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EXHIBIT 10.10
 
LOAN AGREEMENT
 

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THIS LOAN AGREEMENT ("Agreement") is made and entered into as of October 12,
2007 (the "Effective Date") by and between: SKYE INTERNATIONAL, INC., a Nevada
corporation with offices at 7701 East Gray Road, Suite 4, Scottsdale, Arizona
85260 ("Borrower"); and TED MAREK FAMILY TRUST dated May 28, 1999, Beverly A.
Marek and Thaddeus Frank Marek, Trustees, with offices at 12210 North 76th
Place, Scottsdale, Arizona 85260 ("Lender").
 
WHEREAS, Borrower desires to borrow from Lender, and Lender has agreed upon the
terms and conditions herein to lend to Borrower, from time to time, cash in
varying amounts and at varying times; and in consideration thereof, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged the parties hereby agree as follows:
 
1.    Loan. Borrower desires to borrow from Lender, from time to time, varying
amounts of funds on an "as needed" basis (any individual amount of funds loaned,
and all such funds together, being referred to herein as a "Loan"). Lender
agrees to consider, upon Borrower's request the possibility of making any one or
more Loans to Borrower. If Lender lends to Borrower, each resulting Loan shall
be subject to this Agreement and be evidenced by the execution and delivery by
Borrower of a secured convertible promissory note substantially in the form
attached hereto as Exhibit "A" and incorporated herein by this reference (each,
a "Note"; and collectively, "Notes"). The proceeds from each Loan shall be used
by Borrower for general corporate purposes, as directed by Borrower's Board of
Directors.
 
2.            Mandatory Issuance to Lender of Shares of Restricted Common Stock
of Borrower; Issuance of Additional Shares Upon Optional Extension of Maturity
Date. As a portion of the consideration to be paid by Borrower to Lender for the
making of any Loan (i.e.. in addition to all of Borrower's additional
obligations under this Agreement and under each Note), Borrower hereby covenants
to issue to Lender one (1) share of the common stock. $.001 par value per share,
of Borrower, for every Two Dollars ($2.00) of principal amount of each Loan
(i.e. each time an additional Note is made by Borrower in favor of Lender.
Borrower concomitantly shall issue common shares to Lender), the parties hereby
acknowledging and agreeing that each and all such newly issued shares shall be:
(i) deemed to be "restricted securities" as defined in applicable federal and
state securities laws; (ii) issued to Lender immediately upon the execution and
delivery of each corresponding Note: and (iii) shall, when issued, be deemed for
all purposes to be shares that are fully paid-up and non-assessable. The parties
further acknowledge and agree that, in accordance with Section 1(c) of each
Note, Lender unilaterally shall have the right to extend the Maturity Date
thereof by one (1) year, upon written notice of such extension given by Lender
to Borrower on or prior to the original Maturity Date, and that, immediately
upon the giving of such notice, if at all, Borrower shall issue to Lender
additional shares of Borrower's common stock, also at the rate of one (1) share
of common stock. $.001 par value per share of Borrower. for every Two Dollars
($2.00) of the original principal amount of the corresponding Note (i.e.,
without any increase in the corresponding Loan amount), such additional shares
also to be deemed to be restricted securities that are fully paid-up and
non-assessable immediately upon their issuance.
 
 
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3.           Certain Prerequisites to Loans. Lender shall have no obligation to
make any Loan or Loans whatsoever to Borrower. If and to the extent that
Borrower seeks any Loan and Lender desires to make a Loan or Loans, from time to
time, then Borrower first shall ensure that the following conditions to the
making of any Loan hereunder shall have been satisfied: (i) this Agreement and
each corresponding Note shall have been duly executed and delivered to Lender,
all in form and substance satisfactory to Lender; (ii) Borrower shall have
furnished to Lender such financial statements and other corporate information of
Borrower, financial and otherwise, as Lender may have requested; (iii) no Event
of Default shall have occurred and be continuing under this Agreement; (iv) all
representations and warranties contained in this Agreement or in any Note shall
be true and correct; (v) Borrower shall have delivered to Lender such
authorizations and other documents as may be requested by Lender to evidence
Borrower’s authority to execute, deliver and perform this Agreement and each
Note, including, without limitation, a Unanimous Consent of the Company’s Board
of Directors approving the Loan, this Agreement and the Notes, all in form and
substance satisfactory to Lender at Lender’s sole discretion; (vi) Borrower
shall have provided to Lender evidence satisfactory to Lender of the existence
of insurance coverage on Borrower’s properties, assets and business in such
amounts and against such risks as Lender may deem appropriate in its sole
discretion, with endorsements to all such insurance policies of Borrower naming
Lender as a loss payee or an additional named insured; and (vii) Borrower shall
have paid all of Lender’s costs and expenses, including reasonable fees of legal
counsel, incurred in the preparation of this Agreement and each Note and any and
all additional instruments and other documents that may be related hereto and
thereto.
 
