Exhibit 10.8
EMEX CORPORATION
Secured Note
$600,000 New York, New York
Date: May 1, 2002
FOR VALUE RECEIVED, Emex Corporation, a Nevada corporation (the "Company")
with its principal executive office at 12600 West Colfax Avenue, Suite C-500,
Lakewood, CO 80215, promises to pay to the order of Thorn Tree Resources LLC, a
Delaware limited liability company ("Payee"), with its principal office at 888
Seventh Avenue, Suite 1608, New York, New York 10106, or its registered assigns,
the principal amount of Six Hundred Thousand Dollars ($600,000.00) (the
"Principal Amount"), together with interest, compounded monthly, on such
Principal Amount, on December 31, 2002 (the "Maturity Date"). The Principal
Amount and accrued interest is payable in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Interest on this Note shall accrue on the
Principal Amount outstanding from time to time at a rate per annum computed in
accordance with Section 2 hereof.
Each payment by the Company pursuant to this note (this "Note") shall be
made without set-off or counterclaim and in immediately available funds. This
Note evidences a loan made by Payee to the Company of $600,000.
The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees, in the event of an Event of
Default (as defined below), to pay to the holder hereof, on demand, all costs
and expenses (including reasonable legal fees) incurred in connection with the
enforcement and collection of this Note.
This Note is secured by an Amended and Restated General Security Agreement
dated as of February 11, 2002 (the "Security Agreement") of the Company in favor
of Payee covering certain collateral (the "Collateral"), all as more
particularly described and provided therein, and is entitled to the benefits
thereof. The Security Agreement, the Uniform Commercial Code financing
statements in connection with the Security Agreement, and any and all other
documents executed and delivered by the Company to Payee under which Payee is
granted liens on assets of the Company are collectively referred to as the
"Security Documents."
The Principal Amount of this Note and any accrued interest hereon may be
prepaid at any time and from time to time, in whole or in part, without premium
or penalty.
1. Conversion Into Securities.
A. The Holder may elect, in its sole discretion, to convert some or
all of the outstanding Principal Amount and any accrued interest thereon into
shares of the Company's
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common stock, $.01 par value per share (the "Common Stock"), at a price equal to
$2.57 per share of Common Stock (the "Conversion Price"). To the extent all or a
portion of the Principal Amount is converted into securities of the Company
pursuant to this Section 1, the Principal Amount of the Company's indebtedness
under this Note shall accordingly be reduced, and such conversion shall
constitute the full discharge of the Principal Amount so converted.
B. Adjustments. The Conversion Price and the shares of Common Stock
are subject to adjustment from time to time as follows:
(i) Merger, Sale of Assets, etc. If at any time while any
portion of the Principal Amount of this Note is outstanding there shall be (i) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a merger in which the Company is the
surviving entity but the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, or (iii) a sale
or transfer of the Company's properties and assets as, or substantially as, an
entirety to any other corporation or other entity, then, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that Payee shall thereafter be entitled to receive upon conversion of
some or all of the outstanding Principal Amount of this Note, the number of
shares of stock or other securities or property that Payee would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer if the conversion had been completed immediately before such
reorganization, merger, consolidation, sale or transfer, all subject to further
adjustment as provided in this Section 1. The foregoing provision of this
Section 1(B)(i) shall similarly apply to successive reorganizations,
consolidations, mergers, sales and transfers and to the stock or securities of
any other corporation or other entity that are at the time receivable upon the
conversion of some or all of the outstanding Principal Amount of this Note. If
the per-share consideration payable to Payee for shares in connection with any
such transaction is in a form other than cash or marketable securities, than
such consideration must be equal to the fair market value of the Principal
Amount converted as determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Note with respect to the conversion and the corresponding
rights and interests of Payee after the transaction, to the end that the
provisions of this Note shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon conversion of some or all of the outstanding Principal Amount of
this Note.
(ii) Reclassification, etc. If the Company, at any time while
any portion of the Principal Amount of this Note remains outstanding, by
reclassification of securities or otherwise, shall change any of the securities
as to which conversion rights under this Note exist into the same or a different
number of securities of any other class or classes, Section 1 of this Note shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under Section 1 of this
Note immediately prior to such reclassification or other change, and the
Conversion
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Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 1.
