Exhibit 10.1
PROMISSORY
NOTE
| FACE AMOUNT |
$250,000 |
| PRICE |
$250,000 |
| INTEREST RATE |
14% per annum |
| NOTE NUMBER |
September-2007-101
|
| ISSUANCE DATE |
September 4, 2007 |
| MATURITY DATE |
March 4, 2008 |
FOR
VALUE RECEIVED, Seawright Holdings, Inc., a Delaware
corporation, and all of its subsidiaries
(the “Company”) (OTC BB: SWRI) hereby promises to
pay to the order of
DUTCHESS PRIVATE EQUITIES FUND, LTD. (the
“Holder”) by the Maturity Date, or earlier,
the Face Amount of Two Hundred and Fifty Thousand Dollars
($250,000) U.S., (this "Note")
in such amounts, at such times and on such terms and conditions as
are specified herein (sometimes
hereinafter the Company and the Holder are referred to collectively
as "the Parties").
Any
capitalized terms not defined in this Note are defined in the
Investment Agreement for the Equity
Line of Credit between Dutchess Private Equities Fund, L.P.
(the “Investor”) and the Company
dated September 12, 2005 (the "Equity Line"), which
definitions the Company and the Holder
incorporate herein by reference.
Article 1
Method
of Payment/Interest
Section
1.1
The
Company shall pay interest (
“Interest ”)
at the rate of fourteen percent
(14%) per annum, compounded daily, on the unpaid Face Amount of
this Debenture at such
times and in such amounts as outlined in this
Article 1. The
Company shall make mandatory
monthly payments of interest (the
“Interest Payments ”),
in an amount equal to the interest
accrued on the principal balance of the Note from the last Interest
Payment until such time
as the current Interest Payment is due and payable. The Interest
Payments shall commence on
September 20th, 2007 and shall continue for five (5) months
thereafter (for a total of six (6) Interest
Payments), and the Interest Payments shall be paid the 20th day of
each such month (“Payment
Date”).
Section
1.2
After
the date the Company’s registration statement for the
Equity Line,
as outlined in Article 20, below, is declared effective by the
SEC (“Effective Date”), the Company
shall make mandatory monthly payments on the Face Amount of
the Note in an amount
equal to the greater of 1) an amount equal to the Face Amount
of the Note divided by the number
of months from the Effective Date until the Maturity Date or
2) 100% of each Put given to
the Investor by the Company.
Section
1.3
Payments
pursuant to this Section 1.2, shall be drawn directly
from the
closing of each Put and shall be wired directly to the Holder
on the Closing Date and shall be included
in the calculation of the Threshold Amount (as defined in
Section 1.4, below). The Company
agrees to fully execute and diligently carry out Puts to the
Investor, on the terms set forth
in the Investment Agreement. The Company agrees that the Put
Amount shall be for the maximum
amount allowed under the Investment Agreement. Further, the
Company agrees to issue
Puts to the Investor for the maximum frequency allowed under
the Investment Agreement. Failure
to comply with the terms of the Investment Agreement with
respect to the Puts will result in an Event of Default as
defined in this Agreement in Article 4.
Section
1.4
In
order to assist the Company in meeting its obligations under
this Note,
the Company hereby authorizes the Investor to transfer funds
from any Put directly to the Holder.
A Put shall be deemed closed after the funds are transferred
to the Holder.
Section
1.5
After
Closing, the Company must make a prepayment to the
Holder
when the aggregate amount of financing ("Financing") received
by the Company is in excess
of one hundred thousand dollars ($100,000) (
" Threshold
Amount
" ).
The Company agrees
to pay one hundred percent (100%) of any proceeds raised by the
Company over the Threshold
Amount toward the prepayment of the Note, Interest and any
penalties until the Face Amount
is paid in full. The prepayments shall be made to the Holder within
one (1) business day
of the Company
' s
receipt of the Financing. Failure to do so will result in an Event
of Default.
The Threshold Amount shall also pertain to any assets sold,
transferred or disposed of by
the Company and any cash balances in the Company bank or brokerage
accounts at the end of each
month.
Section
1.6
Notwithstanding
any provision to the contrary in this Note, the
Company
shall pay the Face Amount to the Holder, with any interest
accrued, and penalities, if any, upon the Maturity
Date.
Article 2
Collateral
Section
2.1
The
Company does hereby agree to issue to the Holder for use
as collateral
fifty (50) signed Put Notices. In the event, each of the Put
Notices are used, the Holder uses
the Collateral in full, the Company shall immediately deliver
to the Holder additional Put Noticess
as requested by the Holder..
Section
2.2
Upon
the completion of the Company's obligation to the Holder
of the
Face Amount of this Note, all remaining Put Notices shall be
marked
" VOID
" by
the Holder and
returned to the Company at the Company's request.
