PROMISSORYNOTE PRIME/LIBORRATE

$6,500,000.00	December 6, 2010
	New York, New York

FOR VALUE RECEIVED, the undersigned, SMART ONLINE INC. (the “Borrower”) HEREBY PROMISES TO PAY to the order of ISRAEL DISCOUNT BANK OF NEW YORK, its successors and assigns (hereinafter the “Bank”), the principal amount of SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000.00), in lawful money of the United States (the “Loan”), or the aggregate unpaid principal amount of all credit advances (hereinafter each being referred to as an “Advance” and collectively, the “Advances”) made to Borrower, as set forth on Bank’s computer system on the Loan Enquiry Page(s) (the “Loan Enquiry Page(s)”) on the maturity date of each such Advance as shown on the Loan Enquiry Page(s), and in no event later than the Maturity Date, and to pay interest on the unpaid principal balance of this Promissory Note (this “Note”) in the manner and at the rate as hereinafter specified and such amounts due hereunder.

1.           Defined Terms.  As used in this Note the following terms shall have the following meanings:

The term “Additional Costs” shall have the meaning as defined in Section 17.

The terms “Advance” or “Advances” shall have the meanings as defined in the introductory paragraph.

The term “Bank” shall have the meaning as defined in the introductory paragraph.

The term “Bankruptcy Code” shall mean Title 11 of the United States Code, as amended.

 

The term “Borrower” shall have the meaning as defined in the introductory paragraph.

The term “Business Day” shall mean any day other than a Saturday, Sunday, or other day on which commercial banks in New York are authorized or required to close under the laws of the State of New York.

The term “Collateral” or "SBLC" shall mean collectively, (i) that certain irrevocable standby letter of credit issued by HSBC Switzerland in favor of Bank in the aggregate amount of $2,500,000.00 and (ii) that certain irrevocable standby letter of credit issued by UBS Switzerland in favor of Bank in the aggregate amount of $4,000,000.00 as may be amended, assigned or otherwise renewed or replaced from time to time.

The term “Default Interest Rate” shall have the meaning as defined in Section 4.

The term “Event of Default” shall mean any of the events or conditions specified in Section 12 hereof.

The term “Indebtedness” shall mean all items of indebtedness, obligation or liability, whether matured or unmatured, liquidated or unliquidated, funded or unfunded, direct or contingent, joint or several, which would properly be included in the liability section of a balance sheet or in a footnote to a financial statement in accordance with generally accepted accounting principles, and shall also include (a) all indebtedness guaranteed, directly or indirectly in any manner, or endorsed (other than for collection or deposit in the ordinary course of business) or sold with recourse, (b) all indebtedness in effect guaranteed, directly or indirectly, through agreements, contingent or otherwise, and (c) all indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, assignment, lien, security interest or other charge or encumbrance upon property owned or acquired subject thereto, whether or not the liabilities secured thereby have been assumed or guaranteed.

The terms “Indemnified Party” or “Indemnified Parties” shall have the meanings as defined in Section 27.

The term “Interest” means the annual rate of interest payable on the outstanding Advances in accordance with Sections 3 and 4.

The term “Interest Period” means with respect each LIBOR Advance:

(a)           initially, the period commencing on the date such LIBOR Advance is made and ending two (2), three (3) or four (4) months thereafter, as selected by Borrower; and

(b)           each Interest Period thereafter shall commence on the day immediately following the expiration of the preceding Interest Period for such LIBOR Advance and shall end two (2), three (3) or four (4)  months thereafter, as selected by Borrower, by irrevocable written notice to Bank before 12:00 p.m., New York time, not less than two (2) Business Days prior to the last day of the then current Interest Period;

(c)           provided, however, that all of the foregoing provisions relating to Interest Periods are subject to the following:

(i)         if any Interest Period pertaining to a LIBOR Advance would otherwise end on a day which is not a Business Day, the Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day; and

(ii)         if Borrower shall fail to give notice as provided in clause (b) above, Borrower shall, in Bank’s sole discretion and determination, be deemed to either (x) have requested that such LIBOR Advances be continued for a successive Interest Period, the term of which shall be selected by Bank, or (y) requested the conversion of such LIBOR Advance to a Prime Rate Advance on the last day of the then current Interest Period with respect thereto; and

(iii)        any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and

(iv)        notwithstanding anything to the contrary, no Interest Period may be selected that would end on a day after the Maturity Date.

