EXHIBIT 10.28
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS
ORIGINALLY ISSUED ON JANUARY 21, 1997, AND HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT 0F 1933, AS AMENDED.
XXXXXXX XXXXX, INC.
PROMISSORY NOTE
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January 21, 1997 $60,000.00
XXXXXXX XXXXX, INC., a California corporation (the "Borrower"), hereby
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promises to pay to the order of Hasco International, Inc., a Missouri
corporation ("Hasco"), as the initial holder of this Note (as such registered
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holder may change from time to time under the terms of this Note, the
"Noteholder"), the principal amount of SIXTY THOUSAND DOLLARS ($60,000.00) (the
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"Principal Amount") on the Maturity Date (as defined in Section 2(a) hereof) in
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accordance with the provisions of this Note.
Capitalized terms used in this Note have the meanings set forth in
section 5 hereof.
1. Interest. Interest on the Principal Amount of this Note shall
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accrue daily at a rate of 10% per annum. Xxxxxxxx agrees to a rate of interest
that is the rate stated above (as such rate may be adjusted pursuant to the
terms of this Note).
2. Payment of Principal on Note.
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(a) Mandatory Payments. On Friday, January 31, 1997 (the "Maturity
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Date") the Borrower shall pay the Principal Amount, together with all accrued
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but unpaid interest hereon, to the Noteholder.
(b) Prepayments. This Note may be prepaid in whole or in part
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without penalty or premium.
(c) Payments by IDI. International Digital Investors, L.P. ("IDI")
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shall have the right to satisfy any and all of the obligations under this Note
(including, without limitation, the payment of the Principal Amount and any
accrued or unpaid interest thereon); provided, however, that nothing contained
in this Note shall obligate IDI to fulfill any obligations under this Note.
3. Events of Default.
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(a) Definition. For purposes of this Note and the Security
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Agreement, dated as of January 21, 1997 (the "Security Agreement"), among the
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Borrower and Hasco, an "Event of Default" shall be deemed to have occurred if
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any of the following events shall occur:
(i) Nonpayment. The Borrower fails to make any payment
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due hereunder.
(ii) Nonperformance. The Borrower fails to perform or
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observe any material provision contained in this Note or the Security
Agreement.
(iii) Material Breach of Representation or Warranty. Any
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representation or warranty made by the Borrower in the Security Agreement
is not true in any material respect when made or deemed made.
(iv) Termination of Existence. The termination of
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existence, liquidation or dissolution of the Borrower or Styles On Video,
Inc., a Delaware corporation ("SOV").
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(v) Bankruptcy/Liquidation. If the Borrower, SOV or
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any of their Subsidiaries: (i) files a voluntary petition in bankruptcy
or a petition or answer seeking or acquiescing in any reorganization or
for an arrangement, imposition, readjustment, liquidation, dissolution,
or similar relief for itself pursuant to the United States Bankruptcy
Code or any similar law or regulation, federal or state relating to any
relief for debtors, now or hereafter in effect; (ii) make an assignment
for the benefit of creditors or admits in writing its inability to pay or
fails to pay its debts as they become due; (iii) consents to or
acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator or other similar official of such party, for all
or substantially all of the assets of Borrower, SOV or any of their
Subsidiaries; (iv) suspends payment of substantially all of its
obligations for more than five (5) days or takes any action in
furtherance of the foregoing; (v) has filed against it an involuntary
petition, arrangement, composition, readjustment, liquidation,
dissolution, or an answer proposing an adjudication of it as bankrupt or
insolvent, or is subject to a reorganization pursuant to the United
States Bankruptcy Code, an action seeking to appoint a trustee, receiver,
custodian, or conservator or liquidator, or any similar law or
regulation, federal or state, now or hereafter in effect, and such action
is approved by any court of competent jurisdiction and the order
approving the same shall not be vacated or stayed within five (5) days
from entry; or (vi) fails to deny the material allegations of a filing of
any such petition or answer in a timely manner.
(vi) Cross-Default. If the Borrower shall fail to make
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any payment when due in respect of any indebtedness having an aggregate
principal amount outstanding in excess of $50,000 and such payment has
not been waived by the lender of such indebtedness, or any event shall
occur or condition shall exist that with or without the giving of notice
or the passage of time or both would result in the acceleration of the
maturity of any such debt or enable the holder thereof to cause such debt
to become due before its stated maturity.
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The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
(b) Consequences of Events of Default.