Article 3
Unpaid
Amounts
Section
3.1
In
the event that on the Maturity Date the Company has any
remaining
amounts unpaid on this Note (the "Residual Amount"), the
Holder can exercise its right
to increase the Face Amount by ten percent (10%) as an initial
penalty
and an
additional two
and one-half percent (2.5%) per month paid, pro rata for partial
periods, compounded daily, as liquidated damages ("Liquidated
Damages"). If a Residual Amount remains, the Company is
in
Default and the Holder may elect remedies as set forth in Article
4, below. The Parties acknowledge
that Liquidated Damages are not interest and should 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
d ays
of (i) a Payment Date; or (ii) the closing of a Put; or, (iii)
a Residual Amount on the Note exists on the Maturity Date;
or
(b)
The
Company, pursuant to or within the meaning of any
Bankruptcy
Law (as hereinafter defined): (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 hereinafter defined) 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; or
(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, for in excess of two (2) consecutive trading days;
or
(d)
Intentionally
Omitted
(e)
The
registration statement for the underlying shares in the
Equity Line
once effective fails to remain effective; or,
(f)
Any
of the Company’s representations or warranties contained
in this
Agreement were false when made; or,
(g)
The
Company breaches this Agreement, and such breach, if
and only
if such breach is subject to cure, continues for a period of
five (5) business days.
(h)
an
attachment or levy is made upon the Company’s assets
having an aggregate
value in excess of twenty-five thousand dollars ($25,000) or a
judgment is rendered against
the Company or the Company’s property involving a
liability of more than twenty-five thousand
dollars ($25,000) which shall not have been vacated,
discharged, stayed or bonded pending
appeal within ninety (90) days from the entry hereof;
or,
(i)
any
change in the Company’s condition or affairs (financial
or otherwise) which
in the Holder’s reasonable, good faith opinion, would
have a Material Adverse Effect; provided,
however, that in the event that such failure is curable, the
Company shall have ten (10) business
days to cure such failure; or,
(j)
any
Lien, except for Permitted Liens, created hereunder or under
any of the
Transaction Documents for any reason ceases to be or is not a
valid and perfected Lien having
a first priority interest; or,
(k)
the
indictment or threatened indictment of the Company, any
officer of the Company
under any criminal statute, or commencement or threatened
commencement of criminal
or civil proceeding against the Company or any officer of the
Company pursuant to which
statute or proceeding penalties or remedies sought or
available include forfeiture of any of the
property of the Company.
(l)
the
Company’s failure to pay any taxes when due unless such
taxes are being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves
have been provided on the Company’s books; provided,
however, that in the event that such
failure is curable, the Company shall have ten (10) business
days to cure such failure; or,
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. The
term “Custodian” means any
receiver, trustee, assignee, liquidator or similar official
under any Bankruptcy Law.
Section
4.2
Remedies. In
the Event of Default, the Holder shall fully enforce
the
Security Agreement and the Guarnaty, both defined below in Article
21.
For
each and every Event
of Default that has not been cured within five (5) business
days,
as outlined in this Agreement, the Holder can exercise its right to
increase the Face Amount
of the Note by ten percent (10%) as an initial penalty. In
addition, the Holder may elect to
increase the Face Amount of the Note by two and one-half percent
(2.5%) as Liquidated Damages,
compounded daily. The Parties acknowledge that Liquidated Damages
are not interest under
the terms of this Agreement, and shall not constitute a
penalty.
In
an Event of a Default has occurred hereunder, the Holder, at
its sole election, shall have
the right, but not the obligation, to either:
a)
Switch the Residual Amount to a three-year (“Convertible
Maturity Date”), eighteen
percent (18%) interest bearing convertible debenture at the
terms described hereinafter (the
"Convertible Debenture"). In the Event of Default, 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, the Company shall have
twenty (20) 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. Such registration statement shall be
declared
effective under the Securities Act of 1933, as amended (the
“Securities Act”), by the Securities
and Exchange Commission (the “Commission”) within
sixty (60) business days the Convertible
Closing Date. In the event the Company does not file such
registration statement within
twenty (20) business days of the Holder's request, or such
registration statement is not declared
effective by the Commision under the Securities Act within the
time period described herein,
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;
or
b)
The
Holder may increase the Payment Amount described under Article
1 to fulfill
the repayment of the Residual Amount and 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 the
same, elect to increase the Face Amount of the Note by 2.5%
each day, compounded daily, in additional
to and on top of 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, but the number of shares issuable shall be
rounded up to the nearest whole
share.
(b)
The
Holder may convert the Convertible Debenture in
whole
or in part, at any time and from time to time.
(c)
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 Debenture will automatically be
converted into shares of
Common Stock on such date in the manner set forth in Section
4.4.
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. The Holder
can elect to either reissue the Convertible Debenture, or
continually convert the existing Debenture.
Any Notice of Conversion faxed or electronically mailed by the
Holder to the Company
on a particular day shall be deemed to have been received no later
than the previous business
day (receipt being via a confirmation of the time such facsimile or
electronic mail to the Company
is received).
(b)
C
ommon Stock to be Issued. Upon
the conversion of any Convertible
Debentures 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 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
Debenture is deemed saleable under Rule 144
of the Securities Exchange Act of 1933, 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,
FedEx 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 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
(
" 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)
It
shall be the Company
' s
responsibility to take all necessary actions
and to bear all such costs to issue the Common Stock as provided
herein, including the responsibility
and cost for delivery of an opinion letter to the transfer agent,
if so required. 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
three (3) 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 three (3)
business days after the Conversion Date,
the Company shall pay to the Holder an additional five
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