The term “Late Charge” shall have the meaning as defined in Section 10.

The term “LIBOR” shall mean with respect to an Interest Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”) as published by Bloomberg (or such other commercially available source providing quotations of BBA LIBOR as designated by Bank from time to time) at approximately 11:00 A.M. (London time) 2 Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided however, if more than one BBA LIBOR Rate is specified, the applicable rate shall be the arithmetic mean of all such rates.

The term “LIBOR Advance” shall mean any Advance for which Borrower has selected LIBOR as the base interest rate.

The term “Loan” shall have the meaning as defined in the introductory paragraph.

The term “Loan Enquiry Page(s)” shall have the meaning as defined in the introductory paragraph.

The term “Margin” shall mean: (i) three hundred basis points (300 bps) for LIBOR Advances; and (ii) one hundred basis points (100 bps) for Prime Rate Advances.

The term “Minimum Advance” shall have the meaning as defined in Section 2(c).

2.           Advances.

(a)           Each request by Borrower for an Advance shall be received by Bank not later than 12:00 noon, Eastern Standard Time: (i) on the date of such request in the case of a Prime Rate Advance, and (ii) three (3) Business Days, in the case of a LIBOR Advance, before the first day of the applicable Interest Period.

(b)           Each request for an Advance shall specify inter alia (i) the requested date of such Advance, (ii) the requested amount of such Advance, (iii) whether the requested Advance is a Prime Rate Advance or a LIBOR Advance, and (iv) if such request is a LIBOR Advance, the applicable Interest Period.

(c)           A request for an Advance shall be irrevocable upon Bank’s first receiving notification thereof and shall be in a minimum amount (“Minimum Advance”) of: (i) $1,000,000.00; or (ii) the remaining amount of the available undrawn balance under the Loan if such amount is less than $1,000,000.00.

(d)           A LIBOR Advance may be refinanced with the proceeds of another LIBOR Advance on the last day of the applicable Interest Period by giving notice as provided herein, provided, however, during the existence of an Event of Default, Bank may, at its option, convert any and all outstanding LIBOR Advances to Prime Rate Advances.

(e)           Borrower may, from time to time, upon at least two (2) Business Days prior written notice to Bank, elect to convert an outstanding LIBOR Advance to Prime Rate Advance, provided, however, that any such conversion of a LIBOR Advance shall be made on the last day of the applicable Interest Period.

(f)           Borrower may, from time to time, upon at least two (2) Business Days prior written notice to Bank, elect to convert an outstanding Prime Rate Advance to a LIBOR Advance by giving Bank irrevocable written notice of such election not later than 12:00 noon, provided that any such conversion shall (i) be in a minimum integral amount of $1,000,000.00, and (ii) no Event of Default shall have occurred and be continuing.

(g)           Subject to the terms and conditions hereof and the terms and conditions set forth in the Loan Documents, Advances that are repaid or prepaid may not be reborrowed.

(h)           Borrower shall utilize the Advances for working purposes and financing for additional debt.

(i)           Borrower shall not be permitted to request or receive any further Advances after six months from the date hereof.

3.           Principal and Interest.

(a)           Interest shall be payable on the outstanding daily unpaid principal amount of each Advance from the date hereof until payment in full is made and shall accrue and be payable at the rates set forth or provided for herein, before and after default, before and after maturity, before and after judgment and before and after the commencement of any proceeding under the Bankruptcy Code, with interest on overdue interest to bear interest and to be compounded at the Default Interest Rate, in each case, to the fullest extent permitted by applicable laws.

