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EXHIBIT 10.1
CONVERTIBLE DEBENTURE LOAN AGREEMENT
BY AND BETWEEN
BIODYNAMICS INTERNATIONAL, INC.
AND ITS WHOLLY-OWNED SUBSIDIARIES:
BIODYNAMICS INTERNATIONAL (UNITED STATES), INC.
BIODYNAMICS INTERNATIONAL (DEUTSCHLAND), GMBH
BIODYNAMICS FOR PARTNERSHIPS, INC.
ALL AS CO-BORROWERS
AND
RENAISSANCE CAPITAL PARTNERS II, LTD.
AS LENDER
This Convertible Debenture Loan Agreement (the "Loan Agreement') is
entered into as of NOVEMBER 11, 1997, by and between BIODYNAMICS INTERNATIONAL,
INC. (a Florida corporation) and its Subsidiaries Biodynamics International
(United States), Inc., (a Florida corporation), Biodynamics International
(Deutschland), GmbH, (a German corporation), and Biodynamics For Partnerships,
Inc. (a Florida corporation), all as co-borrowers (collectively hereinafter
referred to as "BORROWER") and RENAISSANCE CAPITAL PARTNERS II, LTD. (a Texas
limited partnership), together with any assignees or successors in interest
(collectively referred to as 'LENDER').
WITNESSETH:
WHEREAS, Borrower is indebted to Lender pursuant to certain promissory
note dated September 15, 1997, in the original principal amount of TWO MILLION
THIRTY-FIVE THOUSAND NINE HUNDRED TWENTY-EIGHT and 32/100 DOLLARS
($2,035,928.32), with interest on the principal balance from time to time
remaining at the rate of twelve percent (12%) per annum, computed on the basis
of a 365-day year (the "Note");
WHEREAS, the Note Matures pursuant to its terms on December 31, 1997;
WHEREAS, Borrower has requested that Lender modify the terms of the
indebtedness represented by the Note to extend the maturity date, to reduce the
interest rate from 12% per annum to 9% per annum, and to convert the
indebtedness into a loan which is convertible into the common stock of the
Borrower as herein provided and Lender is willing to furnish such to Borrower
upon the terms and subject to the conditions and for the considerations
hereinafter set forth;
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NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, receipt and sufficiency of
which is acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITION OF TERMS
SECTION 1.01 DEFINITIONS
For the purposes of this Loan Agreement, unless the context otherwise requires,
the following terms shall have the respective meanings assigned to them in this
Article I or in the section or recital referred to below:
"AFFILIATE" with respect to any Person shall mean (i) any person
directly or indirectly owning, controlling or holding power to vote 10% or more
of the outstanding voting securities of any Person; (ii) any person, 10% or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by any Person; (iii) any person directly
or indirectly controlling, controlled by or under common control with any
Person; (iv) any officer, director or partner of any Person; and (v) if a
Person is an officer, director or partner, any company for which any Person
acts in such capacity. For purposes of this Agreement, any partnership of
which any Person is a general partner, or any joint venture in which any Person
is a joint venturer, is an Affiliate of each Person.
"CAPITAL EXPENDITURE" shall mean an expenditure for assets that will
be used in years subsequent to the year in which the purchase is made and which
asset is properly classifiable in financial statements as equipment, real
property or improvements, or similar type of capitalized asset.
"CAPITAL LEASE" shall mean any lease of property, real or personal,
which is in substance a financing lease and which would be capitalized on a
balance sheet of the lessee, including without limitation, any lease under
which (i) such lessee will have an obligation to purchase the property for a
fixed sum; (ii) an option to purchase the property at an amount less than a
reasonable estimate of the fair market value of such property as of the date
such lease is executed; or (iii) the term of the lease approximates or exceeds
the expected useful life of the property leased thereunder.
"CONSOLIDATED SUBSIDIARIES" shall mean those corporations of which 50%
or more of the voting stock is owned by Borrower and their financial statements
are consolidated with those of the Borrower.
"CONVERSION" or "CONVERSION RIGHTS" shall mean exchange of, or the
rights to exchange, the Principal Amount of the loan, or any part thereof, for
Borrower's fully paid and non-assessable common stock on the terms and
conditions as provided in the Debenture.
"COMMON STOCK" shall mean Biodynamics International, Inc., common
stock, $0.01 par value.
"DEBENTURES" shall mean the Debentures executed by Borrower and
delivered pursuant to the terms of this Loan Agreement, together with any
renewals, extensions or modifications thereof
"DEBTOR LAWS" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization
or similar laws from time to time in effect affecting the rights of creditors
generally.
"DEFAULT" shall mean any of the events specified in Article VIII.
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"DIVIDENDS", in respect of any corporation, shall mean (i) cash
distributions or any other distributions on, or in respect of, any class of
capital stock of such corporation, except for distributions made solely in
shares of stock of the same class; and (ii) any and all funds, cash and other
payments made in respect of the redemption, repurchase or acquisition of such
stock, unless such stock shall be redeemed or acquired through the exchange of
such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act, as
amended, together with all regulations issued pursuant thereto.
"GAAP" shall mean generally accepted accounting principles applied on
a consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, or their
successors, which are applicable in the circumstances as of the date in
question. The requisite that such principles be applied on a consistent basis
shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period.
"GOVERNMENTAL AUTHORITY" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or a Subsidiary or any
of its or their business, operations or properties.
"GUARANTY" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person in effect guarantees
the payment of any Indebtedness of any other Person (the "Primary Obligor') in
any manner, whether directly or indirectly, including without limitation
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds primarily for the purpose of
assuring the holder of such Indebtedness of the ability of the Primary Obligor
to make payment; or (iii) otherwise to assure the holder of the Indebtedness of
the Primary Obligor against loss in respect thereof, except that "Guaranty"
shall not include the endorsement by Borrower or a Subsidiary in the ordinary
course of business of negotiable instruments or documents for deposit or
collection.
"HOLDER" shall mean the owner of Registerable Securities.
"INDEBTEDNESS" shall mean, with respect to any Person, the following
indebtedness, obligations and-liabilities of such Person: (i) all "liabilities"
that would be reflected on a balance sheet of such Person; (ii) all obligations
of such Person in respect of any Guaranty; (iii) all obligations of such Person
in respect of any Capital Lease, (iv) all obligations, indebtedness and
liabilities secured by any lien or any security interest on any property or
assets of such Person; and (v) all preferred stock of such Person which is
subject to a mandatory redemption requirement, valued at the greater of its
involuntary redemption price or liquidation preference plus accrued and unpaid
dividends.
