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THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW HAS BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL TO THE COMPANY TO THE EFFECT THAT
REGISTRATION UNDER THE ACT OR APPLICABLE STATE SECURITIES LAW IS NOT REQUIRED IN
CONNECTION WITH THE PROPOSED TRANSFER.
CONVERTIBLE PROMISSORY NOTE
$1,000,000 September 6th, 2011
FOR VALUE RECEIVED, ENVISION SOLAR INTERNATIONAL, INC., a Nevada
corporation (the "Company"), promises to pay to the order of Gerald Hickson, an
individual ("Holder"), at such address as the Holder shall direct, the principal
sum of One Million Dollars ($1,000,000) plus accrued but unpaid interest on
December 31st, 2012, or such other date as provided in the Loan Agreement (as
defined below) (the "Maturity Date"), to the extent that this Note has not been
converted as provided in Section 3 of this Note. This Note is subject to the
following terms and conditions:
1. LOAN AGREEMENT; PAYMENTS. This Note is issued pursuant to and is subject
to the terms and conditions of that certain Loan Agreement between the Company
and the Holder of even date with this Note (the "Loan Agreement"). Capitalized
terms used herein, which are not defined, shall have the meanings set forth in
the Loan Agreement. This Note may be prepaid only in accordance with the terms
of the Loan Agreement. Payments on this Note shall be applied first to accrued,
unpaid interest and thereafter to reduce the outstanding principal amount.
2. INTEREST. This Note shall bear interest on the unpaid principal balance
hereof from time to time outstanding at the simple rate of nine percent (9%) per
annum, subject to the terms and conditions of the Loan Agreement. Accrued
interest shall be payable on the Maturity Date, and any accrued interest not
paid when due shall thereafter bear interest at the same rate as the principal
of this Note.
3. CONVERSION.
(a) RIGHT TO CONVERT. The entire principal amount of this Note
and all accrued interest hereon (the "Conversion Amount"), or any portion
hereof, shall be convertible, at the option of the Holder, at any time after the
date of this Note at the office of the Company or any transfer agent for its
shares of common stock ("Shares"), into such number of fully paid and
nonassessable Shares as is determined by dividing the Conversion Amount by the
Conversion Price. The Conversion Price shall be $0.29 (twenty-nine cents) per
Share.
(b) INTENTIONALLY LEFT BLANK.
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(c) MECHANICS OF CONVERSION. No fractional Shares shall be
issued upon conversion of this Note. In lieu of any fractional Shares to which
the Holder would otherwise be entitled, the Company shall pay cash equal to such
fraction multiplied by the then effective Conversion Price. Before any Holder
shall be entitled to convert the Note into Shares pursuant to Section 3(a), such
Holder shall surrender the Note, at the office of the Company or of any transfer
agent for such Shares, and shall give written notice to the Company at its
principal corporate office of the election to convert the same and the amount of
principal and/or interest being converted. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the Note, or if the Note is reported lost, stolen or destroyed, on
the date of receipt by the Company of Holder's written election to convert plus
any additional documents requested by the Company and reasonably satisfactory to
it, including but not limited to an agreement by the Holder to indemnify the
Company from any loss incurred by it in connection with such lost, stolen or
destroyed Note. The Company shall, as soon as practicable thereafter, issue and
deliver to such address as the Holder may direct, a certificate or certificates
for the number of Shares to which such Holder shall be entitled and, if
applicable, a new Note in the principal amount which has not been converted
pursuant to Section 3(a).
(d) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
RECLASSIFICATIONS OR SIMILAR EVENTS. If the Shares shall be changed into the
same or a different number of Shares or other securities or property, whether by
capital reorganization, merger, reclassification or otherwise, then the Note
shall thereafter be convertible into the number of Shares or other securities or
property to which a holder of the number of Shares of the Company deliverable
upon conversion of the Note shall have been entitled upon such reorganization,
merger, reclassification or other event.
(e) NO IMPAIRMENT. The Company will not, by amendment of its
Articles 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 to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Note and in the taking of all such action as may be necessary or appropriate in
order to protect the conversion rights of the Holder set forth herein and in the
Shares against impairment.
4. RESERVATION OF SECURITIES. The Company shall reserve, so long as this
Note is outstanding, such securities as the Holder is entitled to receive upon
conversion of this Note.
5. DEFAULT. Upon the occurrence of any Event of Default (as defined in the
Loan Agreement), the entire unpaid principal balance of this Note and all
accrued and unpaid interest shall become or may be declared to be immediately
due and payable, as provided in the Loan Agreement.
6. GENERAL. Principal of and interest on this Note shall be payable in
lawful money of the United States of America. If a payment hereunder becomes due
and payable on a Saturday, Sunday, or legal holiday, the due date thereof shall
be extended to the next succeeding Business Day, and interest shall be payable
thereon during such extension. The Company agrees to pay all costs and expenses
(including without limitation reasonable attorney's fees) incurred by Holder in
connection with the enforcement of this Note. The Company hereby waives
presentment, demand for payment, notice of dishonor, notice of nonpayment,
protest, notice of protest, and any and all other notices and demands in
connection with the delivery, acceptance, performance, default, or enforcement
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of this Note. Nothing herein shall be deemed to limit any of the terms or
provisions of the Loan Agreement or any other present or future document,
instrument or agreement, between the Company and the Holder and all of Holder's
rights and remedies hereunder and thereunder are cumulative. In the event any
one or more of the provisions of this Note shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other provision
of this Note and the remaining provisions of this Note shall remain in full
force and effect. This Note is payable in, and shall be governed by the laws of,
the State of California. Any notices which the Company or the Holder is required
or desires to give to the other shall be in writing and shall be deemed to have
been given when given as provided in the Loan Agreement. This Note, and the
obligations of the Company hereunder shall be binding upon the Company, and
shall inure to the benefit of the Holders, and their respective heirs,
executors, administrators, successors and assigns.
7. NO SHAREHOLDER RIGHTS. Nothing contained in this Note shall be construed
as (a) conferring upon the Holder or any other person the right to vote or to
consent or to receive notice as a shareholder with respect to meetings of
shareholders for any matters or any rights as a shareholder of the Company, and
(b) no distributions by the Company shall be payable or accrued in respect of
this Note or the interest represented hereby, or the equity securities into
which this Note may be converted, until, and only to the extent that, this Note
is converted as provided in this Note and the Loan Agreement.
ENVISION SOLAR INTERNATIONAL, INC.
a Nevada corporation
By:/s/ Desmond Wheatley
____________________________________________
Desmond Wheatley, Chief Executive Officer
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