(b)           Interest accrued on each Advance shall be due quarterly and payable in arrears on the last day of each February, May and August and November commencing on the last day of February, 2011. Except as otherwise provided in Section 4, the unpaid principal amount of each Advance shall bear interest as follows:

(i)          With respect to a LIBOR Advance at a rate per annum equal to LIBOR for the applicable Interest Period plus the Margin;

(ii)         With respect to a Prime Rate Advance at a rate per annum equal to the Prime Rate plus the Margin; and

(iii)        If the rate of interest calculated in accordance with subparagraphs (i) or (ii) above is less than four percent (4.00%) percent (the “Floor”), then the rate per annum for such Advance shall be equal to the Floor.  At no time during the term of the Loan shall any unpaid principal amount bear interest at a rate per annum that is less than the Floor.

(c)           The unpaid principal amount of any Advance may, at any time and from time to time, be voluntarily paid or prepaid in whole or in part except that, with respect to any voluntary prepayment, (i) Bank shall have received written notice of any prepayment by 12:00 noon, Eastern Standard Time on a Business Day on the date of prepayment in the case of a Prime Rate Advance, and five (5) Business Days, in the case of a LIBOR Advance, before the date of prepayment, which notice shall identify the date and amount of the prepayment, (ii) each prepayment of an Advance shall be accompanied by payment of interest accrued to the date of payment on the amount of principal paid, and (iii) any payment or prepayment of all or any part of any LIBOR Advance on a day other than the last day of the applicable Interest Period shall be accompanied by a prepayment premium equal to, and to partially compensate the Bank, for the amount of interest which Bank would have earned on the principal amount so prepaid from the date of such prepayment to the last day of the then current Interest Period for such LIBOR Advance.  Bank shall not be obligated to accept any prepayment of a LIBOR Advance unless it is accompanied by the prepayment premium.

 

(d)           Bank may act without liability upon the basis of telephonic notice believed by Bank in good faith to be from Borrower.  Borrower shall immediately confirm to Bank, in writing, each telephonic notice.  All Advances are made at Bank’s sole and absolute discretion and Bank may, at its option and in its sole and absolute discretion and without notice to the undersigned, decline to make any Advance requested by Borrower.  Borrower hereby expressly authorizes Bank to record in its computer system the amount and date of each Advance, the applicable rate of interest, the applicable Interest Period, the maturity date, and each payment of principal and interest thereon.  In the event of any discrepancy between any such notation by Bank and any records of Borrower, the records of Bank shall be controlling and conclusive.

(e)           All amounts due and owing hereunder shall be paid in full no later than the earlier of: (i) demand by Bank; (ii) Maturity Date; or (iii) the occurrence and continuation of an Event of Default.

4.           Default Rate.  At the option of the Bank, upon the occurrence and during the continuance of any Event of Default, and in any event if any installment of principal or interest or any fee or cost or other amount payable under this Note, or any other Loan Document, is not paid when due, the Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the rate otherwise applicable thereto plus five (5%) percent per annum (the “Default Interest Rate”), to the fullest extent permitted by applicable law.  Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be compounded monthly, on the last day of each calendar month, to the fullest extent permitted by applicable law.

5.           Computation of Interest and Fees.

(a)           Computation of interest on the Loan and all fees under this Note shall be calculated on the basis of a year of 360 days and the actual number of days elapsed.  Borrower acknowledges that such latter calculation method will result in a higher yield to the Bank than a method based on a year of 365 or 366 days.

 

(b)           Under no circumstances or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Note exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such court determines Bank has charged or received interest hereunder in excess of the highest applicable rate, Bank shall apply, in its sole discretion, and set off such excess interest received by Bank against other Obligations due or to become due and such rate shall automatically be reduced to the maximum rate permitted by such law.

