EXHIBIT 10.4

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR VERTEL CORPORATION SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.

 

VERTEL CORPORATION

 

SECURED PROMISSORY NOTE

 

U.S. $110,000

New York, New York

April 16, 2003

 

FOR VALUE RECEIVED, the undersigned, Vertel Corporation, a California
corporation (the “Borrower”), hereby promises to pay to the order of SDS
MERCHANT FUND, L.P. or any future permitted holder of this promissory note (the
“Lender”), at the principal office of the Lender set forth herein, or at such
other place as the holder may designate in writing to the Borrower, the
principal sum of up to ONE HUNDRED TEN THOUSAND DOLLARS (U.S. $110,000), or such
other amount as may be outstanding hereunder, together with all accrued but
unpaid interest, in such coin or currency of the United States of America as at
the time shall be legal tender for the payment of public and private debts and
in immediately available funds, as provided in this promissory note (the
“Note”).

 

1. Principal and Interest Payments.

 

(a) The Borrower shall repay in full the entire principal balance then
outstanding under this Note on the earlier (the “Maturity Date”) of: (i) October
16, 2003, or (ii) the acceleration of the obligations as contemplated by this
Note. The Maturity Date may be extended as agreed upon in writing between the
parties.

 

(b) Interest on the outstanding principal balance of this Note shall accrue at a
rate of twelve percent (12%) per annum. Interest on the outstanding principal
balance of the Note shall be computed on the basis of the actual number of days
elapsed and a year of three hundred and sixty (360) days and shall be payable by
the Borrower and shall be payable by the Borrower in cash in full on the
Maturity Date. Furthermore, upon the occurrence of an Event of Default (as
hereinafter defined), then to the extent permitted by law, the Borrower will pay
interest to the Lender, payable on demand, on the outstanding principal balance
of the Note from the date of the Event of Default until payment in full at the
rate of fifteen percent (15%) per annum.

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2. Security Agreement. The obligations of the Borrower hereunder shall be
secured by, and the Lender shall be entitled to the rights and security granted
by the Borrower pursuant to, the Security Agreement dated as of the date hereof
by the Borrower for the benefit of the Lender (the “Security Agreement”).

 

3. Payment on Non-Business Days. Whenever any payment to be made shall be due on
a Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

 

4. Representations and Warranties. To induce the Lender to make this loan,
Borrower hereby represents and warrants to the Lender that at and as of the date
hereof:

 

(a) The Borrower has been duly incorporated and is validly existing and in good
standing under the laws of the state of California, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as currently conducted. The Borrower is duly qualified as a foreign
entity to do business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. “Material Adverse Effect” means any material adverse
effect on the ability of the Borrower to perform its obligations hereunder or on
the business, operations, properties, prospects or financial condition of the
Borrower.

 

(b) Each of this Note and the Security Agreement has been duly authorized,
validly executed and delivered on behalf of the Borrower and is a valid and
binding obligation of the Borrower enforceable against the Borrower in
accordance with its terms, subject to limitations on enforcement by general
principles of equity and by bankruptcy or other laws affecting the enforcement
of creditors’ rights generally, and the Borrower has full power and authority to
execute and deliver this Note and the Security Agreement and to perform its
obligations hereunder and thereunder.

 

(c) The execution, delivery and performance of this Note and the Security
Agreement will not (i) conflict with or result in a breach of or a default under
any of the terms or provisions of, (A) the Borrower’s articles of incorporation
or by-laws, or (B) any material provision of any indenture, mortgage, deed of
trust or other material agreement or instrument to which the Borrower is a party
or by which it or any of its material properties or assets is bound, (ii) result
in a violation of any material provision of any law, statute, rule, regulation,
or any existing applicable decree, judgment or order by any court, Federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Borrower, or any of its material properties or assets or
(iii) result in the creation or imposition of any material lien, charge or
encumbrance upon any material property or assets of the Borrower or any of its
subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of their
property or any of them is subject.

 

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(d) No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Borrower is required
in connection with the valid execution and delivery of this Note or the Security
Agreement.

 

All representations and warranties made by Borrower under or in connection with
this Note shall survive the making of this loan and issuance and delivery of
this Note to Lender, notwithstanding any investigation made by Lender or on
Lender’s behalf. All statements contained in any certificate or financial
statement delivered by Borrower to Lender under this Note or the Security
Agreement shall constitute representations and warranties made by Borrower
hereunder.

 

5. Covenants of the Borrower. Borrower shall not without the prior written
consent of the Lender (a) change the location of its place of business or move
any of its assets from their present location or initiate any plan to discuss
such and (b) appoint, remove or approve the appointment or removal of any
members to its Board of Directors; provided, however, that in the case of
subsection (b) of this Section 5, such consent shall not be unreasonably
withheld by the Lender.

