SECURED TERM NOTE
FOR VALUE RECEIVED, each of XXXXXX EQUIPMENT, INC., a Delaware
corporation ("Xxxxxx Equipment"), and XXXXXX VENTURES, INC., a Delaware
corporation ("Xxxxxx Ventures") and together with Xxxxxx Equipment, each a
"Borrower" and collectively the "Borrowers") jointly and severally promises to
pay to LAURUS MASTER FUND, LTD., c/o 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 Four Million Six Hundred Forty
Thousand Dollars ($4,640,000), together with any accrued and unpaid interest
hereon, on July 6, 2006 (the "Maturity Date") if not sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Security and Purchase Agreement
dated as of November 9, 2004 among Borrowers and the Holder (as amended by that
certain letter agreement dated as of the date hereof by and among the Borrowers
and the Holder and as otherwise heretofore or hereafter amended, modified,
restated and supplemented from time to time, the "Security Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & REDEMPTION
1.1. Interest Rate. Subject to Sections 2.9 and 4.7 hereof, interest
payable on the outstanding principal amount of this Note (the "Principal
Amount") shall accrue at a rate per annum equal to ten percent (10%). Interest
shall be (i) calculated on the basis of a 360 day year, and (ii) payable
monthly, in arrears, commencing on February 1, 2006 and on the first Business
Day of each consecutive calendar month thereafter through and including the
Maturity Date, whether by acceleration or otherwise.
1.2. Mandatory Redemption. The total outstanding Applicable Principal
Amount (as defined below) together with any accrued and unpaid interest hereon
and any and all other unpaid amounts which are then owing by the Borrowers to
the Holder in connection with the transactions contemplated by this Note, shall
be due and payable on the earlier of (i) the Maturity Date and (ii) the
consummation of any offering of Xxxxxx Equipment's Common Stock to a Person
other than the Holder. For purposes of this Note, the "Applicable Principal
Amount" shall mean 115% of the Principal Amount outstanding at the time of such
payment or prepayment, as applicable.
1.3. Optional Redemption. The Borrowers may prepay this Note ("Optional
Redemption") by paying to the Holder a sum of money equal to the Applicable
Principal Amount 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 Security Agreement and/or any other Ancillary Agreement (the "Redemption
Amount"), in each case, outstanding on the Redemption Payment Date (as defined
below). Xxxxxx Equipment shall deliver to the Holder a written notice of
redemption (the "Notice of Redemption") specifying 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. On the Redemption
Payment Date, the Redemption Amount must be paid in good funds to the Holder. In
the event the Borrowers fail to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then such Notice of Redemption will be null
and void.
ARTICLE II
EVENTS OF DEFAULT
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, shall be an "Event of Default":
2.1. Failure to Pay Principal, Interest or other Fees. Any Borrower
fails to pay when due any installment of principal, interest or other fees
hereon or on any other promissory note issued pursuant to the Security
Agreement, or any Borrower fails to pay when due any amount due under any other
promissory note issued by such Borrower, when due in accordance with the terms
of such note, 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.
2.2. Breach of Covenant. Any Borrower breaches any covenant or other
term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of fifteen (15) days after the
occurrence thereof.
2.3. Breach of Representations and Warranties. Any representation or
warranty of any Borrower or any of its Subsidiaries made herein, or the Security
Agreement, or in any Ancillary Agreement shall be false or misleading in any
material respect.
2.4. Receiver or Trustee. Any 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 any Borrower or any of its Subsidiaries or any of
their respective property or other assets for more than $250,000 in the
aggregate for Borrower and all such Subsidiaries, and shall remain unvacated,
unbonded or unstayed for a period of thirty (30) days.
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 by or against any Borrower or any
of its Subsidiaries.
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2.7. Default Under Other Agreements. The occurrence of an Event of
Default under and as defined in the Security Agreement or any Ancillary
Agreement or any event of default (or similar term) under any other agreement
evidencing indebtedness of at least $250,000.
2.8. Change in Control. The occurrence of a change in the controlling
ownership of any Borrower.
DEFAULT RELATED PROVISIONS
2.9. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, interest on this Note shall automatically be
increased by one and one-half percent (1.50%) per month, and all outstanding
Obligations, including unpaid interest, shall continue to accrue interest from
the date of such Event of Default at such interest rate applicable to such
Obligations until such Event of Default is cured or waived.
2.10. Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE III
DEFAULT PAYMENTS
3.1. Default Payment. If an Event of Default occurs and is continuing
beyond any applicable grace period, the Holder, at its option, may elect, in
addition to all rights and remedies of Holder under the Security Agreement and
the Ancillary Agreements and all obligations of each Borrower under the Security
Agreement and the Ancillary Agreements, to require the Borrowers to make a
Default Payment ("Default Payment"). The Default Payment shall be 115% of the
outstanding principal amount of the Note, plus accrued but unpaid interest, all
other fees then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be applied first to any fees due and payable to Holder
pursuant to the Notes or the Ancillary Agreements, then to accrued and unpaid
interest due on the Notes and then to outstanding principal balance of the
Notes.
3.2. Default Payment Date. The Default Payment shall be due and payable
immediately on the date that the Holder has exercised its rights pursuant to
Section 3.1.
ARTICLE IV
MISCELLANEOUS
4.1. 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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4.2. Notices. Any notice herein required or permitted to be given shall
be in writing and provided in accordance with the terms of the Security
Agreement.
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, and any successor instrument as it may be amended or supplemented.
4.4. Assignability. This Note shall be binding upon each Borrower and
its successors and assigns, and shall 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 Security Agreement.
4.5. Cost of Collection. If default is made in the payment of this
Note, each Borrower shall jointly and severally 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 state courts of New York or in the federal courts located in the state of
New York. Each party hereto and the individual signing this Note on behalf of
each 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 any Borrower in any
other jurisdiction to collect on such 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 order in favor of Xxxxxx.
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 Borrowers to the Holder and thus refunded to the
Borrowers
4.8. Security Interest. The Holder has been granted a security interest
in certain assets of the Borrowers as more fully described in the Security
Agreement.
4.9. 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 favor any party
against the other.
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4.10. Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Borrowers (or its agent) shall register the Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Borrowers of this Note to the new holder
or the issuance by the Borrowers of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Borrowers (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, each Borrower has caused this Secured Term Note to
be signed in its name effective as of this 9th day of January, 2006.
XXXXXX EQUIPMENT, INC.
By: /s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
Title: Chairman
WITNESS:
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XXXXXX VENTURES, INC.
By: /s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
Title: Chairman
WITNESS:
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