 

6.           Manner and Treatment of Payments.

(a)           Each payment due on this Note, or under any other Loan Document, shall be made to Bank, at Bank’s office located at 511 Fifth Avenue, New York, New York 10017-4997, for the account of Bank, in immediately available funds not later than 3:00 p.m., New York local time, on the day of payment (which must be a Business Day).  All payments received after these deadlines shall be deemed received on the next succeeding Business Day.  All payments shall be made in lawful money of the United States of America.

 

(b)           Bank shall have the unconditional right and discretion (and Borrower hereby authorizes Bank) to charge Borrower’s operating and/or deposit account(s) for all of Borrower’s Obligations as they become due from time to time under this Note, or any other Loan Document, including, without limitation, interest, principal, fees, indemnification obligations and reimbursement of expenses.

 

(c)           Any payment due under this Note which is paid by check or draft shall be subject to the condition that any receipt issued therefore shall be ineffective unless and until the amount due is actually received by Bank.  Each payment received by Bank shall be applied as follows: first, to the payment of any and all costs, fees and expenses incurred by or payable to Bank in connection with the collection or enforcement of this Note; second, to the payment of all unpaid late charges (if any); third, to the payment of all accrued and unpaid interest hereunder; and fourth, to the payment of the unpaid principal balance of this Note, or in any other manner which Bank may, in its sole discretion, elect from time to time.

 

7.           Security Interest in Collateral.

(a)           To secure payment to Bank and performance of the Obligations, Borrower hereby grants to Bank a continuing security interest in, a general lien upon and a right of set-off against the Collateral.

(b)           Borrower hereby authorizes Bank, at any time and from time to time, to file financing statements, continuation statements and amendments thereto under the Uniform Commercial Code naming Borrower as debtor and Bank as secured party and indicating therein the types or describing the items of Collateral herein specified.  Borrower will not, without the prior written consent of Bank, file or authorize or permit to be filed in any jurisdiction any such financing or like statement in which Bank is not named as the sole secured party covering the Collateral set forth herein.

 

(c)           Bank, at its discretion, whether any of the Obligations be due may, in its name or in the name of Borrower or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for, or make any compromise or settlement deemed desirable with respect to, any of the Collateral, but shall be under no obligation so to do, or Bank may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, or release, any of the Collateral, without thereby incurring responsibility to, or discharging or otherwise affecting any liability of Borrower.  Bank shall not be required to take any steps necessary to preserve any rights of prior parties to any of the Collateral.  Upon default hereunder or in connection with any of the Obligations (whether such default be that of Borrower or of any other party obligated thereon), Bank shall have the rights and remedies provided by law.  Borrower will pay to Bank all reasonable out of pocket expenses (including reasonable expense for legal services of every kind) of, or incidental to, the enforcement of any of the provisions hereof or of any of the Obligations, or any actual or attempted sale, or any exchange, enforcement, collection, compromise or settlement of any of the Collateral or receipt of the proceeds thereof, and for the care of the Collateral and defending or asserting the rights and claims of Bank in respect thereof, by litigation or otherwise, including expense of insurance, and all such expenses shall be indebtedness within the terms of this Note.  Bank, at any time, at its option, may apply the net cash receipts from the Collateral to the payment of principal of and/or interest on any of the Obligations, whether or not then due, making proper rebate of interest or discount.  Notwithstanding that Bank, whether in its own behalf and/or in behalf of another and/or of others, may continue to hold Collateral and regardless of the value thereof, Borrower shall be and remain liable for the payment in full, principal and interest, of any balance of the Obligations and expenses at any time unpaid.

8.           Right of Set-Off.  To secure payment of this Note and all other Obligations of Borrower to Bank, Borrower and any Obligor of this Note hereby grant Bank a continuing lien and/or right of set-off upon any and all deposit and/or operating accounts now or hereafter maintained with Bank, any and all securities and other property of Borrower and any Obligor and the proceeds thereof now or hereafter coming into the possession or control of Bank, hereby authorizing Bank, at any time, without prior notice, to appropriate and apply such deposits or the proceeds of the sale of such securities or other property to any such Obligations, although contingent and although unmatured, it being understood that Bank shall be under no obligation to effect any such appropriation and application.

