Exhibit 4.3
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE APPLICABLE SECURITIES UNDER THE ACT AND ANY STATE SECURITIES
LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH AN ACCOMPANYING OPINION
OF COUNSEL WITH RESPECT TO THE AVAILABILITY OF ANY SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (AS DEFINED HEREIN).
SECURED NOTE
$25,000
JUNE 10, 2003
LOS ANGELES, CALIFORNIA
WHEREAS, Devenshire Management Corp. ("Holder"), previously loaned an
aggregate of Twenty-Five Thousand Dollars ($25,000) to Quick Test 5, Inc., a
Delaware corporation and predecessor in interest to QT-5, Inc., a Delaware
corporation ("QT-5, Inc." or "Maker"), pursuant to that certain Bridge
Promissory Notes dated, September 29, 2002, (collectively, the "Previous Note");
WHEREAS, QT-5, Inc., as successor in interest to Quick Test 5, Inc. is in
default under the Previous Note;
WHEREAS, Holder has agreed to extend the maturity of the Previous Note and
TQ-5 has agreed to provide security for amounts owed to Holder by Maker; and
WHEREAS, Holder and QT-5, Inc. intend that this Secured Note supercede the
Previous Note, and govern the rights and obligations of the parties hereto with
respect to the amounts hereunder.
FOR VALUE RECEIVED, subject to the terms and conditions herein set forth,
the undersigned, Maker, hereby promises to pay to the order of Holder at
Devenshire Management Corp., 1925 Century Park East, Suite 880, Los Angeles, CA
90067, or such other address or account as Holder may from time to time specify
in writing to Maker, in lawful money of the United States and in immediately
available funds, the principal amount of Twenty-Five Thousand Dollars ($25,000),
together with interest at the rate specified below. The due payment and
performance of Maker's obligations under this Note are secured by that certain
Security Agreement dated June 5, 2003, by Maker in favor of Holder.
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SECTION 1. INTEREST. The unpaid principal balance of this Note
outstanding shall accrue interest from the date above first written at the rate
of twelve percent (12%) per annum, and such interest shall be payable on the
Maturity Date (as defined below). Interest hereon shall be calculated on the
basis of a 365-day year until all accrued and unpaid interest is paid in full.
If this Note is not paid when due, the unpaid balance shall bear interest at the
lesser of: (1) the rate of twenty percent (20%) per annum; or (2) the maximum
rate permitted by law (the "Default Rate"), payable in cash monthly in arrears.
SECTION 2. PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The entire amount
due hereunder, including principal and accrued interest, shall be due and
payable on December 1, 2003 (the "Maturity Date"). All payments shall be applied
first to accrued but unpaid interest on the unpaid principal balance and the
remainder to principal. All interest due and payable hereunder which is not paid
when due for any reason shall, to the extent permitted by applicable law, be
cumulated and accrue interest at the Default Rate.
SECTION 3. PREPAYMENT AND REDEMPTION. The principal amount of this Note
may be prepaid, in whole or in part, at any time or from time to time without
any penalty to Maker;.
SECTION 4. TRANSFER, EXCHANGE AND REPLACEMENT OF NOTE. Subject to the
provisions of Section 5.2 hereof, Holder may transfer this Note in whole or in
part. This Note shall be transferable on the note register of Maker maintained
at the office of Maker's transfer agent or at the principal executive office of
Maker, upon delivery thereof duly endorsed by Holder, or accompanied (as
reasonably required by Maker) by proper evidence of succession, assignment or
authority to transfer executed by Holder. In addition, Holder and, if
applicable, any transferee shall comply with the terms of Section 5.2 hereof.
Upon any registration of transfer, Maker shall execute a new Note or Notes to
the persons entitled thereto. Each transferee and subsequent transferee shall
accept this Note subject to all of the terms and conditions set forth herein, as
if such transferee or subsequent transferee were deemed the Holder. Maker may
deem and treat the person in whose name this Note is registered as the absolute,
true and lawful owner of this Note for all purposes. Upon receipt by Maker of
evidence reasonably satisfactory to it of loss, theft, destruction or mutilation
of this Note, Maker shall make and deliver a new Note of like tenor in lieu of
this Note, if (i) in case of loss, theft or destruction, Maker receives
indemnity reasonably satisfactory to it, (ii) Maker is reimbursed for all
reasonable expenses incidental to such replacement, and (iii) this Note is
surrendered and canceled, if mutilated. For purposes of clause (i) above, Maker
agrees that an unsecured indemnity from the original Holder of this Note shall
be reasonably satisfactory to Maker.
SECTION 5. INVESTMENT ACQUISITION AND RESTRICTIONS ON TRANSFER.
SECTION 5.1 INVESTMENT REPRESENTATIONS. By acceptance of this Note,
Holder represents and warrants to Maker as follows:
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(a) Holder understands that the Note has not been registered
under federal or state securities laws and has been or will be issued, as the
case may be, pursuant to exemptions from registration contained in such laws;
and
(b) Holder has acquired the Note solely for its own account and
not as a nominee for any other party and not with a view toward the resale or
distribution of the Note in violation of applicable securities laws.
