SECOND AMENDED AND RESTATED PROMISSORY NOTE AND SECURITY AGREEMENT
SECOND
AMENDED AND RESTATED PROMISSORY NOTE
AND
SECURITY AGREEMENT
DATE: February
15, 2007
MAKER: LOW
▇▇▇▇▇.▇▇▇, INC. (“Maker”)
PAYEE: HEXAGON
FINANCIAL, LLC, an Arizona limited liability company
(“Payee”)
PRINCIPAL
AMOUNT
OF
NOTE: Eight
Hundred Eighty-Two Thousand Eight Hundred Thirty Nine Dollars
($882,839)
RECITALS
A. Maker
is
currently indebted to Payee pursuant to that certain Amended and Restated
Promissory Note and Security Agreement, by Maker in favor of Payee, in the
original principal amount of Two Million Six Hundred Thirty-Six Thousand Four
Hundred Ninety-One Dollars and Six Cents ($2,636,491.06), dated December 28,
2006 (the “First Amended and Restated Note”);
B. Maker
desires to amend certain terms and conditions of the First Amended and Restated
Note.
C. Payee
has
agreed to modify certain terms and conditions of the First Amended and Restated
Note, upon the terms and conditions contained herein.
AGREEMENT
In
consideration of Payee advancing the principal amount under the First Amended
and Restated Note and the accommodations made by Payee to Maker with regard
to
the First Amended and Restated Note, Maker promises and agrees to pay, without
presentment, demand, protest or notice of any kind all of which are hereby
expressly waived, to Payee, or order, at Payee’s offices at
▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
place as the holder hereof may from time-to-time designate, the principal sum
of
all monies advanced by Payee to Maker under this Note together with all interest
and other sums owing as agreed pursuant to this Note, to be paid as
follows:
1. RESTATEMENT
OF THE FIRST AMENDED AND RESTATED NOTE.
This
Agreement amends, restates and replaces the First Amended and Restated Note
in
its entirety.
2. OUTSTANDING
BALANCE.
The
Maker and Payee each acknowledge that the outstanding balance due and payable
with regard to this Second Amended and Restated Note as of the date hereof
is
the original principal amount of Eight Hundred Eight-Two Thousand Eight Hundred
Thirty-Nine ($882,839), which reflects the negotiated reduction in payments
based upon book value of Payee’s inventory as of January 28, 2007 as originally
reflected in the First Amended and Restated Promissory Note. This Second Amended
and Restated Promissory Note is due and payable by Maker to Payee upon the
terms
and conditions contained herein.
3. FIXED
INTEREST.
Fixed
interest (“Fixed Interest”) shall accrue from the date of this Note up to, but
excluding the date of repayment of this Note on the unpaid balance of this
Promissory Note at a rate equal to five percent (5%) per annum (the “Fixed
Rate”). The Fixed Interest provided herein shall be calculated for the actual
number of days the principal is outstanding on the basis of a 360-day year
and
compounded daily.
4. EFFECTIVE
RATE OF INTEREST.
Maker
agrees to an effective rate of interest that is the rate of Fixed Interest
as
stated above plus any additional rate of interest resulting from any other
charges in the nature of interest paid or to be paid by or on behalf of Maker,
or any benefit received or to be received by Payee or any holder, in connection
with this Note.
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5. DEFAULT
INTEREST.
Payments
of principal and any other amounts not paid when due and which remain unpaid
five (5) business days after the applicable due date shall bear default
interest at a rate equal to ten percent (10%) per annum.
6. PAYMENTS.
The
principal balance outstanding hereunder, together with any other amounts due
and
owing to Payee shall be due and payable as follows::
(a) Maker
shall pay to Payee the following amounts on the following dates or upon the
occurrence of the following events as applicable:
(i) April
5,
2007 - $100,000;
(ii) April
10,
2007 - $100,000;
(iii) $300,000
immediately upon the closing of the line of credit with United Commercial Bank
(“UCB”), however, such $300,000 payment shall be made no later than May 1, 2007,
no matter what the status of the Maker’s line of credit with UCB;
(iv) June
1,
2007 - $50,000;
(v) July
31,
2007 - $50,000;
(vi) August
31, 2007 - $50,000;
(vii) September
30, 2007 - $50,000;
(viii) October
31, 2007 - $50,000;
(ix) November
30, 2007 - $50,000;
(x) December
31, 2007 - $50,000; and
(xi) January
31, 2008 - $50,000.
