Attached files
US
$7,716.40
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July
1, 2009
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PROMISSORY
NOTE
FOR VALUE
RECEIVED, the undersigned, Ecology Coatings, Inc., a Nevada corporation (the
“The Maker”), promises to pay to the order of JB Smith LC. (the “Holder”), the
principal amount of Seven Thousand Seven Hundred Sixteen and 40/100 dollars
($7,716.40.00), together with interest thereon as provided below.
ARTICLE
I
TERMS OF
REPAYMENT
1.
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Interest.
The Note shall bear interest (“Interest”) equal to five (5%) 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. 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.
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2.
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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.
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3.
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Maturity
Date. All of the outstanding principal and interest shall be payable
within fifteen (15) days following receipt of a written payment demand
from the Holder.
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4.
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Pre-Payment
Demand. If 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 Note shall become due and payable within fifteen (15) days
following Maker’s receipt of the Pre-Payment
Notice.
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5.
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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.
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ARTICLE
II
COVENANTS
6.
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Conversion
into Common Stock. If the Maker completes a New Offering, the Maker shall
give the Holder the option to convert this Note, in whole or in part, into
Common Stock of the Maker based on a conversion price equal to the lower
of: (a) the closing bid price per share of the Common Stock on the date
first above written as reported on the Over-The-Counter Bulletin Board, or
if there is not such price on the Effective Date, then the last bid price
on the date nearest preceding the date first above written, or; (b) the
average price at which the Maker sells its Common Stock in the New
Offering (the “Conversion Price”)(the “Conversion
Shares”).
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7.
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Piggyback
Registration. If the Conversion Shares and the Underlying Shares
(collectively, the “Shares”) have not been otherwise registered and at any
time the Maker proposes to file a registration statement, whether or not
for sale for the Maker’s own account, on a form and in a manner that would
also permit registration of shares (other than in connection with a
registration statement on Forms S-4 or S-8 or any similar or successor
form) the Maker shall give to Holder, written notice of such proposed
filing promptly, but in any case at least twenty (20) days before the
anticipated filing. The notice referred to in the preceding sentence shall
offer the holder(s) holding the Shares the opportunity to register such
amount of the Shares as he may request (a “Piggyback Registration”).
Subject to this Section, the Maker will include in each such Piggyback
Registration (and any related qualification under state blue sky laws and
other compliance filings, and in any underwriting involved therein) that
portion of the Shares with respect to which the Maker has received written
requests for inclusion therein within twenty (20) days after the written
notice from the Maker is given. The holders holding any portion of the
Shares will be permitted to withdraw all or part of the Shares from a
Piggyback Registration at any time prior to the effective date of such
Piggyback Registration. Notwithstanding the foregoing, the Maker will not
be obligated to effect any registration of shares under this Paragraph 7
as a result of the registration of any of its securities solely in
connection with mergers effected pursuant to a Form S-4
Filing.
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8.
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Covenants
Regarding Registration
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a.
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The
Maker shall use its best efforts to have any registration statement
declared effective at the earliest possible time, and shall furnish such
number of prospectuses as shall be reasonably required.
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b.
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The
Maker shall bear all costs, fees and expenses in connection with a
Piggyback Registration,
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c.
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The
Maker will take all necessary action which may be required in qualifying
qualifying or registering the Shares included in any Piggyback
Registration for offering and sale under the securities or blue sky laws
of such states as are requested by the holders of such Shares, provided
that the Maker shall not be obligated to execute or file any general
consent to service or process or to qualify as a foreign corporation to do
business under the laws of any such
jurisdiction.
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9.
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Indemnification.
The Maker shall, at The Maker’s expense, protect, defend, indemnify, save
and hold Holder harmless against any and all claims, demands, losses,
expenses, damages, causes of action (whether legal or equitable in nature)
asserted by any person or entity arising out of, caused by or relating to
the Note, including without limitation the construction of the Note and
the use or application of the proceeds of the Note, and The Maker shall
pay Holder upon demand all claims, judgments, damages, losses and expenses
(including court costs and reasonable attorneys’ fees and expenses)
incurred by Holder as a result of any legal or other action arising out of
the Note as aforesaid.
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10.
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Attorneys
Fees. The Maker shall reimburse Holder for all reasonable costs,
attorney’s fees, and all other expenses in connection with this
Note.
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11.
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Notice
of Default. So long as any amount under this Note shall remain unpaid, the
Holder will, unless the Maker otherwise consents in writing, promptly give
written notice to the Maker in reasonable detail of the occurrence of any
Event of Default, or any condition, event or act which with the giving of
notice or the passage of time or both would constitute an Event of
Default.
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ARTICLE
III
DEFAULT
12.
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Events
of Default. Any of the following events shall constitute an “Event of
Default” hereunder:
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a.
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Failure
by the Maker to pay the principal or Interest, if any, of this Note when
due and payable.
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b.
