SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
Exhibit
10.7
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$
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Los
Angeles, California
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August
_______, 2005
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1.
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Obligation.
For value received, US DRY CLEANING CORPORATION, a Delaware corporation
("Maker"), hereby unconditionally promises to pay to
________________________ (“Payee”),
at such place as Payee may from time to time designate in writing
to
Maker, the principal sum of $___________, plus interest on the
unpaid
principal balance hereof at the rate of 10% per annum from August
_______,
2005, payable quarterly in arrears, in immediately available funds
to the
date of which is twelve months from the date hereof (the “Maturity Date”)
unless earlier redeemed or converted. This Note is one of a number
of
Senior Secured Convertible Promissory Notes (collectively, the
“Offering
Notes”) having substantially identical terms and conditions, in an
aggregate principal amount not to exceed Three Million Five Hundred
Thousand Dollars ($3,500,000). The
Offering Notes are issued as senior secured obligations of Maker
and rank
senior to all of Maker’s other obligations, whether now existing or
hereinafter incurred or created.
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2.
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Payment
of Principal and Interest.
Unless this Note is converted in accordance with the provisions
of Section
8 hereof, principal shall be payable in lawful money of the United
States
in immediately available funds, without deduction or offset, on
the
Maturity Date; provided,
however,
that the Maturity Date may be extended by written notice, made
by the
holders of no less than 50.1% in interest of the principal amount
outstanding under all Offering Notes then outstanding (a “Qualifying
Percentage”).
Interest shall be calculated on the basis of a 360 day year consisting
of
twelve 30-day months.
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3.
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Unpaid
Interest Bears Interest.
If
interest is not paid when due, it shall bear like interest as principal,
but such unpaid interest so compounded shall not exceed an amount
equal to
simple interest on the unpaid principal at the maximum rate permitted
to
be charged under any applicable laws, rules and regulations limiting
interest rates.
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4.
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Late
Charge.
If
any installment of principal or interest is not received within
10 days
after the same becomes due and payable, with notice to the Maker
and at
the option of Payee, Maker shall pay to Payee a "late charge" in
the
amount of 5% of any such delinquent amount, to cover the extra
expense
incurred in handling delinquent
payments.
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5.
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Purpose.
Maker hereby represents and warrants that the proceeds of the loan
evidenced by this Note shall be used solely for business
purposes.
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6.
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Redemption.
Maker shall have the right to redeem the Note at any time, without
penalty
or premium, upon 45 days’ written notice to Xxxxx. Maker shall pay all
accrued interest along with the entire principal in immediately
available
funds at the date of redemption specified in such notice. The Note
may be
converted to Common Stock at any time prior to the date of redemption
in
accordance with Section 8.
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7.
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Limitation
on Interest Charged.
Notwithstanding any provision herein to the contrary, including
the
provisions of Paragraph 3, the interest rate charged to and to
be paid by
Maker hereunder shall not exceed the maximum rate permitted to
be charged
under any applicable laws, rules and regulations limiting interest
rates,
it being the express intent of Payee and Maker that this Paragraph
7 shall
operate as a "usury savings clause" under California
law.
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8.
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Convertibility
of Note.
The holder of this Note will have the unilateral right exercisable
at any
time prior to the Maturity Date of the date of redemption to convert
the
principal amount of this Note into common stock of Maker at a conversion
price of $1.00 per share (with such share price being subject to
adjustment for any stock split, stock dividend, or similar event)
.
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9
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Reverse
Merger.
Upon the consummation of a Reverse Merger, this Note shall automatically
be assumed by the Public Company surviving such merger and shall
be
convertible into that number of shares of common stock of the Public
Company that the holder of this Note would have received had it
converted
this Note into shares of Maker’s common stock immediately prior to the
closing of the Reverse Merger. A “Reverse Merger” shall mean the closing
of a merger of Maker with and into a Public Company (as defined
below)
pursuant to which the stockholders of Maker receive shares of common
stock
of such Public Company in exchange for their shares of common stock
of
Maker (a “Reverse Merger”). A “Public Company” is any company the common
stock of which is traded on any national securities exchange or
quoted on
the Nasdaq stock market, the OTC Bulletin Board or the so-called
“pink
sheets.”
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10.
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Collateral.
The Company will, upon the acquisition of each Designated Subsidiary
(as
defined below), cause each such Designated Subsidiary to execute
a “Grant
of Security Interest” in favor of Xxxxxx X. Xxxxx, as agent for all of the
holders of Offering Notes, pursuant to which the Offering Notes
will
become secured by substantially all of the tangible and intangible
personal and real property assets (the “Collateral”) of each such
Designated Subsidiary. The Company will also cause each Designated
Subsidiary to file a UCC-1 financing statement in the appropriate
office
of such Designated Subsidiary’s jurisdiction of incorporation describing
the Collateral and naming the holders of the Offering Notes as
“secured
parties” thereunder. The “Designated Subsidiaries” are the first two dry
cleaning operating entities to be acquired by the Company shortly
after
the closing of the offering placing the Offering Notes, namely,
Coachella
Valley Retail, LLC and Steam Press Holdings, Inc. (its operating
conducted
through its wholly-owned subsidiary Enivel, Inc.).