(b) The
payment schedule detailed above represents payment of the outstanding principal
balance as of the date of this Note coupled with the Fixed Rate. To the extent
that the Maker fails to make any payment in a timely manner or becomes subject
to the penalties as outlined herein, any additional amounts of any kind due
and
owing by Maker to Payee with regard to the Note shall be payable no later than
January 31, 2008.
7. FAILURE
TO MAKE PAYMENT.
Maker
hereby acknowledges that the terms and conditions contained in this Note are
an
accommodation by Payee to Maker and represents a reduction with regard to the
principal amount and a reduction in the Fixed Rate from the terms of the First
Amended and Restated Note. Maker further agrees that to the extent any payment
due by Maker to Payee pursuant to Section
6,
is not
paid to Payee in full within twenty (20) days of the date stated in Section
6,
then
the principal balance due at the time of such late payment under this Note
shall
automatically increase by One Hundred Eighty Four Thousand Two Hundred Twelve
Dollars and Twenty Three Cents ($184,212), the amount of the principal reduction
agreed to by Maker and Payee in anticipation of entering into this
Note
8. PREPAYMENT.
The
unpaid principal balance of this Note may be prepaid, whole or in part at any
time. Amounts prepaid under this Note may not be re-borrowed by Maker.
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9. FORM
OF PAYMENTS.
All
amounts owing hereunder shall be payable in lawful money of the United States
of
America in immediately available funds.
(a) CREDITING
OF PAYMENTS.
Any
payments made hereunder shall be credited first to any accrued charges as
described herein then to accrued interest and then to principal. Any accrued
and
unpaid charges or interest shall be added to the principal on a daily basis
and
thereafter shall accrue interest at the rate provided herein.
10. REPRESENTATIONS
AND WARRANTIES.
Maker
makes the following representations and warranties, which shall be true,
correct, and complete in all respects as of the date hereof and as of any future
date on which any amounts are outstanding under this Note:
(a) Location
of Chief Executive Office.
The
chief executive office of Maker is located at Suite 102, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) Due
Organization and Qualification. Maker
is
duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and qualified and licensed to do business
in
that jurisdiction and in each other jurisdiction in which the conduct of its
business would require it to be qualified and licensed to do
business.
(c) Due
Authorization; No Conflict.
(i) The
execution, delivery, and performance by Maker of this Note has been duly
authorized by all necessary action.
(ii) The
execution, delivery, and performance by Maker of this Note does not and will
not
(i) violate any provision of federal, state, provincial or local law or
regulation applicable to it or any order issued by any court or regulatory
body
having jurisdiction over Maker, (ii) conflict with, result in a breach of,
or constitute (with due notice or lapse of time or both) a default under any
material contractual obligation or material lease, (iii) result in or
require the creation or imposition of any Lien of any nature whatsoever upon
any
properties or assets, or (iv) require any approval or consent of any Person
under any material contractual obligation.
(iii) The
execution, delivery, and performance by Maker of this Note does not and will
not
require any registration with, consent, or approval of, or notice to, or other
action with or by, any federal, state, provincial, foreign, or other
Governmental Authority or other Person.
(iv) This
Note, and all other documents contemplated hereby, when executed and delivered
by Maker will be the legally valid and binding obligations of Maker, enforceable
against Maker in accordance with their respective terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally.
(v) The
Liens
granted by Maker to Payee in and to its properties and assets pursuant to this
Note are validly created, perfected and are first-priority Liens subordinate
to
no other Liens on such properties and assets.
(d) Litigation.
Except
for the Hyde litigation, there
are
no actions or proceedings pending, by or against Maker before any court or
administrative agency, and Maker has no knowledge of any pending, threatened,
or
imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Maker.
11. AFFIRMATIVE
COVENANTS.
Maker
covenants and agrees that, until full and final payment of this Note, and unless
Payee shall otherwise consent in writing in its sole and absolute discretion,
Maker shall do all of the following:
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(a) Taxes.
