FORM OF PROMISSORY NOTE
ANNEX
XI
TO
SECURITIES
PURCHASE AGREEMENT
<PROTOTYPE
FOR EACH ISSUANCE>
FORM
OF PROMISSORY NOTE
THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR
AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
ST.
XXXXXX INVESTMENTS, LLC
FOR VALUE RECEIVED, ST. XXXXXX INVESTMENTS LLC, a
limited liability company organized and existing under the laws of the State of
Illinois (the "Debtor"), promises to pay to AMERICAN SECURITY RESOURCES
CORPORATION, the registered holder hereof (the "Company"), the principal
sum of _____________________ and 00/100 Dollars (US
$_______)5 on the Maturity Date (as defined
below) and to pay interest on the principal sum outstanding from time to time in
arrears at the rate of 7.5% per annum, accruing from ______________, 20__,6 the date of initial issuance of
this Promissory Note (the “Issue Date”), to the Maturity Date. Interest shall
accrue monthly (pro-rated on a daily basis for any period longer or shorter than
a month) from the Issue Date and shall be payable in cash.
This Promissory Note is being issued
pursuant to the terms of the Securities Purchase Agreement, dated as of February
28, 2008 (the “Securities Purchase Agreement”), to which the Company and the
Debtor are parties. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Securities Purchase
Agreement.
This Promissory Note represents all or
a portion of the Debenture Purchase Price for the Company’s 7.75% Convertible
Debenture Series 08-__ No. 08- - ,
in the original principal amount of $___________7 issued to the Debtor on the Issue
Date (the “Specific Debenture”). This Promissory Note is the Specific
Purchase Note referred to in the Specific Debenture.
This
Promissory Note is subject to the following additional provisions:
1. This
Promissory Notes will initially be issued in denominations determined by the
Debtor, but are exchangeable for an equal aggregate principal amount of
Promissory Notes of different denominations, as requested by the Company
surrendering the same. No service charge will be made for such
registration or transfer or exchange.
2. The
Debtor shall be entitled to withhold from all payments of principal of, and
interest on, this Promissory Note any amounts required to be withheld under the
applicable provisions of the United States income tax laws or other applicable
laws at the time of such payments, and Company shall execute and deliver all
required documentation in connection therewith.
3. A. The
Debtor shall have the right to prepay any or all of the outstanding principal of
this Promissory Note at any time or from time to time, without the prior written
consent of the Company in each instance, provided, however, that any such
payment shall be applied in the priority provided in Section 3(B)
hereof.
B. Except
as may specified in a specific provision of this Promissory Note, any payments
under this Promissory Note shall be applied in the following order of priority:
(i) first to Other Costs (as defined below), (ii) then, to accrued
but unpaid interest; and (iii) then, to principal in the inverse order of
maturity.
4. A. The
term “Maturity Date” means the earlier of (i) __________, 20__8 (the “Scheduled Maturity Date”) or
(ii) the Required Prepayment Date (as defined below).
B. The
term “Required Prepayment Date” means, subject, however, to the provisions of
Section 4(C) through (E) below, (i) if this Promissory Note is No. 1 of this
Series, the date which is six (6) months after the Issue Date, and (ii) if this
Promissory Note is No. 2 or higher of this Series, the date which is one month
after the Required Prepayment Date of the Promissory Note with the immediate
preceding No. of this Series.9
C. Any
other provision hereof to the contrary notwithstanding, if, but for the giving
of notice or the passage of time or both, there would an Event of Default under
the Specific Debenture (a “Potential Event of Default”) on the Required
Prepayment Date, then the Required Prepayment Date shall be deferred until the
date which is twenty (20) Trading Days after there has been no Potential Event
of Default under the Specific Debenture. If the Required Prepayment
Date of any Promissory Note in this Series is deferred as a result of this
Section 4(C), the provisions of clause (ii) of Section 4(B) shall continue to
apply with respect to the Required Payment Date of the Promissory Note or Notes,
if any, with succeeding No(s). of this Series. If applicable, the
provisions of Section 4(D) or Section 4(E) hereof shall supersede the provisions
of this Section 4(C).
D. Any
other provision hereof (including, but not necessarily limited to the provisions
of Section 4(C) or 4(E) hereof) notwithstanding, if, at any time on or before
the Required Prepayment Date (as originally scheduled or as deferred by this
Section 4(C)), there is an Event of Default under the Specific Debenture (either
because there is no requirement for the giving of notice or the passage of time
or both or if, and to the extent, so provided in the Specific Debenture, the
relevant notice has been given or the relevant passage of time has occurred or
both have occurred), then the there shall be no obligation to make any payment
on a Required Prepayment Date for this Promissory Note or for any Promissory
Note or Notes, if any, with succeeding No(s). of this Series.
E. Any
other provision hereof (including, but not necessarily limited to the provisions
of Section 4(C) or 4(D) hereof) notwithstanding, no Required Prepayment Date for
this Note shall occur until the Company shall have provided the Holder with a
written opinion of counsel to the Company that, subject only to the payment or
other satisfaction in full of this Note, the Holder would be eligible to sell
all Conversion Shares issuable on conversion of the Specific Debenture under
Rule 144 on or after the date which is the later of (i) the Conversion Date (as
used in the Specific Debenture) for such share or (ii) the date which is six
months from the Issue Date.
5. Subject
to the terms of the Securities Purchase Agreement, no provision of this
Promissory Note shall alter or impair the obligation of the Debtor, which is
absolute and unconditional, to pay the principal of, and interest on, this
Promissory Note at the time, place, and rate, and in the coin or currency as
applicable, as herein prescribed.