4.          Representations and Warranties, and Certain Covenants, of Borrower.
To induce Lender to enter into this Agreement, Borrower hereby represents and
warrants to Lender, at the commencement of each Loan, during the term of each
Loan, and throughout any and all renewals and extensions thereof, as follows:
(i) Borrower is and shall remain duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, and is and shall remain
authorized to conduct business in all jurisdictions in which Borrower’s
ownership of property and transaction of business legally requires such
authorization, except where the failure to be authorized to conduct business
would not result in a material adverse effect upon Borrower’s business, and
Borrower has and shall continue to have full power, authority and legal right to
own its property and to transact business as presently transacted or proposed to
be transacted; (ii) the execution, delivery and performance of this Agreement
and of each Note by Borrower are and shall remain within the powers of Borrower
and have been duly authorized by Borrower’s Board of Directors, and the same are
not in contravention of law or the terms of Borrower’s organizational documents,
or of any indenture, agreement or undertaking to which Borrower is a party or by
which Borrower or any of Borrower’s assets are bound; (iii) this Agreement and
each Note, when duly executed and delivered, shall constitute legal, valid and
binding obligations of Borrower, and shall be fully enforceable in accordance
with their respective terms; (iv) all financial statements and information that
have been or may hereafter be furnished to Lender in connection herewith do and
shall present fairly the financial condition of Borrower as of the dates
thereof, for the periods for which the same are furnished, and shall be
accurate, correct and complete in every material respect; (v) there is no
action, suit, investigation or proceeding pending or, to Borrower’s knowledge,
threatened against Borrower, as of the Effective Date, and Borrower hereby
undertakes to notify Lender immediately in writing of the initiation of any such
action suit, investigation or proceeding against Borrower; (vi) Borrower has
timely filed and shall continue timely to file all tax returns and all
securities law filings that are required to be filed (subject to permitted
extensions), and has paid all taxes and other fees and charges due in accordance
with such returns and other filings or otherwise due or pursuant to any
assessment received by Borrower, and shall continue to do the same; (vii)
Borrower holds and shall continue to hold all material licenses, permits,
certificates, consents and franchises, and all necessary filings associated
therewith have been made, in order for Borrower to carry on its business as now
being conducted and to own or lease and operate its properties as now owned,
leased or operated, and all such material licenses, permits, certificates,
consents and franchises are and shall continue to be valid and in full force and
effect; (viii) there is no material fact that Borrower has not disclosed to
Lender that could have a material adverse effect on the properties, business,
prospects or condition (financial or otherwise) of Borrower, and Borrower
affirmatively undertakes to notify Lender in writing of the occurrence of any
such fact, immediately upon occurrence; (ix) to Borrower’s knowledge, Borrower
is not in violation of any law, rule, regulation, order or decree applicable to
Borrower or its properties, and Borrower affirmatively undertakes to comply at
all times with all applicable laws, rules and regulations; (x) no Event of
Default has occurred and is continuing; and (xi) Borrower has obtained the
advice of independent counsel, who has reviewed and negotiated this Agreement
and the form of Note on behalf of Borrower prior to the execution and delivery
hereof and thereof. All of the representations and warranties, and the
covenants, made by Borrower herein, shall survive the delivery of this Agreement
and of each Note, and any renewal and extension of any Loan or Loans made
hereunder. All statements made by or on behalf of Borrower under or pursuant to
this Agreement or any Note, or otherwise in connection with the transactions
contemplated hereby, shall constitute representations and warranties made by
Borrower hereunder.
 
