THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
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 PACIFIC CMA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
FOR VALUE RECEIVED, each of PACIFIC CMA, INC., a Delaware
corporation (the "Parent"), and the other companies listed on Exhibit A attached
hereto (such other companies together with the Parent, each a "Company" and
collectively, the "Companies"), 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,
the sum of Four Million Dollars ($4,000,000), or, if different, the aggregate
principal amount of all Loans (as defined in the Security Agreement referred to
below), together with any accrued and unpaid interest hereon, on July 29, 2008
(the "Maturity Date") if not sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement among the Companies
and the Holder dated as of the date hereof (as amended, modified and/or
supplemented from time to time, the "Security Agreement").
The following terms shall apply to this Minimum Borrowing Note (this
"Note"):
ARTICLE I
CONTRACT RATE
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest
payable on the outstanding principal amount of this Note (the "Principal
Amount") shall accrue at a rate per annum equal to the "prime rate" published in
The Wall Street Journal from time to time (the "Prime Rate"), plus one percent
(1.0%) (the "Contract Rate"). The Contract 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 the Prime Rate. Subject to Section 1.2,
the Contract Rate shall not at any time be less than six percent (6.0%) per
annum. Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on August 1, 2005 on the first business
day of each consecutive calendar month thereafter through and including the
Maturity Date and on the Maturity Date, whether by acceleration or otherwise.
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall
be calculated on the last business day of each calendar month hereafter (other
than for increases or decreases in the Prime Rate which shall be calculated and
become effective in accordance with the terms of Section 1.1) until the Maturity
Date (each a "Determination Date") and shall be subject to adjustment as set
forth herein. If (i) the Parent shall have registered the shares of the Common
Stock underlying the conversion of each Minimum Borrowing Note and each Warrant
on a registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), and (ii) the market price (the "Market Price") of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market for the five
(5) trading days immediately preceding a Determination Date exceeds the then
applicable Fixed Conversion Price by at least twenty-five percent (25%), the
Contract Rate for the succeeding calendar month shall automatically be reduced
by 200 basis points (200 b.p.) (2%) for each incremental twenty-five percent
(25%) increase in the Market Price of the Common Stock above the then applicable
Fixed Conversion Price. Notwithstanding the foregoing (and anything to the
contrary contained herein), in no event shall the Contract Rate at any time be
less than zero percent (0%).
ARTICLE II
LOANS; PAYMENTS UNDER THIS NOTE
2.1 Loans. All Loans evidenced by this Note shall be made in
accordance with the terms and provisions of the Security Agreement.
2.2 No Effective Registration. Notwithstanding anything to the
contrary herein, the Holder shall not be required to accept shares of Common
Stock as payment following a conversion by the Holder if there fails to exist an
effective current Registration Statement (as defined in the Registration Rights
Agreement) covering the shares of Common Stock to be issued, or if an Event of
Default hereunder exists and is continuing, unless such requirement is otherwise
waived in writing by the Holder in whole or in part at the Holder's option. If
Xxxxxx submits a Notice of Conversion and there are no shares of Common Stock
underlying this Note that are subject to an effective current Registration
Statement, Laurus shall have the option of accepting shares of Common Stock that
are not subject to an effective current Registration Statement or withdrawing
such Notice of Conversion (in which case such Notice of Conversion shall be
deemed withdrawn and all obligations under this Note relating to such Notice of
Conversion shall be reinstated).
2.3 Optional Redemption in Cash. The Companies will have the option
of prepaying this Note ("Optional Redemption") by paying to the Holder a sum of
money equal to one hundred twenty percent (120%) of the principal amount of this
Note 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, or any other Ancillary Agreement (the "Redemption Amount")
outstanding on the Redemption Payment Date (as defined below). The Company 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 not be less than seven (7) days after the date
of the Notice of Redemption (the "Redemption Period"). A Notice of Redemption
shall not be effective with respect to any portion of this Note for which the
Holder has previously delivered a Notice of Conversion (defined below) pursuant
to Section 3.1, or for conversions elected to be made by the Holder pursuant to
2
Section 3.1 during the Redemption Period. The Redemption Amount shall be
determined as if such Xxxxxx's conversion elections had been completed
immediately prior to the date of the Notice of Redemption. On the Redemption
Payment Date, the Redemption Amount (plus any additional interest and fees
accruing on the Notes during the Redemption Period) must be irrevocably paid in
full in immediately available funds to the Holder. In the event the Companies
fail to pay the Redemption Amount on the Redemption Payment Date, then such
Redemption Notice shall be null and void.
