Document:

EX-10.5

 

Exhibit
10.5

EXECUTION COPY

February 11, 2008

THL Managers VI, LLC

c/o Thomas H. Lee Partners, L.P.

100 Federal Street, 35th Floor

Boston, Massachusetts 02110

Fax No.: (617) 227-3514

Attn: Thomas M. Hagerty

MoneyGram Payment Systems Worldwide, Inc.

MoneyGram International Inc.

1500 Utica Avenue South, MS 8020

Minneapolis, Minnesota 55416

Fax No.: (952) 591-3859

Attn: Teresa H. Johnson, Esq.

GSMP/GSCP

c/o Goldman, Sachs & Co.

85 Broad Street

New York, New York 10004

Attention: Edward Pallesen

Contingent Fee Letter

Ladies and Gentlemen:

     Reference is made to (a) that certain Note Purchase Agreement (the “Note Purchase Agreement”),
dated as of February 11, 2008, by and between MONEYGRAM INTERNATIONAL, INC., a Delaware corporation
(“HoldCo”), MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC., a Delaware corporation (the “Company”), GSMP
V ONSHORE US, LTD., an exempted company incorporated in the Cayman Islands with limited liability
(“GSMP V Onshore”), GSMP V OFFSHORE US, LTD., an exempted company incorporated in the Cayman
Islands with limited liability (“GSMP V Offshore”), and GSMP V INSTITUTIONAL US, LTD., an exempted
company incorporated in the Cayman Islands with limited liability (“GSMP Institutional and,
together with GSMP V Onshore and GSMP V Offshore, “GSMP”) and (b) that certain Purchase Agreement
(the “Equity Purchase Agreement”), dated as of February 11, 2008, by and between Holdco, GSMP, the
parties set forth on Schedule A attached thereto under the heading THL (collectively, “THL”) and
the parties set forth on Schedule A attached hereto under the heading Goldman Sachs Capital
Partners (collectively, “GSCP” and, together with THL and GSMP, the “Investors”). Capitalized
terms used herein and not otherwise defined have the meanings given in the Note Purchase Agreement
or Equity Purchase Agreement, as applicable.

	 	1.	 	Contingent Fee. In connection with the Note Purchase Agreement, the Company
hereby agrees concurrently with the execution of this letter and the execution of the Note
Purchase Agreement by all of the parties thereto, to deposit, by wire transfer in
immediately available funds, into the escrow (the “Escrow”) established pursuant to that
certain Escrow Agreement (the “Escrow Agreement”), dated as of the date hereof, among the
Company, THL Managers VI, LLC (“THL Managers”), GSCP, GSMP and Fried, Frank Harris Shriver
& Jacobson, LLP or any successor thereto (the “Escrow Agent”), a deposit with respect to a
contingent break-up fee equal to $15,000,000, representing 3.00% of the maximum principal
amount of the Notes to be purchased

 

 

	 	 	 	by GSMP pursuant to the Note Purchase Agreement (the “Contingent Fee”).

	 	2.	 	Payment of Contingent Fee. The parties hereto hereby agree that the Contingent
Fee shall be disbursed and paid by the Escrow Agent as follows:

	 	a.	 	If the transactions contemplated by the Equity Purchase Agreement and
issuance of the Notes pursuant to the Note Purchase Agreement are consummated, the
Contingent Fee shall be paid by the Escrow Agent to the Company.
	 
	 	b.	 	If the Equity Purchase Agreement is terminated by the Company pursuant
to Section 5.1(e) thereof, or by any Investor pursuant to Section 5.1(d) thereof,
and GSMP has not committed to provide financing in connection with the Superior
Proposal that resulted in such termination, the Contingent Fee shall be paid by the
Escrow Agent to GSMP.
	 