SECTION 5.2 RESTRICTIONS ON TRANSFER. Holder, by the acceptance of this
Note, agrees that Holder will not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of this Note or any interest in the same in violation of the
Securities Act of 1933, as amended, or any applicable state securities laws.
SECTION 6. DEFAULTS AND REMEDIES.
SECTION 6.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) Maker fails to pay any amount due under this Note when due
and is unable to cure such failure within three (3) business days of receipt of
written notice from Holder that it is in default;
(b) Maker fails to observe, perform or comply with any covenant,
agreement or term contained in this Note or the Security Agreement and, if
subject to remedy, the same is not remedied within thirty (30) days after notice
from Holder;
(c) Any representation, warranty or certification made by Maker
pursuant to this Note, the Settlement Agreement of even date, or the Security
Agreement having been false or misleading in any material respect as of the date
made, and, if subject to remedy, the same is not remedied within thirty (30)
days after notice from Holder;
(d) Maker or any Subsidiary thereof applies for or consents to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property;
Maker or any Subsidiary admits in writing its inability, or is generally unable,
to pay its debts as they become due for a period of ninety (90) consecutive
days; Maker or any Subsidiary thereof makes a general assignment for the benefit
of creditors; any proceeding is instituted by or against Maker or any Subsidiary
thereof seeking to adjudicate it a bankrupt or insolvent, seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debts, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or for any substantial part of its property, provided that, in any such case,
if the same is dismissed or vacated within ninety (90) days of being instituted,
then any such default shall be deemed cured; or Maker or any Subsidiary thereof
takes any corporate action to authorize any of the actions set forth above;
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(e) a material part of the operations or business of Maker and
its Subsidiaries, considered as a whole, shall be suspended or cease for a
period exceeding thirty (30) days;
(f) Maker purports or attempts to assign or delegate any of its
rights or obligations hereunder or the Security Agreement;
(g) Maker fails to (i) ship in any calendar month at least ten
thousand (10,000) cases of NicoWater and (ii) generate gross sales of at least
$280,000 from the sale of NicoWater in any month; or
(h) the Security Agreement or this Note shall, at any time after
its execution and delivery, for any reason cease to be in full force and effect
(unless such occurrence is in accordance with its terms or after payment hereof)
or shall be declared null and void or the validity or enforceability thereof
shall be contested by Maker, or Maker denies that it has further liability or
obligation thereunder.
SECTION 6.2 REMEDIES. During the continuance of any Event of Default,
Holder may, at its sole option, declare the entire unpaid principal balance and
accrued, unpaid interest on this Note (if any) immediately due and payable, by
written notice to Maker, in which event Maker immediately shall pay to Holder
the entire unpaid principal balance of this Note together with accrued, unpaid
interest thereon to the date of such payment. No delay or omission of Holder to
exercise any right or power occurring upon any Event of Default hereunder shall
impair any such right or power or shall be construed as a waiver of any such
Event of Default or an acquiescence therein. To the fullest extent permitted by
law, Holder's rights and remedies under this Note shall be cumulative, and
Holder shall have all other rights and remedies not inconsistent herewith as are
provided under the Uniform Commercial Code as in effect in the relevant
jurisdictions, by law or in equity. No exercise by Holder of one right or remedy
shall be deemed an election, no waiver by Holder of any default on the part of
the Maker shall be deemed a continuing waiver (unless expressly so provided
therein), and no delay by Holder shall constitute a waiver, election or
acquiescence by it.
SECTION 6.3 WAIVERS BY MAKER. Maker waives presentment, demand, notice of
dishonor, notice of default or delinquency, notice of acceleration, notice of
protest and nonpayment, notice of costs, expenses or losses and interest
thereon, notice of interest on interest and delinquence in taking any action to
collect any sums owing under this Note or in a proceeding against any of the
rights or interests in or to properties securing payment of this Note, except as
otherwise expressly provided herein.
SECTION 7. COLLATERAL. The amounts due under this Secured Convertible
Note are secured by a pledge of all of the tangible and intangible assets of
Maker pursuant to that certain Security Agreement, dated as of June 5, 2003, by
and among Maker and Holder.
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SECTION 8. MISCELLANEOUS.
SECTION 8.1 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and may be delivered by personal
service, or sent by registered or certified mail, return receipt requested, with
postage thereon fully prepaid. All such communications shall be addressed to the
Holder of record at its address appearing on the books of Maker.
SECTION 8.2 SUCCESSORS. All the covenants, agreements, representations
and warranties contained in this Note shall bind the parties hereto and their
respective heirs, executors, administrators, distributees, successors and
assigns, including any subsequent Holders of this Note.
