THIS NOTE HAS
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “ SECURITIES ACT ”), OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED
STATES AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS
BERMAN CENTER, INC.
SECURED CONVERTIBLE PROMISSORY
NOTE
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$200,000.00
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October 6, 2006
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FOR VALUE RECEIVED, the undersigned, BERMAN
CENTER, INC., a company incorporated under the laws of the State of
Delaware (the “ Company ”), promises to pay to
the order of HUNTER FUND LTD. or its registered assigns (the
“ Holder ”), the principal sum of Two Hundred
Thousand Dollars ($200,000.00), with interest from the date hereof
at the rate of fifteen percent (15%) per annum on the unpaid
balance hereof until paid.
1.
Principal and Term
. If not earlier converted pursuant
to Section 4(a) hereof, the principal of this Note shall be payable
in one installment one (1) year from the date of this Note (“
Due Date ”). This Note is subject to conversion at the
option of the Holder, as described in Section 4(a).
2.
Interest . Interest on the unpaid principal balance of
this Note shall accrue at the rate of fifteen percent (15%) per
annum compounded annually (computed on the basis of a 365-366 day
year (as applicable) based on actual days elapsed) commencing on
the date hereof, and payable in cash on the Due Date, if not
converted earlier pursuant to Section 4(a). The Company agrees to
pay interest after the occurrence of an Event of Default, at a rate
per annum equal to the highest rate of interest per annum permitted
by applicable law (the “ Default Rate ”) until
all amounts outstanding under the Note payable to Holder have been
paid in full. For purposes herein, an “Event of
Default” exists if the Company fails to make a payment
required by Section 1 or 2 hereof, and such failure is not cured
within ten (10) days following written notice from the
Holder.
(a)
Company . In order to secure the payment of the Note,
the Company hereby grants to Holder a continuing first priority
security interest in all assets of the Company now owned or at any
time hereafter acquired by the Company, or in which the Company now
has or at any time in the future may acquire any right, title or
interest, including, without limitation: all accounts, inventory,
equipment, goods, documents, instruments (including, without
limitation, promissory notes), contract rights, general
intangibles, chattel paper, supporting obligations, investment
property, letter-of-credit rights, intellectual property rights,
patents, copyrights, trademarks in which the Company now has or
hereafter may acquire any right, title or interest, all proceeds
and products thereof (including, without limitation, proceeds of
insurance) and all additions, accessions and substitutions thereto
or therefore.
(b)
Subsidiary
. In order to secure the payment of
the Note, Berman Health & Media, Inc., a Delaware corporation
and the wholly-owned subsidiary of the Company (the “
Subsidiary ”), hereby grants to Holder a continuing
first priority security interest in all assets of the Subsidiary
now owned or at any time hereafter acquired by the Subsidiary, or
in which the Subsidiary now has or at any time in the future may
acquire any right, title or interest, including, without
limitation: all accounts, inventory, equipment, goods, documents,
instruments (including, without limitation, promissory notes),
contract rights, general intangibles, chattel paper, supporting
obligations, investment property, letter-of-credit rights,
intellectual property rights, patents, copyrights, trademarks in
which the Subsidiary now has or hereafter may acquire any right,
title or interest, all proceeds and products thereof (including,
without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore.
Holder shall
have the rights of a secured party under the Uniform Commercial
Code. To effect the foregoing, each of the Company and the
Subsidiary agrees to execute promptly such additional security
documentation as Holder may request and hereby authorizes Holder to
file financing and other statements as Holder deems advisable to
perfect the first priority security interest granted
herein.
4.
Conversion and Mechanics of
Conversion .
(a)
Conversion
. This Note is convertible at the
option of the Holder at any time prior to the Due Date by providing
written notice to the Company (the “ Conversion
”). Upon the Conversion, the entire unpaid principal balance
of this Note plus any unpaid interest will convert into shares of
common stock of the Company, par value $.001 per share (the “
Common Stock ”), at a price equal to the Conversion
Price (as hereinafter defined). For purposes hereof
“Conversion Price” shall be an amount equal to the
lesser of (i) fifty percent (50%) of the weighted average closing
price (weighted with reference to the trading volume on each
trading day) of the Common Stock on the Electronic Quotation
Services (the “ Pink Sheets ”) during the thirty
(30) trading days immediately preceding the date of Conversion, or
(ii) $0.25 per share.
(b)
Mechanics of
Conversion . The Company
shall not be obligated to issue certificates evidencing the Common
Stock issuable upon a Conversion unless this Note is either
delivered to the Company, duly endorsed, at the office of the
Company, or the Holder notifies the Company that this Note has been
lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify the Company from any loss incurred by it
in connection with this Note. As soon as practicable after delivery
of the Note, or delivery of an agreement and indemnification in the
case of a lost Note, the Company shall issue and deliver to the
Holder a certificate or certificates for the number of shares of
Common Stock to which the Holder shall be entitled (the “
Conversion Shares ”).
(c)
Fractional Shares
. No fractional shares of Common
Stock shall be issued upon conversion of this Note. Any fractional
shares to which the Holder would otherwise be entitled will be
rounded up and an additional share of Common Stock shall be issued
to the Holder.