	 	c.	 	If the Equity Purchase Agreement is terminated by the Company pursuant
to Section 5.1(e) thereof, or by any Investor pursuant to Section 5.1(d) thereof,
and GSMP has committed to provide financing in connection with the Superior
Proposal that resulted in such termination, then (a) if such financing is
consummated, the Contingent Fee shall be paid by the Escrow Agent: (i) 80 percent
to THL Managers and (ii) 20 percent to GSCP and GSMP, pro rata among GSCP and GSMP,
in accordance with the aggregate relative purchase price committed to be paid by
each of them pursuant to the Equity Purchase Agreement (such allocation, the “80/20
Allocation”) and (b) if such financing is not consummated, then (i) the portion of
the Contingent Fee, if any, equal to any fees paid to and retained by GSMP in
connection with such financing shall be paid by the Escrow Agent in accordance with
the 80/20 Allocation, which amounts shall be paid on the first date on which GSMP
is not subject to any obligation to return or otherwise disgorge such fees, and
(ii) the balance, if any, of such Contingent Fee shall be paid by the Escrow Agent
to GSMP pursuant to Section 2 (b) hereof.
	 
	 	d.	 	If the Equity Purchase Agreement is terminated as a result of a willful
breach thereof by the Company, the Contingent Fee shall be paid by the Escrow Agent
to GSMP.
	 
	 	e.	 	If the Equity Purchase Agreement is terminated pursuant to Section
5.1(b) of the Equity Purchase Agreement as a result of the failure of the closing
condition in Section 1.2(c)(i) of the Equity Purchase Agreement to be satisfied or
pursuant to Section 5.1(c) of the Equity Purchase Agreement, the Contingent Fee
shall be paid by the Escrow Agent to the Company.
	 
	 	f.	 	If the Equity Purchase Agreement is terminated for any other reason,
the Contingent Fee shall be paid 1/3 to GSMP and 2/3 to the Company.

	 	3.	 	Subsequent Transaction. If the Equity Purchase Agreement is terminated as
described in either Section 2(e) or 2(f) above for any reason (other than primarily as a
result of the Investors’ breach of their obligations under the Equity Purchase Agreement
which resulted in the failure to satisfy conditions set forth in Section 1.2(c) of the
Equity Purchase Agreement) and the Company enters into a definitive agreement with respect
to, or consummates, a transaction contemplated by any Company Transaction Proposal (other
than a transaction entered into or consummated following a voluntary or involuntary
petition by Holdco, the Company or any subsidiary of the Company under the federal
bankruptcy code) (a “Subsequent Transaction”) within nine (9) months of the date of
termination of the Equity Purchase Agreement, then the Company shall pay to GSMP an amount
equal to the portion of the Contingent Fee paid to the Company pursuant to Section 2(e)

 

 

	 	 	 	or 2(f), as applicable, as promptly as possible (but in any event within two (2) Business
Days) following the earlier of entering into a definitive agreement with respect to or
consummating a Company Transaction Proposal.

     If the Equity Purchase Agreement is terminated as described in any of Section 2(e)
or 2(f)
above for any reason (other than primarily as a result of the Investors’ breach of their
obligations under the Equity Purchase Agreement which resulted in the failure to satisfy
conditions set forth in Section 1.2(c) of the Equity Purchase Agreement) and (x) the Company
enters into a definitive agreement with respect to, or consummates, a Subsequent Transaction
within nine (9) months of the date of termination of the Equity Purchase Agreement and (y)
GSMP provides or commits to provide second lien or subordinated debt financing with respect
to the Subsequent Transaction, then in lieu of making the payments referred to under the
preceding paragraph: (a) if such financing is consummated, (A) the Company shall pay, in
accordance with the 80/20 Allocation, an aggregate amount equal to 100% of the portion of
the Contingent Fee that would have been repaid to GSMP pursuant to the preceding paragraph
and (B) if the Equity Purchase Agreement is terminated as described in Section 2(f), GSMP
shall pay, in accordance with the 80/20 Allocation, an aggregate amount of the portion of
the Contingent Fee paid to GSMP pursuant to Section 2(f) (net of any withholding tax paid by
GSMP as a result of its receipt of such portion of the Contingent Fee) in each case, as
promptly as possible, but in any event on the date of the consummation of a Company
Transaction Proposal and (b) if such financing is not consummated, then (A) the Company
shall pay an aggregate amount equal to 100% of the portion of the Contingent Fee that would
have been repaid to GSMP pursuant to the preceding paragraph, to the extent of any fees paid
to and retained by GSMP in connection with such financing in accordance with the 80/20
Allocation, and (B) if the Equity Purchase Agreement is terminated as described in Section
2(f), GSMP shall also pay an aggregate amount of the portion of the Contingent Fee paid to
GSMP pursuant to Section 2(f) (net of any withholding tax paid by GSMP as a result of its
receipt of such portion of the Contingent Fee) in accordance with the 80/20 Allocation,
which such amounts shall be paid on the first date on which GSMP is not subject to any
obligation to return or otherwise disgorge such fees.

