FOR VALUE
RECEIVED, the undersigned, MBI Mortgage, Inc., a Texas corporation
(“Maker”), hereby promise to pay to the order of New
Horizons Financial, Inc., a California corporation
(“Payee”), at 100 Chaparral Ct. Suite 100, Anaheim
Hills, California 92808, or at such other location as directed by
Payee, in lawful money of the United States of America, the
principal sum of ONE MILLION TWO HUNDRED FIFTY FOUR THOUSAND FOUR
HUNDRED NINETY SEVEN and 30/100 Dollars ($1,254,497.30)
(“Note”) or as much as may be outstanding hereunder.
This Note is given in conjunction with the Agreement for Sale and
Purchase of Assets (“Agreement”) among MBI Mortgage,
New Horizons Financial, Inc. and Brett Faryniarz dated
June 30, 2006.
The principal
balance hereunder shall not bear interest prior to default or
maturity. Payments will be made as follows: TWO-HUNDRED THOUSAND
and NO/100 Dollars ($200,000.00) on December 1, 2006,
April 5, 2007, July 5, 2007, October 5, 2007,
January 5, 2008 and April 5 2008; one payment of THREE
THOUSAND TWO HUNDRED FIVE and 73/100 Dollars ($3,205.73) to be paid
on June 30, 2006; and monthly payments of SIX THOUSAND FOUR
HUNDRED ELEVEN and 45/100 Dollars ($6,411.45) to be paid on or
before the sixteenth day of each month commencing upon
July 16, 2006 to and including February 16, 2007. If Maker, or
Maker’s parent or any affiliate, closes on any “funding
transaction”, or series of transactions within a rolling
12 month period, equal to or in excess of $10,000,000 prior to
April 5, 2008, any remaining balance on above obligation shall
be paid upon the demand of the Payee. Upon April 5, 2008, in
the event Maker, or Maker’s parent or any affiliate, fails to
close on any funding transaction, or series of transactions within
a rolling 12 month period, equal to or in excess of
$10,000,000, then Maker shall pay a prorated portion (based on the
difference between $10,000,000 and the amount acquired pursuant to
such funding transactions) of the remaining balance on the above
obligation upon the demand of Payee. For purposes of this Note,
“funding transaction” shall mean any debt or equity
placement, and/or proceeds from any asset or stock sale, as well as
any recapitalization. Maker must provide holder five
(5) business days notice prior to the close of any funding
transaction that will cause this threshold to be met, along with
information as to when to submit an escrow demand if desired by the
holder.
The outstanding
principal balance hereof shall bear interest after default or
maturity at the Default Rate (hereinafter defined).
Interest on the
indebtedness evidenced by this Note shall be computed on the basis
of a year of 360 days and the actual number of days elapsed
(including the first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest
shall be calculated on the basis of a year of 365 or 366 days,
as the case may be.
1
As used in this
Note, the following terms shall have the respective meanings
indicated below:
“Default
Rate” means the rate per annum equal to the lesser of
(i) the Wall Street Journal prime rate as quoted in the money
rates section of the Wall Street Journal which is also the base
rate on corporate loans at large United States money center
commercial banks as its prime commercial or similar reference
interest rate plus eight percent, with adjustments to be made on
the same date as any change in the rate and (ii) the Maximum
Rate.
“Maximum
Rate” means the maximum rate of nonusurious interest
permitted from day to day by applicable law, and as the same may be
amended hereafter, but otherwise without limitation, that rate
based upon the “indicated rate ceiling” and calculated
after taking into account any and all relevant fees, payments, and
other charges in respect of this Note which are deemed to be
interest under applicable law.
This Note is a
secured obligation as set forth in that certain Security Agreement
(the “Security Agreement”) between Payee and Maker,
incorporated herein by this reference and concurrently executed and
delivered herewith, or in any related agreements (collectively with
this Note, the “Agreements”). The security for this
Note, upon written request by Maker to Payee, shall be reasonably
subordinated to the secured obligations of certain third-party
investors, which provide acquisition financing that shall be used
by Maker, in part, to satisfy the obligations set forth herein. For
pur
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