(a) The Holder acknowledges that this Note and the
Common Stock issuable upon its conversion have not been registered
or qualified under federal or state securities laws.
(b) The shares of Common Stock that are issuable
upon Conversion of this Note or that have been issued upon any
Conversion of this Note shall be eligible for registration pursuant
to the Securities Act (“ Registrable Securities
”) under the following terms and conditions:
(i)
The Company agrees to include the
Registrable Securities in the first registration statement it files
with the Securities and Exchange Commission, whether on its own
account or on behalf of other shareholders, excluding registration
statements on Forms S-4 or S-8 (an “ Eligible Registration
Statemen t”). If an Eligible Registration Statement is
filed prior to full Conversion, if any, then the Company shall
register two hundred percent (200%) of the shares issuable based on
the exercise price for such shares calculated pursuant to Section
4(a) hereof as if the Conversion occurred on the date on which the
Eligible Registration Statement is filed. If the Eligible
Registration Statement is filed after a full Conversion, if any,
the Company shall register the amount of shares of Common Stock
issued upon such Conversion. In addition, at any time and from time
to time on or after the date hereof, the Holder may make a one (1)
written demand for registration under the Securities Act of all or
part of their Registrable Securities (a “ Demand
Registration ”). After Conversion, any demand made for a
Demand Registration shall specify the number of shares of
Registrable Securities proposed to be sold. If the Holder provides
to the Company written demand for a Demand Registration prior to a
full Conversion, if any, then the Company shall register two
hundred percent (200%) of the shares issuable upon receipt of such
Demand Registration based on the exercise price for such shares
calculated pursuant to Section 4(a) hereof as if the Conversion
occurred on the date of the Demand Registration. If the Holder
provides to the Company written demand for a Demand Registration
after a full Conversion, if any, the Company shall register the
amount of shares of Common Stock issued upon such Conversion. In no
circumstance shall a notice for Demand Registration be interpreted
as a notice for Conversion. The Company shall not be obligated to
effect more than one (1) Demand Registration under this Section
5(b)(i) in respect of Registrable Securities.
(ii)
All registration expenses will be
borne by the Company, whether or not the registration statement
becomes effective and whether or not any Registrable Securities are
sold pursuant to such registration statement; provided, however,
that such expenses shall not include (i) any underwriting discount
or commissions with respect to the Holder’s shares and/or
(ii) cost of special counsel for the Holder.
(iii)
In the event of a registration
statement filed in connection with an underwritten offering, these
registration rights are subject to the requirement that the Holder
submits to any lock-up provisions and cut-backs, if any, as may be
proposed by the underwriter(s).
(iv)
The Company shall send to the
Holder written notice of any decision to file an Eligible
Registration Statement at least thirty (30) days prior to the
initial filing date; if within fifteen (15) days after receipt of
such notice, the Holder requests in writing that some or all of
such Holder’s Registrable Securities be included in such
registration statement, the Company shall then cause the
registration under the Securities Act of all or part of the
Holder’s Registrable Securities, as requested by holder;
provided, however, that if at any time after giving written notice
of its intention to register any securities and prior to the
effective date of the Eligible Registration Statement, the Company
shall determine for any reason not to register, or to delay
registration of, such securities, the Company may, at its election,
give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration and (ii) in the
case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities for the same period as
the delay in registering any other securities.
(v)
In connection with each
registration statement covering the Registrable Securities, the
Holder shall be required to furnish to the Company information
regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the
registration statement, and the Company may exclude from such
registration the Registrable Securities of the Holder if it fails
to furnish such information within a reasonable time prior to the
filing of such registration statement or any supplemented
prospectus and/or amended registration statement.
(c)
Indemnification by the Company
Pertaining to Registration . The Company shall, notwithstanding any
termination of this Note, defend, indemnify and hold harmless the
Holder, each officer, director, manager, owner, agent, broker
(including brokers who offer and sell Registrable Securities as
principals as a result of a pledge or any failure to perform under
a margin call), investment advisor and employee of the Holder, each
Person who controls the Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the “ Exchange Act ”)) and
each officer, director, manager, owner, agent and employee of each
such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims,
damages, liabilities, reasonable costs (including, without
limitation, costs of investigation, preparation and attorneys'
fees) and expenses (collectively, “ Losses ”),
as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in a registration
statement or any prospectus or any amendment or supplement thereto,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in the light of the circumstances under which
they were made) not misleading, except to the extent, but only to
the extent, that (i) such untrue statements or omissions are based
solely upon information regarding the Holder which was furnished in
writing to the Company by the Holder expressly for use therein,
which information was reasonably relied on by the Company for use
therein or (ii) such information relates to the Holder or the
Holder's proposed method of distribution of Registrable Securities
and was reviewed and expressly approved in writing by the Holder
for use in the registration statement or such prospectus or in any
amendment or supplement thereto. The Company shall notify the
Holder promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of an Indemnified Party and shall survive the
transfer of the Registrable Securities by the Holder.
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