	 	4.	 	Further Agreements. The parties agree to jointly instruct the Escrow Agent, in
accordance with the Escrow Agreement, to effect payment of the Contingent Fee, by wire
transfer in immediately available funds, in accordance with the terms of Section 2 above.
Any earnings on the funds deposited in Escrow will be paid to the party or parties entitled
to received the payment of the Contingent Fee in proportion to the portion of the
Contingent Fee paid to such party.
	 
	 	5.	 	GOVERNING LAW; JURISDICTION. EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY SUIT OR PROCEEDING ARISING IN RESPECT TO THIS LETTER OR OUR
COMMITMENT WILL BE TRIED EXCLUSIVELY (SUBJECT TO THE PROVISO BELOW) IN THE U.S. DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR, IF THAT COURT DOES NOT HAVE SUBJECT MATTER
JURISDICTION, IN ANY STATE COURT LOCATED IN THE CITY OF NEW YORK, AND YOU AGREE TO SUBMIT
TO THE EXCLUSIVE JURISDICTION OF, AND TO VENUE IN, SUCH COURT. THIS LETTER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPALS OF CONFLICTS OF LAWS THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
	 
	 	6.	 	WAIVER OF JURY TRIAL. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION OR
PROCEEDING ARISING IN CONNECTION WITH OR AS A RESULT OF EITHER OUR COMMITMENT OR ANY MATTER
REFERRED TO IN THIS LETTER IS

 

 

	 	 	 	HEREBY WAIVED BY THE PARTIES HERETO.

	 	7.	 	Counterparts. This letter may be executed in counterparts, each of which shall
be deemed to constitute an original but all of which shall constitute one and the same
instrument. Delivery of an executed signature page of this letter by facsimile, e-mail or
similar transmission shall be effective as delivery of a manually executed counterpart
hereof.

[SIGNATURE PAGES FOLLOW]

 

 

     If the foregoing terms and conditions are acceptable to you, please so indicate by signing
both of the enclosed copies of this letter where indicated and returning one to the undersigned,
whereupon this letter shall become a binding agreement between us.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	 	 	MONEYGRAM PAYMENT SYSTEMS WORLDWIDE, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/  David J. Parrin
	 

	 	 	 	 
	 

	 	Name:	 	David J. Parrin 
	 

	 	Title:	 	Executive Vice President
and
Chief Financial Officer

 

 

Goldman Sachs Mezzanine Partners 

	 	 	 	 	 
	 	 	GSMP V ONSHORE US, LTD.
	 
	 	 	 	 
	 

	 	By:
	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President
	 
	 	 	 	 
	 	 	GSMP V OFFSHORE US, LTD.
	 
	 	 	 	 
	 

	 	By:	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President
	 
	 	 	 	 
	 	 	GSMP V INSTITUTIONAL US, LTD.
	 
	 	 	 	 
	 

	 	By:	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President

 

 

Goldman Sachs Capital Partners 

	 	 	 	 	 
	 	 	GS CAPITAL PARTNERS VI FUND, L.P.
	 
	 	 	 	 
	 	 	By: GSCP VI Advisors, L.L.C., its General Partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President
	 
	 	 	 	 
	 	 	GS CAPITAL PARTNERS VI OFFSHORE FUND, L.P.
	 
	 	 	 	 
	 	 	By: GSCP VI Offshore Advisors, L.L.C., its General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President
	 
	 	 	 	 
	 	 	GS CAPITAL PARTNERS VI GmbH & Co. KG
	 
	 	 	 	 
	 	 	By: GS Advisors VI, L.L.C., its Managing Limited Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President
	 
	 	 	 	 
	 	 	GS CAPITAL PARTNERS VI PARALLEL, L.P.
	 
