MDWERKS,
INC.
CONVERTIBLE
NOTE
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Issuance
Date: December 3, 2007
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Original
Principal Amount: U.S. $575,000
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FOR
VALUE RECEIVED, MDwerks, Inc., a Delaware corporation (the
“Company”
),
hereby promises to pay to Vicis Capital Master Fund or its registered assigns
(
“Holder”
)
the amount set out above as the Original Principal Amount (as may be reduced
pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
the
“Principal”
)
when due, whether upon the Maturity Date (as defined below), and to pay interest
(
“Interest”
)
on any outstanding Principal at a rate per annum equal to the Interest Rate
(as
defined below), from the date set out above as the Issuance Date (the
“Issuance
Date”
)
until the same becomes due and payable.
1.
PAYMENTS
OF PRINCIPAL AND INTEREST; MATURITY; PREPAYMENT
.
(a)
On December 2, 2008 (the
“Maturity
Date”)
,
the Company shall pay to the Holder an amount equal to the Principal plus
accrued Interest thereon in cash in accordance with Section 8 of this
Note.
(b)
Maker,
at
its option, may prepay all or any part of the outstanding principal amount
of
this Note and accrued interest thereon through the date of prepayment without
penalty.
2.
INTEREST;
INTEREST RATE
.
Interest on this Note shall commence accruing on the Issuance Date at the
rate
of 8% per annum and shall be computed on the basis of a 360-day year and
actual
days elapsed and shall be payable in arrears.
3.
CONVERSION
OF NOTE
.
Upon the initial closing of the sale of units to Vicis Capital Master Fund
or
one or more of its affiliates consisting of (i) shares of Series B Preferred
Stock of the Company (“Series B Preferred Stock”), (ii) accompanying warrants to
purchase shares of Common Stock of the Company (“Warrants” and, collectively
with the Series B Preferred Stock, a “Unit”), this Note shall be automatically
converted into the number of Units determined by dividing the amount of
Principal outstanding under this Note plus accrued Interest thereon by the
price
per Unit at which such Units are sold to Holder. Upon such conversion, the
Company shall deliver to Holder the securities constituting the Units into
which
this Note is converted and Holder shall surrender this Note to the Company
for
cancellation.
4.
RIGHTS
UPON EVENT OF DEFAULT
.
(a)
Event
of Default
.
Each of the following events shall constitute an “Event of
Default”:
(i)
the
Company's failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption or make-whole payments), Interest, or
other
amounts when and as due under this Note;
(ii)
the
Company or any of its Subsidiaries, pursuant to or within the meaning of
Title
11, U.S. Code, or any similar Federal, foreign or state law for the relief
of
debtors (collectively,
“Bankruptcy
Law”
),
(A) commences a voluntary case, (B) consents to the entry of an order for
relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official
(a
“Custodian”
),
(D) makes a general assignment for the benefit of its creditors or (E) admits
in
writing that it is generally unable to pay its debts as they become
due;
(iii)
a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company or any of its Subsidiaries
in an
involuntary case, (B) appoints a Custodian of the Company or any of its
Subsidiaries or (C) orders the liquidation of the Company or any of its
Subsidiaries; or
(iv)
the
Company shall default in the observance or performance of any term or provision
of an agreement, to which it is a party or by which it is bound, which default
will have a Material Adverse Effect (as defined below) and such default is
not
waived or cured within the applicable grace period provided for in such
agreement.
“Material
Adverse Effect”
means an event or combination of events, which individually or in the aggregate,
would reasonably be expected to (x) materially adversely affect the legality,
validity or enforceability of this Note (y) have or result in a material
adverse
effect on the results of operations, business, operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
materially adversely impair the Company's ability to perform fully on a timely
basis its material obligations under the Note.
(b)
Upon
the
occurrence of an Event of Default, the Holder may, at its option, declare
the
entire amount of principal and accrued interest on this Note immediately
due and
payable by written notice delivered to the Maker, in which event the Maker
shall
immediately pay to the Holder the entire unpaid principal balance of this
Note
together with accrued interest thereon. In addition to the payment of principal
and interest on this Note, upon the occurrence of an Event of Default, Maker
shall reimburse Holder for all of Holder’s costs and expenses, including
attorney fees and disbursements, incurred by Holder in enforcing the provisions
of this Note. Upon the occurrence of an Event of Default Interest shall accrue
at the rate of the lesser of 12% per annum, or the maximum rate of interest
per
annum permitted by applicable law.
5.
PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS
.
If (a) this Note is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding or the
Holder otherwise takes action to collect amounts due under this Note or to
enforce the provisions of this Note or (b) there occurs any bankruptcy,
reorganization, receivership of the Company or other proceedings affecting
Company creditors' rights and involving a claim under this Note, then the
Company shall pay the reasonable costs incurred by the Holder for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited
to,
attorneys' fees and disbursements.
6.
CONSTRUCTION;
HEADINGS
.