Cause
all assessments and taxes, whether real, personal, or otherwise, due or payable
by, or imposed, levied, or assessed against it or any of its properties to
be
paid in full, before delinquency or before the expiration of any extension
period.
(b) No
Setoffs or Counterclaims. Make
payments hereunder without setoff or counterclaim and free and clear of, and
without deduction or withholding for or on account of, any federal, state,
or
local taxes.
(c) Compliance
with Laws.
Comply
with the requirements of all applicable laws, rules, regulations, and orders
of
any governmental authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act, other than laws, rules, regulations, and orders
the non-compliance with which, individually or in the aggregate, would not
have
and could not reasonably be expected to have a Material Adverse
Change.
(d) Leases;
Expenses.
Pay when
due all rents and other amounts payable under any leases to which it is a party
or by which its properties and assets are bound. Pay all expenses in accordance
with prior customary business practices, which shall include the manner and
order of payments.
(e) Financial
Information.
Keep
true and correct financial books and records, using generally accepted
accounting principles consistently applied, or such other accounting principles
as Payee in its reasonable judgment may find acceptable from time to time.
Maker
must provide Payee, upon request or demand, within two Business Days of Payee’s
request financial statements in form and content acceptable to Payee, including
copies of tax returns or any other information concerning Maker’s affairs and
properties as Payee may request.
(f) Maintenance
of Equipment. Maintain
the Equipment in good operating condition and repair (ordinary wear and tear
excepted), and make all necessary replacements thereto so that the value and
operating efficiency thereof shall at all times be maintained and preserved.
Other than those items of Equipment that constitute fixtures on the date hereof,
Maker shall not permit any item of Equipment to become a fixture to real estate
or an accession to other property, and such Equipment shall at all times remain
personal property.
(g) Insurance.
(i) At
Maker’s expense, keep the Collateral insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as are ordinarily insured against by other owners in similar
businesses. Maker also maintains business interruption, public liability,
product liability and property damage insurance relating to Maker’s ownership
and use of the Collateral, as well as insurance against larceny, embezzlement
and criminal misappropriation.
(ii) All
such
policies of insurance shall be in such form, with such companies, and in such
amounts as may be reasonably satisfactory to Payee.
(h) Operation
of Business.
Operate
the Business in a commercially reasonable manner, consistent with the operation
of like or similar businesses.
12. NEGATIVE
COVENANTS.
Maker
covenants and agrees that, until full and final payment of this Note, Maker
shall not do any of the following without Payee’s prior written consent which,
shall not be unreasonably withheld and which shall be deemed given by Payee
if
Payee fails to object to such action by communicating such objection in any
manner to Payee within two (2) Business Days following written notice by Maker
to Payee. For the purpose of this Section 12, written notice shall be delivered
at the following e-mail address: ▇▇▇@▇▇▇▇▇▇▇.▇▇▇
with a
carbon copy to ▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇.
(a) Indebtedness.
Except
for regular and systematic expenses incurred in the ordinary course of business,
create, incur, assume, permit, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except
Indebtedness owing to Payee.
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(b) Liens.
Create,
incur, assume, or permit to exist, directly or indirectly, any Lien on or with
respect to any of its property or assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom.
(c) Restrictions
on Fundamental Changes.
Enter
into any merger, consolidation, reorganization, amalgamation, arrangement or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution).
(d) Disposal
of Assets.
Convey,
sell, lease, assign, transfer, or otherwise dispose of, in one transaction
or a
series of transactions, any of its properties or assets.
(e) Change
Name/Location. Change
its name, corporate structure, or identity, or add any new fictitious name
or
change the state where it is located.
(f) Guarantee.
Guarantee
or otherwise become in any way liable with respect to the obligations of any
third Person.
(g) Nature
of Business. Make
any
change in the principal nature of its business, including, but not limited
to,
affiliating with any other organization or Person or entering into a joint
venture, strategic partnership or any other relationship with any
Person.
(h) Change
of Control. Cause,
permit, or suffer, directly or indirectly, any change of control in ownership
or
management of Maker.
(i) Investments.
Directly
or indirectly make, acquire, or incur any liabilities (including contingent
obligations) for or in connection with (a) the acquisition of the securities
(whether debt or equity) of, or other interests in, a Person, (b) loans,
advances, capital contributions, or transfers of property to a Person, or (c)
the acquisition of all or substantially all of the properties or assets of
a
Person.