	 	 	 	 
	 	 	By: GS Advisors VI, L.L.C., its General Partner
	 
	 	 	 	 
	 

	 	By:	 	/s/  Bradley Gross
	 

	 	 	 	 
	 

	 	Name:	 	Bradley Gross 
	 

	 	Title:	 	Managing Director and Vice President

 

 

THL

	 	 	 	 	 
	 	 	THL MANAGERS VI, LLC
	 
	 	 	 	 
	 	 	By: Thomas H. Lee Partners, L.P., its managing member
	 
	 	 	 	 
	 	 	By: Thomas H. Lee Advisors, LLC, its general partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Scott L. Jaeckel
	 

	 	 	 	 
	 

	 	Name:	 	Scott L. Jaeckel 
	 

	 	Title:	 	Managing Directorexv10w27

 

Exhibit
10.27

No. 1

			
	 	 	 
	US $50,000.00
	 	February 5, 2008

PROMISSORY NOTE

     FOR VALUE RECEIVED, the undersigned, Ecology Coatings, Inc., a Nevada corporation (the “The
Maker”), promises to pay to the order of Hayden Capital USA, LLC on behalf of Hayden Capital USA,
LLC, Series I, a Delaware limited liability company (the “Holder”), the principal amount of Fifty
Thousand and 00/100 dollars ($50,000.00), together with interest thereon as provided below.

ARTICLE I

TERMS OF REPAYMENT

     1. Interest. The Note shall bear interest (“Interest”) equal to twenty-five (25%) percent per
annum on the unpaid principal balance, computed on a three hundred and sixty-five (365) day year,
during the term of the Note. The Maker shall pay all Interest on or before the Maturity Date. In no
event shall the rate of Interest payable on this Note exceed the maximum rate of interest permitted
to be charged under applicable law.

     2. Payments. All payments by the Maker under this Note shall first be credited against costs
and expenses provided for hereunder, second to the payment of any penalties, third to the payment
of accrued and unpaid interest, if any, and the remainder shall be credited against principal. All
payments due hereunder shall be payable in legal tender of the United States of America, and in
same day funds delivered to the Holder by cashier’s check, certified check, or any other means of
guaranteed funds to the mailing address provided below, or at such other place as the Holder or any
holder hereof shall designate in writing for such purpose from time to time. If a payment hereunder
otherwise would become due and payable on a Saturday, Sunday or legal holiday, the due date thereof
shall be extended to the next succeeding business day, and Interest, if any, shall be payable
thereon during such extension.

     3. Maturity Date. All outstanding principal and interest shall be payable on May 31, 2008 (the
“Maturity Date”). At its sole option, the Maker may extend the Maturity Date for an additional
thirty (30) days upon delivery to Holder of an option to purchase thirty thousand (30,000) shares
of the Maker’s Common Stock (the “Extension Option”). The Company shall pay the Note on or before
the Maturity Date on a pro rata basis with all three (3) Notes made in favor of Hayden Capital USA,
LLC.

     4. Pre-Payment Demand. If at any time before the Maturity Date the Maker completes an
underwritten public offering of its common stock or other form of security convertible into common
stock pursuant to an effective registration statement under the

1

 

Securities Act of 1933 (the “Act”),
as amended, or a managed private offering exempt from registration under Section 4(2) of the Act
and Regulation D promulgated thereunder
(collectively, a “New Offering”) which results in proceeds received by the Maker net of
underwriting discounts and commissions, of at least One Million and 00/100 dollars ($1,000,000.00)
(a “Pre-Payment Event”), then at the sole and absolute discretion of the Holder, and upon written
demand to the Maker (the “Pre-Payment Notice”), all amounts owed under this Note shall become due
and payable within fifteen (15) days following Maker’s receipt of the Pre-Payment Notice..

