SENIOR SECURED GRID NOTE DUE MAY 1, 2010
EXHIBIT
1.2
DUE
MAY 1, 2010
Original
Issue Date: MAY
8, 2008
FOR
VALUE
RECEIVED, Alternative
Construction Technologies, Inc.,
a
Delaware corporation (hereinafter called the "Borrower"
or
“Company”),
hereby
promises to pay to the order of [
],
a
[
]
or its
registered assigns (the "Holder")
the sum
of ________________
U.S.
Dollars (U.S. $____,000,000)
or so much thereof as shall be advanced (each, an “Advance”)
by the
Holder to the Borrower hereunder and not repaid, on May 1, 2010 (the
"Maturity
Date"),
which
maturity date may be extended by one (1) year at the sole option of the Holder
up to five (5) times (each by providing written notice to the Company prior
to
the then existing Maturity Date), or such earlier date as this Note is required
or permitted to be repaid as provided hereunder, and to pay interest to the
Holder on the aggregate then outstanding principal amount of this Note in
accordance with the provisions hereof. This Note (including all Notes issued
in
exchange, transfer or replacement hereof, this "Note")
is one
of an issue of Notes issued pursuant to the Line of Credit Agreement (as defined
in Section 1 below) on the Closing Date (collectively, the "Notes"
and such
other Notes, the "Other
Notes").
All
payments due hereunder shall be made in lawful money of the United States of
America in immediately available funds provided that, to the extent that any
accrued Interest has not been paid when due, at the option of the Holder, upon
written notice to the Borrower, such accrued and unpaid Interest may, in whole
or in part, be added to the principal amount of this Note, in which event
Interest shall accrue thereon in accordance with the terms of this Note. All
payments shall be made at the address of the Holder as set forth in the Line
of
Credit Agreement or at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions of this Note.
Whenever any amount expressed to be due by the terms of this Note is due on
any
day which is not a Business Day (as defined below), the same shall instead
be
due on the next succeeding day which is a Business Day and such additional
time
shall be included in the computation of Interest.
This
Note
evidences loans made by Holder to Borrower from time to time, subject to, and
as
provided in the Line of Credit Agreement. The unpaid principal balance of this
Note at any time shall be the total amount advanced by Holder to Borrower,
less
the total amount of principal payments made hereon by Borrower. The date and
amount of each Advance and each payment on account of principal thereof may
be
endorsed by Holder on the grid attached to and made a part of this Note, and
when so endorsed shall represent evidence thereof binding upon Borrower in
the
absence of manifest error. Any failure by Holder to so endorse shall in no
way
mitigate or discharge the obligation of Borrower to repay any loans actually
made. Borrower may prepay this Note in whole or in part at any time with all
accrued interest to the date of prepayment.
Advances
hereunder may be made, at the option of the Holder, subject to the limitations
as to time and amount set forth in the Line of Credit Agreement. Any such
Advance so made shall be conclusively presumed to have been made to or for
the
benefit of Borrower, and Borrower shall be liable in respect thereof when any
such Advance is made in accordance with any such request or direction, or when
deposited to any account of Borrower. Upon each Advance, Borrower shall deliver
to Holder a certificate signed by its CEO and CFO representing to Holder that
(i) all of the representations and warranties of Borrower set forth in this
Note
and in the Line of Credit Agreement are true and correct as of the date of
such
request as if made on and as of such date and (ii) on such date Borrower is
not
in breach of any of its covenants to Holder set forth in this Note, the Line
of
Credit Agreement, the Security Agreement or in any other document or instrument
of Borrower to Holder and no Event of Default has occurred.
1
Except
as
expressly otherwise provided herein with respect to prepayments, all payments
on
this Note shall be applied to the payment of accrued interest and accrued
reimbursement obligations with respect to Xxxxxx’s attorneys’ fees and expenses
before being applied to the payment of principal. In the event that any other
Required Cash Payment is due at any time that Holder receives a payment from
Borrower on account of this Note or any such other Obligations, Holder may
apply
such payment to amounts due under this Note or any such other Required Cash
Payments in such manner as Holder, in its discretion, elects, regardless of
any
instructions from Borrower to the contrary. The
obligations of Borrower to Holder evidenced by this Note are secured by that
certain Security Agreement (as defined in the Line of Credit Agreement) dated
as
of the date hereof.
This
Note
is subject to the following additional provisions:
Section
1. Certain
Definitions.
Capitalized terms used and not otherwise defined herein that are defined in
that
certain Line of Credit Agreement, of date even herewith, pursuant to which
the
Note was originally issued (the "Line
of Credit Agreement" or
the
“Purchase
Agreement”),
shall
have the meanings given such terms in the Line of Credit Agreement. For the
purposes hereof, the following terms shall have the following
meanings:
“1933
Act” means
the
Securities Act of 1933, as amended, and the rules and regulations promulgated
hereunder.
