or law.
11. Amendments. Neither this Note nor any provision hereof may be amended, waived, discharged or terminated except by a written instrument signed by the Lender and, in the case of amendments, by the Borrower.
12. Binding Effect of Note. This Note shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns; provided that neither the Borrower nor the Lender may assign or transfer its rights or obligations hereunder.
13. Partial Invalidity. The invalidity or unenforceability of anyone or more phrases, clauses or sections of this Note shall not affect the validity or enforceability of the remaining portions of it.
14. Captions. The captions and headings of the various sections and subsections of this Note are provided for convenience only and shall not be construed to modify the meaning of such sections or subsections.
15. Entire Agreement. This Note and the documents and any agreements executed in connection herewith constitute the final agreement of the parties hereto and supersede any prior agreement or understanding, written or oral, with respect to the matters contained herein and therein.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF WASHINGTON, UNITED STATES OF AMERICA. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WJTH, THE LAWS OF KING COUNTY, STATE OF WASHINGTON, EXCLUDING CONFLICT OF LAWS PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF LAWS OF ANY OTHER JURISDICTION.
COROWARE, INC.
| By: | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Name: | ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Title: | President and CEO | |
| Date: | April 2. 2011 |
HOLDER
| By: | ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
| Name: | ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |
| Date: | April 2, 2011 |
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $________________ of the principal and $_______ of the interest due on the Note issued by COROWARE, INC. on _____________2011 into shares of common stock of COROWARE, INC. (the “Company”) according to the conditions set forth in such Note, as of the date written below.
| Date of | |
| Conversion: | |
| Conversion | |
| Price: | |
| Shares To Be | |
| Delivered: | |
| Signature | |
| Name: | |
| Address:, |