The headings of this Note are for convenience of reference and shall not
form
part of, or affect the interpretation of, this Note.
7.
FAILURE
OR INDULGENCE NOT WAIVER
.
No failure or delay on the part of the Holder in the exercise of any power,
right or privilege hereunder shall operate as a waiver thereof, nor shall
any
single or partial exercise of any such power, right or privilege preclude
other
or further exercise thereof or of any other right, power or
privilege.
8.
NOTICES;
PAYMENTS
.
(a)
All
notices and other communications made pursuant to the provisions of or in
connection with this Note shall be in writing and shall be deemed to have
been
duly made when delivered personally or by express mail or courier or when
sent
by facsimile transmission with confirmation received:
(i)
If to
the Holder, to 126 East 56
th
Street,
7
th
Floor,
New York, NY 10022, or to such other address as the Holder may give notice
of to
the Maker from time to time; or
(ii)
If
to the Maker, 1020 NW 6th Street, Suite I, Deerfield Beach, FL 33442, or
to such
other address as the Maker may give notice of to the Holder from time to
time.
(b)
Whenever any payment of cash is to be made by the Company to Holder pursuant
to
this Note, such payment shall be made in lawful money of the United States
of
America by a check drawn on the account of the Company and sent via overnight
courier service to Holder at such address as previously provided to the Company
in writing; provided that the Holder may elect to receive a payment of cash
via
wire transfer of immediately available funds by providing the Company with
prior
written notice setting out such request and the Holder's wire transfer
instructions. Whenever any amount expressed to be due by the terms of this
Note is due on any day which is not a Business Day, the same shall instead
be
due on the next succeeding day which is a Business Day and, in the case of
any
Interest Date which is not the date on which
this Note is paid in full, the extension of the due date thereof shall not
be
taken into account for purposes of determining the amount of Interest due
on
such date.
9.
CANCELLATION
.
After all Principal, accrued Interest and other amounts at any time owed
on this
Note has been paid in full, or this note is converted pursuant to Section
3 of
this Note, this Note shall automatically be deemed canceled, shall be
surrendered to the Company for cancellation and shall not be
reissued.
10.
WAIVER
OF NOTICE
.
To the extent permitted by law, the Company hereby waives demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.
11.
GOVERNING
LAW
.
This Note shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of
this
Note shall be governed by, the internal laws of the State of Florida, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Florida or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State of Florida.
In the event that any provision of this Note is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be
deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of this Note.
12.
SUBORDINATION
.
The obligations of the Company under this Note are expressly subordinated
to the
obligations of the Company and its Subsidiaries in connection with (i) that
certain promissory note, dated October 19, 2006, issued by the Company to
Gottbetter Capital Master, Limited (“Gottbetter”) in the original principal
amount of $2,500,000 and (ii) that certain promissory note, dated November
9,
2006, issued by the Company to Gottbetter in the original principal amount
of
$2,500,000 (the indebtedness evidenced by each of such notes is hereinafter
referred to as “Permitted Senior Indebtedness”). By acceptance of this note,
Holder agrees that it shall promptly execute and deliver (i) such agreements,
documents and instruments as may be reasonably requested by holders of Permitted
Senior Indebtedness, expressly confirming the subordination of the Company’s
obligations under this Note to those of the holders of Permitted Senior
Indebtedness and (ii) such intercreditor agreements as may be reasonably
requested by holders of Permitted Senior Indebtedness relating to customary
intercreditor arrangements including, but not limited to, standstill agreements
and the right to cure defaults under this Note.
13.
COMPANY
REPRESENTATIONS AND WARRANTIES
.
The Company represents and warrants to the Holder as of the Issuance Date
as
follows:
(a)
Status
.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power to own its properties and to carry on its business as now being conducted.
(b)
Authorization
.
This
Note
is duly authorized and, upon payment and issuance in accordance with the
terms
hereof, shall be free from all taxes, liens and charges with respect to the
issuance thereof.
This
Note has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement
of
creditors' rights generally.
(c)
Non-Contravention
.
The execution and delivery of this Note does not and will not conflict with
or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the certificate of incorporation or by-laws
of
the Company, each as currently in effect, (ii) any indenture, mortgage, deed
of
trust, or other material agreement or instrument to which the Company is
a party
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, or result
in
the imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the material properties or assets of the Company or
any
subsidiary pursuant to, any agreement, credit facility, debt or other instrument
(evidencing a Company debt or otherwise) or other understanding to which
the
Company is a party or by which any property or asset of the Company is bound
or
affected, or (iii) any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal
or
state regulatory body, administrative agency, or other governmental body
having
jurisdiction over the Company or any of its properties or assets, except
in the
case of clauses (ii) and (iii), such conflict, breach or default which would
not
have or result in a Material Adverse Effect.
IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as
of the
Issuance Date set out above.
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MDWERKS,
INC.
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By:
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/s/ Howard
B.
Katz
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Name:
Howard
B. Katz
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Title: Chief
Executive Officer
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