(j) Suspension.
Suspend
or go out of a substantial portion of its business.
(k) No
Prohibited Transactions Under ERISA.
Directly:
(i) engage
in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC
for
which a statutory or class exemption is not available or a private exemption
has
not been previously obtained from the Department of Labor;
(ii) permit
to
exist with respect to any Benefit Plan any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the IRC), whether or not
waived;
(iii) fail
to
pay timely required contributions or annual installments due with respect to
any
waived funding deficiency to any Benefit Plan;
(iv) terminate
any Benefit Plan where such event would result in any liability of Maker or
any
ERISA Affiliate under Title IV of ERISA;
(v) fail
to
make any required contribution or payment to any Multiemployer
Plan;
(vi) fail
to
pay any required installment or any other payment required under
Section 412 of the IRC on or before the due date for such installment or
other payment;
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(vii) amend
a
Plan resulting in an increase in current liability for the plan year such that
either of Maker or any ERISA Affiliate is required to provide security to such
Plan under Section 401(a)(29) of the IRC; or
(viii) withdraw
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
which,
individually or in the aggregate, results in or reasonably would be expected
to
result in a claim against or liability of Maker or any ERISA Affiliate in excess
of $25,000.
(l) Limitation
on Transactions with Affiliates.
Enter
into any transaction, including without limitation, any purchase, sale, lease
or
exchange of property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate unless such transaction
is in the ordinary course of business and upon fair and reasonable terms no
less
favorable than it would obtain in a comparable arm’s length transaction with a
Person which is not an Affiliate.
(m) Distributions.
Permit
any Person to withdraw capital invested in Maker or to receive distributions
from Maker in respect of any ownership or equity interest prior to the payment
in full of the entire unpaid principal balance of this Note together with all
accrued interest and other charges.
(n) Payments
to Affiliates.
Pay or
permit to be paid to any Affiliate, including, without limitation, family
members of, any amount, fee, payment or distribution, except a reasonable salary
for services rendered to the Business in accordance with the past business
practices of Maker and its affiliates.
(o) Use
of Funds.
Use the
funds advanced pursuant to this Note for any personal or non-business
purpose.
(p) Personal
Funds.
Use
accounts of the Business to record personal or non-business funds, expenses
or
transactions, or fund personal expenses through the operations of the
Business.
13. EVENTS
OF DEFAULT AND REMEDIES.
The
occurrence of any one or more of the following events shall constitute an “Event
of Default” hereunder, and upon such Event of Default, Payee may, in Payee’s
sole and absolute discretion, accelerate this Note by declaring a written notice
to Maker that the then entire outstanding principal sum hereof, together with
all unpaid interest and other amounts payable hereunder is immediately due
and
payable and may exercise any and all rights and remedies available at law or
in
equity, including, without limitation, selling or otherwise disposing of the
Collateral as provided under the Uniform Commercial Code. All sums owing under
this Note shall be immediately due and payable upon an occurrence of an Event
of
Default set forth in Section 13(h) hereto:
(a) Nonpayment
of principal, interest or other amounts when the same shall become due and
payable hereunder;
(b) The
failure of Maker to comply with any provision, condition, covenant or agreement
of this Note;
(c) The
occurrence of any Material Adverse Change in the condition (financial or
otherwise) of Maker or any person or entity who is or may become liable
herewith;
(d) Any
statement, representation or warranty contained herein shall be false;
(e) The
occurrence of a default or an event of default after the date hereof under
any
agreement, note or instrument evidencing any Indebtedness of Maker or under
any
guarantee relating to any Indebtedness of Maker;
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(f) The
failure of Maker to comply with any provision of any document, instrument or
agreement executed in connection with the Indebtedness evidenced hereby or
any
security document securing the Indebtedness evidenced by this Note;
(g) The
making by Maker or any other person or entity who is or may become liable
hereunder of an assignment for the benefit of its creditors; and
(h) The
appointment of (or application for appointment of) a receiver of Maker or any
other person or entity who is or may become liable hereunder, or the involuntary
filing against or voluntary filing by Maker, or any other person or entity
who
is or may become liable hereunder, of a petition or application for relief
under
federal bankruptcy law or any similar state or federal law, or the issuance
of
any writ of garnishment, execution or attachment for service with respect to
Maker or any person or entity who is or may become liable hereunder, or any
property of Maker or property of any person or entity who is or may become
liable hereunder.
