EXHIBIT 10.5
------------
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXX.XXX, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
------------------------------------------
FOR VALUE RECEIVED, XXX.XXX, INC. a Delaware corporation (the
"BORROWER") promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore Corporate
Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand
Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or its registered
assigns, on order, the sum of Four Million Dollars Two Hundred Fifty Thousand
Dollars ($4,250,000) without duplication of any amounts owing by Borrower to
Holder under the Revolving Note, together with any accrued and unpaid interest
hereon, on August 1, 2006 (the "MATURITY DATE").
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement between Borrower and
the Holder dated as of August 31, 2004 (as amended, modified and supplemented
from time to time, the "SECURITY AGREEMENT").
The following terms shall apply to this Secured Convertible Minimum
Borrowing Note (this "Note"):
ARTICLE I
INTEREST RATE
1.1 Contract Rate. Subject to Sections 5.3 and 6.7 hereof, interest
payable on this Note shall accrue at a rate per annum equal to the Prime Rate
plus two percent (2.00%) (the "CONTRACT RATE"). The Contract 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 in
accordance with the terms of the Security Agreement. Subject to Section 1.2, the
Contract Rate shall not be less than six percent (6.00%) nor greater than seven
percent (7.00%).
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall be
subject to further adjustment as set forth herein on the last business day of
each month hereafter until the Maturity Date (each a "Determination Date"). If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of this Note and the exercise of 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") 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 reduced by 200 basis points (200 b.p.) (2.0.%)
therefore and 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 this Note and the exercise
of 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 Contract Rate for the succeeding calendar month shall automatically be
decreased by 100 basis points (100 b.p.) (1.0.%) therefore and 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 Contract Rate be less than zero percent (0%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing on October 1, 2004 and on the first business day of each consecutive
calendar month thereafter until the Maturity Date (and on the Maturity Date),
whether by acceleration or otherwise (each, a "CONTRACT RATE PAYMENT DATE").
ARTICLE II
ADVANCES, PAYMENTS UNDER NOTE
2.1. Mechanics of Advances. All Loans evidenced by this Note shall be made
in accordance with the terms and provisions of the Security Agreement.
2.2. Fixed Conversion Price. For purposes hereof, subject to Section 3.5
hereof, the initial "FIXED CONVERSION PRICE" means $0.28 (105% of the average of
the closing price of the Common Stock for the ten (10) trading days immediately
prior to the date hereof).
2.3. Payments in Common Stock. Subject to Sections 2.4 and 3.2, if the
average closing price of the Common Stock on the Principal Market is at least
115% of the Closing Price, with the product rounded to the nearest xxxxx, for
any period of ten (10) consecutive trading days (each, a "DETERMINATION
PERIOD"), then on the next trading day following the completion of each such
Determination Period, the Holder shall provide the Borrower with written notice
(a "CALL NOTICE") requiring the conversion at the Fixed Conversion Price of all
(or such lesser amount as may be necessary to comply with the provisions of
Section 3.2) of the outstanding interest and principal of this Note as of the
date set forth in the Call Notice (the "CALL DATE") (it being acknowledged and
agreed that Holder shall specify any limitation imposed by Section 3.2 in its
Call Notice, and, so long as a Determination Period shall be continuing, as soon
as Holder reduces its holdings of Common Stock so as not to be in violation of
Section 3.2, Holder shall deliver a subsequent Call Notice requiring the
conversion the remaining outstanding interest and principal of this Note up to
the limitations of Section 3.2). The Call Date associated with any Call Notice
shall be at least three (3) trading days following
2
the date of the Call Notice. On the Call Date, the Borrower shall deliver to the
Holder certificates evidencing the shares of Common Stock issued in satisfaction
of the principal and interest being retired. Notwithstanding the foregoing, the
Borrower's issuance of shares of Common Stock in payment of its obligations
under this Note pursuant to this Section 2.3 shall be subject to the limitation
that the number of shares of Common Stock to be issued in connection with any
Call Notice shall not exceed thirty percent (30%) of the aggregate dollar
trading volume (the "TRADING VOLUME LIMITATION") of the Common Stock (as such
volume is reported by Bloomberg, L.P.) during the Determination Period
corresponding to such Call Notice. Notwithstanding anything herein to the
contrary, the parties agree that if any conversion hereunder is limited by the
Trading Volume Limitation and the closing price of the Common Stock on the
Principal Market shall continue to be at least 115% of the Closing Price beyond
the Determination Period for which and initial Call Notice shall have been
delivered, a new Determination Period shall occur each trading day thereafter on
a rolling ten (10) trading day basis until such time as the Common Stock on the
Principal Market shall cease to trade at least 115% of the Closing Price;
provided however, that if new Trading Volume Limitation(s) shall be calculated
on a rolling basis for a five (5) trading day period, no more than an aggregate
of two (2) conversions at such new Trading Volume Limitation(s) may be made
during any calendar month. For purposes hereof, the "Closing Price" means $0.27.
