Contract
Exhibit
4.12
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR
THE SECURITIES COMMISSION OF ANY STATE 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 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. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
BRENDAN
TECHNOLOGIES, INC.
15%
SECURED PROMISSORY NOTE
| $__________ | July 12, 2007 |
FOR
VALUE
RECEIVED, Brendan Technologies, Inc., a Nevada corporation (the “Maker”),
with
its principal offices located at 0000 Xxxxxxxxxx Xx., Xxxxx 000, Xxxxxxxx,
Xxxxxxxxxx 00000, promises to pay to the order of __________, or its registered
assigns (the “Payee”),
upon
the terms set forth below, the principal sum of _______ dollars ($________)
plus
interest on the unpaid principal sum outstanding at the rate of 15% per annum
(this “Note”).
Terms
used herein but not otherwise defined herein shall have the meanings given
to
such terms in the Loan and Security Agreement, dated as of July 10, 2007,
between the Maker, the Guarantors and the Secured Parties (as such terms are
defined in such Loan and Security Agreement) (“the
Loan and Security Agreement”).
1. Payments.
(a)
The
full
amount of principal and accrued interest under this Note shall be due on April
10, 2008 (the “Maturity
Date”),
unless due earlier in accordance with the terms of this Note.
(b)
The
Maker
shall pay interest to the Payee on the aggregate then outstanding principal
amount of this Note at the rate of 15% per annum, accrued daily and payable
monthly on the first calendar day of each month commencing on September 1,
2007
and on the Maturity Date (collectively, “Interest
Payment Dates”).
(c)
All
overdue accrued and unpaid principal and interest to be paid hereunder shall
entail a late fee at the rate of 22% per annum (or such lower maximum amount
of
interest permitted to be charged under applicable law) which will accrue daily,
from the date such principal and/or interest is due hereunder through and
including the date of payment.
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(d) The
Maker
hereby agrees to allocate any and all of the funds received by the Maker or
any
Subsidiary during the term of the Note from the sources set forth in this
Section 1(d) to, firstly, the payment of interest on this Note on the Interest
Payment Dates and, secondly, the prepayment of principal on this Note in the
manner as set forth in this Section 1(d):
(A)
funds
received by the Maker or any Subsidiary as payment pursuant to contracts and
contractual arrangements (collectively, “Maker
Contractual Receipts”)
in the
manner set forth below:
(x)
for
Maker Contractual Receipts of up to $250,000 during the term of this Note,
the
Maker shall have no obligation, but shall have the right, to apply such funds
toward the payment of interest and principal on this Note;
(y)
for
Maker Contractual Receipts from $250,000 through $1,000,000 during the term
of
this Note, the Maker shall apply 50% of such funds toward the payment of
interest and principal on this Note; and
(z)
for
Maker Contractual Receipts over $1,000,000 during the term of this Note, the
Maker shall apply 100% of such funds toward the payment of interest and
principal on this Note;
(B)
funds
received by the Maker as payment upon the sale of any debt (including any lines
of credit) or equity or equity derivative securities of the Maker (“Sale
of Securities Proceeds”),
provided that the Maker shall apply 100% of Sale of Securities Proceeds during
the term of this Note toward the payment of interest and principal on this
Note;
and
(C)
funds
received by the Maker as payment upon the sale of any assets of the Maker
(“Sale
of Assets Proceeds”),
provided that the Maker shall apply 100% of Sale of Assets Proceeds during
the
term of this Note toward the payment of interest and principal on this
Note.
All
funds
received pursuant to subparagraphs (A), (B) or (C) above shall be paid by the
Maker to the Payee within 5 business days of their receipt.
2.
Secured
Obligation.
The
obligations of the Maker under this Note are secured by all of the assets of
the
Maker and its subsidiaries pursuant to the Loan and Security
Agreement.
3.
Prepayment.
The
Maker may prepay any portion of the principal amount of this Note upon at least
3 business days’ notice to the Payee. Any such prepayments shall be pro rata
among all holders of the series of Notes of which this Note is a
part.
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4. Events
of Default.
