Exhibit 10.72
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, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE OR SUCH COMMON SHARES, AS APPLICABLE, UNDER SAID ACT AND ANY APPLICABLE
STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
VENTURES-NATIONAL INCORPORATED D/B/A TITAN GENERAL HOLDINGS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
SECURED REVOLVING NOTE
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FOR VALUE RECEIVED, VENTURES-NATIONAL INCORPORATED D/B/A TITAN
GENERAL HOLDINGS, INC. a Utah corporation (the "BORROWER") promises to pay to
LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234
G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax:
000-000-0000 (the "HOLDER") or its registered assigns, on order, the sum of up
to TWO MILLION FIVE HUNDRED THOUSAND DOLLARS ($2,500,000) without duplication of
any amounts owing by Borrower to Holder under the Minimum Borrowing Notes (as
defined in the Security Agreement referred to below), or , if different, the
aggregate principal amount of all "Loans" (as such term is defined in the
Security Agreement referred to below), together with any accrued and unpaid
interest hereon, on November 20, 2006 (the "MATURITY DATE").
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement between Borrower and
the Holder dated as of November 20, 2003 (as amended, modified and supplemented
from time to time, the "SECURITY AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & PREPAYMENTS
1.1. INTEREST RATE AND PAYMENTS. Subject to Sections 5.3 and 6.7
hereof, interest payable on this Note shall accrue at a rate per annum equal to
the "prime rate" published in THE WALL STREET JOURNAL from time to time, 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 Rate; each change to
be effective as of the day of the change in such rate in accordance with the
terms of the Security Agreement. Subject to the immediately following sentence,
the Contract Rate hall not be less than seven percent (7%). The Contract Rate
shall be adjusted as follows: if (i) the Company shall have registered the
shares of the Company's common stock underlying the
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conversion of all currently issued and outstanding Minimum Borrowing Notes and
that certain warrant issued to Holder of even date herewith on a registration
statement declared effective by the Securities Exchange Commission, and (ii) the
volume weighted average price of the Common Stock as reported by Bloomberg, L.P.
on the principal market for any of the ten (10) trading days immediately
preceding a Interest Payment Date (defined below) exceeds the then applicable
Fixed Conversion Price by twenty five percent (25%), the Contract Rate for the
succeeding calendar month shall automatically be reduced by twenty five basis
points (25 b.p.) for such period PROVIDED, HOWEVER, that in no event will the
Contract Rate hereunder be reduced to less than 0.00%. Interest shall be payable
monthly in arrears commencing on December 1, 2003 and on the first day of each
consecutive calendar month thereafter, (each, an "INTEREST PAYMENT DATE").
1.2. OPTIONAL PREPAYMENT IN CASH. The Borrower will have the
option of prepaying this Note in full or in part at any time in an amount equal
to 115% of the amount being prepaid.
1.3 ALLOCATION OF OUTSTANDING PRINCIPAL TO MINIMUM BORROWING
NOTE. In the event that the amount due and payable hereunder should equal or
exceed $1,000,000, to the extent that the outstanding balance on Minimum
Borrowing Note shall be less than $1,500,000 (the difference of $1,500,000 less
the actual balance of the Minimum Borrowing Note, the "Available Minimum
Borrowing"), such portion of the balance hereof as shall equal the Available
Minimum Borrowing shall be deemed to be simultaneously extinguished on the
Revolving Note and transferred to, and evidenced by, the next additional Minumum
Borrowing Note (e.g., the Available Minimum Borrowing shall remain $0).
ARTICLE II
HOLDER'S CONVERSION RIGHTS
2.1. OPTIONAL CONVERSION. Subject to the terms of this Article
II, the Holder shall have the right, but not the obligation, at any time until
the Maturity Date, or thereafter during an Event of Default (as defined in
Article IV), and, subject to the limitations set forth in Section 2.2 hereof, to
convert all or any portion of the outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable shares of
the Common Stock at the Fixed Conversion Price. For purposes hereof, subject to
Section 3.5 hereof, the "FIXED CONVERSION PRICE" means $0.77. The shares of
Common Stock to be issued upon such conversion are herein referred to as the
"CONVERSION SHARES."
