EXHIBIT 10.2
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CATALYST LIGHTING GROUP, INC. THAT SUCH REGISTRATION IS NOT
REQUIRED.
SECURED CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, CATALYST LIGHTING GROUP, INC., a Delaware corporation
(the "BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Xxxxxx House, South Church Street,
Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the "HOLDER") or
its registered assigns or successors in interest, on order, the sum of Two
Million Dollars ($2,000,000), together with any accrued and unpaid interest
hereon, on September 30, 2007 (the "MATURITY DATE") if not sooner paid. The
original principal amount of this Note subject to amortizing payments pursuant
to Section 1.2 hereof is hereinafter referred to as the "AMORTIZING PRINCIPAL
AMOUNT" and the remaining original principal amount of this Note is hereinafter
referred to as the "NON-AMORTIZING PRINCIPAL AMOUNT."
Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "Purchase Agreement").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1. (a) Interest Rate. Subject to Sections 1.1(b), 4.11 and 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the "Interest
Rate") equal to the "prime rate" published in The Wall Street Journal from time
to time (the "Prime Rate"), plus two percent (2%). The Prime Rate shall be
increased or decreased as the case may be for each increase or decrease in the
prime rate in an amount equal to such increase or decrease in the prime rate;
each change to be effective as of the day of the change in such rate. Subject to
Section 1.1(b) hereof, the Interest Rate shall not be less than six percent
(6%). Interest shall be calculated on the basis of a 360 day year. Interest
shall accrue but not be payable during the period commencing on the date hereof
and ending on September 30, 2004. Interest on the Amortizing Principal Xxxxxx
shall be payable monthly, in arrears, commencing on November 1, 2004 and on the
first day of each consecutive calendar month thereafter (each, a "REPAYMENT
DATE") and on the Maturity Date, whether by acceleration or otherwise. Accrued
interest on the Non-Amortizing Principal Amount shall be payable only on the
Maturity Date or, in the event of the redemption or conversion of all or any
portion of the Non-Amortizing Principal Amount, accrued interest on the amount
so redeemed or converted shall be paid on the date of redemption or conversion,
as the case may be.
Page 1 of 13
(b) Interest Rate Adjustment. The Interest Rate shall be subject to
adjustment on the last business day of each month hereafter until the Maturity
Date (each a "Determination Date"). If on any Determination Date (i) the
Borrower shall have registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the shares of Common Stock underlying each of the conversion
of this Note and the exercise of the Warrant issued on a registration statement
declared effective by the Securities and Exchange Commission (the "SEC"), and
(ii) the market price (the "Market Price") of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market (as defined below) for the five (5)
consecutive trading days immediately preceding such Determination Date exceeds
the then applicable Fixed Conversion Price by at least twenty five percent
(25%), the Interest Rate for the succeeding calendar month shall automatically
be reduced by 100 basis points (100 b.p.) (1.0.%) for each incremental twenty
five percent (25%) increase in the Market Price of the Common Stock above the
then applicable Fixed Conversion Price. If on any Determination Date (i) the
Borrower shall not have registered under the Securities Act the shares of Common
Stock underlying the conversion of this Note and the exercise of the Warrant on
a registration statement declared effective by the SEC or the Borrower shall
have registered such shares under the Securities Act but on such Determination
Date the related registration statement is not effective, and (ii) the Market
Price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market
for the five (5) consecutive trading days immediately preceding such
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be decreased by 100 basis points (100 b.p.) (1.0.%)
for each incremental twenty five percent (25%) increase in the Market Price of
the Common Stock above the then applicable Fixed Conversion Price.
Notwithstanding the foregoing (and anything to the contrary contained in
herein), in no event shall the Interest Rate be less than zero percent (0%).
1.2. Minimum Monthly Principal Payments. Amortizing payments of the
outstanding principal amount of this Note not contained in the Restricted
Account (as defined in the Restricted Account Agreement) shall begin on January
1, 2005 and shall recur on each succeeding Repayment Date thereafter until the
Amortizing Principal Amount has been repaid in full, whether by the payment of
cash or by the conversion of such principal into Common Stock pursuant to the
terms hereof. Subject to Section 2.1 and Article 3 below, on each Repayment
Date, the Borrower shall make payments to the Holder in the amount
$__________________ (the "MONTHLY PRINCIPAL AMOUNT"), together with any accrued
and unpaid interest then due on such portion of the Amortizing Principal Amount
plus any and all other amounts which are then owing under this Note that have
not been paid (the Monthly Principal Amount, together with such accrued and
unpaid interest and such other amounts, collectively, the "MONTHLY AMOUNT") ;
provided that, following a release of an amount of funds from the Restricted
Account (as defined in the Restricted Account Agreement) for the purposes set
forth in the Restricted Account Side Letter (other than with respect to a
release that occurs as a result of a conversion of any Principal Amount) (each,
a "RELEASE AMOUNT") each Monthly Principal Amount due on any Repayment Date
following any such release shall be increased by an amount equal to (x) such
Release Amount divided by (y) the sum of (I) the number of Repayment Dates
remaining until the Maturity Date plus (II) one (1). Any Principal Amount that
remains outstanding on the Maturity Date shall be due and payable on the
Maturity Date.