"INVESTMENT" in any Person shall mean any investment, whether by means
of share purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person; provided however, that "Investment" shall not
include (i) any demand deposits in a duly chartered state or national bank or
other cash equivalent investments (ii) any loans permitted by Section 6.12, or
(iii) any acquisitions of equity in any other Person.
"IRS CODE" shall mean the Internal Revenue Code of 1986, as amended,
together with all regulations issued thereunder.
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"LIEN" shall mean any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"LOAN" shall mean the money lent to Borrower pursuant to this Loan
Agreement, along with any accrued interest thereon.
"LOAN CLOSING" or "LOAN CLOSING DATE" shall mean the initial
disbursement of Loan funds which shall occur on a date 30 days from the date
hereof or such earlier date on which Borrower requests, and Lender approves, as
the date at which the initial advance of the Loan funds shall be consummated,
provided that such date may be mutually extended beyond 30 days, but only by
written agreement of the parties hereto.
"LOAN DOCUMENTS" shall mean this Loan Agreement, the Debentures
(including any renewals, extensions and refundings thereof), and any other
agreements or documents (and with respect to this Loan Agreement, and such
other agreements and documents, any amendments or supplements thereto or
modifications thereof) executed or delivered pursuant to the terms of this Loan
Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" shall mean any
change, factor or event that shall (i) have a material adverse effect upon the
validity, performance or enforceability of any Loan Documents, (ii) have a
material adverse effect upon the financial condition or business operations of
Borrower or any Subsidiaries, (iii) have a material adverse effect upon the
ability of the Borrower to fulfill its obligations under the Loan Documents, or
(iv) any event that causes an Event of Default or which, with notice or lapse
of time or both, could become an Event of Default.
"OBLIGATION" shall mean: (i) all present and future indebtedness,
obligations and liabilities of Borrower to Lender arising pursuant to this Loan
Agreement, regardless of whether such indebtedness, obligations and liabilities
are direct indirect, fixed, contingent, joint, several or joint and several;
(ii) all present and future indebtedness, are direct, indirect, fixed,
contingent, joint, several, or joint and several obligations and liabilities of
Borrower to Lender arising pursuant to or represented by the Debentures and all
interest accruing thereon, and reasonable attorneys' fees incurred in the
enforcement or collection thereof; (iii) all present and future indebtedness,
obligations and liabilities of Borrower and any Subsidiary evidenced by or
arising pursuant to any of the Loan Documents; (iv) all costs incurred by
Lender, including but not limited to reasonable attorneys' fees and legal
expenses related to this transaction; and (v) all renewals, extensions and
modifications of the indebtedness referred to in the foregoing clauses, or any
part thereof
"PERMITTED LIENS" shall mean: (i) Liens (if any) granted to Lender to
secure the Obligation; (ii) pledges or deposits made to secure payment of
worker's compensation insurance (or to participate in any fund in connection
with worker's compensation insurance), unemployment insurance, pensions or
social security programs; (iii) Liens imposed by mandatory provisions of law
such as for landlord's, materialmen's, mechanics', warehousemen's and other
like Liens arising in the ordinary course of business, securing Indebtedness
whose payment is not yet due; (iv) Liens for taxes, assessments and
governmental charges or levies imposed upon a Person or upon such Person's
income or profits or property, if the same are not yet due and payable or if
the same are being contested in good faith and as to which adequate cash
reserves have been provided or if an extension is obtained with respect
thereto; (v) Liens arising from good faith deposits in connection with tenders,
leases, real estate bids or contracts (other than contracts involving the
borrowing of money), pledges or deposits to secure public or statutory
obligations and deposits to secure (or in lieu of) surety, stay, appeal or
customs bonds and deposits to secure the payment of taxes, assessments, customs
duties or other similar charges; (vi) encumbrances consisting of zoning
restrictions, easements, or other restrictions on the use of real property,
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provided that such items do not materially impair the use of such property for
the purposes intended, and none of which is violated by existing or proposed
structures or land use; (vii) mortgages, financing statements, equipment leases
or other encumbrances incurred in connection with the acquisition of property
or equipment or the replacement of existing property or equipment, provided
that such liens shall be limited to the property or equipment then being
acquired; and (viii) Liens arising from standard bank revolving working capital
financing secured by inventory, receivables, or general assets of the Borrower,
provided any such lien arose prior to the date of this Agreement.
"PERSON" shall include an individual, a corporation, a joint venture,
a general or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"PLAN" shall mean an employee benefit plan or other plan maintained by
Borrower for employees of Borrower and/or any Subsidiaries and covered by Title
IV of ERISA, or subject to the minimum funding standards under Section 412 of
the Internal Revenue Code of 1986, as amended.
"PRINCIPAL AMOUNT" shall mean, as of any time, the then aggregate
outstanding face amount of the Debentures after any conversions or redemptions
and after giving effect to any installment payments received by Lender.
"REGISTERABLE SECURITIES" shall mean (i) the Common Stock issued upon
Conversion of the Debentures, or (ii) any Common Stock issued upon Conversion
of the Debentures or exercise of any warrant, right or other security which is
issued with respect to the Common Stock referred to in clause (i) and (ii)
above by way of stock dividend; any other distribution with respect to or in
exchange for, or in replacement of Common Stock; stock split; or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization; excluding in all cases, however, any Registerable Security that
is not a Restricted Security and any Registerable Securities sold or
transferred by a person in a transaction in which the rights under this Loan
Agreement are not assigned.
"REGISTERABLE SECURITIES THEN OUTSTANDING" shall mean an amount equal
to the number of Registerable Securities outstanding which have been issued
pursuant to the Conversion of the Debentures.
"RENTALS" of any Person shall mean, as of any date, the aggregate
amount of the obligations and liabilities (including future obligations and
liabilities not yet due and payable) of such Person to make payments under all
leases, subleases and similar arrangements for the use of real, personal or
mixed property, other than leases which are Capital Leases.
"RESTRICTED SECURITY" shall mean a security that has not been (i)
registered under the 1933 Act or (ii) distributed to the public pursuant to
Rule 144 (or any similar provisions that are in force) under the 0000 Xxx.
"SEC" shall mean the Securities and Exchange Commission.
"1933 ACT" shall refer to the Securities Act of 1933, as amended.
"1934 ACT" shall refer to the Securities Exchange Act of 1934, as
amended.
"SOLVENT" shall mean, with respect to any Person on a particular date,
that on such date: (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person; (ii) the present fair salable value, in the
ordinary course of business, of
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the assets of such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they become absolute
and matured; (iii) such Person is able to realize upon its assets and pay its
debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business; (iv) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"SUBORDINATED DEBT" shall mean any indebtedness of the Borrower or any
Subsidiaries, now existing or hereafter incurred, which indebtedness is, by its
terms, junior in right of repayment to the payment of the Debentures.