(a)
“Event
of Default”,
wherever used herein, means any one of the following events (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)
any
default in the payment of the principal of, or the interest on, this Note,
as
and when the same shall become due and payable;
(ii)
Maker
shall fail to observe or perform any obligation or shall breach any term or
provision of this Note and such failure or breach shall not have been remedied
within 10 days after the date on which notice of such failure or breach shall
have been delivered;
(iii)
Maker
or
any of its subsidiaries shall fail to observe or perform any of their respective
obligations owed to Payee or any other covenant, agreement, representation
or
warranty contained in, or otherwise commit any breach hereunder or in any of
the
Transaction Documents or any other agreement executed in connection
herewith;
(iv)
Maker
or
any of its subsidiaries shall commence, or there shall be commenced against
Maker or any subsidiary a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or Maker or any
subsidiary 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
Maker or any subsidiary, or there is commenced against Maker or any subsidiary
any such bankruptcy, insolvency or other proceeding which remains undismissed
for a period of 60 days; or Maker or any subsidiary is adjudicated insolvent
or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Maker or any subsidiary suffers any appointment of
any
custodian or the like for it or any substantial part of its property which
continues undischarged or unstayed for a period of 60 days; or Maker or any
subsidiary makes a general assignment for the benefit of creditors; or Maker
or
any subsidiary 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 Maker or
any
subsidiary shall call a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or Maker or any
subsidiary 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 Maker or any subsidiary for the purpose of effecting any
of
the foregoing;
(v)
Maker
or
any subsidiary shall default in any of its respective 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 Maker or any subsidiary, 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, regardless of whether the holder or holders of any
such
indebtedness actually make any declaration of default or acceleration;
including, without limitation, any default by Maker of any of its obligations
under any of those certain 8% Convertible Notes described on Schedule 5(h)
to
the Loan and Security Agreement; or
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(vi)
Maker
(a)
shall be a party to any Change of Control Transaction (as defined below), (b)
shall agree to sell or dispose all or in excess of 33% of its assets in one
or
more transactions (whether or not such sale would constitute a Change of Control
Transaction), (c) shall redeem or repurchase more than a de minimis
number
of shares of Common Stock or other equity securities of Maker, or (d) shall
make
any distribution or declare or pay any dividends (in cash or other property,
other than Common Stock) on, or purchase, acquire, redeem, or retire any of
Maker's capital stock, of any class, whether now or hereafter outstanding.
“Change
of Control Transaction”
means
the occurrence of any of: (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Securities Exchange Act of 1934, as amended) of effective
control (whether through legal or beneficial ownership of capital stock of
Maker, by contract or otherwise) of in excess of 33% of the voting securities
of
Maker, (ii) a replacement at one time or over time of more than one-half of
the
members of Maker's board of directors which is not approved by a majority of
those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors
on
any date whose nomination to the board of directors was approved by a majority
of the members of the board of directors who are members on the date hereof),
(iii) the merger of Maker with or into another entity that is not wholly-owned
by Maker or the consolidation or sale of 33% or more of the assets of Maker
in
one or a series of related transactions, or (iv) the execution by Maker of
an
agreement to which Maker is a party or by which it is bound, providing for
any
of the events set forth above in (i), (ii) or (iii); or
(vii)
trading in the Common Stock shall have been suspended by the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc.,
or
the Company’s principal Trading Market for any period in excess of 5 Trading
Days.
(b)
If
any Event of Default occurs, the full principal amount of this Note, together
with all accrued interest thereon, shall become, at the Payee's election,
immediately due and payable in cash. Commencing 5 days after the occurrence
of
any Event of Default that results in the acceleration of this Note, the interest
rate on this Note shall accrue at the rate of 22% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law. The
Payee need not provide and Maker hereby waives any presentment, demand, protest
or other notice of any kind, and the Payee may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by Xxxxx at any time prior to payment
hereunder. No such rescission or annulment shall affect any subsequent Event
of
Default or impair any right consequent thereon.
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5. Negative
Covenants.
So
long
as any portion of this Note is outstanding, the Maker will not and will not
permit any of its Subsidiaries to directly or indirectly:
a) other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or
suffer to exist any indebtedness for borrowed money of any kind, including
but
not limited to, a guarantee, on or with respect to any of its property or assets
now owned or hereafter acquired or any interest therein or any income or profits
therefrom;
b) other
than Permitted Liens, enter into, create, incur, assume or suffer to exist
any
liens of any kind, on or with respect to any of its property or assets now
owned
or hereafter acquired or any interest therein or any income or profits
therefrom;
c) amend
its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Payee;
d) except
as
contractually required by the Maker as of the date of issuance of this Note,
repay, repurchase or offer to repay, repurchase or otherwise acquire more than
a
de minimis
number
of securities;
e) enter
into any agreement with respect to any of the foregoing;
f) pay
any
accrued salaries for any officer or director of the Company or any subsidiary
accrued prior to the date hereof; or
g) pay
cash
dividends or distributions on any equity securities of the Maker.
“Permitted
Indebtedness”
shall
mean (a)
the
indebtedness evidenced by this Note, and (b) the indebtedness of the Maker
existing on the date of issuance of this Note.
