THIS NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. B1 U.S. $225,000.00 Original Issue Date: May 5, 2006
Holder: John Fife
Address: 303 East Wacker Drive
Suite 301
Chicago, IL 60601
SERIES 2006
SECURED ORIGINAL ISSUE DISCOUNT NOTE DUE AUGUST 5, 2006
THIS Note is one of a duly authorized issue of Notes of VALCOM, INC., a
Delaware corporation, having a principal place of business at C/o ValCom, Inc.,
920 S. Commerce Street, as Vegas, NV 89106 (the "Company"), designated as
its Note (the "Note"), due upon August 5, 2006 ("Maturity Date"), in an
aggregate face amount of up Two Hundred and Twenty Five Thousand and 00/100
Dollars ($225,000.00).
FOR VALUE RECEIVED, the Company promises to pay to the Holder or
registered assigns, the principal sum of Two Hundred Thousand and Twenty Five
Thousand 00/100 Dollars ($225,000.00) ("Principal Amount"), on the Maturity
Date. Upon default, all amounts due hereunder shall bear interest at the rate
of 1.5% per month from the day such interest is due hereunder through and
including the date of payment. The principal of, and interest on, this Note
are payable in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts, at the
address of the Holder last appearing on the Note Register.
This Note is subject to the following additional provisions:
Section 1. The Notes are exchangeable for an equal aggregate
principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same but shall not be issuable in denominations
of less than integral multiples of Twenty Thousand Dollars ($20,000) unless
such amount represents the full principal balance of Notes outstanding to such
Holder. No service charge will be made for such registration of transfer or
exchange.
Section 2.
(a) The Holder, by acceptance hereof, agrees to give written
notice to the Company before transferring this Note; such notice will describe
briefly the proposed transfer and will give the Company the name, address, and
tax identification number of the proposed transferee, and will further provide
the Company with an opinion of the Holder's counsel that such transfer can be
accomplished in accordance with federal and applicable state securities laws
(unless such transaction is permitted by the plan of distribution in an
effective Registration Statement). Promptly upon receiving such written
notice, the Company shall present copies thereof to the Company's counsel.
(i) If in the opinion of such counsel the proposed transfer may be
effected without registration or qualification (under any federal or
state securities laws), the Company, as promptly as practicable, shall
notify the Holder of such opinion, whereupon the Holder shall be entitled
to transfer this Note or to dispose of Underlying Shares received upon
the previous conversion of this Note, all in accordance with the terms of
the notice delivered by the Holder to the Company; provided that an
appropriate legend may be endorsed on this Note respecting restrictions
upon transfer thereof necessary or advisable in the opinion of counsel
and satisfactory to the Company to prevent further transfers which would
be in violation of Section 5 of the Securities Act and applicable state
securities laws; and provided further that the prospective transferee or
purchaser shall execute such documents and make such representations,
warranties, and agreements as may be required solely to comply with the
exemptions relied upon by the Company for the transfer or disposition of
the Note.
(ii) If in the opinion of the counsel referred to in this Section 2, the
proposed transfer or disposition of this Note described in the written
notice given pursuant to this Section 2 may not be effected without
registration or qualification of this Note, the Company shall promptly
give written notice thereof to the Holder, and the Holder will limit its
activities in respect to such as, in the opinion of such counsel, are
permitted by law.