14. RIGHTS
AND REMEDIES.
(a) Upon
the
occurrence, and during the continuation, of an Event of Default Payee may,
at
its election, without notice of its election and without demand, do any one
or
more of the following, all of which are authorized by Maker:
(i) Declare
all obligations evidenced by this Note, or otherwise, immediately due and
payable which shall occur automatically without action by Payee upon an Event
of
Default specified in Section 13(h);
(ii) Cease
advancing money or extending credit to or for the benefit of Maker under any
other note or agreement between Maker and Payee;
(iii) Pursue
any of Payee’s rights and remedies provided for in this Note, any other
agreement with Maker, or any of Payee’s rights and remedies under applicable
law;
(iv) Settle
or
adjust disputes and claims directly with Account Debtors for amounts and upon
terms which Payee considers advisable and enforce Maker’s rights against the
Account Debtors, and in such cases, Payee will credit the obligations owing
under this Note with only the net amounts received by Payee in payment of such
disputed Accounts after deducting all Payee’s expenses incurred or expended in
connection therewith;
(v) Without
notice to or demand upon Maker, make such payments and do such acts as Payee
considers necessary or reasonable to protect its security interests in the
Collateral. Maker agrees to assemble the Collateral if Payee so requires, and
to
make the Collateral available to Payee as Payee may designate. Maker authorizes
Payee to enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or Lien that in Payee’s
determination appears to conflict with its security interests and to pay all
expenses incurred in connection therewith. With respect to Maker’s owned or
leased premises, Maker hereby grants Payee a license to enter into possession
of
such premises and to occupy the same, without charge, in order to exercise
any
of Payee’s rights or remedies provided herein, at law, in equity, or
otherwise;
(vi) Without
notice to Maker (such notice being expressly waived), and without constituting
a
retention of any collateral in satisfaction of an obligation (within the meaning
of Section 9-620 of the Arizona Uniform Commercial Code), set off and apply
to
the obligations under this Note any and all (i) balances and deposits of Maker
held by Payee, or (ii) Indebtedness at any time owing to or for the credit
or the account of Maker held by Payee;
(vii) Hold,
as
cash collateral, any and all balances and deposits of Maker held by Payee,
to
secure the full and final repayment of all of the obligations under this
Note;
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(viii) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Collateral. Payee
is
hereby granted a license or other right to use, without charge, Maker’s labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any of the Collateral and Maker’s rights under
all licenses and all franchise agreements shall inure to Payee’s
benefit;
(ix) Sell
the
Collateral at either a public or private sale, or both, by way of one or more
contracts or transactions, for cash or on terms, in such manner and at such
places (including Maker’s premises) as Payee determines is commercially
reasonable. It is not necessary that the Collateral be present at any such
sale;
(x) Payee
shall give notice of the disposition of the Collateral as follows:
· Payee
shall give Maker and each holder of a security interest in the Collateral who
has filed with Payee a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Collateral, then
the
time on or after which the private sale or other disposition is to be
made;
· The
notice shall be personally delivered or mailed, postage prepaid, to Maker at
least 5 Business Days before the date fixed for the sale, or at least 5 Business
Days before the date on or after which the private sale or other disposition
is
to be made; no notice needs to be given prior to the disposition of any portion
of the Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than a Maker claiming an interest in the Collateral shall be sent to
such
addresses as they have furnished to Payee;
· If
the
sale is to be a public sale, Payee shall also give notice of the time and place
by publishing a notice one time at least 5 Business Days before the date of
the
sale in a newspaper of general circulation in the county in which the sale
is to
be held;
(xi) Payee
may
credit bid and purchase at any public sale; and
(xii) Any
deficiency that exists after disposition of the Collateral as provided above
will be paid immediately by Maker, which shall be a joint and several
obligation. Any excess will be returned, without interest and subject to the
rights of third Persons, by Payee to Maker.
