SECURED PROMISSORY NOTE
$200,000.00 Date: April 6, 2001
FOR VALUE RECEIVED, Meltronix, Inc., a California corporation
("Meltronix"), promises to pay to La Jolla Cove Investors, Inc. ("LJCI"),
the principal sum of Two Hundred Thousand Dollars ($200,000.00), with
interest thereon, in accordance with the terms and conditions of this
secured promissory note ("Note"). This Note is entered into in
connection with the Loan Agreement ("Loan Agreement"), the Security
Agreement ("Security Agreement"), and the Registration Rights Agreement
("Registration Rights Agreement"), all entered into between Meltronix
and LJCI (collectively the Transaction Documents") effective as of
April 6, 2001 ("Effective Date").
1. The unpaid portion of the principal balance of this Note shall
bear simple interest until paid in full, at an annual rate of nine
percent (9%), accrued from the date of April 6, 2001. Accrued interest
shall be payable from April 6, 2001, monthly in arrears.
2. The entire outstanding balance of this Note, including all
principal, and any previously unpaid accrued interest that may be
outstanding at that time, shall be due and payable in full in one lump
sum on April 6, 2002.
3. All payments made pursuant under this Note shall be applied
(i) first, to pay any costs and expenses incurred by LJCI in the
event LJCI is required to enforce this Note against Meltronix; (ii)
second, to pay any accrued interest; and (iii) third, to pay the
principal balance of this Note.
4. Upon the occurrence of any Event of Default (as that term is
hereafter defined), LJCI may, at any time thereafter, without demand,
presentment, protest, notice of protest, notice of maturity or
non-payment, notice of dishonor, or any other notices or demands
whatsoever in connection with the delivery, acceptance, performance,
default, endorsement, or guaranty of this Note, accelerate the unpaid
balance of all amounts owing under this Note, and declare such unpaid
balance immediately due and payable. For purposes of this Note, the
occurrence of any one of the following events shall constitute an
"Event of Default":
(a) (i) Meltronix shall default in the payment of
principal of or interest on this Note, or on any other obligation of
Meltronix to pay either principal or interest to any third party on
any other promissory note or loan agreement of any kind, as and when
the same shall be due and payable and, in the case of an interest payment
default, such default shall continue for three (3) business days after
the date such interest payment was due; or (ii) Meltronix shall fail to
perform or observe any other covenant, agreement, term, provision,
undertaking or commitment under this Note and/or any of the Transaction
Documents, and such default shall continue for a period of ten (10)
business days after the delivery to Meltronix of written notice that
Meltronix is in default hereunder or thereunder; or (iii) Meltronix shall
fail to perform or observe any material covenant, agreement, term,
provision, undertaking or commitment under any other loan document
relating to any other loan that may have been made by LJCI or the
Normal A. Lizt IRA to Meltronix, and such default shall continue for a
period of ten (10) business days after the delivery to Meltronix of
written notice that Meltronix is in default thereunder; or (iv)
Meltronix shall fail to perform or observe any material covenant,
agreement, term, provision, undertaking or commitment under any other
loan document relating to any other loan that may have been made by any
third party to Meltronix, and such default shall continue for a period
of ten (10) business days after the delivery to Meltronix of written
notice that Meltronix is in default thereunder;
(b) Any of the representations or warranties made by
Meltronix herein or in any of the Transaction Documents shall be false
or misleading in any material respect as of the Effective Date;
(c) Under the laws of any jurisdiction not otherwise
covered by clauses (d) and (e) below, Meltronix (i) makes a general
assignment for the benefit of creditors; or (ii) institutes or has
instituted against it any proceeding seeking (x) to adjudicate it a
bankrupt or insolvent, (y) liquidation, winding-up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors including any plan of compromise or arrangement or
other corporate proceeding involving or affecting its creditors, or (z)
the entry of an order for relief or the appointment of a receiver,
trustee or other similar or it or for any substantial part of its
properties and assets, and in the case of any such official proceeding
instituted against it (but not instituted by it), either the proceeding
remains undismissed or unstayed for a period of sixty (60) calendar days,
or any of the actions sought in such proceeding (including the entry of
an order for relief against it or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its properties and assets) occurs.
(d) The entry of a decree or order by a court having
jurisdiction in the premises adjudging Meltronix a bankrupt or insolvent,
or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of Meltronix under
the Bankruptcy Code (as hereafter defined) or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of Meltronix or of
any substantial part of its property, or ordering the winding-up or
liquidation of its affairs, and any such decree or order continues and is
unstayed and in effect for a period of sixty (60) calendar days;
(e) The institution by Meltronix of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the
institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization
or relief under the Bankruptcy Code (as hereafter defined) or any other
applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee or sequestrator (or other similar official) of Meltronix or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors;
(f) It becomes unlawful for Meltronix to perform or comply
with its obligations under this Note in any respect, or any of the
Transaction Documents in any material respect;
5. Meltronix agrees and promises to pay all of LJCI's
reasonable attorneys' fees and other costs and expenses incurred by
LJCI with respect to collection, suit, or other proceedings to enforce
this Note.
6. No delay or omission on LJCI's part in exercising any
rights under, or failure to insist upon prompt compliance with the
terms of this Note shall operate as a waiver of any of LJCI's rights
hereunder.