 
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5.           Certain Events of Default. Each of the following shall constitute
an Event of Default hereunder and under each Note: (i) any failure to pay when
due any amount of principal or interest in accordance with the terms of this
Agreement or of any Note, and the continuation of such default without cure for
a period of ten (10) calendar days after written notice by Lender of the
occurrence of such default; (ii) any failure to pay when due any other amount
payable to Lender under the terms of this Agreement or of any Note, and the
continuation of such default without cure for a period of ten (10) calendar days
after written notice by Lender of the occurrence of such default; (iii) any
default by Borrower in the performance or observance of any covenant or
agreement contained in this Agreement or in any Note, or in any other agreement
made in connection herewith or therewith, or in any other agreement or
instrument delivered to Lender in connection with this Agreement or any Note,
and the continuation of such default without cure for a period of ten (10)
calendar days after written notice by Lender of the occurrence of such default;
(iv) any representation or warranty made by Borrower to Lender, or any
representation, statement, certificate, schedule or report made or furnished to
Lender on behalf of Borrower, is false or erroneous in any material respect at
the time of its making or otherwise ceases to be accurate in any material
respect; (v) Borrower applies for or consents to the appointment of a receiver,
trustee or liquidator of its properties, or admits in writing its inability to
pay debts as they mature, or makes a general assignment for the benefit of
creditors, or any material part of Borrower’s assets or properties is placed in
the charge of a receiver, trustee or other officer or representative of a court
or of creditors; (vi) Borrower is adjudged a bankrupt, or any voluntary
proceeding is instituted by Borrower in insolvency or bankruptcy or for
readjustment, extension or composition of debts, or for any other relief of
debtors; (vii) any involuntary proceeding is instituted against Borrower in
insolvency or for readjustment, extension, or composition of debts, which
proceeding is not dismissed within ninety (90) days after the filing of the
same; (viii) entry by any court of a final judgment against Borrower, or the
institution of any levy, attachment, garnishment or charging order against
Borrower, which has a material adverse effect, as determined by Lender in
Lender’s reasonable judgment, on the financial condition of Borrower; or (ix)
any default, event of default, or breach occurs with respect to or otherwise on
the part of Borrower under or in connection with any other agreement between
Lender and Borrower, including, without limitation, that certain Loan Agreement
and corresponding 15% Convertible Debenture executed by Lender and Borrower as
of September 1, 2007 (the parties also hereby agreeing that any default by
Borrower under any Loan made hereunder shall create an Event of Default with
respect to all Loans made hereunder, and with respect to all other agreements
between Borrower and Lender, including the September 1, 2007 Loan Agreement and
Debenture).
 
6.           Remedies. Upon the occurrence of any one or more Events of Default
that have not been timely cured, Lender may, at its sole option, exercise any
and all of the following rights and remedies, at Lender’s sole discretion, each
and every one of which shall be cumulative and in addition to each other and to
the additional rights arising on the part of Lender at law and in equity: (i)
declare all sums owing under this Agreement and the corresponding Note or Notes
to be immediately due and payable, without the need to wait for the occurrence
of any deadline or other passage of time; (ii) terminate any or all of Lender’s
obligations hereunder; (iii) exercise a right of offset against any and all
property of Borrower in Lender’s custody or possession; (iv) without notice of
default or demand, pursue and enforce any and all of Lender’s rights and
remedies against Borrower, including, without limitation, any and all rights of
Lender arising under this Agreement and any and all Notes; (v) exercise all
rights of Lender under that certain Security Agreement made of even date
herewith between Borrower and Lender, under which Borrower has granted to Lender
a security interest in all of Borrower’s assets to secure performance of
Borrower’s obligations to Lender under this Agreement and under each Note (the
“Security Agreement”); and (vi) exercise any and all additional rights and
remedies of Lender at law or in equity. Lender may waive any Event of Default,
but only in a writing executed by Lender. Any Event of Default waived in a
writing executed by Lender shall be deemed under this Agreement and under each
Note to have been cured and not to be continuing; but no waiver shall waive the
effect of any subsequent or different Event of Default.
 
 
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7.           General Provisions. Borrower and Lender further agree as follows:
 
7.1    Modification; Construction. No failure to exercise and no delay in
exercising any right of Lender hereunder or under any Note shall operate as a
waiver hereof or thereof, neither shall any single or partial exercise of any
such right preclude any additional or further exercise thereof. The rights of
Lender hereunder and under each Note shall be in addition to all other rights of
Lender at law and in equity and those arising under any other instrument or
other agreement, including the Security Agreement. No modification of any
provision of this Agreement or of any Note or of the Security Agreement shall be
effective unless made in a writing signed by Lender and Borrower. No notice or
demand given in any case shall constitute a waiver of the right to take other
action in the same, similar or other instances without such notice or demand.
Initially capitalized terms used but not defined in this Agreement shall have
the meanings given to them, respectively, in the Note and in the Security
Agreement.
 
7.2    Notices. Any and all notices and other communications required or
permitted to be given under this Agreement or under any Note shall be given in
writing and personally delivered or mailed by prepaid mail or overnight courier
to the address of such party as provided at the beginning of this Agreement. Any
such notice or other communication shall be deemed to have been given on the
date that is: three (3) days after it has been mailed by prepaid certified or
registered US Mail; one (1) day after it has been sent by overnight courier; on
the same day on which it personally has been hand delivered; and if sent by
other means, when actually received. Any party may change its address for notice
purposes by giving notice of such change to the other party as provided herein.
 