     5. Exemption from Restrictions. It is the intent of the Maker and the Holder in the execution
of this Note that the indebtedness hereunder be exempt from the restrictions of the usury laws of
any applicable jurisdiction. The Maker and the Holder agree that none of the terms and provisions
contained herein shall be construed to create a contract for the use, forbearance or detention of
money requiring payment of interest at a rate in excess of the maximum interest rate permitted to
be charged by the laws of any applicable jurisdiction. In such event, if any holder of this Note
shall collect monies which are deemed to constitute interest which would otherwise increase the
effective interest rate on this Note to a rate in excess of the maximum rate permitted to be
charged by the laws of any applicable jurisdiction, all such sums deemed to constitute interest in
excess of such maximum rate shall, at the option of such holder, be credited to the payment of this
principal amount due hereunder or returned to the Maker.

     6. Senior Indebtedness. This Note shall constitute the Senior Indebtedness of the Maker and is
unsecured. The indebtedness evidenced by this Note is senior to the prior payment when due of the
principal of, and premium, if any, and accrued and unpaid interest on, all existing and future
Subordinated Indebtedness of the Maker and junior to the prior payment when due of the principal
of, and premium, if any, and accrued and unpaid interest on, all existing and future Secured
Indebtedness of the Maker to the extent of the assets securing such Secured Indebtedness. The term
''Senior Indebtedness’’ shall mean: (i) the principal of and premium, if any, and interest and
expenses on any indebtedness of the Maker to Holder under the Note, and (ii) all amendments,
modifications, renewals, extensions and refinancings of the Senior Indebtedness as defined in
clause (i) above. The term “Secured Indebtedness” shall mean any indebtedness of the Maker, whether
outstanding on the date of this Note or hereafter incurred, that is secured by all or part of the
assets of the Maker. The term “Subordinated Indebtedness” shall mean any indebtedness of the Maker,
whether outstanding on the date of this Note or hereafter incurred, which is contractually
subordinate or junior in right of payment to the Secured Indebtedness and this Note.. Maker
represents and warrants to Holder that the Subordinated Indebtedness includes all the existing
indebtedness of the Maker as of the date first above written.

2

 

ARTICLE II

COVENANTS

     7. Right of Payment. The Maker shall not incur any Secured Indebtedness, Senior Indebtedness
or other indebtedness senior or pari passu in right of payment to the Note while the Note remains
outstanding.

     8. Conversion into Common Stock. If at any time before the Maturity Date, the Maker completes
a New Offering, the Maker shall give the Holder the option to convert this Note, in whole or in
part, into Common Stock of the Maker based on a conversion price equal to the lower of: (a) the
closing bid price per share of the Common Stock on the date first above written as reported on the
Over-The-Counter Bulletin Board, or if there is not such price on the Effective Date, then the last
bid price on the date nearest preceding the date first above written, or; (b) the average price at
which the Maker sells its Common Stock in the New Offering (the “Conversion Price”)(the “Conversion
Shares”).

     9. Options. In partial consideration of this Note, the Maker shall issue to Holder a option to
purchase Thirty-Seven Thousand five hundred (37,500) shares of the Maker’s Common Stock (the
“Consideration Option”). The Consideration Option, together when applicable with the Extension
Option, will herein be referred to collectively as the “Options” and will be immediately
exercisable, in whole or part, into the “Underlying Shares.” The Options will have an exercise
price equal to the lower of: (a) Two and 00/100 dollars ($2.00), or; (b) the Conversion Price
(collectively, the “Options”). The Options will be delivered in a form acceptable to Holder and
contain a cashless exercise provision.

     10. Piggyback Registration. If the Conversion Shares and the Underlying Shares (collectively,
the “Shares”) have not been otherwise registered and at any time the Maker proposes to file a
registration statement, whether or not for sale for the Maker’s own account, on a form and in a
manner that would also permit registration of shares (other than in connection with a registration
statement on Forms S-4 or S-8 or any similar or successor form) the Maker shall give to Holder,
written notice of such proposed filing promptly, but in any case at least twenty (20) days before
the anticipated filing. The notice referred to in the preceding sentence shall offer the holder(s)
holding the Shares the opportunity to register such amount of the Shares as he may request (a
“Piggyback Registration”). Subject to this Section, the Maker will include in each such Piggyback
Registration (and any related qualification under state blue sky laws and other compliance filings,
and in any underwriting involved therein) that portion of the Shares with respect to which the
Maker has received written requests for inclusion therein within twenty (20) days after the written
notice from the Maker is given. The holders holding any portion of the Shares will be permitted to
withdraw all or part of the Shares from a Piggyback Registration at any time prior to the effective
date of such Piggyback Registration. Notwithstanding the foregoing, the Maker will not be obligated
to effect any registration of shares under this Paragraph 7 as a result of the registration of any
of its securities solely in connection with mergers effected pursuant to a Form S-4 Filing.

