SECURED TERM NOTE
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FOR VALUE RECEIVED, each of XXXXXX EQUIPMENT, INC., a Delaware corporation
("Xxxxxx Equipment"), and XXXXXX VENTURES, INC., a Delaware corporation ("Xxxxxx
Ventures") and together with Xxxxxx Equipment, each a "Borrower" and
collectively the "Borrowers") jointly and severally 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,
on order, the sum of Eight Million Five Hundred Thousand Dollars ($8,500,000),
together with any accrued and unpaid interest hereon, on May 12, 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 Security and Purchase Agreement dated as
of November 9, 2004 among Borrowers and the Holder (as amended by that certain
letter agreement dated as of the date hereof by and among the Borrowers and the
Holder and as otherwise heretofore or hereafter amended, modified, restated and
supplemented from time to time, the "Security Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & REDEMPTION
1.1. Interest Rate. Subject to Sections 2.9 and 4.7 hereof, interest
payable on the outstanding principal amount of this Note (the "Principal
Amount") shall accrue at a rate per annum equal to the sum of (i) the "prime
rate" published in The Wall Street Journal from time to time (the "Prime Rate"),
plus three percent (3%) (the "Cash Contract Rate"), plus (ii) five percent (5%)
(the "PIK Contract Rate") (the sum of (i) and (ii) shall be referred to as the
"Contract Rate"). The Cash 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 Cash Contract Rate shall not at
any time be less than ten percent (10%). Interest shall be (i) calculated on the
basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on
June 1, 2006 and on the first Business Day of each consecutive calendar month
thereafter through and including the Maturity Date, whether by acceleration or
otherwise (each date upon which interest shall be so payable, an "Interest
Payment Date"). Through any Interest Payment Date, interest on the Principal
Amount that shall have accrued at the Cash Contract Rate and shall remain unpaid
as of such Interest Payment Date (for any Interest Payment Date, a "Cash
Interest Amount") shall be paid in immediately available funds by Borrowers to
the Holder on such Interest Payment Date. Through any Interest Payment Date,
interest on the Principal Amount that shall have accrued at the PIK Interest
Rate and shall remain unpaid as of such Interest Payment Date (for any Interest
Payment Date, a "PIK Interest Amount") shall not be paid on such Interest
Payment Date. All outstanding PIK Interest Amounts shall be due and payable on
the Maturity Date. Notwithstanding any other provision of this Note, Borrowers
may, in their sole discretion, pay any PIK Interest Amount on any Interest
Payment Date in immediately available funds without any premium or penalty.
1.2. Principal Payments. Amortizing payments of the Principal Amount shall
be made, jointly and severally, by the Borrowers on October 1, 2006 and on the
first business day of each succeeding month thereafter through and including the
Maturity Date (each, an "Amortization Date"). Commencing on the first
Amortization Date, the Borrowers shall, jointly and severally, make monthly
payments to the Holder on each Repayment Date, each such payment in the amount
of $265,625 together with any accrued and unpaid Cash Interest Amount on such
portion of the Principal Amount plus any and all other unpaid amounts which are
then owing under this Note, the Security Agreement and/or any other Ancillary
Agreement (collectively, the "Monthly Amount"). Any outstanding Principal Amount
together with any accrued and unpaid Cash Interest Amounts and PIK Interest
Amounts and any and all other unpaid amounts which are then owing by the
Borrowers to the Holder under this Note, the Security Agreement and/or any other
Ancillary Agreement shall be due and payable on the Maturity Date.
1.3. Optional Redemption. The Borrowers may prepay this Note ("Optional
Redemption") by paying to the Holder a sum of money a sum of money equal to one
hundred and five percent (105%) of the principal amount of this Note together
with accrued but unpaid Cash Interest Amounts and PIK Interest Amounts and any
and all other sums due, accrued or payable to the Holder arising under this
Note, the Security Agreement and/or any other Ancillary Agreement (the
"Redemption Amount"), in each case, outstanding on the Redemption Payment Date
(as defined below). Xxxxxx Equipment 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. On the Redemption
Payment Date, the Redemption Amount must be paid in good funds to the Holder. In
the event the Borrowers fail to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then such Notice of Redemption will be null
and void.