ARTICLE III
CONVERSION RIGHTS AND FIXED CONVERSION PRICE
3.1 Optional Conversion. Subject to the terms of this Article III,
the Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or during an Event of Default (as defined in Article IV), and,
subject to the limitations set forth in Section 3.2 hereof, to convert all or
any portion of the outstanding Principal Amount and/or accrued interest into
fully paid and nonassessable shares of the Common Stock at the Fixed Conversion
Price. For purposes hereof, subject to Section 3.6 hereof, the initial "Fixed
Conversion Price" means (i) with respect to the first $3,750,000 of the
aggregate principal amount converted pursuant to the terms of this Note, any
other Minimum Borrowing Note or the Revolving Note (and all interest related
thereto), $.88 and (ii) with respect to the remaining principal amount converted
pursuant to the terms of this Note, any other Minimum Borrowing Note or the
Revolving Note (and all interest related thereto), $1.05. The shares of Common
Stock to be issued upon such conversion are herein referred to as the
"Conversion Shares."
3.2 Conversion Limitation.
Notwithstanding anything contained herein to the contrary, the Holder
shall not be entitled to convert pursuant to the terms of this Note an amount
that would be convertible into that number of Conversion Shares which would
exceed the difference between (i) 4.99% of the outstanding shares of Common
Stock and (ii) the number of shares of Common Stock beneficially owned by the
Holder. For purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act and
Regulation 13d-3 thereunder. The Conversion Shares limitation described in this
Section 3.2 shall automatically become null and void following written notice to
any Company upon the occurrence and during the continuance of an Event of
Default, or upon 75 days prior written notice to the Parent, except that at no
time shall the number of shares of Common Stock beneficially owned by the Holder
exceed 19.99% of the outstanding shares of Common Stock, or such lesser amount
as required by the applicable Principal Market on which the Parent's Common
Stock is listed, unless such shall first be approved by the Parent's
stockholders. Notwithstanding anything contained herein to the contrary, the
number of shares of Common Stock issuable by the Parent and acquirable by the
Holder at a price below $.81 per share pursuant to the terms of this Note, the
Security Agreement or any other Ancillary Agreement, shall not exceed an
aggregate of 5,095,933 shares of Common Stock (subject to appropriate adjustment
for stock splits, stock dividends, or other similar recapitalizations affecting
3
the Common Stock) (the "Maximum Common Stock Issuance"), unless the issuance of
Common Stock hereunder in excess of the Maximum Common Stock Issuance shall
first be approved by the Parent's shareholders. If at any point in time and from
time to time the number of shares of Common Stock issued pursuant to the terms
of this Note, the Security Agreement or any other Ancillary Agreement, together
with the number of shares of Common Stock that would then be issuable by the
Parent to the Holder in the event of a conversion or exercise pursuant to the
terms of this Note, the Security Agreement or any other Ancillary Agreement,
would exceed the Maximum Common Stock Issuance but for this Section 3.2, the
Parent shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance. Notwithstanding anything contained herein to
the contrary, the provisions of this Section 3.2 are irrevocable and may not be
waived by the Holder or any Company.
3.3 Mechanics of Xxxxxx's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion in
substantially the form of Exhibit A hereto (appropriately completed) ("Notice of
Conversion") to the Parent and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Parent
within two (2) Business Days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Parent in accordance with
the provisions hereof shall be deemed a Conversion Date (the "Conversion Date").
Pursuant to the terms of the Notice of Conversion, the Parent will issue
instructions to the transfer agent accompanied by an opinion of counsel within
two (2) Business Days of the date of the delivery to the Parent of the Notice of
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
Business Days after receipt by the Parent of the Notice of Conversion (the
"Delivery Date"). In the case of the exercise of the conversion rights set forth
herein the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Parent of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of the Conversion
Shares, unless the Holder provides the Parent written instructions to the
contrary.