7. All of the covenants, stipulations, promises and
agreements by or on behalf of Meltronix relating to this Note shall
be deemed material and shall bind its successors and assigns, whether
so expressed or not.
8. Time is of the essence of each obligation of Meltronix
under this Note.
9. To the greatest extent permitted under applicable law,
Meltronix hereby waives and agrees not to allege or claim that any
provisions of this Note could give rise to or result in any actual or
potential violations of any applicable usury laws. All agreements
between LJCI and Meltronix are expressly limited so that in no
contingency or event whatsoever (whether by reason of the advancement
of any proceeds under this Note, demand for payment, acceleration of
maturity of any unpaid balance or otherwise) shall the amount paid or
agreed to be paid to Meltronix for the use, forbearance, or detention
of any proceeds advanced or to be advanced hereunder exceed the highest
rate permissible under applicable law. If any payments in the nature
of interest, additional interest, and other charges made hereunder are
held to be in excess of the applicable limits imposed by the usury laws
of the State of California, it is agreed that any such amount held to
be in excess shall be considered payment of principal hereunder, and
the principal amount any indebtedness evidenced hereby shall be reduced
by such amount so that the total liability for payments in the nature
of interest, additional interest and other charges shall not exceed the
applicable limits imposed by the usury laws of the State of California.
10. Miscellaneous Provisions.
10.1 Governing Law. This Note shall in all respects be
construed, interpreted and enforced in accordance with and governed by
the laws of the State of California, United States of America.
10.2 Attorneys' Fees. Subject to the provisions of
Section 5 hereof, in the event of any legal action between the parties
with respect to this Note or the subject matter hereof, the prevailing
party shall be entitled to recover reasonable attorneys' fees in
addition to court costs and litigation expenses incurred in said legal
action, regardless of whether such legal action is prosecuted to
judgment.
10.3 Notices. Any notice, demand or other communication
required or permitted under this Note shall be deemed given and
delivered when in writing and (a) personally served upon the receiving
party, or (b) upon the third (3rd) calendar day after mailing to the
receiving party by either (i) United States registered or certified
mail, postage prepaid, or (ii) FedEx or other comparable overnight
delivery service, delivery charges prepaid, and addressed as follows:
To Meltronix: Meltronix, Inc.
9577 Chesapeake Drive
San Diego, CA 92123
Attn: Chief Executive Officer
To LJCI: c/o Travis Huff
La Jolla Cove Investors, Inc.
7817 Herschel Avenue, Suite 200
La Jolla, California 92037
Any party may change the address specified in this section by giving
the other party notice of such new address in the manner set forth
herein.
10.4 Severability. In the event that any provision of
this Note becomes or is declared by a court of competent jurisdiction
to be illegal, unenforceable or invalid, then this Note shall continue
in full force and effect without said provision. If this Note continues
in full force and effect as provided above, the parties shall replace the
invalid provision with a valid provision which corresponds as far as
possible to the spirit and purpose of the invalid provision.
10.5 Counterparts. This Note may be executed in any number
of counterparts, each of which may be executed by less than all of the
parties hereto, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall
constitute one document.
10.6 Entire Agreement. This Note, the Loan Agreement, and
the documents and agreements contemplated herein and therein, constitute
the entire agreement between the parties with respect to the subject
matter hereof, and supersede all prior oral or written agreements,
representations or warranties between the parties other than those set
forth herein or herein provided for.
10.7 Successors and Assigns. The provisions hereof shall
inure to the benefit of, and be binding upon, the permitted successors
and assigns, heirs, executors, and administrators of the parties hereto.
10.8 Amendment and Waiver. No modification or waiver of
any provision of this Note shall be binding upon the party against whom
it is sought to be enforced, unless specifically set forth in writing
signed by an authorized representative of that party. A waiver by any
party of any of the terms or conditions of this Note in any one instance
shall not be deemed or construed to be a waiver of such terms or
conditions for the future, or of any subsequent breach thereof. The
failure by any party hereto at any time to enforce any of the provisions
of this Note, or to require at any time performance of any of the
provisions hereof, shall in no way to be construed to be a waiver of such
provisions or to affect either the validity of this Note or the right of
any party to thereafter enforce each and every provision of this Note.
10.9 Survivability. All of the representations, warranties,
agreements and obligations of the parties pursuant to this Note shall
survive the closing of any of the transactions contemplated hereby.
10.10 Security. This Note shall be secured pursuant to
the terms and conditions of the Security Agreement and related UCC-1
Financing Statement, pursuant to which Meltronix has pledged the
collateral described therein as security for the repayment of this
Note.
10.11 Diligence and Good Faith. LJCI and Meltronix
specifically agree to act diligently, in the utmost good faith and in a
timely manner to perform their respective obligations pursuant hereto,
and to carry out the reasonable intent of the provisions of this Note.
Each party hereto shall execute such other and further agreements,
ocuments and things as reasonable requested by the other parties hereto
to effect the transactions contemplated by this Note.
IN WITNESS WHEREOF, LJCI and Meltronix have duly executed this
Note as of the date first above written.
MELTRONIX, INC. LA JOLLA COVE INVESTORS INC.
a California corporation
By:_______________________________ By:________________________________