3

 

     11. Covenants Regarding Registration

	 	a.	 	The Maker shall use its best efforts to have any registration
statement declared effective at the earliest possible time, and shall furnish
such number of prospectuses as shall be reasonably required.
	 
	 	b.	 	The Maker shall bear all costs, fees and expenses in connection
with a Piggyback Registration,
	 
	 	c.	 	The Maker will take all necessary action which may be required
in qualifying qualifying or registering the Shares included in any Piggyback
Registration for offering and sale under the securities or blue sky laws of
such states as are requested by the holders of such Shares, provided that the
Maker shall not be obligated to execute or file any general consent to service
or process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction.

     12. Indemnification. The Maker shall, at The Maker’s expense, protect, defend, indemnify, save
and hold Holder harmless against any and all claims, demands, losses, expenses, damages, causes of
action (whether legal or equitable in nature) asserted by any person or entity arising out of,
caused by or relating to the Note, including without limitation the construction of the Note and
the use or application of the proceeds of the Note, and The Maker shall pay Holder upon demand all
claims, judgments, damages, losses and expenses (including court costs and reasonable attorneys’
fees and expenses) incurred by Holder as a result of any legal or other action arising out of the
Note as aforesaid.

     13. Attorneys Fees. The Maker shall reimburse Holder for all reasonable costs, attorney’s
fees, and all other expenses in connection with this Note.

     14. Notice of Default. So long as any amount under this Note shall remain unpaid, the Holder
will, unless the Maker otherwise consents in writing, promptly give written notice to the Maker in
reasonable detail of the occurrence of any Event of Default, or any condition, event or act which
with the giving of notice or the passage of time or both would constitute an Event of Default.

4

 

ARTICLE III

DEFAULT

     15. Events of Default. Any of the following events shall constitute an “Event of Default”
hereunder:

	 	a.	 	Failure by the Maker to pay the principal or Interest, if any,
of this Note when due and payable on the Maturity Date.
	 
	 	b.	 	The entry of an order for relief under Federal Bankruptcy Code
as to the Maker or approving a petition in reorganization or other similar
relief under bankruptcy or similar laws in the United States of America or any
other competent jurisdiction, and if such order, if involuntary, is not
satisfied or withdrawn within sixty (60) days after entry thereof; or the
filing of a petition by the Maker seeking any of the foregoing, or consenting
thereto; or the filing
of a petition to take advantage of any debtor’s act; or making a general
assignment for the benefit of creditors; or admitting in writing inability to
pay debts as they mature; or
	 
	 	c.	 	Failure by the Maker to pay the principal and Interest, if any,
of this Note concurrent with a Pre-Payment Event; or
	 
	 	d.	 	The breach of any covenant made by the Maker in this Note.

     16. Acceleration. Upon any Event of Default (in addition to any other rights or remedies
provided for under this Note), at the option of the Holder or any holder hereof, all sums evidenced
hereby, including all principal, accrued but unpaid Interest, fees and all other amounts due
hereunder, shall become immediately due and payable. If an Event of Default relating to certain
events of bankruptcy or insolvency of the Maker occurs and is continuing, the principal of and
interest, if any, on this Note will become and be immediately due and payable without any
declaration or other act on the part of the Holder or any holder hereof. This Note shall bear
interest at the rate of twenty-five (25%) percent per annum upon the occurrence of an Event of
Default (“Default Interest”). Payments of the Default Interest shall be due every thirty (30) days
following the occurrence Event of Default.

     17. Employment Contracts. Upon an Event of Default, the Holder may, at its option, cause the
Board of Directors of the Marker to terminate all the employment contracts of the Maker, with the
exception of the employment contract of Sally J. Ramsey, within thirty (30) days of the Event of
Default.