2.2. 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 the number of shares
of Common Stock beneficially owned by such Holder or issuable upon exercise of
warrants held by such Holder and 4.99% of the outstanding shares of Common Stock
of the Borrower. 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 2.2
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shall automatically become null and void without any notice to Borrower upon the
occurrence and during the continuance beyond any applicable grace period of an
Event of Default, or upon 75 days prior notice to the Borrower.
2.3. MECHANICS OF HOLDER'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 ("NOTICE OF CONVERSION") to the Borrower and such Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal
Amount, accrued interest and fees that are 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 Borrower within two (2) business days after the Conversion Date.
Each date on which a Notice of Conversion is delivered or telecopied to the
Borrower in accordance with the provisions hereof shall be deemed a Conversion
Date (the "CONVERSION DATE"). A form of Notice of Conversion to be employed by
the Holder is annexed hereto as Exhibit A. Pursuant to the terms of the Notice
of Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel within two (2) business days of the date of
the delivery to Borrower 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
Borrower 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 Borrower of the Notice of Conversion. The Holder shall be treated for all
purposes as the record holder of such Common Stock, unless the Holder provides
the Borrower written instructions to the contrary.
2.4. LATE PAYMENTS. The Borrower understands that a delay in the
delivery of the shares of Common Stock in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, the Borrower agrees to pay late
payments to the Holder for late issuance of such shares in the form required
pursuant to this Article III upon conversion of the Note, in the amount equal to
$500 per business day after the Delivery Date. The Borrower shall pay any
payments incurred under this Section in immediately available funds upon demand.
2.5. ADJUSTMENT PROVISIONS. The Fixed Conversion Price and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 2.1 shall be subject to adjustment from time to
time upon the happening of certain events while this conversion right remains
outstanding, as follows:
A. RECLASSIFICATION, ETC. If the Borrower 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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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
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 2.5, if the Borrower shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of 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 Borrower) 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 to such lower Offer Price. For purposes hereof, the issuance
of any security of the Borrower convertible into or exercisable or exchangeable
for Common Stock shall result in an adjustment to the Fixed Conversion Price
only upon the conversion, exercise or exchange of such securities.
D. COMPUTATION OF CONSIDERATION. For purposes of any
computation respecting consideration received pursuant to Subsection C above,
the following shall apply:
(a) 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 Borrower for any underwriting of the
issue or otherwise in connection therewith;
(b) 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 Borrower
(irrespective of the accounting treatment thereof); and
(c) upon any such exercise, the aggregate
consideration received for such securities shall be deemed to be the
consideration received by the Borrower for the issuance of such securities plus
the additional minimum consideration, if any, to be received by the Borrower
upon the conversion or exchange thereof (the consideration in each case to be
determined in the same manner as provided in clauses (a) and (b) of this
Subsection (D)).
2.6. RESERVATION OF SHARES. During the period the conversion
right exists, the Borrower 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 Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower 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
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and issuing stock certificates to execute and issue the necessary certificates
for shares of Common Stock upon the conversion of this Note.
ARTICLE III
EVENTS OF DEFAULT
The occurrence of any of the following events is an Event of
Default ("EVENT OF DEFAULT"):
3.1. FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The
Borrower fails to pay when due any installment of principal, interest or other
fees hereon or on any other Note issued pursuant to the Security Agreement, when
due in accordance with the terms of such Note.
3.2. BREACH OF COVENANT. The Borrower breaches any covenant or
other term or condition of this Note in any material respect and such breach, if
subject to cure, continues for a period of thirty (30) days after the occurrence
thereof.
3.3. BREACH OF REPRESENTATIONS AND WARRANTIES. Any material
representation or warranty of the Borrower made herein, or the Security
Agreement, or in any Ancillary Agreement shall be materially false or
misleading.
3.4. STOP TRADE. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for 5 consecutive days
or 5 days during a period of 10 consecutive days, excluding in all cases a
suspension of all trading on a Principal Market, provided that the Borrower
shall not have been able to cure such trading suspension within 30 days of the
notice thereof or list the Common Stock on another Principal Market within 60
days of such notice. The "Principal Market" for the Common Stock shall include
the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market
System, American Stock Exchange, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common
Stock), or any securities exchange or other securities market on which the
Common Stock is then being listed or traded.
3.5. DEFAULT UNDER RELATED AGREEMENT. The occurrence of an Event
of Default under and as defined in the Security Agreement.
