From the 10-Q
PROMISSORY NOTE
October 8, 2010
$25,000.00
FOR VALUE RECEIVED , the undersigned corporation (the “ Company ”), promises to pay to E-Lionheart Associates, LLC . , a Delaware limited liability company (the “ Lenders ”) the principal sum of Twenty Five Thousand Dollars and Zero Cents ($25,000.00) and interest at the annual rate of eight percent (8%) on the unpaid balance pursuant to the following terms:
1. Principal and Interest . For value received, the Company hereby promises to pay to the order of the Lender in lawful money of the United States of America and in immediately available funds the principal sum of Twenty Five Thousand Dollars and Zero Cents ($25,000.00) , together with interest on the unpaid principal of this note at the rate of eight percent (8%) per year (computed on the basis of a 365-day year and the actual days elapsed) from the date of this Promissory Note (the “ Note ”) until paid.
2. Principal and Interest Payments . All principal and accrued interest shall be due and payable one (1) calendar year from the date of this Note, in shares or cash at the discretion of the Lender; provided, however, in the event that the Company receives any financing from any other source all proceeds received in connection with any such financing shall be paid to the Lender until such time that all outstanding principal and accrued interest has been paid to the Lender. All payment amounts shall be first applied to interest, if any, and then to the balance to principal.
3. Conversion .
(a) At any time on or prior to the Maturity Date, any amount of the unpaid Principal Amount (the “Conversion Amount”) may be converted into restricted shares of Common Stock of the Company equal to the result of (i) the Conversion Amount, divided by (ii) the Variable Conversion Price (as defined below):
(A) The “ Variable Conversion Price ” shall mean the Applicable Percentage (as defined herein) multiplied by the Market Price (as defined herein). “ Market Price ” means the average of the lowest three (3) Trading Prices (as defined below) for the Common Stock during the twenty (20) Trading Day period ending one Trading Day prior to the date the Conversion Notice is sent by the Holder to the Borrower via facsimile (the “ Conversion Date ”). “ Trading Price ” means, for any security as of any date, the intraday trading price on the Pink Sheets (the “ PINKSHEETS ”) as reported by a reliable reporting service mutually acceptable to and hereafter designated by Holders of a majority in interest of the Notes and the Borrower or, if the PINKSHEETS is not the principal trading market for such security, the intraday trading price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no intraday trading price of such security is available in any of the foregoing manners, the average of the intraday trading prices of any market makers for such
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security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. “Applicable Percentage” shall mean 25%.
(b) In the event that the Principal Amount on this Note is converted into Common Stock in accordance with the terms of this Section 3, the Company shall promptly issue to the Noteholder a certificate representing the shares of Common Stock into which the obligations of the Company under this Note have been converted, which certificate shall bear restrictive legends restricting the transfer of such certificate or the shares of Common stock represented thereby, unless otherwise contemplated.
(c) No certificates representing fractional shares of Common Stock shall be issued to Noteholder upon conversion of principal due hereunder into Common Stock, no dividend or distribution of the Company shall relate to fractional share interests and such fractional share interests will not entitle the Noteholder to vote or to any rights as a stockholder of the Company. The Noteholder shall pay to Company cash in lieu of any fractional shares of Common Stock resulting from conversion of any principal due hereunder, concurrently with the issuance to Noteholder of the Common Stock to which such fractional shares relate.
4. Waiver and Consent . To the fullest extent permitted by law and except as otherwise provided herein, the Company waives demand, presentment, protest, notice of dishonor, suit against or joinder of any other person, and all other requirements necessary to charge or hold the Company liable with respect to this Note.
5. Costs, Indemnities and Expenses . In the event of default as described herein, the Company agrees to pay all reasonable fees and costs incurred by the Lender in collecting or securing or attempting to collect or secure this Note, including reasonable attorneys’ fees and expenses, whether or not involving litigation, collecting upon any judgments and/or appellate or bankruptcy proceedings. The Company agrees to pay any documentary stamp taxes, intangible taxes or other taxes which may now or hereafter apply to this Note or any payment made in respect of this Note, and the Company agrees to indemnify and hold the Lender harmless from and against any liability, costs, attorneys’ fees, penalties, interest or expenses relating to any such taxes, as and when the same may be incurred.
