Contract
EXHIBIT
10.2
THIS
NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933,
AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO CANCABLE INC. THAT
SUCH
REGISTRATION IS NOT REQUIRED.
SECURED
TERM NOTE
FOR
VALUE
RECEIVED, CANCABLE INC., an Ontario corporation (the “Borrower”),
hereby promises to pay to LAURUS MASTER FUND, LTD., M&C Corporate Services
Limited, P.O. Box 309 GT, Xxxxxx House, South Church Street, Xxxxxx Town, Grand
Cayman, Cayman Islands, Fax: 000-000-0000 (the “Holder”)
or its
registered assigns or successors in interest, on order, the sum of Six Million
Eight Hundred Sixty-Five Thousand Dollars in lawful money of the United States
(USD6,865,000), together with any accrued and unpaid interest hereon, on
December 31, 2011 (the “Maturity
Date”)
if not
sooner paid.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof
between the Borrower and the Holder (as amended, modified or supplemented from
time to time, the “Purchase
Agreement”).
The
following terms shall apply to this Note:
ARTICLE
I
INTEREST
& AMORTIZATION
| 1.1 |
Interest
Rate.
Subject to Sections 2.10
and 3.8
hereof, interest payable on the outstanding principal amount of this
Note
shall accrue at a rate per annum (the “Interest
Rate”)
equal to the “prime rate” published in The Wall Street Journal from time
to time, plus one and three quarters percent (1.75%). The prime rate
shall
be increased or decreased as the case may be for each increase or
decrease
in the prime rate in an amount equal to such increase or decrease
in the
prime rate; each change to be effective as of the day of the change
in
such rate. Subject to Section 1.1
hereof, the Interest Rate shall not be less than seven percent (7%)
per
annum. Interest shall be calculated on the basis of a 360 day year.
Interest shall accrue but not be payable during the period commencing
on
December 30, 2005 and shall be payable, in arrears, commencing on
February
1, 2005 and on the first business day of each consecutive calendar
month
thereafter (each, a “Repayment
Date”)
and on the Maturity Date, whether by acceleration or
otherwise.
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| 1.2 |
Currency.
All principal, interest and other amounts owing under this Note,
the
Purchase Agreement or any Related Agreement that, in accordance with
their
terms, are paid in cash shall be paid in US dollars. All amounts
denominated in other currencies shall be converted in the US dollar
equivalent amount in accordance with the Exchange Rate on the date
of
calculation. “Exchange Rate” means, in relation to any amount of currency
to be converted into US dollars pursuant to this Note, the US dollar
exchange rate as published in the Wall Street Journal on the relevant
date
of calculation.
|
| 1.3 |
Taxes.
|
| (a) |
Any
and all payments by the Borrower hereunder, including any amounts
received
on redemption of the Note and any amounts on account of interest
or deemed
interest, shall be made free and clear of and without deduction for
any
and all present or future taxes, levies, imposts, deductions, charges
or
withholdings, and all liabilities with respect thereto, excluding
taxes
imposed on net income or franchise taxes of the Holder by the jurisdiction
in which such person is organized or has its principal office (all
such
non-excluded taxes, levies, imposts, deductions, charges withholdings
and
liabilities, collectively or individually, “Taxes”).
If the Borrower shall be required to deduct any Taxes from or in
respect
of any sum payable hereunder to the Holder, (i) the sum payable shall
be increased by the amount (an “additional
amount”)
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this
Section 1.3)
the Holder shall receive an amount equal to the sum it would have
received
had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant governmental authority in accordance with applicable
law.
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| (b) |
In
addition, Xxxxxxxx agrees to pay to the relevant governmental authority
in
accordance with applicable law any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
that arise from any payment made hereunder or from the execution,
delivery
or registration of, or otherwise with respect to, this Note (“Other
Taxes”).
The Borrower shall deliver to the Holder official receipts, if any,
in
respect of any Taxes or Other Taxes payable hereunder promptly after
payment of such Taxes or Other Taxes or other evidence of payment
reasonably acceptable to the
Holder.
|
| (c) |
The
obligations of the Borrower under this Section 1.3
shall survive the termination of this Note and the payment of the
Note and
all other amounts payable
hereunder.
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| 1.4 |
Minimum
Monthly Principal Amount.
Amortizing payments of the aggregate principal amount outstanding
under
this Note shall begin on October 2,
2006
and shall recur on the first business day of each succeeding month
thereafter until the Maturity Date as set forth in the amortization
schedule annexed hereto as Schedule A. Notwithstanding any other
provision
of this Note, the Borrower is not obligated, except upon an Event
of
Default, to pay more than 25% of the Principal Amount prior to December
31, 2011.
