EXHIBIT 10.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO UNIVERSAL
COMMUNICATION SYSTEMS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
PRINCIPAL AMOUNT $_______________ ISSUE DATE: FEBRUARY ___, 2006
PURCHASE PRICE $_________________
SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, UNIVERSAL COMMUNICATION SYSTEMS, INC., a Nevada
corporation (hereinafter called "Borrower"), hereby promises to pay to
____________________________,___________________________________, (the "Holder")
or its registered assigns or successors in interest or order, without demand,
the sum of [_________________________________________________] Dollars
($___________) ("Principal Amount"), with simple and unpaid interest thereon, on
February ____, 2008 (the "Maturity Date"), if not sooner paid.
This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower, the Holder and certain other holders (the "Other
Holders") of secured convertible promissory notes (the "Other Notes"), dated of
even date herewith (the "Subscription Agreement"), and shall be governed by the
terms of such Subscription Agreement. Unless otherwise separately defined
herein, all capitalized terms used in this Note shall have the same meaning as
is set forth in the Subscription Agreement. The following terms shall apply to
this Note:
ARTICLE I
INTEREST; AMORTIZATION; SECURITY AGREEMENT
1.1. Interest Rate. Subject to Section 6.7 hereof, interest payable on
this Note shall accrue at a rate per annum (the "Interest Rate") of nine percent
(9%). Interest on the Principal Amount shall accrue from the date of this Note
and shall be payable, in arrears, together with Principal Amount payments as
described below and on the Maturity Date, whether by acceleration or otherwise.
1.2. Minimum Monthly Principal Payments. Amortizing payments of the
outstanding Principal Amount and interest of this Note shall commence on the six
month anniversary date of this Note and on the same day of each month thereafter
(each a "Repayment Date") until the Principal Amount and interest have been
repaid in full, whether by the payment of cash or by the conversion of such
Principal Amount and interest 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 of five and one-half percent
(5.5%) of the initial Principal Amount ("Fixed Principal Portion"), all interest
accrued on the Note as of the Repayment Date and any other amounts which are
then owing under this Note that have not been paid (collectively, the "Monthly
Amount"). In addition to the regular payment of the Monthly Amount, additional
payments (each an "Interim Payment") will be required to be made at the written
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election of the Holder (a form of which is annexed hereto) for each and every
day (each a "Determination Date") the total reported dollar volume of the Common
Stock exceeds $46,000 ("Liquidity Benchmark"). The amount of each Interim
Payment will be determined by multiplying the Fixed Principal Portion by a
fraction the numerator of which is the total reported dollar volume of the
Common Stock on a Determination Date and the denominator of which is the
Liquidity Benchmark. The Holder must give written notice to the Borrower within
two business days after a Determination Date of Holder's election to receive an
Interim Payment. If such notice is given, the Holder may elect to receive and
the Borrower must pay or deliver (i) cash on the business day immediately
following the date notice is given, or (ii) Common Stock valued at eighty-five
percent (85%) of the average closing bid price of the Common Stock as reported
by Bloomberg L.P. for the five (5) trading days preceding the date notice is
given by the Holder of the demand for an Interim Payment. If the Holder elects
to receive Common Stock in satisfaction of an Interim Payment, then the date of
the Holder's notice shall be deemed a Conversion Date and the Common Stock must
be delivered in the same manner and under the same conditions as required in
connection with a Notice of Conversion. All payments of cash or amounts
converted into Common Stock pursuant to this Note by the Holder or Borrower
shall be applied first against outstanding fees and damages, then accrued
interest on the Principal Amount and then to Principal Amounts of not yet due
Monthly Amounts, commencing with the Monthly Amount next payable and then
Monthly Amounts thereafter in reverse chronological order. Any Principal Amount,
interest and any other sum arising under the Transaction Documents that remains
outstanding on the Maturity Date shall be due and payable on the Maturity Date.
1.3. Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, which, if susceptible to cure is not cured
within ten (10) days, otherwise then from the first date of such occurrence, the
annual interest rate on this Note shall (subject to Section 6.7) automatically
be increased to fifteen percent (15%).