“Bankruptcy
Event”
means
any of the following events: (a) the Company or any Significant Subsidiary
(as
such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a
case
or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or
similar law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof; (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not dismissed
within sixty (60) days after commencement; (c) the Company or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
or other order approving any such case or proceeding is entered; (d) the Company
or any Significant Subsidiary thereof suffers any appointment of any custodian
or the like for it or any substantial part of its property that is not
discharged or stayed within sixty (60) calendar days after such appointment;
(e)
the Company or any Significant Subsidiary thereof makes a general assignment
for
the benefit of creditors; (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition,
adjustment or restructuring of its debts; or (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
“Bloomberg”
shall
mean Bloomberg L.P.
"Business
Day" shall
mean any day other than a Saturday, Sunday or a day on which commercial banks
in
the City of New York, New York are authorized or required by law or executive
order to remain closed.
“Buyer(s)”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Closing
Date” means
the
Trading Day when (i) all of the Holder’s Transaction Documents have been
executed and delivered by the applicable parties thereto, (ii) all conditions
precedent to the Company’s obligations to deliver the Securities have been
satisfied or waived, and (iii) Holder shall have delivered the purchase price
for the Note to the Company in accordance with the Line of Credit
Agreement.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock” means
the
Company’s shares of Common Stock, par value $0.0001.
“Common
Stock Equivalents”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
2
"Notes"
shall be
deemed to refer to this Note, as originally executed, or if later amended or
supplemented, then as so amended or supplemented, all other notes issued
pursuant to the Line of Credit Agreement and all notes issued in replacement
hereof or thereof or otherwise with respect hereto or
thereto.
"Eligible
Market"
shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Event
of Default”
shall
have the meaning set forth in Section 7.
“Exempt
Issuance”
shall
have the meaning ascribed to it in the Warrants.
“Holders”
shall
mean the Holder, and the other holders of Notes issued pursuant to the Line
of
Credit Agreement.
"Indebtedness"
shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Interest”
shall
heave the meaning set forth in Section 2 below.
“Original
Issue Date”
shall
mean the date of the first issuance of any Note regardless of the number of
transfers of any particular Note.
“Permitted
Indebtedness”
means
(a) Indebtedness evidenced by the Notes or issuances to the Holders as
contemplated by the Transaction Documents; (b) the Indebtedness existing on
the
Original Issue Date as set forth on Schedule
9(bb)
attached
to the Line of Credit Agreement, provided that the principal amount thereof
is
not increased or the terms thereof are not otherwise amended or modified after
the Closing Date; (c)
Indebtedness to trade creditors incurred in the ordinary course of business
not
to exceed $1,000,000, in the aggregate, and (d) indebtedness that (i) is
expressly junior and subordinated to the Notes pursuant to a written
subordination agreement with the Holders that is acceptable to each Holder
in
its sole and absolute discretion, and (ii) matures at a date later than the
Maturity Date (iii) has no prepayments or amortization payments prior to the
Maturity Date of the Notes, and (iv) has a rate of interest no greater than
the
interest rate of the Notes. For
purposes of clarification, it is expressly agreed and understood that the
classification of Indebtedness as “Permitted Indebtedness” does not
cause
such Indebtedness to be exempted from (i) the Subsequent Issuance Adjustments
(as defined in Section 6 below and as defined in the Warrants), (ii) the
prohibition against the issuance of “Highly Dilutive Equity Securities” (as
defined in the 2007 Securities Purchase Agreement), (iii) the Buyer’s Rights of
Participation (as defined in Section 10(b) of the Line of Credit Agreement)
or
(iv) from any other provisions of the Transaction Documents, except that
Permitted Indebtedness does constitute an exception to the Indebtedness
Negative
Covenant
specified in Section 6(d) hereof.
“Permitted
Liens”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
"Person"
means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and
a government or any department or agency thereof.
“Principal
Market”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Redemption”
shall
mean any redemption of the Note hereunder, including but not limited to a
Redemption Upon Major Transaction, a Mandatory Redemption, and an Automatic
Redemption.
3
“Redemption
Amount”
shall
mean any amount that is payable to the Holder pursuant to a
Redemption.
“Redemption
Date”
shall
mean the date of any Redemption of the Note hereunder.
“Required
Cash Payment”
shall
have the meaning set forth in Section 7(a) below.
“Required
Holders”
shall
mean Holders holding at least seventy five percent (75%) of the then outstanding
principal amount of Notes.
