Exhibit
10.25
PROMISSORY
NOTE
FACE AMOUNT
$1,300,000
PRICE
$1,000,000
INTEREST RATE
12% per annum
NOTE NUMBER
February-2007-101
ISSUANCE DATE
February 2,
2007
MATURITY DATE
June 2, 2008
FOR VALUE RECEIVED,
Eagle Broadband, Inc., a Texas corporation, and all of its
subsidiaries (the “ Company ”) (AMEX: EAG)
hereby promises to pay to the order of DUTCHESS PRIVATE EQUITIES
FUND, LTD., a Cayman Island exempted company (the “
Holder ”), by the Maturity Date, or earlier, the Face
Amount of One Million Three Hundred Thousand Dollars ($1,300,000)
plus accrued interest U.S., (this “ Note
”) in such amounts, at such times and on such terms and
conditions as are specified herein. The Company and the
Holder are sometimes hereinafter collectively referred to as the
“ Parties ” and each a “ Party
” to this Agreement.
Article
1
Method of
Payment/Interest
Section 1.1
Payments made to the
Holder by the Company in satisfaction of this Note (referred to as
a “ Payment ,” or “ Payments
”, or the amounts outlined as the “ Payment
Amount ”) based upon the following schedule:
Payment due on March 2,
April 2, and May 2, 2007 will be in the amount of ten thousand
forty-eight dollars and forty eight cents ($10,048.48);
Payment due on June 2,
2007 and the second business day of each month thereafter until
this Note is paid in full will be in the amount of one hundred
thousand dollars ($100,000.00).
Any outstanding balance
on the Note upon Maturity shall be due and payable immediately to
the Holder at such time.
Payments made during a
month that exceed the Payment Amount due shall NOT be applied to
the any future Payments due to the Holder by the Company; provided,
however, that such Payments will reduce the unpaid Face Amount of
the Note accordingly.
Section 1.2
If the Company raises
any funds from a third-party, whether involving the issuance of
debt or equity, including any equity line agreements with the
Holder or a third party (a “ Financing ”), then
the Company shall pay to the Holder one hundred percent (100%) of
the net proceeds therefrom as prepayment of the Face Amount of this
Note, Interest and penalties, if any, then due. A
Financing will also include the sale by the Company of any of its
assets (excluding assets sold in the normal course of business).
All prepayments described in this Section 1.2 shall be
made to the Holder within one (1) business day of the
Company’s receipt of proceeds from the Financing.
Failure to comply with this Section 1.2 shall
constitute an Event of Default (as described in Article 4
hereof). The Holder may, but is not required to, waive all or
part of this Section 1.2 upon request from the
Company.
Section 1.3
The Company shall pay
twelve percent (12%) annual coupon on the unpaid Face Amount of
this Note, commencing on the Issuance Date (the “
Interest ”). The Interest shall compound daily,
pro rata for partial periods.
Article
2
Intentionally
Omitted
Article
3
Unpaid
Amounts
Section 3.1
In the event that the
Company has not repaid the Face Amount by the Maturity Date (the
“ Residual Amount ”), then as liquidated damages
(the “ Liquidated Damages ”), the Face Amount
shall be increased
1
by ten percent (10.0%)
as an initial penalty and an additional two
and one-half percent (2.5%) per month (pro rata for partial
periods), compounded daily, for each month until the Face Amount is
paid in full. Further, if a Residual Amount remains at
Maturity, it shall constitute an Event of Default hereunder.
The Parties acknowledge that the Liquidated Damages are not
interest under this Note and shall not constitute a
penalty.
