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 ADAL GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, ADAL GROUP, INC., a Delaware corporation (the
"Company"), hereby 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 One
Million Five Hundred Dollars ($1,500,000), together with any accrued and unpaid
interest hereon, on June 29, 2008 (the "Maturity Date") if not sooner paid. The
original principal amount of this Note, subject to amortizing payments pursuant
to Section 1.2 hereof is hereinafter referred to as the "Principal Amount".
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 between the Company and the Holder (the "Purchase
Agreement").
The following terms shall apply to this Secured Convertible Term Note
(this "Note"):
ARTICLE I
INTEREST & AMORTIZATION
1.1 (a) Contract Rate. Subject to Sections 1.1(b), 4.2 and 5.10 hereof,
interest payable on the Principal Amount of this Note 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 three percent (3%) (the "Contract Rate"). The
Prime 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 Xxxx; each change to be effective as of the day of the change in the
Prime Rate. Subject to Section 1.1(b) hereof, the Contract Rate shall not be
less than eight percent (8%). Interest shall be calculated on the basis of a 360
day year. Interest shall accrue but not be payable during the period commencing
on the date hereof and ending on June 30, 2005. Interest on the Principal Amount
shall be payable monthly, in arrears, commencing on July 1, 2005 and on the
first business day of each consecutive calendar month thereafter (each, a
"Repayment Date") and on the Maturity Date, whether by acceleration or
otherwise.
1.1 (b) Contract Rate Adjustment. The Contract Rate shall be subject to
adjustment on the last business day of each month hereafter until the Maturity
Date (each a "Determination Date"). If on any Determination Date (i) the Company
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shall have registered under the Securities Act of 1933, as amended (the
"Securities Act"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of each Warrant and Option issued on a
registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), and (ii) the market price (the "Market Price") of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined
below) for the five (5) consecutive trading days immediately preceding such
Determination Date 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 100 basis points (100 b.p.) (1.0%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. Notwithstanding
the foregoing (and anything to the contrary contained in herein), in no event
shall the Contract Rate be less than zero percent (0%).
1.2 Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note shall begin on January 1, 2005 and
shall recur on each succeeding Repayment Date thereafter until the Principal
Amount has been repaid in full, whether by the payment of cash or by the
conversion of such principal into Common Stock pursuant to the terms hereof.
Subject to Section 2.1 and Article 3 below, on each Repayment Date, the Company
shall make payments to the Holder in the amount of $50,000.00 (the "Monthly
Principal Amount"), together with any accrued and unpaid interest then due on
such portion of the Principal Amount plus any and all other amounts which are
then owing under this Note that have not been paid (the Monthly Principal
Amount, together with such accrued and unpaid interest and such other amounts,
collectively, the "Monthly Amount"). Any outstanding Principal Amount together
with any accrued and unpaid interest and any 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.
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ARTICLE II
CONVERSION REPAYMENT
2.1 (a) Payment of Monthly Amount in Cash or Common Stock. If the
Monthly Amount (or a portion thereof of such Monthly Amount if such portion of
the Monthly Amount would have been converted into shares of Common Stock but for
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 equal to 102% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. 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 Repayment Date (in
respect of such portion of the Monthly Amount converted into in shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(x) the portion of the Monthly Amount converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion Price. For purposes hereof, the "Fixed
Conversion Price" shall, subject to adjustments as set forth herein, mean (i)
with respect to the first $1,000,000 of the Principal Amount of this Note
converted pursuant to the terms hereof (and all interest and fees related
thereto), $3.00. and (ii) with respect to the remaining Principal Amount of this
Note converted pursuant to the terms hereof (and all interest and fees related
thereto), $3.50.
(b) Monthly Amount Conversion Guidelines. 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 Repayment Date according to
the following guidelines (collectively, the "Conversion Criteria"): (i) the
average closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) consecutive trading days immediately preceding
such Repayment 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
five percent (25%) of the average dollar trading volume of the Common Stock for
the twenty two (22) day trading period immediately preceding the applicable
Repayment Date. If the Conversion Criteria are not met, the Holder shall convert
only such part of the Monthly Amount that meets the Conversion Criteria. Any
part of the Monthly Amount due on a Repayment Date that the Holder has not been
able to convert into shares of Common Stock due to failure to meet the
Conversion Criteria, shall be paid by the Company in cash at the rate of 102% of
the Monthly Amount otherwise due on such Repayment Date, within three (3)
business days of the applicable Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted
by the Holder 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 Amount, and (iii) third, the Principal Amount.
2.2 No Effective Registration. Notwithstanding anything to the contrary
herein, no amount payable hereunder 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 satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144 of the
Securities Act, and (b) no Event of Default hereunder exists and is continuing,
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unless such Event of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at the Holder's
option.
2.3 Optional Redemption of Principal Amount. The Company will have the
option of prepaying the outstanding Principal Amount by paying to the Holder a
sum of money equal to one hundred fifteen percent (115%) of the Principal Amount
to be redeemed, 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 Related Agreement (the "Redemption Amount") on the
Redemption Payment Date (as defined below). The Company shall deliver to the
Holder a notice of redemption (the "Notice of Redemption") specifying the date
for such Optional Redemption (the "Redemption Payment Date"), which date shall
be not less than 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 the Principal Amount for which the
Holder has a pending election to convert pursuant to Section 3.1, or for
conversions initiated or made by the Holder pursuant to Section 3.1 during the
Redemption Period. The Redemption Amount shall be determined as if such Xxxxxx's
conversion elections had been completed immediately prior to the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount
shall 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 Notice of Redemption will be null and void.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. Subject to Section 2.2, the Holder
shall have the right, but not the obligation, to convert all or any portion of
the then aggregate outstanding Principal Amount of this Note, together with
interest and fees due hereon, into shares of Common Stock, subject to the terms
and conditions set forth in this Article III. The Holder may exercise such right
by delivery to the Company of a written Notice of Conversion pursuant to Section
3.3. 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 difference between 4.99% of the issued and
outstanding shares of Common Stock and the number of shares of Common Stock
beneficially owned by such Holder or issuable upon exercise of Warrants or the
Option held by such Holder. For the 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 the
Company.
