Contract
EXHIBIT
10.03
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 STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXX.XXX, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
AMENDED
AND RESTATED SECURED REVOLVING NOTE
FOR
VALUE
RECEIVED, XXX.XXX, INC., a Delaware corporation (the “Borrower”),
promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services
Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman,
Cayman Islands, Fax: 000-000-0000 (the “Holder”)
or its
registered assigns, on order, the sum of Seven Hundred Fifty Thousand Dollars
($750,000) without duplication of any amounts owing by Borrower to Holder under
the Minimum Borrowing Notes (as defined in the Security Agreement referred
to
below), or, if different, the aggregate outstanding principal amount of all
“Loans” made and allocated hereto (as such term is defined in the Security
Agreement referred to below), together with any accrued and unpaid interest
hereon, on November 1, 2006 (the “Maturity
Date”).
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Security Agreement between the Borrower and the Holder dated as
of
August 31, 2004 (as amended, modified and supplemented from time to time, the
“Security
Agreement”).
The
following terms shall apply to this Amended and Restated Secured Revolving
Note
(this “Note”):
ARTICLE
I
CONTRACT
RATE & PREPAYMENTS
1.1. Interest
Rate.
Subject
to Sections 4.3 and 5.7 hereof, interest payable on this Note shall accrue
at a
rate per annum equal to (a) seven percent (7%) through August 1, 2006 and (b)
ten percent (10.00%) after August 1, 2006 (the “Contract
Rate”).
1.2. Contract
Rate and Payments.
Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on October 1, 2004 and on the first
business day of each consecutive calendar month thereafter until the Maturity
Date (and on the Maturity Date), whether by acceleration or otherwise (each,
a
“Contract
Rate Payment Date”).
ARTICLE
II
HOLDER’S
CONVERSION RIGHTS
2.1. Optional
Conversion.
Subject
to the terms of this Article II, 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
2.2 hereof, to convert all or any portion of the outstanding Principal Amount
and/or accrued interest and fees due and payable into fully paid and
nonassessable restricted shares of the Common Stock at the Fixed Conversion
Price (defined below). For purposes hereof, subject to Section 2.7 hereof,
the
initial “Fixed
Conversion Price”
means
$0.28 (105% of the average of the closing price of the Common Stock for the
ten
(10) trading days immediately prior to the date hereof.) The shares of Common
Stock to be issued upon such conversion are herein referred to as the
“Conversion
Shares.”
2.2. Conversion
Limitation.
.4.99%
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 shares of Common Stock which, when added
to
the number of shares of Common Stock otherwise beneficially owned by such Holder
(with respect to such Holder, such number of shares of Common Stock herein
referred to as the Holder’s “Beneficial
Ownership”)
including those issuable upon exercise of warrants held by such Holder would
exceed 4.99% of the outstanding shares of Common Stock of the Borrower at the
time of conversion. For the 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. In connection with any obligation
of the Borrower to issue to the holder shares of Common Stock pursuant to the
terms hereof, the Holder will inform the Borrower of such Xxxxxx’s Beneficial
Ownership. Subject to Section 2.3 below, the conversion limitation described
in
this Section 2.2 shall automatically become null and void without any notice
to
Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 75 days prior notice to the
Borrower.
2.3. 19.99%
Limitation.
Notwithstanding anything contained herein to the contrary, the number of shares
of Common Stock issuable by the Borrower and acquirable by the Holder at a
price
below $0.24 per share pursuant to the terms of this Note, the Security Agreement
or any Ancillary Agreement, shall not exceed an aggregate of 19.99% of the
total
issued and outstanding shares (calculated in accordance with applicable
Principal Market rules and regulations) shares of the Borrower’s Common Stock
(subject to appropriate adjustment for stock splits, stock dividends, or other
similar recapitalizations affecting the Common Stock) or otherwise violate
the
Borrower’s obligations under the rules and regulations of the Principal Market
(the “Maximum
Common Stock Issuance”),
unless Stockholder Approval shall first be obtained in accordance with Section
13(u) of the Security Agreement. Borrower shall not be obligated to issue such
shares of Common Stock in excess of the Maximum Common Stock
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Issuance
unless and until the Borrower obtains the Stockholder Approval at its next
annual meeting of stockholders in accordance with applicable Principal Market
rules and regulations.
2.4 Optional
Prepayment in Cash.
(a)
Subject to Section 2.4(b) hereof, the Borrower will have the option of prepaying
this Note in full (“Optional
Prepayment”)
by
paying to the Holder a sum of money equal to one hundred percent (100%) of
the
then outstanding 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 “Prepayment
Amount”).
The
Borrower may exercise its prepayment right by delivery of written notice (the
“Notice of Prepayment”) to the Holder and otherwise complying with the
provisions of this Section 2.4.
