PROMISSORY NOTE
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PRINCIPAL Loan Date Maturity Loan No Call/Coll Account Officer Initials
$600,000.00 03-30-2007 03-30-2010 200717 07 123186 029
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References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing "***" has been omitted due to text length limitations.
BORROWER: PIPEX PHARMACEUTICALS, INC. LENDER: BANK OF XXX ARBOR
(TIN: 00-0000000) MAIN OFFICE
0000 XXXXXXXX XXXX XX. 000 X. XXXXX XXXXXX
XXX XXXXX, XX 00000 XXX XXXXX, XX 00000
(000) 000-0000
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PRINCIPAL AMOUNT: $600,000.00 INITIAL RATE: 10.250% DATE OF NOTE: MARCH 30, 2007
PROMISE TO PAY. PIPEX PHARMACEUTICALS, INC. ("BORROWER") PROMISES TO PAY TO BANK
OF XXX ARBOR ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF SIX HUNDRED THOUSAND & 00/100 DOLLARS
($600,000.00), TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM MARCH
30, 2007, UNTIL PAID IN FULL.
PAYMENT. SUBJECT TO ANY PAYMENT CHANGES RESULTING FROM CHANGES IN THE INDEX,
BORROWER WILL PAY THIS LOAN IN 35 PRINCIPAL PAYMENTS OF $16,666.67 EACH AND ONE
FINAL PRINCIPAL AND INTEREST PAYMENT OF $16,808.91. XXXXXXXX'S FIRST PRINCIPAL
PAYMENT IS DUE APRIL 30, 2007, AND ALL SUBSEQUENT PRINCIPAL PAYMENTS ARE DUE ON
THE SAME DAY OF EACH MONTH AFTER THAT. IN ADDITION, BORROWER WILL PAY REGULAR
MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF EACH PAYMENT DATE,
BEGINNING APRIL 30, 2007, WITH ALL SUBSEQUENT INTEREST PAYMENTS TO BE DUE ON THE
SAME DAY OF EACH MONTH AFTER THAT. XXXXXXXX'S FINAL PAYMENT DUE MARCH 30, 2010,
WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET PAID. UNLESS
OTHERWISE AGREED OR REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST
TO ANY ACCRUED UNPAID INTEREST; THEN TO PRINCIPAL; THEN TO ANY UNPAID COLLECTION
COSTS; AND THEN TO ANY LATE CHARGES. THE ANNUAL INTEREST RATE FOR THIS NOTE IS
COMPUTED ON A 365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL
INTEREST RATE OVER A YEAR OF 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL
BALANCE, MULTIPLIED BY THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE IS
OUTSTANDING. XXXXXXXX WILL PAY LENDER AT XXXXXX'S ADDRESS SHOWN ABOVE OR AT SUCH
OTHER PLACE AS XXXXXX MAY DESIGNATE IN WRITING.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is Xxxxxx's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Xxxxxxxx's request. The interest rate
change will not occur more often than each Day. Borrower understands that Lender
may make loans based on other rates as well. THE INDEX CURRENTLY IS 8.250% PER
ANNUM. The interest rate to be applied to the unpaid principal balance during
this Note will be at a rate of 2.000 percentage points over the Index, adjusted
if necessary for any minimum and maximum rate limitations described below,
resulting in an initial rate of 10.250% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be less than 4.750% per annum
or more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Xxxxxx in
writing, relieve Xxxxxxxx of Xxxxxxxx's obligation to continue to make payments
under the payment schedule. Rather, early payments will reduce the principal
balance due and may result in Borrower's making fewer payments. Xxxxxxxx agrees
not to send Lender payments marked "paid in full", "without recourse", or
similar language. If Borrower sends such a payment, Xxxxxx may accept it without
losing any of Xxxxxx's rights under this Note, and Borrower will remain
obligated to pay any further amount owed to Lender. All written communications
concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes "payment in full" of the amount owed
or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Bank of Xxx Arbor, 000 X.
Xxxxx Xxxxxx Xxx Xxxxx, XX 00000.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
3.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT OR $25.00,
WHICHEVER IS GREATER.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by adding a 3.000
percentage point margin ("Default Rate Margin"). The Default Rate Margin shall
also apply to each succeeding interest rate change that would have applied had
there been no default. However, in no event will the interest rate exceed the
maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of
default ("Event of Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the related documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
INSOLVENCY. The dissolution or termination of Xxxxxxxx's existence as a
going business, the insolvency of Xxxxxxxx, the appointment of a receiver
for any part of Xxxxxxxx's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This includes
a garnishment of any of Xxxxxxxx's accounts, including deposit accounts,
with Lender. However, this Event of Default shall not apply if there is a
good faith dispute by Xxxxxxxx as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Xxxxxx written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any guaranty of the indebtedness evidenced by this Note. In the
event of a death, Lender, at its option, may, but shall not be required to,
permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Xxxxxx believes the prospect of payment or performance of
this Note is impaired.
INSECURITY. Lender in good faith believes itself insecure.
CURE PROVISIONS. If any default, other than a default in payment is curable
and if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it may be
cured if Borrower, after receiving written notice from Lender demanding
cure of such default: (1) cures the default within ten (10) days; or (2) if
the cure requires more than ten (10) days, immediately initiates steps
which Lender deems in Lender's sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary
steps sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Xxxxxx may declare the entire unpaid principal
balance under this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Xxxxxx's reasonable
attorneys' fees and Xxxxxx's legal expenses whether or not there is a lawsuit,
including reasonable attorneys' fees and expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Xxxxxxxx also will pay any court
costs, in addition to all other sums provided by law.
JURY WAIVER. XXXXXX AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER XXXXXX OR BORROWER AGAINST
THE OTHER.
PROMISSORY NOTE
LOAN NO: 200717 (CONTINUED) PAGE 2
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY FEDERAL LAW APPLICABLE TO LENDER
AND, TO THE EXTENT NOT PREEMPTED BY FEDERAL LAW, THE LAWS OF THE STATE OF
MICHIGAN WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. THIS NOTE HAS BEEN
ACCEPTED BY XXXXXX IN THE STATE OF MICHIGAN.
CHOICE OF VENUE. If there is a lawsuit, Xxxxxxxx agrees upon Xxxxxx's request to
submit to the jurisdiction of the courts of Washtenaw County, State of Michigan.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Xxxxx accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Xxxxxx, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts, and, at Xxxxxx's option, to
administratively freeze all such accounts to allow Lender to protect Xxxxxx's
charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by a Commercial Security
Agreement, three Commercial Pledge Agreements, a Business Loan Agreement and
four Commercial Guarantees all dated an even date herewith.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Xxxxxxxx, and
upon Xxxxxxxx's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: Bank of Xxx Arbor
000 X. Xxxxx Xxxxxx Xxx Xxxxx, XX 00000.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan or release any party or guarantor or collateral; or impair, fail
to realize upon or perfect Xxxxxx's security interest in the collateral; and
take any other action deemed necessary by Xxxxxx without the consent of or
notice to anyone. All such parties also agree that Xxxxxx may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, XXXXXXXX READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. XXXXXXXX AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
PIPEX PHARMACEUTICALS, INC.
BY: /s/ Xxxxx Xxxxxx
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XXXXX XXXXXX, CEO OF PIPEX PHARMACEUTICALS, INC.
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