Contract
Exhibit
4.10
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 OR SUCH SHARES UNDER SAID
ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO MAGNETECH INTEGRATED SERVICES CORP. THAT SUCH REGISTRATION
IS
NOT REQUIRED.
FOR
VALUE
RECEIVED, MAGNETECH INTEGRATED SERVICES CORP., an Indiana 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 August
24, 2008 (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 the date
hereof by and between the Company, certain Subsidiaries of the Company and
the
Holder (as amended, modified and/or supplemented from time to time, the
“Security
Agreement”).
This
Note is issued pursuant to, and is subject to the terms and conditions of,
the
Security 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
one percent (1.0%) (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. Interest shall be (i) calculated on the basis of
a 360
day year, and (ii) payable monthly, in arrears, commencing on September 1,
2005,
and 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 Adjustments.
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 (each a “Determination
Date”)
and
shall be subject to
adjustment
as set forth herein. If (i) the Company shall have registered the Grant Shares
and the shares of the Common Stock underlying the conversion of this Note and
each Warrant then outstanding on a registration statement declared effective
by
the Securities and Exchange Commission (the “SEC”),
and
(ii) the average of the Closing Prices (as defined below) of the Common
Stock as reported by Bloomberg, L.P. on the Principal Market for the five (5)
trading days immediately preceding a Determination Date (the “Closing
Price Average”)
exceeds the then applicable Fixed Conversion Price by at least twenty-five
percent (25%), the Contract Rate for the succeeding calendar month shall
automatically be reduced by 200 basis points (200 b.p.) (2.0%) for each
incremental twenty-five percent (25%) increase in the Closing Price Average
of
the Common Stock above the then applicable Fixed Conversion Price.
Notwithstanding the foregoing (and anything to the contrary contained herein),
in no event shall the Contract Rate at any time be less than zero percent (0%).
For purposes of this Note, the “Closing
Price”of
the
Common Stock shall mean: (i) in the event that the Common Stock is listed on
the
American Stock Exchange or New York Stock Exchange or the National or SmallCap
Market of The Nasdaq Stock Market, Inc. (“Nasdaq”),
the
closing or last sale price, as the case may be, reported for the applicable
day
or (ii) in the event that the Common Stock is not traded on the American Stock
Exchange or New York Stock Exchange or on the Nasdaq but is quoted on the NASD
Over The Counter Bulletin Board, then the average of the closing bid and asked
prices reported for the applicable day.
1.3 Principal
Payments.
Subject
to Articles II and III below, amortizing payments of the aggregate principal
amount outstanding under this Note at any time (the “Principal
Amount”)
shall
be made by the Company on March 1, 2006 and on the first business day of each
succeeding month thereafter through and including the Maturity Date (each,
an
“Amortization
Date”).
Subject to Articles II and III below, commencing on the first Amortization
Date,
the Company shall make monthly payments to the Holder on each Repayment Date,
each such payment in the amount of $100,000 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 Security Agreement and/or
any
other Ancillary Agreement (other than the Revolving Note and each Minimum
Borrowing Note) (collectively, the “Monthly
Amount”).
Any
outstanding Principal Amount together with any accrued and unpaid interest
thereon and any and all other unpaid amounts which are then owing by the Company
to the Holder under this Note, the Security Agreement and/or any other Ancillary
Agreement (other than the Revolving Note and any Minimum Borrowing Note) 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 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 101% of the
Monthly Amount (the “Premium
Fee”)
due
and owing to the Holder on the Amortization Date; provided, however, that if
only a portion of such Monthly Amount may be converted into shares of Common
Stock pursuant to Section 3.2, then the balance of such Monthly Amount that
is
required to be paid in cash shall not be subject to the
2
Premium
Fee. 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”
means
$0.26 per share of Common Stock.
(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 of the Monthly Amount due on each Amortization Date
(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) if the following
conditions (the “Conversion
Criteria”)
are
satisfied: (i) the average of the Closing Prices (as defined herein)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 110% of the Fixed Conversion Price and (ii) the amount of
such
conversion does not exceed twenty eight percent (28%) 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
101% of the Monthly Amount otherwise due on such Amortization Date, within
three
(3) business days of such Amortization Date, pursuant to Section 2.1(a) above.