(iii) Split, Subdivision or Combination of Shares. If the
Company, at any time while any portion of the Principal Amount of this Note
remains outstanding, shall split, subdivide or combine the securities as to
which conversion rights under Section 1 of this Note exist, into a different
number of securities of the same class, the Conversion Price for such securities
shall be proportionately decreased in the case of a split or subdivision or
proportionately increased in the case of a combination.
(iv) Adjustments for Dividends in Stock or other Securities or
Property. If while any portion of the Principal Amount of this Note remains
outstanding, the holders of the Common Stock (including, without limitation,
holders of securities which may be converted into Common Stock) at the time
shall have received, or, on or after the record date fixed for the determination
of eligible stockholders, shall have become entitled to receive, without payment
therefor, other or additional stock or other securities or property (other than
cash) of the Company by way of dividend, then and in each case, Section 1 of
this Note shall represent the right to acquire, in addition to the number of
shares of Common Stock receivable upon conversion of some or all of the
outstanding Principal Amount of this Note, and without payment of any additional
consideration therefor, the amount of such other or additional stock or other
securities or property (other than cash) of the Company that Payee would hold on
the date of such exercise had it been the holder of record of the shares of
Common Stock receivable upon conversion of some or all of the outstanding
Principal Amount of this Note on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 1, less the portion, if any, of such
other or additional stock or other securities or property (other than cash)
attributable to shares that were acquired by Payee through conversion of all or
a portion of the Principal Amount pursuant hereto and disposed of prior to the
record date of the dividend.
(v) Adjustments for Issuances of Common Stock Below Conversion
Price. In case the Company shall hereafter issue shares of its Common Stock
(excluding shares issued (i) in any of the transactions described in Sections
1(B)(ii), 1(B)(iii) or 1(B)(iv), above, (ii) upon exercise of options granted to
the Company's officers, directors and employees under a plan or plans adopted by
the Company's Board of Directors and approved by its shareholders, if such
shares would otherwise be included in this subsection (v), (but only to the
extent that the aggregate number of shares excluded hereby and issued after the
date hereof, shall not exceed 10% of the Common Stock outstanding at the time of
any issuance), (iii) upon exercise of options, warrants and convertible
debentures outstanding as of the date hereof, or conversion of some or all of
the outstanding Principal Amount of this Note, (iv) to shareholders of any
corporation which merges into the Company in proportion to their stock holdings
of such corporation immediately prior to such merger, upon such merger or (v)
issued in a bona fide public offering pursuant to a firm commitment
underwriting, but only if no adjustment is required pursuant to any other
specific subsection of this Section 1 (without regard to subsection (viii)
below) with respect to the transaction giving rise to such rights) for a
consideration per share (the "Offering Price") less than the Conversion Price,
then
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the Conversion Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of shares of Common Stock
which the aggregate consideration received (determined as provided in subsection
(vii) below) for the issuance of such additional shares would purchase at the
Conversion Price, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an issuance is
made.
(vi) Adjustments for Issuances of Convertible Securities Below
Conversion Price. In case the Company shall hereafter issue any securities
convertible into or exchangeable for its Common Stock for a consideration per
share of Common Stock initially deliverable upon conversion or exchange of such
securities (determined as provided in subsection (vii) below) less than the
Conversion Price, then the Conversion Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities and the number
of shares of Common Stock which the aggregate consideration received (determined
as provided in subsection (vii) below) for such securities would purchase at the
Conversion Price, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance and the
maximum number of shares of Common Stock of the Company deliverable upon
conversion of or in exchange for such securities at the initial conversion or
exchange price or rate. Such adjustment shall be made successively whenever such
an issuance is made.
(vii) Method of Computation. For purposes of any computation
respecting consideration received pursuant to subsections (v) and (vi) of this
Section 1(B), 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 the 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 current market price thereof as
determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof), whose determination shall be conclusive;
and
(c) in the case of the issuance of securities
convertible into or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the consideration received
by the Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the
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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 (vii)).
(viii) Required Adjustments. No adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in such price; provided, however, that any adjustments
which by reason of this subsection (viii) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment required to
be made hereunder. All calculations under this Section 1 shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(ix) Adjustment of Number of Shares of Common Stock. Whenever
the Conversion Price is adjusted pursuant to Section 1(B)(iii), 1(B)(v) and
1(B)(vi) above, the number of shares of Common Stock acquired upon conversion of
some or all of the outstanding Principal Amount of this Note shall be adjusted
by multiplying such number of shares of Common Stock by a fraction, the
numerator of which is the Conversion Price immediately prior to such adjustment
and the denominator of which is the Conversion Price immediately after such
adjustment.
