THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO AUXILIO, INC THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, AUXILIO, INC, a Nevada corporation (the
"Company"), 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 Three Million Dollars
($3,000,000), together with any accrued and unpaid interest hereon, on April 7,
2009 (the "Maturity Date") if not sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof by and between the Company and the Holder (as
amended, modified and/or supplemented from time to time, the "Purchase
Agreement").
The following terms shall apply to this Secured Convertible Term
Note (this "Note"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10, 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. The Contract Rate shall
not at any time be less than eight percent (8%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing thirty (30) days from the effective date of this Note, 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.
1.2 Contract Rate 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.
1.3 Principal Payments. Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the "Principal
Amount") shall be made by the Company on July 7, 2006 and on the first business
day of each succeeding month thereafter through and including the Maturity Date
(each, an "Amortization Date"). Subject to Article III below, commencing on the
first Amortization Date, the Company shall make monthly payments to the Holder
on each Amortization Date, each such payment in the amount of $50,000 together
with any accrued and unpaid interest on such portion of the Principal Amount
plus any and all other unpaid amounts which are then owing under this Note, the
Purchase Agreement and/or any other Related Agreement (collectively, the
"Monthly Amount"). Any outstanding Principal Amount together with any accrued
and unpaid interest and any and all other unpaid amounts which are then owing by
the Company to the Holder under this Note, the Purchase Agreement and/or any
other Related Agreement shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
(a) Payment in Cash or Common Stock. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in cash pursuant to Section 2.1(b), then the Company shall pay the Holder
an amount in cash equal to 100% of the Monthly Amount (or such portion of such
Monthly Amount to be paid in cash) due and owing to the Holder on the
Amortization Date. If the Monthly Amount (or a portion of such Monthly Amount if
not all of the Monthly Amount may be converted into shares of Common Stock
pursuant to Section 3.2) is required to be paid in shares of Common Stock
pursuant to Section 2.1(b), the number of such shares to be issued by the
Company to the Holder on such Amortization Date (in respect of such portion of
the Monthly Amount converted into shares of Common Stock pursuant to Section
2.1(b)), shall be the number determined by dividing (i) the portion of the
Monthly Amount converted into shares of Common Stock, by (ii) the then
applicable Fixed Conversion Price. For purposes hereof, subject to Section 3.6
hereof, the initial "Fixed Conversion Price" shall mean, individually, each of
the following taken separately, and, collectively, each of the following taken
together: (i) with respect to the first $1,000,000 principal amount of this Note
converted pursuant to the terms hereof (and all interest and fees related
thereto, $1.68, (ii) with respect to the next $1,000,000 principal amount of
this Note converted pursuant to the terms hereof (and all interest and fees
related thereto), $1.78 and (iii) with respect to the remaining $1,000,000
principal amount of this Note converted pursuant to the terms hereof (and all
interest and fees related thereto), $1.92.
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(b) Monthly Amount Conversion Conditions. Subject to Sections
2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of Common
Stock all or a portion of the Monthly Amount due on each Amortization Date if
the following conditions (the "Conversion Criteria") are satisfied: (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Amortization Date shall be greater than or equal to 118% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock for the period
of twenty-two (22) trading days immediately preceding such Amortization Date. If
subsection (i) of the Conversion Criteria is met but subsection (ii) of the
Conversion Criteria is not met as to the entire Monthly Amount, the Holder shall
convert only such part of the Monthly Amount that meets subsection (ii) of the
Conversion Criteria. Any portion of the Monthly Amount due on an Amortization
Date that the Holder has not been able to convert into shares of Common Stock
due to the failure to meet the Conversion Criteria, shall be paid in cash by the
Company at the rate of 100% of the Monthly Amount otherwise due on such
Amortization Date, within three (3) business days of such Amortization Date.
(c) Application of Conversion Amounts. Any amounts paid in
shares of Common Stock pursuant to Section 2.1(b) shall be deemed to constitute
payments of, or applied against, (i) first, outstanding fees, (ii) second,
accrued interest on the Principal Xxxxxx, and (iii) third, the Principal Amount.
2.2 No Effective Registration. Notwithstanding anything to the
contrary herein, none of the Company's obligations to the Holder may be
converted into Common Stock unless (a) either (i) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists or (ii) an exemption from registration for resale of
all of the Common Stock issued and issuable is available pursuant to Rule 144 of
the Securities Act and (b) no Event of Default (as hereinafter defined) exists
and is continuing, unless such Event of Default is cured within any applicable
cure period or otherwise waived in writing by the Holder.