“Permitted
Lien”
shall
mean the individual and collective reference to the following: (a) liens in
connection with this Note; (b) liens for taxes, assessments and other
governmental charges or levies not yet due or liens for taxes, assessments
and
other governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves (in the good faith judgment
of the management of the Maker) have been established in accordance with
generally accepted accounting procedures; and (c) liens imposed by law which
were incurred in the ordinary course of business, such as carriers’,
warehousemen’s and mechanics’ liens, statutory landlords’ liens, and other
similar liens arising in the ordinary course of business, and (x) which do
not
individually or in the aggregate materially detract from the value of such
property or assets or materially impair the use thereof in the operation of
the
business of the Maker and its consolidated subsidiaries or (y) which are being
contested in good faith by appropriate proceedings, which proceedings have
the
effect of preventing the forfeiture or sale of the property or asset subject
to
such lien.
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6. No
Waiver of Payee's Rights.
All
payments of principal and interest shall be made without setoff, deduction
or
counterclaim. No delay or failure on the part of the Payee in exercising any
of
its options, powers or rights, nor any partial or single exercise of its
options, powers or rights shall constitute a waiver thereof or of any other
option, power or right, and no waiver on the part of the Payee of any of its
options, powers or rights shall constitute a waiver of any other option, power
or right. Maker hereby waives presentment of payment, protest, and all notices
or demands in connection with the delivery, acceptance, performance, default
or
endorsement of this Note. Acceptance by the Payee of less than the full amount
due and payable hereunder shall in no way limit the right of the Payee to
require full payment of all sums due and payable hereunder in accordance with
the terms hereof.
7.
Modifications.
No term
or provision contained herein may be modified, amended or waived except by
written agreement or consent signed by the party to be bound
thereby.
8.
Cumulative
Rights and Remedies; Usury.
The
rights and remedies of Payee expressed herein are cumulative and not exclusive
of any rights and remedies otherwise available under this Note, the Loan and
Security Agreement, or applicable law (including at equity). The election of
Payee to avail itself of any one or more remedies shall not be a bar to any
other available remedies, which Maker agrees Payee may take from time to time.
If it shall be found that any interest due hereunder shall violate applicable
laws governing usury, the applicable rate of interest due hereunder shall be
reduced to the maximum permitted rate of interest under such law.
9.
Use
of
Proceeds.
Maker
shall use the proceeds from the sale of this Note to the Payee for working
capital purposes as set forth in Schedule H of the Loan and Security Agreement
and shall not use such proceeds for (a) the satisfaction of any portion of
Maker’s or subsidiary’s debt (other than payment of trade payables in the
ordinary course of Maker's business and prior practices), (b) the redemption
of
any of Maker’s or subsidiary’s equity or equity-equivalent securities, (c) the
settlement of any outstanding litigation or (d) the payment of the previously
earned salary or bonus of any director or officer of the Maker.
10.
Collection
Expenses.
If
Payee shall commence an action or proceeding to enforce this Note, then Maker
shall reimburse Payee for its costs of collection and reasonable attorneys
fees
incurred with the investigation, preparation and prosecution of such action
or
proceeding.
11.
Severability.
If any
provision of this Note is declared by a court of competent jurisdiction to
be in
any way invalid, illegal or unenforceable, the balance of this Note shall remain
in effect, and if any provision is inapplicable to any person or circumstance,
it shall nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest due
hereunder shall violate applicable laws governing usury, the applicable rate
of
interest due hereunder shall automatically be lowered to equal the maximum
permitted rate of interest.
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12.
Successors
and Assigns.
This
Note shall be binding upon Maker and its successors and shall inure to the
benefit of the Payee and its successors and assigns. The term “Payee” as used
herein, shall also include any endorsee, assignee or other holder of this
Note.
13.
Lost
or Stolen Promissory Note.
If this
Note is lost, stolen, mutilated or otherwise destroyed, Maker shall execute
and
deliver to the Payee a new promissory note containing the same terms, and in
the
same form, as this Note. In such event, Maker may require the Payee to deliver
to Maker an affidavit of lost instrument and customary indemnity in respect
thereof as a condition to the delivery of any such new promissory
note.
14.
Governing
Law; Arbitration.
This
Note shall be governed by and construed in accordance with the internal laws
of
the State of Nevada. Any controversy or claim arising out of or related to
this
Debenture or the breach thereof, shall be settled by binding arbitration in
New
York, New York in accordance with the Expedited Procedures (Rules 53-57) of
the
Commercial Arbitration Rules of the American Arbitration Association
(“AAA”).
A
proceeding shall be commenced upon written demand by the Company or Buyer to
the
other. The arbitrator(s) shall enter a judgment by default against any party,
which fails or refuses to appear in any properly noticed arbitration proceeding.