“Subsidiaries”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
"Trading
Day"
shall
mean any day on which the Common Sock is traded for any period on the Principal
Market, or on the principal securities exchange or other securities market
on
which the Common Stock is then being traded.
“Transaction
Documents” shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Variable
Equity Securities” shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Warrant”
shall
have the meaning ascribed to it in the Line of Credit Agreement.
“Warrant
Shares”
shall
have the meaning ascribed to it in the Warrant.
Section
2. Interest.
The
Company shall pay interest (“Interest”)
to the
Holder on the aggregate then outstanding principal amount of this Note at the
rate of thirteen percent (13%) per annum (the “Interest
Rate”)
from
the Original Issue Date (as defined herein) until the same becomes due and
payable, whether at maturity or upon acceleration or otherwise. Interest shall
commence accruing on the Original Issue Date, shall be computed on the basis
of
a 365-day year and the actual number of days elapsed and shall be payable
monthly (as further described below), in cash or, to the extent not yet paid,
on
the Maturity Date or upon acceleration in accordance with the terms hereof.
Payments of Interest shall be due and payable (i) monthly, in arrears, on the
first Business Day of each month after the Original Issue Date, occurring after
the Original Issue Date, (ii) on
each
date that a payment is made to the Holder out of the Lockbox Account pursuant
to
the Line of Credit Agreement, (iii) on each Redemption Date, and (iv) on the
Maturity Date (each such date, an “Interest
Payment Date”).
Furthermore,
upon the occurrence of an Event of Default, the Company will pay interest to
the
Holder, payable on demand, on the outstanding principal balance of and unpaid
interest on the Note from the date of the Event of Default until such Event
of
Default is cured at the rate of the lesser of eighteen percent (18%) and the
maximum applicable legal rate per annum.
Section
3. Rights
Upon Major Transaction or Change of Entity Transaction.
(a)
Definitions.
For purposes hereof,
“Change
of Entity Transaction”
means a consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or other similar event, in one or a series
of transactions (A) following which the holders of Common Stock immediately
preceding such consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or other similar event either (1) no longer
hold a majority of the shares of Common Stock of the Company or (2) no longer
have the ability to elect the board of directors of the Company or (B) as a
result of which shares of Common Stock shall be changed into (or the shares
of
Common Stock become entitled to receive) the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity.
4
“Sufficient
Trading Characteristics”
shall
mean that the average daily dollar trading volume of the common stock of such
entity on its primary exchange or market is equal to or in excess of $100,000
for the 90th through the 31st day prior to the public announcement of the
transaction in respect of which this definition shall be applied.
“Permissible
Change of Entity Transaction”
shall
mean a Change of Entity Transaction where the Successor Entity (as defined
below) (A) is a publicly traded company whose common stock is quoted on or
listed for trading on an Eligible Market, (B) has Sufficient Trading
Characteristics (as defined above) and (C) meets the Assumption Requirements
(as
required in Section 3(b) below), or any other Change of Entity Transaction
with
respect to which the Holder provides the Company with a Major Transaction
Approval Notice (as defined in Section 3(d) below).
“Impermissible
Change of Entity Transaction”
shall
mean a Change of Entity Transaction which does not qualify as a Permissible
Change of Entity Transaction.
“Major
Transaction”
means
(i) an
Impermissible Change of Entity Transaction; and
(ii) the
sale
or transfer of more than 40%, in the aggregate, of the properties or assets
of
the Company to another Person or Persons in any rolling 12 month period (an
“Asset
Sale”).
(b)
Assumption Upon Permissible Change of Entity Transaction.
The
Company shall not, so long as any of the Notes remain outstanding, enter into
or
be party to a Change of Entity Transaction unless any Person purchasing the
Company’s assets or Common Stock, or any successor entity resulting from such
Change of Entity Transaction (in each case, an “Successor
Entity”),
assumes (an “Assumption”)
in
writing all of the obligations of the Company under the Note and the other
Transaction Documents in accordance with the provisions of this Section 3(b)
pursuant to written agreements in form and substance satisfactory to the
Required Holders and approved by the Required Holders prior to such Change
of
Entity Transaction, including agreements to deliver to each holder of Notes
in
exchange for such Notes a security of the Successor Entity evidenced by a
written instrument substantially similar in form and substance to the Note,
including, without limitation, having a principal amount and interest rate
equal
to the principal amount and Interest rate of the Notes held by such Holder,
and
having similar priority to the Notes, and otherwise satisfactory to the Required
Holders. Upon the occurrence of any Change of Entity Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the
date
of such Change of Entity Transaction, the provisions of the Note referring
to
the "Company" shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations
of
the Company under the Note with the same effect as if such Successor Entity
had
been named as the Company herein. The provisions of this Section shall apply
similarly and equally to successive Change of Entity Transactions. The
requirements of this Section 3(b) are referred to herein as the “Assumption
Requirements.”