2.3 Optional Redemption in Cash. The Company may prepay this Note
("Optional Redemption") by paying to the Holder a sum of money equal to one
hundred twenty percent (120%) of the Principal Amount outstanding at such time
together with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note, the Purchase
Agreement or any other Related Agreement (the "Redemption Amount") outstanding
on the Redemption Payment Date (as defined below). 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 seven (7) business days after the date of the Notice
of Redemption (the "Redemption Period"). A Notice of Redemption shall not be
effective with respect to any portion of this Note for which the Holder has
previously delivered a Notice of Conversion (as hereinafter defined) or for
conversions elected to be made by the Holder pursuant to Article III during the
Redemption Period. The Redemption Amount shall be determined as if the Holder's
conversion elections had been completed immediately prior to the date of the
Notice of Redemption. 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.
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ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms set forth in this
Article III, the Holder shall have the right, but not the obligation, to convert
all or any portion of the issued and outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable shares of
Common Stock at the Fixed Conversion Price. The shares of Common Stock to be
issued upon such conversion are herein referred to as, the "Conversion Shares."
3.2 Conversion Limitation. Notwithstanding anything herein to the
contrary, in no event shall the Holder be entitled to convert any portion of
this Note in excess of that portion of this Note upon exercise of which the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and
its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of this Note
or the unexercised or unconverted portion of any other security of the Holder
subject to a limitation on conversion analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its Affiliates of any amount greater than 4.99% of the then
outstanding shares of Common Stock (whether or not, at the time of such
conversion, the Holder and its Affiliates beneficially own more than 4.99% of
the then outstanding shares of Common Stock). As used herein, the term
"Affiliate" means any person or entity that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a person or entity, as such terms are used in and construed under Rule 144
under the Securities Act. For purposes of the proviso to the second preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G
thereunder, except as otherwise provided in clause (1) of such proviso. The
limitations set forth herein (x) may be waived by the Holder upon provision of
no less than sixty-one (61) days prior notice to the Company and (y) shall
automatically become null and void (i) following notice to the Company upon the
occurrence and during the continuance of an Event of Default, or (ii) upon
receipt by the Holder of a Notice of Redemption.
3.3 Mechanics of Xxxxxx's Conversion. In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion in
substantially the form of Exhibit A hereto (appropriate completed) ("Notice of
Conversion") to the Company and such Notice of Conversion shall provide a
breakdown in reasonable detail of the Principal Amount, accrued interest and
fees that are being converted. On each Conversion Date (as hereinafter defined)
and in accordance with its Notice of Conversion, the Holder shall make the
appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Company
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Company in accordance
with the provisions hereof shall be deemed a Conversion Date (the "Conversion
Date"). Pursuant to the terms of the Notice of Conversion, the Company will
issue instructions to the transfer agent accompanied by an opinion of counsel
within three (3) business days of the date of the delivery to the Company of the
Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days of delivery of the Company's request to the transfer
agent (the "Delivery Date"). If the Notice of Conversion is delivered during the
period of time when a post-effective amendment to the Registration Statement has
yet to be declared effective by the Commission, and, as a result, the Note
Shares issued hereunder are not freely transferable, the Purchaser shall have
the option of either receiving the Note Shares with the legend set forth in
Section 5.8 hereof or receiving the Note Shares within three (3) business days
of the post-effective amendment being declared effective by the Commission,
which Note Shares shall contain no such legend. In the case of the exercise of
the conversion rights set forth herein the conversion privilege shall be deemed
to have been exercised and the Conversion Shares issuable upon such conversion
shall be deemed to have been issued upon the date of receipt by the Company of
the Notice of Conversion. The Holder shall be treated for all purposes as the
record holder of the Conversion Shares, unless the Holder provides the Company
written instructions to the contrary.
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3.4 Late Payments. The Company understands that a delay in the
delivery of the Conversion Shares in the form required pursuant to this Article
beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to all other rights and
remedies which the Holder may have under this Note, applicable law or otherwise,
the Company shall pay late payments to the Holder for any late issuance of
Conversion Shares in the form required pursuant to this Article II upon
conversion of this Note, in the amount equal to $250 per business day after the
Delivery Date. The Company shall make any payments incurred under this Section
in immediately available funds upon demand.