The proceeding shall be conducted by one (1) arbitrator, unless the amount
alleged to be in dispute exceeds two hundred fifty thousand dollars ($250,000),
in which case three (3) arbitrators shall preside. The arbitrator(s) will be
chosen by the parties from a list provided by the AAA, and if the parties are
unable to agree within ten (10) days, the AAA shall select the arbitrator(s).
The arbitrators must be experts in securities law and financial transactions.
The arbitrators shall assess costs and expenses of the arbitration, including
all attorneys’ and experts’ fees, as the arbitrators believe is appropriate in
light of the merits of the parties’ respective positions in the issues in
dispute. Each party submits irrevocably to the jurisdiction of any state court
sitting in New York, New York or to the United States District Court sitting
in
New York, New York for purposes of enforcement of any discovery order, judgment
or award in connection with such arbitration. The award of the arbitrator(s)
shall be final and binding upon the parties and may be enforced in any court
having jurisdiction. The arbitration shall be held in such place as set by
the
arbitrator(s) in accordance with Rule 55. With respect to any arbitration
proceeding in accordance with this section, the prevailing party’s reasonable
attorney’s fees and expenses shall be borne by the non-prevailing
party.
Although
the parties, as expressed above, agree that all claims, including claims that
are equitable in nature, for example specific performance, shall initially
be
prosecuted in the binding arbitration procedure outlined above, if the
arbitration panel dismisses or otherwise fails to entertain any or all of the
equitable claims asserted by reason of the fact that it lacks jurisdiction,
power and/or authority to consider such claims and/or direct the remedy
requested, then, in only that event, will the parties have the right to initiate
litigation respecting such equitable claims or remedies. The forum for such
equitable relief shall be in either a state or federal court sitting in New
York, New York. Each party waives any right to a trial by jury, assuming such
right exists in an equitable proceeding, and irrevocably submits to the
jurisdiction of said New York court. Nevada law shall govern both the proceeding
as well as the interpretation and construction of this Note and the transaction
as a whole. Notwithstanding the preceding provisions, the parties agree to
preserve, without diminution, certain remedies that any party may exercise
before or after an arbitration proceeding is brought. The parties shall have
the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power
of
sale or under applicable law by judicial foreclosure including a proceeding
to
confirm the sale; (ii) all rights of self-help including peaceful occupation
of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. The parties further agree
that
they shall not have a remedy of punitive or exemplary damages against any other
party and hereby waive any right or claim to punitive or exemplary damages
they
have now or which may arise in the future in connection with any action whether
the action is brought by arbitration or judicially.
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15. Notice.
Any and
all notices or other communications or deliveries to be provided by the Payee
hereunder, including, without limitation, any conversion notice, shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to the Maker, Brendan Technologies, Inc. (a Nevada
corporation), or such other address or facsimile number as the Maker may specify
for such purposes by notice to the Payee delivered in accordance with this
paragraph. Any and all notices or other communications or deliveries to be
provided by the Maker hereunder shall be in writing and delivered personally,
by
facsimile, sent by a nationally recognized overnight courier service or sent
by
certified or registered mail, postage prepaid, addressed to the Payee at the
address of the Payee appearing on the books of the Maker (as set forth in the
Loan and Security Agreement), or if no such address appears, at the principal
place of business of the Payee. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the date
of
transmission if delivered by
hand
or by telecopy that has been confirmed as received by 5:00 p.m. on a business
day,
(ii)
one
business day after being sent by nationally recognized overnight courier or
received by telecopy after 5:00 p.m. on any day,
or
(iii) five
business
days
after being sent by certified or registered mail, postage and charges prepaid,
return receipt requested.
16. Required
Notice to Payee. The
Payee
is to be immediately notified by the Maker, in accordance with Section 16,
of
the existence or occurrence of any Event of Default.
17. Capacity
of Agent. Maker
acknowledges that the Payee has appointed an Agent to act on its behalf under
certain circumstances as set forth in the Loan and Security
Agreement.
18. Transferability
of Note. Subject
to compliance with any applicable securities laws, this Note and all rights
hereunder are transferable, in whole or in part, upon surrender of this Note
at
the principal office of the Maker, together with a written assignment or
endorsement of this Note duly executed by the Payee or its agent or attorney
and
funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Maker shall
execute and deliver a new Note or Notes in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Note evidencing the portion
of
this Note not so assigned, and this Note shall promptly be cancelled.
8
The
undersigned signs this Note as a maker and not as a surety or guarantor or
in
any other capacity.
| BRENDAN
TECHNOLOGIES, INC.,
a
Nevada corporation
|
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| |
|
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| By: | ||
|
Name:
Title:
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