[The average of the closing price of the Common Stock for the ten (10) trading
days immediately prior to the date hereof.]
2.4. No Effective Registration. Notwithstanding anything to the contrary
herein, no repayment of any amount hereunder in shares of Common Stock shall be
made if at any time from the Call Date for such payment through the date upon
which such payment is made by delivery of certificates for shares of Common
Stock there fails to exist an effective current Registration Statement (as
defined in the Registration Rights Agreement) covering the shares of Common
Stock to be issued, or if an Event of Default (as defined in Article V hereof)
hereunder exists and is continuing, unless such requirement is otherwise waived
in writing by the Holder in whole or in part at the Holder's option.
2.5. Optional Prepayment in Cash. (a) Subject to Section 2.5(b) hereof, the
Borrower will have the option of prepaying this Note in whole or in part
("OPTIONAL PREPAYMENT ") by paying to the Holder a sum of money equal to the sum
of (i) one hundred fifteen percent (115%) of the outstanding principal amount of
this Note to be prepaid and (ii) any accrued and unpaid interest on such
outstanding principal amount of this Note and any and all other sums due accrued
or payable to Holder under the Note, the Security Agreement or any other
Ancillary Agreement (as defined in the Security Agreement) (the "Prepayment
AMOUNT") on the day written notice of redemption (the "NOTICE OF PREPAYMENT ")
is given to the Holder.
(b) If a Registration Statement (as defined in the Registration Rights
Agreement) covering the Securities has been filed as required by the
Registration Rights Agreement and has been declared and remains effective, the
Borrower will have the option irrespective of 2.5(a) above of prepaying this
Note in whole or in part by paying to the Holder a sum of money equal to the sum
of (i) one hundred five percent (105%) of the outstanding principal amount of
this Note to be prepaid by delivering a Notice of Prepayment to the Holder and
(ii) any accrued and
3
unpaid interest on such outstanding principal amount of this Note and any and
all other sums due accrued or payable to Holder under this Note, the Security
Agreement or any other Ancillary Agreement (as defined in the Security
Agreement).
(c) Any Notice of Prepayment delivered pursuant to this Section 2.5 shall
specify the date for such Optional Prepayment (the "PREPAYMENT PAYMENT DATE")
which date shall be seven (7) days after the date of the Notice of Prepayment
(the "PREPAYMENT PERIOD"). A Notice of Prepayment shall not be effective with
respect to any portion of this Note for which the Holder has previously
delivered a Notice of Conversion (defined below) pursuant to Section 3.1, or for
conversions made by the Holder pursuant to Section 3.1 during the Prepayment
Period. The Prepayment Amount shall be determined as if such Xxxxxx's conversion
elections had been completed immediately prior to the date of the Notice of
Prepayment. On the Prepayment Payment Date, the Prepayment Amount (plus any
additional interest and fees accruing on the Notes during the Prepayment Period)
must be irrevocably paid in full in immediately available funds to the Holder.
In the event the Borrower fails to pay the Prepayment Amount on the Prepayment
Payment Date, then such Prepayment Notice will be null and void.
ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1. Optional Conversion. Subject to the terms of this Article III, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or thereafter during an Event of Default, and, subject to the
limitations set forth in Section 3.2 hereof, to convert all or any portion of
the outstanding principal amount under this Note and/or accrued interest and
fees due and payable into fully paid and nonassessable shares of the Common
Stock at the then applicable Fixed Conversion Price. The shares of Common Stock
to be issued upon such conversion are herein referred to as the "CONVERSION
SHARES."
3.2 Conversion Limitation. A. 4.99% Limitation. Notwithstanding anything
contained herein to the contrary, the Holder shall not be entitled to convert
pursuant to the terms of Section 3.1 of this Note an amount that would be
convertible into that number of shares of Common Stock which, when added to the
number of shares of Common Stock otherwise beneficially owned by such Holder
(with respect to such Holder, such number of shares of Common Stock herein
referred to as the Holder's "BENEFICIAL OWNERSHIP") including those issuable
upon exercise of Warrants held by such Holder would exceed 4.99% of the
outstanding shares of Common Stock of the Borrower at the time of conversion.
For the purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act and
Regulation 13d-3 thereunder. In connection with any obligation of the Borrower
to issue to the Holder shares of Common Stock pursuant to the terms hereof, the
Holder will inform the Borrower of such Holder's Beneficial Ownership. Subject
to Section 3.2 B below, the conversion limitation described in this Section 3.2A
shall automatically become null and void without any notice to Borrower upon the
occurrence and during the continuance beyond any applicable grace period of an
Event of Default, or upon 75 days prior notice to the Borrower by the Holder.
4
B. 19.99% Limitation. Notwithstanding anything contained herein to the
contrary, the number of shares of Common Stock issuable by the Borrower and
acquirable by the Holder at a price below $0.24 per share pursuant to the terms
of this Note, the Security Agreement or any Ancillary Agreement, shall not
exceed an aggregate of 19.99% of the total issued and outstanding shares
(calculated in accordance with applicable Principal Market rules and
regulations) shares of the Borrower's Common Stock (subject to appropriate
adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Common Stock) or otherwise violate the Borrower's obligations
under the rules and regulations of the Principal Market (the "MAXIMUM COMMON
STOCK ISSUANCE"), unless Stockholder approval shall first be obtained in
accordance with Section 13(u) of the Security Agreement. Borrower shall not be
obligated to issue such shares of Common Stock in excess of the Maximum Common
Stock Issuance unless and until the Borrower obtains the Stockholder Approval in
accordance with Section 13(u) of the Security Agreement and applicable Principal
Market rules and regulations.
3.3 Mechanics of Xxxxxx's Conversion. In the event that the Holder elects
to convert this Note into Common Stock, the Holder shall give notice of such
election by delivering an executed and completed notice of conversion ("NOTICE
OF CONVERSION") to the Borrower and such Notice of Conversion shall provide a
breakdown in reasonable detail of the principal amount, accrued interest and
fees that are being converted and include the Holder's then current Beneficial
Ownership. On each Conversion Date (as hereinafter defined) and in accordance
with its Notice of Conversion, the Holder shall make the appropriate reduction
to the principal amount, accrued interest and fees as entered in its records and
shall provide written notice thereof to the Borrower within two (2) business
days after the Conversion Date. Each date on which a Notice of Conversion is
delivered or telecopied to the Borrower in accordance with the provisions hereof
shall be deemed a Conversion Date (the "CONVERSION DATE"). A form of Notice of
Conversion to be employed by the Holder is annexed hereto as Exhibit A. Pursuant
to the terms of the Notice of Conversion, the Borrower will issue instructions
to the transfer agent accompanied by an opinion of counsel within three (3)
business days 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 Late Payments. The Borrower understands that a delay in the delivery
of the shares of Common Stock in the form required pursuant to this Article III
beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of such shares in the form required
pursuant to this Article III upon conversion of this Note, in the amount equal
5
to $500 per business day after the Delivery Date. The Borrower shall pay any
payments incurred under this Section in immediately available funds upon demand.