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The
entry of an order for relief under Federal Bankruptcy Code as to the Maker
or approving a petition in reorganization or other similar relief under
bankruptcy or similar laws in the United States of America or any other
competent jurisdiction, and if such order, if involuntary, is not
satisfied or withdrawn within sixty (60) days after entry thereof; or the
filing of a petition by the Maker seeking any of the foregoing,
or
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consenting
thereto; or the filing of a petition to take advantage of any debtor’s
act; or making a general assignment for the benefit of creditors; or
admitting in writing inability to pay debts as they mature;
or
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c.
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Failure
by the Maker to pay the principal and Interest, if any, of this Note
concurrent with a Pre-Payment Event; or
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d.
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The
breach of any covenant made by the Maker in this
Note.
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13.
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Acceleration.
Upon any Event of Default (in addition to any other rights or remedies
provided for under this Note), at the option of the Holder or any holder
hereof, all sums evidenced hereby, including all principal, accrued but
unpaid Interest, fees and all other amounts due hereunder, shall become
immediately due and payable. If an Event of Default relating to certain
events of bankruptcy or insolvency of the Maker occurs and is continuing,
the principal of and interest, if any, on this Note will become and be
immediately due and payable without any declaration or other act on the
part of the Holder or any holder hereof. This Note shall bear interest at
the rate of ten (10%) percent per annum upon the occurrence of an Event of
Default (“Default Interest”). Payments of the Default Interest shall be
due every thirty (30) days following the occurrence Event of
Default.
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14.
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No
Waiver. Failure of the Holder or any holder hereof to exercise any option
hereunder shall not constitute a waiver of the right to exercise the same
in the event of any subsequent Event of Default, or in the event of
continuance of any existing Event of Default after demand or performance
thereof.
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15.
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Pursuit
of any Remedy. The Holder or holder hereof may pursue any remedy under
this Note without notice or presentment. The Holder or any holder hereof
has the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Holder or any such
holder hereof under this Note.
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ARTICLE
IV
MISCELLANEOUS
16.
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Amendments.
No amendment or waiver of any provision of this Note, nor consent to any
departure by the Maker herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Holder, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which
given.
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17.
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Notices.
All notices and other communications provided for hereunder shall be in
writing (including telecopier communication) and mailed, telecopied, or
delivered, to the Maker or the Holder, as applicable, at their respective
addresses specified on the signature pages hereof, or, as to each party,
at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall, when
mailed or telecopied, be effective when deposited in the mails or
telecopied with receipt confirmed,
respectively.
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18.
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No
Waiver; Remedies. No failure on the part of the Holder to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any
other right. All rights, powers and remedies of the Holder in connection
with this Note are cumulative and not exclusive, and shall be in addition
to any other rights, powers or remedies provided by law or
equity.
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19.
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Severability;
Headings. If any one or more provisions of this Note shall be held to be
illegal, invalid or otherwise unenforceable, the same shall not affect any
other provisions of this Note and the remaining provisions of this Note
shall remain in full force and effect. Article and paragraph headings in
this Note are included herein for convenience of reference only and shall
not constitute a part of this Note for any other purpose or be given any
substantive effect.
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20.
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Binding
Effect; Transfer. This Note shall be binding upon and inure to the benefit
of the Maker and the Holder and their respective successors and assigns.
The Holder may not assign or otherwise transfer, or grant participations
in, this Note or all or any portion of its rights hereunder or its
interest herein to any person or entity, without the prior written consent
of the Maker which consent shall not be unreasonably withheld. The Maker
may not assign or otherwise transfer its rights or obligations hereunder
or any interest herein without the prior written consent of the Holder.
Any attempted assignment by the Maker or the Holder in contravention of
this paragraph shall be null and void and of no force or
effect.
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21.
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Enforcement.
It is agreed that time is of the essence of this Note and in the event of
default of the terms of this Note, the Maker agrees to pay all costs of
collection or enforcement, including reasonable attorneys’ fees and if
there is a default in payment of any sum due
hereunder.
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22.
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Governing
Law. This Note shall be governed by, and shall be construed and enforced
in accordance with, the internal laws of the State of Michigan without
regard to conflicts of laws principles. The venue of any legal proceeding
taken in connection with this Note will be in Pontiac,
Michigan.
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23.
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Independence
of Covenants. All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default or event which with notice or lapse of
time or both would become an Event of Default if such action is taken or
condition exists.
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24.
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Interpretation.
The Holder and the Maker hereby waive the benefit of any statute or rule
of law or judicial decision which would otherwise require that the
provisions of this Note be construed or interpreted more strongly against
the party responsible for the drafting
thereof.
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IN
WITNESS WHEREOF, this Note has been issued as of date first written
above.
MAKER:
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Ecology
Coatings, Inc.
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/s/
Robert G. Crockett
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Robert
G. Crockett
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Chief
Executive Officer
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Mailing
Address of Holder:
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JB
Smith LC
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2701
Cambridge Court
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Suite
425, Auburn Hills, MI 48326
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Mailing
Address of Maker:
Ecology
Coatings, Inc.
2701
Cambridge Court
Suite
100
Auburn
Hills, MI 48326