ARTICLE II
CONVERSION REPAYMENT
2.1. Payment of Monthly Amount in Cash or Common Stock. Subject to
Section 3.2 hereof, the Borrower, at the Borrower's election, shall pay the
Monthly Amount (i) in cash within one (1) business day after the applicable
Repayment Date, or (ii) in registered Common Stock at an applied conversion rate
equal to the lesser of (A) the Fixed Conversion Price (as defined in Section 3.1
hereof), or (B) eighty-five percent (85%) of the average closing bid prices of
the Common Stock as reported by Bloomberg L.P. for the Principal Market for the
five (5) trading days preceding such Repayment Date (as such amount may be
adjusted as described herein). The Borrower must send notice to the Holder by
confirmed telecopier not later than 3:00 PM, New York City time on the
twenty-second Trading Day preceding a Repayment Date notifying Holder of
Borrower's election to pay the Monthly Redemption Amount in cash or stock. The
Notice must state the amount of the Monthly Redemption Amount and include
supporting calculations. Elections by the Borrower must be made to all Holders
of Notes similar to this Note in proportion to the relative Note principal held
by such Note Holders. If such notice (x) is not timely sent, or (y) if the
Monthly Redemption Amount is not timely delivered, or (z) if the Borrower elects
to pay the Monthly Redemption Amount with Common Stock, then the Holder shall
have the right to elect in writing within three trading days prior to the
applicable Repayment Date or required Delivery Date, as the case may be with
respect to (x) and (y), whether to be paid in cash or Common Stock, or in the
case of (z) defer the payment of the relevant Monthly Redemption Amount that the
Borrower has elected to pay with Common Stock until the conversion of the
deferred amount by the Holder. Such Holder's election shall not be construed to
be a waiver of any default by Borrower relating to non-timely compliance by
Borrower with any of its obligations under this Note. Nor shall the Borrower's
compliance with Holder's election be a default of any of Borrower's obligations
under this Note. Shares of Common Stock must be delivered to the Holder not
later than three (3) business days after the applicable Repayment Date.
Whichever of the Principal Market or such other principal market or exchange
where the Common Stock is listed or traded is the principal trading exchange or
market for the Common Stock is the Principal Market.
2.2. No Effective Registration. Notwithstanding anything to the
contrary herein, no amount payable hereunder may be paid in shares of Common
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Stock by the Borrower without the Holder's consent unless (a) either (i) an
effective current Registration Statement 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(k) of the
1933 Act, and (b) no Event of Default hereunder (or an event that with the
passage of time or the giving of notice could become an Event of Default),
exists and is continuing, unless such event or 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.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. Subject to Section 3.2, the Holder
shall have the right, but not the obligation at all times, to convert all or any
portion of the then aggregate outstanding Principal Amount of this Note, into
shares of Common Stock, subject to the terms and conditions set forth in this
Article III at the rate of $0.01 per share of Common Stock ("Fixed Conversion
Price") as same may be adjusted pursuant to this Note and the Subscription
Agreement. The Holder may exercise such right by delivery to the Borrower of a
written Notice of Conversion pursuant to Section 3.3. After the occurrence of an
Event of Default, the Fixed Conversion Price shall be the lesser of the Fixed
Conversion Price or 75% of the VWAP for the five trading days prior to a
Conversion Date.
3.2. Conversion Limitation. The Holder shall not be entitled to convert
on a Conversion Date that amount of the Note in connection with that number of
shares of Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates on a
Conversion Date, (ii) any Common Stock issuable in connection with the
unconverted portion of the Note, and (iii) the number of shares of Common Stock
issuable upon the conversion of the Note with respect to which the determination
of this provision is being made on a Conversion Date, which would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock of the Borrower on such Conversion Date. For
the purposes of the provision to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to
the foregoing, the Holder shall not be limited to aggregate conversions of only
4.99% and aggregate conversion by the Holder may exceed 4.99%. The Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section 3.2 will limit any conversion hereunder and to the extent that
the Holder determines that the limitation contained in this Section applies, the
determination of which portion of the Notes are convertible shall be the
responsibility and obligation of the Holder. The Holder may waive the conversion
limitation described in this Section 3.2, in whole or in part, upon and
effective after 61 days prior written notice to the Borrower. The Holder may
decide whether to convert a Note or exercise Warrants to achieve an actual 4.99%
ownership position.
3.3. Mechanics of Holder'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 amounts being converted. The original Note is not required to be
surrendered to the Borrower until all sums due under the Note have been paid. 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. 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.
