LOAN AGREEMENT II
Agreement, made as of March 16, 2004 between Xxxxxxx Xxxxxx with an address
at 000 Xxxxxxxxxx Xxxx, Xxxxxxxxxxxx, Xxx Xxxx 00000 (the "Lender") and
Xxxxxxxxx Energy Corporation, a Delaware company with its business address at
0000 Xxxxx XxxxxXxxx Xxxx., Xxxxxxxxx, Xxxxxxxx 00000 (the "Borrower").
WHEREAS, the Lender and the Borrower desire to memorialize certain
conditions that effect the following:
1. The loan set forth herein
2. Loan Agreement dated October 3, 2003, between Lender and Borrower
3. Promissory Note dated October 3, 2003, between Lender and Borrower
Hereinafter, in this Loan Agreement II document, the above mentioned
October 3, 2003 loan agreements and Promissory Note and this Loan Agreement II
shall be collectively referred to as "Three Strain Debt Agreements".
WHEREAS, the Lender and the Borrower desire to collateralize the
aforementioned Three Strain Debt Agreements, between Lender and Borrower.
WHEREAS, the Lender and the Borrower agree to a fixed conversion price and
registration right of the aforementioned Three Strain Debt Agreements, between
Lender and Borrower.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The Lender shall loan to the Borrower $2,000,000 pursuant to the terms of a
Promissory Note of even date March 16, 2004 in the form and substance mutually
acceptable by the Lender and Borrower.
2. The Borrower grants to the Lender a security interest in, and the Lender
shall have a first lien on, all assets of the Borrower and all Borrower's
subsidiaries, which shall include, but not be limited to accounts receivable,
inventory, equipment and general intangibles. The Borrower will also pledge the
shares of its subsidiaries, (collectively the "Collateral").
3. The Borrower hereby authorizes the Lender to file UCC-1 financing statements
covering the Collateral naming the Lender as secured party and the Borrower as
the debtor simultaneous with the closing hereof, in all appropriate
jurisdictions, together with any amendments, modifications and substitutions
thereto to secure the obligations of the Borrower to the Lender contained herein
and the cost, if any, incurred in collecting such obligations.
4. The Lender shall have the right, at any time, upon written notice to the
Borrower, to convert all, or any portion of the outstanding indebtness under the
Three Strain Debt Agreements into shares of the Borrowers common stock. The
conversion price therefore will be equal to 103% of the average closing price of
the Borrowers common stock for the 5 trading days prior to the date hereof. The
terms and condition of that certain conversion agreement dated October 3, 2003
between Borrower and the Lender, other than the conversion price set forth
therein, are hereby incorporated by reference into this Agreement and made a
part hereof (including, without limitation the miscellaneous section thereof),
with respect to the terms and mechanisms of the conversion hereunder.
5. The Borrower will file a registration statement for the Borrowers common
stock into which all of the debt in the Three Strain Debt Agreements are
convertible, with the SEC within 120 days of funding and will have the
registration declared effective within 180 days of funding. The terms and
conditions of sections 1 through 9 of that certain Registration Rights Agreement
dated October 3, 2003 between the Borrower, the Lender and/or any designees of
the Lender, are hereby incorporated by reference in this Agreement and made a
part hereof, except that in the event that there is a conflict between the first
sentence of this section 5 and the terms of the Registration Rights Agreement
incorporated herein, the terms of the first sentence of this section 5 will
govern.
IN WITNESS WHEREOF the parties have caused this agreement to be executed by
their proper officers and by having their seals affixed on the day and year
first above written.
Lender
------
/s/ Xxxxxxx Xxxxxx
--------------------
XXXXXXX XXXXXX
Borrower
--------
XXXXXXXXX ENERGY CORPORATION
By: /s/ Xxxx Xxxxxx
------------------
Name: Xxxx Xxxxxx
-------------
Title: CEO/President
--------------