3.5 Adjustment Provisions. The Fixed Conversion Price and number and kind
of shares or other securities to be issued upon conversion determined pursuant
to Section 2.2 shall be subject to adjustment from time to time upon the
happening of certain events while this conversion right remains outstanding, as
follows:
A. Reclassification, 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 (i) immediately prior to or (ii) immediately after
such reclassification or other change at the sole election of the Holder.
B. Stock Splits, Combinations and Dividends. If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock or any preferred
stock issued by the Borrower in shares of Common Stock, the Fixed Conversion
Price and for the purposes of Section 2.3 hereof, the Closing Price, shall be
proportionately reduced in case of subdivision of shares or stock dividend or
proportionately increased in the case of combination of shares, in each such
case by the ratio which the total number of shares of Common Stock outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
C. Share Issuances. Subject to the provisions of this Section 3.5, if the
Borrower shall at any time prior to the conversion or repayment in full of the
Principal Amount issue any shares of Common Stock or securities convertible into
Common Stock to a person other than the Holder (except pursuant to: (i)
Subsections A or B above; (ii) securities issued, or deemed issued (as provided
below), to directors, officers, employees or consultants of the Borrower or a
subsidiary of the Borrower in connection with their service as directors of the
Borrower or a subsidiary of the Borrower, their employment by the Borrower or a
subsidiary of the Borrower or their retention as consultants by the Borrower or
a subsidiary of the Borrower under any stock agreement and/or stock plan adopted
by the Borrower, plus such number of shares of Common Stock which are
repurchased by the Borrower from such persons pursuant to contractual rights
held by the Borrower and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Borrower therefor; (iii)
shares of Common Stock issuable upon exercise of options, warrants or other
obligations outstanding as of the date hereof; (iv) shares of Common Stock
issuable upon the conversion of the Borrower's Preferred Stock in existence on
the date hereof; and (v) shares of Common Stock issued as payment of interest in
accordance with the terms of the notes issued pursuant to that Note and Warrant
Purchase Agreement dated as of July 18, 2003 by and among the Borrower and the
investors named therein) for a consideration per share (the "OFFER PRICE") less
than the Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be immediately reset pursuant to the formula below:
6
If the Corporation issues any additional shares pursuant to Section 3.5C
above then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
-----------------------------
A + B
-----------------------------
(A + B) + [((C - D) x B) / C]
-----------------------------
A = Total amount of shares convertible pursuant to this Note.
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
For purposes hereof, the issuance of any security of the Borrower
convertible into or exercisable or exchangeable for Common Stock shall result in
an adjustment to the Fixed Conversion Price at the time of issuance of such
securities. Notwithstanding the immediately foregoing, no adjustment to the then
applicable Fixed Conversion Price shall be made if such adjustment, as
calculated pursuant to this Section 3.5(C), would result in a change to the then
applicable Fixed Conversion Price of less than $0.01.
D. Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Subsection C above, the following
shall apply:
(a) in the case of the issuance of shares of Common Stock for cash,
the consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other expenses
incurred by the Borrower for any underwriting of the issue or otherwise in
connection therewith;
(b) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of the Borrower (irrespective of the accounting
treatment thereof); and
(c) Upon any such exercise, the aggregate consideration received for
such securities shall be deemed to be the consideration received by the Borrower
for the issuance of such securities plus the additional minimum consideration,
if any, to be received by the Borrower upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as provided
in clauses (a) and (b) of this Subsection (D)).
7
3.6 Reservation of Shares. During the period the conversion right exists,
the Borrower will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the
full conversion of this Note. The Borrower represents that upon issuance, such
shares will be duly and validly issued, fully paid and non-assessable. The
Borrower agrees that its issuance of this Note shall constitute full authority
to its officers, agents, and transfer agents who are charged with the duty of
executing and issuing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the conversion of this Note.
3.7 Registration Rights. The Holder has been granted registration rights
with respect to the shares of Common Stock issuable upon conversion of this Note
as more fully set forth in a Registration Rights Agreement.
ARTICLE IV
EVENTS OF DEFAULT
The occurrence of any of the events set forth in Sections 4.1 and 4.2,
inclusive, shall be an Event of Default ("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 or
on any other promissory note issued pursuant to the Security Agreement, or the
Borrower fails to pay when due any amount due under any other promissory note
issued by the Borrower, when due in accordance with the terms of such note.
