EXHIBIT 10.2 PROMISSORY NOTE IN FAVOR OF CHROME
EXHIBIT A
NEW NOTE FOR $10,134,084.42
REFLECTING CANCELLATION AND CONSOLIDATION OF OLD NOTES
THIS NOTE, AND THE SECURITIES ISSUABLE UPON THE CONVERSION OF THIS NOTE, HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
APPLICABLE STATE LAW AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE STATE ACT OR UNLESS THE
COMPANY RECEIVES AN OPINION FROM COUNSEL TO THE HOLDER AND IS SATISFIED THAT
THIS NOTE AND THE UNDERLYING SECURITIES MAY BE TRANSFERRED WITHOUT REGISTRATION
UNDER THE ACT.
CONSOLIDATED CONVERTIBLE NOTE
$10,134,084.42 As of December 15, 2004
Houston, Texas
FOR VALUE RECEIVED, ENVIRONMENTAL REMEDIATION HOLDING CORPORATION, a Colorado
corporation (the "Company"), hereby promises to pay to the order of Chrome
Energy, L.L.C, or any subsequent holder of this Note (the "the Holder"), at 5444
Westheimer, Suite 1570, Houston, Texas 77056, or at such other place as may be
designated by the Holder from time to time by notice to the Company, the
principal sum of TEN MILLION ONE HUNDRED THIRTY FOUR THOUSAND EIGHTY FOUR AND
42/100 DOLLARS ($10,134,084.42), together with simple interest from the date
hereof (the "Issuance Date") on the unpaid principal amount at an annual rate
equal to twelve percent (12%) per annum.
1. PAYMENTS.
(a) Unless previously fully converted into Common Stock (as defined herein) as
herein provided, the unpaid principal amount of this Note plus all accrued and
unpaid interest thereon shall be payable to the Holder in cash on or before
January 31, 2007 (collectively the "Maturity Date").
(b) Interest on the unpaid principal balance of this Note at the rate of twelve
percent (12%) per annum shall accrue from the date hereof and shall be payable
to the Holder in cash or Common Stock, if such interest amount is converted into
Common Stock as herein provided, on January 31, 2006, and on the Maturity Date.
Notwithstanding anything in this Note to the contrary, in no event shall the
rate of interest charged with respect to this Note exceed the highest rate of
interest which may be lawfully charged under the laws of any jurisdiction
governing this Note and the payment of interest thereon.
(c) All payments contemplated hereby to be made "in cash" shall be made in
immediately available good funds of United States of America currency by wire
transfer to an account designated in writing by the Holder to the Company (which
account may be changed by notice similarly given). All payments of cash and each
delivery of shares of Common Stock issuable to the Holder as contemplated hereby
shall be made to the Holder at the address designated in writing by the Holder.
(d) In the event that any payment of principal and/or interest hereunder becomes
due and payable on a Saturday, Sunday or other day on which commercial banks in
the City of Houston, Texas are authorized or required by law to close, then the
maturity thereof shall be extended to the next succeeding "Business Day"
(defined as any days on which national banks in the United States are open for
business); and during any such extension, interest on principal amounts payable
shall accrue and be payable at the applicable rate.
2. CONSOLIDATION.
In connection with the Company's efforts to recapitalize all of the Company's
current debt obligations, the Company has consolidated all notes and obligation
existing between the Company and the Holder prior to December 15, 2004,
including that certain Senior Secured 10.00% Exchangeable Promissory Note Due
February 15, 2005, with a principle amount due as of November 18, 2004 of
$4,294,460.92, that certain Senior Secured Promissory Note Due September 1,
2004, as extended, with a principle amount of $1,800,000, that certain Senior
Secured 8.00% Exchangeable Promissory Note Due September 1, 2004, as extended,
with a principle amount of $2,200,000, that certain Amended and Restated
Convertible Note, as extended, dated as of January 31, 2001, with a principle
amount of $804,312.50, Amended and Restated Convertible Note, as extended, dated
as of January 31, 2001, with a principle amount of $631,666.67, and that certain
Note, dated as of February 15, 2001, as extended, with a principle amount of
$403,643.85 (collectively, the "Old Notes"), into this Note. This Note
supersedes the terms and conditions of the Old Notes and Holder acknowledges
that the acceptance of this Note by Holder, cancels and discharges any and all
representations or obligations contained in the Old Notes. Holder and Company
acknowledge and agree that there are no other debts or obligations owed to
Holder by Company, except for this Note and that certain Promissory Note, issued
of even date herewith, with a principal amount of $2,500,000. This Note is
intended by the parties to be the entire and final expression of the parties'
intent concerning this subject matter.