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(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 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. Notwithstanding the
foregoing to the contrary, the Borrower or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the Holder's behalf via
DWAC (or certificates free of restrictive legends) if the registration statement
providing for the resale of the shares of Common Stock issuable upon the
conversion of this Note is effective and the Holder has complied with all
applicable securities laws in connection with the sale of the Common Stock,
including, without limitation, the prospectus delivery requirements. In the
event that Conversion Shares cannot be delivered to the Holder via DWAC, the
Borrower shall deliver physical certificates representing the Conversion Shares
by the Delivery Date.
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.
(b) The Fixed Conversion Price and number and kind of shares or
other securities to be issued upon conversion shall be subject to adjustment
from time to time upon the happening of certain events while this conversion
right remains outstanding, as follows:
A. Merger, Sale of Assets, etc. If the Borrower at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other corporation, this Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase such number and kind of shares or other
securities and property as would have been issuable or distributable on account
of such consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower 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 portion thereof 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 immediately prior to such
reclassification or other change.
C. 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 in shares
of Common Stock, the Conversion Price shall be proportionately reduced in case
of subdivision of shares or stock dividend or proportionately increased in the
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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.
D. Share Issuance. So long as this Note is outstanding, if the
Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in the Subscription Agreement), prior to the complete conversion or
payment of this Note, for a consideration less than the Fixed Conversion Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Fixed Conversion Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Fixed Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option and again upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the then applicable Conversion Price. The
reduction of the Fixed Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the Subscription
Agreement.
(c) Whenever the Conversion Price is adjusted pursuant to Section
3.4(b) above, the Borrower shall promptly mail to the Holder a notice setting
forth the Conversion Price after such adjustment and setting forth a statement
of the facts requiring such adjustment.
3.5. Reservation. During the period the conversion right exists,
Borrower will reserve from its authorized and unissued Common Stock not less
than the number of shares to provide for the issuance of Common Stock upon the
full conversion of this Note as further described in the Subscription Agreement.
Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. Borrower agrees that its issuance of this
Note shall constitute full authority to its officers, agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for shares of Common Stock upon
the conversion of this Note.
3.6 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, provided Holder has surrendered an
original Note to the Company. In the event that the Holder elects not to
surrender a Note for reissuance upon partial payment or conversion, the Holder
hereby indemnifies the Borrower against any and all loss or damage attributable
to a third-party claim in an amount in excess of the actual amount then due
under the Note.
ARTICLE IV
SECURITY INTEREST
4. Security Interest/Waiver of Automatic Stay. This Note is secured by
a security interest granted to the Collateral Agent for the benefit of the
Holder pursuant to a Security Agreement, as delivered by Borrower to Holder. The
Borrower acknowledges and agrees that should a proceeding under any bankruptcy
or insolvency law be commenced by or against the Borrower, or if any of the
Collateral (as defined in the Security Agreement) should become the subject of
any bankruptcy or insolvency proceeding, then the Holder should be entitled to,
among other relief to which the Holder may be entitled under the Transaction
Documents and any other agreement to which the Borrower and Holder are parties
(collectively, "Loan Documents") and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Holder to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. TO THE EXTENT PERMITTED BY LAW, THE
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BORROWER EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C.
SECTION 362. FURTHERMORE, THE BORROWER EXPRESSLY ACKNOWLEDGES AND AGREES THAT
NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR
OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE HOLDER TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS
AND/OR APPLICABLE LAW. The Borrower hereby consents to any motion for relief
from stay that may be filed by the Holder in any bankruptcy or insolvency
proceeding initiated by or against the Borrower and, further, agrees not to file
any opposition to any motion for relief from stay filed by the Holder. The
Borrower represents, acknowledges and agrees that this provision is a specific
and material aspect of the Loan Documents, and that the Holder would not agree
to the terms of the Loan Documents if this waiver were not a part of this Note.
The Borrower further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Holder nor any
person acting on behalf of the Holder has made any representations to induce
this waiver, that the Borrower has been represented (or has had the opportunity
to he represented) in the signing of this Note and the Loan Documents and in the
making of this waiver by independent legal counsel selected by the Borrower and
that the Borrower has discussed this waiver with counsel.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:
5.1 Failure to Pay Principal or Interest. The Borrower fails to pay any
installment of Principal Amount, interest or other sum due under this Note or
any Transaction Document when due and such failure continues for a period of
five (5) business days after the due date.