Article
4
Defaults and
Remedies
Section 4.1
Events of
Default. An
“ Event of Default ” occurs if any one of the
following occur:
(a)
The Company does not
make a Payment within two (2) business days of a Payment Date, or a
Residual Amount on the Note exists on the Maturity Date;
(b)
The Company, pursuant
to or within the meaning of any Bankruptcy Law (as defined below):
(i) commences a voluntary case; (ii) consents to the entry of an
order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as defined below) of the Company
or for its property; (iv) makes an assignment for the benefit of
its creditors; or (v) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (A) is for relief
against the Company in an involuntary case; (B) appoints a
Custodian of the Company or for its property; or (C) orders the
liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty (60) calendar days;
(c)
The Company’s
$0.001 par value common stock (the “Common Stock”) is
suspended or is no longer listed on any recognized exchange,
including an electronic over-the-counter bulletin board, in excess
of two (2) consecutive trading days;
(d)
The registration
statement for the shares underlying the current Equity Line of
Credit is not effective for any reason;
(e)
The Company breaches a
material term of this Agreement or any of the Company’s
representation or warranties hereunder were false when
made;
(f)
The Company fails to
carry out Puts, including any paperwork needed, in a timely
manner;
(g)
The Company pays any
cash compensation to its Board of Directors during the remainder of
the fiscal year ending August 31, 2007 or in any month thereafter
in which the Company only makes a partial payment on either this
Note or the Prior Note.
(h)
The Company's failure
to use its best efforts to negotiate an initial payment to the
State of Texas for assessed sales taxes due from Clearworks
Communications, Inc. for an amount equal to or less than
twenty-five percent (25%) of the sale price of the fiber optic
network, which is so encumbered, upon the sale of such
network.
(i)
An event of default
occurs under any agreement given as security for the obligations
and liabilities under this Note, including, without limitation, (i)
the Amended and Restated Share Pledge Agreement of even date
herewith between David Micek (“ Micek ”) and the
Holder (the “ Pledge Agreement ”) and (ii) the
Amended and Restated Security Agreement of even date herewith among
the Company, Clearworks.Net, Inc. (“ Net ”),
Clearworks Communications, Inc. (“ Communications
”) and the Holder (the “ Security Agreement
”).
(j)
The occurrence of any
event which is described elsewhere in this Note as constituting an
Event of Default hereunder.
As used in this
Section 4.1 , the term “ Bankruptcy Law ”
means Title 11 of the United States Code or any similar federal or
state law for the relief of debtors, and the term “
Custodian ” means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
Section 4.2
Remedies.
Upon the
occurrence of each and every Event of Default, the Holder may seek
any or all of the following remedies:
2
(a)
The Holder may elect to
execute the Puts in an amount that will repay the Holder and fully
enforce the Holder’s rights under the Pledge Agreement and
the Security Agreement as well as the Secured Continuing
Unconditional Guaranty of even date herewith among Net,
Communications and the Holder (the “ Guaranty
”)
(b)
The Holder may increase
the Face Amount of the Note by ten percent (10.0%) as an initial
penalty and an additional two and one-half percent (2.5%) per month
(pro rata for partial periods), compounded daily, until such Event
of Default is cured (if capable of being cured) or this Note,
together with all interest thereon, is repaid in full (i.e.,
exercise the Liquidated Damages option). The Parties
acknowledge that the Liquidated Damages are not interest under this
Note and shall not constitute a penalty.
(c)
The Holder may elect to
stop any further funding to the Company excluding the Equity Line
of Credit.
(d)
The Holder may also do
either (i) or (ii) below, but not both:
(i)
Switch the Residual
Amount to a three-year (“ Convertible Maturity Date
”), eighteen percent (18%) interest bearing convertible
debenture at a floating rate discount of twenty-five percent (25%)
to the prevailing market price during conversion, and with such
other terms described hereinafter (the “ Convertible
Debenture ”). The Convertible Debenture shall be
considered closed (“ Convertible Closing Date ”)
as of the date of the Event of Default. If the Holder chooses
to convert the Residual Amount to a Convertible Debenture, then the
Company shall have ten (10) business days after notice of default
from the Holder (the “ Notice of Convertible Debenture
”) to file a registration statement covering an amount of
shares equal to three hundred percent (300%) of the Residual
Amount, plus interest thereon and any Liquidated Damages due at
such time. In the event the Company does not file such
registration statement within such period of time, or such
registration statement is not declared by the Commission to be
effective under the Securities Act within sixty (60) business days
of the Convertible Closing Date, then the Residual Amount shall
increase by five thousand dollars ($5,000) per day. In the
event the Company is given the option for accelerated effectiveness
of the registration statement, the Company will cause such
registration statement to be declared effective as soon as
reasonably practicable and will not take any action to delay the
registration to become effective. In the event that the
Company is given the option for accelerated effectiveness of the
registration statement, but chooses not to cause such registration
statement to be declared effective on such accelerated basis, the
Residual Amount shall increase by five thousand dollars ($5,000)
per day commencing on the earliest date as of which such
registration statement would have been declared to be effective if
subject to accelerated effectiveness.