The foregoing security interests will be senior to all material
security
interests in the Collateral. Payee may not take any action with
respect to
the Collateral without the prior approval of the holders of a Qualifying
Percentage. Once this Note has been paid in full, all of the foregoing
security interests will be released with respect to the holder
hereof.
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11.
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Notices.
Notices provided for herein may be given by delivery personally
or by
sending them by registered or by certified mail, with postage charged
prepaid, to the following mailing addresses, or to any other mailing
address of which written notice is given, and notices shall be
deemed
given upon actual receipt
thereof:
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If
to Payee:
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Telephone:
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Telefax:
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If
to Maker:
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Xx. Xxxxxxx X. Xxxxx, CEO |
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US
DRY CLEANING CORPORATION
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00-000
Xxxx Xxxx Xxxxx Xxx 000
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Cathedral
City CA 92234
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Telephone:
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(000)
000-0000
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Telefax:
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(000)
000-0000
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12.
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Assignment.
Maker covenants that, except as provided for in Section 9, it shall
not
assign or transfer its obligations under this Note without prior
written
consent of Payee, which consent shall not be unreasonably withheld.
Maker
hereby agrees that Payee may assign its rights under this Note
effective
only upon notice to the Maker and the surrender of the Note for
issuance
of a substitute Note in the name of the transferee. No transfer
shall be
effective until surrender and the entry of the transferee’s name on the
books of the Maker.
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13.
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Default.
A
default under the Note shall exist if one or more of the following
events
occur (“Events of Default”): (i) any default by Maker in the payment of
any installment when due hereunder or in the performance of Maker's
obligations under this Note or any other instrument securing repayment
of
this Note, (ii) a breach of any representation or warranty contained
in
this Note or any other instrument securing repayment of this Note,
(iii) a
filing of any petition by or against Maker in any court, whether
or not
pursuant to any statute of the United States or of any state, in
any
bankruptcy, reorganization, composition, extension, arrangement
or
insolvency proceedings, and Maker shall thereafter be adjudicated
bankrupt, or such petition be approved by the court, or the court
assumes
jurisdiction of the subject matter, and such proceedings not be
dismissed
within 90 days after the institution of the same, or (iv) an assignment
by
Maker for the benefit of its creditors. Upon an Event of Default,
Payee
shall be entitled to all remedies available at law or equity and
may
protect and enforce its rights hereunder by suit in equity or action
at
law. Holder may also, upon written notice to Maker, declare the
entire
principal balance of this Note, together with all accrued interest
required to be paid immediately due and payable if Maker does not
cure
said default within 15 days of receipt of such acceleration
notice.
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14.
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Binding
on Heirs, Successors and Assigns.
Subject to the restrictions on assignment and transfer contained
in
Paragraph 12, this Note shall be binding on and inure to the benefit
of
the legal representatives, heirs, successors and assigns of Payee
and
Maker.
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15.
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Governing
Law; Venue.
This Note shall be governed by and construed in accordance with
the
substantive and procedural laws of the State of California. This
Note is
entered into and is to be enforced in Los Angeles County, California,
and
accordingly the only appropriate venue for a dispute under this
Note is in
the Municipal or Superior Court of California with venue in the
County of
Los Angeles.
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16.
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Amendments. Any
term of this Note may be amended or waived with the written consent
of
Maker and the holders of no less than a Qualifying Percentage,
as provided
in this Note. Payee acknowledges that because this Note may be
amended
with the consent of a Qualifying Percentage, Xxxxx’s rights hereunder
(including, without limitation, Xxxxx’s rights to receive principal and
interest as due) may be amended and waived without Xxxxx’s
consent.
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17.
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Partial
Invalidity.
If
any provision of this Note is held to be unenforceable for any
reason, it
shall be adjusted rather than voided, if possible, to achieve the
intent
of the parties to the extent possible. In any event, all other
provisions
of this Note shall be deemed valid and enforceable to the extent
possible.
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18.
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Ranking
of Notes.
All of the Offering Notes shall rank pari
passu
with all other Offering Notes in right of payment and priority
of liens
and security interests, regardless of the order of filing of any
UCC-1
financing statements.
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IN
WITNESS WHEREOF, Maker has executed this Note as of the date first above written
at Honolulu, Hawaii.
US
DRY CLEANING CORPORTATION, a Delaware corporation
BY:
_____________________________________
Xxxxxxx
X. Xxxxx
CEO