Page 2 of 13
ARTICLE II
CONVERSION REPAYMENT
2.1. (a) Payment of Monthly Amount in Cash or Common Stock. If the Monthly
Amount (or a portion thereof of such Monthly Amount if such portion of the
Monthly Amount would have been converted into shares of Common Stock but for
Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the
Borrower shall pay the Holder an amount equal to 101% of the Monthly Amount due
and owing to the Holder on the Repayment Date in cash. If the Monthly Amount (or
a portion of such Monthly Amount if not all of the Monthly Amount may be
converted into shares of Common Stock pursuant to Section 3.2) is required to be
paid in shares of Common Stock pursuant to Section 2.1(b), the number of such
shares to be issued by the Borrower to the Holder on such Repayment Date (in
respect of such portion of the Monthly Amount converted into shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing
(x) the portion of the Monthly Amount converted into shares of Common Stock, by
(y) the then applicable Fixed Conversion Price. For purposes hereof, the initial
"FIXED CONVERSION PRICE" means $2.66.
(b) Monthly Amount Conversion Guidelines. Subject to Sections
2.1(a), 2.2 and 3.2 hereof, the Holder shall convert into shares of Common Stock
all or a portion of the Monthly Amount due on each Repayment according to the
following guidelines (collectively, the "CONVERSION CRITERIA"): (i) the average
closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) consecutive trading days immediately preceding
such Notice Date shall be greater than or equal to 110% of the Fixed Conversion
Price and (ii) the amount of such conversion does not exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock for the twenty
two (22) day trading period immediately preceding the applicable Repayment Date.
If the Conversion Criteria are not met, the Holder shall convert only such part
of the Monthly Amount that meets the Conversion Criteria. Any part of the
Monthly Amount due on a Repayment Date that the Holder has not been able to
convert into shares of Common Stock due to failure to meet the Conversion
Criteria, shall be paid by the Borrower in cash at the rate of 101% of the
Monthly Amount otherwise due on such Repayment Date, within three (3) business
days of the applicable Repayment Date.
(c) Application of Conversion Amounts. Any amounts converted by the
Holder pursuant to Section 2.1(b) shall be deemed to constitute payments of, or
applied against, (i) first, outstanding fees, (ii) second, accrued interest on
the Amortizing Principal Xxxxxx, (iii) third, accrued interest on the
Non-Amortizing Principal Xxxxxx and (iv) fourth, the Amortizing Principal
Xxxxxx.
2.2. No Effective Registration. Notwithstanding anything to the contrary
herein, no amount payable hereunder may be converted into Common Stock unless
(a) either (i) an effective current Registration Statement (as defined in the
Registration Rights Agreement) covering the shares of Common Stock to be issued
in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144 of the
Securities Act, and (b) no Event of Default hereunder exists and is continuing,
unless such Event of Default is cured within any applicable cure period or is
otherwise waived in writing by the Holder in whole or in part at the Holder's
option.
Page 3 of 13
2.3. Optional Redemption of Amortizing Principal Amount. The Borrower will
have the option of prepaying the outstanding Amortizing Principal Amount
("OPTIONAL AMORTIZING REDEMPTION"), in whole or in part, by paying to the Holder
a sum of money equal to one hundred twenty percent (120%) of the Amortizing
Principal Amount to be redeemed, together with accrued but unpaid interest
thereon and any and all other sums due, accrued or payable to the Holder arising
under this Note, the Purchase Agreement or any Related Agreement (the
"AMORTIZING REDEMPTION AMOUNT") on the day written notice of redemption (the
"NOTICE OF AMORTIZING REDEMPTION") is given to the Holder. The Notice of
Amortizing Redemption shall specify the date for such Optional Amortizing
Redemption (the "AMORTIZING REDEMPTION PAYMENT DATE"), which date shall be not
less than seven (7) business days after the date of the Notice of Amortizing
Redemption (the "REDEMPTION PERIOD"). A Notice of Amortizing Redemption shall
not be effective with respect to any portion of the Amortizing Principal Amount
for which the Holder has a pending election to convert pursuant to Section 3.1,
or for conversions initiated or made by the Holder pursuant to Section 3.1
during the Redemption Period. The Amortizing Redemption Amount shall be
determined as if such Xxxxxx's conversion elections had been completed
immediately prior to the date of the Notice of Amortizing Redemption. On the
Amortizing Redemption Payment Date, the Amortizing Redemption Amount shall be
paid in good funds to the Holder. In the event the Borrower fails to pay the
Amortizing Redemption Amount on the Amortizing Redemption Payment Date as set
forth herein, then such Notice of Amortizing Redemption will be null and void.