7.3    Governing Law; Jurisdiction; Forum. This Agreement has been executed,
delivered and accepted by Borrower and Lender in the State of Arizona; and the
substantive laws of Arizona and the applicable federal laws of the United States
of America shall govern the validity, construction, enforcement and
interpretation of this Agreement and of each Note. Any suit, action or
proceeding against Borrower with respect to this Agreement or any Note may be
brought in the Superior Court of Arizona located in Maricopa County, Arizona, or
in the United States District Court for the District of Arizona, as Lender, in
Lender’s sole discretion, may elect; and Borrower hereby submits to the
non-exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. Borrower hereby irrevocably waives any objections Borrower
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or any Note that may be
brought in any such courts, and Borrower further irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
 
7.4    No Oral Agreements; Invalid Provisions; Multiple Counterparts. THIS
AGREEMENT AND EACH NOTE ISSUED HEREUNDER REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES
AFFECTING THE SUBJECT MATTER OF THIS AGREEMENT OR OF THE NOTES OR THE SECURITY
AGREEMENT. If any provision of this Agreement or of any Note is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, and the remaining enforceable provisions shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part thereof; and the remaining provisions shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from the remaining provisions. This
Agreement and each Note may be executed in any number of counterparts, and any
of the parties hereto may execute the same by signing any such counterpart.
 
 
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7.5    Waiver of Jury Trial; Enforcement Costs and Expenses to be Borne by
Borrower. Borrower and Lender hereby mutually and irrevocably waive their right
to a jury trial of any dispute that may arise out of or in connection with this
Agreement, the parties instead irrevocably agreeing that any such dispute shall
be resolved by a court of competent jurisdiction sitting without a jury.
Borrower agrees to pay all costs of enforcement of this Agreement, including,
without limitation, attorneys' fees and other costs incurred by Lender in
addressing its claims against Borrower hereunder, regardless of whether a
lawsuit is actually filed; and Borrower agrees to pay all of Lender's costs of
preparation for suit, and proceeding with a suit, plus any and all additional
attorney and other fees and costs Lender may incur in any proceeding under any
bankruptcy or other similar federal or state law in connection with the
obligations evidenced hereby. In the event of any court proceeding, court costs
and attorneys' fees shall be set by the court and not by a jury and shall be
included in any judgment obtained by the Lender.
 
7.6    Binding Effect; Assignable by Lender Only. This Agreement and each Note
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors, assigns and legal representatives: provided, however,
that: (i) Borrower shall not, without the prior written consent of Lender,
assign any rights, powers, duties or obligations hereunder or thereunder; but
(ii) Lender shall he authorized to assign this Agreement and each and every Note
to any other person, at Lender's sole discretion, without the consent of
Borrower.
 
IN WITNESS WHEREOF, the undersigned have executed and delivered this Agreement
as of the Effective Date.
 
 
"BORROWER"
SKYE INTERNATIONAL, INC.,    
a Nevada corporation
         
 
By:
/s/  Mark D. Chester       Mark D. Chester, Chairman  

 
 
"LENDER"
TED MAREK FAMILY TRUST dated May 28, 1999          
 
By:
/s/  Beverly A. Marek       Beverly A. Marek, Trustee              By:  /s/ 
Thaddeus Frank Marek       Thaddeus Frank Marek, Trustee  

 
 
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EXHIBIT “A”
 
TO LOAN AGREEMENT DATED OCTOBER 12, 2007 BETWEEN
SKYE INTERNATIONAL, INC. AND TED MAREK DEFINED BENEFIT PENSION PLAN
 
FORM OF SECURED CONVERTIBLE PROMISSORY NOTE TO BE EXECUTED UPON
THE MAKING OF ANY LOAN UNDER THE LOAN AGREEMENT
 

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THE SALE, TRANSFER OR OTHER DISPOSITION OF THIS NOTE, OR OF THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF, IS RESTRICTED.
 
SKYE International, Inc.
 
15% CONVERTIBLE SECURED PROMISSORY NOTE
1-YEAR MATURITY (OPTIONAL 2-YEAR MATURITY)
 

 

US  $__________________
_____________, 20__
Phoenix, Arizona, USA  

 
FOR VALUE RECEIVED, Skye International, Inc., a Nevada corporation with offices
at 7701 East Gray Road, Suite 4, Scottsdale, Arizona 85260 (the "Company"),
hereby promises unconditionally, as of ____________, 20__ (the “Effective
Date”), to pay to the order of Ted Marek Defined Benefit Pension Plan dated
December 23, 1993 and effective January 1, 1994, located at 9977 North 90th
Street, Suite 220, Scottsdale, Arizona 85258 (“Holder”), the principal amount of
_________________ Dollars (US $__________) together with interest on the
principal balance outstanding from time to time under this instrument ("Note"),
from and including the date hereof, until, but excluding, the date of payment,
at a per annum rate equal to the "Stated Interest Rate" specified in Section
1(a), or, to the extent applicable, at the "Default Interest Rate" specified in
Section 1(b), in accordance with the following terms and conditions:
 
