FORM OF PROMISSORY NOTE]
EXHIBIT
10.3
[FORM
OF
PROMISSORY NOTE]
| [$___________] |
[__________
__,
2006]
|
FOR
VALUE
RECEIVED, Sparta
Commercial Services, Inc.,
a
Nevada corporation (“Borrower”), hereby promises to pay to
_________________________________ (the “Holder”), without demand, the sum of
$___________ on the forty-fifth (45th)
calendar day from the date hereof (the “Maturity Date”), together with simple
interest at the rate of 10% per annum. Whenever any payment to be made hereunder
falls due on a Saturday, Sunday or business holiday in New York, New York,
such
payment may be made on the next succeeding business day and such extension
of
time will, in such case, be included in computing interest, if any, in
connection with such payment.
Borrower
may prepay this Promissory Note at any time, in whole or in part, with accrued
interest to the date of prepayment, and without penalty. All payments on this
Promissory Note shall be applied first to the payment of accrued interest and
the balance shall be applied to principal.
Borrower
may extend the due date by up to forty-five (45) days.
In
the
event of default on repayment by the Borrower, as penalty, the simple interest
rate on the unpaid principal shall be increased to the lower of a rate of 20%
per annum or the highest applicable rate allowable under law commencing from
the
date of default.
Additionally,
in the event of default on repayment by the Borrower, the Equity Kicker and
the
Additional Equity (as both are defined in the Loan Agreement) to be issued
to
the Lender shall be increased by 50% for each month or portion thereof that
such
default has not been cured. For purposes of illustration only, assuming that
the
Equity Kicker is 50,000 shares of the Borrower’s common stock and the Additional
Equity is 30,000 shares, then, upon an event of default on repayment by the
Borrower, the Equity Kicker and the Additional Equity shall each be increased
by
40,000 shares of the Borrower’s common stock for each month or portion thereof
that such default is not cured.
Additionally,
as penalty, the repayment after default of this Promissory Note shall be
collateralized by a Security Interest. Such Security Interest shall mean a
continuing security interest in, a lien upon and a right of setoff against,
all
present and future (i) Accounts (defined as all of Borrower's present and future
accounts, contract rights, general intangibles, chattel paper, documents and
instruments, as such terms are defined in the New York Uniform Commercial Code
("UCC"), including, without limitation, all obligations for the payment of
money
arising out of our sale of goods or rendition of services), (ii) moneys,
securities and other property and the proceeds thereof, now or hereafter held
or
received by, or in transit to, Lender from or for Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
of
Borrower’s deposits (general or special), balances, sums and credits with Lender
at any time existing, (iii) all of Borrower’s right, title and interest, and all
of Borrower’s rights, remedies, security and liens, in, to and in respect of the
Accounts, including, without limitation, rights of stoppage in transit,
replevin, repossession and reclamation and other rights and remedies of an
unpaid vendor, lien or secured party, guaranties or other contracts of surety
ship with respect to the Accounts, deposits or other security for the obligation
of any Account Debtor, and credit and other insurance, (iv) all of Xxxxxxxx’s
right, title and interest in, to and in respect of all goods relating to, or
which by sale have resulted in, Accounts, including, without limitation, all
goods described in invoices or other documents or instruments with respect
to,
or otherwise representing or evidencing, any Account and all returned, retained
or repossessed goods, (v) all deposit accounts, as such term is defined in
the
UCC, (vi) all books, records, ledger cards, computer programs and other property
and general intangibles at any time evidencing or relating to the Accounts
(“Records”), (vii) all other general intangibles of every kind and description,
including (without limitation) trade names and trademarks and the goodwill
of
the business symbolized thereby, and Federal, State and local tax refund claims
of all kinds, and (viii) all proceeds of the foregoing, in any form, including,
without limitation, any claims against third parties for loss or damage to
or
destruction of any or all of the foregoing. The Security Interest shall be
subordinate to the rights of any lending institution, any asset-based lending
agreement, and any rights and preferences of investors in the Company’s Series A
Convertible Preferred Stock. As of the date hereof, Xxxxxxxx has not granted
any
security interest to any person. Except pursuant to agreements, terms and
conditions with any lending institution, any asset-based lending agreement,
any
rights and preferences of investors in the Private Placement, and in the
ordinary course of business, Xxxxxxxx agrees not to grant to any person any
security interest prior to the Maturity Date.
Any
notice herein required or permitted to be given shall be in writing and sent
by
means of certified or registered mail, express mail, or other overnight delivery
service, hand delivery confirmed by signed receipt or facsimile transmission
(followed by prompt transmission of the original of such notice by any of the
foregoing means) in each case proper postage or other charges pre-paid and
addressed or directed to the Holder or to the Borrower as set forth
below:
If
to the
Borrower:
000
Xxxxxxx Xxx., 00xx
Floor
New
York,
NY 10018
Attn.:
President
Fax:
000-000-0000
If
to the
Holder:
The
address set forth in the Signature Page to the Loan Agreement.
Such
notice shall be deemed given when actually received. Both the Holder and
Borrower may change the address and fax number for notices by service of notice
to the other as herein provided.
This
Promissory Note shall not be assignable.
Borrower
waives demand for payment, notice of nonpayment, presentment, notice of
dishonor, protest, and notice of protest.
This
Promissory Note shall be governed by the internal laws of the State of New
York,
without regard to the principles of conflict of laws, and shall be enforced
in
the courts located in New York County in the State of New York.
This
Promissory Note, together with the Loan Agreement, is the entire agreement
between the parties and neither party is relying on any prior or contemporaneous
representation or promise, or any omission of any information, in entering
into
this Promissory Note.
IN
WITNESS WHEREOF, Xxxxxxxx has caused this Promissory Note to be signed in its
name by its duly authorized representative on the date first written.
| Sparta Commercial Services, Inc. | ||
| By: | ||
|
Xxxxxxx
X. Xxxxxx, President
and
Chief Executive Officer
|
||
