NON NEGOTIABLE PROMISSORY NOTE
Amount $3,500,000
November 17, 2000
Gemini VII, Inc., a corporation formed under the laws of the State of
Delaware with offices at 700 Gemini, Suite 100, Houston, Texas 77058 (herein
called the "Maker"), for good and valuable consideration, the receipt of which
is hereby acknowledged, hereby promises to pay to The Sagemark Companies, Ltd.,
a New York corporation with offices at c/o Martin Siegel, Esq., Berlack, Israels
& Liberman, LLP, 120 West 45th Street, New York, NY 10036 (herein called the
"Payee"), the principal sum of Three Million Five Hundred Thousand Dollars
($3,500,000) (or such lesser principal amount as may be outstanding, when due)
(the "Principal"), all on and subject to the terms and conditions hereinafter
set forth:
1. INCORPORATION BY REFERENCE. Reference is made to that certain
Stock Purchase Agreement dated as of November 17, 2000 by and between Maker and
Payee (the "Stock Purchase Agreement") and to that certain Guaranty of even date
herewith executed by Frank DeLape and Richard Young (the "Guaranty"), the terms
of which are incorporated herein by reference thereto. To the extent any
capitalized terms are used but not defined herein, such terms shall have the
meanings ascribed to them in the Stock Purchase Agreement or the Guaranty.
2. PAYMENT TERMS. Maker shall pay to Payee, without set-off or
deduction, the Principal of this Note on the later of November 30, 2009 or the
date of expiration of the term of the Partnership Agreement (the "Maturity
Date"), subject to prepayment as provided in Section 3 hereof.
3. PREPAYMENT. Notwithstanding the foregoing, Maker shall be
obligated to mandatorily prepay, without penalty or premium, the Principal of
this Note within ten (10) business days after any of such dates, if any, prior
to the Maturity Date, that (a) Sagemark Management, LLC ("SML") receives,
directly or indirectly, in accordance with the terms of that certain Agreement
of Limited Partnership dated November 30, 1999 (the "Partnership Agreement") of
Sagemark Capital LP (the "Partnership"), any distributions from the Partnership
(but only in such amounts as shall be equal to the amounts of any such
distributions to SML, LESS the amount of all applicable Federal, state and local
taxes computed at the maximum applicable tax rate (i.e., the maximum Federal tax
rate is currently 39.8%) and any amounts, if any, paid to Scott Cook (or his
designee) by SML solely from such distributions (the "Scott Deduction") if Scott
Cook (or his designee) hereafter becomes a member of SML, divided by 2, PROVIDED
THAT the Scott Deduction does not exceed 33-1/3% of the amount of any such
distributions), or (b) Maker receives the proceeds from the sale of any or all
of the shares of capital stock of Gavelnet.com, Inc. or JewelersEdge, Inc. owned
by Maker to the full extent of any such proceeds, less the amount of all
applicable taxes. Maker may prepay this Note, in whole or in part, and from time
to time prior to the Maturity Date, without penalty or premium. This Note shall
be non-interest bearing and, notwithstanding any provision of this Note or the
Stock Purchase Agreement or the Guaranty to the contrary, the Principal of this
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Note shall be reduced on the Maturity Date by an amount equal to and measured by
$3,500,000, less the aggregate amount of all such distributions and sales
proceeds which are referred to in clauses 3(a) and 3(b) above (i.e., there will
be no amounts due under this Note if, on the Maturity Date, there have been no
such distributions or sales proceeds prior to such Maturity Date).
NOTWITHSTANDING ANY OTHER PROVISION OF THIS NOTE TO THE CONTRARY, THE
OBLIGATIONS OF MAKER AND THE GUARANTORS HEREUNDER SHALL BE WITH RECOURSE TO
MAKER AND THE GUARANTORS ONLY TO THE EXTENT OF ANY NON-PAYMENT OF THE PRINCIPAL
OF THIS NOTE AS A RESULT OF A BREACH OF THE MANDATORY PREPAYMENT PROVISIONS SET
FORTH IN THIS PARAGRAPH.
4. PLACE AND MANNER OF PAYMENT. All payments of Principal under this
Note shall be made to Payee on or before the due date thereof (except with
respect to the mandatory prepayments of Principal described in Section 2 hereof
which shall be due and payable as provided therein with respect thereto) at
Payee's address set forth above or at such other address or to such other bank
account of Payee as Payee may, from time to time, designate in writing to Maker
prior to the due date of any such payment. If any payment hereunder becomes due
on a Saturday, Sunday or legal holiday, such payment shall become due on the
next business day.
5. WAIVER OF PRESENTMENT, DEMAND AND NOTICE. Maker hereby waives
presentment for payment, demand, notice of demand, notice of non-payment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default, or enforcement
of the terms of this Note (except as specifically provided elsewhere in this
Note) and Maker hereby agrees that the liability under this Note shall be
without regard to the liability of any other party, including the Guarantors or
any other guarantor of this Note, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or
consented to by Payee. Maker hereby agrees that additional makers, endorsers,
guarantors or sureties may become parties to this Note without notice to Maker
and without affecting Maker's liability hereunder.