     18. No Waiver. Failure of the Holder or any holder hereof to exercise any option hereunder
shall not constitute a waiver of the right to exercise the same in the event of any subsequent
Event of Default, or in the event of continuance of any existing Event of Default after demand or
performance thereof.

     19. Pursuit of any Remedy. The Holder or holder hereof may pursue any remedy under this Note
without notice or presentment. The Holder or any holder hereof has the right to direct the time,
method and place of conducting any proceeding for exercising any remedy available to the Holder or
any such holder hereof under this Note.

5

 

ARTICLE IV

MISCELLANEOUS

     20. Amendments. No amendment or waiver of any provision of this Note, nor consent to any
departure by the Maker herefrom, shall in any event be effective unless the same shall be in
writing and signed by the Holder, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

     21. Notices. All notices and other communications provided for hereunder shall be in writing
(including telecopier communication) and mailed, telecopied, or delivered, to the Maker or the
Holder, as applicable, at their respective addresses specified on the signature pages hereof, or,
as to each party, at such other address as shall be designated by such party in a written notice to
the other party. All such notices and communications shall, when mailed or telecopied, be effective
when deposited in the mails or telecopied with receipt confirmed, respectively.

     22. No Waiver; Remedies. No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof or the exercise of
any other right. All rights, powers and remedies of the Holder in connection with this Note are
cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

     23. Severability; Headings. If any one or more provisions of this Note shall be held to be
illegal, invalid or otherwise unenforceable, the same shall not affect any other provisions of this
Note and the remaining provisions of this Note shall remain in full force and effect. Article and
paragraph headings in this Note are included herein for convenience of reference only and shall not
constitute a part of this Note for any other purpose or be given any substantive effect.

     24. Binding Effect; Transfer. This Note shall be binding upon and inure to the benefit of the
Maker and the Holder and their respective successors and assigns. The Holder may not assign or
otherwise transfer, or grant participations in, this Note or all or any portion of its rights
hereunder or its interest herein to any person or entity, without the prior written consent of the
Maker which consent shall not be unreasonably withheld. The Maker may not assign or otherwise
transfer its rights or obligations hereunder or any interest herein without the prior written
consent of the Holder. Any attempted assignment by the Maker or the Holder in contravention of this
paragraph shall be null and void and of no force or effect.

     25. Enforcement. It is agreed that time is of the essence of this Note and in the event of
default of the terms of this Note, the Maker agrees to pay all costs of collection or enforcement,
including reasonable attorneys’ fees and if there is a default in payment of any sum due hereunder.

6

 

     26. Governing Law. This Note shall be governed by, and shall be construed and enforced in
accordance with, the internal laws of the State of New York without regard to conflicts of laws
principles. The venue of any legal proceeding taken in connection with this Note will be New York,
New York.

     27. Independence of Covenants. All covenants hereunder shall be given independent effect so
that if a particular action or condition is not permitted by any of such covenants, the fact that
it would be permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of an Event of Default or event which with notice or lapse
of time or both would become an Event of Default if such action is taken or condition exists.

     28. Interpretation. The Holder and the Maker hereby waive the benefit of any statute or rule
of law or judicial decision which would otherwise require that the provisions of this Note be
construed or interpreted more strongly against the party responsible for the drafting thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, this Note has been issued as of date first written above.

	 	 	 	 	 
	 

	 	MAKER:	 	 
	 
	 	 	 	 
	 

	 	Ecology Coatings, Inc.	 	 
	 
	 	 	 	 
	 

	 	 

Richard D. Stromback
	 	 
	 

	 	Chief Executive Officer	 	 

Mailing Address of Holder:

Hayden Capital USA, LLC, Series I

c/o Stephen Hayden

Hayden Capital Corp.

2331 — 4th Avenue NW

Calgary, AB

T2N 0P1

Mailing Address of Maker:

Ecology Coatings, Inc.

c/o Adam S. Tracy, General Counsel

35980 Woodward Avenue, Suite 200

Bloomfield Hills, Michigan 48304

8

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