SECTION 8.3 ASSIGNMENT; PARTICIPATIONS. Maker and Holder shall include the
successors and assigns thereof; provided, however, that Maker may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of Holder. Holder may, without the consent of Maker, at any time assign
or grant participations in all or any portion of this Note or its rights
hereunder; provided, however, that any such assignment or participation shall be
in accordance with applicable law, including without limitation all applicable
federal and state securities laws, and subject to the provisions of Section 5.2.
SECTION 8.4 NO ORAL MODIFICATION. The provisions, terms and conditions
of 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.
SECTION 8.5 GOVERNING LAW. MAKER ACKNOWLEDGES THAT THE TRANSACTIONS
CONTEMPLATED BY THIS NOTE BEAR A REASONABLE RELATION TO THE STATE OF CALIFORNIA
IN THAT, INTER ALIA, MAKER'S PRINCIPAL PLACE OF BUSINESS IS IN THE STATE OF
CALIFORNIA AND THE PROCEEDS OF THE SALE OF THIS NOTE ARE TO BE PAID IN
CALIFORNIA, AND A SUBSTANTIAL PART OF THE NEGOTIATIONS RELATING TO THE
TRANSACTIONS CONTEMPLATED BY THIS NOTE HAVE OCCURRED IN THE STATE OF CALIFORNIA.
THIS NOTE IS DELIVERED IN THE STATE OF CALIFORNIA AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAW OF THE STATE OF CALIFORNIA WITHOUT
GIVING ANY EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. IT IS THE INTENT OF
MAKER THAT THE LAWS OF CALIFORNIA REGARDING USURY AND THE CHARGING OF INTEREST
APPLY TO THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.6 SUBMISSION TO JURISDICTION; SERVICE OF PROCESS. Maker hereby:
(a) irrevocably submits to the jurisdiction of the state and
federal courts sitting in the City of Los Angeles, State of California for the
purpose of any suit, action or other proceedings arising out of or based upon
this Secured Note or the subject matter hereof brought by any party hereto or
their respective successors or assigns;
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(b) waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, in any such suit, action or proceeding, any claim that
it is not subject personally to the jurisdiction of the above named courts, that
its property is exempt or immune from attachment or execution, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Secured Note or the subject
matter hereof may not be enforced in or by such court;
(c) waives any right to jury trial and any offsets or
counterclaims in any such action, suit or proceeding (other than compulsory
counterclaims); and
(d) consents to service of process by registered mail at the
address to which notices are to be given.
SECTION 8.7 HEADINGS. The Section headings in this Secured Note are
inserted for purposes of convenience only, and shall not affect in any way the
meaning or interpretation hereof.
Section 8.8 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Secured Note or the rights
and duties of the parties in relation hereto, the prevailing party will be
entitled, in addition to any other relief granted, to all costs and expenses
incurred by such prevailing party, including, without limitation, all reasonable
attorneys' fees.
SECTION 8.9 TIME OF THE ESSENCE. Time is of the essence with respect to
every provision hereof.
SECTION 8.10 USURY. Notwithstanding any other provision of this Secured
Note to the contrary, all agreements among the Maker and Holder are expressly
limited, so that in no event or contingency whatsoever, whether by reason of the
delivery of the proceeds of this Secured Note, acceleration of maturity of the
unpaid principal balance, the addition of accrued interest to principal or
otherwise, shall the amount paid, charged for, contracted for, received or
agreed to be paid to Holder for the use, forbearance or detention of the money
to be delivered under this Note exceed the highest lawful rate permissible under
applicable usury laws as prescribed by a court of competent jurisdiction
("Applicable Law"). If, from any circumstances whatsoever, interest would
otherwise be payable to Holder in excess of the maximum amount permissible under
Applicable Law, the interest payable to Holder shall be reduced to the maximum
amount permissible under Applicable Law, and if from any circumstances Holder
shall ever receive anything deemed interest by Applicable Law in excess of the
maximum amount permissible under Applicable Law, an amount equal to the
excessive interest shall be applied to the reduction of the principal hereof and
not to the payment of interest, or if such excessive amount of interest exceeds
the unpaid principal balance hereof, such excess shall be refunded to Maker. All
interest paid or agreed to be paid to Holder shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated and spread throughout the full
period (including any renewal or extension) until payment in full of the
principal so that the interest
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hereon for such full period shall not exceed the maximum amount permissible
under Applicable Law. Holder, by its acceptance hereof, expressly disavows any
intent to contract for, charge or receive interest in an amount which exceeds
the maximum amount permissible under Applicable Law. This Section 8.10 shall
control agreements between Maker and Holder. This covenant shall survive the
payment in full of this Secured Note.
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IN WITNESS WHEREOF, Maker has executed this Secured Note as of the date
first above written.
"MAKER" QT-5, Inc.,
a Delaware corporation
By: /s/ Steve Reder
---------------------------------
Steve Reder
President, Director
By: /s/ Timothy Owens
---------------------------------
Tim Owens
Chief Executive Officer, Director
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