Contract
Exhibit
4.2
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 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 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO HYBRID FUEL SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE
NOTE
FOR VALUE
RECEIVED, HYBRID FUEL SYSTEMS, INC., a Georgia corporation (hereinafter called
"Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT,
Xxxxxxxxx 0, 0000 Xxxxxxxxxxx, Xxxxx, Xxxxxxxxxxxx, Fax: 000-00-00000000, (the
"Holder") or its registered assigns or successors in interest or order, without
demand, the sum of _____________________________ THOUSAND DOLLARS ($________)
(“Principal Amount”), with simple and unpaid interest thereon, on March 31, 2007
(the "Maturity Date"), if not sooner paid.
This Note
has been entered into pursuant to the terms of a subscription agreement between
the Borrower and the Holder, dated of even date herewith (the “Subscription
Agreement”), and shall be governed by the terms of such Subscription Agreement.
Unless otherwise separately defined herein, all capitalized terms used in this
Note shall have the same meaning as is set forth in the Subscription Agreement.
The following terms shall apply to this Note:
ARTICLE
I
INTEREST;
AMORTIZATION;
SECURITY AGREEMENT
1.1. Interest
Rate. Subject
to Section 6.7 hereof, interest payable on this Note shall accrue at a rate per
annum (the "Interest Rate") equal to the "prime rate" published in The Wall
Street Journal from time to time, plus three percent (3%). The interest 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 such rate. The
Interest Rate shall not be less than eight percent (8%). Interest shall be
calculated on the basis of a 360-day year. Interest on the Principal Xxxxxx
shall accrue from the date of this Note and be payable monthly, in arrears,
commencing on August 1, 2005 and on the first day of each consecutive calendar
month thereafter (each, a "Repayment Date") and on the Maturity Date, whether by
acceleration or otherwise.
1.2. Minimum
Monthly Principal Payments.
Amortizing payments of the outstanding Principal Amount of this Note and accrued
interest shall commence on the first (1st)
Repayment Date and shall recur on each succeeding Repayment Date thereafter
until the Principal Amount has been repaid in full, whether by the payment of
cash or by the conversion of such principal into Common Stock pursuant to the
terms hereof. Subject to Section 2 and Article III below, on each Repayment
Date, the Borrower shall make payments to the Holder in the amount of
one-twentieth (1/20th) of the
initial Principal Amount (the "Monthly Principal Amount"), together with any
accrued and unpaid interest due on the Principal Amount plus any and all other
amounts which are then owing under this Note that have not been paid (the
Monthly Principal Amount, together with such accrued and unpaid interest and
such other amounts, collectively, the "Monthly Amount"). Amounts of conversions
of Principal Xxxxxx made by the Holder or Borrower pursuant to Section 2 or
Article III, and Redemption Amounts (as
defined in Section 2.3 of this Note) actually
paid to Borrower shall be applied first against outstanding fees and damages,
then accrued interest on the Principal Amount and then to Monthly Amounts
commencing with the Monthly Amounts first payable and then Monthly Amounts
thereafter in chronological order. Any Principal Amount, interest and any other
sum arising under the Subscription Agreement that remains outstanding on the
Maturity Date shall be due and payable on the Maturity Date.
1
1.3. Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
which, if susceptible to cure is not cured within twenty (20) days, otherwise
then from the first date of such occurrence, the annual interest rate on this
Note shall (subject to Section 6.7) automatically be increased to fifteen
percent (15%), 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.
1.4 Pledge
and Security Agreement. The obligations of the Borrower hereunder shall be
secured by, and the Holder shall be entitled to the rights and security granted
by the Borrower pursuant to, the Pledge and Security Agreement dated as of the
date hereof by the Borrower for the benefit of the Holder.
ARTICLE
II
CONVERSION
REPAYMENT
2.1. (a) Payment
of Monthly Amount in Cash or Common Stock. If the
Monthly Principal Amount and interest accrued thereon (or a portion thereof of
such amount if such portion of the Monthly Amount could have been converted into
shares of Common Stock but for Section 3.2) is required to be paid in cash
pursuant to Section 2.1(b), then the Borrower shall pay the Holder an amount
equal to 103% of such amount due and owing to the Holder on the Repayment Date
in cash. If the Monthly Principal Amount and interest accrued thereon (or a
portion of such amount if not all of such amount may be converted into shares of
Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Borrower to the Holder on such Repayment Date (in
respect of the portion of such amount converted into shares of Common Stock
pursuant to Section 2.1(b)), shall be the number determined by dividing (x) the
portion of such amount converted into shares of Common Stock, by (y) the then
applicable Fixed Conversion Price. For purposes hereof, the initial "Fixed
Conversion Price" means fifty-five cents ($0.55).