(x) Other Adjustments. In case any event shall occur as to
which the other provisions of this Section 1 are not strictly applicable but as
to which failure to make any adjustment would not fairly protect the exercise
rights represented by this Section 1 in accordance with the essential intent and
principles hereof then, in each such case, Payee may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which such firm shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the exercise rights
represented herein. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to Payee and shall make the adjustments described therein. The
fees and expenses of such independent public accountants shall be borne by the
Company.
2. Computation of Interest.
A. Base Interest Rate. Subject to Sections 2B and 2C below, the
outstanding Principal Amount shall bear interest at the rate of the Prime Rate
at J.P. Morgan Chase & Co. as of the date hereof (the "Prime Rate"), plus three
(3%) percent per annum.
B. Penalty Interest. From and after the occurrence of an Event of
Default until the earlier of (i) the date upon which such Event of Default has
ceased to exist or (ii) payment in full of the Principal Amount of this Note,
the rate of interest applicable to the unpaid Principal Amount shall be adjusted
to the Prime Rate plus five (5%) percent per annum, payable on demand; provided,
that in no event shall the interest rate exceed the Maximum Rate provided in
Section 2C below.
C. Maximum Rate. In the event that it is determined that, under the
laws relating to usury applicable to the Company or the indebtedness evidenced
by this Note ("Applicable Usury Laws"), the interest charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith
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cause the effective interest rate applicable to the indebtedness evidenced by
this Note to exceed the maximum rate allowed by law (the "Maximum Rate"), then
such interest shall be recalculated for the period in question and any excess
over the Maximum Rate paid with respect to such period shall be credited,
without further agreement or notice, to the Principal Amount outstanding
hereunder to reduce said balance by such amount with the same force and effect
as though the Company had specifically designated such extra sums to be so
applied to principal and Payee had agreed to accept such extra payment(s) as a
premium-free prepayment. All such deemed prepayments shall be applied to the
principal balance payable at maturity. In no event shall any agreed to or actual
exaction as consideration for this Note exceed the limits imposed or provided by
Applicable Usury Laws in the jurisdiction in which the Company is a resident
applicable to the use or detention of money or to forbearance in seeking its
collection in the jurisdiction in which the Company is a resident.
3. Events of Default.
If any of the following events shall occur for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation by law or otherwise) (each, an "Event of Default"):
(i) Non-Payment of Obligations. The Company fails to make any
payment of the principal of this Note within five (5) business days after the
same shall become due and payable (whether by acceleration or otherwise) or
shall fail to pay accrued interest on this Note within five (5) business days of
when the same shall become due and payable (whether by acceleration or
otherwise);
(ii) Non-Performance. The Company shall materially default
and/or be in material breach of any term and/or provision in this Note, that
certain Secured Grid Note of the Company payable to Payee, dated October 17,
2001, that certain Secured Grid Note of the Company payable to Payee, dated
January 23, 2002, that certain Secured Grid Note of the Company payable to
Payee, dated February 11, 2002, the Security Documents, the Warrants to purchase
Common Stock issued to Payee on October 17, 2001, on January 23, 2002, on
February 11, 2002 and on the date hereof, the Warrant Agreements relating
thereto, or any representation and/or warranty made by the Company to Payee, and
the Company shall fail to cure such default or breach within ten (10) business
days after written notice from Payee;
(iii) Bankruptcy, Insolvency, etc. The Company (or any of its
subsidiaries) shall:
(a) become insolvent or generally fail or be unable to
pay, or admit in writing its inability to pay, its debts as they become due
(provided, that financial statement book value shall not be considered in
determining insolvency for the purposes of this Section 3(iii)(a));
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for the
Company or any of its property, or make a general assignment for the benefit of
creditors;
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(c) in the absence of such application, consent or
acquiesce in, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or for any part of its property;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company, and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or shall result
in the entry of an order for relief, provided no default shall be deemed to have
occurred if the Company acts to procure the dismissal or discontinuance of any
such case or proceeding within thirty (30) days after its commencement; or
(e) take any corporate or other action authorizing, or
in furtherance of, any of the foregoing;
(iv) Cross-Acceleration. Any indebtedness for borrowed money
of the Company or any subsidiary in an aggregate principal amount exceeding
$250,000 (1) shall be duly declared to be or shall become due and payable prior
to the stated maturity thereof or (2) shall not be paid as and when the same