(b) The
remedies of the holder hereof, as provided in this Note and in any other
agreement related to this Note, shall be cumulative and concurrent, and may
be
pursued singularly, successively or together, at the sole discretion of the
holder hereof, and may be exercised as often as occasion therefor shall arise.
No act of omission or commission by the holder hereof, including specifically
any failure to exercise any right, remedy or recourse provided for hereunder
or
under applicable law, shall be deemed to be a waiver or release of any right,
remedy or recourse, such waiver or release to be effected only through a written
document executed by the holder hereof. A waiver or release with reference
to
any one event shall not be construed as continuing, as a bar to, or as a waiver
or release of, any subsequent right, remedy or recourse as to a subsequent
event.
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15. SECURITY.
Maker
hereby grants to Payee a first position security interest in the following
(collectively, the “Collateral”):
(a) the
Inventory of Maker; and
(b) the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the Collateral, and
any
and all Accounts of Maker, the Company Books of Maker, Equipment of Maker,
General Intangibles of Maker, Inventory of Maker, Negotiable Collateral of
Maker, goods, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any
of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
Maker
grants a security interest in the Collateral to secure the payment or
performance of following obligations of Maker: (i) Maker’s obligations under
this Note; (ii) the repayment of any amounts that Payee may advance or spend
for
the maintenance or preservation of the Collateral and any other expenditures
that Payee may make under the provisions of this Note or for the benefit of
Maker; (iii) all amounts owed under any modifications, renewals or extensions
of
any of the foregoing obligations; (iv) any of the foregoing that arises after
the filing of a petition by or against Maker under the Bankruptcy Code, even
if
the obligations do not accrue because of the automatic stay under Section 362
of
the Bankruptcy Code or otherwise.
Maker
agrees that, from time to time, Maker shall: (i) execute all documents and
take
all other actions requested by the Payee to perfect any security interests
in
connection with this Note, and (ii) execute and record all documents, file
additional financing statements, amend any existing financing statements and
continuation statements and take any other actions reasonably requested by
the
Payee to grant a security interest in the Collateral or to perfect, further
perfect, evidence or continue the rights, claims or security interest of the
Payee with respect to the Collateral, including, without limitation, a pledge
agreement.
Maker
hereby authorizes Payee to file financing statements covering the Collateral
and
naming Maker as debtor and Payee as secured party in such jurisdictions as
Payee
deems appropriate in its sole discretion and hereby authorizes the filing of
any
such financing statements which may have occurred on or prior to the date
hereof.
16. ATTORNEYS’
FEES.
In the
event of a default under this Note or in the event Payee seeks legal advice
in
order to enforce the provisions of this Note, Maker agrees to pay all attorneys’
fees incurred by Payee. If any action is brought to enforce or interpret the
provisions of this Note, the prevailing party shall be entitled to a reasonable
sum for attorneys’ fees.
17. GOVERNING
LAW AND SEVERABILITY.
This
Note is made pursuant to, and shall be construed and governed by, the laws
of
the State of Arizona. If any provision of this Note is construed or interpreted
by a court of competent jurisdiction to be void, invalid or unenforceable,
such
decision shall affect only those provisions so construed or interpreted and
shall not affect the remaining provisions of this Note.
18. TIME
OF ESSENCE.
Time is
of the essence of this Note and each and every provision hereof.
19. PAYMENT
WITHOUT OFFSET.
Principal and interest shall be paid without setoff, counterclaim or other
deduction of any nature.
20. ASSIGNMENT.
Payee or
other holder of this Note may assign all or a portion of its rights, title
and
interest in this Note to any person, firm, corporation or other entity without
the consent of Maker. Maker shall not assign any of its rights or obligations
under this Note without the express written consent of Payee, which consent
may
be granted or withheld in Payee’s sole discretion.
21. RELATIONSHIP.
The
relationship of the parties hereto is that of borrower and lender and it is
expressly understood and agreed that nothing contained in this Note shall be
interpreted or construed to make Maker and Payee partners, joint venturers
or
participants in any other legal relationship except for borrower and
lender.
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22. WAIVER.
Except
as set forth in this Note, to the extent permitted by applicable law, Maker,
and
each person who is or may become liable hereunder, waives and agrees not to
assert demand, diligence, grace, presentment for payment, protest, notice of
nonpayment, nonperformance, extension, dishonor, maturity, protest and default.
