EXHIBIT 10.44
CONVERTIBLE TERM NOTE
$1,500,000.00 June 3, 1999
FOR VALUE RECEIVED, on or before May 31, 2004 ("Maturity Date"), the
undersigned and if more than one, each of them, jointly and severally
(hereinafter referred to as "Borrower"), promises to pay to the order of THE
▇▇▇▇▇▇▇▇▇ FOUNDATION ("▇▇▇▇▇▇▇▇▇") at its offices in ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal amount of ONE MILLION FIVE HUNDRED
THOUSAND AND 00/100 DOLLARS ($1,500,000.00) ("Total Principal Amount"), together
with interest at the rate set forth below.
1. Interest Rate. The unpaid principal amount of this Note shall bear
interest at a rate per annum which shall be equal to twelve percent (12%)
("Contract Rate"); provided, however, in no event shall the Contract Rate exceed
the maximum rate allowed by applicable law.
2. Repayment Terms. The principal of and all accrued but unpaid interest on
this Note (the "Loan") shall be due and payable as follows:
(a) interest shall be due and payable monthly as it accrues,
commencing on the 30th day of June, 1999 and continuing on the
last day of each successive month thereafter during the term of
this Note; and
(b) principal of the Loan shall be due and payable in one installment
of all unpaid principal and accrued unpaid interest on May 31,
2004.
3. Prepayment Penalty. On or after the second anniversary of the date
hereof, ▇▇▇▇▇▇▇▇ may prepay the Loan in full or in part at any time prior to May
31, 2004, provided, that the Borrower shall (i) give ▇▇▇▇▇▇▇▇▇ thirty (30) days'
written notice of the Borrower's intention to do so and (ii) pay to ▇▇▇▇▇▇▇▇▇,
as liquidated damages and not as a penalty, an amount equal to the twelve
percent (12%) multiplied by the principal amount of the Loan being prepaid at
such time.
4. Loan Documents. This Note is subject to the terms and conditions set
forth in that certain Loan Agreement dated June __, 1999 by and between ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇▇▇, as may be amended from time to time (the "Loan Agreement"). All
capitalized terms used herein that are not otherwise defined herein shall have
the same meaning given to such terms in the Loan Agreement. This Note, the Loan
Agreement and all other documents evidencing, securing, governing, guaranteeing
and/or pertaining to this Note are hereinafter collectively referred to as the
"Loan Documents". The holder of this Note is entitled to the benefits and
security provided in the Loan Documents.
5. Purpose. ▇▇▇▇▇▇▇▇ agrees that no proceeds of the Loan under this Note
shall be used for personal, family or household purposes, and that the proceeds
of the Loan hereunder shall be used solely for business, commercial, investment
or other similar purposes.
6. Event of Default. ▇▇▇▇▇▇▇▇ agrees that upon the occurrence of any one
ormore of the following events of default ("Event of Default"):
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(a) failure of Borrower to pay when due any installment of principal
of or interest on this Note or on any other indebtedness now or
hereafter owing by Borrower to ▇▇▇▇▇▇▇▇▇, or
(b) the occurrence of any event of default specified in any of the
other Loan Documents; or
(c) the bankruptcy or insolvency of, the assignment for the benefit
of creditors by, or the appointment of a receiver for any of the
property of, or the liquidation, termination, dissolution or
death or legal incapacity of Borrower;
the holder of this Note may, at its option, without further notice or demand,
(i) declare the outstanding principal balance of and accrued but unpaid interest
on this Note at once due and payable, (ii) foreclose all liens securing payment
hereof, (iii) pursue any and all other rights, remedies and recourses available
to the holder hereof, including but not limited to any such rights, remedies or
recourses under the other Loan Documents, at law or in equity, or (iv) pursue
any combination of the foregoing. The failure to exercise the option to
accelerate the maturity of this Note or any other right, remedy or recourse
available to the holder hereof upon the occurrence of an Event of Default
hereunder shall not constitute a waiver of the right of the holder of this Note
to exercise the same at that time or at any subsequent time with respect to such
Event of Default or any other Event of Default. The rights, remedies and
recourses of the holder hereof, as provided in this Note and in any of the other
Loan Documents, shall be cumulative and concurrent and may be pursued
separately, successively or together as often as occasion therefore shall arise,
at the sole discretion of the holder hereof. The acceptance by the holder hereof
of any payment under this Note which is less than the payment in full of all
amounts due and payable at the time of such payment shall not (i) constitute a
waiver of or impair, reduce, release or extinguish any right, remedy or recourse
of the holder hereof, or nullify any prior exercise of any such right, remedy or
recourse, or (ii) impair, reduce, release or extinguish the obligations of any
party liable under any of the other Loan Documents as originally provided herein
or therein.
