f8ka1063007ex10ii_somerset.htm


    THIS
      NOTE AND THE SHARES OF COMMON STOCK ACQUIRABLE ON CONVERSION HEREOF HAVE NOT
      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
      SOLD, OFFERED FOR SALE, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE
      OF
      SUCH REGISTRATION OR AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION SHALL
      BE
      SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION IS NOT
      REQUIRED.

     

    CONVERTIBLE
      PROMISSORY NOTE

     

    
      	
              ***$250000.00***

            	 	
              BEDMINSTER
                NJ

            
	 	 	
              July
                5, 2007

            


    

     

    FOR
      VALUE
      RECEIVED, the undersigned, SOMERSET INTERNATIONAL GROUP, INC., a Delaware
      corporation (the "Corporation"), agrees and promises to pay to the order of
      Keith Kesheneff and Kathryn Kesheneff (the "Holder") at 57 Yacht Club Drive,
      Lake Hopatcong, New Jersey 07849, or at such other place or places as the Holder
      may designate in writing, the principal amount of TWO HUNDRED AND FIFTY THOUSAND
      ($250,000) DOLLARS, with interest, if applicable as hereinafter provided, in
      legal tender of the United States of America, in immediately available funds,
      as
      follows:

     

    (a)  Commencing
      on August 1, 2007, and continuing on the first (1st) day
      of each
      consecutive month thereafter until July 1, 2008 (the "Maturity Date"), the
      Corporation shall make equal payments calculated so as to directly reduce the
      principal amount to zero as of the Maturity Date.

     

    (b)  In
      the
      event that any principal payment due on or after March 1, 2008 is not paid
      within three (3) business days after same is due, then interest shall begin
      to
      accrue at an annual rate of eight (8.00%) percent on the then outstanding
      principal balance. Interest, which shall be calculated in arrears based upon
      a
      360 day year, shall be due and payable in full with each subsequent monthly
      principal installment.

     

    (c)  The
      entire unpaid principal of this Note, together with interest, if applicable,
      shall be due and payable on the Maturity Date.

     

    (d)  The
      Corporation may at its option prepay this Note, in whole or in part, at any
      time
      prior to the Maturity Date, without penalty. Any prepayment shall first be
      applied to any outstanding interest due and payable, then to the principal
      balance in the inverse order of payment.

     

    (e)           The
      Corporation's obligations under this Note shall be secured by a pledge of a
      portion of the outstanding shares of common stock of Vanwell Electronics, Inc.,
      pursuant to the terms of a Stock Pledge and Escrow Agreement dated of even
      date
      herewith.

     

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

     

    1.             Convertibility.
      This Note is issued with conversion rights pursuant to the terms of a Stock
      Purchase Agreement (the "SPA") executed on July 5, 2007 and effective as of
      June
      30, 2007. Reference is made to the SPA for a description of the agreement among
      the parties. A copy of the SPA is available for review by any holder at the
      office of the Corporation. The Holder shall be bound by the terms of the SPA,
      except if such terms are inconsistent with the terms hereof. All terms which
      are
      not defined in this Note shall be as defined in the SPA.

     

    2.             Place
      and Manner of Payment. All sums due under this Note are payable not later
      than 1 2:30p.m. Eastern time, in legal tender of the United States of America,
      in immediately available funds, without offset or setoff. Any payments in excess
      of $50,000 shall be made, at the option of the Holder, by wire transfer to
      a
      bank account designated in writing to the Corporation by the Holder not less
      than five (5) days prior to the time such payment is due and, if no such
      designation has been made by the Holder, by check mailed by certified or
      registered mail to the address of the Holder designated in accordance with
      Section 14. Any remittances by check sent via mail shall be postmarked not
      later
      than three (3) business days prior to the due date, such payment to be subject
      to the condition that any such check may be handled for collection in accordance
      with the practice of the collecting bank or banks, and any acceptance of a
      check
      by the Holder shall be void unless the amount due is actually received by the
      Holder.