(b) Prior to transfer of this Note in compliance with this
Section 2, the Company and any agent of the Company may treat the person in
whose name this Note is duly registered on the Note Register as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note is overdue, and neither the Company
nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
"Event of Default" wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative
or governmental body):
(i) any default in the payment of the principal of, interest on,
or other obligations in respect of, this Note, free of any claim of
subordination, as and when the same shall become due and payable,
(whether on the Maturity Date or by acceleration or otherwise);
(ii) the Company or any Pledgor shall fail to observe or perform
any other covenant, agreement or warranty contained in, or otherwise
commit any breach of, this Note or the Stock Pledge Agreement, including
but not limited to the obligation of the Pledgor to issue additional
Collateral , and such failure or breach shall not have been remedied
within 5 days after the date on which notice of such failure or breach
shall have been given;
(iii) the Company shall commence a voluntary case under the United
States Bankruptcy Code or insolvency laws as now or hereafter in effect
or any successor thereto (the "Bankruptcy Code"); or an involuntary case
is commenced against the Company under the Bankruptcy Code; or a
"custodian" (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or any substantial part of the property of the
Company or the Company commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Company or there is
commenced against the Company; or the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case
or proceeding is entered; or the Company suffers any appointment of any
custodian or the like for it or any substantial part of its property; or
the Company makes a general assignment for the benefit of creditors; or
the Company shall fail to pay, or shall state that it is unable to pay
its debts generally as they become due or the Company shall call a
meeting of all of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company shall by any act or failure to
act indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company for
the purpose of effecting any of the foregoing;
(iv) the Company shall default in any of its obligations under any
mortgage, credit agreement or other facility, indenture, agreement or
other instrument under which there may be issued, or by which there may
be secured or evidenced any indebtedness of the Company in an amount
exceeding $500,000.00, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it
would otherwise become due and payable;
(v) the Company shall be a party to any Change of Control
Transaction (as defined in Section 6), shall agree to sell or dispose of
all or in excess of 49% of its assets (based on book value calculation as
reflected in the Company's most recent financial statements) in one or
more transactions (whether or not such sale would constitute a Change of
Control Transaction) or
(vi) The Company shall have its Common Stock suspended or delisted
from trading for in excess of three (3) Trading Days.
Immediately upon the occurrence of an Event of Default, Holder will have
the right to foreclose on the collateral shares and immediately begin to sell
such stock until Holder has fully realized Maturity Amount. In addition, if
the Maturity Amount is not paid in full with five (5) business days after its
due date, the Company will be assessed with a default fee of 10% of the
principal amount of the note.
Section 4. Interest Rate Limitation. The parties intend to conform
strictly to the applicable usury laws in effect from time to time during
the term of the Loan. Accordingly, if any transaction contemplated hereby
would be usurious under such laws, then notwithstanding any other
provision hereof: (i) the aggregate of all interest that is contracted
for, charged, or received under this Agreement or under any other Loan
Document shall not exceed the maximum amount of interest allowed by
applicable law (the "Highest Lawful Rate"), and any excess shall be
promptly credited to Borrower by Lender (or, to the extent that such
consideration shall have been paid, such excess shall be promptly
refunded to Borrower by Lender); (ii) neither Borrower nor any other
Person now or hereafter liable hereunder shall be obligated to pay the
amount of such interest to the extent that it is in excess of the Highest
Lawful Rate; and (iii) the effective rate of interest shall be reduced to
the Highest Lawful Rate. All sums paid, or agreed to be paid, to Lender
for the use, forbearance, and detention of the debt of Borrower to Lender
shall, to the extent permitted by applicable law, be allocated throughout
the full term of the Note until payment is made in full so that the
actual rate of interest does not exceed the Highest Lawful Rate in effect
at any particular time during the full term thereof. If at any time the
rate of interest under the Note exceeds the Highest Lawful Rate, the rate
of interest to accrue pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary in this Agreement, to the
Highest Lawful Rate, but any subsequent reductions in the Base Rate shall
not reduce the interest to accrue pursuant to this Agreement below the
Highest Lawful Rate until the total amount of interest accrued equals the
amount of interest that would have accrued if a varying rate per annum
equal to the interest rate under the Note had at all times been in
effect. If the total amount of interest paid or accrued pursuant to this
Agreement under the foregoing provisions is less than the total amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had been in effect, then Borrower agrees to
pay to Lender an amount equal to the difference between (x) the lesser of
(A) the amount of interest that would have accrued if the Highest Lawful
Rate had at all times been in effect, or (B) the amount of interest that
would have accrued if a varying rate per annum equal to the interest rate
under the Note had at all times been in effect, and (y) the amount of
interest accrued in accordance with the other provisions of this
Agreement.
Section 5. Prepayment.
(a) The Company shall have the right to prepay this Note in whole or in
part thereon prior to the Maturity Date.