 

6. Events of Default; Remedies. Upon the occurrence of any of the following
(each, an “Event of Default”):

 

(a) the Borrower shall fail to make the payment of any amount of any principal
outstanding after the date such payment shall become due and payable hereunder;
or

 

(b) the Borrower shall fail to make any payment of interest after the date such
interest shall become due and payable hereunder; or

 

(c) any representation, warranty, covenant or certification made by the Borrower
herein or in the Security Agreement or in any certificate or financial statement
shall prove to have been false or incorrect or breached in a material respect on
the date as of which made; or

 

(d) the Borrower or any of its subsidiaries shall (i) default in any payment of
any amount or amounts of principal of or interest on any indebtedness for
borrowed money (the “Indebtedness”) (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness of all such persons is in
excess of $100,000, whether such Indebtedness now exists or shall hereinafter be
created, and such default entitles the holder thereof to declare such
Indebtedness to be due and payable, and such Indebtedness has not been
discharged in full or such acceleration has not been stayed, rescinded or
annulled within twelve (12) business days of such acceleration, or (ii) default
in the observance or performance of any other agreement or condition relating to
any Indebtedness in excess of $100,000 after the date hereof or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders or beneficiary or
beneficiaries of such Indebtedness to cause with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity; or

 

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(e) A judgment or order for the payment of money shall be rendered against the
Borrower or any subsidiary in excess of $100,000 in the aggregate (net of any
applicable insurance coverage) for all such judgments or orders against all such
persons (treating any deductibles, self insurance or retention as not so
covered) that shall not be discharged, and all such judgments and orders remain
outstanding, and there shall be any period of thirty (30) consecutive days
following entry of the judgment or order in excess of $100,000 or the judgment
or order which causes the aggregate amount described above to exceed $100,000
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

 

(f) the Borrower shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) admit in writing
its inability to pay its debts as such debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a voluntary case
under the U.S. Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic), (v) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (vi) acquiesce in
writing to any petition filed against it in an involuntary case under the U.S.
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic), or (vii) take any action under the laws of any jurisdiction (foreign
or domestic) analogous to any of the foregoing; or

 

(g) a proceeding or case shall be commenced in respect of the Borrower or any of
it’s subsidiaries without its application or consent, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets or (iii) similar relief in respect
of it under any law providing for the relief of debtors, and such proceeding or
case described in clause (i), (ii) or (iii) shall continue undismissed, or
unstayed and in effect, for a period of thirty (30) consecutive days or any
order for relief shall be entered in an involuntary case under the U.S.
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic) against the Borrower or any of its subsidiaries or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing
shall be taken with respect to the Borrower or any of its subsidiaries and shall
continue undismissed, or unstayed and in effect for a period of thirty (30)
consecutive days; or

 

(h) The occurrence of any event which has a Material Adverse Effect.

 

THEN, Lender may, at its election and without demand or notice of any kind,
which are hereby waived, declare the unpaid balance of the Note, and accrued
interest thereon, immediately due and payable, proceed to collect the same, and
exercise any and all other rights, powers and remedies given it by this Note and
the Security Agreement or otherwise at law or in equity.

 

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7. Borrower’s Prepayment Option. The Borrower may prepay, at its sole option,
all or any portion of the outstanding principal amount of this Note and the
accrued and unpaid interest thereon upon two (2) business days prior written
notice to the Lender (the “Borrower Prepayment Notice”) at a cash price equal to
100% of the sum of the outstanding principal amount and any interest accrued and
outstanding (the “Borrower Prepayment Price”). The Borrower may not deliver a
Borrower Prepayment Notice to the Lender unless the Borrower has clear and good
funds for a minimum of the amount it intends to prepay in a bank account
controlled by the Borrower. The Borrower Prepayment Notice shall state the date
of prepayment (the “Borrower Prepayment Date”), the Borrower Prepayment Price,
the amount of the Note of such Lender to be prepaid, the amount of accrued and
unpaid interest through the Borrower Prepayment Date and shall call upon the
Lender to surrender to the Borrower on the Borrower Prepayment Date at the place
designated in the Borrower Prepayment Notice such Lender’s Note. The Borrower
Prepayment Date shall be no more than five (5) trading days after the date on
which the Lender is notified of the Borrower’s intent to prepay the Note (the
“Borrower Prepayment Notice Date”). If the Borrower fails to pay the Borrower
Prepayment Price by the sixth (6th) trading day following the Borrower
Prepayment Notice Date, the prepayment will be declared null and void and the
Borrower shall lose its right to deliver a Borrower Prepayment Notice to the
Lender in the future. On or after the Borrower Prepayment Date, the Lender shall
surrender the Notes called for prepayment to the Borrower at the place
designated in the Borrower Prepayment Notice and shall thereupon be entitled to
receive payment of the Borrower Prepayment Price.