3.5 Conversion Mechanics. The number of shares of Common Stock to be
issued upon each conversion of this Note shall be determined by dividing that
portion of the principal and interest and fees to be converted, if any, by the
then applicable Fixed Conversion Price. In the event of any conversions of a
portion of the outstanding Principal Amount pursuant to this Article III, such
conversions shall be deemed to constitute conversions of the outstanding
Principal Amount applying to Monthly Amounts for the remaining Amortization
Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to this Note shall be subject to adjustment from time to time upon the
occurrence of certain events during the period that this conversion right
remains outstanding, as follows:
(a) Reclassification. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.
5
(b) Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock or any
preferred stock issued by the Company in shares of Common Stock, the Fixed
Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
3.7 Reservation of Shares. During the period the conversion right
exists, the Company will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Conversion Shares
upon the full conversion of this Note and the Warrant. The Company represents
that upon issuance, the Conversion Shares will be duly and validly issued, fully
paid and non-assessable. The Company agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for the Conversion Shares upon the conversion
of this Note.
3.8 Registration Rights. The Holder has been granted registration
rights with respect to the Conversion Shares as set forth in the Registration
Rights Agreement.
3.9 Issuance of New Note. Upon any partial conversion 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 converted or paid.
Subject to the provisions of Article IV 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.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. The occurrence of any of the following events
set forth in this Section 4.1 shall constitute an event of default ("Event of
Default") hereunder.
(a) Failure to Pay. The Company fails to pay when due any
installment of principal, interest or other fees hereon in accordance herewith,
or the Company fails to pay any of the other Obligations (under and as defined
in the Master Security Agreement) when due, and, in any such case, such failure
shall continue for a period of five (5) business days following the date upon
which any such payment was due.
(b) Breach of Covenant. The Company or any of its Subsidiaries
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
twenty (20) days after the occurrence thereof.
6
(c) Breach of Representations and Warranties. Any
representation, warranty or statement made or furnished by the Company or any of
its Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect on
the date as of which made or deemed made. For purposes of clarity, all
representations, warranties and statements made or furnished by the Company or
any of its subsidiaries in this Note, the Purchase Agreement or any other
Related Agreement shall be deemed to have been made at the Closing Date (as
defined in the Purchase Agreement), except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date.
(d) Default Under Other Agreements. The occurrence of any
default (or similar term) in the observance or performance of any other
agreement or condition relating to any indebtedness or contingent obligation of
the Company or any of its Subsidiaries beyond the period of grace (if any), the
effect of which default is to cause, or permit the holder or holders of such
indebtedness or beneficiary or beneficiaries of such contingent obligation to
cause, such indebtedness to become due prior to its stated maturity or such
contingent obligation to become payable.
(e) Bankruptcy. The Company or any of its Subsidiaries shall
(i) apply for, consent to or suffer to exist the appointment of, or the taking
of possession by, a receiver, custodian, trustee or liquidator 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 under the federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, without challenge within
ten (10) days of the filing thereof, or failure to have dismissed, within thirty
(30) days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (vii) take any action for the purpose of effecting any of
the foregoing.
(f) Judgments. Attachments or levies in excess of $100,000 in
the aggregate are made upon the Company or any of its Subsidiary's assets or a
judgment is rendered against the Company's property involving a liability of
more than $100,000 which shall not have been vacated, discharged, stayed or
bonded within thirty (30) days from the entry thereof.
(g) Insolvency. The Company or any of its Subsidiaries shall
admit in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business.
(h) Change of Control. A Change of Control (as defined below)
shall occur with respect to the Company, unless Holder shall have expressly
consented to such Change of Control in writing. A "Change of Control" shall mean
any event or circumstance as a result of which (i) any "Person" or "group" (as
such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in
effect on the date hereof), other than the Holder, is or becomes the "beneficial
owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act),
directly or indirectly, of 35% or more on a fully diluted basis of the then
outstanding voting equity interest of the Company, (ii) the Board of Directors
of the Company shall cease to consist of a majority of the Company's board of
directors on the date hereof (or directors appointed by a majority of the board
of directors in effect immediately prior to such appointment) or (iii) the
Company or any of its Subsidiaries merges or consolidates with, or sells all or
substantially all of its assets to, any other person or entity.
7
(i) Indictment; Proceedings. The indictment or threatened
indictment of the Company or any of its Subsidiaries or any executive officer of
the Company or any of its Subsidiaries under any criminal statute, or
commencement or threatened commencement of a criminal, or civil proceeding in
excess of $20,000, against the Company or any of its Subsidiaries or any
executive officer of the Company or any of its Subsidiaries pursuant to which
statute or proceeding penalties or remedies sought or available include
forfeiture of any of the property of the Company or any of its Subsidiaries.