"SUBSIDIARY" shall mean any corporation whether now existing or
hereafter acquired of which fifty percent (50%) or more of the Voting Shares
are owned, directly or indirectly, by Borrower.
"VOTING SHARES" of any corporation shall mean shares of any class or
classes (however designated) having ordinary voting power for the election of
at least a majority of the members of the Board of Directors (or other
governing bodies) of such corporation, other than shares having such power only
by reason of the happening of a contingency.
SECTION 1.02 OTHER DEFINITION PROVISIONS
(a) All terms defined in this Loan Agreement shall have the
above-defined meanings when used in the Debentures or any other Loan Documents,
certificate, report or other document made or delivered pursuant to this Loan
Agreement, unless the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the
plural and vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms
when used in this Loan Agreement shall refer to this Loan Agreement as a whole
and not to any particular provision of this Loan Agreement.
(d) References to financial statements and reports shall be deemed
to be a reference to such statements and reports prepared in accordance with
GAAP recognized as such by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by the Financial
Accounting Standards Board which principles are consistently applied, on the
basis used by Borrower in prior years, for all periods after the date hereof so
as to property reflect the financial condition, and the results of operations
and statement of cash flows, of Borrower and its Consolidated Subsidiaries, if
any.
(e) Accounting terms not specifically defined above, or not
defined in the Loan Agreement, shall be construed in accordance with GAAP as
recognized as of this date by the American Institute of Certified Public
Accountants.
ARTICLE II - LOAN PROVISIONS
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SECTION 2.01 LOAN CLOSING
(a) Subject to the terms and conditions of this Loan Agreement,
and the compliance with such terms and conditions by all parties, Lender agrees
to an extension of the payment term on The Note including principal and
interest earned thereon until November 11, 1997, which amount equals the sum of
$2,074,081.06 and to reduce the interest provided for in the Note from 12% per
annum to 9% per annum effective November II, 1997.
(b) Such borrowing shall be evidenced by Borrower's duly executed
Debenture (in one or more counterparts) in the aggregate sum of the Principal
Amount advanced substantially in the form of Exhibit 2.01(b) attached hereto
and made a part hereof, with appropriate insertion of names, dates and amounts.
In the event of any differences in terms between the Loan Agreement and the
Debenture, the Debenture will be controlling; provided, however, that the
holder of the Debenture shall be entitled to all the rights and benefits of the
Lender provided in this Agreement.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at
the offices of Renaissance Capital Group, Inc. in Dallas, Texas.
SECTION 2.02 USE OF PROCEEDS
Biodynamics International, Inc., Biodynamics International (United States),
Inc., Biodynamics International (Deutschland), GmbH, and Biodynamics For
Partnerships, Inc. all hereby acknowledge that the proceeds from the Loan shall
be used by each company individually for the growth of their respective
businesses by providing working capital and capital for acquisitions and the
repayment of debt.
SECTION 2.03 INTEREST RATE AND INTEREST PAYMENTS
Interest on the Principal Amount outstanding from time to time shall accrue at
the rate of 9.00% per annum, with the first installment payable on JANUARY 1,
1998 and subsequent payments at the first day of each month thereafter.
Overdue principal and interest on the Debentures shall bear interest, to the
extent permitted by applicable law, at a rate of 12.00% per annum. Interest on
the Principal Amount of each Debenture shall be calculated, from time to time,
on the basis of the actual days elapsed in a year consisting of 365 days.
SECTION 2.04 MATURITY
If not sooner redeemed or converted, the Debentures shall mature on NOVEMBER
11, 2002, at which time all the remaining unpaid principal, interest and any
other charges then due under the Debentures and the Loan Agreement shall be due
and payable in full.
SECTION 2.05 MANDATORY PRINCIPAL REDEMPTION INSTALLMENTS
Mandatory principal redemption installments on each Debenture shall be as
provided for in the Debentures.
SECTION 2.06 OPTIONAL REDEMPTION
Optional principal redemption on each Debenture shall be as provided for in the
Debentures.
SECTION 2.07 TAXES
(a) Payments by Borrower hereunder shall be made without deduction
for any present or future taxes, duties, charges or withholdings, (excluding,
in the case of the Lender, any foreign taxes, any federal,
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state or local income taxes and any franchise taxes or taxes imposed upon it by
the jurisdiction, or any political subdivision thereof, under which the Lender
is organized or is qualified to do business) and all liabilities with respect
thereto (herein "Taxes") shall be paid by Borrower. If Borrower shall be
required by law to deduct any Taxes for which Borrower is responsible under the
preceding sentence from any sum payable hereunder to any Lender: (i) the sum
payable shall be increased so that after making all required deductions, such
Lender receives an amount equal to the sum it would have received had no such
deductions been made; (ii) Borrower shall make such deductions; and (iii)
Borrower shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with applicable law.
(b) Except as otherwise set forth in this Loan Agreement or the
other Loan Documents, Borrower shall pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or under the Loan Documents
or from the execution, delivery or registration of, or otherwise with respect
to, this Loan Agreement or the other Loan Documents (hereinafter referred to as
"Other Taxes").
(c) Borrower shall indemnify Lender for the full amount of Taxes
and Other Taxes reasonably paid by Lender or any liability (including any
penalties or interest assessed because of Borrower's defaults) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. This indemnification shall be made within
thirty (30) days from the date Lender makes written demand therefor. Lender
shall subrogate any and all rights and claims relating to such Taxes and Other
Taxes to Borrower upon payment of said indemnification.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower in this Section
2.09 shall survive the payment in full of the Obligation.
SECTION 2.08 STOCK CONVERSION RIGHTS AND REGISTRATION RIGHTS AGREEMENT
(a) Each Debenture shall be exchangeable for shares of Borrower's
common stock on such terms and in such amounts as shall be stated in the
Debenture. The holders of the stock issued upon exercise of the right of
conversion as provided in said Debenture shall be entitled to all the rights of
the Lender as stated in this Loan Agreement or the other Loan Documents to the
extent such rights are specifically stated to survive the surrender of the
Debenture for conversion as therein provided.
(b) The holder of shares of common stock of Borrower issued upon
conversion shall be entitled to the rights as provided in Article IX of this
Loan Agreement.
SECTION 2.09 COLLATERAL SECURITY AGREEMENTS AND STOCK PLEDGE AGREEMENTS
The due and prompt performance of the obligations of Borrower to Lender under
the Loan Agreement and the Debentures shall be secured by all of the assets of
the Borrowers and such collateral shall be evidenced by the Security Agreements
previously executed on June 13, 1997 by and between the Lender and Borrowers
and previously amended on September 12, 1997, and as may be amended hereafter
from time to time, the Stock Pledge Agreements previously executed on June 13,
1997, by Borrowers, as previously amended on September 12, 1997, and as amended
hereafter from time to time, and any all UCC- I Financing Statements previously
executed by Borrowers, together with any amended UCC Financing Statements
required to be filed by Lender.