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| 1.5 |
Mandatory
Redemption.
The total outstanding Principal Amount together with any accrued
and
unpaid interest and any and all other unpaid amounts which are then
owing
by the Borrower to the Holder under this Note, the Purchase Agreement
and/or any other Related Agreement shall be due and payable on the
Maturity Date.
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| 1.6 |
Optional
Redemption of Amortizing Principal Amount.
The Borrower will have the option of prepaying the outstanding Principal
Amount (“Optional
Redemption”),
in whole or in part, by paying to the Holder a sum of money equal
to the
Applicable Principal Amount (as defined below) to be redeemed, together
with accrued but unpaid interest thereon and any and all other sums
due,
accrued or payable to the Holder arising under this Note, the Purchase
Agreement or any other Related Agreement (the “Redemption
Amount”)
on the day written notice of redemption (the “Notice
of Redemption”)
is given to the Holder. The Notice of Amortizing Redemption shall
specify
the date for such Optional Redemption (the “Redemption
Payment Date”),
which date shall be seven (7) business days after the date of the
Notice
of Redemption (the “Redemption
Period”).
On the Redemption Payment Date, the Redemption Amount shall be paid
in
good funds to the Holder. In the event the Borrower fails to pay
the
Redemption Amount on the Redemption Payment Date as set forth herein,
then
such Notice of Redemption will be null and void. For the purposes
of this
Section 1.6,
the “Applicable
Principal Amount”
shall mean the outstanding Principal Amount to be repaid (to a maximum
of
40% of the original Principal Amount when aggregated with all optional
prepayments of outstanding Principal Amount made in accordance with
this
provision from time to time during the term of this Note) and
105%
of the outstanding Principal Amount to be repaid in accordance with
this
provision in excess of 40% of the original Principal Amount. In the
event
of an optional prepayment made in accordance with this provision,
the
Borrower shall be entitled to require all or any portion of the Principal
Amount repaid (but not any premium forming part of the Applicable
Principal Amount) to be applied in satisfaction of all or any portion
of
one or more monthly amortization payments required to be made in
accordance with Section 1.4 of this
Note.
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-2-
ARTICLE
II
EVENTS
OF DEFAULT
Upon
the
occurrence and continuance of an Event of Default beyond any applicable grace
period, the Holder may make all sums of principal, interest and other fees
then
remaining unpaid hereon and all other amounts payable hereunder immediately
due
and payable. In the event of such an acceleration, the amount due and owing
to
the Holder shall be 120% of the outstanding principal amount of the Note (plus
accrued and unpaid interest and fees, if any) (the “Default
Payment”).
The
Default Payment shall be applied first to any fees due and payable to Holder
pursuant to this Note, the Purchase Agreement or the Related Agreements, then
to
accrued and unpaid interest due on the Note and then to outstanding principal
balance of the Note.
The
occurrence of any of the following events set forth in
Sections 2.1
through
2.9,
inclusive, is an “Event
of Default”:
| 2.1 |
Failure
to Pay Principal, Interest or other Fees.
The Borrower fails to pay when due any instalment of principal, interest
or other fees hereon in accordance herewith, or the Borrower fails
to pay
when due any amount due under any other promissory note issued by
Borrower, and in any such case, such failure shall continue for a
period
of three (3) days following the date upon which any such payment
was
due.
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| 2.2 |
Breach
of Covenant.
The Borrower breaches any covenant or any other term or condition
of this
Note or the Purchase Agreement in any material respect, or the Borrower
or
any of its Subsidiaries breaches any covenant or any other term or
condition of any Related Agreement in any material respect and, any
such
case, such breach, if subject to cure, continues for a period of
fifteen
(15) days after the occurrence
thereof.
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| 2.3 |
Breach
of Representations and Warranties.
Any representation or warranty made by the Borrower in this Note
or the
Purchase Agreement, or by the Borrower or any of its Subsidiaries
in any
Related Agreement, shall, in any such case, be false or misleading
in any
material respect on the date that such representation or warranty
was made
or deemed made.
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-3-
| 2.4 |
Receiver
or Trustee.
The Borrower or any of its Subsidiaries shall make an assignment
for the
benefit of creditors, or apply for or consent to the appointment
of a
receiver or trustee for it or for a substantial part of its property
or
business; or such a receiver or trustee shall otherwise be
appointed.
|
| 2.5 |
Judgments.
Any money judgment, writ or similar final process shall be entered
or
filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than USD250,000, and
shall
remain unvacated, unbonded or unstayed for a period of sixty
days.
