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 One Million
Five Hundred Thousand Dollars ($1,500,000), together with any accrued and unpaid
interest hereon, on January 17, 2009 (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 the sum of (i) the “prime rate” published in
The
Wall Street Journal
from
time to time (the “Prime
Rate”),
plus
two percent (2%) (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. The Contract Rate shall not at any time be less than
nine percent (9%). Interest shall be (i) calculated on the basis of a 360 day
year, and (ii) payable monthly, in arrears, commencing on February 1, 2007
and
on the first Business Day of each consecutive calendar month thereafter through
and including the Maturity Date, whether by acceleration or otherwise (each
date
upon which interest shall be so payable, an “Interest
Payment Date”).
1.2. Optional
Redemption.
The
Borrowers may prepay this Note (“Optional
Redemption”)
by
paying to the Holder a sum of money a sum of money equal to one hundred and
five
percent (105%) of the principal amount of this Note together with accrued but
unpaid interest 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.
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.
2
DEFAULT
RELATED PROVISIONS
2.9. Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
the
Contract Rate 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.
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.
3
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.
4
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.]
5
IN
WITNESS WHEREOF,
each
Borrower has caused this Secured Term Note to be signed in its name effective
as
of this 17th
day of
January, 2007.
| XXXXXX EQUIPMENT, INC. | ||
| |
|
|
| By: | /s/ XXXXXXX XXXXXX | |
|
Name: Xxxxxxx Xxxxxx |
||
| Title: CRO | ||
| XXXXXX VENTURES, INC. | ||
| |
|
|
| By: | /s/ XXXXXXXX XXXXXX | |
|
Name: Xxxxxxx Xxxxxx |
||
|
Title:
CRO
|
||
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