SECURED NOTE
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO APRECIA, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
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Principal
Amount: $_________
|
Issue
Date: May ___, 2007
|
|
Purchase
Price: $__________
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FOR
VALUE
RECEIVED, APRECIA, INC., a Delaware corporation (hereinafter called "Borrower"),
hereby promises to pay to ______________________________________________ (the
"Holder") or order, without demand, the sum of ___________________________
Dollars ($__________), with simple and unpaid interest thereon, on September
____, 2007 (the "Maturity Date"), if not paid sooner.
This
Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such Subscription Agreement.
Unless otherwise separately defined herein, all capitalized terms used in this
Note shall have the same meaning as is set forth in the Subscription Agreement.
The following terms shall apply to this Note:
ARTICLE
I
GENERAL
PROVISIONS
1.1 Payment
Grace Period.
The
Borrower shall have a five (5) business day grace period to pay any monetary
amounts due under this Note, after which grace period and during the pendency
of
an Event of Default (as defined in Article III) a default interest rate of
eighteen percent (18%) per annum shall apply to the amounts owed
hereunder.
1.2. Interest
Rate.
Subject
to Sections 1.1 and 4.7 hereof, interest payable on this Note shall accrue
at a
rate per annum (the "Interest Rate") of seven percent (7%). Interest on the
Principal Amount shall accrue from the date of this Note and shall be payable,
in arrears, together with Principal Amount payments as described below and
on
the Maturity Date, whether by acceleration or otherwise.
ARTICLE
II
EVENT
OF DEFAULT
The
occurrence of any of the following events of default ("Event of Default") shall,
at the option of the Holder hereof, make all sums of principal and interest
then
remaining unpaid hereon and all other amounts payable hereunder immediately
due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:
1
2.1 Failure
to Pay Principal or Interest.
The
Borrower fails to pay any installment of principal, interest or other sum due
under this Note when due and such failure continues for a period of five (5)
business days after the due date. The five (5) day period described in this
Section 2.1 is the same five (5) business day period described in Section 1.1
hereof.
2.2 Breach
of Covenant.
The
Borrower breaches any material covenant or other material term or condition
of
the Subscription Agreement or this Note in any material respect and such breach,
if subject to cure, continues for a period of ten (10) business days after
written notice to the Borrower from the Holder.
2.3 Breach
of Representations and Warranties.
Any
material representation or warranty of the Borrower made herein, in the
Subscription Agreement, or in any agreement, statement or certificate given
in
writing pursuant hereto or in connection therewith shall be false or misleading
in any material respect as of the date made and the Closing Date.
2.4 Receiver
or Trustee.
The
Borrower 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 without the consent of the Borrower is not dismissed within
forty-five (45) days of appointment.
2.5 Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any of its property or other assets for more than $50,000, and
shall
remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60)
days.
2.6 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance
of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower and if instituted against Borrower are
not
dismissed within sixty (60) days of initiation.
2.7 Non-Payment.
A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $50,000 for more than thirty days after the due
date, unless the Borrower is contesting the validity of such obligation in
good
faith and has segregated cash funds equal to not less than one-half of the
disputed amount.
2.8 Stop
Trade.
An SEC
or judicial stop trade order or Principal Market trading suspension that lasts
for ten or more consecutive trading days.
2.9 Failure
to Deliver Common Stock or Replacement Note.
Xxxxxxxx's failure to deliver Common Stock to the Holder pursuant to and in
the
form required by Section 11 of the Subscription Agreement, or, if required,
a
replacement Note more than five Business Days after the required delivery date
of such Common Stock or Note.
2.10 Delisting.
Failure
of the Common Stock to be quoted or listed on the OTC Bulletin Board (“Bulletin
Board”) or other Principal Market; failure to comply with the requirements for
continued listing on the Bulletin Board for a period of seven consecutive
trading days; or notification from the Bulletin Board or any Principal Market
that the Borrower is not in compliance with the conditions for such continued
listing on the Bulletin Board or other Principal Market.