(c) Notice
of Transaction.
At least
thirty (30) days prior to the consummation of a Major Transaction or Change
of
Entity Transaction, but not prior to the public announcement of such
transaction, the Company shall deliver written notice thereof via facsimile
and
overnight courier to the Holder (a "Transaction
Notice"),
which
notice shall specify the nature and terms of the proposed transaction (including
notice of whether or not such transaction constitutes a Major Transaction)
and
nature of the Successor Entity (if any).
5
(d) Redemption
Upon Major Transaction at Option of Holder. At
any
time during the period beginning after the Holder's receipt of a Transaction
Notice and ending on the Trading Day immediately prior to the consummation
of
such Major Transaction, the Holder may require the Company to redeem (a
“Redemption
Upon Major Transaction”)
all or
any portion of the Holder’s Note by delivering written notice thereof
("Major
Transaction Redemption Notice" or“Redemption
Notice”)
to the
Company, which Major Transaction Redemption Notice shall indicate the aggregate
principal amount of Notes (the “Redemption
Principal Amount”)
that
the Holder is electing to be redeemed. Unless otherwise indicated by the Holder
to the Company in writing, in the event that the holder does not provide a
Major
Transaction Redemption Notice to the Company, the Holder shall be deemed to
have
delivered a Major Transaction Redemption Notice, on the last day such notice
is
allowable, requiring the Company to redeem 100% of the Holder’s Note. The
Redemption Principal Amount of Notes subject to redemption pursuant to this
Section 3(d) shall be redeemed by the Company in cash at a price (the
"Major
Transaction Redemption Price")
equal
to the sum of (A) 120% multiplied by the Redemption Principal Amount being
redeemed plus, plus (B) any accrued and unpaid Interest to the Redemption Date,
and any other Required Cash Payments (such amounts in addition to the Redemption
Principal Amount are referred to herein as the “Supplementary
Amounts”).
(e)
Mechanics
of Redemptions Upon Major Transactions.
Redemptions Upon Major Transactions required by this Section 3 shall be made
in
accordance with the provisions of Section 9 and shall have priority to payments
to shareholders in connection with a Major Transaction. To the extent
redemptions required by this Section 3(e) are deemed or determined by a court
of
competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments. The parties hereto
agree that in the event of the Company's failure to redeem any portion of the
Note under this Section 3, the Holder's damages would be uncertain and difficult
to estimate because of the parties' inability to predict future interest rates
and the uncertainty of the availability of a suitable substitute investment
opportunity for the Holder. Accordingly, any redemption premium due under
Section 3(d) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder's actual loss of its investment opportunity and not
as a
penalty.
Section
4. Automatic
Redemption at End of Term.
(a)
Automatic Redemption at End of Term.
Any Note
that has not been subjected to a Default Notice by midnight, New York City
time,
on the Maturity Date (the “Automatic
Redemption Date”),
shall
be automatically redeemed (“Automatic
Redemption”)
for a
redemption price, in cash, equal to the outstanding principal amount of this
Note, plus all accrued and unpaid Interest, and other Required Cash Payments
(the “Automatic
Redemption Amount”).
The
Automatic Redemption Amount shall be due and payable within five (5) Business
Days of the Automatic Redemption Date.
6
Section
5. Senior
Debt; Secured Obligation.
(a)
Senior
Debt; Priority.
The
Notes shall constitute senior debt of the Company. There is no debt currently
outstanding that is senior to the Notes. Except as otherwise expressly set
forth
in the Line of Credit Agreement or the Security Agreement, (i) all future debt
issued by the Company or any Subsidiary shall be subordinated and junior to
the
Notes, and (ii) neither the Company nor any Subsidiary shall, without the prior
written permission of the Holder hereof, issue any other debt that is senior
to,
or pari passu with in right of priority, the Notes or grant any security
interest with respect to the Collateral (as defined in the Security Agreement).
From the Original Issue Date of the Notes through the date that all of the
Notes
have been paid in full, before entering into, or permitting any Subsidiary
to
enter into, any future debt with a third party, the Company shall first obtain
a
subordination agreement, satisfactory to Holder, from the proposed debt holder.
(b)
Secured
Obligation.
The
obligations of the Company under this Note are secured by the Collateral
pursuant to the Security Agreement and the Intellectual Property Security
Agreement (“Security
Agreement”)
of date
even herewith, between the Company, certain of the Subsidiaries of the Company
and the Secured Parties (as defined therein).
Section
6. Certain
Negative Covenants; Miscellaneous.
