PROMISSORYNOTE

NEITHER THE SECURITIES REPRESENTED BY NEITHER THIS NOTE OR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.

 

 

 

 

Cliff Rock Resources Corp., a Nevada corporation (the “Company”), for value received hereby promises to pay to [                               ] or its registered assigns (the “Holder”), the sum of $_________, or such other amount as shall then equal the outstanding principal amount hereof and all accrued and unpaid interest, as set forth below, on ______________ (the “Maturity Date”).  This Note shall be pre payable at the Company’s option. Payment for all amounts due hereunder shall be made by wire transfer of immediately available funds, in lawful tender of the United States, to an account designated in writing by the Holder.

1. Definitions. As used in this Note, the following terms, unless the context otherwise requires, have the following meanings:

 

(i) “Company” includes any corporation that, to the extent permitted by this Note, shall succeed to or assume the obligations of the Company under this Note.

 

(ii) “Holder,” when the context refers to a holder of this Note, shall mean any person who shall at the time be the registered holder of this Note.

 

2. Interest. Until all outstanding principal and interest on this Note shall have been paid in full, interest on the unpaid principal balance of this Note shall accrue from the date hereof at the rate of 30.0% per annum (the “Initial Interest Rate”).  Interest will be payable on the Maturity Date.  In the event that this Note is not paid on the Maturity Date the interest shall automatically be increased to 10% per annum.

 

3. Events of Default. If any of the events specified in this Section 3 shall occur (herein individually referred to as an “Event of Default”), the Company agrees to give the Holder prompt written notice of such event. The Holder may, so long as such condition exists or has not  been cured during the applicable cure period (whether or not the Holder has received notice of such event), declare the entire principal and unpaid accrued interest here on immediately due and payable, by notice in writing to the Company; provided that upon occurrence of an Event of Default specified in subsection (ii) below, all principal and interest shall automatically become immediately due and payable in full:

 

 

 

 

 

 

 

(i)           Failure by the Company to make any payment hereunder when due, which failure has not been cured within ten (10) days following such due date; or

 

(ii)           Any breach by the Company of any material representation, warranty or covenant in this Note which results in a Material Adverse Effect on the Company’s business, operations or financial condition; provided, that, in the event of any such breach, such breach shall not have been cured by the Company within 30 days after the earlier to occur of (a) written notice to the Company of such breach, and (b) the Company’s knowledge of such breach; or

 

(iii)           The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the Company in furtherance of any such action; or

 

(iv)           If, within sixty (60) days after the commencement of an action against the Company seeking any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial part of the properties of the Company, such appointment shall not have been vacated; or

 

4.           Miscellaneous.

 

4.1           Notices of Record Date, etc.  In the event of:

 

4.11           Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or

 

4.1.2                      Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company; or

 

 

 

 

 

 

 

4.1.3                      Any voluntary or involuntary dissolution, liquidation or winding-up of the Company; the Company will mail to the holder of this Note at least five (5) business days prior to the earliest date specified therein, a notice specifying:

 

4.1.3.1                       The date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and

 

4.1.3.2                        The date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become effective and the record date for determining stockholders entitled to vote thereon.

 

5.           Conversion.   The Company shall have the right to convert the principal amount of this Note into an investment in the Company’s contemplated private placement (the “Private Placement”) on the same terms as offered to the investors in the Private Placement provided that the Private Placement results in gross proceeds to the Company of at least $500,000 exclusive of the conversion of this Note.  It is contemplated that the Private Placement will consist of shares of common stock at $.35 per share.  For every share purchased, investors would receive a half of a warrant to purchase common stock at $.30 per share.  There can be no assurance as to what the final terms of the Private Placement will be.

 

6.           Registration.   The Company agrees that in the event that it files a registration statement to register any of its securities under the Act it will include the shares of common stock issuable upon conversion of this Note and upon exercise of the Warrant in such registration statement.

 

7.           Assignment. Subject to the restrictions on transfer set forth herein, the rights and obligations of the Company and the Holder of this Note shall be binding upon and benefit the successors and assigns of the parties. This Note may not be assigned or transferred by the parties except in accordance with the terms hereof.   This Convertible Note is nontransferable by the Noteholder without prior written approval of the Board of Directors of the Company.  Prior to the Board of Directors of the Company approving the sale of this Convertible Note to a third party, it must first be offered for sale to the Company for a period of 30 days.  If the Company fails to purchase this Convertible Note within the 30 day period, this Convertible Note must be next be offered for sale to all existing shareholders at a price equal to the price at which it was offered to the Company.  Existing shareholders have a further 30 days to purchase this Convertible Note.  If neither the Company nor existing shareholders agrees to purchase this Convertible Note within the prescribed period of time, the Noteholder may sell this Convertible Note to a third party, approved in writing by the Company, at a price equal to the face value of this Convertible Note.

 

8.           Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Holder.

 

9.           Transfer of this Note. With respect to any offer, sale or other disposition of this Note, the Holder will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder’s counsel, which counsel must be acceptable to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and opinion, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this Note, all in accordance with the terms of the notice delivered to the Company.  Each Note thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel for the Company such legend is not required. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

 

 

 

 

 

 

 

 

10.             Treatment of Note. To the extent permitted by GAAP, the Company will treat, account and report the Note as debt and not equity for accounting purposes and with respect to any returns filed with federal, state or local tax authorities.

 

11.             Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or if faxed with confirmation of receipt by telephone or if mailed by registered or certified mail, postage prepaid, at the respective addresses of the parties as set forth in this Note. Any party hereto may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered, faxed, or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered.

 

12.             No Stockholder Rights.  Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall be payable or accrued in respect of this Note or the interest represented hereby.

 

13.             Usury. This Note is hereby expressly limited so that in no event whatsoever, whether by reason of acceleration of maturity of the loan evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Holder hereunder for the loan, use, forbearance or detention of money exceed that permissible under applicable law. If at any time the performance of any provision of this Note or of any other agreement or instrument entered into in connection with this Note involves a payment exceeding the limit of the interest that may be validly charged for the loan, use, forbearance or detention of money under applicable law, then automatically and retroactively, ipso facto, the obligation to be performed shall be reduced to such limit, it being the specific intent of the Company and the Holder that all payments under this Note are to be credited first to interest as permitted by law, but not in excess of (i) the agreed rate of interest set forth herein or therein or (ii) that permitted by law, whichever is the lesser, and the balance toward the reduction of principal. The provisions of this Section 12 shall never be superseded or waived and shall control every other provision of this Note and all other agreements and instruments between the Company and the Holder entered into in connection with this Note.

 

14.             Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, excluding that body of law relating to conflict of laws.

 

 

 

 

 

 

 

 

 

 

15.             Heading; References. All headings used herein are used for convenience only and shall not be used to construe or interpret this Note. Except where otherwise indicated, all references herein to Sections refer to Sections hereof.

 

16.             Waiver. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be issued this __ day of _______, 2010.