4.2 Other Events of Default. The occurrence of any other Event of Default
as set forth in Section 19 of the Security Agreement.
DEFAULT RELATED PROVISIONS
4.3 Payment Grace Period. The Borrower shall have a three (3) business day
grace period to pay any monetary amounts due under this Note.
4.4 Conversion Privileges. The conversion obligations set forth in Article
II and 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.
ARTICLE V
DEFAULT PAYMENTS
5.1 Default Payment. If an Event of Default occurs and is continuing
beyond any applicable grace period, the Holder, at its option, may elect, in
addition to all rights and remedies of Holder under the Security Agreement and
all obligations of Borrower under the Security Agreement, to require the
Borrower to make a Default Payment ("DEFAULT PAYMENT"). The Default Payment
shall be 112% of the outstanding principal amount of the Note, plus accrued but
unpaid interest, all other fees then remaining unpaid, and all other amounts
payable hereunder. The Default Payment shall be applied first to any fees due
and payable to Holder pursuant to the Notes or the Ancillary Agreements, then to
accrued and unpaid interest due on the Notes and then to outstanding principal
balance of the Notes.
5.2 Default Payment Date and Default Notice Period. The Default Payment
shall be due and payable on the fifth business day after an Event of Default as
defined in Article IV ("DEFAULT PAYMENT DATE") has occurred and is continuing
beyond any applicable grace period. The period between date upon which of an
Event of Default has occurred and is continuing beyond any applicable grace
period and the Default Payment Date shall be the "DEFAULT PERIOD." If during the
Default Period, the Borrower cures the Event of Default, the Event of Default
will no longer exist and any additional rights the Holder had triggered by the
occurrence and continuance of an Event of Default will no longer exist
including, without limitation, the right to receive the Default Payment. If the
Event of Default is not cured during the Default Notice Period, all amounts
payable hereunder shall be due and payable on the Default Payment Date, all
without further demand, presentment or notice, or grace period, all of which
hereby are expressly waived.
5.3 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, interest on this Note shall automatically be
increased to the Default Rate, and all outstanding Obligations under this Note,
including unpaid interest, shall continue to accrue interest from the date of
such Event of Default at such interest rate applicable to such Obligations until
such Event of Default is cured or waived.
5.4 Cumulative Remedies. The remedies under this Note shall be cumulative.
ARTICLE VI
MISCELLANEOUS
6.1 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.
6.2 Notices. Any notice herein required or permitted to be given shall be
in writing and provided in accordance with the terms of the Security Agreement.
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, and any successor instrument as it may be 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, and may be assigned by the Holder in accordance with the
requirements of the Security Agreement.
9
6.5 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
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 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 obligatio ns, or to
enforce a judgment or other court order in favor of Xxxxxx.
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 Security Interest and Guarantee. The Holder has been granted a
security interest in certain assets of the Borrower and its Subsidiaries as more
fully described in the Security Agreement.
6.9 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows.]
10
IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible
Minimum Borrowing Note to be signed in its name effective as of this 31st day of
August, 2004.
XXX.XXX, INC.
By: /s/ Xxxxxx X. XxXxxxxx
----------------------------
Name: Xxxxxx X. XxXxxxxx
--------------------------
Title: Chief Financial Officer
-------------------------
WITNESS:
/s/ Xxxx X. Xxxxxxx
-------------------
Xxxx X. Xxxxxxx
11
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Secured Convertible Minimum Borrowing Note
issued by XXX.XXX, INC. on August 31, 2004 into Shares of Common Stock of
XXX.XXX, INC. (the "Borrower") according to the conditions set forth in such
Note, as of the date written below.
Date of Conversion: _____________________________________________________
Conversion Price: _____________________________________________________
Shares To Be Delivered: _____________________________________________________
Signature: _____________________________________________________
Print Name: _____________________________________________________
Address: _____________________________________________________
_____________________________________________________
Holder DWAC
instructions _____________________________________________________
3137386
12
