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THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. 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 RELIANT HOME WARRANTY CORPORATION
THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED REVOLVING NOTE
FOR VALUE RECEIVED, RELIANT HOME WARRANTY CORPORATION, a
Florida corporation (the "Company" or "Parent"), promises to pay to LAURUS
MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Xxxxxx
House, South Church Street, Xxxxxx Town, Grand Cayman, Cayman Islands, Fax:
000-000-0000 (the "Holder") or its registered assigns or successors in interest,
the sum of up to Twenty Five Million Dollars (US$25,000,000), without
duplication of any amounts owing by the Company to the Holder under the Note (as
defined in the Security and Purchase Agreement referred to below), or, if
different, the aggregate principal amount of all Loans (as defined in the
Security and Purchase Agreement referred to below), together with any accrued
and unpaid interest hereon, on June 1, 2009 (the "Maturity Date") if not sooner
paid in full.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in the Security and Purchase Agreement among
the Company and the Eligible Subsidiaries (as described therein) and the Holder
dated as of the date hereof (as amended, modified and/or supplemented from time
to time, the "Security and Purchase Agreement").
ARTICLE I
CONTRACT RATE AND THE NOTE
1.1 Availability. The Company hereby acknowledges and agrees that with the
exception of the Initial Overadvance, the Loans contemplated in the
Security and Purchase Agreement shall not be made available by the
Holder to the Company until all conditions precedent in Section 3.1
have been met to the satisfaction of the Holder in its sole discretion.
1.2 Contract Rate. Subject to Sections 3.2 and 4.9, interest payable on the
outstanding principal amount of this Note (the "Principal Amount")
shall accrue at a rate per annum equal to the "prime rate" published in
The Wall Street Journal from time to time (the "Prime Rate"), plus two
percent (2.0%) (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 the Prime Rate. Subject to Section 1.2, the Contract Rate shall not
at any time be less than eight percent (8.0%). Interest shall (i)
accrue as of the Closing Date, (ii) be calculated on the basis of a 360
day year, and (iii) be payable monthly, in arrears, commencing one (1)
calendar month from the Closing Date (as defined below) on the first
business day of each consecutive calendar month thereafter through and
including the Maturity Date, and on the Maturity Date, whether by
acceleration or otherwise.
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1.3 Contract Rate Adjustments and Payments. The Contract Rate shall be
calculated on the last business day of each calendar month hereafter
(other than for increases or decreases in the Prime Rate which shall be
calculated and become effective in accordance with the terms of Section
1.1) until the Maturity Date.
1.4 Taxes.
(a) Any and all payments by the Company hereunder, including any amounts
received on redemption of the Note and any amounts on account of
interest or deemed interest, shall be made free and clear of and
without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on net income or franchise
taxes of the Holder by the jurisdiction in which such person is
organized or has its principal office (all such non-excluded taxes,
levies, imposts, deductions, charges withholdings and liabilities,
collectively or individually, "Taxes"). If the Company shall be
required to deduct any Taxes from or in respect of any sum payable
hereunder to the Holder, (i) the sum payable shall be increased by the
amount (an "additional amount") necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 1.4) the Holder shall receive an amount
equal to the sum it would have received had no such deductions been
made, (ii) the Company shall make such deductions and (iii) the Company
shall pay the full amount deducted to the relevant governmental
authority in accordance with applicable law.
(b) In addition, Company agrees to pay to the relevant governmental
authority in accordance with applicable law any present or future stamp
or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to,
this Note ("Other Taxes"). The Company shall deliver to the Holder
official receipts, if any, in respect of any Taxes or Other Taxes
payable hereunder promptly after payment of such Taxes or Other Taxes
or other evidence of payment reasonably acceptable to the Holder.
(c) The obligations of the Company under this Section 1.4 shall survive the
termination of this Note and the payment of the Note and all other
amounts payable hereunder.
ARTICLE II
OPTIONAL PREPAYMENT
2.1 Optional Redemption in Cash. The Company will have the option of
prepaying this Note ("Optional Redemption") by paying to the Holder the
Prepayment Premium (as hereinafter defined) together with accrued but
unpaid interest thereon to the Redemption Payment Date (as hereinafter
defined) and any and all other unpaid amounts then due, accrued,
payable or owing to the Holder under this Note, the Security and
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Purchase Agreement or any Ancillary Agreement (the "Redemption
Amount"). The "Prepayment Premium" (i) for the period commencing on the
date hereof up to and including the six month anniversary of the date
hereof shall be 5% of the Principal Amount, (ii) for the period
commencing after the 6 month anniversary of the date hereof up to and
including the 18 month anniversary of the date hereof, shall be equal
to 4% of the Principal Amount and (iii) for the period commencing after
the 18 month anniversary of the date hereof up to and including the
Maturity Date shall be 3% of the Principal Amount. The Company shall
deliver to the Holder a written notice of redemption (the "Notice of
Redemption") specifying the date for such Optional Redemption (the
"Redemption Payment Date"), which date shall be ten (10) business days
after the date of the Notice of Redemption (the "Redemption Period").