1.           Contracted For Rate of Interest. The contracted for rate of
interest of the indebtedness evidenced by this Note shall include and consist of
the following, as applicable:
 
(a)          Stated Interest Rate. The "Stated Interest Rate" shall equal
Fifteen Percent (15%) per annum, calculated on the basis of the actual number of
days elapsed, assuming a 365-day year, applied to the outstanding principal
balance of this Note from time to time. The principal balance outstanding
hereunder shall bear interest at the Stated Interest Rate from the date of
issuance of this Note through the date that is one day prior to the first to
occur of the following events: (i) the unpaid principal balance, together with
all accrued interest and other amounts payable hereunder, have been paid in
full; (ii) the unpaid principal balance, together with all accrued interest and
other amounts payable hereunder, have been converted into shares of the
Company’s common stock as permitted in accordance with Section 7; or (iii) the
passage of ten (10) days following the occurrence of one or more uncured Events
of Default as defined in Section 4.
 
(b)          Default Interest Rate. The "Default Interest Rate" shall equal
Eighteen Percent (18%) per annum, calculated on the basis of the actual number
of days elapsed, assuming a 365-day year, applied to the outstanding principal
balance of this Note from time to time. The principal balance outstanding
hereunder shall bear interest at the Default Interest Rate beginning eleven (11)
days after the date of occurrence of any uncured Event of Default, as defined in
Section 4, and continuing until the first to occur of the following events: (i)
the unpaid principal balance, together with all accrued interest and other
amounts payable hereunder, have been paid in full; or (ii) the unpaid principal
balance, together with all accrued interest and other amounts payable hereunder,
have been converted into shares of the Company’s common stock as permitted in
accordance with Section 7.

 
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(c)          Monthly Payments of Interest Only; Payment in Full on Maturity Date
(or Extended Maturity Date). Interest accrued on the principal balance of this
Note shall be due and payable to Holder monthly, on the first day of each
calendar month, beginning at the start of the first full calendar month
following the Effective Date and continuing on the first day of each month
thereafter until all obligations of the Company under this Note have been paid
in full. The outstanding principal balance of this Note, together with all
accrued but unpaid interest and all additional amounts payable hereunder, shall
be due and payable in full on the date that is exactly one (1) year after the
Effective Date (the "Maturity Date"); provided, however, that the Company shall
not be required to repay such outstanding principal, interest or additional
amounts if and to the extent that this Note has been converted by Holder, at
Holder’s sole option, into shares of the Company's Common Stock as permitted
under Section 7; and provided further, that the Holder unilaterally shall have
the right to extend the Maturity Date by one (1) year (the “Extended Maturity
Date”), upon written notice of such extension given by Holder to Company on or
prior to the Maturity Date; and in the event of such extension, the Note shall
be deemed for all purposes to have been issued originally with a two-year period
of maturity.
 
2.          Application of Payments. All payments received by Holder with
respect to the indebtedness evidenced hereby shall be applied: (i) first to
Additional Sums (as hereinafter defined) and to any other non-interest charges
and costs provided for in this Note; (ii) next, to accrued but unpaid interest
at the Default Interest Rate, if and to the extent applicable; (iii) next, to
accrued but unpaid interest at the Stated Interest Rate; and (iv) finally, to
the unpaid principal balance outstanding hereunder from time to time.
 
3.           Prepayments. Payments of principal hereof may be made at any time,
or from time to time, in whole or in part, prior to the Maturity Date (or the
Extended Maturity Date, as applicable), without penalty, provided that all
interest and other charges accrued through the date of prepayment are also paid
in full, in accordance with Section 2. Notwithstanding any prepayment of
principal hereof: (i) there shall be no change to the Maturity Date (or, if
applicable, to the Extended Maturity Date) or to the amount of payments due
hereunder unless Holder, in its sole and absolute discretion, agrees in writing
to such change; and (ii) no terms and conditions of this Note shall be changed
or affected in any manner whatsoever; and (iii) the Company's obligations
hereunder shall continue in effect, and this Note shall remain outstanding,
unless and until this Note is converted into shares of the Company's Common
Stock as permitted under Section 7, or until the principal balance outstanding
hereunder, together with all accrued interest and other amounts payable
hereunder, are paid in full, upon which, Holder shall deliver to the Company the
original executed copy of this Note, marked "PAID" in bold lettering in a
conspicuous location on the first page and on the signature page hereof.
 