(ii)
The Holder may increase
the Payment Amount described under Article 1 hereof to
fulfill the repayment of the Residual Amount. The Company
shall provide full cooperation to the Holder in directing funds
owed to the Holder on any Put made by the Company to the Investor.
The Company agrees to diligently carry out the terms outlined
in the Equity Line for delivery of any such shares. In the
event the Company is not diligently fulfilling its obligation to
direct funds owed to the Holder from Puts to the Investor, as
reasonably determined by the Holder, the Holder may, after giving
the Company two (2) business days advance notice to cure same,
elect to increase the Face Amount of the Note by two and one-half
percent (2.5%) per day, compounded daily, in addition to and on top
of any additional remedies available to the Holder under this
Note.
Section 4.3
Conversion
Privilege
(a)
The Holder shall have
the right to convert the Convertible Debenture into shares of
Common Stock at any time following the Convertible Closing Date and
before the close of business on the Convertible Maturity Date.
The number of shares of Common Stock issuable upon the
conversion of the Convertible Debenture shall be determined
pursuant to Section 4.4 hereof, but the number of shares
issuable shall be rounded up to the nearest whole share.
(b)
In the event all or any
portion of the Convertible Debenture remains outstanding on the
Convertible Maturity Date (the “ Debenture Residual
Amount ”), the unconverted portion of such
Convertible
3
Debenture will
automatically be converted into shares of Common Stock on such date
in the manner set forth in Section 4.4 hereof.
Section 4.4
Conversion
Procedure
(a)
The Holder may elect to
convert the Residual Amount in whole or in part any time and from
time to time following the Convertible Closing Date. Such
conversion shall be effectuated by providing the Company, or its
attorney, with that portion of the Convertible Debenture to be
converted together with a facsimile or electronic mail of the
signed notice of conversion (the “ Notice of
Conversion ”). The date on which the Notice of
Conversion is effective (“ Conversion Date ”)
shall be deemed to be the date on which the Holder has delivered to
the Company a facsimile or electronically mailed the Notice of
Conversion (receipt being via a confirmation of the time such
facsimile or electronic mail to the Company as provided by the
Holder). The Holder can elect to either reissue the
Convertible Debenture, or continually convert the existing
Debenture.
(b)
C ommon Stock to be
Issued.
Upon the conversion of
the Convertible Debenture by the Holder, the Company shall instruct
its transfer agent to issue stock certificates without restrictive
legends or stop transfer instructions, if, at that time, the
aforementioned registration statement described in Section
4.2 hereof has been declared effective (or with proper
restrictive legends if the registration statement has not as yet
been declared effective), in specified denominations representing
the number of shares of Common Stock issuable upon such conversion.
In the event that the Convertible Debenture is deemed
saleable under Rule 144 of the Securities Act, the Company shall,
upon a Notice of Conversion, instruct the transfer agent to issue
free trading certificates without restrictive legends, subject to
other applicable securities laws. The Company is responsible
to for all costs associated with the issuance of the shares,
including but not limited to the opinion letter, overnight delivery
of the certificates and any other costs that arise. The
Company shall act as registrar of the Shares of Common Stock to be
issued and shall maintain an appropriate ledger containing the
necessary information with respect to each Convertible Debenture.
The Company warrants that no instructions have been given or
will be given to the transfer agent which limit, or otherwise
prevent resale and that the Common Stock shall otherwise be freely
resold, except as may be set forth herein or subject to applicable
law.
