FORM OF 5% CONVERTIBLE PROMISSORY NOTE
EXHIBIT 10.2
FORM OF 5% CONVERTIBLE PROMISSORY NOTE
THIS NOTE AND THE SECURITIES OBTAINABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
5% CONVERTIBLE PROMISSORY NOTE
| No. 2018-[ ] | [•] |
| U.S. $ _____________ |
|
FOR VALUE RECEIVED, the undersigned, Grasshopper Staffing, Inc., a Nevada corporation (the “Company”), hereby unconditionally promises to pay ____________________ (the “Holder”), on the Maturity Date (as defined in Section 1 hereof) to the order of the Holder, in lawful money of the United States of America and in immediately available funds, the principal amount of _____________________ ($________) Dollars (the “Principal Amount”). Interest shall accrue the rate of 5% per annum (“Interest”) based on a 360 day year, shall compound annually and shall be payable on the Maturity Date (as defined below) or converted pursuant to Section 2 hereof.
This Note is one of a series of 5% convertible promissory notes of like tenor and ranking made by the Company in favor of certain investors and issued, from time to time (collectively, the “Notes”) pursuant to that certain Confidential Term Sheet for Accredited Investors dated March 1, 2018 (the “Term Sheet”) and the Subscription Agreements by and between the Company and certain investors (each, a “Subscription Agreement”), including the Holder, of even date herewith, including all attachments, schedules and exhibits thereto (collectively, the “Subscription Documents”). Capitalized terms used and not otherwise defied herein shall have the meanings set forth in the Subscription Documents. Each of the Notes shall rank equally without preference or priority of any kind over one another, and all payments on account of Principal Amount and Interest with respect to any of the Notes shall be applied ratably and proportionately on the outstanding Notes on the basis of the Principal Amount of the outstanding indebtedness represented thereby.
1.
Maturity. Unless otherwise converted into Common Stock, as such term is defined in Section 2 hereof, in accordance with the provisions of said Section 2, this Note shall mature on March 12, 2019 (such date, the “Maturity Date”) On the Maturity Date, unless, and to the extent, not previously converted in accordance with the provisions of Section 2 hereof, any
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and all outstanding Principal Amount and accrued and unpaid Interest due and owing under the Note shall be immediately paid by the Company.
2.
Conversion.
(a)
General. The outstanding Principal Amount and accrued but unpaid Interest due hereunder is convertible at any time prior to the Maturity Date at the option of the Holder into shares of the Company's common stock, par value $0.001 per share (the “Common Stock”) at a conversion price of $0.50 per share (the "Conversion Price"). At any time prior to the Maturity Date that the Company should conclude the sale of equity securities in a private offering (the “Qualified Private Offering Securities”) resulting in gross proceeds to the Company of at least One Million dollars ($1,000,000) (a “Qualified Private Offering”), concurrent with the first closing of such Qualified Private Offering, the outstanding Principal Amount and all accrued but unpaid Interest due under the Note shall automatically convert into shares of the Company's Common Stock at the Conversion Price. The Company covenants to cause such securities, when issued pursuant to this Section 2(a), to be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof, other than any taxes, liens or charges not caused by the Company.
(b)
Mechanics of Conversion. No later than five (5) business days prior to the first closing of the Qualified Private Offering, the Company shall notify Holder of such closing and the conversion terms of this Note. The date of such first closing is herein referred to as the “Conversion Date.” No fractions of shares of Common Stock will be issued upon the conversion of this Note. Any fractional amount will be rounded up to the next whole share. Subject to Section 2(c) below, on the Conversion Date, the repayment rights and other rights of Holder under this Note shall cease, and the person in whose name the shares of Common Stock shall be issuable upon such conversion shall become the holder of record of such shares.