5.2 Breach of Covenant. The Borrower breaches any material covenant or
other term or condition of the Subscription Agreement, this Note or other
Transaction Document in any material respect and such breach, if subject to
cure, continues for a period of ten (10) business days after written notice to
the Borrower from the Holder.
5.3 Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Subscription
Agreement, Transaction Document or in any agreement, statement or certificate
given in writing pursuant hereto or in connection herewith or therewith shall be
false or misleading in any material respect as of the date made and the Closing
Date.
5.4 Receiver or Trustee. The Borrower or any Subsidiary of Borrower
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for them or for a substantial part
of their property or business; or such a receiver or trustee shall otherwise be
appointed.
5.5 Judgments. Any money judgment, writ or similar final process shall
be entered or filed against Borrower or any subsidiary of Borrower or any of
their property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45) days.
5.6 Non-Payment. The Borrower shall have received a notice of default,
which remains uncured for a period of more than thirty (30) business days, on
the payment of any one or more debts or obligations aggregating in excess of One
Hundred Thousand Dollars (US $100,000.00) beyond any applicable grace period;
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5.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower or any Subsidiary of
Borrower and if instituted against them are not dismissed within sixty (60) days
of initiation.
5.8 Delisting. Failure of the Common Stock to be quoted or listed on
the OTC Bulletin Board ("Bulletin Board") or other Principal Market; failure to
comply with the requirements for continued listing on the Bulletin Board for a
period of five consecutive trading days; or notification from the Bulletin Board
or any Principal Market that the Borrower is not in compliance with the
conditions for such continued listing on the Bulletin Board or other Principal
Market.
5.9 Stop Trade. An SEC or judicial stop trade order or Principal Market
trading suspension with respect to Borrower's Common Stock that lasts for five
or more consecutive trading days.
5.10 Failure to Deliver Common Stock or Replacement Note. Borrower's
failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note or the Subscription Agreement, and, if requested by
Borrower, a replacement Note.
5.11 Non-Registration Event. The occurrence of a Non-Registration Event
as described in the Subscription Agreement.
5.12 Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty days prior written notice to the Holder.
5.13 Reservation Default. Failure by the Borrower to have reserved for
issuance upon conversion of the Note the amount of Common Stock as set forth in
this Note and the Subscription Agreement.
5.14 Cross Default. A default by the Borrower of a material term,
covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period.
ARTICLE VI
MISCELLANEOUS
6.1 Failure or Indulgence Not Waiver. No failure or delay on the part
of 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.
6.2 Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
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transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: Universal Communication
Systems, Inc., 407 Lincoln Road, Suite 12F, Miami Beach, FL 33139, Attn: Michael
J. Zwebner, CEO, telecopier: (305) 672-1965, with a copy by telecopier only to:
Torys LLP, 466 Lexington Avenue, New York, NY 10017, Attn: Andrew J. Beck, Esq.,
telecopier: (212) 682-0200, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176, telecopier number: (212) 697-3575.
6.3 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.
6.4 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.
6.5 Cost of Collection. If default is made in the payment of this Note,
Borrower shall pay the Holder hereof reasonable costs of collection, including
reasonable attorneys' fees.
6.6 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to conflicts
of laws principles that would result in the application of the substantive laws
of another jurisdiction. 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
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 order in favor of the Holder.
6.7 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.
6.8. 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.
6.9 Redemption. This Note may not be redeemed or called without the
consent of the Holder except as described in this Note.
6.10 Shareholder Status. The Holder shall not have rights as a
shareholder of the Borrower with respect to unconverted portions of this Note.
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However, the Holder will have the rights of a shareholder of the Borrower with
respect to the Shares of Common Stock to be received after delivery by the
Holder of a Conversion Notice to the Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by an authorized officer as of the ____ day of February, 2006.
UNIVERSAL COMMUNICATION SYSTEMS, INC.
By:__________________________________
Name:
Title:
WITNESS:
______________________________________
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NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal
and $_________ of the interest due on the Note issued by Universal Communication
Systems, Inc. on February ____, 2006 into Shares of Common Stock of Universal
Communication Systems, Inc. (the "Borrower") according to the conditions set
forth in such Note, as of the date written below.
Date of Conversion:_____________________________________________________________
Conversion Price:_______________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of Universal Communication Systems, Inc.
Shares To Be Delivered:_________________________________________________________
Signature:______________________________________________________________________
Print Name:_____________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
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