6. A. The
obligations of the Debtor under this Promissory Note are secured under the terms
of that certain Security Interest and Pledge Agreement, dated as of February
___, 2008 (the “Pledge Agreement”), to which the Debtor and the Company are
parties, the terms of which are incorporated herein by reference. If the Company
forecloses on any of the Pledged Certificates, the obligations of the Debtor
will be reduced only to the extent of the proceeds actually realized from such
foreclosure, in the priority specified in Section 3(B) hereof.
7. Except
as provided in Sections 4 and 5 above or in a separate instrument signed by the
party to be charged therewith, no recourse shall be had for the payment of the
principal of, or the interest on, this Promissory Note, or for any claim based
hereon, or otherwise in respect hereof (including, but not limited to, a claim
for Other Costs), against any incorporator, shareholder, officer or director, as
such, past, present or future, of the Debtor or any successor entity, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
8. All
payments contemplated hereby to be made “in cash” shall be made in immediately
available good funds of United States of America currency by wire transfer to an
account designated in writing by the Company to the Debtor (which account may be
changed by notice similarly given).
9. The
Company, by acceptance hereof, agrees that this Promissory Note is being
acquired for investment and that the Company will not offer, sell or otherwise
dispose of this Promissory Note, except under circumstances which will not
result in a violation of the Securities Act of 1933, as amended, or any
applicable state Blue Sky or foreign laws or similar laws relating to the sale
of securities.
10. A. This
Promissory Note shall be governed by and construed in accordance with the laws
of the State of Illinois for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of
laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the City of Chicago or
the state courts of the State of Illinois sitting in the City of Chicago in
connection with any dispute arising under this Promissory Note and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non
coveniens, to the bringing of any such proceeding in such
jurisdictions.
B. In
the event of any litigation or dispute arising from this Debenture or any of the
other Transaction Agreements, the parties agrees that the party which is awarded
the most money shall be deemed the prevailing party for all purposes and such
prevailing party shall be entitled to an additional award from the other party
for the full amount of the attorneys’ fees and expenses paid or payable by such
prevailing party in connection with the litigation and/or dispute, without
reduction or apportionment based upon the individual claims or defenses giving
rise to such fees and expenses. If such award is made in favor the
Company, such award is referred to as “Other Costs.” Nothing in this Section
10(B) shall restrict or impair a court’s power to award fees and expenses to any
party for frivolous or bad faith pleading by the other party.
11. JURY TRIAL WAIVER.
The Company and the Debtor hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out of or in connection with
this Promissory Note.
12. The
term "Event of Default" means the Debtor shall default in the payment of any
outstanding principal or accrued but unpaid interest on this Promissory Note or
any other Promissory Note issued in this Series on the Scheduled Maturity Date
specified in such Promissory Note.
13. Any
notice required or permitted hereunder shall be given in manner provided in the
Section headed "NOTICES" in the Securities Purchase Agreement, the terms of
which are incorporated herein by reference.
14. In
the event for any reason, any payment by or act of the Debtor or the Company
shall result in payment of interest which would exceed the limit authorized by
or be in violation of the law of the jurisdiction applicable to this Promissory
Note, then ipso facto
the obligation of the Debtor to pay interest or perform such act or requirement
shall be reduced to the limit authorized under such law, so that in no event
shall the Debtor be obligated to pay any such interest, perform any such act or
be bound by any requirement which would result in the payment of interest in
excess of the limit so authorized. In the event any payment by or act
of the Debtor shall result in the extraction of a rate of interest in excess of
a sum which is lawfully collectible as interest, then such amount (to the extent
of such excess not returned to the Debtor) shall, without further agreement or
notice between or by the Debtor or the Company, be deemed applied to the payment
of principal, if any, hereunder immediately upon receipt of such excess funds by
the Company, with the same force and effect as though the Debtor had
specifically designated such sums to be so applied to principal and the Company
had agreed to accept such sums as an interest-free prepayment of this Promissory
Note. If any part of such excess remains after the principal has been
paid in full, whether by the provisions of the preceding sentences of this
Section or otherwise, such excess shall be deemed to be an interest-free loan
from the Debtor to the Company, which loan shall be payable immediately upon
demand by the Debtor. The provisions of this Section shall control
every other provision of this Promissory Note.
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1 Insert
unique series letter for Promissory Notes issued on particular
Closing Date (e.g., A for Notes issued on Initial Closing Date, B for Promissory
Notes issued on first Additional Closing Date, etc.).
3Amount to
be determined by Debtor, as provided in Section 1(c)(i) of the Securities
Purchase Agreement.
7 Insert
specific information from relevant Specific Debenture for which this Promissory
Note is the Specific Purchase Note.
9 Thus,
No. 2 in this Series would have a Required Prepayment Date which is seven (7)
months after the Issue Date, No. 3 in this Series would have a Required
Prepayment Date which is eight (8) months after the Issue Date, and so
on. If the provisions of Section 4(C) hereof apply, any such Required
Prepayment Date would be deferred as provided
therein.
IN WITNESS WHEREOF, the Debtor has
caused this instrument to be duly executed by an officer thereunto duly
authorized.
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ST.
XXXXXX INVESTMENTS LLC
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Dated:
_________________, 20___
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By:_______________________________________
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__________________________________________
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(Print
Name)
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__________________________________________
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(Title)
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