4.           Events of Default; Acceleration. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder, and
upon any such Event of Default, the entire principal balance outstanding
hereunder, together with all accrued interest and other amounts payable
hereunder, at the election of Holder, shall become immediately due and payable,
without any notice to the Company, and without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Company:
 
(a)          Nonpayment of principal, interest or other amounts when the same
become due and payable hereunder, if the Company does not cure such failure to
pay within ten (10) days after the date such payment is due;
 
(b)          The dissolution, winding-up or termination of the existence of the
Company or the sale or disposition of substantially all of the assets of the
Company’s business;
 
(c)          The making by the Company of an assignment for the benefit of its
creditors;
 
(d)          The appointment of (or application for appointment of) a receiver
for the Company, or the involuntary filing against or voluntary filing by the
Company of a petition or application for relief under federal bankruptcy law or
under any similar federal or state law, which is not stayed or dismissed within
90 days of filing, or the issuance of any writ of garnishment, execution or
attachment for service with respect to the Company or any property of the
Company; or
 
(e)          Any other material breach by the Company of the terms and
conditions of this Note.

 
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5.          Additional Sums. The Company agrees to pay an effective, contracted
for rate of interest equal to the rate of interest resulting from all interest
payable as provided in this Note plus the additional rate of interest resulting
from the “Additional Sums” as defined in the next sentence. All fees, charges,
goods, things in action and any other sums or things of value, other than the
interest resulting from the Stated Interest Rate and the Default Interest Rate,
as applicable, paid or payable by the Company (collectively, the "Additional
Sums") pursuant to this Note, that may be deemed to constitute interest for the
purpose of any applicable laws that may limit the maximum amount of interest to
be charged by a lender, shall be payable by the Company as, and shall be deemed
actually to be, additional interest; and for such purposes only, the agreed upon
and "contracted for rate of interest" payable under this Note shall be deemed
increased by the rate of interest resulting from the imposition of the
Additional Sums. The Company understands and believes that this transaction
complies with all applicable laws of the State of Arizona; however, if any
interest or other charges in connection with this Note are ever held by a court
of competent jurisdiction to have exceeded the maximum amount of interest
permitted by law, then the Company agrees that: (i) the amount of interest or
charges payable pursuant under this Note shall be reduced to the maximum amount
permitted by law; and (ii) any excess amount previously collected from the
Company in connection with this Note that exceeded the maximum amount permitted
by law shall be credited against the principal balance then outstanding
hereunder.
 
6.          Waivers. Except as set forth in this Note, to the extent permitted
by applicable law, the Company waives and agrees not to assert demand,
diligence, grace, presentment for payment, protest, or notice of nonpayment,
nonperformance, extension, dishonor, maturity, protest, acceleration or default.
No failure to accelerate the indebtedness evidenced hereby upon a default
hereunder, no acceptance of a past-due installment, and no other indulgence
granted from time to time by Holder, shall be construed as a novation of this
Note or as a waiver of such right of acceleration or of the right of Holder
thereafter to insist upon strict compliance with the terms of this Note or to
prevent the exercise of such right of acceleration or any other right granted
hereunder or by applicable law. Holder may extend the time for payment of, or
renew, this Note; and any such extension, renewal, release or other indulgence
shall not alter or diminish the liability of the Company or any other person or
entity who is or may become liable on this Note except to the extent expressly
set forth in a writing executed by Holder and evidencing or constituting such
extension, renewal, release or other indulgence. No delay or failure of Holder
in exercising any right hereunder shall affect such right, neither shall any
single or partial exercise of any right preclude further exercise thereof.
 
7.          Optional Conversion of All or Part of the Note into Common Stock of
the Company.
 
(a)          Conversion Option of the Holder. The Holder may, at its option (the
“Conversion Option”), convert all or any lesser amount of the unpaid principal
amount of this Note plus all accrued but unpaid interest and Additional Sums
outstanding hereunder into shares of the Company's common stock, par value $.001
per share (the "Common Stock"), at the conversion price ("Conversion Price")
defined below. The right of conversion described in this Section 7(a) shall be
exercisable by the Holder upon presentation by the Holder of written notice to
the Company, along with the surrender of this Note to the Company, in exchange
for the number of shares of Common Stock into which this Note is exchanged. The
option arising under this Section 7(a) shall terminate only upon the Maturity
Date or, if applicable, the Extended Maturity Date.
 
(b)          Conversion Price. Upon any exercise by the Holder of the Conversion
Option described in Section 7(a), the outstanding principal amount of this Note,
plus accrued and unpaid interest thereon, plus all unpaid Additional Sums, shall
be converted into shares of the Company's Common Stock at the rate of
Thirty-Five Cents (US $0.35) per share (the "Conversion Price"), subject to
adjustment as hereinafter provided.
 
