Exhibit 10.2
PROMISSORY NOTE
No. 2 December 15, 2003
FOR VALUE RECEIVED, the undersigned, ECOLOGY COATING, INC., a California
corporation (the "Payor"), promises to pay to DEANNA STROMBACK (together with
his successors and assigns, referred to as the "Payee"), in the manner and at
the place provided in this Note the principal amount set forth on Exhibit A,
which is the total of the various advances (the "Advances") that the Payee has
made to the Payor under this Note. The outstanding principal balance of this
Note shall be payable on December 31, 2007 (the "Maturity Date").
ARTICLE 1
TERMS OF REPAYMENT
1.1 INTEREST. This Note shall bear interest ("Interest") equal to four
percent (4%) per annum on the unpaid principal balance, computed on a three
hundred sixty-five (365)-day year, during the term of the Note. Interest will
accrue on each Advance commencing on the date of the Advance as set forth in
Exhibit A to this Note. The Payor shall pay all Interest on or before the
Maturity Date. In no event shall the rate of Interest payable on this Note
exceed the maximum rate of interest permitted to be charged under applicable
law.
1.2 PAYMENTS. All payments under this Note shall first be credited against
costs and expenses provided for hereunder, second to the payment of any
penalties, third to the payment of accrued and unpaid interest, if any, and the
remainder shall be credited against principal. All payments due hereunder shall
be payable in legal tender of the United States of America, and in same day
funds delivered to the Payee by cashier's check, certified check, or any other
means of guaranteed funds to the mailing address provided below, or at such
other place as the Payee or any holder hereof shall designate in writing for
such purpose from time to time. If a payment hereunder otherwise would become
due and payable on a Saturday, Sunday or legal holiday, the due date thereof
shall be extended to the next succeeding business day, and Interest, if any,
shall be payable thereon during such extension.
1.3 VOLUNTARY PRE-PAYMENT. The Payor may voluntarily prepay this Note in
whole or in part at any time without penalty.
1.4 MANDATORY PRE-PAYMENT. If Payor sells, or transfers in any manner, all
or substantially all of its assets or merges into another corporation, then all
amounts owed under this Note shall become immediately due and payable.
1.5 EXEMPTION FROM RESTRICTIONS. It is the intent of the Payor and the
Payee in the execution of this Note that the indebtedness hereunder be exempt
from the restrictions of the usury laws of any applicable jurisdiction. The
Payor and the Payee agree that none of the terms and provisions contained herein
shall be construed to create a contract for the use, forbearance or detention of
money requiring payment of interest at a rate in excess of the maximum interest
rate permitted to be charged by the laws of any applicable jurisdiction. In such
event, if any holder of
this Note shall collect monies which are deemed to constitute interest which
would otherwise increase the effective interest rate on this Note to a rate in
excess of the maximum rate permitted to be charged by the laws of any applicable
jurisdiction, all such sums deemed to constitute interest in excess of such
maximum rate shall, at the option of such holder, be credited to the payment of
the principal amount due hereunder or returned to the Payor.
1.6 UNSECURED NOTE. This Note is unsecured.
ARTICLE 2
COVENANTS
2.1 CONVERSION INTO COMMON STOCK. The Payor shall give the Payee the option
to convert this Note, in whole or in part, into Common Stock of the Payor under
terms acceptable to the Payor and the Payee at any point prior to the Maturity
Date.
2.2 NOTICE OF DEFAULT. So long as any amount under this Note shall remain
unpaid, the Payor will, unless the Payee otherwise consents in writing, promptly
give written notice to the Payee in reasonable detail of the occurrence of any
Event of Default, or any condition, event or act which with the giving of notice
or the passage of time or both would constitute an Event of Default.
ARTICLE 3
DEFAULT
3.1 EVENTS OF DEFAULT. Any of the following events shall constitute an
"Event of Default" hereunder:
3.1.1 Failure by the Payor to pay the principal or Interest, if any,
of this Note when due and payable on any Payment Date or on the Maturity Date,
which failure continues for a period of thirty (30) days after written notice of
default has been given by the Payee to the Payor; or
3.1.2 The entry of an order for relief under Federal Bankruptcy Code
as to the Payor or approving a petition in reorganization or other similar
relief under bankruptcy or similar laws in the United States of America or any
other competent jurisdiction, and if such order, if involuntary, is not
satisfied or withdrawn within sixty (60) days after entry thereof; or the filing
of a petition by the Payor seeking any of the foregoing, or consenting thereto;
or the filing of a petition to take advantage of any debtor's act; or making a
general assignment for the benefit of creditors; or admitting in writing
inability to pay debts as they mature; or
3.1.3 Failure by the Payor to pay the principal and Interest, if any,
of this Note concurrent with a Mandatory Pre-Payment Event; or
3.1.4 The breach of any covenant made by the Payor in this Note.
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3.2 ACCELERATION. Upon any Event of Default (in addition to any other
rights or remedies provided for under this Note), at the option of the Payee or
any holder hereof, all sums evidenced hereby, including all principal, accrued
but unpaid Interest, fees and all other amounts due hereunder, shall become
immediately due and payable. If an Event of Default relating to certain events
of bankruptcy or insolvency of the Payor occurs and is continuing, the principal
of and interest, if any, on this Note will become and be immediately due and
payable without any declaration or other act on the part of the Payee or any
holder hereof. This Note shall bear interest at the rate of fifteen percent
(15%) per annum upon the occurrence of an Event of Default.