6. REMEDIES CUMULATIVE. The rights and remedies of Payee provided in
this Note shall be cumulative and concurrent and exclusive of all rights and
remedies provided by law or in equity and Payee may, at its election, pursue its
rights and remedies hereunder or thereunder, singly, successively, or together,
at the sole discretion of Payee, and all of such rights and remedies may be
exercised separately as often as occasion therefor shall occur. The failure of
Payee to exercise any such right or remedy shall in no event be construed as a
waiver or release thereof.
7. SEVERABILITY; LAWFUL INTEREST. If any provision of this Note is
held to be invalid or unenforceable by a court of competent jurisdiction, the
other provisions of this Note shall remain in full force and effect and shall be
unaffected thereby.
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8. NO WAIVER BY PAYEE. Payee shall not be deemed, by any act of
omission or commission, to have waived any of its rights or remedies hereunder
unless such waiver is in writing and signed by Payee, and then only to the
extent specifically set forth in any such writing. A waiver of one event shall
not be construed as continuing or constitute a bar to or waiver of any right or
remedy with respect to a subsequent event.
9. MODIFICATION; GOVERNING LAW. The provisions of this Note represent
the entire agreement and understanding of Maker and Payee with respect thereto
(except for the applicable provisions of the Stock Purchase Agreement) and may
not be modified or amended except by an instrument in writing signed by the
party to be bound thereby. To the extent that there is any inconsistency between
the terms of this Note and the terms of the Stock Purchase Agreement, the terms
of this Note shall govern and be controlling. This Note and the respective
rights and obligations of Maker and Payee hereunder shall be governed by and
construed in accordance with the laws of the State of New York with respect to
contracts made and to be fully performed therein and without regard to the
principles of conflicts of laws thereof. The parties hereto hereby agree that
any suit or proceeding arising under or as a result of this Agreement, the
Guaranty or the consummation of the transactions contemplated hereby, shall be
brought solely in a Federal or state court located in the County of New York,
State of New York. By their execution hereof, the parties hereto irrevocably
consent and submit to the IN PERSONAM jurisdiction of the Federal and state
courts located in the County of New York, State of New York, and agree that any
process in any suit or proceeding commenced in such courts under this Agreement
may be served upon them personally or by certified or registered mail, return
receipt requested, addressed to the Maker and Payee at their respective
addresses set forth on the first page of this Agreement (and to the Guarantors
at their respective addresses set forth in the Guaranty) (or at such other
address as either Maker, Payee or the Guarantors may notify the other of, in
writing), or by a nationally recognized overnight courier service which provides
evidence of delivery, with the same force and effect as if personally served
upon them in such county and state. Maker and Payee each waive any claim that
any such jurisdiction is not a convenient forum, or that there is another more
convenient forum, for any such suit or proceeding and any defense of lack of IN
PERSONAM jurisdiction with respect thereto.
10. NOTICES. All notices, consents, requests, demands and other
communications required or permitted to be given under this Note shall be in
writing and delivered to Maker or the Guarantors personally, receipt
acknowledged, or mailed by registered or certified mail, postage prepaid, return
receipt requested, addressed to Maker or the Guarantors at their respective
addresses referred to in Paragraph 8 above. All such notices, consents,
requests, demands and other communications shall be deemed given when personally
delivered, as aforesaid, or, if mailed as aforesaid, on the third business day
after the mailing thereof or on the day actually received, if earlier, except
for a notice of a change of address which shall be effective only upon receipt.
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11. BINDING EFFECT. This Note shall be binding upon Maker and the
Guarantors and their respective heirs, personal representatives, successors and
assigns and shall inure to the benefit of Payee and its successors and assigns.
Maker shall not have the right to assign this Note, or any of its obligations
hereunder, without the written consent of Payee.
12. FURTHER ASSURANCES. Maker hereby agrees that, at any time and from
time to time after the date hereof, upon the reasonable request of Payee and at
Payee's expense, it shall do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, such further acts, deeds,
assignments, transfers, conveyances, and assurances as may be reasonably
required to more effectively consummate this Note or the Guaranty or to confirm
or otherwise effectuate the provisions of this Note or the Guaranty.
13. COLLECTION COSTS. In the event that any action or proceeding is
instituted to enforce the provisions of this Note, the party prevailing therein
shall be entitled to reimbursement of its reasonable costs in connection
therewith (including its reasonable counsel fees and disbursements). In
addition, in such event, if the Payee prevails in any such action or proceeding,
it shall also be entitled to receive interest at the rate of 10% per annum from
the date of Maker's default to the date of payment, only on such portion of the
unpaid Principal of this Note which is in default.
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has
caused this Note to be signed and dated the day and year above written.
WITNESS: GEMINI VII, INC.
By: /s/ RICHARD YOUNT
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Richard Young, President
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