Exhibit 10.40
No. 1
PROMISSORY NOTE
FOR VALUE RECEIVED
, the undersigned, Ecology Coatings, Inc., a Nevada
corporation (the “The Maker”), promises to pay to the
order of Richard D. Stromback (the “Holder”), the
principal amount of Three Thousand three hundred and thirty-three
dollars and 00/100 ($3,333), together with interest thereon as
provided below.
ARTICLE I
TERMS OF REPAYMENT
1. Interest. The
Note shall bear interest (“Interest”) equal to
twenty-five (25%) percent per annum on the unpaid principal
balance, computed on a three hundred and sixty-five (365) day
year, during the term of the Note. The Maker shall pay all Interest
on or before the Maturity Date. In no event shall the rate of
Interest payable on this Note exceed the maximum rate of interest
permitted to be charged under applicable law.
2. Payments. All
payments by the Maker under this Note shall first be credited
against costs and expenses provided for hereunder, second to the
payment of any penalties, third to the payment of accrued and
unpaid interest, if any, and the remainder shall be credited
against principal. All payments due hereunder shall be payable in
legal tender of the United States of America, and in same day funds
delivered to the Holder by cashier’s check, certified check,
or any other means of guaranteed funds to the mailing address
provided below, or at such other place as the Holder or any holder
hereof shall designate in writing for such purpose from time to
time. If a payment hereunder otherwise would become due and payable
on a Saturday, Sunday or legal holiday, the due date thereof shall
be extended to the next succeeding business day, and Interest, if
any, shall be payable thereon during such extension.
3. Maturity Date.
All outstanding principal and interest shall be payable on
August 10, 2008 (the “Maturity Date”).
4. Pre-Payment
Demand. If at any time before the Maturity Date the Maker
completes an underwritten public offering of its common stock or
other form of security convertible into common stock pursuant to an
effective registration statement under the Securities Act of 1933
(the “Act”), as amended, or a managed private offering
exempt from registration under Section 4(2) of the Act and
Regulation D promulgated thereunder (collectively, a
“New Offering”) which results in proceeds received by
the Maker net of underwriting discounts and commissions, of at
least One Million and 00/100 dollars ($1,000,000.00) (a
“Pre-Payment Event”), then at the sole and absolute
discretion of the Holder, and upon written demand to the Maker (the
“Pre-Payment Notice”), all amounts owed under
this
1
Note
shall become due and payable within fifteen (15) days
following Maker’s receipt of the Pre-Payment Notice.
5. Exemption from
Restrictions . It is the intent of the Maker and the Holder
in the execution of this Note that the indebtedness hereunder be
exempt from the restrictions of the usury laws of any applicable
jurisdiction. The Maker and the Holder agree that none of the terms
and provisions contained herein shall be construed to create a
contract for the use, forbearance or detention of money requiring
payment of interest at a rate in excess of the maximum interest
rate permitted to be charged by the laws of any applicable
jurisdiction. In such event, if any holder of this Note shall
collect monies which are deemed to constitute interest which would
otherwise increase the effective interest rate on this Note to a
rate in excess of the maximum rate permitted to be charged by the
laws of any applicable jurisdiction, all such sums deemed to
constitute interest in excess of such maximum rate shall, at the
option of such holder, be credited to the payment of this principal
amount due hereunder or returned to the Maker.
6. The
indebtedness evidenced by this Note is hereby expressly
subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the
Maker’s Senior Indebtedness, as hereinafter defined.
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a. |
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As used in this Note, the term “Senior
Indebtedness” shall mean the principal of an unpaid accrued
interest on: (i) indebtedness of the Maker or with respect to
which the Maker is a guarantor, in excess of Fifty Thousand and
00/100 dollars ($50,000.00), to banks, insurance companies, or
other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Maker in the
ordinary course of business; (ii) any of the three
(3) promissory notes made by the Maker in favor of Hayden
Capital USA, LLC, a Delaware limited liability company, on
February 4, 2008 and May 20, 2008, (the “Senior
Notes”); (iii) any of the two (2) promissory notes
made by the Maker dated March 1, 2008; (iv) any of the
two (2) promissory notes made by the Maker in favor of Mitch
Shaheen, or; (v) any such indebtedness or any debentures,
notes or other evidence of indebtedness issued in exchange for such
Senior Indebtedness, or any indebtedness arising from the
satisfaction of such Senior Indebtedness by a guarantor. |
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b. |
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If there should occur any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, reorganization or
arrangements with creditors (whether or not pursuant to bankruptcy
or other insolvency laws) sale of all or substantially all of the
assets, dissolution, liquidation or nay other marshaling of the
assets and liabilities of the Maker, or if this Note shall be
declared due and payable upon the occurrence of any Event of
Default with respect to any Senior Indebtedness, then: (i) no
amount shall be paid by the Maker in respect to the principal of
and interest on this Note at the time outstanding, unless and until
the principal of an interest on the Senior Indebtedness then
outstanding shall be paid in full; (ii) no claim or proof of
claim shall be filed with the Maker by or on behalf of the Holder
that shall assert any right to receive |
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payments in respect of the principal of and interest on this
Note, except subject to the payment in full of the principal of and
interest on all of the Senior Indebtedness then outstanding. If
there occurs an Event of Default that has been declared in writing
with respect to any Senior Indebtedness, or in the instrument under
which any Senior Indebtedness is outstanding, permitting the holder
of such Senior Indebtedness to accelerate the maturity thereof,
then, unless and until such Event of Default shall have been cured
or waived or shall have ceased to exist, or all Senior Indebtedness
shall have been paid in full, no payment shall be made in respect
of the principal of or interest on this Note, unless within thirty
(30) days after the happening of such event of default, the
maturity of such Senior Indebtedness shall not have been
accelerated. |
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c. |
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Subject to the rights, if any, of the holders of Senior
Indebtedness under this Section 6 to receive cash, securities
or other properties otherwise payable or deliverable to the Holder
of this Note, nothing contained in this Section 6 shall
impair, as between the Company and the Holder, the obligation of
the Company, subject to the terms and conditions hereof, to pay to
the Holder the principal hereof and interest hereon as and when the
same become due and payable, or shall prevent the Holder of this
Note, upon default hereunder, from exercising all rights, powers
and remedies otherwise provided herein or by applicable law. |
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d. |
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Subject to the payment in full of all Senior Indebtedness and
until this Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to
the extent of payments or distributions previously made to such
holders of Senior Indebtedness pursuant to the provisions of
Section 6 above) to receive payments or distributions of
assets of the Maker applicable to the Senior Indebtedness. No such
payments or distributions applicable to the Senior Indebtedness
shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder, be deemed to be a
payment by the Company to or on account of this Note; and for the
purposes of such subrogation, no payments or distributions to the
holders of Senior Indebtedness to which the Holder would be e |
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