6. Intentionally Omitted.
7. Event of Default . An “ Event of Default ” shall be deemed to have occurred upon the occurrence of any of the following: (i) the Company should fail for any reason or for no reason to make any payment of the principal, interest, costs, indemnities, or expenses pursuant to this Note within ten (10) days of the date due as prescribed herein; (ii) any default, whether in whole or in part, in the due observance or performance of any obligations or other covenants, terms or provisions to be performed by the Lender under this Note or any other related agreements hereunder between the Company and the Lender of even date herewith which is not cured by the Company by any applicable cure period therein, or (iii) the Lender shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties; (3) commence a voluntary case for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit to any governmental authority any
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petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction. Upon an Event of Default (as defined above), the entire principal balance and accrued interest outstanding under this Note, and all other obligations of the Company under this Note, shall be immediately due and payable without any action on the part of the Lender, interest shall accrue on the unpaid principal balance at twenty-four percent (24%) per year or the highest rate permitted by applicable law, if lower, and the Lender shall be entitled to seek and institute any and all remedies available to it.
8. Maximum Interest Rate . In no event shall any agreed to or actual interest charged, reserved or taken by the Lender as consideration for this Note exceed the limits imposed by New York law. In the event that the interest provisions of this Note shall result at any time or for any reason in an effective rate of interest that exceeds the maximum interest rate permitted by applicable law, then without further agreement or notice the obligation to be fulfilled shall be automatically reduced to such limit and all sums received by the Lender in excess of those lawfully collectible as interest shall be applied against the principal of this Note immediately upon the Lender’s receipt thereof, with the same force and effect as though the Company had specifically designated such extra sums to be so applied to principal and the Lender had agreed to accept such extra payment(s) as a premium-free prepayment or prepayments.
9. Issuance of Capital Stock . So long as any portion of this Note is outstanding, the Company shall not, without the prior written consent of the Lender, (i) issue or sell shares of common stock or preferred stock without consideration or for a consideration per share less than the bid price of the common stock determined immediately prior to its issuance, (ii) issue any warrant, option, right, contract, call, or other security instrument granting the holder thereof, the right to acquire common stock without consideration or for a consideration less than such common stock’s bid price value determined immediately prior to it’s issuance, (iii) enter into any security instrument granting the holder a security interest in any and all assets of the Company, or (iv) file any registration statement on Form S-8.
10. Cancellation of Note . Upon the repayment by the Company of all of its obligations hereunder to the Lender, including, without limitation, the principal amount of this Note, plus accrued but unpaid interest, the indebtedness evidenced hereby shall be deemed canceled and paid in full. Except as otherwise required by law or by the provisions of this Note, payments received by the Lender hereunder shall be applied first against expenses and indemnities, next against interest accrued on this Note, and next in reduction of the outstanding principal balance of this Note.
11. Severability . If any provision of this Note is, for any reason, invalid or unenforceable, the remaining provisions of this Note will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Note that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect.
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12. Amendment and Waiver . This Note may be amended, or any provision of this Note may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties hereto. The waiver by any such party hereto of a breach of any provision of this Note shall not operate or be construed as a waiver of any other breach.
13. Successors . Except as otherwise provided herein, this Note shall bind and inure to the benefit of and be enforceable by the parties hereto and their permitted successors and assigns.
14. Assignment . This Note shall not be directly or indirectly assignable or delegable by the Company. The Lender may assign this Note as long as such assignment complies with the Securities Act of 1933, as amended.
15. No Strict Construction . The language used in this Note will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party.
16. Further Assurances . Each party hereto will execute all documents and take such other actions as the other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Note.
17. Notices, Consents, etc. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) trading day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to Company: Address listed on the Pink Sheets website
If to the Lenders: Fairhills Capital
245 Main Street
Suite 390
White Plains, NY 10601
or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) trading days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
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