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3.3 Mechanics of Xxxxxx's Conversion. (a) In the event that the Holder
elects to convert any amounts outstanding under this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed and
completed notice of conversion (a "Notice of Conversion") to the Company, which
Notice of Conversion shall provide a breakdown in reasonable detail of the
Principal Amount, accrued interest and fees 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". A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of a Notice of Conversion, the
Company will issue instructions to the transfer agent accompanied by an opinion
of counsel, if so required by the Company's transfer agent, within one (1)
business day of the date of the delivery to 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 date of receipt by the Company of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Company written instructions to the
contrary.
3.4 Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon
each conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price. In the event
of any conversions of outstanding obligations under this Note in part pursuant
to this Article III, such conversions shall be deemed to constitute conversions
(i) first, of the Monthly Amount for the current calendar month, (ii) then of
the accrued interest on the Principal Amount, and (iii) then of outstanding
Principal Amount, by applying the conversion amount to Monthly Principal Amounts
for the remaining Repayment Dates in chronological order.
(b) The Fixed Conversion Price and number and kind of shares
or other securities to be issued upon conversion is subject to adjustment from
time to time upon the occurrence of certain events, as follows:
A. 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 or the Conversion Price, as
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the case may be, shall be proportionately reduced in the 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.
B. 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 Common Stock
upon the full conversion of this Note. The Company represents that upon
issuance, such 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 shares
of Common Stock upon the conversion of this Note.
C. Share Issuances. Subject to the provisions of this
Section 3.4, 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 Subsections A or B above; (ii)
pursuant to options, warrants or other obligations to issue shares
outstanding on the date hereof as disclosed to Holder in writing; or
(iii) pursuant to options that may be issued under any employee
incentive stock option and/or any qualified stock option plan adopted
by the Company) 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 applicable to a portion of the
outstanding principal amount of this Note (and all interest, fees,
costs and expenses related thereto) equal to the fair market value of
the aggregate consideration paid for, or attributable to, such shares
of Common Stock or securities convertible into Common Stock (the
"Aggregate Consideration") shall be immediately reset to such lower
Offer Price at the time of issuance of such securities (provided that,
in the event that the outstanding principal amount of this Note is
greater than the respective Aggregate Consideration, the Holder shall
determine in its sole discretion which portion of the outstanding
principal amount of the Note shall have a "reset" Fixed Conversion
Price as a result of such issuance). For example, in the event that (i)
the Offer Price is less than the Fixed Conversion Price at the time of
such issuance and (ii) the Aggregate Consideration equals $1,000,000,
the Fixed Conversion Price applicable a principal amount of this Note
equal to $1,000,000 (plus all interest, fees, costs and expenses
related thereto) shall be reset to the Offer Price. . 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 at the time of issuance of
such securities.
D. Reclassification, etc. 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 immediately prior to such reclassification or other
change.
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3.5 Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Company to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid. Subject to the provisions of
Article IV, the Company will pay no costs, fees or any other consideration to
the Holder for the production and issuance of a replacement 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 three (3) 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
fifteen (15) days after the occurrence thereof.
(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.
(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) Material Adverse Effect. Any change or the occurrence of
any event which could reasonably be expected to have a Material Adverse Effect;
(f) 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
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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;
(g) Judgments. Attachments or levies in excess of $200,000 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 $200,000 which shall not have been vacated, discharged, stayed or
bonded within thirty (30) days from the entry thereof;
(h) 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;
(i) Change in 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 Board of Directors of
the Company on the date hereof (or directors appointed by a majority of the
Board of Directors of the Company 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.;
(j) Indictment; Proceedings. The 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 of criminal or civil
proceeding 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;
(k) 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 fifteen (15) 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);
(l) Stop Trade. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)
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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; or
(m) 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 two (2) 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 one and one half percent (1.5%) per annum, 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.
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 130% 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
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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 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 issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
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. This Note shall not be assigned by the
Company without the consent of the Holder.
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 (a) Governing Law, Jurisdiction and Waiver of Jury Trial. 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 t 12 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
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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 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.
(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
permitted by such law, any payments in excess of such maximum 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) pursuant to certain Foreign Documentation. The obligations of
the Company under this Note are guaranteed by certain Subsidiaries of the
Company pursuant to certain Foreign Documentation.
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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 Cost of Collection. If default is made in the payment of this
Note, the Company shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
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IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name effective as of this 29th day of June, 2005.
ADAL GROUP, INC.
By: /s/ Xxxxxxxx Xxxxxxx
Name: X. Xxxxxxx
Title: CEO
WITNESS:
/s/ Xxxxxxxx Xxxxxxxx
Xxxxxxxx Xxxxxxxx, Xxxx Rapinet
00/00 Xxxxxx Xxxxxx
Xxxxxx XX0X 0XX
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ADAL GROUP,
INC. dated June __, 2005 by delivery of Shares of Common Stock of ADAL GROUP,
INC. on and subject to the conditions set forth in Article III of such Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
By:_______________________________
Name:_____________________________
Title:______________________________
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