EXHIBIT 10.7
THIS SECURED CONVERTIBLE PROMISSORY NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON ANY CONVERSION HEREOF,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER APPLICABLE STATE
SECURITIES LAWS. THIS SECURED CONVERTIBLE PROMISSORY NOTE MAY
NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE LAWS OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH
STATE LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY WHOSE AUTHORIZED OFFICER HAS SIGNED
THIS NOTE BELOW.
SECURED CONVERTIBLE PROMISSORY
NOTE
$3,000,000.00
February 13, 2007
For value received, Colfax Financial
Corporation , a Utah corporation (the “Maker”),
promises to pay to the order of R.W. Sabes Investment, LLC
(the “Holder”), 6655 W Sahara, Suite B200, Las Vegas NV
89146, or at such other place as the Holder may from time to time
designate, the principal sum of Three Million and no/100 Dollars
($3,000,000.00) or so much thereof as shall be advanced by Holder
pursuant to the Credit Agreement (as hereinafter defined) and
remain unpaid from time to time (the “Principal
Amount”), plus interest on the outstanding unpaid Principal
Amount hereof from the date hereof at the annual rate of fifteen
percent (15%) (the “Interest”). All interest
payment calculations required hereunder shall be computed on the
basis of the actual number of days elapsed over a year comprised of
three hundred sixty (360) days.
The original principal amount of this
Secured Convertible Promissory Note (“Note”),
together with all of the Interest thereon, shall be due and
payable in full on the thirty-month anniversary of the date of this
Note, to-wit, August 12, 2009 (the “Maturity Date”)
unless earlier converted as provided herein. On March 1,
2007, the Maker shall pay to the Holder all accrued and unpaid
interest on the Initial Advance (as defined in the Credit
Agreement) from the date of issuance of this Note. Commencing
April 1, 2007 and continuing until this Note is repaid in full, the
Maker shall make monthly payments on the first day of each month to
the Holder equal to $74,163.36 as payment against principal and
interest on the Initial Advance. From and after each
additional Advance (as defined in the Credit Agreement), the
Company shall make (a) on the first day of the calendar month
following the Advance, a payment of accrued but unpaid interest on
such Advance through such date and (b) beginning on the first day
of the second calendar month following the Advance, additional
monthly payments of principal and interest on the first day of each
month calculated based on such additional Advance and interest
being amortized over the remaining term of this Note. The
Maker shall pay to the Holder a late payment fee equal to five
percent (5%) of the past due payment amount for any monthly
installment of principal and interest not received by the Holder
within five (5) days after the installment is due.
This Note is entitled to the benefit and
security of the Security Agreement between Holder and Maker
(“Security Agreement”), dated as of the date hereof;
the Credit Agreement between Holder and Maker, dated of even date
herewith (“Credit Agreement”); and the Guaranty between
Holder and STEN Corporation (“STEN”), dated of even
date herewith (“Guaranty”). Whenever used in this
Note, the words “Maker” and “Holder” shall
mean, respectively, the Maker and the Holder named in the first
paragraph of this Note and their respective successors and
assigns.
At any time prior to payment in full of
any or all amounts payable under this Note, and from time to time,
the principal amount outstanding and accrued interest of this Note
(which in no event shall exceed $3,000,000 of principal amount)
shall be convertible, in full or in part, at the election of
Holder, by exercise of Conversion Notice attached hereto as
Exhibit A , into that number of shares of STEN’s
common stock, $0.01 par value per share (the “Common
Stock”), equal to dividing $8.20 (“Conversion
Price”) into the aggregate principal amount and accrued
interest of this Note being converted. Notwithstanding the
conversion of any or all amounts payable under this Note, Maker
shall remain liable for any and all principal amount and accrued
interest which is not converted and such amount shall be paid in
full on or before the Maturity Date; upon conversion, the entire
principal amount and accrued interest of this Note, or the portion
hereof so converted, shall be deemed to have been satisfied and
discharged. Such conversion shall be deemed to have been
effected at the close of business of the date of receipt of a
properly executed Conversion Notice, so that Holder shall be
treated for all purposes as having become the record holder of
Common Stock at such time.
Holder shall have the right by written
notice to Maker and STEN to terminate the conversion rights under
this Note. In no event shall the number of shares of Common
Stock issuable upon conversion of this Note along with the number
of shares of Common Stock issuable upon exercise of the warrant
issued to Maker by STEN on the date hereof exceed 19.9% of the
outstanding Common Stock, unless and until STEN obtains approval of
its shareholders under Nasdaq Marketplace Rules to issue in excess
of 19.9% of the outstanding Common Stock. For the purposes of
calculating the number of shares of Common Stock issuable upon
conversion hereof and the beneficial ownership of any person, the
parties agree to apply the Nasdaq Marketplace Rules and the rules
and regulations of the Securities and Exchange
Commission.
Transfer of this Note shall be subject to
prior delivery by the proposed transferee to the Company of an
opinion of counsel reasonably satisfactory to the Company that such
transfer is in compliance with all federal and all applicable
securities laws. Holder may transfer this Note only in whole
and not in part and only to an assignee that assumes all of
Holder’s rights and obligations under the Credit Agreement,
the Security Agreement and the Guaranty. In order to transfer
this Note, Holder, or its duly authorized attorney, shall surrender
this Note at the office of the Company, accompanied by an
assignment duly executed by Holder. This Note is, and each
certificate representing the shares of STEN common stock into which
it is convertible shall be, and any shares issued upon conversion
that may be subsequently transferred (other than a transfer
registered under the Act or any subsequent transfer of shares so
registered) stamped or otherwise imprinted with a legend
substantially in the following form:
“The securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, or any the securities laws of any state and may not be
reoffered, sold, transferred, pledged, or otherwise disposed of
except pursuant to (1) registration under such Act or laws or (2)
an opinion of counsel reasonably acceptable to the Company to the
effect that such registration is not required.”
The shares of Common Stock issuable upon
conversion of this Note are the subject of that certain
Registration Rights Agreement dated as of the