3. PREPAYMENT OF NOTE.
(a) The principal amount of this Note and any accrued and unpaid interest may be
prepaid, at the option of the Company, in whole or in part, without premium or
penalty, at any time or from time to time from and after the Issuance Date.
(b) Each prepayment notice shall be in writing in accordance with the provisions
of Section 4(g) hereof and shall specify the principal amount of this Note to be
redeemed. Each prepayment of principal of this Note shall be accompanied by the
payment of all interest accrued and unpaid to the prepayment date on the amount
so prepaid. Any partial prepayment of this Note, whether optional or mandatory,
shall be applied first to accrued and unpaid interest hereon, and then to the
outstanding principal amount of this Note in the inverse order of maturity.
4. CONVERSION.
The Company shall have the following conversion rights (the "Conversion
Rights"):
(a) Conversion. At any time or from time to time, the Company may elect to
convert all or a portion of the original principal amount of this Note and any
accrued but unpaid interest, into shares of common stock of the Company ("Common
Stock"), by written notice given to the Holder in accordance with the provisions
of Section 4(f) hereof (the "Conversion Notice"). The "Conversation Date" shall
be the date the Conversion Notice is provided pursuant to Section 4(f) hereof.
The Holder shall deliver to the Company this Note by no later than five (5)
business days after the date on which the Conversion Notice is delivered by the
Company as contemplated in this paragraph. New certificates will be delivered to
the Holder, within five (5) business days after receipt of the Note by the
Company.
(b) Conversion Price. Subject to adjustment from time to time as provided in
Section 4(c) below, the term "Conversion Price" shall mean $0.175 per share of
Common Stock.
(c) Adjustments of Conversion Price. The Conversion Price in effect from time to
time shall be, subject to adjustment in accordance with the provisions of this
Section 4(c).
(i) Adjustments for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the Issuance Date, effect a
stock split of the outstanding Common Stock, the Conversion Price in
effect immediately prior to the stock split shall be proportionately
decreased. If the Company shall at any time or from time to time after the
Issuance Date, combine the outstanding shares of Common Stock, the
Conversion Price in effect immediately prior to the combination shall be
proportionately increased. Any adjustments under this Section 4(c) (i)
shall be effective at the close of business on the date the stock split or
combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If the
Company shall at anytime or from time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
shares of Common Stock, then, and in each event, the Conversion Price in
effect immediately prior to such event shall be decreased as of the time
of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect by a fraction;
(A) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date; and
(B) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such record
date plus the number of shares of Common Stock issuable in payment
of such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. If the
Company shall at any time or from time to time after the Issuance Date,
make or issue or set a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable
in other than shares of Common Stock, then, and in each event, an
appropriate revision to the Conversion Price shall be made and provision
shall be made (by adjustments of the Conversion Price or otherwise) so
that the Holder shall receive upon conversions thereof, in addition to the
number of shares of Common Stock receivable thereon, the number of
securities of the Company which they would have received had this Note
been converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including
the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to
all adjustments called for during such period under this Section 4(c)(i)
with respect to the rights of the holders of the Note.
(iv) Adjustments for Reclassification, Exchange or Substitution. If
the Common Stock issuable upon conversion of this Note at any time or from
time to time after the Issuance Date shall be changed into the same or a
different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way
of a stock split or combination of shares or stock dividends provided for
in Sections 4(c)(i), (ii) and (iii), or a reorganization, merger,
consolidation, or sale of assets provided for in Section 4(c)(v)), then,
and in each event, an appropriate revision to the Conversion Price shall
by made and provisions shall be made (by adjustments of the Conversion
Price of otherwise) so that the Holder shall have the right thereafter to
convert such Note into the kind and amount of shares of stock and other
securities receivable upon such reclassification, exchange, substitution
or other change, by holders of the number of shares of Common Stock into
which such Note might have been converted immediately prior to such
reclassification, exchange, substitution or other change, all subject to
further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales
of Assets. If at anytime or from time to time after the Issuance Date
there shall be a capital reorganization of the Company (other than by way
of a stock split or combination of shares or stock dividends or
distributions provided for in Section 4(c)(i), (ii) and (iii), or a
reclassification, exchange or substitution of shares provided for in
Section 4(c) (iv)), or a merger or consolidation of the Company with or
into another corporation, or the sale of all or substantially all of the
Company's properties or assets to any other person, then as a part of such
reorganization, merger, consolidation, or sale, then, and in each such
case, proper provision shall be made so that, upon the exercise of this
Note at any time after the consummation of such reorganization, merger,
consolidation, or sale, the Holder shall be entitled to receive (at the
Conversion Price in effect for Common Stock issuable upon such exercise of
this Note immediately prior to such consummation), in lieu of Common Stock
issuable upon such exercise of this Note prior to such consummation, the
stock and other securities, cash and assets to which such Holder would
have been entitled upon such consummation if this Note had been exercised
immediately prior thereto.