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(i) Upon the occurrence of an Event of Default, the
interest rate on the Note shall increase immediately by an increment of
two (2) percentage points to the extent permitted by law. Any such
increase of the interest rate resulting from the operation of this
subparagraph shall terminate as of the close of business on the first
subsequent date on which no Events of Default exist (subject to
subsequent increases pursuant to this subparagraph).
(ii) If an Event of Default has occurred, the Principal
Amount, together with all accrued but unpaid interest of the Note on such
date shall become immediately due and payable without any action on the
part of the Noteholder, and the Borrower shall immediately pay to the
Noteholder all amounts due and payable with respect to the Note.
(iii) The Noteholder shall also have any other rights which
such holder may have been afforded under Security Agreement, any other
contract or agreement and any other rights which such holder may have
pursuant to applicable law.
(iv) The Borrower hereby waives diligence, presentment,
protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note, and expressly agrees that this Note, or any
payment hereunder, may be extended from time to time and that the
Noteholder may accept security for this Note or release security for this
Note, all without in any way affecting the liability of the Borrower
hereunder.
(v) The Noteholder's right and remedies shall be
cumulative. No exercise by the Noteholder of one right or remedy shall be
deemed an election which precludes other remedies, and no waiver by the
Noteholder of any Event of Default on the Borrower's part shall be deemed
made unless done in a writing signed by the Noteholder. No delay by the
Noteholder shall constitute a waiver, election, or acquiescence by it.
(vi) The Borrower shall pay, or reimburse the Noteholder
for all reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable attorneys fees and expenses) paid or incurred by
the Noteholder before and after judgment in enforcing, protecting or
preserving its rights under this Note and as a Noteholder under the
Security Agreement.
(vii) If the Borrower becomes aware of the occurrence of an
Event of Default, it shall give notice of such Event of Default to the
Noteholder and IDI. If the Noteholder believes that an Event of Default
has occurred and has not received notice to that effect from the
Borrower, it shall give notice of such Event of Default to the Borrower
and IDI.
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4. Amendment and Waiver. Except as otherwise expressly
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provided herein, the provisions of the Note may be amended and the Borrower may
take any action herein prohibited or omit to perform any act herein required to
be performed by it, only if the Borrower has obtained the written consent of the
Noteholder.
5. Definitions. For purposes of the Note, the following
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capitalized terms have the following meaning:
"Person" means an individual, a partnership, a corporation, a
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limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
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limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one of more
Subsidiaries of that Person or a combination thereof. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
6. Cancellation. After the Principal Xxxxxx, together with
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all accrued but unpaid interest heron, at any time owed on this Note has been
paid in full this Note shall be surrendered to the Borrower for cancellation and
shall not be reissued.
7. Payments. Unless otherwise expressly provided herein,
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all payments to be made to the Noteholder shall be made in the lawful money of
the United States of America in immediately available funds to such account as
designated from time to time by the Noteholder.
8. Business Days. If any payment is due, or any time period
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for giving notice or taking action expires, on a day which is a Saturday, Sunday
or legal holiday in the United States of America or the State of California, the
payment shall be due and payable on, and the time period shall automatically be
extended to, the next business day immediately following such Saturday, Sunday
or legal holiday, and interest shall continue to accrue at the required rate
hereunder until any such payment is made.
9. Successors and Assigns. This Note shall bind and inure
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to the benefit of the respective successors and assigns of each of the parties;
provided, however, that neither this Note nor any rights hereunder may be
assigned by either party without the other party's written consent,
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which consent may be granted or withheld in such party's sole discretion. This
Note is only transferable on the Note Registry of the Borrower upon surrender of
this Note for Registration of transfer at the principal office of Borrower at
000 Xxxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx Xxxx, XX 00000, whereupon a new Note shall
be issued to the designated registered transferee.
10. Investment Representations. This Note is being acquired by
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Hasco solely for its own account, for investment and is not being purchased for
or on behalf of any other person or for or with a view to the resale,
distribution, subdivision or fractionalization therein. Each Noteholder, by
accepting this Note, represents and warrants to the Borrower that this Note is
being acquired solely for its own account, for investment and is not being
purchased for or on behalf of any other person or for or with a view to the
resale, distribution, subdivision or fractionalization thereof.
11. Severability. Whenever possible, each provision of this
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Note shall be interpreted in such a manner as to be valid, legal and enforceable
under applicable law. Without limiting the generality of the foregoing sentence,
in case any provision of this Note shall be invalid, illegal or unenforceable
under the applicable law, the validity, legality and enforceability of the
remaining provisions, or of such provision in any other jurisdiction, shall not
in any way be affected or impaired thereby.