(b) Conversion
Guidelines. Subject
to Sections 2.1(a), 2.2 and 3.2 hereof, the Holder shall convert into shares of
Common Stock at the Fixed Conversion Price, the maximum portion of the Monthly
Principal Amount and interest accrued thereon due on each Repayment Date
provided that the average of the five lowest closing bid prices of the Common
Stock as reported by Bloomberg, L.P. on the Principal Market (as defined below)
for the twenty (20) consecutive trading days immediately preceding such
Repayment Date shall be greater than or equal to 15% above the Fixed Conversion
Price (“Conversion Criterion”). The Monthly Amount due on a Repayment Date that
the Holder has not been able to convert into shares of Common Stock due to
failure to meet the Conversion Criterion shall be paid by the Borrower at the
Borrower’s election (i) in cash at the rate of 103% of such Monthly Amount
otherwise due on such Repayment Date within three (3) business days of the
applicable Repayment Date, or (ii) in registered, unlegended, free-trading
Common Stock at an applied conversion rate equal to eighty percent (80%) of the
average of the five (5) lowest closing bid prices of the Common Stock as
reported by Bloomberg L.P. for the twenty (20) trading days preceding such
Repayment Date. Such shares of Common Stock must be delivered to the Holder not
later than three (3) business days after the applicable Repayment Date.
Whichever of the OTC Pink Sheets, NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market System, American Stock Exchange, or New York
Stock Exchange or such other principal market or exchange where the Common Stock
is listed or traded is the principal trading exchange or market for the Common
Stock is the Principal Market.
2
(c) The
Borrower may not elect to pay any amount due on a Repayment Date in Common Stock
in an amount of shares of Common Stock which would exceed in the aggregate for
all Holders of Notes similar to this Note, twenty percent (20%) of the aggregate
daily trading volume for the twenty trading days preceding the Repayment Date
multiplied by the lesser of (A) the closing bid price of the Common Stock on the
trading day preceding the Repayment Date, or (B) the average volume weighted
average price of the Common stock as reported by Bloomberg L.P. for the
Principal Market using the AQR function (“VWAP”) for the twenty trading days
preceding the Repayment Date.
(d) The
Borrower must send notice to the Holder by confirmed telecopier not later than
3:00 PM, New York City time on each Repayment Date notifying Holder of
Borrower’s election to pay the Monthly Redemption Amount in cash or stock. The
Notice must state the amount of cash and or stock to be paid and include
supporting calculations. Elections by the Borrower must be made to all Holders
of Notes similar to this Note in proportion to the relative Note principal held
by such Note Holders. If such notice is not timely sent or if the Monthly
Redemption Amount is not timely delivered, then Holder shall have the right,
instead of the Company, to elect within five trading days after the later of the
applicable Repayment Date or required delivery date, as the case may be whether
to be paid in cash or Common Stock. Such Holder’s election shall not be
construed to be a waiver of any default by Borrower relating to non-timely
compliance by Borrower with any of its obligations under this Note.
2.2. No
Effective Registration.
Notwithstanding anything to the contrary herein, no amount payable hereunder may
made in
shares of Common Stock by
the Borrower without the Holder’s consent unless (a) either (i) an effective
current Registration Statement covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144(k) of the
Securities Act, and (b) no Event of Default hereunder exists and is continuing,
unless such Event of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at the Holder's
option.
2.3. Optional
Redemption of Principal Amount.
Provided an Event of Default has not occurred, whether or not such Event of
Default has been cured, the Borrower will have the option of prepaying the
outstanding Principal Amount ("Optional Redemption"), in whole or in part, by
paying to the Holder a sum of money equal to one hundred twenty percent (120%)
of the Principal Amount to be redeemed, 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 Subscription Agreement or any Transaction
Document through the Redemption Payment Date as defined below (the "Redemption
Amount"). Xxxxxxxx’s election to exercise its right to prepay must be by notice
in writing (“Notice of Redemption”). The Notice of Redemption shall specify the
date for such Optional Redemption (the "Redemption Payment Date"), which date
shall be not less than thirty (30) business 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 the Principal Amount for which the
Holder has a pending election to convert pursuant to Section 3.1, or for
conversions initiated or made by the Holder pursuant to Section 3.1 during the
Redemption Period. On the Redemption Payment Date, the Redemption Amount less
any portion of the Redemption Amount against which the Holder has exercised its
rights pursuant to Section 3.1, shall be paid in good funds to the Holder. In
the event the Borrower fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then (i) such Notice of Redemption will be
null and void, (ii) Borrower will have no right to deliver another Notice of
Redemption, and (iii) Borrower’s failure may be deemed by Holder to be a
non-curable Event of Default.
3
ARTICLE
III
CONVERSION
RIGHTS
3.1. Holder's
Conversion Rights. Subject
to Section 2.2 and the mandatory conversion provisions therein, the Holder shall
have the right, but not the obligation, to convert all or any portion of the
then aggregate outstanding Principal Amount of this Note, together with interest
and fees due hereon, into shares of Common Stock, subject to the terms and
conditions set forth in this Article III. The Holder may exercise such right by
delivery to the Borrower of a written Notice of Conversion pursuant to Section
3.3.
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 nor may this Note be
converted in whole or in part into an amount of Common Stock that would be
convertible into that number of Common Stock which would exceed the difference
between the number of shares of Common Stock beneficially owned by such Holder
and 4.99% of the outstanding shares of Common Stock. 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. The foregoing limitation shall be calculated as of each Conversion
Date. Aggregate conversions over time shall not be limited to 4.99%. The Holder
may waive the Conversion Share limitation described in this Section 3.2, in
whole or in part, upon 61 days prior notice to the Borrower. The Holder may
allocate which of the equity of the Borrower deemed beneficially owned by the
Holder shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
3.3. Mechanics
of Xxxxxx's Conversion.
(a) In the
event that the Holder elects to convert any amounts outstanding under this Note
into Common Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion (a "Notice of Conversion") to the
Borrower, which Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. The
original Note is not
required
to be surrendered to the Borrower until all sums due under the Note have been
paid. 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 three (3) 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." A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A.
(b) Pursuant
to the terms of a Notice of Conversion, the Borrower will issue instructions to
the transfer agent accompanied by an opinion of counsel, if so required by the
Borrower's transfer agent, within
two
(2)
business days after
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 ("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 shares of Common Stock, unless the Holder
provides the Borrower written instructions to the contrary. Notwithstanding
the foregoing to the contrary, the Borrower or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the Holder’s behalf via
DWAC (or certificates free of restrictive legends) if the registration statement
providing for the resale of the shares of Common Stock issuable upon the
conversion of this Note is effective and the Holder has complied with all
applicable securities laws in connection with the sale of the Common Stock,
including, without limitation, the prospectus delivery requirements. In the
event that Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the Conversion Shares
by the Delivery Date.
4
3.4. Conversion
Mechanics.
(a) The
number of shares of Common Stock to be issued upon each conversion of this Note
pursuant to this Article III shall be determined by dividing that portion of the
Principal Amount and interest and fees to be converted, if any, by the then
applicable Fixed Conversion Price.
(b) The Fixed
Conversion Price and number and kind of shares or other securities to be issued
upon conversion shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows:
X. Xxxxxx,
Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge
into or sell or convey all or substantially all its assets to any other
corporation, this Note, as to the unpaid principal portion thereof and accrued
interest thereon, shall thereafter be deemed to evidence the right to purchase
such number and kind of shares or other securities and property as would have
been issuable or distributable on account of such consolidation, merger, sale or
conveyance, upon or with respect to the securities subject to the conversion or
purchase right immediately prior to such consolidation, merger, sale or
conveyance. The foregoing provision shall similarly apply to successive
transactions of a similar nature by any such successor or purchaser. Without
limiting the generality of the foregoing, the anti-dilution provisions of this
Section shall apply to such securities of such successor or purchaser after any
such consolidation, merger, sale or conveyance.
B. Reclassification,
etc. 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 portion thereof 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
immediately prior to such reclassification or other change.
C. 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 in shares of Common Stock, the 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.
D. Share
Issuance. So long as this Note is outstanding, if the Borrower shall issue any
Common Stock except for the Excepted Issuances (as defined in the Subscription
Agreement), prior to the complete conversion of this Note for a consideration
less than the Fixed Conversion Price that would be in effect at the time of such
issue, then, and thereafter successively upon each such issuance, the Fixed
Conversion Price shall be reduced to such other lower issue price. For purposes
of this adjustment, the issuance of any security or debt instrument of the
Borrower carrying the right to convert such security or debt instrument into
Common Stock or of any warrant, right or option to purchase Common Stock shall
result in an adjustment to the Fixed Conversion Price upon the issuance of the
above-described security, debt instrument, warrant, right, or option and again
upon the issuance of shares of Common Stock upon exercise of such conversion or
purchase rights if such issuance is at a price lower than the then applicable
Conversion Price. The reduction of the Fixed Conversion Price described in this
paragraph is in addition to the other rights of the Holder described in the
Subscription Agreement.
5
(c) Whenever the
Conversion Price is adjusted pursuant to Section 3.4(b) above, the Borrower
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a statement of the facts requiring such
adjustment.
3.5. Reservation. During
the period the conversion right exists, Borrower will reserve from its
authorized and unissued Common Stock not less than two
hundred percent (200%) of the number of shares to provide for the issuance of
Common Stock upon the full conversion of this Note.
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and
non-assessable. Xxxxxxxx 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.
3.6 Issuance
of Replacement Note. Upon
any partial conversion of this Note, a replacement Note containing the same date
and provisions of this Note shall, at the written request of the Holder, be
issued by the Borrower to the Holder for the outstanding Principal Amount of
this Note and accrued interest which shall not have been converted or paid,
provided Xxxxxx has surrendered an original Note to the Company. In the event
that the Holder elects not to surrender a Note for reissuance upon partial
payment or conversion, the Holder hereby indemnifies the Borrower against any
and all loss or damage attributable to a third-party claim in an amount in
excess of the actual amount then due under the Note.
ARTICLE
IV
EVENTS
OF DEFAULT
The
occurrence of any of the following events of default ("Event of Default") shall,
at the option of the Holder hereof, make all sums of principal and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due
and payable, upon demand, without presentment, or grace period, all of which
hereby are expressly waived, except as set forth below:
4.1 Failure
to Pay Principal or Interest. The
Borrower fails to pay any installment of Principal Amount, interest or other sum
due under this Note or any Transaction Document when due and such failure
continues for a period of ten (10) business days after the due
date.
4.2 Breach
of Covenant. The
Borrower breaches any material covenant or other term or condition of the
Subscription Agreement, this Note or Transaction Document in any material
respect and such breach, if subject to cure, continues for a period of ten (10)
business days after written notice to the Borrower from the Holder.
4.3 Breach
of Representations and Warranties. Any
material representation or warranty of the Borrower made herein, in the
Subscription Agreement, Transaction Document or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith or
therewith shall be false or misleading in any material respect as of the date
made and a Closing Date.
4.4 Receiver
or Trustee. The
Borrower or any Subsidiary of Borrower shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or
trustee for them or for a substantial part of their property or business; or
such a receiver or trustee shall otherwise be appointed.
6
4.5 Judgments. Any
money judgment, writ or similar final process shall be entered or filed against
Borrower or any subsidiary of Borrower or any of their property or other assets
for more than $50,000, and
shall remain unvacated, unbonded or unstayed for a period of forty-five (45)
days.
4.6 Non-Payment. A
default by the Borrower under any one or more obligations in an aggregate
monetary amount in excess of $100,000 for more than thirty (30) days after the
due date.
4.7 Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance of
any notice in relation to such event, for the relief of debtors shall be
instituted by or against the Borrower or any Subsidiary of Borrower and if
instituted against them are not dismissed within forty-five (45) days of
initiation.
9.7. Delisting.
Delisting of the Common Stock from the OTC Bulletin Board (“Bulletin Board”) or
such other principal exchange on which the Common Stock is listed for trading;
failure to comply with the requirements for continued listing on the Bulletin
Board for a period of seven consecutive trading days; or notification from the
Bulletin Board or any Principal Market that the Borrower is not in compliance
with the conditions for such continued listing on the Bulletin Board or other
Principal Market.
4.9 Stop
Trade. An SEC
or judicial stop trade order or Principal Market trading suspension with respect
to Borrower’s Common Stock that lasts for five or more consecutive trading
days.
4.10 Failure
to Deliver Common Stock or Replacement Note.
Xxxxxxxx's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note or the Subscription Agreement, or, if
requested by Borrower, a replacement Note, and
such failure continues for a period of three (3) business days after the due
date.
4.11 Non-Registration
Event. The
occurrence of a Non-Registration Event as described in the Subscription
Agreement that is not cured within ten (10) business days after notice from
Holder.
4.12 Reverse
Splits. The
Borrower effectuates a reverse split of its Common Stock without the prior
written consent of the Holder.
4.13 Cross
Default. A
default by the Borrower of a material term, covenant, warranty or undertaking of
any Transaction Document or other agreement to which the Borrower and Holder are
parties, or the occurrence of a material event of default under any such other
agreement which is not cured after any required notice and/or cure
period.
ARTICLE
V
SECURITY
INTEREST
5. Security
Interest/Waiver of Automatic Stay. This
Note is secured by a security interest granted to the Collateral Agent for the
benefit of the Holder pursuant to a Security Agreement, as delivered by Borrower
to Holder. The Borrower acknowledges and agrees that should a proceeding under
any bankruptcy or insolvency law be commenced by or against the Borrower, or if
any of the Collateral (as defined in the Security Agreement) should become the
subject of any bankruptcy or insolvency proceeding, then the Holder should be
entitled to, among other relief to which the Holder may be entitled under the
Transaction Documents and any other agreement to which the Borrower and Holder
are parties (collectively, "Loan Documents") and/or applicable law, an order
from the court granting immediate relief from the automatic stay pursuant to 11
U.S.C. Section 362 to permit the Holder to exercise all of its rights and
remedies pursuant to the Loan Documents and/or applicable law. THE BORROWER
EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION
362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
7
SHALL
STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE
HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS AND/OR
APPLICABLE LAW. The Borrower hereby consents to any motion for relief from stay
that may be filed by the Holder in any bankruptcy or insolvency proceeding
initiated by or against the Borrower and, further, agrees not to file any
opposition to any motion for relief from stay filed by the Holder. The Borrower
represents, acknowledges and agrees that this provision is a specific and
material aspect of the Loan Documents, and that the Holder would not agree to
the terms of the Loan Documents if this waiver were not a part of this Note. The
Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to he represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel.
ARTICLE
VI
MISCELLANEOUS
6.1 Failure
or Indulgence Not Waiver. No
failure or delay on the part of 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.
6.2 Notices. All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Borrower to: Hybrid Fuel Systems, Inc.,
Hybrid Fuel Systems, Inc., 00000 Xxxxxxx Xxxxx, Xxxxx, XX 00000, Attn: Xxxx
Xxxxxx, CEO, telecopier number: (000) 000-0000,
with a
copy by telecopier only to:
Xxxxxxxxx, Xxxx, Xxxxxxxx & Xxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx
Xxxx, XX 00000, Attn: Xxxxxx Xxxxxx, Esq., telecopier number: (000)
000-0000, and (ii)
if to the Holder, to the name, address and telecopy number set forth on the
front page of this Note, with a copy by telecopier only to
Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, telecopier number: (000) 000-0000.
8
6.3 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.
6.4 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.
6.5 Cost
of Collection. If
default is made in the payment of this Note, Borrower shall pay the Holder
hereof reasonable costs of collection, including reasonable attorneys'
fees.
6.6 Governing
Law.
This Note
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to conflicts of laws
principles that would result in the application of the substantive laws of
another jurisdiction. 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 in favor of the
Holder.
6.7 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.
6.8. 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.
6.9 Redemption. This
Note may not be redeemed or called without the consent of the Holder except as
described in this Note.
6.10 Shareholder
Status. The
Holder shall not have rights as a shareholder of the Borrower with respect to
unconverted portions of this Note. However, the Holder will have the rights of a
shareholder of the Borrower with respect to the Shares of Common Stock to be
received after delivery by the Holder of a Conversion Notice to the
Borrower.
9
IN
WITNESS WHEREOF,
Xxxxxxxx has caused this Note to be signed in its name by an authorized officer
as of the 31st day of
March, 2005.
| HYBRID FUEL SYSTEMS, INC. | ||
| |
|
|
| By: | /s/ Xxxx Xxxxxx | |
|
Name:
Xxxx Xxxxxx | ||
| Title: CEO | ||
| WITNESS: | ||
| ______________________________________ | ||
10
NOTICE
OF CONVERSION
(To be
executed by the Registered Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Note issued by Hybrid Fuel Systems, Inc. on March 31,
2005 into Shares of Common Stock of Hybrid Fuel Systems, Inc. (the "Borrower")
according to the conditions set forth in such Note, as of the date written
below.
Date of
Conversion:____________________________________________________________________
Conversion
Price:______________________________________________________________________
Number of
Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of Hybrid Fuel Systems,
Inc.
Shares To
Be
Delivered:_________________________________________________________________
Signature:____________________________________________________________________________
Print
Name:__________________________________________________________________________
Address:_____________________________________________________________________________
____________________________________________________________________________
11