(c)
Rights as a Stockholder. Unless and until this Note is converted in accordance with the terms hereof, Holder shall not be entitled to vote or receive distributions or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable upon the conversion of this Note for any purpose, nor shall anything contained herein be construed to confer upon Holder, as such, any of the rights of a stockholder of the Company or any right to vote as a stockholder of the Company or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of equity securities of the Company, reclassification of equity securities of the Company, consolidation, merger, transfer of assets or otherwise) or to receive notice of meetings, or to receive distributions or subscription rights or otherwise unless and until this Note is converted in accordance with the terms hereof.
(d)
If the Company at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price pursuant to Section 2 hereof in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price pursuant to Section 2 hereof in effect immediately prior to such combination will be proportionately increased. Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly, but no later than ten (10) days after any request by the Holder, cause a notice setting forth the adjusted Conversion
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Price, and, if requested, information describing the transactions giving rise to such adjustment(s), to be mailed to the Holder at its last address appearing in the records of the Company.
3.
Events of Default. The term “Event of Default” shall mean any of the events set forth in this Section 3:
(a)
the Company shall default in the performance of, or violate any material covenants and agreements contained in this Note or the Subscription Agreement, including without limitation, the failure to pay amounts due under this Note on its Maturity Date, or any of the other Notes on their Maturity Date;
(b)
any representation, warranty or certification made by or on behalf of the Company in this Note or the Subscription Agreement shall have been incorrect in any material respect when made;
(c)
there shall be a dissolution, termination of existence, suspension or discontinuance of the Company’s business for a continuous period of twenty (20) days or it ceases to operate as going concern;
(d)
if the Company shall:
(i)
admit in writing its inability to pay its debts generally as they become due;
(ii)
file a petition in bankruptcy or a petition to take advantage of any insolvency act;
(iii)
consent to the appointment of a receiver, trustee, custodian or similar official, for the Company or any material portion of the property or assets of the Company;
(iv)
on a petition in bankruptcy filed against it, be adjudicated a bankrupt; or
(v)
file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof;
(e)
if a court of competent jurisdiction shall enter an order, judgment, or decree appointing, without the consent of the Company, a receiver of the whole or any substantial part of the Company’s assets, and such order, judgment or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of entry thereof;
(f)
if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the whole or any substantial part of the Company’s assets and such custody or control shall not be terminated or stayed within sixty (60) days from the date of assumption of such custody or control; or
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(g)
the Company shall default in any of its obligations under any other promissory note, indenture 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 in an amount exceeding $50,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable.
If any Event of Default described in clause (d) of Section 3 shall occur, the Principal Amount of this Note, together with all accrued and unpaid Interest shall automatically be and become immediately due and payable, without notice or demand.
If any Event of Default (other than any Event of Default described in clause (d) of Section 3) shall occur for any reason, whether voluntary or involuntary, the Holder may, upon written notice to the Company, declare all or any portion of the outstanding Principal Amount, together with all accrued and unpaid Interest, to be due and payable, whereupon the full unpaid Principal Amount hereof, together with all accrued and unpaid Interest shall be so declared due and payable shall be and become immediately due and payable if default is not cured by the Company within ten (10) business days of receipt of written notice, without further notice, demand, or presentment.
4.
Remedies. In case any one or more of the Events of Default specified in Section 3 hereof shall have occurred and be continuing, the Holder may proceed to protect and enforce the Holder’s rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note or in aid of the exercise of any power granted in this Note or may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the Holder.
5.
Affirmative Covenants. The Company covenants and agrees that, while any amounts under this Note are outstanding, it shall:
(a)
Do all things necessary to preserve and keep in full force and effect its corporate existence, including, without limitation, all licenses or similar qualifications required by it to engage in its business in all jurisdictions in which it is at the time so engaged; and continue to engage in business of the same general type as conducted as of the date hereof; and continue to conduct its business substantially as now conducted or as otherwise permitted hereunder;
(b)
Pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid, might reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and the Company has maintained adequate reserves with respect thereto in accordance with U.S. generally accepted accounting principles consistently applied (“GAAP”);
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(c)
Comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations and requirements applicable to it of all governmental bodies, departments, commissions, boards, companies or associations insuring the premises, courts, authorities, officials or officers which are applicable to the Company or any of its properties, except where the failure to so comply would not have a Material Adverse Effect (as defined in this Section 5); and
(d)
Keep proper records and books of account with respect to its business activities, in which proper entries, reflecting all of its financial transactions, are made in accordance with GAAP.