     

    3.             Events
      of Default;
      Consequences. In the event of the occurrence of an Event of Default (as
      defined) the Holder may declare the entire unpaid principal balance of this
      Note, together with interest accrued, immediately due and payable at the place
      of payment, without presentment, protest, notice or demand, all of which are
      expressly waived. The term "Event of Default" shall mean:

     

    (a)  The
      failure to pay any principal or interest installments due under this Note within
      ten (10) days after the day on which any such payment is due, if such failure
      occurs more than twice during the term of this Note;

     

    (b)  any
      default by the Corporation under a certain "EBITDA Adjustment Note" executed
      by
      the Corporation pursuant to Section 4(iv) of the SPA;

     

    (c)  any
      default by the Corporation under a certain "NCA Note" executed by the
      Corporation pursuant to Section 4(iii) of the SPA;

     

    (d)  any
      default by the Corporation or any other party except the Holder, under a certain
      "Covenants Agreement" executed by the Corporation and the Holder, inter alia,
      of
      even date herewith;

     

    (e)     the
      Corporation shall make an assignment for the benefit of creditors or admit
      in
      writing its inability to pay its debts generally as they become due or fail
      to
      generally pay its debts as they become due; an order, judgment or decree shall
      be entered for relief in respect of or adjudicating the Corporation or any
      of
      its subsidiaries bankrupt or insolvent; the Corporation or any of its
      subsidiaries shall petition or apply to any tribunal for the appointment of,
      or
      taking of possession by, a trustee, receiver, custodian, or liquidator or other
      similar official of the Corporation or any subsidiary or of any substantial
      part
      of any of their respective assets; the Corporation or any of its subsidiaries
      shall commence any proceeding relating to the Corporation or any subsidiary
      under any bankruptcy, reorganization, arrangement, insolvency, readjustment
      of
debt,
      dissolution or liquidation law of any jurisdiction, or any such petition or
      application is filed or any such proceeding is commenced against the Corporation
      or any of its subsidiaries and such petition, application or proceeding is
      not
      dismissed within 60 days;

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

     

    (f)           if
      any representation or warranty made by the Corporation herein is breached or
      is
      false or misleading in any material respect, or any schedule, certificate,
      financial statement, report, notice, or other writing furnished by the
      Corporation to the holder is false or misleading in any material respect on
      the
      date as of which the facts therein set forth are stated or
      certified.

     

        
      4.   
Default
      Rate of Interest. In addition to any rights the Holder may have hereunder
      and/or pursuant to applicable law, if there is any Event of Default, the rate
      of
      interest on all unpaid principal shall be automatically increased to 15% per
      annum, retroactive to the issue date of this Note, and the Conversion Price
      specified in Section 8 hereof shall be reduced to $.20 per share of Common
      Stock.

     

      
      5.    No
      Setoff, Etc. The obligations of the Corporation to pay the principal balance
      and interest due to the Holder shall be absolute and unconditional and the
      Corporation shall make such payment without abatement, diminution or deduction
      regardless of any cause or circumstances whatsoever including, without
      limitation, any defense, setoff, recoupment, or counterclaim which the
      Corporation may have or assert against the Holder or any other
      person.

     

    6.    Waiver
      of Presentment, Etc.  THE CORPORATION WAIVES
PRESENTMENT, DEMAND, NOTICE OF DISHONOR, PROTEST
      AND NOTICE OF
      NONPAYMENT AND PROTEST.

     

    7.    Costs
      of Collection. The Corporation shall pay all costs and expenses of
      collection incurred by the Holder, including reasonable attorneys' fees and
      expenses.

     

    8.           Conversion.
      The Holder may, at any time prior to the Maturity Date, convert the
      principal amount of this Note, plus any accrued interest, or any portion
      thereof, into fully paid and nonassessable shares of the Common Stock, $.001
      par
      value, of the Corporation (the "Common Stock"), on the basis of one share of
      such stock for each $0.40 or $.20 in the event of a Default as defined in
      paragraph 3(ii) (the "Conversion Price") in unpaid principal and/or interest.
      Such conversion shall be effected by the surrender of this Note at the principal
      office of the Corporation (or such other office or agency of the Corporation
      in
      the continental United States as the Corporation may designate by notice in
      writing to the Holder) at any time during usual business hours, together with
      notice in writing that the Holder wishes to convert a portion or all of this
      Note, which notice shall also state the name(s) (with addresses) and
      denominations in which the certificate(s) for Common Stock shall be issued
      and
      shall include instructions for delivery thereof. Such conversion shall be deemed
      to have been effected as of the close of business on the date on which this
      Note
      shall have been surrendered and such notice shall have been received, and at
      such time (the "Voluntary Conversion Date") the rights of the Holder with
      respect to the principal amount of the Note converted shall cease and the
      person(s) in whose name(s) any certificate(s) for Common Stock are to be issued
      upon such conversion shall be deemed to have become the holder or holders of
      record of the shares of Common Stock represented by such certificate(s). As
      soon
      as practicable after the Voluntary Conversion Date, the Corporation shall
      deliver to, or as directed by, the Holder, certificates representing the number
      of shares of Common Stock issuable by reason of such conversion registered
      in
      such name or names and such denomination or denominations as the Holder shall
      have specified, together with cash as provided in Section 12 in respect of
      any
      fraction of a share of such stock otherwise issuable upon such conversion.
      In
      each case of conversion of this Note in part only, the Corporation shall receive
      and
      hold
      this Note as a fiduciary agent of the Holder, shall endorse on this Note the
      date and amount of this Note so converted, and such amount shall be deemed
      no
      longer outstanding. Upon such endorsement, the Corporation shall promptly return
      this Note to the Holder. Any partial conversion shall be treated as a prepayment
      in part and shall be applied to the principal balance in the inverse order
      of
      payments.

