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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$225,000.00
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March 7, 2007
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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
Twenty-Five Thousand Dollars ($225,000.00), 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 on October 5, 2007 (“ 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.
(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.
(d) Adjustment for Stock Splits, Stock Subdivisions
or Combinations of Shares of Common Stock . The Conversion Price of this Note shall be
proportionally decreased and the number of shares of Common Stock
deliverable upon exercise of this Note (or any shares of stock or
other securities at the time deliverable upon conversion of this
Note) shall be proportionally increased to reflect any stock split
or subdivision of the Company’s Common Stock. The Conversion
Price of this Note shall be proportionally increased and the number
of shares of Common Stock deliverable upon conversion of this Note
(or any shares of stock or other securities at the time deliverable
upon conversion of this Note) shall be proportionally decreased to
reflect any combination of the Company’s Common
Stock.
(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. The Company shall file
such Registration Statement no later than forty-five (45) days
after it receives written notice of Demand Registration from the
Holder, and shall use reasonable best efforts to cause such
Registration Statement to become effective within one hundred and
fifty (150) days from the date of the Company’s receipt of
the written notice of Demand Registration or one hundred eighty
(180) days if the Registration Statement is subject to a full
review by the SEC. The parties acknowledge that the Company shall
not be held liable for failure to register the Registrable
Securities if such failure is the primary and direct cause is a
result of comments from the SEC regarding the ability of the
Company to utilize and rely upon Rule 415 of the Securities Act of
1933, as amended.
(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 amendmen
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