2.2 No
Effective Registration.
Notwithstanding anything to the contrary herein, none of the Company’s
obligations to the Holder under this Note 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 conversion 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 fifteen percent (115%)
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 Security Agreement or any other
Ancillary Agreement (other than the Revolving Note and any Minimum Borrowing
Note) (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
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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 Section 3.1 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.
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 under this Note and fees due and
payable under this Note, the Security Agreement or any other Ancillary Agreement
(other than the Revolving Note and any Minimum Borrowing Note) into fully paid
and nonassessable shares of Common Stock at the Fixed Conversion Price. Such
conversion shall constitute complete satisfaction of the Principal Amount and/or
accrued interest and fees so converted. 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 contained herein to the contrary, the Holder shall
not
be entitled to convert pursuant to the terms of this Note an amount that would
be convertible into that number of Conversion Shares which would exceed the
amount by which (i) 9.99% of the outstanding shares of Common Stock exceeds
(ii)
the number of shares of Common Stock beneficially owned by the Holder. For
purposes of the immediately preceding sentence, beneficial ownership shall
be
determined in accordance with Section 13(d) of the Exchange Act and Regulation
13d-3 thereunder. The Conversion Shares limitation described in this Section
3.2
shall automatically become null and void following notice to the Company upon
the occurrence and during the continuance of an Event of Default, or upon 75
days prior notice to the Company. Notwithstanding anything contained herein
to
the contrary, the provisions of this Section 3.2 are irrevocable and may not
be
waived by the Holder or any Company.
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. The election to convert shall be irrevocable except (i) if an Event
of Default has occurred and is continuing or (ii) if the Company has consented
to such a revocation. 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
4
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 the Company’s
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 after receipt by the Company of the Notice of
Conversion (the “Delivery
Date”).
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 Conversion Date. 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 and further provides the Company any information
reasonably requested and pays any transfer taxes or other fees relating to
the
issuance of the shares in a name other than that of the Holder.
3.4 Fractional
Shares.
The
Company shall not be required to issue fractional shares of Common Stock upon
any conversion of this Note. In lieu of any fractional shares of Common Stock
that would otherwise be issuable upon conversion, the Company shall pay the
Holder an amount in cash equal to the product of such fraction multiplied by
the
then applicable Fixed Conversion Price.
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 the number of and kind
of
securities that would have been issued to the Holder had the Holder converted
this Note into Common Stock immediately before such reclassification or other
change.
(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
5
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.
(c) Share
Issuances.
Subject
to the provisions of this Section 3.6, if the Company shall at any time prior
to
the conversion or repayment in full of the Principal Amount issue any shares
of
Common Stock or securities convertible into Common Stock to a Person other
than
the Holder (except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant
to options, warrants, or other obligations to issue shares outstanding on the
date hereof as disclosed to the Holder in writing; (iii) pursuant to any equity
incentive plan for directors, officers or employees adopted by the Company;
or
(iv) the Notes, the Warrants, and Common Stock issued upon conversion or
exercise, as applicable, of any of the Notes or Warrants) for a consideration
per share (the “Offer
Price”)
less
than the Fixed Conversion Price in effect at the time of such issuance, then
the
Fixed Conversion Price shall be immediately reset pursuant to the formula below.
For purposes hereof, the issuance of any security of the Company convertible
into or exercisable or exchangeable for Common Stock shall result in an
adjustment to the Fixed Conversion Price upon the issuance of such securities
rather than upon the issuance of Common Stock in connection with the conversion,
exercise or exchange, as applicable, of such securities.
If
the
Company issues any additional shares of Common Stock for a consideration per
share less than the then-applicable Fixed Conversion Price pursuant to this
Section 3.6 then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
|
A
+
B
|
|
(A
+ B) + [((C - D) x B) / C]
|
A
= Total
amount of shares convertible pursuant to this Note
B
=
Actual shares sold in the offering
C
= Fixed
Conversion Price
D
= Offer
Price
(d) Computation
of Consideration.