(d) Certificate as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Note pursuant to this Section 4, the Company at
its expense, shall promptly compute: such adjustment or readjustment in
accordance with the terms hereof and furnish notice to the Holder, a certificate
setting forth such adjustment and readjustment, showing in detail the facts upon
which such adjustment or readjustment is based. The Company shall, upon written
request of the Holder, at any time, furnish or cause to be furnished to such
holder a like certificate setting forth such adjustments and readjustments, the
applicable Conversion Price in effect at the time and the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the conversion of such Note. Notwithstanding the
foregoing, the Company shall not be obligated to deliver a certificate unless
such certificate would reflect an increase or decrease of at least one percent
(1%) of such adjusted amount.
(e) Issue Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant hereto; provided, however, that the Company shall not be obligated to
pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(f) Notices and Delivery of Shares. All notices and other communications
hereunder shall be in writing and shall be deemed given (i) on the same date, if
delivered personally or by facsimile by not later than 5:00 p.m. Houston, Texas
time (provided, that a copy of such facsimile shall be simultaneously sent to
Brewer & Pritchard, PC at (713) 659-5302), or (ii) three business days following
being mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed to the party in accordance with Section 7 hereof. Not later
than five (5) Business Days following receipt of notice of conversion as
provided herein (the "Delivery Date"), the Company shall deliver to the holders
of this Note, against delivery of this Note surrendered for conversion,
certificates evidencing all shares of Common Stock into which this Note shall be
converted.
(g) Fractional Shares. No fractional shares of Common Stock shall be issued upon
conversion of the Note. In lieu of any fractional shares to which the holder
would otherwise be entitled, the Company shall pay cash equal to the product of
such fraction multiplied by the Conversion Price of one share of Common Stock on
the applicable Conversion Date.
(h) Retirement of Note. Conversion of this Note shall be deemed to have been
effected on the applicable Conversion Date. The Holder shall be deemed to have
become a shareholder of record of the Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of this Note, the Company shall issue
and deliver to such holder, at the expense of the Company, against receipt of
the original Note delivered for partial cancellation, a new Note representing
the unconverted portion of this Note so surrendered and Common Stock equal to
the portion converted.
5. HOLDER REPRESENTATIONS.
(a) Investment Purposes. The Holder is acquiring the Note for investment
purposes and not with a view to the resale or distribution of all or any part
thereof. The Holder acknowledges that the Note has not been registered under the
Securities Act, or the securities or "blue sky" laws of any state or other
domestic or foreign jurisdiction and that none of such securities may be sold,
transferred or otherwise disposed of except pursuant to an effective
registration statement thereunder or an applicable exemption therefrom.
(b) Accredited Investor. The Holder (i) has such knowledge and experience in
financial and business matters that such Holder is capable of evaluating the
merits and risks of his or her investment in the Note and has the financial
ability to assume the monetary risk associated therewith; (ii) is able to bear
the complete loss of his or her investment in the Note; has received such
documents and information from the Company as such Holder has requested and has
had the opportunity to ask questions of and receive answers from the Company and
the terms and conditions of the offering of the notes and to obtain additional
information; (iv) is an "accredited investor" as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act; and (v) is not relying upon
any statements or instruments made or issued by any person other than the
Company in making a decision to invest in the Note.
(c) Restrictive Legends. Any certificate for Common Stock issued upon conversion
of the Note and each certificate for Common Stock issued to a subsequent
transferee shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Securities Act") or any
state securities act. The securities have been acquired for investment and
may not be sold, transferred, pledged or hypothecated unless (i) they
shall have been registered under the Securities Act and any applicable
state securities act, or (ii) the corporation shall have been furnished
with an opinion of counsel, satisfactory to counsel for the corporation,
that registration is not required under any such act."
