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EXHIBIT 10.3
EXHIBIT A
THE INDEBTEDNESS EVIDENCED BY THIS PROMISSORY NOTE AND ANY RIGHTS OR
REMEDIES HEREUNDER SHALL BE SUBORDINATE TO MAKER'S PRESENT AND FUTURE BANK AND
OTHER FINANCIAL INSTITUTION DEBT AND SUCH OTHER DEBT AS SET FORTH IN SECTION
1.2(a) OF THE ASSET PURCHASE AGREEMENT; PROVIDED, HOWEVER THAT THIS PROMISSORY
NOTE SHALL RANK SENIOR TO ALL FUTURE ACQUISITION INDEBTEDNESS AND SHALL RANK NO
WORSE THAN PARI PASAU WITH ALL OTHER FUTURE INDEBTEDNESS OF THE MAKER.
THE PAYMENTS UNDER THIS PROMISSORY NOTE ARE SUBJECT TO OFFSET PURSUANT TO
SECTION 5.7 OF THE ASSET PURCHASE AGREEMENT, DATED November 19, 2002, BY AND
AMONG MAKER AND LENDER.
SUBORDINATED PROMISSORY NOTE
U.S. $1,264,000.00 December 1, 2002
Manalapan, NJ
FOR VALUE RECEIVED, STRATUS SERVICES GROUP, INC., a Delaware corporation
(hereinafter referred to as the "Maker") promises to pay to the order of ELITE
PERSONNEL SERVICES, INC., a California corporation (hereinafter referred to as
the "Lender"), at 12663 Promentory Road, Los Angeles, California 90049, or at
such address as Lender may designate from time to time, the principal sum of One
Million Two Hundred Sixty-Four Thousand and 00/100 Dollars ($1,264,000.00),
which is deemed to include interest at the rate of four percent (4%) per annum,
payable in ninety-six (96) equal monthly payments in the amount of Thirteen
Thousand, One Hundred Sixty-Seven Thousand and 00/100 Dollars ($13,167.00)
commencing on the date hereof, and monthly thereafter on the 1st day of each
month, to accounts designated by the Lender, no less than two (2) business days
before a scheduled payment date.
This Promissory Note (the "Note") is made pursuant to the provisions of
that certain Asset Purchase Agreement, dated as of November 19, 2002, by and
between the Maker and Lender (the "Asset Purchase Agreement"). Any payment under
this Note may be offset pursuant to the terms of Section 5.7 of the Asset
Purchase Agreement. The capitalized terms herein not otherwise defined shall
have the meaning given to such terms in the Asset Purchase Agreement.
Payments of the amounts due hereunder shall be made in lawful money of the
United States which shall be legal tender in payment of all debts, public and
private, at the time of payment.
The indebtedness represented by this Note and any rights and remedies
hereunder shall be subordinate to Maker's present and future bank and other
financial institution debt and such other debt as set forth in Section 1.2(a) of
the Asset Purchase Agreement; provided, however that this Note shall rank senior
to all future acquisition indebtedness and shall rank no worse than pari pasau
with all other future indebtedness of Maker.
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Maker will be in default under this Note upon:
(a) a failure to make payment of any installment within ten (10) days of
the applicable due date. Upon the Maker's default, the installment
shall be subject to a five percent (5%) late charge;
(b) the filing by or against Maker of any petition seeking liquidation,
reorganization, arrangement, readjustment of debts or any other relief
under the federal Bankruptcy Code or under any other act or law
pertaining to insolvency or debtor relief, whether state or federal;
(c) A custodian, trustee, receiver or assignee for the benefit of
creditors is appointed or takes possession of any of Maker's assets;
or
(d) Maker becomes insolvent, liquidates, sells or disposes of all or
substantially all of the assets of its business, or otherwise ceases
to do business in substantially the same manner as on the date hereof.
Upon any default under this Note, the unpaid principal shall, at the option
of the Lender, become immediately due and payable and interest will accrue,
commencing on the default date, at an annual rate equal to the lesser of
eighteen percent (18%) or the maximum rate of interest permitted by applicable
law. To the greatest extent permitted by law, interest shall continue to accrue
after the filing by or against Maker of any petition seeking any relief in
bankruptcy or under any law pertaining to insolvency or debtor relief. Failure
to exercise this right to accelerate the Maturity Date shall not constitute a
waiver of Lender's right to exercise the same in the event of any subsequent
default. Any property of the Maker or of any endorser held by the Lender hereof
may be applied by the Lender to any sums due and unpaid pursuant to this Note.
As to this Note and any other instrument securing the indebtedness, the
Maker and all guarantors and endorsers severally waive all notice of
acceleration, presentment, protest and demand, dishonor and non-payment of this
Note, and expressly agree that the maturity of this Note, or any payment
hereunder, may be extended from time to time without in any way affecting the
liability of the Maker and all guarantors and endorsers.
Should it become necessary to collect this Note through an attorney, the
Maker and any surety, endorser or guarantor of this Note hereby agrees to pay
all costs and expenses of collection, including reasonable attorneys' fees and
any attorneys' fees incurred in appellate, bankruptcy or post-judgment
proceedings.
This Note shall be governed by and construed in accordance with the laws of
the State of New Jersey without regard to conflicts of law principles.
The Maker acknowledges and agrees that this Note has been signed and
delivered in exchange for valuable consideration.
This Note may be prepaid in whole or in part at any time prior to the
Maturity Date without penalty.
This Note may not be changed orally, but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.
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Until the first anniversary of the date hereof, this Note shall not be
transferred, sold, assigned, pledged, hypothecated or otherwise disposed of by
Lender without the prior written consent of the Maker except to Bernard Freedman
or Capital Temp Funds, Inc. Maker shall not sell, transfer, assign or otherwise
dispose of this Note without the prior written consent of the Lender; provided
that Maker may assign this Note to a subsidiary or affiliate of Maker as long as
Maker remains liable for the obligations hereunder.
The term "Maker" as used herein in every instance shall include the
successors and assigns of Maker.
STRATUS SERVICES GROUP, INC.
By: /s/ Joseph J. Raymond
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Joseph J. Raymond, President and CEO
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