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Cash Flow Promissory Note
$ [principal sum]
[city and state]
FOR VALUE RECEIVED, the undersigned [name of Corporation], a corporation organized and existing under the laws of the State of [state] located at [address] (Maker) promises to pay to the order of [name] (Lender), residing at [address], or at such other place as the holder hereof may designate in writing, the principal sum of ........... dollars ($ ..........), together with accrued interest in arrears at the rate of .......... percent (..........%) per annum.
The principal balance of this Note and the accrued interest thereon shall be payable as follows: in monthly installments on the [number] day of each month (each a Payment Date) from and including [date] to and including [date] (the Maturity Date), each in an amount equal to .......... percent (..........%) of Maker's Excess Cash Flow, if any, during the immediately preceding calendar month. Payments received by the holder hereof from time to time shall be applied first to accrued interest and late payment fees if any, and then to the principal balance hereof.
For purposes of this Note, the term "Excess Cash Flow" shall mean, with respect to any calendar month or portion thereof during the term of this Note, the sum of (i) the aggregate amount of sales and other operating revenues of Maker for such month, less the cost of goods sold and selling, general, and administrative expenses of Maker for such month, plus (ii) depreciation, amortization, and other noncash charges, if any, minus (iii) payments of interest (including contingent interest) on indebtedness, minus (iv) capital expenditures and lease payments actually made during such month, minus (v) principal payments made with respect to indebtedness (including prepayments but excluding payments based on a percentage of Excess Cash Flow), and minus (vi) federal, state, and local tax payments. Maker or its accountants will prepare and deliver to Lender with each payment of principal hereunder a statement setting forth the calculation of Excess Cash Flow hereunder.
In addition, if Maker's gross sales during any fiscal year of the Maker at any time on or before the Maturity Date are equal to or greater than .......... dollars ($ ..........), then Maker shall pay to Lender the sum of .......... dollars ($ ..........) as additional interest hereunder (Contingent Payment). Notwithstanding the foregoing, Maker may elect, in its sole discretion, to pay the Contingent Payment to Lender at any time on or before the Maturity Date whether or not Maker's gross sales during any fiscal year of the Maker are equal to or greater than .......... dollars ($ ..........) as aforesaid.
Interest shall accrue at the rate herein stated on the balance from the date hereof until payment in full is received by Holder of this Note. The outstanding principal balance hereof together with all accrued interest thereon shall be payable in full on the Maturity Date.
Maker shall have the right at any time to prepay the entire outstanding amount of this Note together with any interest charges due to the holder up to the time of the prepayment. Maker shall have the right to make a partial prepayment of this Note at any time, and if Maker does make such a partial prepayment, it will be applied first to accrued interest and late payment fees if any, and then to the principal balance hereof.
This Note shall, at the option of Holder, become immediately due and payable without notice or demand upon the occurrence of any of the following events (each an Event of Default):
1. Maker fails to make payments hereunder on three (3) consecutive Payment Dates by reason of the absence of Excess Cash Flow; or
2. Maker fails to make any payment hereunder on any Payment Date for any reason other than the absence of Excess Cash Flow; or
3. Maker fails to make payment in full of the principal balance hereof and all accrued interest thereon within [number] days after the Maturity Date; or
4. Maker shall admit its inability to pay its debts as they mature or shall make an assignment for the benefit of its creditors; or
5. A proceeding in bankruptcy or for reorganization of Maker or the readjustment of any of its debts under Title 11 of the United States Code, as amended, or any part thereof or under any other laws, whether state or federal, for the relief of debtors now or hereafter existing, shall be commenced by Maker or shall be commenced against Maker and shall not be discharged within sixty (60) days of its commencement; or
6. A receiver or trustee shall be appointed for Maker or for any substantial part of its assets, or any proceeding shall be instituted for the dissolution or the full or partial liquidation of Maker, and such receiver or trustee shall not be discharged within thirty (30) days of his appointment, or such proceeding shall not be discharged within thirty (30) days of its commencement; or
7. A judgment creditor of Maker shall obtain possession of any of its assets by any means including, without limitation, levy, restraint, or replevin; or
8. Maker shall merge or consolidate with or into any other person or entity, sell all or substantially all of its assets, dissolve or liquidate, cease to conduct the business presently conducted by Maker, or take corporate action to effectuate any of the foregoing; or
9. The validity or enforceability of this Note, or any lien contemplated hereby shall be contested by Maker or Maker shall deny any further liability or obligation hereunder or thereunder; or
10. [Name of principal shareholder of maker] shall cease to own at least 51 percent (51%) of the issued and outstanding common stock of Maker.
Except for the Events of Default set forth in subsections (1), (2) and (3) of this Note, Holder shall give written notice to Maker of any event of default that has occurred and Maker shall have fifteen (15) days from the date on which Holder sends such notice, to cure such event of default. If an event of default described in subsection (8) above shall have occurred and be continuing, Maker shall promptly pay to Lender the proceeds of any merger, consolidation or sale of assets described in such subsection, provided that if such payment is not sufficient to pay in full the outstanding principal balance of this Note and all interest accrued thereon, Lender shall be entitled to exercise all of its rights and remedies herein. If Maker fails to cure any such event of default within said fifteen (15)-day period, Holder may accelerate the outstanding obligations of Maker as provided hereinabove, immediately and without further notice.
In the event a judgment shall be entered upon this Note, interest on the unpaid principal balance shall continue to accrue at the rate provided herein from the date of judgment until payment in full is received by Holder hereof.
The undersigned further promises to pay any lawful taxes that may be assessed upon the principal amount of this Note against Holder of this Note and all costs and expenses, including reasonable attorney fees, which may be incurred by the holder of this Note in collecting any sums due under this Note or in bringing any action to foreclose the lien securing this Note or in protecting or sustaining the lien or security agreement.
Failure by Holder hereof to insist upon performance in accordance with the terms of this Note shall not be deemed a waiver of any other obligation under this Note.
Presentment, notice of dishonor, and protest are hereby waived by all makers, sureties, guarantors, and endorsers hereof. This Note shall be the joint and several obligation of all makers, sureties, guarantors, and endorsers and shall be binding upon them and their heirs, personal representatives, successors, and assigns.
Any notice to Maker provided for in this Note shall be given by mailing such notice by certified mail addressed to Maker at the address stated above, or to such other address as Maker may designate by notice to Holder. Any notice to Holder shall be given by mailing such notice by certified mail, return receipt requested, to Holder at the address stated above in this Note, or at such other address as may have been designated by notice to Maker.
This Note is to be governed by and construed in accordance with the laws of the State of [state] for all purposes.
This Note is secured by a lien in certain personal property of Maker pursuant to a Security Agreement of even date herewith.
[name of maker]
By: [print name and title:]
*** If Required By State Law ***
This Section for Notary:
State of _________
County of ________ [COUNTY]
On [DATE] before me, [NAME OF NOTARY], notary, personally appeared [NAME OF PERSON(S) INVOLVED], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____