7. Conversion Rights.
(a) Conversion into Shares of Common Stock at Option of Holder. At
any time, the holder of this Note ("Holder") shall have the right
by delivering at least five (5) business days prior to the
anticipated conversion date an irrevocable Conversion Notice (as
defined below) to convert all or any part (in integral multiples
of $500,000) of the principal balance this Note into such number
of fully paid and non-assessable shares of common stock, $.001
par value, of the Borrower (the "Common Stock") as is equal to
the amount of unpaid principal under this Note to be converted as
specified in the Conversion Notice, divided by the Conversion
Price (as defined below) then in effect.
(b) Conversion into Shares of Common Stock at Option of Borrower. If
(i) the average closing bid price (as reported on the NASDAQ) of
a share of Common Stock for a twenty-five (25) consecutive
trading day period (the "Average Closing Price") is at least
$4.00 per share (the "Target Price"), or (ii) an underwriter for
the Borrower's Common Stock shall have agreed to sell in a firm
commitment underwriting on behalf of ▇▇▇▇▇▇▇▇▇ the Common Stock
to be held by ▇▇▇▇▇▇▇▇▇ upon conversion hereunder to result in
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net proceeds (after underwriting discounts, commissions and
expenses) to ▇▇▇▇▇▇▇▇▇ from such offering of not less than
$1,500,000, the Borrower shall have the right (subject to the
requirements set forth in the next sentence) to convert all or
any part (in integral multiples of $500,000) of the unpaid
principal of this Note into such number of fully paid and
non-assessable shares of Common Stock as is equal to the amount
of unpaid principal of this Note to be converted as specified in
the Conversion Notice, divided by the Conversion Price (as
defined below) then in effect. Upon receipt of a Conversion
Notice from the Borrower, Holder may elect, upon one (1) business
day's notice, to have such conversion be effected prior to the
conversion date specified in the Conversion Notice.
(c) Obligations Upon Conversion. In the event of any conversion of
all or any part of this Note by either Borrower or Holder, all
accrued but unpaid interest on the principal to be converted to,
but not including, the effective date of such conversion shall be
paid to Holder within ten (10) business days of such conversion.
Upon the conversion of all or any part of this Note by either
Borrower or Holder, Holder shall deliver this Note to the
Borrower and, upon such delivery, Holder shall be entitled to
receive, as soon as practicable but in no event later than ten
(10) days thereafter, and the Borrower shall issue: (i) a
certificate evidencing the number of shares of Common Stock
issuable upon conversion hereof ("Conversion Shares") (or if such
shares of Common Stock have been converted into cash, securities
or other property in connection with the sale, transfer or other
disposition of the Borrower or substantially all of the
Borrower's assets, such cash, securities or other property), (ii)
payment of any accrued but unpaid interest to, but not including,
the effective date of such conversion, (iii) cash for any
fractional share resulting from the conversion of this Note into
Common Stock, and (iv) a replacement Note evidencing the
remaining balance not converted. As soon as practicable after the
date of such conversion and the surrender of this Note, the
Borrower shall cause to be issued and delivered to Holder, or to
Holder's written order, a certificate or certificates for the
number of full shares of Common Stock or other securities
issuable on such conversion (or if such shares of Common Stock
have been converted into cash, securities or other property in
connection with a sale, transfer or other disposition of all or
substantially all of the Borrower's assets, such cash, securities
or other property) in accordance with the provisions hereof and
cash for any fractional share.
(d) Conversion Price; Conversion Notice. For purposes hereof, the
term "Conversion Price" shall initially mean $0.375. For purposes
hereof, the term "Conversion Notice" shall mean a written notice
delivered pursuant to conversion by Borrower or Holder as
described above specifying the principal amount hereunder to be
converted, and the date on which such conversion is proposed to
be completed.