For purposes hereof, “Material Adverse Effect” shall be an event, matter, condition or circumstance which has or would reasonably be expected to have a material adverse effect on the business, operations, economic performance, assets, financial condition, material agreements or results of operations of the Company and its subsidiaries, taken as a whole.
6.
Negative Covenants. The Company covenants and agrees that while any amount of this Note is outstanding it will not directly or indirectly:
(a)
Declare or pay, directly and indirectly, any dividends or make any distributions, whether in cash, property, securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of its capital stock (including without limitation any preferred stock) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its capital stock or any option, warrant or other right to purchase or acquire any such shares (in each case other than repurchases from terminated employees of the Company) or set aside any amount for any such purpose;
(b)
Sell, transfer, discount or otherwise dispose of any claim or debt owing to it, including, without limitation, any notes, accounts receivable or other rights to receive payment, except for reasonable consideration and in the ordinary course of business;
(c)
Incur, guarantee, assume or otherwise become responsible for (directly or indirectly) any indebtedness for borrowed money that is senior to the Notes, without first obtaining the prior written consent of the holders of more than fifty one percent (51%) of the outstanding principal of the Notes (the “Requisite Consent”); or
(d)
Create, incur, assume or permit to exist any lien on any property or assets now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except as otherwise in the ordinary course of business.
7.
Amendments and Waivers. The terms of this Note may be amended and the observance of any term of this Note may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and the Requisite Consent, except with respect to the Maturity Date and the Conversion Price, which can only be amended with the Holder’s consent.
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8.
Notices.
(a)
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Subscription Agreement.
(b)
Any party may give any notice, request, consent or other communication under this Note using any other means (including personal delivery, messenger service, telecopy, first class mail or electronic mail), but no such notice, request, consent or other communication shall be deemed to have been duly given unless and until it is actually received by the party for whom it is intended. Any party may change the address to which notices, requests, consents or other communications hereunder are to be delivered by giving the other parties notice in the manner set forth in this Section 8.
9.
Severability. The unenforceability or invalidity of any provision or provisions of this Note as to any persons or circumstances shall not render that provision or those provisions unenforceable or invalid as to any other provisions or circumstances, and all provisions hereof, in all other respects, shall remain valid and enforceable.
10.
Governing Law. This Note shall be governed by and construed under the laws of the State of Nevada applicable to agreements made and to be performed entirely within such jurisdiction.
11.
Waivers. The non-exercise by either party of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.
12.
Attorneys’ Fees; Costs. If any Event of Default occurs, the Company promises to pay all costs of enforcement and collection, including but not limited to, Holder’s attorneys’ fees, whether or not any action or proceeding is brought to enforce the provisions hereof.
13.
Successor and Assigns. This Note shall be binding upon the Company and its successors and permitted assigns and shall inure to the benefit of the Holder and its successors and assigns. The Company may not assign or delegate any of its duties or obligations under this Note without the written consent of the Holder.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused its duly authorized officers to execute this Note as of the date first written above.
COMPANY:
GRASSHOPPER STAFFING, INC.
By: _______________________________
Name: Melanie Osterman
Title: President
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Optional Conversion Notice
______________________, the registered holder of this 5% Convertible Promissory Note, issued ________, 2018, hereby gives notice of the conversion of all outstanding principal and accrued interest into Common Stock of Grasshopper Staffing, Inc. at a conversion price equal to $0.50 per share.
Holder:
______________________________________________
(Print Name)
__________________________________________________
Signature
Date: ________________