Without
the prior written consent of the Required Holders, for so long as any of the
Notes remain Outstanding, the Company shall not, and shall not permit any of
its
Subsidiaries to, directly or indirectly:
(a)
(i)
pay, declare or set apart for such payment, any dividend or other distribution
(whether in cash, property or other securities) on shares of capital stock
or
(ii) directly or indirectly or through any Subsidiary make any other payment
or
distribution in respect of its capital stock. For purposes hereof, each Note
or
any portion thereof shall be deemed to be “Outstanding”
until
such time as it has been redeemed or otherwise satisfied in accordance with
its
terms.
(b)
redeem, repay, repurchase or otherwise acquire (whether for cash or in exchange
for property or other securities or otherwise) in any one transaction or series
of related transactions any shares of capital stock of the Company or any
warrants, rights or options to purchase or acquire any such shares, other than
as to the Warrant Shares as permitted under the Transaction
Documents.
(c)
by
amendment of its charter documents, including but not limited to the Articles
of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
the
Note, and will at all times in good faith carry out all of the provisions of
the
Note and take all action as may be required to protect the rights of the Holder
of the Note.
(d)
other
than Permitted Indebtedness (as defined herein), enter into, create, incur,
assume, guarantee or suffer to exist any indebtedness for borrowed money of
any
kind, including but not limited to, a guarantee, on or with respect to any
of
its property or assets now owned or hereafter acquired or any interest therein
or any income or profits therefrom (the “Indebtedness
Negative Covenant”);
(e)
other
than Permitted Liens, enter into, create, incur, assume or suffer to exist
any
mortgage, lien, pledge, charge, security interest or other encumbrance upon
or
in any property or assets (including accounts and contract rights) owned by
the
Company or any of its Subsidiaries (collectively, "Liens")
of
any
kind, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;
(f)
enter
into any transaction with any Affiliate (as defined in the Line of Credit
Agreement) of the Company;
(g)
redeem, defease, repurchase, repay or make any payments in respect of, by the
payment of cash or cash equivalents (in whole or in part, whether by way of
open
market purchases, tender offers, private transactions or otherwise), all or
any
portion of any Indebtedness, whether by way of payment in respect of principal
of (or premium, if any) or interest on such Indebtedness, if at the time such
payment is due or is otherwise made or after giving effect to such payment,
an
event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is
continuing;
7
(h)
make any payment on any indebtedness owed to officers, directors or Affiliates,
other than regularly scheduled payments on the currently outstanding
indebtedness as of the date hereof owed to officers, directors or Affiliates
disclosed in Schedule 6(h);
(i)
make any payment to a Holder or any Affiliate thereof whether in the form of
cash, securities or other consideration, in respect of any consent, waiver
or
other accommodation, or enter into any consulting or other similar arrangement
with a Holder or any Affiliate thereof; or
(j)
enter
into any agreement with respect to any of the foregoing.
Section
7. Events
of Default.
Unless
waived by the Required Holders, each of the following events shall be considered
to be an "Event
Of Default":
(a)
Failure
to Make Cash Payments When Due. The
Company fails to pay (each, a “Payment
Failure”)
any cash
payments due to the Holder under the terms of this Note when due under this
Note, whether on an Interest Payment Date, the Maturity Date, upon mandatory
or
requested prepayment, upon acceleration, upon an Event of Default, or upon
any
Redemption, or otherwise or fails to pay any redemption price, or other cash
payments that are due and owing under this Note, the Line of Credit Agreement,
a
Warrant or any other Transaction Document when due, including but not limited
to
all accrued and unpaid Interest and Redemption Amounts, and accrued and unpaid
Interest thereon (each cash payment referred to above is referred to as a
“Required
Cash Payment”),
or
fails to pay any late fees accrued on any of the above, and such Payment Failure
continues for a period of five (5) days after the applicable due date;
or
(b)
Exercise
of Warrants and Delivery of the Shares.
The
Company (i) fails to issue and deliver shares of Common Stock to the Holder
upon
exercise by the Holder of the exercise rights of the Holder in accordance with
the terms of the Warrant by the fifth (5th) Business Day after the Exercise
Date, or (ii) fails for a period of five (5) Business days to transfer or cause
its Transfer Agent to transfer (electronically or in certificated form) any
certificate for shares of Common Stock issued or issuable to the Holder upon
exercise of the Warrant as and when required by the terms of the Warrant;
or
(c) Breach
of Covenants.
The
Company breaches any representation, warranty, covenant or other term or
condition of this Note, or any of the other Transaction Documents in any
respect, and such breach is not cured by the earlier to occur of (i) five (5)
Business Days after written notice of such breach to the Company from the Holder
and (ii) ten (10) Business Days after the Company has become or should have
become aware of such breach; or
(d)
Breach
of Representations and Warranties.