     

     

    
      
         

      

      
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    9.  
Reservation
      of Common
      Stock

     

    (a)  The
      Corporation will at all times from and after this date reserve and keep
      available out of its authorized but unissued shares of Common Stock or its
      treasury shares, or otherwise, solely for the purpose of issuance upon the
      conversion of this Note, such number of shares of Common Stock as shall then
      be
      issuable upon the conversion of this Note. The Corporation covenants that all
      shares of Common Stock which shall be so issuable shall, when issued, be duly
      and validly issued, fully paid and nonassessable and free from all taxes, liens
      and charges.

     

    (b)  The
      Corporation will not take any action which would result in any adjustment of
      the
      number of shares of Common Stock acquirable upon conversion of this Note if
      the
      total number of shares issuable after such action upon conversion of this Note,
      together with the total number of shares of Common Stock then outstanding,
      would
      exceed the total number of shares of Common Stock then authorized under the
      Corporation's Certificate of Incorporation which are not reserved or required
      to
      be reserved for any purpose other than the purpose of issue upon conversion
      of
      this Note.

     

    (c)  The
      issuance of certificates for shares of Common Stock upon conversion of this
      Note
      shall be made without charge to the Holder for any issuance tax or other cost
      incurred by the Corporation in connection with such conversion and the related
      issuance of shares of Common Stock.

     

    (d)  If
      any
      shares of Common Stock required to be reserved for purposes of conversion of
      this Note require, before such shares may be issued upon conversion,
      registration with or approval of any governmental authority under any federal
      or
      state law (other than any registration under the Securities Act of 1933, as
      then
      in effect, or any similar federal statute then in force, or any state securities
      law, required by reason of any transfer involved in such conversion) or listing
      on any domestic securities exchange, the Corporation will, at its expense and
      as
      expeditiously as possible, use its best efforts to cause such shares to be
      duly
      registered or approved for listing or listed on such domestic securities
      exchange, as the case may be.

     

    10.    Subdivisions
      and
      Combinations.

     

    (a)   In
      the event the
      Corporation shall at any time subdivide by any stock split its outstanding
      Common Stock into a greater number of shares of such stock, the Conversion
      Price
      shall be proportionately decreased. Conversely, in the event the outstanding
      shares of one or more classes of Common Stock shall at any time be combined
      into
      a smaller number of shares by a reverse stock split, the Conversion Price shall
      be proportionately increased. In the case of any subdivision or combination
      described in this Section 10, the adjustment to be made pursuant hereto shall
      be
      made as of the close of business on the date immediately prior to the date
      upon
      which such corporate action becomes effective.

     

    (b)       No
      Adjustment for Small Amounts. Notwithstanding any provision of subsections
      (a) of this Section 10 which may be to the contrary, the Corporation shall
      not
      be required to give effect to any adjustment to the Conversion Price if the
      amount of such adjustment would be less than $.01, but any such adjustment
      shall
      be carried forward and adjustment with respect thereto shall be made at the
      time
      of and together with any subsequent adjustment which, together with such amount
      and any other amount or amounts so carried forward, causes a cumulative net
      adjustment of $.03 or more.