(e) Adjustment for Stock Splits and Combinations. If at any time or
from time to time after the date hereof, the Borrower (i) effects
a subdivision of the outstanding Common Stock, then, and in each
such event, the then current Conversion Price shall be
proportionately decreased, or (ii) combines the outstanding
shares of Common Stock into a smaller number of shares, then, and
in each such event, the Conversion Price shall be proportionately
increased. Any adjustment under this paragraph shall become
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effective at the close of business on the date the subdivision or
combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. If at any
time or from time to time after the date hereof, the Borrower
makes a dividend or other distribution payable in additional
shares of Common Stock, then, and in each such event, the then
current Conversion Price shall be decreased by multiplying the
then current Conversion Price by a fraction (A) the numerator of
which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the
close of business on such record date, and (B) the denominator of
which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or
distribution.
(g) Adjustments for Other Dividends and Distributions. If at any time
or from time to time after the date hereof, the Borrower makes a
dividend or other distribution payable in securities of the
Borrower other than shares of Common Stock, then and in each such
event, provision shall be made so that Holder shall receive upon
conversion of this Note, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of
the Borrower that Holder would have received had this Note been
converted into Common Stock on the date of such event and had
Holder thereafter, during the period from the date of such event
to and including the conversion date, retained such securities
receivable by Holder during such period, subject to all other
adjustments called for during such period hereunder with respect
to the rights under this Note.
(h) Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the date hereof, the Common
Stock issuable upon the conversion of this Note is changed into
the same or a different number of shares of any class or classes
of stock, whether by recapitalization, reclassification, exchange
or otherwise (other than a subdivision or combination of shares
or dividend or distribution provided for above), then and in any
such event thereafter this Note shall be convertible into the
kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification, exchange
or other change by holders of the number of shares of Common
Stock into which the Note could have been converted immediately
prior to such recapitalization, reclassification or exchange, all
subject to further adjustment as provided herein.
(i) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion hereof. In lieu of any fractional shares
to which Holder would otherwise be entitled, the Borrower shall
pay cash equal to the fair market value of the fractional share
of Common Stock into which this Note would otherwise be
converted.
8. Registration Rights.
(a) Optional Registrations.
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(i) If the Borrower decides to register any of its Common Stock
or securities convertible into or exchangeable for Common
Stock under the Securities Act on a form which is suitable
for an offering for cash of shares of the Borrower held by
third parties and which is not a registration solely to
implement an employee benefit plan or a transaction to which
Rule 145, S-8 or any other similar rule of the Securities
and Exchange Commission (the "Commission") is applicable,
the Borrower will promptly give written notice to the
Holder, and the Borrower will use all reasonable efforts to
effect the registration under the Securities Act of all
Registrable Securities that the Holder requests be included
in such registration by a written notice delivered to the
Borrower within fifteen (15) days after the notice given by
the Borrower. The Holder agrees that any securities it
requests to be included in a Company registration pursuant
to this Section 8(a) shall be included by the Borrower on
the same form of registration statement as has been selected
by the Borrower for the securities the Borrower is
registering for sale for its own account.
(ii) If the registration involves an underwritten public
offering, the Borrower will not be required to register
Registrable Securities in excess of the amount that the
principal underwriter reasonably and in good faith
recommends may be included in such offering (a "Cutback"),
which recommendation, and supporting reasoning, shall be
delivered in writing to the Holder. If such a Cutback
occurs, the number of shares that are entitled to be
included in the registration and underwriting shall first be
allocated to the Borrower for securities being sold for its
own account and thereafter shall be allocated to the Holder
requesting inclusion in the registration.
(iii)If the Borrower elects to terminate any registration filed
under this Section 8(a), the Borrower will have no
obligation to register the securities sought to be included
by the Holder in such registration. If the Borrower includes
in such registration any securities to be offered by it, all
expenses of the registration and offering and the reasonable
fees and expenses of not more than one independent counsel
for the Holder will be borne by the Borrower, except that
the Holder will bear underwriting discounts and commissions
attributable to its Registrable Securities being registered
and transfer taxes on shares being sold by it.
(b) Required Registrations.
(i) If the Holder notifies the Borrower in writing that the
Holder intends to offer for public sale any Registrable
Securities, the Borrower will cause the Conversion Shares as
may be requested by the Holder to be included in a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"). In connection with one (1)
registration made by the Borrower pursuant to this Section
8(b), all expenses of such registration and the reasonable
fees and expenses of not more than one independent counsel
for the Holder will be borne by the Borrower, except that
the Holder will bear underwriting discounts and commissions
and transfer taxes on shares being sold by the Holder. The
Borrower shall not be required to file any registration
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statement for securities other than shares of Common Stock,
although any conversion of this Note may be conditioned upon
such registration statement becoming effective, to the
extent that the conversion relates to Conversion Shares
covered by the Holder's written notice of an intended public
offering. In connection with all other registrations made by
the Borrower pursuant to this Section 8(b), all expenses of
any such registrations (other than audit and "blue sky" fees
and expenses, which fees and expenses will be borne by the
Borrower) shall be borne by the Holder; provided, however,
that if the Borrower for its own account or any other holder
of shares elects to register its shares under this Section
8(b) as permitted below, the expenses of such registration
shall be borne pro rata by all parties to the registration
based upon the ratio that the number of such shares being
registered by such entity bears to the total number of
shares to be registered pursuant to this Section 8(b).
Except as provided in Section 8(c), this Section 8(b) will
not apply to a request for registration on Form S-3 (or
successor form) which will be governed by Section 8(c). In
the event any registration attempted under this Section 8(b)
pursuant to which the Borrower would be responsible for the
above expenses of the Holder is not consummated, then the
Borrower shall pay such expenses and shall remain
responsible for the above expenses of the Holder with
respect to one (1) consummated registration under this
Section 8(b).
(ii) The registration statement filed pursuant to the request of
the Holder may include other securities of the Borrower,
with respect to which "piggyback" registration rights have
been granted, and may include securities of the Borrower
being sold for the account of the Borrower; provided,
however, that if the Borrower shall request inclusion in any
registration pursuant to this Section 8(b) of the securities
being sold for its own account, or if other persons shall
request inclusion in any registration pursuant to this
Section 8(b), the Holder shall, on behalf of all entities
requesting inclusion in such registration, offer to include
such securities in the offering and may condition such offer
on their acceptance of any other reasonable conditions
(including, without limitation, if such offering is
underwritten, that such requesting holders agree in writing
to enter into an underwriting agreement with usual and
customary terms). Notwithstanding any other provisions of
this Section 8(b), if the representative of the underwriters
advises the Holder in writing that marketing factors require
a limitation on the number of shares to be underwritten, the
number of shares to be included in the underwriting or
registration shall be allocated first to the Holder, second
to the Borrower and thereafter to the holders requesting
inclusion in the registration on the basis of the number of
shares each requesting holder requests be included bears to
the total number of shares of all requesting holders that
have been requested be included in such registration. If a
person who has requested inclusion in such registration as
provided above does not agree to the terms of any such
underwriting, such person shall be excluded therefrom by
written notice from the Borrower, the underwriter or the
Holder. The securities so excluded shall also be withdrawn
from registration.
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(c) Form S-3.
(i) Once the Borrower is eligible to effect a registration of
its securities under Form S-3 (or a successor form), the
Holder will have the right to request and have effected
registrations of shares of its Registrable Securities on
Form S-3 as long as the aggregate proposed offering price is
not less than $1,000,000 for any such registration.
(ii) Upon written request of the Holder, the Borrower will cause
the registration of all Registrable Securities on Form S-3
or such successor form to the extent requested by the
Holder. All expenses incurred in connection with such
registration requested pursuant to this Section 8(c) shall
be borne by the Holder; provided, however, that if the
Borrower for its own account or any other holder of shares
elects to register its shares as permitted below, the
expenses of such registration shall be borne pro rata by all
parties to the registration based upon the ratio that the
number of such shares registered by such entity bears to the
total number of shares to be registered; provided, further,
however, that if the Holder elects to treat this request as
a required registration pursuant to Section 8(b) above, then
the Borrower, if requested by the Holder, will bear all such
expenses as provided in such Section to the extent that it
would be required to pursuant to said Section.
(iii)The registration statement filed pursuant to the request of
the Holder may include other securities of the Borrower,
with respect to which "piggyback" registration rights have
been granted, and may include securities of the Borrower
being sold for the account of the Borrower; provided,
however, that any Cutback shall be dealt with in the same
manner as the second paragraph of Section 8(b).
(d) Procedure for Registration. Whenever the Borrower is required
under this Agreement to register Common Stock, it agrees to the
following:
(i) Use all reasonable efforts to prepare promptly for filing
with the Commission a registration statement and such
amendments and supplements to said registration statement
and the prospectus as may be necessary to keep the
registration statement effective and to comply with the
provisions of the Securities Act for the period necessary to
complete the proposed public offering, but not more than 180
days;
(ii) Furnish to each selling holder such copies of each
preliminary and final prospectus and such other documents as
such holder may reasonably request to facilitate the public
offering of its Common Stock;
(iii)Enter into any underwriting agreement with provisions
reasonably required by the proposed underwriter for the
selling holders, if any; and
(iv) Use all reasonable efforts to register or qualify the Common
Stock covered by the registration statement under the
securities or "blue-sky" laws of such jurisdictions as any
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selling holder may reasonably request, although the Borrower
will not have to register in any states that require it to
qualify to do business or subject itself to general service
of process, and for a registration under Section 8(a), the
Borrower will not be required to register in more states
than are necessary to permit the sale of the securities.
(e) Limitation on Registration. The Borrower is not required to file
a registration statement requested under Sections 8(b) or 8(c)
prior to the earlier of (i) twenty- four (24) months from the
date of this Agreement, or (ii) ninety (90) days following the
effective date of any other registration statement initiated by
the Borrower except for registrations being initiated solely to
implement an employee's benefit plan. The Borrower is not
required to file a registration statement requested under Section
8(b) unless requested by holders owning in the aggregate a
majority of the Registrable Securities. The Borrower may postpone
the filing of any registration statement required under Sections
8(b) or 8(c) for a reasonable period of time, not to exceed
ninety (90) days, if the Borrower has been advised by legal
counsel that such filing would require the disclosure of a
material fact, and the Borrower determines reasonably and in good
faith that such disclosure would have a material adverse effect
on the Borrower. In addition, if (i) in the good faith judgment
of the Board of Directors of the Borrower, a required
registration under Section 8(b) or 8(c) would be seriously
detrimental to the Borrower and the Board of Directors of the
Borrower concludes, as a result, that it is essential to defer
the filing of such registration statement at such time, and (ii)
the Borrower shall furnish to the Holder a certificate signed by
the President of the Borrower stating that in the good faith
judgment of the Board of Directors of the Borrower, it would be
seriously detrimental to the Borrower for such registration
statement to be filed in the near future and that it is,
therefore, essential to defer the filing of such registration
statement, then the Borrower shall have the right to defer such
filing for a period of not more than one hundred eighty (180)
days after receipt of the request of the Holder, and, provided
further, that the Borrower shall not defer its obligation in this
manner more than once in any twelve-month period.
(f) Indemnification. Subject to applicable law, the Borrower will
indemnify each underwriter and the Holder and each person
controlling any of them, against all claims, losses, damages and
liabilities, including legal and other expenses reasonably
incurred, arising out of any untrue or allegedly untrue statement
of a material fact contained in the registration statement, or
any omission or alleged omission to state a material fact
required to be stated in the registration statement or necessary
to make the statements not misleading, or arising out of any
violation by the Borrower of the Securities Act, any state
securities or "blue-sky" laws or any applicable rule or
regulation. This indemnification will not apply to any claims,
losses, damages or liabilities to the extent they may have been
caused by an untrue statement or omission based upon information
furnished in writing to the Borrower by such underwriter, the
Holder, or controlling person, respectively, expressly for use in
the registration statement. With respect to such untrue statement
or omission in the information furnished in writing to the
Borrower by the Holder, such person will indemnify the
underwriters, the Borrower, its directors and officers, the other
persons selling securities under the registration statement and
each person controlling any of them against any losses, claims,
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damages, expenses or liabilities to which any of them may become
subject as a result of such untrue statement or omission
(including those incurred in connection with investigating or
defending against such claims).
(g) Rule 144 Requirements. The Borrower will file with the Commission
such information as the Commission may require and will make
available Rule 144 under the Securities Act (or any successor
exemptive rule).
(h) Obligations of Investor and Others in a Registration. The Holder
agrees timely to furnish such information regarding such person
and the securities sought to be registered and to take such other
action as the Borrower may reasonably request in connection with
the registration, qualification or compliance. The Borrower
agrees that, in connection with any offering undertaken pursuant
to Section 8(b), the Holder shall have the right if it deems an
underwriter or underwriters necessary or appropriate, to
designate such underwriter(s), which underwriters shall be
reasonably acceptable to the Borrower and subject to the written
approval of the Borrower, which approval shall not be
unreasonably withheld. If the registration involves an
underwriter, the Holder agrees, upon the request of such
underwriter, not to sell any unregistered securities of the
Borrower for a period of ninety (90) days following the effective
date of the registration statement for such offering and to enter
into an underwriting agreement with such underwriters containing
usual and customary terms and provisions.
(i) Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Borrower will give
the holders of Registrable Securities registered under such
registration statement, their underwriters, if any, and one
counsel or firm of counsel and one accountant or firm of
accountants representing all the holders of Registrable
Securities to be registered under such registration statement,
the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed
with the Commission, and each amendment thereof or supplement
thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the
Borrower with its officers and the independent public accountants
who have certified its financial statements as shall be necessary
in the opinion of such holders' and such underwriters' respective
counsel to conduct a reasonable investigation within the meaning
of the Securities Act.
(j) Rule 144A. The Borrower agrees that, upon the request of any
holder of Registrable Securities or any prospective purchaser of
Registrable Securities designated by a holder, the Borrower shall
promptly provide (but in any case within 15 days of a request) to
such holder or potential purchaser, the following information:
(i) a brief statement of the nature of the business of the
Borrower and any Subsidiaries and the products and services
they offer;
(ii) the most recent consolidated balance sheets and profit and
losses and retained earnings statements, and similar
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financial statements of the Borrower for the two most recent
fiscal years (such financial information shall be audited,
to the extent reasonably available); and
(iii)such other information about the Borrower, any
Subsidiaries, and their business, financial condition and
results of operations as the requesting holder or purchaser
of such Registrable Securities shall request in order to
comply with Rule 144A, as amended, and the antifraud
provisions of the federal and state securities laws.
The Borrower hereby represents and warrants to any such requesting
holder and any prospective purchaser of Registrable Securities from such holder
that the information provided by the Borrower pursuant to this Section 8(j) will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
(k) Limitations on Subsequent Registration Rights. The Borrower will
not, without the prior written consent of the Holder, enter into
any agreement with any holder or prospective holder of any
securities of the Borrower which would grant such holder or
prospective holder registration rights with respect to securities
of the Borrower.
(l) Definitions. For purposes of this Note:
"Conversion Shares" shall mean any securities of the Borrower
issued or issuable upon conversion of this Note.
"Registrable Securities" shall mean any shares of Common Stock
issuable to the Holder upon conversion of this Note and any other
Common Stock distributable on, with respect to, or in
substitution for such Registrable Securities, including those
which have been transferred as permitted under Section 8(h),
except for those that have been sold or transferred pursuant to
an effective registration statement or pursuant to Rule 144 under
the Securities Act.
9. Compliance With Usury Laws.
(a) No interest rate specified in this Note or any other Loan
Document shall at any time exceed the Maximum Rate. If at any time the
Contract Rate for the Loan or any other indebtedness, liability or
obligation shall exceed the Maximum Rate, thereby causing the interest
accruing thereon to be limited to the Maximum Rate, then any subsequent
reduction in the Contract Rate therefor shall not reduce the rate of
interest therefor below the Maximum Rate until the aggregate amount of
interest accrued thereon equals the aggregate amount of interest which
would have accrued thereon if the Contract Rate had at all times been
in effect.
(b) Notwithstanding anything to the contrary contained in this
Note or the other Loan Documents, none of the terms and provisions of
this Note or the other Loan Documents shall ever be construed to create
a contract or obligation to pay interest at a rate in excess of the
Maximum Rate; and ▇▇▇▇▇▇▇▇▇ shall never charge, receive, take, collect,
reserve or apply, as interest on the Loan or any other indebtedness,
liability or obligation, any amount in excess of the Maximum Rate. The
parties hereto agree that any interest, charge, fee, expense or other
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obligation provided for in this Note or in the other Loan Documents
which constitutes interest under applicable law shall be, ipso facto
and under any and all circumstances, limited or reduced to an amount
equal to the lesser of (i) the amount of such interest, charge, fee,
expense or other obligation that would be payable in the absence of
this Section 9 (b) or (ii) an amount, which when added to all other
interest payable under this Note and the other Loan Documents, equals
the Maximum Rate. If, notwithstanding the foregoing, ▇▇▇▇▇▇▇▇▇ ever
contracts for, charges, receives, takes, collects, reserves or applies
as interest any amount in excess of the Maximum Rate, such amount which
would be deemed excessive interest shall be deemed a partial payment or
prepayment of principal of the Loan or any other indebtedness,
liability or obligation and treated hereunder as such; and if the Loan
or any other indebtedness, liability or obligation, or applicable
portions thereof, are paid in full, any remaining excess shall promptly
be paid to the Borrower or other applicable Obligor or Obligors (as
appropriate). In determining whether the interest paid or payable,
under any specific contingency, exceeds the Maximum Rate, the Borrower
and the other Obligors and ▇▇▇▇▇▇▇▇▇ shall, to the maximum extent
permitted by applicable law, (a) characterize any nonprincipal payment
as an expense, fee or premium rather than as interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate and spread in equal or unequal parts the total amount
of interest throughout the entire contemplated term of the Loan or any
other indebtedness, liability or obligation, or applicable portions
thereof, so that the interest rate does not exceed the Maximum Rate at
any time during the term of the Loan or any other indebtedness,
liability or obligation; provided that, if the unpaid principal balance
is paid and performed in full prior to the end of the full contemplated
term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Rate, ▇▇▇▇▇▇▇▇▇ shall refund to
the Borrower or other applicable Obligor or Obligors (as appropriate)
the amount of such excess and, in such event, ▇▇▇▇▇▇▇▇▇ shall not be
subject to any penalties provided by any laws for contracting for,
charging, receiving, taking, collecting, reserving or applying interest
in excess of the Maximum Rate. The terms of this Section shall be
deemed to be incorporated into every other Loan Document.
As used herein the term "Maximum Rate" means, with respect to
▇▇▇▇▇▇▇▇▇, the maximum non-usurious interest rate, if any, that any
time or from time to time may be contracted for, taken, reserved,
charged or received with respect to the Loan or other amount as to
which such rate is to be determined, payable to ▇▇▇▇▇▇▇▇▇ pursuant to
this Note or any other Loan Document, under laws applicable to
▇▇▇▇▇▇▇▇▇ which are presently in effect or, to the extent allowed by
law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum non-usurious interest rate than applicable
laws now allow. The Maximum Rate shall be calculated in a manner that
takes into account any and all fees, payments and other charges in
respect of the Loan Documents that constitute interest under applicable
law. Each change in any interest rate provided for herein based upon
the Maximum Rate resulting from a change in the Maximum Rate shall take
effect without notice to the Borrower at the time of such change in the
Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the weekly rate ceiling
described in, and computed in accordance with the Texas Finance Code or
any successor or replacement statute; provided, however, that, to the
extent permitted by applicable law, ▇▇▇▇▇▇▇▇▇ shall have the right to
change the applicable rate ceiling from time to time in accordance with
applicable law.
10. Costs of Collection; Waivers. If this Note is placed in the hands
of an attorney for collection, or is collected in whole or in part by suit or
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through probate, bankruptcy or other legal proceedings of any kind, ▇▇▇▇▇▇▇▇
agrees to pay, in addition to all other sums payable hereunder, all costs and
expenses of collection, including but not limited to reasonable attorneys' fees.
Borrower and any and all endorsers and guarantors of this Note severally waive
presentment for payment, notice of nonpayment, protest, demand, notice of
protest, notice of intent to accelerate, notice of acceleration and dishonor,
diligence in enforcement and indulgences of every kind and without further
notice hereby agree to renewals, extensions, exchanges or releases of
collateral, taking of additional collateral indulgences or partial payments,
either before or after maturity.
11. Governing Law; Venue; Submission to Jurisdiction. THIS NOTE SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. THIS NOTE
IS PERFORMABLE IN DALLAS COUNTY, TEXAS. ▇▇▇▇▇▇▇▇ AGREES THAT DALLAS COUNTY,
TEXAS SHALL BE THE EXCLUSIVE VENUE FOR LITIGATION OF ANY DISPUTE OR CLAIM
ARISING UNDER OR RELATING TO THIS NOTE, AND THAT SUCH COUNTY IS A CONVENIENT
FORUM IN WHICH TO DECIDE ANY SUCH DISPUTE OR CLAIM. BORROWER CONSENTS TO THE
PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS COUNTY,
TEXAS FOR THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM. BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
12. Waiver of Jury Trial. BORROWER HEREBY IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY OR
ASSOCIATED HEREWITH.
13. Final Agreement. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN ▇▇▇▇▇▇▇▇▇ AND BORROWER WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER:
KARTS INTERNATIONAL INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President & C.E.O.
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