Any
representation or warranty of the Company made herein, in any of the Transaction
Documents or in any agreement, statement or certificate given in writing
pursuant hereto (including, without limitation, pursuant to the Line of Credit
Agreement, the Security Agreement and the Warrants), shall be false or
misleading in any material respect when made and the breach of which has a
material adverse effect on the rights of the Holder with respect to this Note,
the Line of Credit Agreement, the Security Agreement or the Warrants;
or
(e)
Receiver
or Trustee.
The
Company or any Subsidiary of the Company shall make an assignment for the
benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business, or
such
a receiver or trustee shall otherwise be appointed; or
8
(f)
Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Company or any "Significant
Subsidiary" (as defined in Rule 1-02(w) of Regulation S-X promulgated under
the
1933 Act) of the Company, or the Company or any Significant Subsidiary shall
otherwise be subject to a Bankruptcy Event; or
(g) Delisting
of Common Stock.
A
Delisting Event (as defined below) occurs and remains uncured for a period
of 10
Trading days, where a “Delisting
Event”
means
that the Common Stock is not listed or traded with an Eligible Market;
or
(h)
Failure
to Authorize and Reserve Common Stock. A
Share
Authorization Failure (as defined in the Warrant) occurs; or
(i)
Legend
Removal Failure. A
Legend
Removal Failure (as defined below) occurs and remains uncured for a period
of
five (5) Business Days, where “Legend
Removal Failure”
means a
failure by the Company to issue Warrant Shares without restrictive legends
or to
remove restrictive legends from Warrant Shares when so required (or to withdraw
any stop transfer instructions in respect thereof), in each case pursuant to
Section 6 of the Line of Credit Agreement or otherwise pursuant to the Warrant
or any of the other Transaction Documents; or
(j)
Corporate
Existence; Major
Transaction.
The
Company has effected a Major Transaction without paying the Major Transaction
Redemption Price to the Holder pursuant to Section 3 or, if the Holder did
not
elect a Redemption Upon Major Transaction (if applicable), the Company has
failed to meet the Assumption Requirements of Section 3(b) prior to effecting
a
Change of Entity Transaction; or
(k)
Breach
of Securities Issuance Restrictions, Limited Issuances, Rights of Participation
or Securities Exchange Rights.
A breach
of Section 10(b) or Section 10(j) of the Line of Credit Agreement occurs;
or
(l)
Impermissible
Liens; Security.
Any
security interest in the Collateral, ceases to be in effect or to be properly
perfected as and when required by the terms of this Note, the Line of Credit
Agreement or the Security Agreement, or the Company creates or suffers to exist
any Lien upon any of its properties, except for Permitted Liens; or
(m)
Failure
to Comply With Dispute Resolution Procedures.
The
Company has failed to comply in good faith with the Dispute Resolution
Procedures (as defined in the Warrant), and such failure continues for an
additional ten (10) days after the Holder provides written notice (a
“Dispute
Resolution Procedure Demand”)
to the
Company that such performance by the Company is required; or
(n)
Cross-Default.
The
Company defaults in the payment when due on any indebtedness, individually
or in
the aggregate, in excess of $175,000; or
(o)
Litigation.
One or
more judgments is rendered against the Company or any of its Subsidiaries for
an
amount, individually or in the aggregate, in excess of $175,000.
Section
8. Mandatory
Redemption.
(a)
Mandatory
Redemption. If
any
Event of Default shall occur then, upon the occurrence and during the
continuation of such Event of Default, at the option of the Holder, such option
exercisable through the delivery of written notice to the Company by such
Holders (the "Default
Notice"),
the
Note shall accelerate and become immediately due and payable and the Company
shall pay to the Holder (a “Mandatory Redemption”), in full satisfaction of its
obligations hereunder, an amount (such amount referred to herein as the
"Default
Amount"
or the
“Mandatory
Redemption Amount”)
equal
to the product of 120% of the sum of
(x)
the
aggregate outstanding principal amount of this Note, PLUS
9
(y)
all
accrued and unpaid Interest thereon for the period beginning on the Original
Issue Date and ending on the date of payment of the Default Amount (the
"Default
Payment Date"),
PLUS
(z)
all
accrued and unpaid Required Cash Payments, if any.
Notwithstanding
the occurrence of an Event of Default, any Required Cash Payments shall continue
to accrue. Five (5) Business Days after the Company’s receipt of the Holder’s
Default Notice (the “Default
Amount Due Date”),
the
Default Amount, together with all other amounts payable hereunder, shall become
due and payable, all without demand, presentment or notice, all of which hereby
are expressly waived, together with all costs, including, without limitation,
legal fees and expenses, of collection, and the Holder shall be entitled to
exercise all other rights and remedies available at law or in equity.