Payee may extend the time for payment of or renew this Note, release any party
from liability hereunder, and any such extension, renewal, release or other
indulgence shall not alter or diminish the liability of Maker or any other
person or entity who is or may become liable on this Note except to the extent
expressly set forth in a writing evidencing or constituting such extension,
renewal, release or other indulgence.
23. HEADINGS.
The
subject headings of the paragraphs of this Note are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any
of its provisions.
24. NO
WAIVER BY PAYEE.
No delay
or failure of Payee in exercising any right hereunder shall affect such right,
nor shall any single or partial exercise of any right preclude further exercise
thereof.
25. AMENDMENTS.
No
amendment, modification, change, waiver, release or discharge hereof and
hereunder shall be effective unless evidenced by an instrument in writing and
signed by the party against whom enforcement is sought.
26. BINDING
NATURE.
The
provisions of this Note shall be binding upon Maker and the heirs, personal
representatives, successors and assigns of Maker, and shall inure to the benefit
of Payee and any subsequent holder of all or any portion of this Note, and
their
respective successors and assigns.
27. EVIDENCE
OF INDEBTEDNESS.
This
Note and the records of the Payee shall conclusively evidence the principal
amount outstanding, and any accrued interest thereon, pursuant
hereto.
28. NOTICE
TO PAYEE.
Maker
shall give prompt written notice to the Payee of any fact that would prohibit
the making of any payment required to be made hereunder. Notwithstanding this
provision or any other provision in this Note, the Payee shall not be charged
with knowledge of the existence of any facts that would prohibit the making
of
any payment required to be made hereunder unless the Payee shall have received
such notice thereof; and, prior to the receipt of any such written notice,
the
Payee shall be entitled in all respects to assume that no such facts
exist.
29. SAVINGS
CLAUSE.
Maker
understands and believes that the terms and conditions of this Note comply
with
the laws of the State of Arizona, including the usury laws; however, if any
interest or other charges in connection with this lending transaction are ever
determined to exceed the maximum amount permitted by law, then Maker agrees
that: (a) the amount of interest or charges payable pursuant to this lending
transaction shall be reduced to the maximum amount permitted by law; and (b)
any
excess amount previously collected from Maker in connection with this
transaction that exceeded the maximum amount permitted by law, will be credited
against the principal balance then outstanding hereunder. If the outstanding
principal balance hereunder has been paid in full, the excess amount paid will
be refunded to Maker as directed by Maker.
30. DEFINITIONS
AND CONSTRUCTION.
Any term
used in the Uniform Commercial Code and not defined in this Note has the meaning
given to the term in the Uniform Commercial Code. Capitalized terms not defined
elsewhere in this Note shall have the following definitions:
“Account
Debtor”
means
any Person who is or who may become obligated under, with respect to, or on
account of, an Account.
“Accounts”
has
the
meaning assigned thereto in the Uniform Commercial Code of the applicable
jurisdiction with respect to Maker.
“Affiliate”
means
as to any Person, any other Person which, directly or indirectly, is in control
of, is controlled by, or is under common control with, such Person, including,
without limitation, any Person who is in any way related by blood or by marriage
to such Person. For purposes of this definition, “control” of a Person means the
power,
directly or indirectly, either to (a) vote 10% or more of the securities having
ordinary voting power for the election of directors (or persons performing
similar functions) of such Person or (b) direct or cause the direction of the
management and policies of such Person, whether by contract or
otherwise.
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“Benefit
Plan”
means
a
“defined benefit plan” (as defined in Section 3(35) of ERISA) for which
Maker or any ERISA Affiliate has been an “employer” (as defined in
Section 3(5) of ERISA) within the past six years.
“Business”
shall
mean the business of Maker.
“Business
Day”
means
any day that is not a Saturday, Sunday, or other day on which national banks
are
authorized or required to close.
“Chattel
Paper”
has
the
meaning assigned thereto in the Uniform Commercial Code of the applicable
jurisdiction with respect to Maker.
“Collateral”
has
the
meaning set forth in Section 15 hereto.
“Company
Books”
means,
with respect to Maker, all of Maker’s books and records including: ledgers;
records indicating, summarizing, or evidencing Maker’s properties or assets
(including the Collateral of Maker) or liabilities; all information relating
to
Maker’s business operations or financial condition; and all computer programs,
disk or tape files, printouts, runs, or other computer prepared
information.
“Equipment”
means,
with respect to Maker, all of Maker’s present and hereafter acquired machinery,
machine tools, motors, equipment, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, goods (other than
consumer goods, farm products, or Inventory), wherever located, including,
(a) any interest of Maker in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1000 et
seq., amendments thereto, successor statutes, and regulations or guidance
promulgated thereunder.
“ERISA
Affiliate”
means
(a) any corporation subject to ERISA whose employees are treated as employed
by
the same employer as the employees of Maker under IRC Section 414(b),
(b) any trade or business subject to ERISA whose employees are treated as
employed by the same employer as the employees of Maker under IRC Section
414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of
the IRC, any organization subject to ERISA that is a member of an affiliated
service group of which Maker is a member under IRC Section 414(m), or
(d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC,
any party subject to ERISA that is a party to an arrangement with Maker and
whose employees are aggregated with the employees of Maker under IRC Section
414(o).
“General
Intangibles”
means,
with respect to Maker, all of Maker’s present and future general intangibles,
including any payment intangibles, and other personal property (including
contract rights, rights arising under common law, statutes, or regulations,
choses or things in action, goodwill, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable
Collateral.
“Governmental
Authority”
means
any nation or government, any state or other political subdivision thereof
and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
“Indebtedness”
means,
with respect to Maker: (a) all obligations of Maker for borrowed money, (b)
all
obligations of Maker evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations of Maker in respect
of
letters of credit, bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations of Maker under capital leases, (d) all obligations
or liabilities of others secured by a Lien on any property or asset of Maker,
irrespective of whether such obligation or liability is assumed, and (e) any
obligation of Maker guaranteeing or intended to guarantee (whether guaranteed,
endorsed, co-made, discounted, or sold with recourse to Maker) any indebtedness,
lease, dividend, letter of credit, or other obligation of any other
Person.
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“Inventory”
has
the
meaning assigned thereto in the Uniform Commercial Code of the applicable
jurisdiction with respect to Maker.
“IRC”
means
the Internal Revenue Code of 1986, as amended, and the regulations
thereunder.
“Lien”
means
any interest in property securing an obligation owed to, or a claim by, any
Person other than the owner of the property, whether such interest shall be
based on the common law, statute, or contract, whether such interest shall
be
recorded or perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, including the lien or security interest arising
from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, security agreement, adverse claim or charge, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also including reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting real property.
“Material
Adverse Change”
means
(a) a material adverse change in the business, operations, results of
operations, assets, liabilities or condition (financial or otherwise) of Maker,
taken as a whole, or (b) the material impairment of Maker’s ability (or any
guarantor under any guarantee related to this Note) to perform its obligations
under any agreements, notes or instruments applicable to it or of Payee to
enforce the obligations under this Note or any guarantee related to this Note
or
realize upon the Collateral, (c) a material adverse effect on the value of
the
Collateral or the amount that Payee would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (d) a material impairment of the priority of Payee’s
Liens with respect to the Collateral.
“Multiemployer
Plan”
means
a
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA) to which Maker
or any ERISA Affiliate has contributed, or was obligated to contribute, within
the past six years.
“Negotiable
Collateral”
means,
with respect to Maker, all of Maker’s present and future letters of credit,
notes, drafts, instruments, investment property, security entitlements,
securities, documents, personal property leases (wherein Maker is the lessor),
chattel paper, and the Company Books of Maker relating to any of the
foregoing.
“Person”
means
and includes natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
“Plan”
means
any employee benefit plan, program, or arrangement maintained or contributed
to
by Maker or with respect to which Maker may incur liability.
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IN
WITNESS WHEREOF,
a duly
authorized representative of Maker has executed this Promissory Note and
Security Agreement as of the date set forth above.
MAKER:
LOW
▇▇▇▇▇.▇▇▇, INC.
By:
Name:
Its:
ACKNOWLEDGED
AND AGREED TO:
HEXAGON
FINANCIAL, LLC
By:
/s/Anchor Management, LLC
Its:
Manager
By:/s/
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title:
Chief
Financial Officer
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