3.4 Late Payments. Each Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to this Article
beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to all other rights and
remedies which the Holder may have under this Note, applicable law or otherwise,
the Companies shall, jointly and severally, pay late payments to the Holder for
any late issuance of Conversion Shares in the form required pursuant to this
Article III upon conversion of this Note, in the amount equal to $200 per
Business Day after the Delivery Date. The Companies shall, jointly and
severally, make any payments incurred under this Section in immediately
available funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing that
4
portion of the principal and interest and fees to be converted, if any, by the
then applicable Fixed Conversion Price.
3.6 Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 3.1 shall be subject to adjustment from time to time upon
the occurrence of certain events during the period that this conversion right
remains outstanding, as follows:
(a) Reclassification. If the Parent at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after
such reclassification or other change at the sole election of the Holder.
(b) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock or any
preferred stock issued by the Parent in shares of Common Stock, the Fixed
Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
(c) Share Issuances. Subject to the provisions of this Section
3.6, if the Parent shall at any time prior to the conversion or repayment in
full of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a person other than the Holder (except (i)
pursuant to Sections 3.6(a) or (b) above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed to
the Holder in writing (either in a Schedule to the Security Agreement or in any
of the Parent's SEC Reports or Exchange Act Filings); or (iii) pursuant to
options that may be issued under any employee incentive stock option and/or any
qualified stock option plan adopted by the Parent) for a consideration per share
(the "Offer Price") less than the Fixed Conversion Price in effect at the time
of such issuance, then the Fixed Conversion Price shall be immediately reset
pursuant to the formula below. For purposes hereof, the issuance of any security
of the Parent convertible into or exercisable or exchangeable for Common Stock
shall result in an adjustment to the Fixed Conversion Price upon the issuance of
such securities pursuant to the formula below.
If the Parent issues any additional shares of Common Stock for
a consideration per share less than the then-applicable Fixed Conversion Price
pursuant to this Section 3.6 then, and thereafter successively upon each such
issue, the Fixed Conversion Price shall be adjusted by multiplying the then
applicable Fixed Conversion Price by the following fraction:
5
--------------------------
A + B
--------------------------
(A + B) + [((C - D) x B)
/ C]
--------------------------
A = Total amount of shares convertible pursuant to the
Notes
B = Actual shares sold in the offering
C = Fixed Conversion Price
=D = Offer Price
(d)Computation of Consideration. For purposes of any computation respecting
consideration received pursuant to Section 3.6(c) above, the following shall
apply:
(i) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Parent for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Parent
(irrespective of the accounting treatment thereof); and
(iii) upon any such exercise, the aggregate consideration received
for such securities shall be deemed to be the consideration received by
the Parent for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Parent upon the conversion or
exchange thereof (the consideration in each case to be determined in the
same manner as provided in subsections (i) and (ii) of this Section
3.6(d)).
3.7 Reservation of Shares. During the period the conversion right
exists, the Parent will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note and the Warrant. The Parent represents
that upon issuance, the Conversion Shares will be duly and validly issued, fully
paid and non-assessable. The Parent agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration Rights. The Holder has been granted registration
rights with respect to the Conversion Shares as set forth in a Registration
Rights Agreement.
3.9 Issuance of New Note. Upon any partial conversion of this Note,
a new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Parent to the Holder for the principal
6
balance of this Note and interest which shall not have been converted or paid.
Subject to the provisions of Article IV of this Note, the Parent shall not pay
any costs, fees or any other consideration to the Holder for the production and
issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
4.1 Events of Default. The occurrence of an Event of Default under
the Security Agreement shall constitute an event of default ("Event of Default")
hereunder.
4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Companies shall, jointly and severally,
pay additional interest on the outstanding principal balance of this Note in an
amount equal to one percent (1%) per month, and all outstanding Obligations,
including unpaid interest, shall continue to accrue interest at such additional
interest rate from the date of such Event of Default until the date such Event
of Default is cured or waived.