(j) The Purchase Agreement and Related Agreements. (i) An
Event of Default shall occur under and as defined in the Purchase Agreement or
any other Related Agreement, (ii) the Company or any of its Subsidiaries shall
breach any term or provision of the Purchase Agreement or any other Related
Agreement in any material respect and such breach, if capable of cure, continues
unremedied for a period of twenty (20) days after the occurrence thereof, (iii)
the Company or any of its Subsidiaries attempts to terminate, challenges the
validity of, or its liability under, the Purchase Agreement or any Related
Agreement, (iv) any proceeding shall be brought to challenge the validity,
binding effect of the Purchase Agreement or any Related Agreement or (v) the
Purchase Agreement or any Related Agreement ceases to be a valid, binding and
enforceable obligation of the Company or any of its Subsidiaries (to the extent
such persons or entities are a party thereto).
(k) Stop Trade. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)
consecutive days or five (5) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
provided that the Company shall not have been able to cure such trading
suspension within thirty (30) days of the notice thereof or list the Common
Stock on another Principal Market within sixty (60) days of such notice.
(l) Failure to Deliver Common Stock or Replacement Note. The
Company's failure to deliver Common Stock to the Holder pursuant to and in the
form required by this Note and the Purchase Agreement and, if such failure to
deliver Common Stock shall not be cured within three (3) business days or the
Company is required to issue a replacement Note to the Holder and the Company
shall fail to deliver such replacement Note within seven (7) business days.
4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay additional interest on
this Note in an amount equal to two percent (2%) per month, and all outstanding
obligations under this Note, the Purchase Agreement and each other Related
Agreement, 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.
8
4.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may demand
repayment in full of all obligations and liabilities owing by Company to the
Holder under this Note, the Purchase Agreement and/or any other Related
Agreement and/or may elect, in addition to all rights and remedies of the Holder
under the Purchase Agreement and the other Related Agreements and all
obligations and liabilities of the Company under the Purchase Agreement and the
other Related Agreements, to require the Company to make a Default Payment
("Default Payment"). The Default Payment shall be 120% 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 this Note, the Purchase Agreement, and/or the other Related
Agreements, then to accrued and unpaid interest due on this Note and then to the
outstanding principal balance of this Note. 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 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.
5.2 Cumulative Remedies. The remedies under this Note shall be
cumulative.
5.3 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.
5.4 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 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 in the Purchase Agreement executed in connection
herewith, and to the Holder at the address provided in the Purchase Agreement
for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx Xxxxxx, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, xxxxxxxxx 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. A Notice of Conversion shall be
deemed given when made to the Company pursuant to the Purchase Agreement.
5.5 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.
9
5.6 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, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. 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.
5.7 Cost of Collection. In case of any Event of Default under this
Note, the Company shall pay the Holder reasonable costs of collection, including
reasonable attorneys' fees.
5.8 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 OR ANY OF THE RELATED 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 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 PURCHASE AGREEMENT AND
THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
10
(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 THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY
OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO.
5.9 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.
5.10 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.
5.11 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Company and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) in the equity interests of the Companies' Subsidiaries pursuant
to the Stock 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.
5.12 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.
5.13 Registered Obligation. This Note is intended to be a registered
obligation within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)
and the Company (or its agent) shall register this Note (and thereafter shall
maintain such registration) as to both principal and any stated interest.
Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal
or stated interest thereunder) may only be effected by (i) surrender of this
Note and either the reissuance by the Company of this Note to the new holder or
the issuance by the Company of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).
[Balance of page intentionally left blank; signature page follows]
11
IN WITNESS WHEREOF, the Company has caused this Secured Convertible Term Note to
be signed in its name effective as of this 7th day of April, 2006.
AUXILIO, INC
By:__________________________________
Name:
Title:
WITNESS:
________________________________
12
EXHIBIT A
---------
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert all or part of the
Secured Convertible Term Note into Common Stock)
[Name and Address of Company]
The undersigned hereby converts $_________ of the principal due on
[specify applicable Repayment Date] under the Secured Convertible Term Note
dated as of _________, 200__ (the "Note") issued by Auxilio, Inc. (the
"Company") by delivery of shares of Common Stock of the Company ("Shares") on
and subject to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
[HOLDER]
By:_______________________________
Name:_____________________________
Title:______________________________