ARTICLE II
EVENTS OF DEFAULT
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, shall be an "Event of Default":
2.1. Failure to Pay Principal, Interest or other Fees. Any Borrower fails
to pay when due any installment of principal, interest or other fees hereon or
on any other promissory note issued pursuant to the Security Agreement, or any
Borrower fails to pay when due any amount due under any other promissory note
issued by such Borrower, when due in accordance with the terms of such note, and
in any such case, such failure shall continue for a period of three (3) days
following the date upon which any such payment was due.
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2.2. Breach of Covenant. Any Borrower breaches any covenant or other term
or condition of this Note in any material respect and such breach, if subject to
cure, continues for a period of fifteen (15) days after the occurrence thereof.
2.3. Breach of Representations and Warranties. Any representation or
warranty of any Borrower or any of its Subsidiaries made herein, or the Security
Agreement, or in any Ancillary Agreement shall be false or misleading in any
material respect.
2.4. Receiver or Trustee. Any Borrower or any of its Subsidiaries 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.
2.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against any Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $250,000 in the aggregate for
Borrower and all such Subsidiaries, and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days.
2.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against any Borrower or any
of its Subsidiaries.
2.7. Default Under Other Agreements. The occurrence of an Event of Default
under and as defined in the Security Agreement or any Ancillary Agreement or any
event of default (or similar term) under any other agreement evidencing
indebtedness of at least $250,000.
2.8. Change in Control. The occurrence of a change in the controlling
ownership of any Borrower.
DEFAULT RELATED PROVISIONS
2.9. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Contract Rate shall automatically be
increased by one and one-half percent (1.50%) per month, and all outstanding
Obligations, including unpaid interest, shall continue to accrue interest from
the date of such Event of Default at such interest rate applicable to such
Obligations until such Event of Default is cured or waived.
2.10. Cumulative Remedies. The remedies under this Note shall be
cumulative.
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ARTICLE III
DEFAULT PAYMENTS
3.1. Default Payment. If an Event of Default occurs and is continuing
beyond any applicable grace period, the Holder, at its option, may elect, in
addition to all rights and remedies of Holder under the Security Agreement and
the Ancillary Agreements and all obligations of each Borrower under the Security
Agreement and the Ancillary Agreements, to require the Borrowers to make a
Default Payment ("Default Payment"). The Default Payment shall be 115% 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 Holder
pursuant to the Notes or the Ancillary Agreements, then to accrued and unpaid
interest due on the Notes and then to outstanding principal balance of the
Notes.
3.2. Default Payment Date. The Default Payment shall be due and payable
immediately on the date that the Holder has exercised its rights pursuant to
Section 3.1.
ARTICLE IV
MISCELLANEOUS
4.1. 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.
4.2. Notices. Any notice herein required or permitted to be given shall be
in writing and provided in accordance with the terms of the Security Agreement.
4.3. Amendment Provision. The term "Note" and all reference 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 it may be amended or supplemented.
4.4. Assignability. This Note shall be binding upon each Borrower 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 Agreement.
4.5. Cost of Collection. If default is made in the payment of this Note,
each Borrower shall jointly and severally pay the Holder hereof reasonable costs
of collection, including reasonable attorneys' fees.
4.6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Each party hereto and the individual signing this Note on behalf of
each Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. 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 unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against any Borrower in any
other jurisdiction to collect on such Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of Xxxxxx.
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4.7. 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
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by Borrowers to the Holder and thus refunded to the
Borrowers
4.8. Security Interest. The Holder has been granted a security interest in
certain assets of the Borrowers as more fully described in the Security
Agreement.
4.9. 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.
4.10. 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 Borrowers (or its agent) shall register the 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 Borrowers of this Note to the new holder
or the issuance by the Borrowers of a new instrument to the new holder, or (ii)
transfer through a book entry system maintained by the Borrowers (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.]
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IN WITNESS WHEREOF, each Borrower has caused this Secured Term Note to be
signed in its name effective as of this 12th day of May, 2006.
XXXXXX EQUIPMENT, INC.
By: /s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
Title: Chairman
XXXXXX VENTURES, INC.
By:/s/ XXXXX XXXXX
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Name: Xxxxx Xxxxx
Title: Chairman
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