4.3 Termination upon an Event of Default. Following the occurrence
and during the continuance of an Event of Default, the Holder, at its option,
may elect., in addition to all rights and remedies of the Holder under the
Security Agreement and the Ancillary Agreements and all obligations of each
Company under the Security Agreement and the Ancillary Agreements, to terminate
the Security Agreement pursuant to Section 17 thereof and require the Companies,
jointly and severally, to make a Default Payment ("Default Payment"). The
Default Payment shall be one hundred twenty percent (120%) 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 the Holder
pursuant to the Notes and/or the Ancillary Agreements, then to accrued and
unpaid interest due on the Notes, the Security Agreement and then to the
outstanding principal balance of the Notes. The Default Payment shall be due and
payable immediately on the date that the Holder has exercised its rights
pursuant to this Section 4.3.
ARTICLE V
MISCELLANEOUS
5.1 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.
5.2 Cumulative Remedies. The remedies under this Note shall be
cumulative.
5.3 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.
7
5.4 Notices. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectively given: (a) upon personal
delivery to the party notified, (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
respective Company at the addresses provided for such Company in the Security
Agreement executed in connection herewith, and to the Holder at the address
provided in the Security Agreement for such Holder, with a copy to Xxxx X.
Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, xxxxxxxxx
number (000) 000-0000, or at such other address as the respective Company or the
Holder may designate by ten days advance written notice to the other parties
hereto.
5.5 Amendment Provision. The term "Note" and all references 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 such successor instrument may be
amended or supplemented.
5.6 Assignability. This Note shall be binding upon each Company 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. No Company may assign any of its
obligations under this Note without the prior written consent of the Holder, any
such purported assignment without such consent being null and void.
5.7 Cost of Collection. In case of any Event of Default under this
Note, the Companies shall, jointly and severally, pay the Holder's reasonable
costs of collection, including reasonable attorneys' fees.
5.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY
COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS
NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY
MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF
THE OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT EACH COMPANY ACKNOWLEDGES THAT
ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
8
THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) EACH COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH COMPANY HERETO
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE
HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE
SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
5.9 Severability. 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 enforceability of any other provision of this
Note.
5.10 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 rate
permitted by such law, any payments in excess of such maximum rate shall be
credited against amounts owed by the Companies to the Holder and thus refunded
to the Companies.
5.11 Security Interest. The Holder has been granted a security
interest (i) in certain assets of the Companies as more fully described in the
Security Agreement and (ii) pursuant to the Stock Pledge Agreement dated as of
the date hereof.
9
5.12 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.
[Balance of page intentionally left blank; signature page follows]
10
IN WITNESS WHEREOF, each Company has caused this Secured Convertible
Minimum Borrowing Note to be signed in its name effective as of this 29th day of
July 2005.
PACIFIC CMA, INC., a Delaware corporation
By:__________________________________
Name:
Title:
WITNESS:
----------------------------------
PACIFIC CMA INTERNATIONAL, LLC, a
Colorado limited liability company
By:__________________________________
Name:
Title:
WITNESS:
----------------------------------
AIRGATE INTERNATIONAL CORPORATION, a New
York corporation
By:__________________________________
Name:
Title:
WITNESS:
----------------------------------
AIRGATE INTERNATIONAL CORPORATION
(CHICAGO), an Illinois corporation
By:__________________________________
Name:
Title:
11
WITNESS:
----------------------------------
PARADIGM INTERNATIONAL INC., a Florida
corporation
By:__________________________________
Name:
Title:
WITNESS:
----------------------------------
12
EXHIBIT A
OTHER COMPANIES
PACIFIC CMA INTERNATIONAL, LLC, a Colorado limited liability company
AIRGATE INTERNATIONAL CORPORATION, a New York corporation
AIRGATE INTERNATIONAL CORPORATION (CHICAGO), an Illinois corporation
PARADIGM INTERNATIONAL INC., a Florida corporation
13
EXHIBIT B
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the
Secured Convertible Minimum Borrowing Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Secured Convertible Minimum Borrowing
Note dated as of July __, 2005 (the "Note") issued by Pacific CMA, Inc. (the
"Parent") and the other Companies named and as defined therein into shares of
Common Stock of the Parent in accordance with the terms and conditions set forth
in the Note, as of the date written below.
Date of Conversion: ________________________________________________
Conversion Price: ________________________________________________
Shares To Be Delivered: ________________________________________________
Signature: ________________________________________________
Print Name: ________________________________________________
Address: ________________________________________________
Holder DWAC instructions ________________________________________________
14