12. Usury Laws. It is the intention of the Borrower and the
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Noteholder to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to reduction to
the amount not in excess of the maximum legal amount allowed under the
applicable usury laws as now or hereafter construed by the courts having
jurisdiction over such matters. If the maturity of this Note is accelerated by
reason of an election by the Noteholder resulting from an Event of Default,
voluntary prepayment by the Borrower or otherwise, then earned interest may
never include more than the maximum amount permitted by law, computed from the
date hereof until payment, and any interest in excess of the maximum amount
permitted by law shall be canceled automatically and, if theretofore paid, shall
at the option of the Noteholder either be rebated to the Borrower or credited on
the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Borrower. The aggregate of all interest (whether
designated as interest, service charges, points or otherwise) contracted for,
chargeable, or receivable under this Note shall under no circumstances exceed
the maximum legal rate upon the unpaid principal balance of this Note remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it shall be deemed a mistake and such excess shall be canceled automatically
and, if theretofore paid, rebated to the Borrower or credited on the principal
amount of this Note, or if this Note has been repaid, then such excess shall be
rebated to the Borrower.
13. Governing Law. All issues and questions concerning the
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construction, validity, interpretation and enforcement of this note shall be
governed by, and construed in accordance with, the laws of the State of
California, without giving effect to any choice of law or conflict of law
provisions of such state.
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14. Guarantee By SOV. SOV, as a principal obligor and not as a
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surety, covenants with the Noteholder:
(a) to cause the Borrower to effect prompt and complete
performance of all the terms, covenants, conditions and provisions of this Note
and the agreements contemplated hereby that are to be kept, observed and
performed by the Borrower;
(b) that, if for any reason whatsoever, including the
insolvency or bankruptcy of the Borrower, the Borrower shall at any time or from
time to time fail to keep, perform or observe any term, covenant, condition or
provision of this Note or any of the agreements contemplated hereby that is to
be kept, observed or performed by the Borrower, then SOV shall forthwith on
demand of the Noteholder, perform or observe, as the case may be, such term,
covenant, condition or provision in accordance with the relevant provisions of
this Note and the agreements contemplated hereby; and
(c) that SOV is jointly and severally bound with the Borrower
to perform the terms, covenants, conditions and provisions of this Note and the
agreements contemplated hereby that are to be kept, observed and performed by
the Borrower and, in the enforcement of its rights pursuant to this Sections 14
the Noteholder may proceed against SOV as if SOV were a principal party under
this Agreement with respect to such terms, covenants, conditions and provisions
applicable to the Borrower.
In the event of a default by the Borrower under this Note or
the agreements contemplated hereby, SOV waives any right to require the
Noteholder to:
(i) proceed against the Borrower or pursue any rights or
remedies with respect to this Note or the agreements contemplated hereby
against the Borrower, or
(ii) pursue any other remedy whatsoever in the power of the
Borrower prior to the Borrower pursuing any rights it may have under
this Note or the agreements contemplated hereby against SOV.
Without limiting the generality of the foregoing, the liability
of SOV shall not be deemed to have been waived, released, discharged,impaired
or affected by reason of the release or discharge of the Borrower in any
receivership, bankruptcy, winding-up or other creditors' proceedings or the
rejection, disaffirmance or disclaimer of this Note or any of the agreements
contemplated hereby in any proceeding, and shall continue with respect to the
periods prior thereto and thereafter, for and with respect to this Note and the
agreements contemplated hereby.
15. Acknowledgment. The Borrower and SOV acknowledge
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and agree that (i) the loan to the Borrower contemplated under this Note has
been made to fund the Borrower's short-term cash needs, (ii) Hasco shall have no
obligation to proceed with the proposed acquisition of Borrower's assets except
as specifically set forth in that certain letter of intent dated December 13,
1996, (iii) Hasco has not made any representations or warranties regarding the
status of its diligence of the Borrower in connection with such letter of intent
or other conditions set forth therein and (iv) this Note shall become due and
payable in accordance with its terms regardless of the status of the
negotiations, documentation or status relating to such proposed acquisition.
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IN WITNESS WHEREOF, the Borrower has executed and delivered this
Note on January 21, 1997.
XXXXXXX XXXXX, INC.
Attest: BY: /s/ Xxxxx X. X'Xxxxx
/s/ X. Xxxxxx ---------------------
------------------------ Name: Xxxxx X. X'Xxxxx
Title: President
STYLES ON VIDEO, INC.
Attest: By: /s/ X. Xxxxxx Xxxxxxx
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Name: X. Xxxxxx Xxxxxxx
Title: CEO
/s/ X. Xxxxxx
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HASCO INTERNATIONAL, INC.
By: --------------------
Name:
Title:
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