(c)          Adjustment Based Upon Stock Dividends, Combination of Shares or
Recapitalization. In the event that the Company, at any time prior to the
termination of the Conversion Option: (i) pays a stock dividend; (ii) subdivides
its outstanding shares of Common Stock into a greater number of shares, (iii)
combines its outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues by reclassification of its shares of Common Stock any other
special capital stock of the Company, the Holder, upon surrender of this Note
for conversion, shall be entitled to receive the number of shares of Common
Stock or other capital stock of the Company that the Holder would have owned or
would have been entitled to receive after the occurrence of any of the events
described above had this Note been converted into the Common Stock immediately
prior to such event.

 
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(d)          Adjustment Based Upon Merger or Consolidation. In case of any
consolidation or merger to which the Company is a party (other than a merger in
which the Company is the surviving entity and that does not result in any
reclassification of or change in the outstanding Common Stock of the Company),
or in case of any sale or conveyance to another person of the property of the
Company as an entirety or substantially as an entirety, the Holder shall have
the right to convert this Note into the kind and amount of securities and
property receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock into which such Note would have
been convertible immediately prior thereto.
 
(e)          Corporate Status of Shares to be Issued. All shares of the
Company's Common Stock that are issued upon the conversion of this Note shall,
upon issuance, be fully paid and non-assessable.
 
(f)           Issuance of Stock Certificate. Upon any conversion of this Note,
the Company promptly shall issue to the Holder a certificate or certificates
representing the number of shares of its Common Stock to which the conversion
relates.
 
(g)          Status of Holder of Note. This Note shall not entitle the Holder to
any voting rights or other rights as a stockholder of the Company or to any
rights whatsoever except the rights herein expressed, and no dividends shall be
payable or accrue in respect of this Note or the shares issuable upon the
conversion hereof unless and until this Note is converted. Upon any conversion
of this Note, the Holder shall, to the extent permitted by law, be deemed to be
the holder of record of the shares of Common Stock issuable upon such
conversion, notwithstanding that the stock transfer books of the Company may be
closed or that the certificates representing such shares of Common Stock may not
yet actually have been delivered.
 
(h)          Reserve of Shares. The Company shall reserve at all times out of
its authorized shares of Common Stock a number of shares sufficient to enable it
to comply with its obligation to issue shares of Common Stock upon the
conversion of this Note.
 
(i)            Status Under Securities Laws.
 
(i)            Restricted Securities. This Note is, and the shares of Common
Stock issuable upon conversion hereof shall be, "restricted securities" within
the meaning of SEC Rule 144 promulgated under the Securities Act of 1933 (the
"1933 Act"). Holder acknowledges and agrees that it is acquiring this Note and,
upon conversion, the shares of Common Stock, without a view to the public
distribution or resale of the Note or such shares in violation of applicable
federal or state securities laws.
 
(ii)           No Registration. This Note has not been, and the shares of Common
Stock issuable upon conversion hereof will not be, registered under the 1933 Act
or under the securities laws of any other jurisdiction; and therefore, Holder
must be able to hold the Note or the shares indefinitely without any transfer,
sale or other disposition, unless they are subsequently registered under the
1933 Act and under the securities laws of other applicable jurisdictions or, in
the opinion of counsel to the Company, registration is not required under such
Act or laws as the result of an available exemption from registration.
 
(iii)          Legend. There shall be endorsed on the certificates evidencing
any shares issued upon the conversion of this Note a legend substantially to the
following effect:
 
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED; AND AS A RESULT, SUCH SHARES ARE 'RESTRICTED
SECURITIES' AS DEFINED BY SEC RULE 144 PROMULGATED UNDER THAT ACT. THE SHARES
MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT REGISTERING THE SHARES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR, IN LIEU THEREOF, WITHOUT AN OPINION OF COUNSEL FOR THIS
COMPANY TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THAT ACT.

 
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WITHOUT LIMITING THE FOREGOING, THE SHARES MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF WITHOUT AN OPINION OF COUNSEL FOR THE COMPANY TO THE
EFFECT THAT SUCH TRANSFER, SALE OR OTHER DISPOSITION DOES NOT VIOLATE THE
SECURITIES LAWS OF ANY JURISDICTION OR THE RULES AND REGULATIONS THEREUNDER."
 
8.           General Provisions.
 
(a)          Severability. If any provision hereof is invalid or unenforceable,
the other provisions hereof shall remain in full force and effect and shall be
construed so as to effectuate the other provisions hereof.
 
(b)          Amendment. This Note may not be changed, modified or terminated,
neither shall any provision of this Note be waived, except by an agreement in
writing signed by the party to be charged.
 
(c)          Binding Nature of Note; Assignment. The provisions of this Note
shall be binding upon the Holder and the Company, and shall inure to the benefit
of and bind the respective successors and assigns of the Holder and the Company.
Neither the Company nor the Holder may assign or transfer this Note or assign or
delegate any of his or its respective rights or obligations hereunder without
the prior written consent of the other party in each instance.
 