For
purposes of any computation respecting consideration received pursuant to
Section 3.6(c) above, the following shall apply:
(i) in
the
case of the issuance of shares of Common Stock for cash, the consideration
shall
be the amount of such cash, provided that in no case shall any deduction be
made
for any commissions, discounts or other expenses incurred by the Company for
any
underwriting of the issue or otherwise in connection therewith;
6
(ii) in
the
case of the issuance of shares of Common Stock for a consideration in whole
or
in part other than cash, the consideration other than cash shall be deemed
to be
the fair market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting treatment thereof);
and
(iii) with
respect to any shares of Common Stock issued upon the exercise or conversion
of
any option, warrant or other convertible security, the aggregate consideration
received for such shares of Common Stock shall be deemed to be the consideration
received by the Company for the issuance of such convertible securities plus
the
additional minimum consideration, if any, to be received by the Company upon
the
conversion or exchange thereof (the consideration in each case to be determined
in the same manner as provided in subsections (i) and (ii) of this Section
3.6(d)).
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.
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 an Event of Default under the Security Agreement shall constitute
an event of default (“Event
of Default”)
hereunder.
4.2 Default
Interest.
Following the occurrence and during the continuance of an Event of Default,
the
Company shall pay additional interest on the outstanding Principal Amount of
this Note in an amount equal to one percent (1%) per month from the date of
such
Event of Default until the date such Event of Default is cured or
waived.
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 Security
Agreement and/or any other Ancillary Agreement and/or may elect, in addition
to
all rights and remedies of the Holder under the Security Agreement and the
other
Ancillary Agreements and all obligations and
7
liabilities
of the Company under the Security Agreement and the other Ancillary Agreements,
to require the Company to make a Default Payment (“Default
Payment”).
The
Default Payment shall be 112% of the outstanding principal amount of the Note,
plus accrued but unpaid interest under this Note, all other fees arising under
this Note or the Security Agreement or any other Ancillary Agreement (other
than
the Revolving Note and any Minimum Borrowing Note), 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 Security Agreement, and/or
the other Ancillary Agreements (other than the Revolving Note and any Minimum
Borrowing Note), then to accrued and unpaid interest due on this Note and then
to the outstanding principal balance of this Note, and any remaining balance
of
the Default Payment shall be retained by the Holder. 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 business 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 Security Agreement executed in connection herewith,
and
to the Holder at the address provided in the Security 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.
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.
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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 Security
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
ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR ANCILLARY TO THIS NOTE
OR ANY OF THE ANCILLARY 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 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 SECURITY 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.
(c) THE
COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO
9
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,
ANCILLARY OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS NOTE, ANY OTHER ANCILLARY AGREEMENT OR THE TRANSACTIONS
ANCILLARY 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 Security Agreement dated
as
of the date hereof and (ii) in the equity interests of the Companies’
Subsidiaries pursuant to the 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 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 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 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]
10
IN
WITNESS WHEREOF,
the
Company has caused this Secured Convertible Term Note to be signed in its name
effective as of this 24th
day of
August, 2005.
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MAGNETECH
INTEGRATED SERVICES CORP.
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|||||
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By:
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/s/ Xxxx X. Xxxxxxx | ||||
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Name:
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Xxxx X. Xxxxxxx | ||||
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Title:
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President & CEO | ||||
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WITNESS:
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|||||
| /s/ Xxxxx X. Xxxx | |||||
11
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)
Magnetech
Integrated Services Corp.
0000
X.
Xxxxxx Xxxxxx
South
Bend, Indiana 46619
Attention:
Chief Financial Officer
The
undersigned hereby converts $_________ of the principal, $______ of the interest
and $________ of the fee due on [specify applicable Repayment Date] under the
Secured Convertible Term Note dated as of August 24, 2005 (the “Note”)
issued
by Magnetech Integrated Services Corp. (the “Company”)
by
delivery of shares of Common Stock of the Company (“Shares”)
on and
subject to the conditions set forth in the Note.
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1.
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Date
of Notice:
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|
2.
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Shares
To Be Delivered:
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|
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3.
|
Holder
DWAC Instructions:
|
|
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4.
|
Holder
Address:
|
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[HOLDER]
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|||||
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By:
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|||||
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Name:
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|||||
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Title:
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