To
the
extent redemptions required by this Section 8 are deemed or determined by a
court of competent jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. If the Company
is
unable to redeem all of the Note submitted for redemption, the Company
shall redeem a pro rata amount from each Holder based on the principal
amount of the Note submitted for redemption by such Holder relative to the
total
principal amount of Notes submitted for redemption by all Holders.
Upon
the
payment in full of the Mandatory Redemption Amount, the Holder shall promptly
surrender this Note to or as directed by the Company (or, if applicable, shall
submit a signed notice that such Note has been lost, stolen or destroyed).
In
connection with such acceleration described herein, the Holder need not provide,
and the Company hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be
rescinded and annulled by Xxxxxx at any time prior to payment hereunder and
the
Holder shall have all rights as a holder of the Note until such time, if any,
as
the Holder receives full payment pursuant to this Section 8. No such rescission
or annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
(b)
Redemption
by Other Holders.
Upon the
Company's receipt of notice from any of the other holders of the Notes for
redemption or repayment as a result of an event or occurrence of an Event of
Default or a Major Transaction (each, an "Other
Redemption Notice"),
the
Company shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to all other Holders by facsimile a copy of such Other
Redemption Notices. If the Company receives one or more Other Redemption
Notices, during the period beginning on and including the date which is three
(3) Business Days prior to the Company's receipt of the Holder's Redemption
Notice and ending on and including the date which is three (3) Business Days
after the Company's receipt of the Holder's Redemption Notice, and the Company
is unable to redeem all principal, interest and other amounts designated in
such
Redemption Notice and such Other Redemption Notices received during such seven
(7) Business Day period, then the Company shall redeem a pro rata amount from
each holder of the Notes (including the Holder) based on the principal amount
of
the Notes submitted for redemption pursuant to such Redemption Notice and such
Other Redemption Notices received by the Company during such seven (7) Business
Day period.
Section
9. Holder’s
Redemptions.
(a)
Mechanics
of Xxxxxx’s Redemptions.
The
Holder shall submit this Note to the Company upon the closing of a Major
Transaction. In the event of a redemption of less than all of the outstanding
principal amount of this Note, the Company shall promptly cause to be issued
and
delivered to the Holder a new Note representing the outstanding principal amount
which has not been redeemed.
10
(b)
Maximum
Interest Rate. To
the
extent that the redemption premium for any Redemption is deemed to constitute
a
payment of interest under applicable law, the amount of such premium shall
not
exceed the maximum rate permitted by applicable law.
Section
10. Late
Payment Fees.
Any
accrued amount under the Transaction Documents, whether principal, Interest,
a
Redemption Amount, Default Amount, or otherwise, which is not paid within three
Business Days of the date due shall result in a late charge being incurred
and
payable by the Company in an amount equal to interest on such amount at the
rate
of eighteen (18%) per annum or the maximum rate permitted by applicable law,
which shall accrue from the date such amount was due until the same is paid
in
full ("Late
Payment Fees").
Section
11. Maximum
Rate of Interest.
Nothing
contained herein or in any document referred to herein or delivered in
connection herewith 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 or dividends 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
Company to the Holder and thus refunded to the Company.
Section
12. Miscellaneous.
(a)
Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder 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 privileges. All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
(b)
Notices.
Any
notice herein required or permitted to be given shall be in writing and may
be
personally served or delivered by courier or sent by United States mail and
shall be deemed to have been given upon receipt if personally served (which
shall include telephone line facsimile transmission) or sent by courier or
five
(5) days after being deposited in the United States mail, certified, with
postage pre-paid and properly addressed, if sent by mail. For the purposes
hereof, the address of the Holder shall be as shown on the records of the
Company; and the address of the Company shall be as follows: Alternative
Construction Technologies, Inc., Attn: Xxxxxxx X. Xxxxxxx, CEO & President,
0000 Xxxx Xxxxx, Xxxxxxxxx, XX 00000, Xxxxxx Xxxxxx, Phone: 000-000-0000,
Fax: 000-000-0000. Both the Holder and the Company may change the address for
service by service of written notice to the other as herein provided.
The
Company shall provide the Holder with prompt written notice of all actions
taken
pursuant to this Note, including in reasonable detail a description of such
action and the reason therefore
(c) Payments.