(b)
Any
Notice of Prepayment delivered pursuant to this Section 2.4 shall specify the
date for such Optional Prepayment (the “Prepayment
Payment Date”)
which
date shall be seven (7) days after the date of the Notice of Prepayment (the
“Prepayment
Period”).
A
Notice of Prepayment 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 2.1, or for conversions made by the Holder
pursuant to Section 2.1 during the Prepayment Period of all or any portion
of
the then outstanding debt under this Note. Subject to Conversion by Holder
as
herein provided, on the Prepayment Payment Date, the Prepayment Amount shall
be
determined as of such Xxxxxx’s conversion elections had been completed
immediately prior to the date of the notice of Prepayment. On the Prepayment
Payment Date, the Prepayment Amount (plus any additional interest and fees
accruing on this Note during the Prepayment Period) must be irrevocably paid
in
full in immediately available funds to the Holder. In the event the Borrower
fails to pay the Prepayment Amount on the Prepayment Payment Date, then such
Prepayment Notice will be null and void. If Holder effects a conversion of
all
of the outstanding indebtedness of this Note during the Prepayment Period,
this
Note shall be deemed fully paid and terminated upon such conversion without
any
further obligation of Borrower hereunder.
2.4.
Mechanics of Holder’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
(“Notice of Conversion”) to the Borrower 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 Borrower within two (2) business days after the Conversion Date.
Each date on which a Notice of Conversion is delivered or telecopied to the
Borrower in accordance with the provisions hereof shall be deemed a Conversion
Date (the “Conversion Date”). A form of Notice of Conversion to
be employed by the Holder is annexed hereto as Exhibit A. Pursuant to the terms
of the Notice of Conversion, the Borrower will issue instructions to the
transfer agent accompanied by an opinion of counsel within one (1) business
day
of the date of the delivery to Borrower 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
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(“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
within three (3) business days after receipt by the Borrower 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 Borrower of the Notice of Conversion. The Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides the Borrower written instructions to the contrary.
2.5. Late
Payments.
The
Borrower understands that a delay in the delivery of the shares of Common Stock
in the form required pursuant to this Article II beyond the Delivery Date could
result in economic loss to the Holder. As compensation to the Holder for such
loss, the Borrower agrees to pay late payments to the Holder for late issuance
of such shares in the form required pursuant to this Article II upon conversion
of this Note, in the amount equal to $500 per business day after the Delivery
Date. The Borrower shall pay any payments incurred under this Section in
immediately available funds upon demand.
2.6. Adjustment
Provisions.
The
Fixed Conversion Price and number and kind of shares or other securities to
be
issued upon conversion determined pursuant to Section 2.1 shall be subject
to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
A.
Reclassification.
If the
Borrower 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 Borrower 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 2.6, if the Borrower 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
pursuant to: (i) Subsections A or B above; (ii) securities issued, or deemed
issued (as provided below), to directors, officers, employees or consultants
of
the Borrower or a subsidiary of the Borrower in connection with their service
as
directors of the Borrower or a subsidiary of the Borrower, their employment
by
the Borrower or a subsidiary of the Borrower or their retention as consultants
by the Borrower or a subsidiary of the Borrower under any stock agreement and/or
stock plan adopted by the Borrower, plus such number of
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shares
of
Common Stock which are repurchased by the Borrower from such persons pursuant
to
contractual rights held by the Borrower and at repurchase prices not exceeding
the respective original purchase prices paid by such persons to the Borrower
therefor; (iii) shares of Common Stock issuable upon exercise of options,
warrants or other obligations outstanding as of the date hereof; (iv)
shares
of
Common Stock issuable upon the conversion of the Borrower’s Preferred Stock in
existence on the date hereof; and (v) shares of Common Stock issued as payment
of interest in accordance with the terms of the notes issued pursuant to that
Note and Warrant Purchase Agreement dated as of July 18, 2003 by and among
the
Borrower and the investors named therein) 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:
If
the
Corporation issues any additional shares pursuant to Section 2.6C above 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:
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A
+
B
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(A
+ B) + [((C - D) x B) / C]
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A
= Total
amount of shares convertible pursuant to this Note.
B
=
Actual shares sold in the offering
C
= Fixed
Conversion Price
D
=
Offering price
For
purposes hereof, the issuance of any security of the Borrower convertible into
or exercisable or exchangeable for Common Stock shall result in an adjustment
to
the Fixed Conversion Price at the time of issuance of such securities.
Notwithstanding the immediately foregoing, no adjustment to the then applicable
Fixed Conversion Price shall be made if such adjustment, as calculated pursuant
to this Section 2.6(C), would result in a change to the then applicable Fixed
Conversion Price of less than $0.01.
D.
Computation
of Consideration.