becomes due and payable, including any applicable grace period;
(vi) Judgments. A judgment which, with other such outstanding
judgments against the Company and its subsidiaries (in each case to the extent
not covered by insurance), exceeds an aggregate of $500,000, shall be rendered
against the Company or any subsidiary and, within 30 days after entry thereof,
such judgment shall not have been discharged or execution thereof stayed pending
appeal, or, within 30 days after the expiration of any such stay, such judgment
shall not have been discharged;
then, and in any such Event of Default, Payee may, by notice to the
Company, take any or all of the following actions, without prejudice to the
rights of Payee to enforce its claims against the Company: (1) declare the
principal of and any accrued interest and all other amounts payable under this
Note to be due and payable, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Company, (2) proceed to enforce or cause to be
enforced any remedies provided under any of the Security Documents, and (3)
exercise any other remedies available at law or in equity, either by suit in
equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Note; provided, that upon the
occurrence of any Event of Default referred to in Section 3(iii) then (without
prejudice to the rights and remedies specified in clause (3) above)
automatically, without notice, demand or any other act by Payee, the principal
of and any accrued interest and all other amounts payable under this Note shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company,
anything contained in this Note to the contrary notwithstanding. No remedy
conferred in this Note upon Payee is intended to be exclusive of any
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other remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereinafter existing
at law or in equity or by statute or otherwise.
4. Representations and Warranties. To induce Payee to make loans to the
Company, the Company represents, warrants and covenants to Payee that:
(i) the Company is duly incorporated and validly existing in good
standing under the laws of the jurisdiction of its incorporation, with full
power and authority to make, deliver and perform this Note;
(ii) the execution, delivery and performance by the Company of this
Note have been duly authorized by all necessary corporate action and do not and
will not violate or conflict with its charter or by-laws or any law, rule,
regulation or order binding on the Company;
(iii) this Note has been fully executed by an authorized officer of
the Company and constitutes a legal, valid, binding and enforceable obligation
of the Company;
(iv) no authorization, consent, approval, license, exemption of or
filing or registration with, any court or government or governmental agency is
or will be necessary to the valid execution, delivery or performance by the
Company of this Note; and
(v) other than the stockholder class actions currently pending
against the Company, there are no pending or threatened actions, suits or
proceedings against or affecting the Company by or before any court, commission,
bureau or other governmental agency or instrumentality, which, individually or
in the aggregate, if determined adversely to the Company, would have a material
adverse effect on the business, properties, operations, or condition, financial
or otherwise, of the Company.
5. Amendments and Waivers.
A. Waivers, Amendments, etc. (i) The provisions of this Note may
from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the Company and Payee.
(ii) No failure or delay on the part of Payee in exercising
any power or right under this Note shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Company in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by Payee shall, except
as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
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(iii) To the extent that the Company makes a payment or
payments to Payee, and such payment or payments or any part thereof are
subsequently for any reason invalidated, set aside and/or required to be repaid
to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had
not occurred.
(iv) After any waiver, amendment or supplement under this
section becomes effective, the Company shall mail to Payee a copy thereof.
6. Miscellaneous.
A. Parties in Interest. All covenants, agreements and undertakings
in this Note binding upon the Company or Payee shall bind and inure to the
benefit of its successors and permitted assigns of the Company and Payee,
respectively.
B. Final Agreement. This Note, when executed by the Company,
supersedes any prior oral or written communication or agreement between the
Company and Payee relating to the subject matter hereof.
C. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof. Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York located in the borough of Manhattan in the
City of New York and the Supreme Court of the State of New York, New York
County, for the purposes of any suit, action or other proceeding arising out of
this Note or any transaction contemplated hereby.
D. Waiver of Jury Trial. PAYEE AND THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED AND
DELIVERED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF PAYEE OR THE COMPANY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR PAYEE'S PURCHASING THIS NOTE.
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IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Company.
EMEX CORPORATION
By:__________________________________
Name:
Title:
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