2.4. Optional Redemption of Non-Amortizing Principal Amount. The Borrower
will have the option of repaying the outstanding Non-Amortizing Principal Amount
("OPTIONAL NON-AMORTIZING REDEMPTION"), in whole or in part, by paying the
Holder a sum of money equal to one hundred twenty percent (120%) of the
Non-Amortizing Principal Amount to be redeemed, together with accrued but unpaid
interest thereon (the "NON-AMORTIZING REDEMPTION AMOUNT") on the day written
notice of redemption (the "NOTICE OF NON-AMORTIZING REDEMPTION") is giving to
the Holder. The Notice of Non-Amortizing Redemption shall specify the date for
such Optional Non-Amortizing Redemption (the "NON-AMORTIZING REDEMPTION DATE"),
which date shall be not less than seven (7) business days after the date of the
Notice of Non-Amortizing Redemption (the "NON-AMORTIZING REDEMPTION PERIOD"). A
Notice of Non-Amortizing Redemption shall not be effective with respect to any
portion of the Non-Amortizing Principal Amount for which the Holder has a
pending election to convert pursuant to Section 3.1, or for conversions
initiated or made by the Holder pursuant to Section 3.1 during the
Non-Amortizing Redemption Period. The Non-Amortizing Redemption Amount shall be
determined as if the Holder's conversion elections had been completed
immediately prior to the date of the Notice of Non-Amortizing Redemption. On the
Non-Amortizing Redemption Date, the Non-Amortizing Redemption Amount shall be
paid (i) in good funds to the Holder, (ii) by furnishing the Holder written
direction to notify the bank holding the Restricted Account to release from the
Restricted Account and deliver to the Holder a sum of money equal to the
Non-Amortizing Redemption Amount, or (iii) if the amount on deposit in the
Restricted Account is less than the Non-Amortizing Redemption Amount, by
furnishing the Holder written direction to notify the bank holding the
Restricted Account to release all amounts on deposit in the Restricted Account
to the Holder and delivering to the Holder good funds in an amount equal to the
balance of the Non-Amortizing Redemption Amount.
Page 4 of 13
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. Subject to Section 2.2, the Holder shall
have the right, but not the obligation, to convert all or any portion of the
then aggregate outstanding Principal Amount of this Note, together with interest
and fees due hereon, into shares of Common Stock, subject to the terms and
conditions set forth in this Article III. The Holder may exercise such right by
delivery to the Borrower of a written Notice of Conversion pursuant to Section
3.3.
3.2. Conversion Limitation. Notwithstanding anything contained herein to
the contrary, the Holder shall not be entitled to convert pursuant to the terms
of this Note an amount that would be convertible into that number of Conversion
Shares which would exceed the difference between 4.99% of the outstanding shares
of Common Stock and the number of shares of Common Stock beneficially owned by
such Holder or issuable upon exercise of Warrants held by such Holder at such
time. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The Holder may void the Conversion Share
limitation described in this Section 3.2 upon 75 days prior notice to the
Borrower or without any notice requirement upon an Event of Default.
Notwithstanding anything contained herein to the contrary, Company shall have no
obligation to confirm the ownership percentage of the Holder either prior or
subsequent to conversion of any portion of this Note, Company shall be entitled
to rely solely on the Notice of Conversion with respect to the Holder's
ownership of Common Stock and Company shall not incur any liability of any kind,
type or nature to any party as a result of any violation of this Section.
3.3. Mechanics of Xxxxxx's Conversion. (a) In the event that the Holder
elects to convert any amounts outstanding under this Note into Common Stock, the
Holder shall give notice of such election by delivering an executed and
completed notice of conversion (a "NOTICE OF CONVERSION") to the Borrower, which
Notice of Conversion shall provide a breakdown in reasonable detail of the
Principal Amount, accrued interest and fees being converted. On each Conversion
Date (as hereinafter defined) and in accordance with its Notice of Conversion,
the Holder shall make the appropriate reduction to the Principal Amount, accrued
interest and fees as entered in its records and shall provide written notice
thereof to the Borrower within two (2) business days after the Conversion Date.