(c)
Conversion
Rate. The Holder is entitled to
convert the Convertible Debenture Residual Amount, plus accrued
interest and penalties, anytime following the Convertible Closing
Date, at the lesser of either (i) seventy-five percent (75%) of the
lowest closing bid price during the fifteen (15) trading days
immediately preceding the Notice of Conversion or (ii) 100% of the
lowest bid price for the twenty (20) trading days immediately
preceding the Convertible Closing Date (“ Fixed Conversion
Price ”). No fractional shares or scrip
representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded up to the nearest
whole share.
(d)
Nothing contained in
the Convertible Debenture shall be deemed to establish or require
the Company to pay interest to the Holder at a rate in excess of
the maximum rate permitted by applicable law. In the event
that the rate of interest required to be paid exceeds the maximum
rate permitted by governing law, the rate of interest required to
be paid thereunder shall be automatically reduced to the maximum
rate permitted under the governing law and such excess shall be
returned with reasonable promptness by the Holder to the Company.
In the event this Section 4.4(d) applies, the Parties
agree that the terms of this Note shall remain in full force and
effect except as is necessary to make the interest rate comply with
applicable law.
(e)
The Holder shall be
treated as a shareholder of record on the date the Company is
required to issue the Common Stock to the Holder. If prior to
the issuance of stock certificates, the Holder designates another
person as the entity in the name of which the stock certificates
requesting the Convertible Debenture are to be issued, the Holder
shall provide to the Company evidence that either no tax shall be
due and payable as a result of such transfer or that the applicable
tax has been paid by the Holder or such person. If the Holder
converts any part of the Convertible Debentures, or will be, the
Company shall issue to the Holder a new Convertible Debenture equal
to the unconverted amount, immediately upon request by the
Holder.
(f)
Within four (4)
business days after receipt of the documentation referred to in
this Section, the Company shall deliver a certificate for the
number of shares of Common Stock issuable upon the conversion.
In the event the Company does not make delivery of the Common
Stock as instructed by Holder within four (4) business days after
the Conversion Date, the Company shall pay to the Holder an
additional one percent
4
(1.0%) per day in cash
of the full dollar value of the Debenture Residual Amount then
remaining after conversion, compounded daily.
(g)
The Company shall at
all times reserve (or make alternative written arrangements for
reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Convertible
Debentures by the Holder of the entire amount of Convertible
Debentures then outstanding. If, at any time, the Holder
submits a Notice of Conversion and the Company does not have
sufficient authorized but unissued shares of Common Stock (or
alternative shares of Common Stock as may be contributed by
stockholders of the Company) available to effect, in full, a
conversion of the Convertible Debentures (a “ Conversion
Default ,” the date of such default being referred to
herein as the “ Conversion Default Date ”), the
Company shall issue to the Holder all of the shares of Common Stock
which are available. Any Convertible Debentures, or any
portion thereof, which cannot be converted due to the
Company’s lack of sufficient authorized common stock (the
“ Unconverted Debentures ”), may be deemed null
and void upon written notice sent by the Holder to the Company.
The Company shall provide notice of such Conversion Default
(“ Notice of Conversion Default ”) to the
Holder, by facsimile, within one (1) business days of such
default.
(h)
The Company agrees to
pay the Holder payments for a Conversion Default (“
Conversion Default Payments ”) in the amount of
(N/365) multiplied by 0.24, the product of which is then multiplied
by the initial issuance price of the outstanding or tendered but
not converted Convertible Debentures held by the Holder, where N
equals the number of days from the Conversion Default Date to the
date (the “ Authorization Date ”) that the
Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Convertible Debentures.
The Company shall send notice (“ Authorization
Notice ”) to the Holder that additional shares of Common
Stock have been authorized, the Authorization Date, and the amount
of Holder’s accrued Conversion Default Payments. The
accrued Conversion Default shall be paid in cash or shall be
convertible into Common Stock at the conversion rate set forth in
Section 4.4(c) hereof, upon written notice sent by the
Holder to the Company, which Conversion Default shall be payable as
follows: (i) in the event the Holder elects to take such payment in
cash, cas