9.           Repayment Extension.  If any payment of principal or interest shall be due on a Saturday, Sunday or any other day on which banking institutions in the State of New York are required or permitted to be closed, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest.

10.         Late Charge.  Borrower shall unconditionally pay to Bank a late charge (the “Late Charge”) equal to the greater of (a) five (5%) percent of the payment then due or (b) $200.00, if any such payment in whole or in part is not received by Bank within ten (10) days after its due date.  The Late Charge is in addition to the Default Interest Rate, if applicable, and shall be payable together with the next payment due hereunder or, at Bank’s option, upon demand by Bank, provided, however, that if any such late charge is not recognized as liquidated damages for such delinquency, and if deemed to be interest in excess of the amount permitted by applicable law, Bank shall be entitled to collect a late charge only at the highest rate permitted by law, and any payment actually collected by Bank in excess of such lawful amount shall be deemed a payment in reduction of the principal sum then outstanding, and shall be so applied.

11.         Representations and Warranties.  Borrower represents and warrants to Bank that:

 

 

12.         Events of Default.  The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Note:

 

 

13.           Rights and Remedies upon Demand or Default.  Upon demand or following the occurrence of an Event of Default hereunder, Bank, in Bank’s sole discretion and without notice or demand to Borrower or any other Obligor, may: (a) declare the entire outstanding principal balance of this Note, together with all accrued interest and all other sums due under this Note to be immediately due and payable, and the same shall thereupon become immediately due and payable without presentment, demand or notice, which are hereby expressly waived (b) exercise its right of set-off against any money, funds, credits or other property of any nature whatsoever of Borrower  or any other Obligor now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, Bank or any affiliate of Bank in any capacity whatsoever, including without limitation, any balance of any deposit account and any credits with Bank or any affiliate of Bank; (c) terminate any outstanding commitments of Bank to Borrower or any Obligor; (d) draw under the SBLC and apply all or a portion of the proceeds of the SBLC in reduction of the Obligations and the Bank shall not be liable or in any way responsible to the Borrower by reason of any draw under the SBLC or any certifications presented to either UBS Switzerland or HSBC Switzerland in connection thereof; and (e) exercise any or all rights, powers, and remedies provided for in the Loan Documents or now or hereafter existing at law, in equity, by statute or otherwise.

14.           Remedies Cumulative.  Each right, power and remedy of Bank hereunder, under the other Loan Documents or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and concurrent, and the exercise or the beginning of the exercise of any one or more of them shall not preclude the simultaneous or later exercise by Bank of any or all such other rights, powers or remedies.  No failure or delay by Bank to insist upon the strict performance of any one or more provisions of this Note or of the Loan Documents or to exercise any right, power or remedy consequent upon a breach thereof or a default hereunder shall constitute a waiver thereof, or preclude Bank from exercising any such other rights, powers or remedy.  By accepting full or partial payment after the due date of any amount of principal or interest on this Note, or other amounts payable on demand, Bank shall not be deemed to have waived the right either to require prompt payment when due and payable of all other amounts of principal or interest on this Note or other amounts payable on demand, or to exercise any rights and remedies available to it in order to collect all such other amounts due and payable under this Note.

15.           Inability to Determine LIBOR.  If prior to the first day of any Interest Period, Bank shall have determined (which determination shall be conclusive and binding upon Borrower, absent manifest error) that LIBOR can not be determined by any of the means set forth in the definition of “LIBOR” and, by reason of circumstances affecting the London Interbank Market, quotations of interest rates for the relevant Interest Periods are not being provided to Bank in the relevant amount or for the relevant maturities for purposes of determining LIBOR for such Interest Period, Bank shall forthwith furnish notice of such determination, confirmed in writing, to Borrower and thereafter any outstanding LIBOR Advance shall, on the last day of the then applicable current Interest Period, be converted to a Prime Rate Advance.