     

    (c)        Organic
      Changes, Etc. If any capital reorganization or reclassification of the
      capital stock of the Corporation (other than a change in par value, or from
      par
      value to no par value, or from no par value to par value, or as a result of
      an
      issuance of Common Stock by dividend or other distribution or by reason of
      a
      subdivision or combination), or any consolidation or merger of the Corporation
      with or into another corporation, or any sale of all or substantially all of
      the
      Corporation's property and assets to any person, firm or corporation
      (collectively, any "Organic Change") shall be effected in such a way that
      holders of Common Stock shall be entitled to receive (either directly or upon
      subsequent liquidation) stock, securities or assets with respect to or in
      exchange for Common Stock, then, as a condition to such Organic Change, lawful
      and adequate provision shall be made whereby the Holders shall thereafter have
      the right to acquire and receive upon the basis and upon the terms and
      conditions specified herein and in lieu of the shares of Common Stock of the
      Corporation immediately theretofore acquirable and receivable (directly or
      upon
      subsequent conversion, assuming unrestricted convertibility) upon the conversion
      of this Note, such shares of stock, securities or assets as may be issued or
      payable with respect to or in exchange for a number of outstanding shares of
      Common Stock equal to the number of shares of Common Stock immediately
      theretofore acquirable and receivable (directly or upon subsequent conversion,
      assuming unrestricted convertibility) upon conversion of this Note had such
      Organic Change not taken place (except that the terms of the parenthetical
      provision at the end of the next sentence shall be applied in determining the
      number of shares of Common Stock immediately theretofore acquirable and
      receivable). In any such case, appropriate provision shall be made with respect
      to the Holder's rights and interests to the end that the provisions contained
      in
      this Note (including without limitation provisions for adjustments of the number
      of shares of Common Stock acquirable and receivable upon the exercise of the
      conversion rights granted herein) shall thereafter be applicable in relation
      to
      any shares of stock, securities or assets thereafter deliverable upon the
      conversion of this Note (including, in the case of any such consolidation,
      merger or sale in which the successor corporation or purchasing entity is other
      than the Corporation, an immediate adjustment in the number of shares of Common
      Stock acquirable and receivable upon conversion of this Note). In the event
      of a
      merger or consolidation of the Corporation with or into another corporation
      or
      the sale of all or substantially all of the Corporation's property and assets
      to
      another corporation as a result of which a number of shares of common stock
      of
      the surviving or purchasing corporation greater or lesser than the number of
      shares of Common Stock of the Corporation outstanding immediately prior to
      such
      merger, consolidation or sale are issuable to holders of Common Stock, the
      aggregate number of shares of Common Stock into which this Note was convertible
      in effect immediately prior to such merger, consolidation or sale shall be
      adjusted (pursuant to Subsection (a) of this Section 10) as though there were
      a
      subdivision or combination of the outstanding shares of Common Stock. The
      provisions of this subsection (c) shall similarly apply to successive Organic
      Changes.

     

     

    
      
         

      

      
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    11.Notice
      of Adjustment.

     

    (a)  Immediately
      upon any adjustment in the number of shares of Common Stock acquirable and
      receivable upon conversion of this Note or any adjustment or readjustment in
      the
      Conversion Price, the Corporation shall send written notice to the Holder,
      which
      notice shall set forth in reasonable detail the method of calculation and the
      facts upon which such calculation is based. The Corporation shall, upon written
      request at any time of the holder, furnish or cause to be furnished to such
      holder a similar certificate setting forth (i) such adjustments and
      readjustments, (ii) the Conversion Price then in effect, and (iii) the number
      of
      shares of Common Stock and the amount, if any, of other property which then
      would be received upon the conversion of this Note. The Corporation may retain
      a
      firm of independent public accountants of recognized standing which may be
      the
      firm regularly retained by the Corporation to make any computation required
      under this Section and a certificate signed by such firm shall be conclusive
      evidence of the correctness of any computation made under this
      Section.

     

    (b)  In
      the
      event that:

     

    
      	
              (i)  

            	
              there
                is any proposed combination or subdivision of the outstanding shares
                of
                Common Stock;

            


    

     

    
      	
              (ii)  

            	
              there
                shall be any proposed Organic Change;
                or

            


    

     

    
      
        	
                (iii)  

              	
                
                  there
                    shall be any proposed voluntary or involuntary dissolution,
                    liquidation or winding up of the
                    Corporation;

                

              


      

       

    

    then
      in
      connection with each such event, the Corporation shall send to the Holder:
      (A)
      at least 60 days' prior written notice of the date on which the books of the
      Corporation shall close or a record shall be taken for determining voting rights
      in respect of such event; and (B) in the case of any proposed Organic Change,
      dissolution, liquidation or winding up, at least 60 days' prior written notice
      of the date when the same shall take place (and specifying the date on which
      the
      holders of Common Stock shall be entitled to exchange their Common Stock for
      securities or other property deliverable upon such Organic Change, dissolution,
      liquidation or winding up).