ARTICLE III - CONDITIONS PRECEDENT
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SECTION 3.01 DOCUMENT REQUIREMENTS
(a) The obligations of Lender hereunder are subject to the
condition precedent that, on or before the closing date, Lender shall have
received the following in form and substance satisfactory to Lender:
(i) One or more duly executed Debentures aggregating the
Principal Amount of Loan funds then advanced, each in amounts as
requested by Lender, in the form of Exhibit 2.01(b) with appropriate
insertions of date, amount and conversion features.
(ii) This Section Intentionally Left Blank.
(iii) A true and correct certificate signed by a duly
authorized officer of the Borrower and dated as of the Loan Closing
Date stating that, to the best knowledge and belief of such officer,
after reasonable and due investigation and review of matters pertinent
to the subject matter of such certificate: (A) all of the
representations and warranties contained in Article IV hereof and the
other Loan Documents are true and correct as of the Loan Closing Date
and (B) no event has occurred and is continuing, or would result from
the Loan, which constitutes a Default or an Event of Default.
(iv) Such other information and documents as may
reasonably be required by Lender and Lender's counsel to substantiate
Borrower's compliance with the requirements of this Loan Agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan hereunder, Borrower represents and
warrants to Lender that:
SECTION 4.01 ORGANIZATION AND GOOD STANDING
Borrower is duly organized and existing in good standing under the laws of the
state or country of its incorporation, is duly qualified as a foreign
corporation and in good standing in all states in which failure to qualify
would have a Material Adverse Effect, and has the corporate power and authority
to own its properties and assets and to transact the business in which it is
engaged and is or will be qualified in those states wherein it proposes to
transact material business operations in the future.
SECTION 4.02 AUTHORIZATION AND POWER
Borrower has the corporate power and requisite authority to execute, deliver
and perform the Loan Documents to be executed by Borrower. The Borrower is
duly authorized to, and has taken all corporate action necessary to authorize,
execute, deliver and perform the Loan Documents executed by Borrower. The
Borrower is and will continue to be duly authorized to perform the Loan
Documents executed by Borrower.
SECTION 4.03 NO CONFLICTS OR CONSENTS
To the best of Borrower's knowledge and belief, after prudent investigation,
neither the execution and delivery of the Loan Documents, nor the consummation
of any of the transactions therein contemplated, nor compliance with the terms
and provisions thereof, will contravene or materially conflict with any
judgment, license, order or permit applicable to Borrower, or any indenture,
loan agreement, mortgage, deed of trust, or other agreement or instrument to
which Borrower is a party or by which Borrower is or becomes bound, or to which
Borrower is or becomes subject, or violate any provision of the charter or
bylaws of Borrower. No consent, approval, authorization or order of any court
or governmental authority or third party is required in connection with the
execution and delivery by Borrower of the Loan Documents; or to consummate the
transactions contemplated hereby or thereby except those that have been
obtained.
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SECTION 4.04 ENFORCEABLE OBLIGATIONS
The Loan Documents have been duly executed and delivered by the Borrower and
are the legal and binding obligations of the Borrower, enforceable in
accordance with their respective terms, except as limited by any applicable
bankruptcy, insolvency or similar laws now or hereafter in effect affecting
creditors rights and debtor's obligations.
SECTION 4.05 NO LIENS
Except for Permitted Liens, all of the properties and assets owned by the
Borrower are free and clear of all Liens and other adverse claims of any
nature, and Borrower has good and marketable title to such properties and
assets. A true and complete list of all liens for borrowed money is disclosed
to Lender pursuant to Exhibit 4.05.
SECTION 4.06 FINANCIAL CONDITION
Borrower has delivered to Lender copies of the balance sheet of Borrower as of
September 30, 1996, and the related statements of income, stockholders' equity
and statement of cash flow for the year ended audited by its independent
Certified Public Accountant. Borrower has also delivered to Lender copies of
the balance sheet of Borrower as of September 30, 1997 and the related
statements of income, stockholders' equity and statement of cash flow for the
period ended such date, which financial statements have not been certified by
its independent Certified Public Accountant. Such financial statements are
true and correct in all material respects, fairly represent the financial
condition of Borrower as of such dates and have been prepared in accordance
with GAAP (except unaudited financial statements omit certain footnotes); and
as of the date hereof, there are no obligations, liabilities or Indebtedness
(including contingent and indirect liabilities and obligations) of Borrower
which are (separately or in the aggregate) material and are not reflected in
such financial statements or otherwise disclosed herein. Since the date of the
above referenced year end financial statements and quarterly financial
statements, there have not been, except as disclosed in Exhibit 4.06 and that
certain Information Statement for Special Meeting of Shareholders dated October
20, 1997 (the "Information Statement"): (i) any Material Adverse Change in the
financial condition, results of operations, business, prospects, assets or
liabilities (contingent or otherwise, whether due or to become due, known or
unknown), of the Borrower; (ii) any dividend declared or paid or distribution
made on the capital stock of the Borrower or any capital stock thereof redeemed
or repurchased; (iii) any incurrence of long-term debt by the Borrower; (iv)
any salary, bonus or compensation increases to any officers, key employees or
agents of the Borrower or; (v) any other transaction entered into by the
Borrower except in the ordinary course of business and consistent with past
practice.
SECTION 4.07 FULL DISCLOSURE
To the best of Borrower's knowledge and belief after current investigation,
there is no material fact that Borrower has not disclosed to Lender which could
reasonably be expected to have a Material Adverse Effect on the properties,
business, prospects or condition (financial or otherwise) of Borrower. Neither
the financial statements referenced in Section 4.06 hereof, nor any business
plan, offering memorandum or prospectus, certificate or statement delivered
herewith or heretofore by Borrower to Lender in connection with the negotiations
of this Loan Agreement, contained any untrue statement of a material fact or
omitted to state any material fact necessary to keep the statements contained
herein or therein from being misleading.
SECTION 4.08 NO DEFAULT
No event has occurred and is continuing which constitutes a Default or an Event
of Default under this Loan Agreement.
SECTION 4.09 MATERIAL AGREEMENTS
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To the best of Borrower's knowledge and belief after prudent investigation, the
Borrower is not in default in any material respect under any contract, lease,
loan agreement, indenture, mortgage, security agreement or other material
agreement or obligation to which it is a party or by which any of its
properties is bound.