For
purposes of any computation respecting consideration received pursuant to
Subsection C above, the following shall apply:
(a) 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 Borrower for
any underwriting of the issue or otherwise in connection therewith;
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(b) 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 Borrower (irrespective of the accounting treatment thereof);
and
(c) Upon
any
such exercise, the aggregate consideration received for such securities shall
be
deemed to be the consideration received by the Borrower for the issuance of
such
securities plus the additional minimum consideration, if any, to be received
by
the Borrower upon the conversion or exchange thereof (the consideration in
each
case to be determined in the same manner as provided in clauses (a) and (b)
of
this Subsection (D)).
2.7. Reservation
of Shares.
During
the period the conversion right exists, the Borrower will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the full conversion of this Note. The
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. The Borrower 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 shares of Common Stock
upon
the conversion of this Note.
ARTICLE
III
EVENTS
OF DEFAULT
The
occurrence of any of the events set forth in Sections 3.1 and 3.2, shall be
an
Event of Default (“Event
of Default”):
3.1. Failure
to Pay Principal, Interest or other Fees.
Subject
to Section 3.3, the Borrower fails to pay when due any installment of principal,
interest or other fees hereon or on any other Note issued pursuant to the
Security Agreement, or the Borrower fails to pay when due any amount due under
any other promissory note issued by the Borrower, when due in accordance with
the terms thereof where such failure to pay has had, or could reasonably be
expected to have a Material Adverse Effect.
3.2
Other
Events of Default.
The
occurrence of any other Event of Default set forth in Section 19 of the Security
Agreement.
3.3
Payment
Grace Period.
The
Borrower shall have a five (5) business day grace period to pay any monetary
amounts due under this Note or the Security Agreement or any Ancillary
Agreement.
3.4
Conversion
Privileges.
The
conversion privileges set forth in Article II shall remain in full force and
effect immediately from the date hereof and until this Note is paid in
full.
3.5
Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
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ARTICLE
IV
DEFAULT
PAYMENTS
4.1. 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 all obligations of Borrower under the
Security Agreement, to require the Borrower to make a Default Payment
(“Default
Payment”).
The
Default Payment shall be 112% 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.
4.2. Default
Payment Date and Default Notice Period.
The
Default Payment shall be due and payable on the fifth business day after an
Event of Default as defined in Article III (“Default
Payment Date”)
has
occurred and is continuing beyond any applicable grace period. The period
between date upon which of an Event of Default has occurred and is continuing
beyond any applicable grace period and the Default Payment Date shall be the
“Default
Period.”
If
during the Default Period, the Borrower cures the Event of Default, the Event
of
Default will no longer exist and any additional rights the Holder had triggered
by the occurrence and continuance of an Event of Default will no longer exist,
including, without limitation, the right to receive the Default Payment. If
the
Event of Default is not cured during the Default Notice Period, all amounts
payable hereunder shall be due and payable on the Default Payment Date, all
without further demand, presentment or notice, or grace period, all of which
hereby are expressly waived.
4.3.
Default Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
interest on this Note shall automatically be increased to the Default Rate,
and
all outstanding Obligations under this Note, 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.
ARTICLE
V
MISCELLANEOUS
5.1. 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.
5.2. 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.
5.3.
Amendment Provision.
The
term “Note” and all reference thereto, as used throughout this instrument, shall
mean this instrument as originally executed, or if later
7
amended
or supplemented, then as so amended or supplemented, and any successor
instrument as it may be amended or supplemented.
5.4. 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, and
may
be assigned by the Holder in accordance with the requirements of the Security
Agreement.
5.5. Cost
of Collection.
If
default is made in the payment of this Note, the Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys’
fees.
5.6. 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. Both parties
and
the individual signing this Note 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
court
order in favor of Xxxxxx.
5.7. 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.
5.8. Security
Interest and Guarantee.
The
Holder has been granted a security interest in certain assets of the Borrower
as
more fully described in the Security Agreement.
5.9. 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.
[Balance
of page intentionally left blank; signature page follows.]
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IN
WITNESS WHEREOF,
the
Borrower has caused this Secured Convertible Revolving Note to be signed in
its
name effective as of this 2nd day of June, 2006.
XXX.XXX,
INC.
By:
/s/
Xxxxxx
Xxxxxx
Name:
Xxxxxx Xxxxxx
Title:
CFO
WITNESS:
/s/
Xxxx X.
Xxxxxxx
Xxxx
X.
Xxxxxxx
9
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Secured Convertible Revolving Note issued by XXX.Xxx,
Inc. on August 31, 2004, as amended, into Shares of Common Stock of XXX.xxx,
Inc. (the “Borrower”) according to the conditions set forth in such Note, as of
the date written below.
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Date
of Conversion:
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Conversion
Price:
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Shares
To Be Delivered:
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Signature:
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Print
Name:
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Address:
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Holder
DWAC instructions
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