6. MERGER; CONSOLIDATION.
If, for as long as this Note remains outstanding, the Company enters into a
merger (other than where the Company is the surviving entity) or consolidation
with another corporation or other entity or a sale or transfer of all or
substantially all of the assets of the Company to another person (collectively,
a "Sale"), the Company will require, in the agreements reflecting such
transaction, that the surviving entity expressly assume the obligations of the
Company hereunder. Notwithstanding the foregoing, if the Company enters into a
Sale and the holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common Stock, then as a
condition of such Sale, the Company and any such successor, purchaser or
transferee will agree that the Note may thereafter be converted on the terms and
subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger, consolidation, sale or
transfer by a holder of the number of shares of Common Stock into which this
Note might have been converted at the Conversion Price immediately before such
merger, consolidation, sale or transfer, subject to adjustments which shall be
as nearly equivalent as may be practicable.
7. EVENTS OF DEFAULT.
The Holder must provide the Company with ten (10) days written notice of any
default. Upon receipt of such notice of default, the Company shall have ten (10)
days to cure such default ("Cure Period"). The continuance of any one or more of
the following events after the Cure Period is herein referred to as an Event of
Default:
(a) The Company shall default if the payment of principal of the Note is
not paid when and as the same shall become due and payable, either
at maturity or by acceleration or otherwise; or
(b) The Company shall default if the payment of interest on the Note is
not paid when the same becomes due and payable; or
(c) If the Company shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
as they become due, or shall file a voluntary petition in bankruptcy
or shall have an order for relief under the United States Bankruptcy
Code granted against it or them, or shall be adjudicated a bankrupt
or insolvent, or shall file any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or
future statute, law or regulation, or shall file any answer
admitting or not contesting the material allegations of a petition
filed against the Company in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee,
custodian, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company, or the Company or
its directors shall take any action looking to the dissolution or
liquidation of the Company; or
(d) If, within sixty (60) days after the commencement of any proceeding
against the Company seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such
proceeding shall not have been dismissed, or if, within sixty (60)
days after the appointment, without the consent or acquiescence of
the Company, of any trustee, receiver or liquidator of the Company
or of all or any substantial part of the properties of the Company,
such appointment shall not have been vacated.
8. REMEDIES ON DEFAULT; ACCELERATION.
Upon the occurrence and during the continuance of an Event of Default, the
entire unpaid balance of principal and accrued interest on this Note may be
accelerated and declared to be immediately due and payable by the holder. Unless
waived by the written consent of the holder, such holder may proceed to protect
and enforce its rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein, or for an injunction against a violation of any of the terms hereof, or
in aid of the exercise of any power granted hereby or by law. Upon the
occurrence of an Event of Default, the Company agrees to pay to the Holder such
further amount as shall be sufficient to cover the cost and expense of
collection, including, without limitation, reasonable attorneys' fees and
expenses. No course of dealing and no delay on the part of the Holder in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers and remedies. No right, power
or remedy conferred hereby upon the Holder shall be exclusive of any other
right, power or remedy referred to herein nor now or hereafter available at law,
in equity, by statute or otherwise.
9. NOTICES.
All notices, requests, demands or other communications hereunder shall be in
writing and personally addressed or sent by telecopier or by registered or
certified mail, return receipt requested, postage pre-paid, addressed or
telecopied as follows or to such other address or telecopier number of which
notice has been given pursuant hereto:
If to the Company: Environmental Remediation Holding Corp.
5444 Westheimer, Suite 1570
Houston, TX 77056
Attn: Mr. Ali Menon, President
Telephone (713) 626-4700
Fax (713) 626-4704
with copy to: Brewer & Pritchard, PC
3 Riverway, Suite 1800
Houston, Texas 77056
Attn: Thomas C. Pritchard, Esq.
Telephone (713) 209-2950
Fax (713) 209-2921
If to the Holder: to the Holder at the address set forth on
the records of the Company. In addition,
copies of all such notices or other
communications shall be concurrently
delivered by the person giving the same to
each person who has been identified to the
Company by the Holder as a person who is to
receive copies of such notices.
9. GOVERNING LAW.
This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Texas, without giving effect to conflict of law
principles.
10. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon and inure to the benefit of the Company and the
Holder and their respective successors and permitted assigns; provided, however,
that the Company may not transfer or assign any of its rights or obligations
hereunder without the prior written consent of the Holder; and provided,
further, that transfer or assignment by the holder is in accordance with
applicable federal and state securities laws.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly
authorized officers as of the date first set forth above.
ENVIRONMENTAL REMEDIATION HOLDING CORP.
By: /s/ Ali Memon
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Name: Ali Memon
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Title: President
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Agreed and Accepted:
NOTEHOLDER
By: /s/ Sir Emeka Offor
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Name: Sir Emeka Offor
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Title: Sole Manager
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