SECTION 4.10 NO LITIGATION
There are no actions, suits, investigations, arbitrations or administrative
proceedings pending, or to the knowledge of Borrower threatened, against
Borrower, and there has been no change in the status of any of the actions,
suits, investigations, litigation or proceedings disclosed to Lender which
could have a materially adverse effect on Borrower Ir on any transactions
contemplated by any Loan Document.
SECTION 4.11 BURDENSOME CONTRACTS
To the best knowledge of the Borrower, it is not a party to, or bound by, any
contract or agreement, the faithful performance of which is so onerous so as to
create or to likely create a Material Adverse Effect on the business,
operations or financial condition of the Borrower.
SECTION 4.12 TAXES
All tax returns required to be filed by Borrower in any jurisdiction have been
filed and all taxes (including mortgage recording taxes), assessments, fees and
other governmental charges upon Borrower or upon any of its properties, income
or franchises have been paid. To the best knowledge of Borrower, there is no
proposed tax assessment against Borrower and there is no basis for such
assessment.
SECTION 4.13 PRINCIPAL OFFICE, ETC.
(a) The principal office and principal place of business of the
Borrower and each of its Subsidiaries is as follows:
Biodynamics International, Inc.
0000 Xxxxx 00, Xxxxx 000
Xxxxxxxxxx, XX 00000
SECTION 4.14 EMPLOYEE BENEFIT AND INCENTIVE PLANS; ERISA
(a) Borrower is not obligated under any Plans.
(b) Borrower is not a party to any collective bargaining agreement
and is not aware of any activities of any labor union that is currently seeking
to represent or organize its employees. Borrower has not experienced any labor
problems, including work stoppages, disputes or slowdowns with respect to its
employees.
SECTION 4.15 COMPLIANCE WITH LAW
To the best of Borrower's knowledge and belief after prudent investigation,
Borrower is in compliance with all laws, rules, regulations, orders and decrees
which are applicable to Borrower or its properties by reason of any
Governmental Authority which are material to the conduct of the business of
Borrower or any of its properties.
SECTION 4.16 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS
To the best knowledge of Borrower, all properties of Borrower are in compliance
with all federal, state or local environmental protection laws, statutes and
regulations which are material to the conduct of the business of Borrower, or
its properties, and the Borrower is currently in compliance with all material
reporting
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requirements, rules, and regulations which are applicable to Borrower
or its properties by reason of such governmental environmental protective
agencies.
SECTION 4.17 SCHEDULE OF CAPITAL STOCK AND SEC REQUIREMENTS
(a) Set forth on Exhibit 4.17, Schedule of Capital Stock, is a
true and correct schedule of all classes of authorized, issued, and outstanding
Capital Stock of the Borrower, all stock options, warrants, conversion rights,
subscription rights and other rights or agreements to acquire securities of
Borrower and any shares held in treasury or reserved for issue upon exercise of
such stock options, warrants or conversion rights, subscription rights and
other rights or agreements to acquire securities including date of termination
of such right and the consideration therefor.
(b) Except as provided in Exhibit 4.17, Schedule of Capital Stock,
to the best of the Borrower's ledge, all securities of Borrower have been
issued in compliance with the requirements of the 1933 Act, and the Zoe's and
regulation promulgated thereunder, or pursuant to an exemption therefrom.
(c) The shares of common stock of the Borrower when issued to
Lender upon conversion of the Debentures will be duly and validly issued, fully
paid and non-assessable and in compliance with all applicable securities laws.
Such issuance will not give rise to preemptive rights or similar rights by any
other security holder of Borrower. Borrower shall at all times reserve and
keep available sufficient authorized and unissued shares of common stock to
effectuate the conversion of the Debentures.
SECTION 4.18 INSIDER
(a) Except as set forth in filings made by Borrower to the
Securities Exchange Commission, neither the Borrower, nor any Person having
"control" (as that term is defined in the Investment Company Act of 1940, as
amended, or in regulations promulgated pursuant thereto (herein the "1940
Act")) of the Borrower is, an "executive officer," "director," or "principal
shareholder" (as those terms are defined in the 0000 Xxx) of Lender.
(b) Except as set forth in the Borrower's Form 10-K and 10-Q
reports, there are no transactions between the Borrower and any affiliates of
Borrower.
SECTION 4.19 SUBSIDIARIES
(a) As of the date hereof, the Borrower has the following
Subsidiaries: Biodynamics International (United States), Inc., Biodynamics
International (Deutschland), GmbH, and Biodynamics For Partnerships, Inc.
(b) Except as disclosed in the Financial Statements and except for
Subsidiaries, the Borrower does not own any equity or debt interest or any form
of proprietary interest in any entity, or any right or option to acquire any
such interest in any such entity.
SECTION 4.20 CASUALTIES
Neither the business nor the properties of Borrower is currently affected by
any environmental hazard, fire, explosion, accident, strike, lockout or other
labor dispute, drought, storm, hail, earthquake, embargo, act of God or other
casualty (whether or not covered by insurance), which could have a Material
Adverse Effect.
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SECTION 4.21 INVESTMENT COMPANY ACT
Borrower is not an "investment company" as defined in Section 3 of the 1940 Act
nor a company that would be an investment company except for the exclusions
from the definition of an investment company in Section 3(C) of the 1940 Act,
and Borrower is not controlled by such a company.
SECTION 4.22 SUFFICIENCY OF CAPITAL
Borrower is, and after consummation of this Loan Agreement and giving effect to
all Indebtedness incurred and transactions contemplated in connection herewith
will be, Solvent.
SECTION 4.23
[This Section 4.23 intentionally left blank.]
SECTION 4.24 MARGIN REGULATION
As of the Loan Closing Date, the Borrower does not have class of securities
with respect to which a member of a national securities exchange, broker, or
dealer may extend or maintain credit to or for a customer pursuant to rules or
regulation adopted by the Board of Governors of the Federal Reserve System
under Section 7 of the 1934 Act.
SECTION 4.25 INSURANCE
All f the insurable properties of the Borrower are insured for its benefit
under valid and enforceable policies, issued X insurers of recognized
responsibility in amounts and against such risks and losses as is customary in
such industry.
SECTION 4.26 PATENTS, TRADEMARKS AND COPYRIGHTS
To the best of Borrower's knowledge and belief after current investigation,
Borrower owns all patents, trademarks and copyrights, if any, necessary to
conduct its business or possesses licenses or other rights, if any, therefor.