2
2.11 Cross
Default.
A
default by the Borrower of a material term, covenant, warranty or undertaking
of
any other agreement to which the Borrower and Holder are parties, or the
occurrence of a material event of default under any such other agreement which
is not cured after any required notice and/or cure period.
ARTICLE
III
SECURITY
INTEREST
3. Security
Interest/Waiver of Automatic Stay.
This
Note is secured by a security interest granted to the Holder pursuant to a
Security Agreement, as delivered by Borrower to Holder. The Borrower
acknowledges and agrees that should a proceeding under any bankruptcy or
insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject
of
any bankruptcy or insolvency proceeding, then the Holder should be entitled
to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant
to
the Loan Documents and/or applicable law. THE BORROWER EXPRESSLY WAIVES THE
BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE,
THE
BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11 U.S.C. SECTION 362
NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR RULE
(INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT,
CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER TO ENFORCE
ANY
OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW.
The
Borrower hereby consents to any motion for relief from stay that may be filed
by
the Holder in any bankruptcy or insolvency proceeding initiated by or against
the Borrower and, further, agrees not to file any opposition to any motion
for
relief from stay filed by the Holder. The Borrower represents, acknowledges
and
agrees that this provision is a specific and material aspect of the Loan
Documents, and that the Holder would not agree to the terms of the Loan
Documents if this waiver were not a part of this Note. The Borrower further
represents, acknowledges and agrees that this waiver is knowingly, intelligently
and voluntarily made, that neither the Holder nor any person acting on behalf
of
the Holder has made any representations to induce this waiver, that the Borrower
has been represented (or has had the opportunity to he represented) in the
signing of this Note and the Loan Documents and in the making of this waiver
by
independent legal counsel selected by the Borrower and that the Borrower has
discussed this waiver with counsel.
ARTICLE
IV
MISCELLANEOUS
4.1 Failure
or Indulgence Not Waiver.
No
failure or delay on the part of 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.
4.2 Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Borrower to: Aprecia, Inc., 0000 Xxxx
Xxxxx Xxxx, Xxxxxxxx, XX 00000, Attn: Xxxxxxx Xxxxxxxxx, President and CEO,
telecopier: (000) 000-0000, with a copy by telecopier only to: Xxxxxx X. Xxxxxx,
Esq., 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx 00000-0000, telecopier number:
(000) 000-0000, and (ii) if to the Holder, to the name, address and telecopy
number set forth on the front page of this Note, with a copy by telecopier
only
to Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000.
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4.3 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.
4.4 Assignability.
This
Note shall be binding upon the Borrower and its successors and assigns, and
shall inure to the benefit of the Holder and its successors and
assigns.
4.5 Cost
of Collection.
If
default is made in the payment of this Note, Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys'
fees.
4.6 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 civil or state
courts of New York or in the federal courts located in the State and county
of
New York. Both parties and the individual signing this Agreement on behalf
of
the Borrower 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
decision in favor of the Holder. This
Note shall be deemed an unconditional obligation of Borrower for the payment
of
money and, without limitation to any other remedies of Holder, may be enforced
against Borrower by summary proceeding pursuant to New York Civil Procedure
Law
and Rules Section 3213 or any similar rule or statute in the jurisdiction where
enforcement is sought. For purposes of such rule or statute, any other document
or agreement to which Holder and Borrower are parties or which Borrower
delivered to Holder, which may be convenient or necessary to determine Holder’s
rights hereunder or Xxxxxxxx’s obligations to Holder are deemed a part of this
Note, whether or not such other document or agreement was delivered together
herewith or was executed apart from this Note.
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4.7 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.
IN
WITNESS WHEREOF,
Xxxxxxxx has caused this Note to be signed in its name by an authorized officer
as of the ____ day of May, 2007.
| APRECIA,
INC.
By:________________________________
Name:
Title:
|
WITNESS:
______________________________________
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