(d)          Waiver of Jury Trial; Enforcement Costs and Expenses to be Borne by
the Company. The Company and the Holder hereby mutually and irrevocably waive
their right to a jury trial of any dispute that may arise out of or in
connection with this Note, the parties instead irrevocably agreeing that any
such dispute shall be resolved by a court of competent jurisdiction sitting
without a jury. The Company agrees to pay all costs of enforcement of this Note,
including, without limitation, attorneys’ fees and other costs incurred by
Holder in addressing its claims against the Company hereunder, regardless of
whether a lawsuit is actually filed; and the Company agrees to pay all of
Holder’s costs of preparation for suit, and proceeding with a suit, plus any and
all additional attorney and other fees and costs Holder may incur in any
proceeding under any bankruptcy or other similar federal or state law in
connection with the obligations evidenced hereby. In the event of any court
proceeding, court costs and attorneys’ fees shall be set by the court and not by
a jury and shall be included in any judgment obtained by the Holder.
 
(e)           Time of Essence. Time is of the essence of this Note and each and
every provision hereof.
 
(f)           Controlling Law; Jurisdiction; Venue. This Note and all questions
relating to its validity, interpretation, performance, and enforcement shall be
governed by and construed in accordance with the laws of the State of Arizona,
notwithstanding any conflicts-of-law provisions to the contrary. Any suit,
action or proceeding against the Company with respect to this Note may be
brought in the Superior Court of Arizona located in Maricopa County, Arizona, or
in the United States District Court for the District of Arizona, as Holder, in
Holder’s sole discretion, may elect; and the Company hereby submits to the
non-exclusive jurisdiction of such courts for the purpose of any such suit,
action or proceeding. The Company hereby irrevocably waives any objections the
Company may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Note that may be brought in any
such courts, and the Company further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
 
(g)          Notices. All notices, requests, demands and other communications
required or permitted under this Note shall be in writing and shall be deemed to
have been duly given, made, and received: (i) when delivered against receipt;
(ii) upon receipt of a facsimile transmission; (iii) one day following the day
of deposit thereof, with delivery charges prepaid, with a national overnight
delivery service; or (iv) three business days following the day of deposit
thereof, with the United States Postal Service, by regular first class,
certified or registered mail, return receipt requested, postage prepaid, in each
case addressed as set forth in the first paragraph of this Note. Either party
may alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section 8(g) for the giving of notice.

 
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(h)          Section Headings. The Section headings in this Note are for
convenience only; they form no part of this Note and shall not affect its
interpretation.
 
(i)           Number of Days. In computing the number of days for purposes of
this Note, all days shall be counted, including Saturdays, Sundays and holidays;
provided, however, that if the final day of any time period falls on a Saturday,
Sunday or holiday, then the final day shall be deemed to be the next day that is
not a Saturday, Sunday or holiday.
 
(j)           Loss or Destruction of Note. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Note, or in the case of loss, theft or destruction of an indemnity
satisfactory to it, and in the case of mutilation, upon surrender and
cancellation of this Note, the Company shall execute and deliver a new Note of
like tenor and date.
 
(k)          Construction. The Company and Holder participated in the drafting
of this Note, and this Note was reviewed by the respective legal counsel for the
Company and Holder. Any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied to the
interpretation of this Note. The language of this Note shall be construed as a
whole according to its fair meaning. The word “include(s)” means “include(s),
without limitation,” and the word “including” means “including, without
limitation.” No inference in favor of, or against, the Company or Holder shall
be drawn from the fact that one party has drafted any portion hereof.
 
(l)           First Priority Security Interest Granted in All the Company’s
Assets to Secure Performance. The performance of the Company’s obligations under
this Note and under the Loan Agreement have been secured by a first priority
security interest granted by the Company to the Holder, as more particularly
specified in that certain Security Agreement between the Company and Holder,
made and delivered of even date with the Loan Agreement.
 
IN WITNESS WHEREOF, the Company and the Holder have caused this Note to be duly
executed, delivered and accepted as of the Effective Date.
 

  Company           SKYE INTERNATIONAL, INC., a     Nevada corporation          
   
[FORM ONLY - NOT FOR EXECUTION]
 
 
By:
                Name: Mark D. Chester               Its: Chairman  

 

    ACCEPTED AND AGREED:          
[FORM ONLY - NOT FOR EXECUTION]
 
By:
            Holder: TED MAREK DEFINED BENEFIT PENSION PLAN     dated December 23
1993 and effective January 1, 1994           Name of
Officer:  _____________________________           Its:
_______________________________________  

 
 
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