3.3 NOTICE BY THE PAYOR. Upon the happening of any Event of Default
specified in this Article 3, the Payor shall notify the Payee and any holder
hereof in writing within five (5) days after the occurrence of any Events of
Default.
3.4 NO WAIVER. Failure of the Payee or any holder hereof to exercise any
option hereunder shall not constitute a waiver of the right to exercise the same
in the event of any subsequent Event of Default, or in the event of continuance
of any existing Event of Default after demand or performance thereof.
3.5 PURSUIT OF ANY REMEDY. The Payee or holder hereof may pursue any remedy
under this Note without notice or presentment. The Payee or any holder hereof
has the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Payee or any such holder hereof under
this Note.
ARTICLE 4
MISCELLANEOUS
4.1 AMENDMENTS. No amendment or waiver of any provision of this Note, nor
consent to any departure by the Payor herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Payee, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
4.2 NOTICES. All notices and other communications provided for hereunder
shall be in writing (including telecopier communication) and mailed, telecopied,
or delivered, to the Payor or the Payee, as applicable, at their respective
addresses specified on the signature pages hereof, or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when mailed or
telecopied, be effective when deposited in the mails or telecopied with receipt
confirmed, respectively.
4.3 NO WAIVER; REMEDIES. No failure on the part of the Payee to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. All rights, powers and remedies of the Payee in connection with this Note
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
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4.4 SEVERABILITY; HEADINGS. If any one or more provisions of this Note
shall be held to be illegal, invalid or otherwise unenforceable, the same shall
not affect any other provisions of this Note and the remaining provisions of
this Note shall remain in full force and effect. Article and paragraph headings
in this Note are included herein for convenience of reference only and shall not
constitute a part of this Note for any other purpose or be given any substantive
effect.
4.5 BINDING EFFECT; TRANSFER. This Note shall be binding upon and inure to
the benefit of the Payor and the Payee and their respective successors and
assigns. The Payee may not assign or otherwise transfer, or grant participations
in, this Note or all or any portion of its rights hereunder or its interest
herein to any person or entity, without the prior written consent of the Payor
which consent shall not be unreasonably withheld. The Payor may not assign or
otherwise transfer its rights or obligations hereunder or any interest herein
without the prior written consent of the Payee. Any attempted assignment by the
Payor or the Payee in contravention of this paragraph shall be null and void and
of no force or effect.
4.6 ENFORCEMENT. It is agreed that time is of the essence of this Note and
in the event of default of the terms of this Note, the Payor agrees to pay all
costs of collection or enforcement, including a reasonable attorneys' fees and
if there is a default in payment of any sum due hereunder.
4.7 GOVERNING LAW. This Note shall be governed by, and shall be construed
and enforced in accordance with, the internal laws of the State of Michigan
without regard to conflicts of laws principles. The venue of any legal
proceeding taken in connection with this Note will be Detroit, Michigan.
4.8 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of an Event of Default or event which with notice or lapse of
time or both would become an Event of Default if such action is taken or
condition exists.
4.9 INTERPRETATION. The Payee and the Payor hereby waive the benefit of any
statute or rule of law or judicial decision which would otherwise require that
the provisions of this Note be construed or interpreted more strongly against
the party responsible for the drafting thereof.
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IN WITNESS WHEREOF, this Note has been issued as of date first written
above.
PAYOR:
ECOLOGY COATING, INC.
By: /s/ Richard D. Stromback
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Richard D. Stromback
Its: President
Mailing Address of Payee:
Deanna Stromback
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Mailing Address of Payor:
Ecology Coating, Inc.
1238 Brittain Road
Akron, OH 44310
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EXHIBIT A
SCHEDULE OF ADVANCES
(UPDATED THROUGH SEPTEMBER 30, 2006)
DATE AMOUNT OF ADVANCE
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December 15, 2003 $10,000
December 31, 2003 20,000
March 1, 2004 11,000
March 23, 2004 15,000
April 19, 2004 20,000
May 26, 2004 15,000
June 29, 2004 15,000
July 17, 2004 5,000
August 30, 2004 10,000
October 22, 2004 10,000
November 19, 2004 15,000
January 23, 2005 10,000
April 19, 2005 2,030
October 3, 2005 7,000
January 19, 2006 8,000
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Effective as of March 1, 2005 Payee converted $27,500 principal amount into 250
shares of Common Stock of Payor and assigned $10,000 of the principal amount of
this Note to Richard D. Stromback.
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