16.           Illegality.  Notwithstanding any other provision herein, if the adoption of or any change in any law, rule, regulation, guideline or order, or the interpretation or application thereof shall make it unlawful for Bank to make or maintain LIBOR Advances as contemplated hereunder (a) Bank shall promptly give notice thereof to Borrower, (b) the obligation of Bank to make LIBOR Advances, continue LIBOR Advances as such and convert Prime Rate Advances to LIBOR Advances shall forthwith be cancelled and (c) Bank’s outstanding LIBOR Advances, if any, shall be converted automatically to Prime Rate Advances as of the date notice is given to Borrower under Subsection (a) hereof.

17.           Additional Costs.  If, as a result of any change in applicable law, regulation, guideline or order, or in the interpretation or application thereof by any governmental authority charged with the administration thereof, there shall be imposed upon or made applicable to Bank any reserve requirement against this Note or any other costs or assessments (hereinafter “Additional Costs”), Borrower shall pay to Bank, on demand (which demand shall be in writing and which will set forth a calculation of such Additional Costs), an amount sufficient to compensate Bank for such Additional Cost.  Bank’s calculation of the amount of such Additional Costs shall be presumed correct absent manifest error.

18.           Collection Expenses.  If this Note is placed in the hands of an attorney for collection following the occurrence of an Event of Default hereunder, Borrower agrees to pay to Bank upon demand costs and expenses, including all attorney’s fees and court costs, paid or incurred by Bank in connection with the enforcement or collection of this Note (whether or not any action has been commenced by Bank to enforce or collect this Note) or in successfully defending any counterclaim or other legal proceeding brought by Borrower contesting Bank’s right collect the outstanding principal balance of this Note.  The obligation of Borrower to pay all such costs and expenses shall not be merged into any judgment by confession against Borrower.  All of such costs and expenses shall bear interest at the highest rate of Interest permitted under this Note from the date of payment by Bank until repaid in full by the Obligor.

19.           Interest Rate after Judgment.  If judgment is entered against Borrower on this Note, the amount of the judgment entered (which may include principal, interest, fees and costs) shall bear interest at the higher of (i) the legal rate of interest then applicable to judgments in the jurisdiction in which judgment was entered, or (ii) if otherwise permitted by applicable law, the Default Interest Rate provided herein.

20.           Certain Waivers by Borrower.  Borrower waives demand, presentment, protest and notice of demand, of non-payment, of dishonor, and of protest of this Note.  Bank, without notice to or further consent of Borrower or any other Obligor and without in any respect compromising, impairing, releasing, lessening or affecting the obligations of Borrower hereunder or under of the Loan Documents, may: (a) release, surrender, waive, add, substitute, settle, exchange, compromises, modify, extend or grant indulgences with respect to (i) this Note, (ii) any of the Loan Documents, and/or (iii) all or any part of any collateral or security for this Note; and/or (iv) any Obligor; (b) complete any blank space in this Note according to the terms upon which the loan evidenced hereby is made; and (c) grant any extension or other postponements of the time of payment hereof.

 

21.           Choice of Law: Forum Selection: Consent to Jurisdiction.  This Note shall be governed by, construed and interpreted in accordance with the laws of the State of New York (excluding the choice of law rules thereof).  Borrower hereby irrevocably submits to the jurisdiction of any New York court or federal court sitting in the State of New York in any action or proceeding arising out of or relating to this Note, and hereby irrevocably waives any objection to the laying of venue of any such action or proceeding in any such court and any claim that any such action or proceeding has been brought in an inconvenient forum.  A final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law.

22.           Subsequent Holders.  In the event that any holder of this Note transfers this Note for value, Borrower agrees that except with respect to a subsequent holder with actual knowledge of a claim or defense, no subsequent holder of this Note shall be subject to any claims or defenses which Borrower may have against a prior holder (which claims or defenses are not waived as to prior holder), all of which are waived as to the subsequent holder, and that all such subsequent holders shall have all of the rights of a holder in due course with respect to Borrower even though the subsequent holder may not qualify, under applicable law, absent this paragraph, as a holder in due course.