3.6. FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. The
Borrower's failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and Section 9 of the Security Agreement if
such failure to timely deliver Common Stock shall not be cured within two (2)
business days, or if required, the Borrower is required to issue to Holder a
replacement Note, and the Borrower's failure to deliver a replacement Note is
not cured within seven (7) business days.
3.7. PAYMENT GRACE PERIOD. The Borrower shall have a three (3)
business day grace period to pay any monetary amounts due under this Note or the
Security Agreement or any Related Document, after which grace period a default
interest rate of five percent (5%) per annum above the then applicable interest
rate hereunder shall apply to the monetary amounts due.
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ARTICLE IV
DEFAULT PAYMENTS
4.1. DEFAULT PAYMENT. If an Event of Default occurs, the Holder,
at its option, may elect, in addition to all rights and remedies of Holder under
the Security Agreement and all obligations of Borrower under the Security
Agreement, to require the Borrower to make a Default Payment ("DEFAULT
PAYMENT"). The Default Payment shall be the outstanding principal amount of the
Note, plus accrued but unpaid interest, all other fees then remaining unpaid,
and all other amounts payable hereunder.
4.2. DEFAULT PAYMENT DATE AND DEFAULT NOTICE PERIOD. The Default
Payment shall be due and payable on the fifth business day after an Event of
Default as defined in Article III ("DEFAULT PAYMENT DATE") has occurred and is
continuing beyond any applicable grace period. The period between date upon
which of an Event of Default has occurred and is continuing beyond any
applicable grace period and the Default Payment Date shall be the "DEFAULT
PERIOD." If during the Default Period, the Borrower cures the Event of Default,
the Event of Default will no longer exist and any additional rights the Holder
had triggered by the occurrence and continuance of an Event of Default will no
longer exist. If the Event of Default is not cured during the Default Notice
Period, all amounts payable hereunder shall be due and payable on the Default
Payment Date, all without further demand, presentment or notice, or grace
period, all of which hereby are expressly waived.
4.3. DEFAULT INTEREST RATE. Following the occurrence and during
the continuance of an Event of Default, interest on this Note shall
automatically be increased by five percent (5%) per annum, and all outstanding
Obligations, including unpaid interest, shall continue to accrue interest from
the date of such Event of Default at such interest rate applicable to such
Obligations until such Event of Default is cured or waived.
4.4. CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.2. NOTICES. Any notice herein required or permitted to be
given shall be in writing and provided in accordance with the terms of the
Security Agreement.
5.3. AMENDMENT PROVISION. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later
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amended or supplemented, then as so amended or supplemented, and any successor
instrument as it may be amended or supplemented.
5.4. ASSIGNABILITY. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder in accordance with
the requirements of the Security Agreement.
5.5. COST OF COLLECTION. If default is made in the payment of
this Note, the Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees.
5.6. GOVERNING LAW. This Note shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be
brought only in the state courts of New York or in the federal courts located in
the city of New York, the state of New York. Both parties and the individual
signing this Note on behalf of the Borrower agree to submit to the jurisdiction
of such courts. The prevailing party shall be entitled to recover from the other
party its reasonable attorney's fees and costs. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such statute or
rule of law. Any such provision which may prove invalid or unenforceable under
any law shall not affect the validity or unenforceability of any other provision
of this Note. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Borrower
in any other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court order in favor of Xxxxxx.
5.7. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed
to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
5.8. SECURITY INTEREST. The Holder of this Note has been granted
a security interest in certain assets of the Borrower more fully described in a
Security Agreement dated as of November __, 2003.
5.9. CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Note and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Secured
Convertible Revolving Note to be signed in its name effective as of this 20th
day of November, 2003.
VENTURES-NATIONAL INCORPORATED
D/B/A TITAN GENERAL HOLDINGS, INC.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
Title: President
WITNESS:
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NOTICE OF CONVERSION
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(To be executed by the Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the
principal and $_________ of the interest due on the Secured Convertible
Revolving Note issued by Ventures-National Incorporated d/b/a Titan General
Holdings, Inc. on _______ __, 2003 into shares of Common Stock of
Ventures-National Incorporated d/b/a Titan General Holdings, Inc. (the
"Borrower") according to the conditions set forth in such Note, as of the date
written below.
Date of Conversion:
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Conversion Price:
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Shares To Be Delivered:
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Signature:
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Print Name:
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Address:
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Holder DWAC
instructions -------------------------------------------------------
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