Each date on which a Notice of Conversion is delivered or telecopied to the
Borrower in accordance with the provisions hereof shall be deemed a "CONVERSION
DATE". A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of a Notice of Conversion, the Borrower
will issue instructions to the transfer agent accompanied by an opinion of
counsel, if so required by the Borrower's transfer agent, within one (1)
business day of the date of the delivery to Borrower of the Notice of Conversion
and shall cause the transfer agent to transmit the certificates representing the
Conversion Shares to the Holder by crediting the account of the Holder's
designated broker with the Depository Trust Corporation ("DTC") through its
Deposit Withdrawal Agent Commission ("DWAC") system within three (3) business
days after receipt by the Borrower of the Notice of Conversion (the "DELIVERY
DATE"). In the case of the exercise of the conversion rights set forth herein
the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Borrower written instructions to
the contrary.
Page 5 of 13
3.4. Conversion Mechanics.
(a) The number of shares of Common Stock to be issued upon each
conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price. In the event
of any conversions of outstanding obligations under this Note in part pursuant
to this Article III, such conversions shall be deemed to constitute conversions
(i) first, of the Monthly Amount for the current calendar month, (ii) then of
outstanding Amortizing Principal Amount, by applying the conversion amount to
Monthly Principal Amounts for the remaining Repayment Dates in chronological
order, (iii) then of the accrued interest on the Non-Amortizing Principal
Amount, and (iv) then, of outstanding Non-Amortizing Principal Xxxxxx.
(b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion is subject to adjustment from time
to time upon the occurrence of certain events, as follows:
A. Reclassification. If Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed
to evidence the right to purchase an adjusted number of such securities and kind
of securities as would have been issuable as the result of such change with
respect to the Common Stock (i) immediately prior to or (ii) immediately after,
such reclassification or other change at the sole election of the Holder.
B. Stock Splits, Combinations and Dividends. If the shares of
Common Stock are subdivided or combined into a greater or smaller number of
shares of Common Stock, or if a dividend is paid on the Common Stock or any
preferred stock issued by Company in shares of Common Stock, the Fixed
Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
C. Share Issuances. Subject to the provisions of this Section
3.4, if Company shall at any time prior to the conversion or repayment in full
of the Principal Amount issue any shares of Common Stock or securities
convertible into Common Stock to a person other than the Holder (except (i)
pursuant to Subsections A or B above; (ii) pursuant to options, warrants, or
other obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing, other than the disclosure made by the Company to the Holder
on Schedule 12(c)(ii) to the Security Agreement (as defined in Section 4.9); or
(iii) pursuant to options that may be issued under any employee incentive stock
option and/or any qualified stock option plan adopted by Company) for a
consideration per share (the "OFFER PRICE") less than the Fixed Conversion Price
in effect at the time of such issuance, then the Fixed Conversion Price shall be
immediately reset to such lower Offer Price. For purposes hereof, the issuance
of any security of Company convertible into or exercisable or exchangeable for
Common Stock shall result in an adjustment to the Fixed Conversion Price upon
the issuance of such securities.
Page 6 of 13
If the Corporation issues any additional shares pursuant to Section 3.4
above then, and thereafter successively upon each such issue, the Fixed
Conversion Price shall be adjusted by multiplying the then applicable Fixed
Conversion Price by the following fraction:
--------------------------------------
A + B
--------------------------------------
(A + B) + [((C - D) x B) / C]
--------------------------------------
A = Actual shares outstanding prior to such offering
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offering price
D. Computation of Consideration. For purposes of any computation
respecting consideration received pursuant to Subsection C above, the following
shall apply:
(a) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in no
case shall any deduction be made for any commissions, discounts or other
expenses incurred by Company for any underwriting of the issue or otherwise in
connection therewith;
(b) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined in
good faith by the Board of Directors of Company (irrespective of the accounting
treatment thereof); and
(c) the aggregate consideration received for such securities
shall be deemed to be the consideration received by Company for the issuance of
such securities plus the additional minimum consideration, if any, to be
received by Company upon the conversion or exchange thereof (the consideration
in each case to be determined in the same manner as provided in clauses (a) and
(b) of this Subsection (D)).
Page 7 of 13
3.5. Issuance of Replacement Note. Upon any partial conversion of this
Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Borrower to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid. Subject to the provisions of
Article IV, the Borrower will pay no costs, fees or any other consideration to
the Holder for the production and issuance of a replacement Note.