23.           Invalidity of Any Part.  If any provision or part of any provision of this Note shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or any remaining part of any provision) of this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained in this Note, but only to the extent of its invalidity, illegality, or unenforceability.  In any event, if any such provision pertains to the repayment of the Obligations evidenced by this Note, then and in such event, at Bank’s option, the outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall become immediately due and payable.

24.           WAIVER OF JURY TRIAL.  BORROWER HEREBY (i)  COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (ii) WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BANK AND BORROWER MAY BE PARTIES ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO THIS NOTE, ANY OF THE LOAN DOCUMENTS AND/OR ANY TRANSACTIONS, OCCURRENCES, COMMUNICATIONS, OR UNDERSTANDINGS (OR THE LACK OF ANY OF THE FOREGOING) RELATING IN ANY WAY TO BORROWER-BANK RELATIONSHIP BETWEEN THE PARTIES.  IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS NOTE.  THIS WAIVER OF JURY TRIAL IS SEPARATELY GIVEN, KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND BORROWER HEREBY AGREES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT.  BANK IS HEREBY AUTHORIZED TO SUBMIT THIS NOTE TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND BORROWER SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF SUCH WAIVER OF RIGHT TO TRIAL BY JURY.  BORROWER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND/OR THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

25.           Waiver of Defenses, Counterclaims, etc.  Borrower hereby waives, in any litigation (whether or not arising out of or related to this note or any other obligation or liabilities to Bank) in which Borrower and Bank shall be adverse parties, the right to interpose any defense, set-off or counterclaim of any nature or description, excluding mandatory counterclaims that, if not raised in such proceeding, would be waived.

26.           Indemnification.  The Borrower agrees: (i) to pay and reimburse Bank for all of its  reasonable and documented out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Note and the other Loan Documents, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees, disbursements and other charges of internal and external counsel, (ii) to pay and reimburse Bank for reasonable and documented out-of-pocket costs and expenses incurred in connection with the enforcement or preservation of any rights under this Note, Loan Documents and any such other documents, including the reasonable fees, disbursements and other charges of its counsel, whether internal or external, (iii) to pay, indemnify and hold harmless the Bank and its directors, officers and agents (each, an “Indemnified Party” and collectively, “Indemnified Parties”) from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, including reasonable and documented fees, disbursements and other charges internal or external counsel for all Indemnified Parties in connection with the execution, delivery, enforcement, performance and administration of this Note or the Loan Documents and any such other documents or the use of the proceeds thereof, including any of the foregoing relating to the violation of, noncompliance with or liability applicable to the operations of the Borrower, any of its subsidiaries; provided that the Borrower shall have no obligation hereunder to any Indemnified Party with respect to damages caused directly by the gross negligence or willful misconduct of such Indemnified Party as determined by a non-appealable final judgment.

27.           Miscellaneous.  Time is of the essence under this Note.  The paragraph headings of this Note are for convenience only, and shall not limit or otherwise affect any of the terms hereof.  This Note and the other Loan Documents, if any, constitute the entire agreement between the parties with respect to their subject matter and supersede all prior letters, representations, or agreements, oral or written, with respect thereto. No modification, release, or waiver of this Note shall be deemed to be made by Bank unless in writing signed by Bank, and each such waiver, if any, shall apply only with respect to the specific instance involved.  No course of dealing or conduct shall be effective to modify, release or waive any provisions of this Note or any of the other Loan Documents.  Borrower acknowledges that this Note is an instrument for the payment of money only within the meaning of Section 3213 of the New York Civil Practice Law & Rules.  This Note shall inure to the benefit of and be enforceable by Bank and Bank’s successors and assigns and any other person to whom Bank may grant an interest in the obligations evidenced by this Note and shall be binding upon and enforceable against Borrower and Borrower’s successors and assigns.  Whenever used herein, the singular number shall include the plural, the plural the singular, and the use of the masculine, feminine, or neuter gender shall include all genders.

 

Borrower: