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, 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 STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXXXXXXX TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, XXXXXXXX TECHNOLOGIES, INC., a Delaware corporation
(the "Borrower"), hereby 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 or successors in interest, on order, the sum of One
Million Dollars ($1,000,000), together with any accrued and unpaid interest
hereon, on June 30, 2007 (the "Maturity Date") if not sooner paid.
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "Purchase Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1(a) Interest Rate. Subject to Sections 4.11 and 5.6 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 one and three quarter percent (1.75%). The prime 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. Subject to
Section 1.1(b) hereof, the Interest Rate shall not be less than five percent
(5%). Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on August 1, 2005 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
"Repayment Date").
1.1 (b) Interest Rate Adjustment. The Interest Rate shall be calculated on
the last business day of each month hereafter until the Maturity Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant issued to
Holder on a registration statement declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii) the market price (the "Market Price")
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of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2.0.%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. If (i) the
Borrower shall not have registered the shares of the Borrower's common stock
underlying the conversion of the Note and that certain warrant issued to Holder
on a registration statement declared effective by the SEC and which remains
effective, and (ii) the Market Price of the Common Stock as reported by
Bloomberg, L.P. on the principal market for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for
the succeeding calendar month shall automatically be decreased by 100 basis
points (100 b.p.) (1.0.%) for each incremental twenty five percent (25%)
increase in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the contrary
contained in herein), in no event shall the Interest Rate be less than zero
percent (0%).
1.2 Minimum Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"Principal Amount") shall begin on February 1, 2006 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "Amortization Date"). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $58,823.53 together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other amounts which are then owing under this Note, the Purchase Agreement
or any other Related Agreement but have not been paid (collectively, the
"Monthly Amount"). Any Principal Amount that remains outstanding on the Maturity
Date shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION REPAYMENT
2.1 (a) Payment of Monthly Amount in Cash or Common Stock. Each month by
the fifth (5th) business day prior to each Amortization Date (the "Notice
Date"), the Holder shall deliver to Borrower a written notice in the form of
Exhibit B attached hereto converting the Monthly Amount payable on the next
Repayment Date in either cash or Common Stock, or a combination of both (each, a
"Repayment Notice"). If a Repayment Notice is not delivered by the Holder on or
before the applicable Notice Date for such Repayment Date, then the Borrower
shall pay the Monthly Amount due on such Repayment Date in cash. Any portion of
the Monthly Amount paid in cash on a Repayment Date, shall be paid to the Holder
an amount equal to 102% of the Monthly Amount due and owing to Holder on the
Repayment Date. If the Holder converts all or a portion of the Monthly Amount in
shares of Common Stock as provided herein, the number of such shares to be
issued by the Borrower to the Holder on such Repayment Date shall be the number
determined by dividing (x) the portion of the Monthly Amount to be paid in
shares of Common Stock, by (y) the then applicable Fixed Conversion Price. For
purposes hereof, the initial "Fixed Conversion Price" means $0.33.
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(b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1(a), 2.2,
and 3.2 hereof, the Holder shall convert all or a portion of the Monthly Amount
due on each Repayment Date in shares of Common Stock if the average closing
price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market
for the five (5) trading days immediately preceding such Repayment Date was
greater than or equal to 110% of the Fixed Conversion Price, provided, however,
that such conversions shall not exceed twenty five percent (25%) of the
aggregate dollar trading volume of the Common Stock for the five (5) day trading
period immediately preceding delivery of a Notice of Conversion to the Borrower.
Any part of the Monthly Amount due on a Repayment Date that the Holder has not
converted into shares of Common Stock shall be paid by the Borrower in cash on
such Repayment Date. Any part of the Monthly Amount due on such Repayment Date
which must be paid in cash shall be paid in cash at the rate of 102% of the
Monthly Amount otherwise due on such Repayment Date, within three (3) business
days of the applicable Repayment Date.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, none of the Borrower's obligations to the Holder may be converted into
Common Stock unless (i) either (x) an effective current Registration Statement
(as defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued in connection with satisfaction of such obligations exists or
(y) an exemption from registration of the Common Stock is available to pursuant
to Rule 144 of the Securities Act and (ii) 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.
Any amounts converted by the Holder pursuant to this Section 2.2 shall be
deemed to constitute payments of outstanding fees, interest and principal
arising in connection with Monthly Amounts for the remaining Repayment Dates, in
chronological order.
2.3 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("Optional Redemption") by paying to the Holder a sum of
money equal to one hundred twenty percent (120%) of the 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 Purchase
Agreement, or any Related Agreement (the "Redemption Amount") outstanding on the
day written notice of redemption (the "Notice of Redemption") is given to the
Holder. The Notice of Redemption shall specify 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 (the "Redemption
Period"). A Notice of Redemption shall not be effective with respect to any
portion of this Note 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. The Redemption Amount
shall be determined as if such Xxxxxx's conversion elections had been completed
immediately prior to 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 Borrower fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then such Redemption Notice will be null and
void.
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ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. 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 not less than one (1) day prior to the date upon
which such conversion shall occur.
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 an amount that would be convertible into that number of Conversion
Shares which would exceed (a) the difference between (i) 4.99% of the issued and
outstanding shares of Common Stock and (ii) the number of shares of Common Stock
beneficially owned by the Holder or (b) twenty five percent (25%) of the
aggregate dollar trading volume of the Common Stock for the five (5) day trading
period immediately preceding delivery of a Notice of Conversion to the Borrower.
For 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 Conversion Share limitation described in this
Section 3.2 shall automatically become null and void following notice to the
Company upon the occurrence and during the continuance of an Event of Default,
or upon 90 days prior notice to the Company, except that at no time shall the
number of shares of Common Stock beneficially owned by the Holder a exceed
19.99% of the outstanding shares of Common Stock. Notwithstanding anything
contained herein to the contrary, the number of shares of Common Stock issuable
by the Company and acquirable by the Holder at a price below $0.29 per share
pursuant to the terms of this Note, the Purchase Agreement, any other Related
Agreement, any Existing Holder Agreement (as defined below) or otherwise, shall
not exceed an aggregate of 3,843,148 shares of Common Stock (subject to
appropriate adjustment for stock splits, stock dividends, or other similar
recapitalizations affecting the Common Stock) (the "Maximum Common Stock
Issuance"), unless the issuance of Common Stock hereunder in excess of the
Maximum Common Stock Issuance shall first be approved by the Company's
shareholders. If at any point in time and from time to time the number of shares
of Common Stock issued pursuant to the terms of this Note, the Purchase
Agreement, any other Related Agreement, any Existing Holder Agreement or
otherwise, together with the number of shares of Common Stock that would then be
issuable by the Company to the Holder in the event of a conversion or exercise
pursuant to the terms of this Note, the Purchase Agreement, any other Related
Agreement, any Existing Holder Agreement or otherwise, would exceed the Maximum
Common Stock Issuance but for this Section 3.2, the Company shall promptly call
a shareholders meeting to solicit shareholder approval for the issuance of the
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shares of Common Stock hereunder in excess of the Maximum Common Stock Issuance.
Notwithstanding anything contained herein to the contrary, the provisions of
this Section 3.2 are irrevocable and may not be waived by the Holder or the
Company. The term "Existing Holder Agreements" shall mean each of the Securities
Purchase Agreement, dated as of June 30, 2004 between the Borrower and the
Holder and each Related Agreement referred to therein (each as amended, modified
or supplemented).
3.3 Mechanics of Xxxxxx's Conversion. (a) 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 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.
(b) 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
("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.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the then applicable Fixed
Conversion Price. In the event of any conversions of outstanding principal
amount under this Note in part pursuant to this Article III, such conversions
shall be deemed to constitute conversions of outstanding principal amount
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.
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(b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion is subject to adjustment from time to
time upon the occurrence of certain events, as follows:
A. 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 Fixed Conversion Price or the Conversion Price, as the case may be, 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.
B. 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.
C. Share Issuances. Subject to the provisions of this Section 3.4, 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 (i) pursuant to
Subsections A or B above; (ii) pursuant to options, warrants, or other
obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; (iii) pursuant to options that may be issued under any
employee incentive stock option and/or any qualified stock option plan adopted
by the Borrower; or (iv) shares of Common Stock not to exceed 250,000 in the
aggregate (as calculated on the date hereof and appropriately adjusted for any
subdivision, combination or similar event), so long as (x) such shares are
restricted and do not become freely or publicly traded in any respect prior to
the one year anniversary of the issuance thereof , (y) such shares are issued at
a price per share no lees than 100% of the average closing price of the Common
Stock for the 10 days prior to the issuance thereof and (z) such shares are
issued in connection with acquisitions, joint ventures and other business
development initiatives) 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 to such lower Offer Price at
the time of issuance of such securities. 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.
D. 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 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 immediately prior to such reclassification or other
change.
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3.5 Issuance of New Note. Upon any partial conversion of this Note, a new
Note containing the same date and provisions of this Note shall, at the request
of the Holder, be issued by the Borrower to the Holder for the principal balance
of this Note and interest which shall not have been converted or paid. The
Borrower will pay no costs, fees or any other consideration to the Holder for
the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, within five
(5) days after written notice from Holder to Borrower (each occurrence being a
"Default Notice Period") the amount due and owing to the Holder shall be 130% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any) (the "Default Payment"). If, with respect to any Event of
Default, the Borrower cures the Event of Default within any applicable grace
period, the Event of Default will be deemed to no longer exist and any rights
and remedies of Holder pertaining to such Event of Default will be of no further
force or effect. The Default Payment shall be applied first to any fees due and
payable to Holder pursuant to the Note or the Related Agreements, then to
accrued and unpaid interest due on the Note and then to outstanding principal
balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.9, inclusive, is an "Event of Default":
4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails
to pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower, and in any such case, such failure
shall continue for a period of three (3) business days following the date upon
which any such payment was due.
4.2 Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and,
any such case, such breach, if subject to cure, continues for a period of thirty
(30) days after the occurrence thereof.
4.3 Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the date that such
representation or warranty was made or deemed.
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4.4 Receiver or Trustee; Bankruptcy. The Borrower or any Subsidiary of the
Borrower shall (i) apply for, consent to, or suffer to exist the appointment of,
or the taking of possession by, a receiver, custodian, trustee, liquidator or
other fiduciary of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within sixty (60) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing..
4.5 Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of thirty (30) business days.
4.6 Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded.
4.7 Failure to Deliver Common Stock or Replacement Note. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).
4.8 Default Under Related Agreements or Other Agreements. The occurrence
and continuance of any Event of Default (as defined in the Purchase Agreement or
any Related Agreement) or any event of default (or similar term) under any other
indebtedness, including, without limitation under any of the Existing Holder
Agreements, and such default shall not be cured within any applicable cure
period as provided for in such agreement or under such other indebtedness.
4.9 Change in Control. The occurrence of a change in the controlling
ownership of the Borrower.
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DEFAULT RELATED PROVISIONS
4.11 Payment Grace Period. Following the occurrence and continuance of an
Event of Default beyond any applicable cure period hereunder, the Borrower shall
pay the Holder a default interest rate of eight percent (8.0%) per annum on all
amounts due and owing under the Note, which default interest shall be payable
upon demand.
4.12 Conversion Privileges. The conversion privileges set forth in Article
III shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
4.13 Cumulative Remedies. The remedies under this Note shall be
cumulative.
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 shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase 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 amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, 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 Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.
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5.5 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 in favor of the Holder.
5.6 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.
5.7 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated
as of the date hereof.
5.8 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.
5.9 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note to
be signed in its name effective as of this 20th day of July 2005.
XXXXXXXX TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: President / CEO
WITNESS:
/s/ Xxxxxxx X. Xxxxx
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by XxxxxXxx
Technologies, Inc. dated July 20, 2005 by delivery of Shares of Common Stock of
XxxxxXxx Technologies, Inc. on and subject to the conditions set forth in
Article III of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT B
CONVERSION NOTICE
(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)
[Name and Address of Holder]
Holder hereby converts $_________ of the Monthly Amount due on [specify
applicable Repayment Date] under the Convertible Term Note issued by XxxxxXxx
Technologies, Inc. (the "Company") dated July 20, 2005 by delivery of Shares of
Common Stock of XxxxxXxx Technologies, Inc. on and subject to the conditions set
forth in Article III of such Note.
1. Fixed Conversion Price: $_______________________
2. Amount to be paid: $_______________________
3. Shares To Be Delivered (2 divided by 1): __________________
4. Cash payment to be made by Company : $_____________________
Date: ____________ LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:______________________________
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