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| 2.6 |
Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings
or other
proceedings or relief under any bankruptcy law or any law for the
relief
of debtors shall be instituted (i) by the Borrower or any of its
Subsidiaries or (ii) against the Borrower or any of its Subsidiaries
and,
solely in the case of this clause (ii), remains undismissed for a
period
of 60 days.
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| 2.7 |
Failure
to Deliver Replacement Note.
The Borrower shall fail to deliver a replacement Note to Holder within
seven (7) business days following the required date of such issuance
pursuant to this Note, the Purchase Agreement or any Related Agreement
(to
the extent required under such
agreements).
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| 2.8 |
Default
Under Related Agreements or Other Agreements.
The occurrence and continuance of (i) any Event of Default (as
defined in the Purchase Agreement or any Related Agreement), (ii) any
Event of Default under and as defined in any of (x) that certain
Secured
Convertible Term Note issued by Creative Vistas, Inc. (“Parent”)
to the Holder, dated September 30, 2004 (as amended, modified or
supplemented from time to time, the “2004
Term Note”),
(y) the Purchase Agreement referred to in the 2004 Term Note (as
amended,
modified or supplemented from time to time, the “2004
Purchase Agreement”
and/or (z) any Related Agreement referred to in the 2004 Purchase
Agreement, as each may be amended, modified or supplemented from
time to
time, (iii) any Event of Default under and as defined in any of (x)
that certain Security Agreement, dated as of September 30, 2004,
by and
among Parent, certain subsidiaries of the Parent and the Holder (as
amended, modified or supplemented from time to time, the “2004
Security Agreement”)
and/or (y) any Ancillary Agreement referred to in the 2004 Security
Agreement (as each may be amended, modified or supplemented from
time to
time and/or (iv) any event of default (or similar term) under any
other
indebtedness.
|
| 2.9 |
Change
in Control.
|
| (a) |
(i) Any
person or company (other than the Holder) or any person or company
acting
jointly or in concert with any person or company (other than the
Holder)
is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange
Act),
directly or indirectly, of 35% or more on a fully diluted basis of
the
then outstanding voting equity interest of the Borrower or (ii) the
Board of Directors of the Borrower shall cease to consist of a majority
of
the Board of Directors of the Borrower on the date hereof (or directors
appointed by a majority of the Board of Directors in effect immediately
prior to such appointment).
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-4-
| (b) |
(i) Any
person or company (other than the Holder) or any person or company
acting
jointly or in concert with any person or company (other than the
Holder)
is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange
Act),
directly or indirectly, of 35% or more on a fully diluted basis of
the
then outstanding voting equity interest of the Parent or (ii) the
Board of Directors of the Parent shall cease to consist of a majority
of
the Board of Directors of the Parent on the date hereof (or directors
appointed by a majority of the Board of Directors in effect immediately
prior to such appointment).
|
| (c) |
(i) Any
person or company (other than the Holder) or any person or company
acting
jointly or in concert with any person or company (other than the
Holder)
is or becomes the “beneficial owner” (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange
Act),
directly or indirectly, of 35% or more on a fully diluted basis of
the
then outstanding voting equity interest of Cancable Holding Corp.
or
(ii) the Board of Directors of the Cancable Holding Corp. shall cease
to consist of a majority of the Board of Directors of Cancable Holding
Corp on the date hereof (or directors appointed by a majority of
the Board
of Directors in effect immediately prior to such
appointment).
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| 2.10 |
Default
Interest Rate.
Following the occurrence and during the continuance of an Event of
Default
and following the expiration of all applicable notice and cure periods
related thereto, the Borrower shall pay additional interest on this
Note
on a monthly basis in an amount equal to eighteen (18%) per annum,
and all
outstanding obligations under this Note, including unpaid interest,
shall
continue to accrue such additional interest from the date of such
Event of
Default until the date such Event of Default is cured or
waived.
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| 2.11 |
Cumulative
Remedies.
The remedies under this Note shall be
cumulative.
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ARTICLE
III
MISCELLANEOUS
| 3.1 |
Failure
or Indulgence Not Waiver.
No failure or delay on the part of the Holder hereof in the exercise
of
any power, right or privilege hereunder shall operate as a waiver
thereof,
nor shall any single or partial exercise of any such power, right
or
privilege preclude other or further exercise thereof or of any other
right, power or privilege. All rights and remedies existing hereunder
are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
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| 3.2 |
Notices.
Any notice herein required or permitted to be given shall be in writing
and provided in accordance with the terms of the Purchase
Agreement.
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| 3.3 |
Amendment
Provision.
The term “Note” and all reference thereto, as used throughout this
instrument, shall mean this instrument as originally executed, or
if later
amended or supplemented, then as so amended or supplemented, and
any
successor instrument issued pursuant to Section 3.4
hereof, as it may be amended or
supplemented.
|
-5-
| 3.4 |
Assignability.
This Note shall be binding upon the Borrower and its successors and
assigns, and shall be binding upon and inure to the benefit of the
Holder
and its successors and assigns, and may be assigned by the Holder
in
accordance with the requirements of the Purchase Agreement. This
Note
shall not be assigned by the Borrower without the consent of the
Holder.
|
| 3.5 |
Governing
Law.
This Note shall be governed by and construed in accordance with the
laws
of the State of New York, without regard to principles of conflicts
of
laws. Any action brought by either party against the other concerning
the
transactions contemplated by this Agreement shall be brought only
in the
state courts of New York or in the federal courts located in the
state of
New York. Both parties to this Note agree to submit to the jurisdiction
of
such courts. The prevailing party shall be entitled to recover from
the
other party its reasonable attorney’s fees and costs. In the event that
any provision of this Note is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall
be
deemed modified to conform with such statute or rule of law. Any
such
provision which may prove invalid or unenforceable under any law
shall not
affect the validity or unenforceability of any other provision of
this
Note. Nothing contained herein shall be deemed or operate to preclude
the
Holder from bringing suit or taking other legal action against the
Borrower in any other jurisdiction to collect on the Borrower’s
obligations to Holder, to realize on any collateral or any other
security
for such obligations, or to enforce a judgment or other court in
favour of
the Holder.
|
| 3.6 |
Maximum
Payments.
Nothing contained herein shall be deemed to establish or require
the
payment of a rate of interest or other charges in excess of the maximum
permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall
be
credited against amounts owed by the Borrower to the Holder and thus
refunded to the Borrower.
|
| 3.7 |
Security
Interest and Guarantee.
The Holder has been granted a security interest in certain assets of
the Borrower and its affiliates as more fully described in the (i)
Master
Security Agreement dated as of the date hereof granted by the Borrower,
Cancable Holding Corp., Cancable, Inc., Iview Digital Solutions Inc.
and
the Parent and (ii) Master Security Agreement dated as of September
30,
2004 granted by the Parent, Creative Vistas Acquisition Corp. and
A.C.
Technical Systems Ltd. The obligations of the Borrower under this
Note are
guaranteed by certain affiliates of the Borrower pursuant the Guarantee
dated as of the date hereof granted by the Parent, Cancable Holding
Corp.,
Cancable, Inc., Iview Digital Solutions Inc., Creative Vistas Acquisition
Corp. and A.C. Technical Systems Ltd.
|
| 3.8 |
Construction.
Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule
of
construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to
favour
any party against the other.
|
| 3.9 |
Cost
of Collection.
If default is made in the payment of this Note, the Borrower shall
pay to
Holder reasonable costs of collection, including reasonable attorney’s
fees.
|
-6-
IN
WITNESS WHEREOF,
the
Borrower has caused this Note to be signed in its name effective as of this
31st
day of
December, 2005.
CANCABLE
INC. (Ontario)
By:
/s/
Xxxx Xxxxxx
Name:
Xxxx Xxxxxx
Title:
President
ACKNOWLEDGED
BY:
CREATIVE
VISTAS, INC. (Arizona)
By:
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx Xxxxx
Title:
President
CANCABLE
HOLDING CORP. (Delaware)
By:
/s/
Xxxxx
Xxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxx
Title:
Chairman and CEO
CANCABLE,
INC. (Nevada)
By:
/s/
Xxxx
Xxxxxx
Name:
Xxxx Xxxxxx
Title:
President and Secretary
CREATIVE
VISTAS ACQUISITION CORP. (Ontario)
By:
/s/
Xxxxx
Xxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxx
Title:
President and Secretary
IVIEW
DIGITAL VIDEO SOLUTIONS INC. (Canada)
By:
/s/
Xxxxx
Xxxxxxxxxx
Name:
Xxxxx Xxxxxxxxxx
Title:
President
A.C.
TECHNICAL SYSTEMS LTD. (Ontario)
By:
/s/
Xxxxxxx Xxxxx
Name:
Xxxxxxx Xxxxx
Title:
President and Secretary
-7-
SCHEDULE
“A”
AMORTIZATION
SCHEDULE
|
Months
|
Monthly
Amortization
|
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|
October
2006 - June 2008
|
USD81,726
|
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