On the Redemption Payment Date, the Redemption Amount must be paid in
good funds to the Holder. In the event the Company fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein,
then such Redemption Notice will be null and void.
2.2 Maturity; Surrender, Etc. In the case of a repayment of this Note
pursuant to this Article II, the Principal Amount of this Note to be
repaid shall mature and become due and payable on the applicable
Redemption Payment Date together with interest on such Principal Amount
accrued to such date and any other amount due and payable under this
Note, the Purchase Agreement or any Ancillary Agreement to the extent
that such amounts are outstanding as of the applicable Redemption
Payment Date. From and after such date, unless the Company shall fail
to pay such Principal Amount when so due and payable together with the
interest and other amounts as aforesaid, interest on such Principal
Amount shall cease to accrue. The Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and other amounts
due, accrued, payable or owing as entered in its records and shall
provide written notice thereof to the Company within one (1) Business
Day of the applicable Payment Date. If this Note is paid in full, it
shall be surrendered to the Company and cancelled and shall not be
reissued and no note shall be issued in lieu of any paid Principal
Amount of this Note.
ARTICLE III
CONDITIONS PRECEDENT
3.1 Conditions Precedent. The Company shall meet the conditions precedent
set forth in Section 9 of the Security and Purchase Agreement prior to
the date upon which any and all Advances shall be made by the Holder to
the Company.
3.2 Conditions Precedent to First Advance. The Company shall meet the
conditions precedent set forth in Section 10 of the Security and
Purchase Agreement prior to the First Advance Date.
ARTICLE IV
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
4.1 Events of Default. The occurrence of an Event of Default under the
Security and Purchase Agreement shall constitute an event of default
("Event of Default") hereunder.
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4.2 Default Interest. Following the occurrence and during the continuance
of an Event of Default, the Company shall, jointly and severally, pay
additional interest on the outstanding principal balance of this Note
in an amount equal to two percent (2%) per month, and all outstanding
Obligations, including unpaid interest, shall continue to accrue
interest at such additional interest rate from the date of such Event
of Default until the date such Event of Default is cured or waived.
4.3 Default Payment. Following the occurrence and during the continuance of
an Event of Default, the Holder, at its option, may elect, acting
reasonably and in good faith, in addition to all rights and remedies of
the Holder under the Security and Purchase Agreement and the other
Ancillary Agreements and all obligations and liabilities of the Company
under the Security and Purchase Agreement and the other Ancillary
Agreements, to require the Company to make a Default Payment ("Default
Payment"). The Default Payment shall be one hundred thirty percent
(130%) 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 the Holder pursuant to the Notes,
the Security and Purchase Agreement and/or the Ancillary Agreements,
then to accrued and unpaid interest due on the Notes and then to the
outstanding principal balance of the Notes. The Default Payment shall
be due and payable immediately on the date that the Holder has
exercised its rights pursuant to this Section 4.3.
ARTICLE V
MISCELLANEOUS
5.1 Cumulative Remedies. The remedies under this Note shall be cumulative.
5.2 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.
5.3 Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effective 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
Company at the address provided for the Company in the Security and
Purchase Agreement executed in connection herewith, and to the Holder
at the address provided in the Security and Purchase Agreement for the
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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 Company or the Holder may designate by ten
days advance written notice to the other parties hereto.
5.4 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.
5.5 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, and may be assigned by the Holder in
accordance with the requirements of the Security and Purchase
Agreement. The Company may not assign any of its obligations under this
Note without the prior written consent of the Holder, which consent
shall not be unreasonably withheld, any such purported assignment
without such consent being null and void.
5.6 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.
5.7 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, THE SECURITY AND PURCHASE AGREEMENT OR
ANY OF THE OTHER ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF
OR RELATED TO THIS NOTE, THE SECURITY AND PURCHASE AGREEMENT OR ANY OF
THE OTHER ANCILLARY AGREEMENTS 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
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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 THE COMPANY HEREBY
WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE
SECURITY AND PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT
THEREOF OR TEN (10) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING
SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO
WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE HOLDER, AND/OR THE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THIS NOTE, THE SECURITY AND PURCHASE
AGREEMENT, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
5.8 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.
5.9 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.
5.10 Security Interest and Guarantee. The Holder has been granted a security
interest (i) in all assets of the Company as more fully described in
the Security and Purchase Agreement, and (ii) in certain assets of the
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Company and its Subsidiaries pursuant to the Share Pledge Agreement
dated as of the date hereof. The obligations of the Company under this
Note are guaranteed by certain Subsidiaries of the Company pursuant to
the Subsidiary Guaranty dated as of the date hereof and are guaranteed
by Xxxxxxxx pursuant to the Xxxxxxxx Guaranty dated as of the date
hereof.
5.11 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.
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IN WITNESS WHEREOF, the Company has caused this Secured Revolving Note to be
signed in its name effective as of this 8th day of June 2006.
RELIANT HOME WARRANTY CORPORATION
By:
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Name:
Title:
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