All intangible property rights are listed in Exhibit 4.26, Schedule of Patents,
Trademarks and Copyrights. Borrower has the right to use such proprietary
rights without infringing or violating the rights of any third parties. No
claim has been asserted by any person to the ownership of or right to use any
such proprietary right or challenging or questioning the validity or
effectiveness of any such license or agreement. Each of the proprietary rights
is valid and subsisting, and has not been canceled, abandoned or otherwise
terminated.
SECTION 4.27 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties by Borrower herein shall survive the Loan
Closing and any subsequent Loan Closings and the delivery of the Debentures, and
any investigation at any time made by or on behalf of Lender shall not diminish
Lender's right to rely on Borrower's' representations and warranties as herein
set forth.
ARTICLE V - AFFIRMATIVE COVENANTS
So long as any part of the Debentures remains unpaid or has not been
redeemed or converted hereunder, and until such payment, redemption or
conversion in full, unless the Lender shall otherwise consent in writing, which
consent shall not be unreasonably withheld, Borrower agrees that:
SECTION 5.01 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS
(a) The Borrower shall accurately and fairly maintain its books of
account in accordance with GAAP, employ a firm of independent certified public
accountants, which firm is one of the six largest national
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accounting firms or which is approved by the Lender, to make annual audits of
its accounts in accordance with generally accepted auditing standards; permit
the Lender and its representatives to have access to and to examine its
properties, books and records (and to copy and make extracts therefrom) at such
reasonable times and intervals as the Lender may request; and to discuss its
affairs, finances and accounts with its officers and auditors, all to such
reasonable extent and at such reasonable times and intervals as the Lender may
request.
(b) The Borrower shall provide the following reports and
information to the Lender and/or the Lender's designee:
(i) As soon as available, and in any event within
forty-five (45) days after the close of each quarter, the Company's
report on Form 10-Q with exhibits for said period. In addition, the
Lender may at its sole discretion request internal monthly reports for
specific periods.
(ii) As soon as available, and in any event within ninety
(90) days after the close of each year, the Company's report on Form
10-K with exhibits for said period.
(iii) Each quarter, concurrent with the periodic report
required above, a certificate executed by the Chief Financial Officer
or Chief Executive Officer of the Borrower, (A) stating that a review
of the activities of the Borrower during such fiscal period has been
made under his supervision and that the Borrower has observed,
performed and fulfilled each and every obligation and covenant
contained herein and is not in default under any of the same or, if
any such default shall have occurred, specifying the nature and status
thereof, and (B) setting forth a computation in reasonable detail as
of the end of the period covered by such statements, of compliance
with the Agreed Minimum Financial Standards in Exhibit 7.01 as
provided therein.
(iv) So long as any Debenture remains outstanding,
promptly (but in any event within five (5) business days) upon
learning of the occurrence of a Default or an Event of Default deliver
a certificate signed by the Chief Executive Officer or Chief Financial
Officer of the Borrower describing such Default, Event of Default and
stating what steps are being taken to remedy or cure the same.
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(v) Promptly (but in any event within five (5) business
days) upon the receipt thereof by the Borrower or the Board of
Directors of the Borrower, copies of all reports, all management
letters and other detailed information submitted to the Borrower or
the Board by independent accountants in connection with each annual or
interim audit or review of the accounts or affairs of the Borrower
made by such accountants.
(vi) With reasonable promptness, such other information
relating to the finances, properties, business and affairs of the
Borrower and each Subsidiary, as Lender may reasonably request from
time to time.
(vii) Promptly upon its becoming available, one copy of
each financial statement, report, press release, notice or proxy
statement sent by Borrower to stockholders generally and of each
regular or periodic report, registration statement or prospectus filed
by Borrower with any securities exchange or the SEC or any successor
agency, and of any order issued by any Governmental Authority in any
proceeding to which the Borrower is a party.
SECTION 5.02 PREPARATION OF A BUDGET
At least thirty (30) days prior to the beginning of Borrower's fiscal year,
Borrower agrees to prepare and submit to the Board, and furnish to the Lender a
copy of, an annual plan for such year which shall include, without limitation,
plans for expansion, if any, plans for incurrences of Indebtedness and
projections regarding other sources of funds, quarterly projected capital and
operating expense budgets, cash flow statements, profit and loss statements and
balance sheet projections, itemized in such detail as the Board and/or the
Lender may request.
SECTION 5.03 OPERATION REVIEW
Borrower agrees that it will review its operations with Lender. Such
operations reviews will be in such depth and detail as. Lender shall reasonably
request. Operations reviews, which usually will require a day or less to
complete, will be held as reasonably necessary, generally once a fiscal
quarter.
SECTION 5.04 PAYMENT OF TAXES AND OTHER INDEBTEDNESS
Borrower shall, and shall cause its Subsidiaries, if any, to pay and discharge
(i) all taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any property belonging to it, before
delinquent; (ii) all lawful claims (including claims for labor, materials and
supplies), which, if unpaid, might give rise to a Lien upon any of its
property; and (iii) all of its other Indebtedness, except as prohibited
hereunder; provided, however, that Borrower and its Subsidiaries, if any, shall
not be required to pay any such tax, assessment, charge or levy if and so long
as the amount, applicability or validity thereof shall currently be contested
in good faith by appropriate proceedings and appropriate accruals and reserves
therefor have been established in accordance with GAAP.
SECTION 5.05 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS
Borrower shall, and shall cause its Subsidiaries, if any, to preserve and
maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business, and
conduct its business in an orderly and efficient manner consistent with good
business practices and in accordance with all valid regulations and orders of
any Governmental Authority. Borrower shall keep its principal place of
business within the United States.
SECTION 5.06 SEC FILING AND MAINTENANCE OF SEC REPORTING REQUIREMENTS
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So long as Borrower has a class of securities registered pursuant to Section 12
of the 1934 Act, Borrower shall duly file, when due, all reports and statements
required of a company whose securities are registered for public trading under
and pursuant to the 1934 Act, as amended, and any rules and regulations issued
thereunder, and to preserve and maintain its registration thereunder and all of
the rights of its security holders normally associated with a publicly traded
stock company.
SECTION 5.07 NOTICE OF DEFAULT
Borrower shall furnish to Lender, immediately upon becoming aware of the
existence of any condition or event which constitutes a Default or would with
the passage of time become a Default or an Event of Default, written notice
specifying the nature and period of existence thereof and the action which
Borrower is taking or proposes to take with respect thereto.
SECTION 5.08 OTHER NOTICES
Borrower shall promptly notify Lender of (i) any Material Adverse Change in its
financial condition or its business; (ii) any default under any material
agreement, contract or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
Indebtedness owing by Borrower or its Subsidiaries, if any; (iii) any material
adverse claim against or affecting Borrower or its Subsidiaries, if any, or any
of its properties; and (iv) the commencement of, and any material determination
in, any litigation with any third party or any proceeding before any
Governmental Authority, the negative result of which has a Material Adverse
Effect on Borrower and its Subsidiaries, taken as a whole.