     

    12.  Fractional
      Interests. The Corporation shall not be required to issue any fractional
      shares of Common Stock on the conversion of this Note. If any fraction of a
      share of Common Stock except for the provisions of this Section 12 would be
      issuable upon conversion of this Note, the Corporation shall purchase such
      fraction for an amount in cash equal to the current market price of such
      fraction on the last Business Day prior to conversion.

     

    13.  Voting.
      Nothing contained in this Note shall be construed as conferring upon the
      Holder the right to vote or to consent or to receive notice as a stockholder
      in
      respect of the meetings of stockholders for the election of directors of the
      Corporation or any other matter. Notwithstanding the foregoing, the Corporation
      shall mail by first class to the Holder at the address specified in Section
      14,
      one copy of all materials forwarded to stockholders, said mailing to be made
      promptly after mailing to stockholders.

     

    14.     Notices.

     

    (a)           Any
      notice pursuant to this Note to be given or made by the Holder to or upon
the
      Corporation shall be sufficiently given or made if sent by certified or
      registered mail, postage

     

     

    
      
         

      

      
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    prepaid,
      addressed (until another address is sent by the Corporation to the Holder)
      as
      follows: To the Corporation:

     

    John
      X.
      Adiletta, President

    Somerset
      International Group, Inc. 

    90
      Washington Valley Road

    Bedminster,
      NJ 07921

     

    To
      the
      Holder:

     

    Mr
&
      Mrs. Keith Kesheneff

    57
      Yacht
      Club Drive

    Lake
      Hopatcong, New Jersey 07849

     

    with
      a
      copy to:

     

    Brown,
      Moskowitz & Kallen, P.C. 75 Main Street

    Suite
      203

    Millburn,
      New Jersey 07041

    Attn:
      Stuart M. Brown, Esq.

     

    (b)     Any
      notice
      pursuant to this Note to be given or made by the Corporation to or upon the
      Holder shall be sufficiently given or made if sent by certified or registered
      mail, postage prepaid, addressed (until another address is sent by the Holder
      to
      the Corporation) to the address of the Holder set forth above.

     

    15.        Governing
      Law; Venue; Jurisdiction. This Note shall be governed by and construed in
      accordance with the internal laws of the State of Delaware. The Corporation
      hereby irrevocably submits to the exclusive jurisdiction of the federal or
      state
      court sitting in New Jersey over any dispute arising out of or relating to
      this
      Note. The Corporation hereby irrevocably waives, to the fullest extent permitted
      by applicable law, any objection which it may now or hereafter have to the
      laying of venue of any such dispute brought in such court or any defense of
      inconvenient forum for the maintenance of such dispute. The Corporation agrees
      that a judgment in any such dispute may be enforced in other jurisdictions
      by
      suit on the judgment or in any other manner provided by law. The Corporation
      consents to process being served in any suit, action or proceeding hereunder
      by
      the mailing of a copy thereof in accordance with the notice provisions of this
      Note.

     

    16.        Modification.
      No modification or waiver of any provision of this Note, or any departure
      by
      the Corporation therefrom, shall in any event be effective unless the same
      shall
      be in writing signed by the Holder and then such modification or waiver shall
      be
      effective only in the specific instance for the specific purpose given.
      Notwithstanding the foregoing, the Board of Directors of the Corporation, in
      its
      sole discretion, shall have the right at any time or from time to time to
      decrease the Conversion Price and/or to increase the number of shares of Common
      Stock issuable upon conversion of this Note. Such reduction of the Conversion
      Price and/or increase in the number of shares of Common Stock issuable upon
      exercise shall be effective for a period or periods to be determined by such
      Board.

     

     

    
      
         

      

      
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    17.           No
      Waiver; Cumulative Remedies. No failure on the part of Holder to exercise
      and no delay in exercising, and no course of dealing with respect to, any right,
      power, or privilege under this Note shall operate as a waiver thereof, nor
      shall
      any single or partial exercise of any right, power, or privilege under this
      Note
      preclude any other or further exercise thereof or the exercise of any other
      right, power, or privilege. To the fullest extent permitted by applicable laws,
      the rights and remedies provided for in this Note are cumulative and not
      exclusive of any rights and remedies provided by law.

     

    Attest:                                                                         
Somerset
      International Group, Inc.

     

     

    By:                                         

    John
      X.
      Adiletta,
      Secretary                                                                   John
      X. Adiletta, President