PARTICIPATING TERM NOTE
FOR
VALUE
RECEIVED, Xxxxxx Ventures, Inc., a Delaware corporation (the “Company”),
promises, to pay to Xxxxxxxx Xxxx, an individual with an address located at
0000
Xxxxxxx’x Xxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxx (the “Holder”)
or his
registered assigns or successors in interest, the sum of Seven Million Eight
Hundred Thousand Dollars ($7,800,000), together with any accrued and unpaid
interest hereon, on February 13, 2012 (the “Maturity
Date”),
if
not sooner indefeasibly paid in full.
Capitalized
terms used herein without definition shall have the meanings ascribed to such
terms in the Stock Purchase Agreement, dated as of the date hereof by and among
the Company, Tcomt, Inc. and the Holder (as amended, restated, modified and/or
supplemented from time to time, collectively, the “Purchase
Agreement”).
The
following terms shall apply to this Participating Term Note (this “Note”):
ARTICLE
I
INTEREST
AND PRINCIPAL PAYMENTS
1.1 Interest
Rate and Payments.
Interest payable on the outstanding principal amount of this Note (the
“Principal
Amount”)
shall
accrue at a rate per annum equal to the London Inter-bank Borrowing Rate for
loans with a ninety-day maturity (“LIBOR”) plus two (2) percent (“Interest
Rate”).
The
Interest Rate shall be reset according to the LIBOR as published in the
Financial Times on the first day of the month every ninety (90) days from the
initial date of this Note. Interest shall be (i) calculated on the basis of
a
365 day year, and (ii) payable monthly, in arrears, commencing on March , 2008,
on the tenth business day of each consecutive calendar month thereafter through
and including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise. Notwithstanding the foregoing, Interest accrued
during each of the first twelve (12) months after the initial date of this
Note
shall be added to the Principal Amount of the Note on the first day of each
successive month.
1.2 Principal
Payments.
Amortization of the Principal Amount and interest shall commence eighteen (18)
months from the initial date of this Note. Amortization shall be based upon
a
fifteen (15) year time period with the monthly payment based upon one hundred
eighty (180) equal installments. Upon the Maturity Date, all outstanding
principal and interest shall be due and payable.
1.3 Prepayment
Participation Rights.
Notwithstanding the provisions of section 1.2 above, after the payment in full
of the outstanding principal amount, and accrued but unpaid interest, due
pursuant to the Secured Term Note, dated the date hereof, made by Xxxxxx
Xxxxxxxxx, Inc., a Delaware Corporation, and Xxxxxx Ventures, Inc., a Delaware
Corporation, in favor of Federal Partners, L.P., a Delaware limited partnership,
in principal amount of Three Million Dollars ($3,000,000), 100% of future net
profits from TComt, Inc. and Tcomt, Ltd. shall be used to pay all outstanding
amounts due under this Note for Principal Amount or Interest (“Prepayment”). The
calculation of net profits available for such prepayment shall be based upon
the
net profit of the Company, if any, as presented in the quarterly or annual
financial statements of the Company which have been reviewed or audited by
the
Company’s regularly engaged independent auditors (“Company Profits”). Such
payments shall not exceed the then outstanding Principal Amount, plus accrued
but unpaid interest.
1.4 Mandatory
Payment. After (i) the holders of the Company’s Series A Convertible Preferred
Stock have been redeemed in full and (ii) the obligation owed to Laurus Master
Fund, Ltd. in the amount of Fifty-Five Million Dollars ($55,000,000), has been
paid in full, the Holder shall be entitled to receive a mandatory payment in
the
amount of Ten Million Dollars ($10,000,000) upon the occurrence of the sale
of
all or substantially all of the assets of the Company. Such mandatory prepayment
shall be due immediately following such sale.
1.5 Optional
Prepayment in Cash.
The
Company may prepay this Note in whole or in part, without premium or penalty
except as otherwise specifically set forth herein.
ARTICLE
II
EVENTS
OF DEFAULT
2.1 Events
of Default.
The
occurrence of any of the following events set forth in this Section 2.1 shall
constitute an event of default (“Event
of Default”)
hereunder:
(a) Failure
to Pay.
The
Company fails to pay, within five (5) days of due date any installment of
principal, interest or other fees hereon in accordance herewith.
(b) Breach
of Covenant.
The
Company breaches any covenant or any other term or condition of this Note in
any
material respect and such breach, if subject to cure, continues for a period
of
fifteen (15) days after the occurrence thereof.
(c) Breach
of Representations and Warranties.
Any
representation, warranty or statement made or furnished by any Company in this
Note shall at any time be false or misleading in any material respect on the
date as of which made or deemed made.
(d) Bankruptcy.
The
Company shall (i) apply for, consent to or suffer to exist the appointment
of,
or the taking of possession by, a receiver, interim receiver, custodian, trustee
or liquidator or like official 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 or proceeding under applicable federal or foreign
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt,
(v) acquiesce to, without challenge within thirty (30) days of the filing
thereof, or failure to have dismissed, within sixty (60) days, any petition
or
proceeding filed against it in any involuntary case or proceeding under such
bankruptcy laws, or (vi) take any action for the purpose of effecting any of
the
foregoing.
ARTICLE
III
MISCELLANEOUS
3.1 Issuance
of New Note.
Upon
any partial redemption 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
Company to the Holder for the principal balance of this Note and interest which
shall not have been paid as of such date. Subject to the provisions of Article
III of this Note, the Company shall not pay any costs, fees or any other
consideration to the Holder for the production and issuance of a new
Note.
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3.2 Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
3.3 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.
3.4 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(5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (d) one(1) 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 Companies at the address set
forth in the Purchase Agreement, or at such other address as the Company or
the
Holder may designate by ten(10) days advance written notice to the other parties
hereto.
3.5 Amendment
Provision.
The
term “Note” and all references 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 such successor instrument may be amended or supplemented.
3.6 Assignability.
This
Note shall be binding upon the Company and its successors and assigns, and
shall
inure to the benefit of the Holder and its successors and assigns. The Company
may not assign any of its obligations under this Note without the prior written
consent of the Holder, any such purported assignment without such consent being
null and void.
3.7 Cost
of Collection.
In case
of any Event of Default under this Note, the Company shall pay the Holder the
Holder’s reasonable costs of collection, including reasonable attorneys’
fees.
3.8 Governing
Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS
NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) THE
COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED
IN
THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION
TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND,
AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE;
PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS
MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE
OF
NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS
AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN
ANY
SUCH COURT, AND EACH COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.
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3.9 Severability.
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 enforceability of any other provision of this Note.
3.10 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 rate permitted by such law, any payments in excess
of such maximum rate shall be credited against amounts owed by the Company
to
the Holder and thus refunded to the Company.
3.11 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]
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IN
WITNESS WHEREOF,
the
Company has caused this Senior Secured Participating Term Note to be signed
in
its name effective as of this 13th day of February, 2007.
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XXXXXX
VENTURES, INC.
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/s/XXXXXXX
X. XXXXXX
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Xxxxxxx
X. Xxxxxx, CRO
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Agreed
to and Accepted:
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/s/
XXXXXXXX XXXX
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Xxxxxxxx
Xxxx
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