SECTION 5.09 COMPLIANCE WITH LOAN DOCUMENTS
Borrower shall, and shall cause each of its Subsidiaries, if any, to promptly
comply with any and all covenants and provisions of the Loan Documents.
SECTION 5.10 COMPLIANCE WITH MATERIAL AGREEMENTS
Borrower shall, and shall cause each of its Subsidiaries, if any to comply in
all material respects with all material agreements, indentures, mortgages or
documents binding on it or affecting its properties or business.
SECTION 5.11 OPERATIONS AND PROPERTIES
Borrower shall, and shall cause each of its Subsidiaries, if any, to act
prudently and in accordance with customary industry standards in managing or
operating its assets, properties, business and investments. Borrower shall,
and shall cause each of its Subsidiaries, if any, to keep in good working order
and condition, ordinary wear and tear excepted, all of its assets and
properties which are necessary to the conduct of its business.
SECTION 5.12 BOOKS AND RECORDS: ACCESS
Borrower shall, and shall cause each of its Subsidiaries, if any, to, maintain
complete and accurate books and records of its transactions in accordance with
good accounting practices. Borrower shall give each duly authorized
representative of Lender access during all normal business hours and shall
permit such representative to examine, copy or make excerpts from, any and all
books, records and documents in the possession of Borrower and its Subsidiaries
and relating to its affairs, and to inspect any of the properties of Borrower
and its Subsidiaries, if any. Borrower shall make a copy of this Loan
Agreement, along with any waivers, consents, modifications or amendments,
available for review at its principal office by Lender or Lender's
representatives.
SECTION 5.13 COMPLIANCE WITH LAW
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Borrower shall, and shall cause each of its Subsidiaries, if any, to comply
with all applicable laws, rules, regulations, and all orders of any
Governmental Authority applicable to it or any of its property, business
operations or transactions, a breach of which could reasonably be expected to
have a Material Adverse Effect.
SECTION 5.14 INSURANCE
Borrower shall, and shall cause each of its Subsidiaries, if any, to maintain
such worker's compensation insurance, liability insurance and insurance on its
properties, assets and business, now owned or hereafter acquired, against such
casualties, risks and contingencies, and in such types and amounts, as are
consistent with customary practices and standards of companies engaged in
similar businesses.
SECTION 5.15 AUTHORIZATIONS AND APPROVALS
Borrower shall, and shall cause each of its Subsidiaries, if any, to promptly
obtain, from time to time at its own expense, all such governmental licenses,
authorizations, consents, permits and approvals as may be required to enable it
to comply with its obligations hereunder and under the other Loan Documents.
SECTION 5.16 ERISA COMPLIANCE
Borrower shall (i) at all times, make prompt payment of all contributions
required under all Plans, if any, and required o meet the minimum funding
standards set forth in ERISA with respect to its Plans subject to ERISA, if
any; (ii) notify Lender immediately of any fact in connection with any of its
Plans, which might constitute grounds for termination. thereof or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan, together with a statement, if requested by Lender as to
the reason therefor and the action, if any, proposed to be taken with respect
thereto; and (iii) furnish to Lender upon its request such additional
information concerning any of its Plans as may be reasonably requested.
SECTION 5.17 FURTHER ASSURANCES
Borrower shall, and shall cause each of its Subsidiaries, if any, to, make,
execute or endorse, and acknowledge and deliver or file or cause the same to be
done, all such notices, certifications and additional agreements, undertakings,
transfers, assignments, or other assurances, and take any and all such other
action, as Lender may, from time to time, deem reasonably necessary or proper
in connection with any of the Loan Documents, or the obligations of Borrower or
its Subsidiaries, if any, thereunder, which Lender may request from time to
time.
SECTION 5.18 INDEMNITY BY BORROWER
Borrower shall indemnify, save, and hold harmless, Lender and its directors,
officers, agents, attorneys, and employees (collectively, the "indemnitees")
from and against: (i) any and all claims, demands, actions or causes of action
that are asserted against any indemnitee if the claim, demand, action or cause
of action directly or indirectly relates to the Loan Agreement and the other
Loan Documents issued pursuant thereto, the use of proceeds of the Loans, or
the relationship of Borrower and Lender under this Loan Agreement or any
transaction contemplated pursuant to this Loan Agreement; (ii) any
administrative or investigative proceeding by any Governmental Authority
directly or indirectly related to a claim, demand, action or cause of action
described in clause (i) above; and (iii) any and all liabilities, losses,
costs, or expenses (including reasonable attorneys' fees and disbursements)
that any indemnitee suffers or incurs as a result of any of the foregoing;
provided, however, that Borrower shall have no obligation under this Section
5.18 to Lender with respect to any of the foregoing arising out of the
negligence or willful misconduct of Lender or its assignees or the breach by
the Lender or its assignees of this Loan Agreement or any other Loan Document
or other document executed in connection with any of the aforesaid, the breach
by Lender or its assignees of any agreement or commitment with other parties,
the violation or alleged violation of any law, rule or regulation by Lender or
its assignees, or from the transfer or disposition by Lender of any Debenture
or the Common Stock issued upon conversion.
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If any claim, demand, action or cause of action is asserted against any
indemnitee, such indemnitee shall promptly notify Borrower, but the failure to
so promptly notify Borrower shall not affect Borrower's obligations under this
Section unless such failure materially prejudices Borrower's right to
participate in the contest of such claim, demand, action or cause of action, as
hereinafter provided. In the event that such indemnitee's failure to properly
notify the Borrower materially prejudices Borrower's right to participate in
the contest of such claim, demand, action, or cause of action, then said
indemnitees shall have no right to receive, and Borrower shall have no
obligation to pay, any indemnification amounts hereunder. Borrower may elect
to defend any such claim, demand, action or cause of action (at its own
expense) asserted against said indemnitee and, if requested by Borrower in
writing and so long as no Default or Event of Default shall have occurred and
be continuing, such indemnitee (at Borrower's expense) shall in good faith
contest the validity, applicability and amount of such claim, demand, action or
cause of action and shall permit Borrower to participate in such contest. Any
indemnitee that proposes to settle or compromise any claim or proceeding for
which Borrower may be liable for payment to or on behalf of an indemnitee
hereunder shall give Borrower written notice of the terms of such proposed
settlement or compromise reasonably in advance of settling or compromising such
claim or proceeding and shall obtain Borrower's written concurrence thereto.