 

8. Replacement. Upon receipt of a duly executed, notarized and unsecured written
statement from the Lender with respect to the loss, theft or destruction of this
Note (or any replacement hereof), and without requiring an indemnity bond or
other security, or, in the case of a mutilation of this Note, upon surrender and
cancellation of such Note, the Borrower shall issue a new Note, of like tenor
and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

 

9. Parties in Interest, Transferability. This Note shall be binding upon the
Borrower and its successors and assigns and the terms hereof shall inure to the
benefit of the Lender and its successors and permitted assigns. This Note may be
transferred or sold, subject to the provisions of Section 11 of this Note, or
pledged, hypothecated or otherwise granted as Security by the Lender.

 

10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. Upon an Event of Default, the Lender shall have all the rights and
remedies contained in this Note and the Security Agreement. The remedies
provided in this Note shall be cumulative and in addition to all other remedies
available under this Note or in the Security Agreement, at law or in equity
(including, without limitation, a decree of specific performance and/or other
injunctive relief), and no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a Lender’s right to pursue actual damages for any failure by the
Borrower to comply with the terms of this Note. The Borrower acknowledges that a
breach by it of its obligations hereunder will cause irreparable and

 

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material harm to the Lender and that the remedy at law for any such breach may
be inadequate. Therefore the Borrower agrees that, in the event of any such
breach or threatened breach, the Lender shall be entitled, in addition to all
other available rights and remedies, at law or in equity, to seek and obtain
such equitable relief, including but not limited to an injunction restraining
any such breach or threatened breach, without the necessity of showing economic
loss and without any bond or other security being required.

 

11. Compliance with Securities Laws. The Lender of this Note acknowledges that
this Note is being acquired solely for the Lender’s own account and not as a
nominee for any other party, and for investment, and that the Lender shall not
offer, sell or otherwise dispose of this Note other than in compliance with the
laws of the United States of America and as guided by the rules of the
Securities and Exchange Commission. This Note and any Note issued in
substitution or replacement therefore shall be stamped or imprinted with a
legend in substantially the following form:

 

“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR VERTEL CORPORATION SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED.”

 

12. Borrower Waivers. Except as otherwise specifically provided herein, the
Borrower and all others that may become liable for all or any part of the
obligations evidenced by this Note, hereby waive presentment, demand, notice of
nonpayment, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals of extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Borrower liable for the payment of this Note, AND
DO HEREBY WAIVE TRIAL BY JURY.

 

(a) No delay or omission on the part of the Lender in exercising its rights
under this Note, or course of conduct relating hereto, shall operate as a waiver
of such rights or any other right of the Lender, nor shall any waiver by the
Lender of any such right or rights on any one occasion be deemed a waiver of the
same right or rights on any future occasion.

 

(b) THE BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART
IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY
WAIVES ITS RIGHT

 

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TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE LENDER OR
ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

 

13. Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the choice of
law provisions. This Note shall not be interpreted or construed with any
presumption against the party causing this Note to be drafted.

 

14. Notices. Any notices, demands or waivers required or permitted to be given
under the terms of this Note shall be in writing and shall be sent by certified
or registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt, if delivered personally or by courier, or by facsimile (if
received during normal business hours), in each case to the address of the party
to receive such notice, demand or waiver as set forth below:

 

If to Borrower:

 

Vertel Corporation

21300 Victory Boulevard

Suite 700

Woodland Hills, CA 91367

Attention: President and Chief Executive Officer

Fax No.: (818) 598-0104

 

with a copy to:

 

Perkins Coie LLP

1620 26th Street, Sixth Floor

Santa Monica, CA 90404

Attention: David J. Katz, Esq.

Fax No.: (310) 843-1254

 

If to the Lender:

 

SDS Merchant Fund, L.P.

c/o SDS Capital Partners LLC

53 Forest Avenue, 2nd Floor

Old Greenwich, CT 06870

Attention: Steve Derby

Fax No.: (203) 967-5851

 

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with a copy to:

 

Jenkens & Gilchrist Parker Chapin LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Attention: Christopher S. Auguste

Tel. No.: (212) 704-6000

Fax No.: (212) 704-6288

 

Each party shall provide notice to the other party of any change in address,
such notice to become effective upon receipt.

 

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IN WITNESS WHEREOF, the Borrower has executed and delivered this Note as of the
date first written above.

 

VERTEL CORPORATION

By:

 

/S/    MARC E. MAASSEN

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Name:

 

Marc E. Maassen

Title:

 

President/CEO

 

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