(b) (i) The Company shall give at least five (5) business days, but
not more than ten (10) business days, written notice of any intention to
prepay this Note prior to the Maturity Date to the Holder which notice
shall specify the "Prepayment Date".
Section 6. Definitions. For the purposes hereof, the following terms
shall have the following meanings:
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government
action to close.
"Change of Control Transaction" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of in excess of 49% of the voting securities of the Company coupled
with a replacement of more than one-half of the members of the Company's
board of directors which is not approved by those individuals who are
members of the board of directors on the date hereof in one or a series
of related transactions, or (ii) the merger of the Company with or into
another entity, consolidation or sale of all or substantially all of the
assets of the Company in one or a series of related transactions, unless
following such transaction, the holders of the Company's securities
continue to hold at least 40% of such securities following such
transaction. The execution by the Company of an agreement to which the
Company is a party or by which it is bound providing for any of the
events set forth above in (i) or (ii) does not constitute the occurrence
of the event until after the event in fact occurs.
Section 7. Except as expressly provided herein, no provision of this
Note shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Note at the time, place, and rate,
and in the coin or currency, herein prescribed. This Note is a direct
obligation of the Company.
Section 8. If this Note shall be mutilated, lost, stolen or destroyed,
the Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the
principal amount of this Note so mutilated, lost, stolen or destroyed but
only upon receipt of evidence of such loss, theft or destruction of such
Note, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 9.
Choice of Law and Venue; Submission to Jurisdiction; Service of
Process.
(a) THE VALIDITY OF THIS NOTE , ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF). THE PARTIES AGREE
THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF NEW YORK, STATE OF NEW YORK OR, AT THE SOLE OPTION OF HOLDER, IN ANY OTHER
COURT IN WHICH HOLDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
(b) COMPANY HEREBY SUBMITS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO
ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT
ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
(c) COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT, OR
OTHER PROCESS ISSUED IN ANY ACTION OR PROCEEDING AND AGREES THAT SERVICE OF
SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL ADDRESSED TO COMPANY.
(d) NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT
OF HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO
PRECLUDE THE ENFORCEMENT BY HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
(e) To the extent determined by such court, the Company shall reimburse the
Holder for any reasonable legal fees and disbursements incurred by the
Holder in enforcement of or protection of any of its rights under any of
this Note.
Section 10. Any waiver by the Company or the Holder of a breach of any
provision of this Note shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Note. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Note on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Note. Any waiver
must be in writing.
Section 11. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 12. Whenever any payment or other obligation hereunder shall be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next calendar month, the preceding Business Day in the appropriate calendar
month).
Section 13. Security. The obligation of the Company for payment of principal,
interest and all other sums hereunder, in the event of a default and failure of
the Company to perform hereunder, is secured by the pledge of certain
securities (the "Pledged Shares") by Vincent Vellardita as Pledgor under the
terms and conditions of a Stock Pledge Agreement, and a Guaranty executed and
delivered by such parties.
Section 14. Registration Rights . If, at any time prior to payment in full of
this Note, the Company participates (whether voluntarily or by reason of an
obligation to a third party) in the registration of any shares of the Company's
stock (other than a registration on Form S-4, S-8 or successor form), the
Company shall give written notice thereof to the Holder and the Holder shall
have the right, exercisable within ten (10) business days after receipt of such
notice, to demand inclusion of all or a portion of the Pledged Shares in such
registration statement. If the Holder exercises such election, the Pledged
Shares so designated shall be included in the registration statement at no cost
or expense to the Holder (other than any costs or commissions which would be
borne by the Holder ). The Holder's rights under this Section 7 shall expire
at such time as the Holder can sell all of the Pledged Shares under Rule
144(k) without volume or other restrictions or limit.
Section 15 . Waiver of Jury Trial
COMPANY HEREBY WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE . COMPANY REPRESENTS
THAT EACH HAS REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer duly authorized for such purpose, as of the date first
above indicated.
VALCOM, INC.
By: /s/ Vincent Vellardita
-------------------------------------------
Vincent Vellardita, Chief Executive Officer
Attest:
By:___________________________