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Exhibit 10.7
NEITHER THIS NOTE NOR THE SHARES OF SERIES A CONVERTIBLE PREFERRED
STOCK OR COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR STATE LAW OR AN OPINION OF COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
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$3,000,000
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New
York, New York
November
13, 2007
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MALEX, INC.
3% CONVERTIBLE PROMISSORY NOTE DUE MARCH 31,
2008
FOR
VALUE RECEIVED, Malex, Inc., a Delaware corporation (the
“Company”), hereby promises to pay to the order of
Sichenzia Ross Friedman Ference, LLP, as escrow agent, or
registered assigns (the “Holder”), the principal
amount of three million dollars ($3,000,000) on March 31, 2008
(the “Maturity Date”). Interest on the outstanding
principal balance shall be paid at the rate of three percent
(3%) per annum, payable on the Maturity Date. Interest shall
be computed on the basis of a 360-day year, using the number
of days actually elapsed. This Note is the promissory note
referred to as the “Make-Good Note” issued
pursuant to the Securities Purchase Agreement (the
“Agreement”), dated November 13, 2007, by and
among the Company, Barron Partners LP and the other Investors
named therein. All terms defined in the Agreement and used in
this Note shall have the same meaning in this Note as in the
Agreement.
Article
1.
Covenants of the Company
(a)
Amendment to Certificate of Incorporation
. The Company shall take such action to amend its certificate of
incorporation and create the Series A Convertible Preferred Stock
as is required pursuant to the Agreement .
(b)
Fundamental Transaction .
The Company shall not enter into any agreement with respect to any
Fundamental Transaction, as defined in the Agreement, or consummate
any Fundamental Transaction without the approval of the
Holder.
Article
2.
Events of Default; Acceleration
(a)
Events of Default Defined .
The entire unpaid principal amount of this Note, together with
interest thereon shall, on written notice to the Company given by
the holders of this Note, forthwith become and be due and payable
if any one or more the following events (“Events of
Default”) shall have occurred (for any reason whatsoever and
whether such happening shall be voluntary or involuntary or be
affected or come about by operation of law pursuant to or in
compliance with any judgment, decree, or order of any court or any
order, rule or regulation of any administrative or governmental
body) and be continuing. An Event of Default shall
occur:
(i)
if failure shall be made in the payment of the principal or
interest on the Note when and as the same shall become due and such
failure shall continue for a period of five (5) business days after
such payment is due; or
(ii)
if the Company shall violate or breach any of the representations,
warranties and covenants contained in the Note or the Agreement and
such violation or breach shall continue for thirty (30) days after
written notice of such breach shall been received by the Company
from the Holder; or
(iii)
if the Company or any Significant Subsidiary (which term shall mean
any subsidiary of the Company which would be considered a
significant subsidiary, as defined in Rule 1-02 of Regulation S-X
of the SEC shall consent to the appointment of a receiver, trustee
or liquidator of itself or of a substantial part of its property,
or shall admit in writing its inability to pay its debts generally
as they become due, or shall make a general assignment for the
benefit of creditors, or shall file a voluntary petition in
bankruptcy, or an answer seeking reorganization in a proceeding
under any bankruptcy law (as now or hereafter in effect) or an
answer admitting the material allegations of a petition filed
against the Company or any Significant Subsidiary, in any such
proceeding, or shall by voluntary petition, answer or consent, seek
relief under the provisions of any other now existing or future
bankruptcy or other similar law providing for the reorganization or
winding up of corporations, or an arrangement, composition,
extension or adjustment with its or their creditors, or shall, in a
petition in bankruptcy filed against it or them be adjudicated a
bankrupt, or the Company or any Significant Subsidiary or their
directors or a majority of its stockholders shall vote to dissolve
or liquidate the Company or any Significant Subsidiary other than a
liquidation involving a transfer of assets from a Subsidiary to the
Company or another Subsidiary; or
(iv)
if an involuntary petition shall be filed against the Company or
any Significant Subsidiary seeking relief against the Company or
any Significant Subsidiary under any now existing or future
bankruptcy, insolvency or other similar law providing for the
reorganization or winding up of corporations, or an arrangement,
composition, extension or adjustment with its or their creditors,
and such petition shall not be vacated or set aside within ninety
(90) days from the filing thereof; or
(v)
if a court of competent jurisdiction shall enter an order, judgment
or decree appointing, without consent of the Company or any
Significant Subsidiary, a receiver, trustee or liquidator of the
Company or any Significant Subsidiary, or of all or any substantial
part of the property of the Company or any Significant Subsidiary,
or approving a petition filed against the Company or any
Significant Subsidiary seeking a reorganization or arrangement of
the Company or any Significant Subsidiary under the Federal
bankruptcy laws or any other applicable law or statute of the
United States of America or any State thereof, or any substantial
part of the property of the Company or any Significant Subsidiary
shall be sequestered; and such order, judgment or decree shall not
be vacated or set aside within ninety (90) days from the date of
the entry thereof; or
(vi)
if, under the provisions of any law for the relief or aid of
debtors, any court of competent jurisdiction shall assume custody
or control of the Company or any Significant Subsidiary or of all
or any substantial part of the property of the Company or any
Significant Subsidiary and such custody or control shall not be
terminated within ninety (90) days from the date of assumption of
such custody or control.