ARTICLE IV
EVENTS OF DEFAULT
Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, the amount
due and owing to the Holder shall be one hundred twenty percent (120%) of the
outstanding principal amount of the Note (plus accrued and unpaid interest and
fees, if any) (the "DEFAULT PAYMENT"). The Default Payment shall be applied
first to any fees due and payable to Holder pursuant to this Note, the Purchase
Agreement or the Related Agreements, then to accrued and unpaid interest due on
the Note and then to outstanding principal balance of the Note.
The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "EVENT OF DEFAULT":
4.1. Failure to Pay Principal, Interest or other Fees. The Borrower fails
to pay when due any installment of principal, interest or other fees hereon in
accordance herewith, or the Borrower fails to pay when due any amount due under
any other promissory note issued by Borrower, and in any such case, such failure
shall continue for a period of five (5) days following the date upon which any
such payment was due.
4.2. Breach of Covenant. The Borrower breaches any covenant or any other
term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and,
any such case, such breach, if subject to cure, continues for a period of twenty
(20) days after the occurrence thereof.
4.3. Breach of Representations and Warranties. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the date that such
representation or warranty was made or deemed made.
4.4. Receiver or Trustee. The Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.
Page 8 of 13
4.5. Judgments. Any money judgment, writ or similar final process shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective property or other assets for more than $100,000 and shall remain
unvacated, unbonded or unstayed for a period of thirty (30) days.
4.6. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against any Borrower or any
of its Subsidiaries and, in the case of an involuntary case or proceeding, such
case or proceeding is not dismissed within forty-five (45) days following
commencement thereof.
4.7. Stop Trade. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for ten (10) consecutive days
or ten (10) days during a period of twenty (20) consecutive days, excluding in
all cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded).
4.8. Failure to Deliver Common Stock or Replacement Note. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within three (3) days
or (ii) to deliver a replacement Note to Holder within fourteen (14) days
following the required date of such issuance pursuant to this Note, the Purchase
Agreement or any Related Agreement (to the extent required under such
agreements).
4.9. Default Under Related Agreements or Other Agreements. The occurrence
and continuance of any Event of Default (as defined in the Purchase Agreement,
any Related Agreement, the Security Agreement among the Borrower, Whitco
Company, LP and the Holder dated as of the date hereof (the "Security
Agreement"), or as defined in the aforementioned Security Agreement any
Ancillary Agreement, as each may be amended, modified and supplemented from time
to time) or any event of default (or similar term) under any other indebtedness.
4.10. Change in Control. The occurrence of a change in the controlling
ownership of the Borrower without the prior written consent of the Holder.
DEFAULT RELATED PROVISIONS
4.11. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Borrower shall pay additional interest
on this Note in an amount equal to two percent (2%) per month to a maximum
annual rate not to exceed fifteen percent (15%), and all outstanding obligations
under this Note, including unpaid interest, shall continue to accrue such
additional interest from the date of such Event of Default until the date such
Event of Default is cured or waived.
Page 9 of 13
4.12. Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.
4.13. Cumulative Remedies. The remedies under this Note shall be
cumulative.
ARTICLE V
MISCELLANEOUS
5.1. Failure or Indulgence Not Waiver. No failure or delay on the part of
the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
5.2. Notices. Any notice herein required or permitted to be given shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party notified, (b) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day,
(c) five days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to Xxxx X. Xxxxxx, Esq., 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, facsimile number (000) 000-0000,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.
5.3. Amendment Provision. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
5.4. Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement and all applicable securities laws. This
Note shall not be assigned by the Borrower without the consent of the Holder.
5.5. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Page 10 of 13
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
5.6. Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the
maximum permitted by applicable law. In the event that the rate of interest
required to be paid or other charges hereunder exceed the maximum permitted by
such law, any payments in excess of such maximum shall be credited against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.
5.7. Security Interest and Pledge Agreement. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Pledge Agreement dated as of the date hereof.
The obligations of the Borrower under this Note are guaranteed by certain
Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated as of the
date hereof.
5.8. Construction. Each party acknowledges that its legal counsel participated
in the preparation of this Note and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party
shall not be applied in the interpretation of this Note to favor any party
against the other.
5.9. Cost of Collection. If default is made in the payment of this Note, the
Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in its
name effective as of this 30th day of September, 2004.
CATALYST LIGHTING GROUP, INC.
By:
--------------------------
Name:
Title:
WITNESS:
----------------------------
Page 12 of 13
EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by CATALYST
LIGHTING GROUP, INC. dated September 30, 2004 by delivery of Shares of Common
Stock of CATALYST LIGHTING GROUP, INC. on and subject to the conditions set
forth in Article III of such Note.
1. Date of Conversion:
---------------------------
2. Shares To Be Delivered:
-----------------------
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Page 13 of 13