Whenever any payment of cash is to be made by the Company to any Person
pursuant to this Note or otherwise pursuant to the Transaction Documents, such
payment shall be made in lawful money of the United States of America by a
check
drawn on the account of the Company and sent via overnight courier service
to
such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Buyers, shall initially be as set
forth on the Schedule of Buyers attached to the Line of Credit Agreement);
provided that the Holder may elect to receive a payment of cash via wire
transfer of immediately available funds by providing the Company with prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day, the same shall instead
be
due on the next succeeding day which is a Business Day and, in the case of
any
Interest Payment Date which is not the date on which
this
Note is paid in full, the extension of the due date thereof shall not be taken
into account for purposes of determining the amount of Interest due on such
date.
11
(d)
Amendments.
Except
as otherwise expressly provided herein, the Notes, and any provision hereof
or
thereof may only be amended by an instrument in writing signed by the Company
and each of the Holders.
(e)
Assignability.
This
Note shall be binding upon the Company and its successors and assigns, and
shall
inure to be the benefit of the Holder and its successors and
assigns.
(f)
Payment
of Collection, Enforcement and Other Costs. If
(i) this Note is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding or the
Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (ii) there occurs any bankruptcy,
reorganization, receivership of the Company or other proceedings affecting
Company creditors' rights and involving a claim under this Note, then the
Company shall pay the costs incurred by the Holder for such collection,
enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, but not limited to, attorneys'
fees
and disbursements.
(g)
Governing
Law; Equitable Relief.
All
questions concerning the construction, validity, enforcement and interpretation
of this Note or the Transaction Documents shall be governed by and construed
and
enforced in accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Each party agrees that
all
legal proceedings concerning the interpretations, enforcement and defense of
the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such
proceeding. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other
manner permitted by law. The parties hereby waive all rights to a trial by
jury.
If either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its reasonable attorneys’
fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
(h)
Certain
Amounts. Whenever
pursuant to this Note the Company is required to pay an amount in excess of
the
principal amount of the outstanding Note (or the portion thereof required to
be
paid at that time) plus accrued and unpaid Interest (including but not limited
to any Required Cash Payments), the Company and the Holder agree that the actual
damages to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to be so paid by the Company represents
stipulated damages and not a penalty. The Company and the Holder hereby agree
that such amount of stipulated damages is not plainly disproportionate to the
possible loss to the Holder from the receipt of a cash payment without the
opportunity to convert this Note into shares of Common Stock.
(i)
Purchase
Agreement.
By its
acceptance of the Note, the Holder agrees to be bound by the applicable terms
of
the Line of Credit Agreement.
12
(j)
Notice
of Corporate Events.
The
Company shall provide the Holder with prior notification of any meeting of
the
Company's shareholders (and copies of proxy materials and other information
sent
to shareholders). In the event the Company takes a record of its shareholders
for the purpose of determining shareholders who are entitled to receive payment
of any dividend or other distribution, any right to subscribe for, purchase
or
otherwise acquire (including by way of merger, consolidation, reclassification
or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders
who are entitled to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company or any
proposed liquidation, dissolution or winding up of the Company, the Company
shall mail a notice to the Holder, at least twenty (20) days prior to the record
date specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right
or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
The Company shall make a public announcement of any event requiring notification
to the Holder hereunder substantially simultaneously with the notification
to
the Holder in accordance with the terms of this Section 12(j).
(k)
Remedies. The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and the other Transaction Documents, at
law
or in equity (including a decree of specific performance and/or other injunctive
relief), and nothing herein shall limit the right of the Holder right to pursue
actual damages for any failure by the Company to comply with the terms of this
Note or any of the Transaction Documents. The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm to the Holder,
by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of
its
obligations under this Note will be inadequate and agrees, in the event of
a
breach or threatened breach by the Company of the provisions of this Note or
the
other Transaction Documents, that the Holder shall be entitled, in addition
to
all other available remedies at law or in equity, to an injunction or
injunctions restraining, preventing or curing any breach of the Note and the
other Transaction Documents and to enforce specifically the terms and provisions
thereof, without the necessity of showing economic loss and without any bond
or
other security being required. No payment shall be made to any Holder in respect
of any amendment, waiver, or consent without making such payment to all such
Holders.
(l)
Construction;
Headings. This
Note shall be deemed to be jointly drafted by the Company and all the
Purchasers and shall not be construed against any person as the drafter hereof.
The headings of this Note are for convenience of reference and shall not
form part of, or affect the interpretation of, this Note.
13
IN
WITNESS WHEREOF, Company has caused the Note to be signed in its name by its
duly authorized officer this 8th
day of
May, 2008.
|
COMPANY:
Alternative
Construction Technologies, Inc.
By:___________________________________
Print
Name: ____________________________
Title:
_________________________________
|
14
ADVANCES
AND PAYMENTS OF PRINCIPAL
|
Date
|
Advance
No.
|
Amount
of Advance
|
Payments
|
Amount
of Principal Balance
|
15