(b)
Rights of Note Holder .
Nothing in this Note shall be construed to modify, amend or limit
in any way the right of the holder of this Note to bring an action
against the Company.
Article
3.
Conversion
(a)
Automatic Conversion .
Upon the filing of both the Restated Certificate and the
Certificate of Designation, the principal and interest of this Note
shall be automatically converted into 24,787,135 shares of Series A
Preferred Stock without any action on the part of the holder of
this Note. In the even that the Company shall not have filed the
Restated Articles and the Certificate of Designation by the
maturity date of this Note, this Note shall be automatically
converted into 24,787,135 shares of Common Stock. Such shares of
Series A Preferred Stock are referred to as the Automatic
Conversion Securities. Upon such conversion, this Note and the
Company’s obligations under this Note (including the
obligation to pay interest) shall terminate.
(b)
Transfer Taxes .
The issuance of certificates for shares of the Common Stock on
conversion of this Note shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such certificate,
provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance
and delivery of any such certificate upon conversion in a name
other than that of the Holder, and the Company shall not be
required to issue or deliver such certificates unless or until the
person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been
paid.
(c)
Absolute Obligation .
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 liquidated damages (if any)
on, this Note at the time, place, and rate, and in the coin or
currency, herein prescribed.
(d)
Certain Adjustments .
(i)
Stock Dividends and Stock Splits .
If the Company, at any time from and after the Closing Date, while
this Note is outstanding: (A) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its
Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt,
shall not include any shares of Common Stock issued by the Company
pursuant to this Note), (B) subdivide outstanding shares of Common
Stock into a larger number of shares, (C) combine (including by way
of reverse stock split) outstanding shares of Common Stock into a
smaller number of shares, or (D) issue by reclassification of
shares of the Common Stock any shares of capital stock of the
Company, then the number of shares of Common Stock in the Optional
Conversion Securities shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding after such event and of which the denominator shall be
the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event. Any adjustment made pursuant to
this Section 3(f)(i) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
(e)
Series A Preferred Stock .
The number of shares of Series A Preferred Stock shall be adjusted
as provided in the Certificate of Designation with respect to any
events of the type described in this Section 3(f) which occur
subsequent to the Closing Date.
(f)
Calculations .
All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may
be.
(g)
Notice to Holders .
(i)
Adjustment to Conversion Price .
Whenever the number of shares of Common Stock issuable is adjusted
pursuant to this Section 3, the Company shall promptly mail to each
Holder a notice setting forth the adjustment and setting forth a
brief statement of the facts requiring such adjustment. If the
Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock equivalents at the lowest
possible conversion or exercise price at which such securities may
be converted or exercised in the case of a Variable Rate
Transaction (as defined in the Purchase Agreement), or the lowest
possible adjustment price in the case of an MFN Transaction (as
defined in the Purchase Agreement).
(ii)
Notices of Other Events .
If (A) the Company shall declare a dividend (or any other
distribution) on the Common Stock; (B) the Company shall declare a
redemption of the Common Stock; (C) the Company shall authorize the
granting to a
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