In the event that said indemnitee fails to obtain Borrower's prior written
consent to any such settlement or compromise, said indemnitee shall have no
right to receive and Borrower shall have no obligation to pay any
indemnification amounts hereunder. Each indemnitee may employ counsel in
enforcing its rights hereunder and in defending against any claim, demand,
action, or cause of action covered by this Section 5.18; provided, however,
that each indemnitee shall endeavor, but shall not be obligated, in connection
with any matter covered by this Section which also involves other indemnitees,
to use reasonable efforts to avoid unnecessary duplication of effort by counsel
for all indemnitees, including by allowing Borrower to select one lawyer for
all parties, such selection to be subject to the approval of such parties,
which approval shall not be unreasonably withheld. Any ligation or liability
of Borrower to any indemnitee under this Section 5.18 shall survive the
expiration or termination rf this Loan Agreement and the repayment of the
Debentures.
ARTICLE VI - NEGATIVE COVENANTS
So long as any part of the Debentures have not been redeemed or
converted hereunder, and until such redemption or conversion in full, unless
the Lender shall otherwise consent in writing, which consent shall not be
unreasonably withheld, Borrower agrees that, unless permitted otherwise:
SECTION 6.01 LIMITATION ON INDEBTEDNESS
Borrower and its Subsidiaries shall not incur, create, contract, waive, assume,
have outstanding, guarantee or otherwise be or become, directly or indirectly,
liable in respect of any Indebtedness, except:
(a) Indebtedness arising out of this Loan Agreement or otherwise
contemplated herein;
(b) Indebtedness secured by the Permitted Liens;
(c) Current liabilities for accounts payable or obligations
accrued (other than for borrowed funds or purchase money obligations) and
incurred in the ordinary course of business, and for taxes and assessments; or
(d) Indebtedness as listed on Exhibit 4.05.
SECTION 6.02 NEGATIVE PLEDGE
Borrower shall note and shall not permit its Subsidiaries, if any, to, create,
incur, permit or suffer to exist any Lien upon any of its property or assets
other than Permitted Liens, or payments upon any Subordinated Debt
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other than regularly scheduled installments of principal and interest and shall
not directly or indirectly make any payment of any Subordinated Debt which
would violate the terms of the Loan Agreement or of such Subordinated Debt or
any subordination agreement applicable to such Subordinated Debt.
SECTION 6.03 LIMITATION ON INVESTMENTS
Borrower shall not, and shall not permit its Subsidiaries, if any, to make or
have outstanding any Investments in any Person, except for Borrower's (and any
Subsidiary's) ownership of stock of Subsidiaries, loans and other transactions
between the Borrower and any Subsidiaries, short term bank deposits or money
market investments, and such other "cash equivalent" investments as Lender may
from time to time approve.
SECTION 6.04 ALTERATION OF MATERIAL AGREEMENTS
Borrower shall not, and shall not permit its Subsidiaries, if any, to, consent
to or permit any alteration, amendment, modification, release, waiver or
termination of any material agreement to which it is a party other than in the
ordinary course of business.
SECTION 6.05 CERTAIN TRANSACTIONS
Except as permitted by Section 6.12, Borrower shall not, and shall not permit
its Subsidiaries, if any, to, enter into any transaction with, or pay any
management fees to, any Affiliate; provided, however, that Borrower and any
Subsidiary may enter into transactions with Affiliates upon terms not less
favorable to Borrower and any Subsidiary than would be obtainable at the time
in comparable transactions of Borrower and any Subsidiaries in arms-length
dealings with Persons other than Affiliates.
SECTION 6.06
[This section 6.06 intentionally left blank.]
SECTION 6.07 LIMITATION ON SALE OF PROPERTIES
Borrower shall note and shall not permit its Subsidiaries, if any, to (i) sell,
assign, convey, exchange, lease or otherwise dispose of any of its properties,
rights, assets or business, whether now owned or hereafter acquired, except in
the ordinary course of its business and for a fair consideration; or (ii) sell,
assign or discount any accounts receivable except for the ordinary course of
business or to secure bank or commercial working capital loans in the ordinary
course of business.
SECTION 6.08 FISCAL YEAR AND ACCOUNTING METHOD
Borrower shall not, and shall not permit its Subsidiaries, if any, to change
its method of accounting except as permitted by GAAP.
SECTION 6.09 LIQUIDATION AND DISPOSITIONS OF SUBSTANTIAL ASSETS
Borrower shall not permit its Subsidiaries to (i) dissolve or liquidate; (ii)
sell, transfer, lease or otherwise dispose of all or any substantial part of
its property or assets or business; or (iii) enter into any other transaction
that has a similar effect.
SECTION 6.10 NO AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS
Borrower shall not, and shall not permit its Subsidiaries, if any, to
materially amend its Articles of Incorporation or bylaws except as is necessary
to fulfill the conditions of this Loan Agreement.
SECTION 6.11 LIMITATION ON INCREASED EXECUTIVE COMPENSATION AND BONUS.
PROFIT SHARING OR OTHER INCENTIVE PAYMENTS
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(a) Borrower will not increase the salary, bonus, or other
compensation programs (whether in cash, securities, or other property, and
whether payment is deferred or current) of its top five executive officers
unless such compensation increase is approved by a majority of the Board or a
Compensation Committee of the Board of Directors, a majority of whom shall
non-employee Directors.
(b) Borrower shall not pay any Bonus, Profit Sharing or Other
Incentive Payments until such plans are formally adopted by the majority of the
Board or a Compensation Committee of the Board of Directors, a majority of
which shall be non-employee Directors.
SECTION 6.12 RESTRICTED PAYMENTS
So long as any Debentures are outstanding, Borrower shall not declare or pay
any dividend (other than stock dividends) (i) on any Common Stock, or purchase,
redeem, decrease, or otherwise acquire any shares of Common Stock, or (ii) on
any Preferred Stock issued after the date hereof if such dividend or purchase
in the aggregate exceeds 1.25 times the cumulative earnings of the Borrower for
the previous twelve months.
ARTICLE VII - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
SECTION 7.01 FINANCIAL RATIOS
So long as any part of the Debentures has not been redeemed or converted
hereunder, and until such redemption or conversion in full, or unless the
Lender (or if any portion of the Debentures has been assigned, the holders of a
majority in amount of the outstanding Principal Amount) shall otherwise consent
in writing, the Borrower will at all times maintain a ratio of current assets
to current liabilities of 1:1 and a ratio of debt to equity of 1:1.5. Borrower
shall deliver to Lender a compliance certificate covering these ratios as
required in Section 5.01(b)(iii).
ARTICLE VIII - EVENTS OF DEFAULT
SECTION 8.01 EVENTS OF DEFAULT
An "Event of Default" shall exist if any one or more of the following events
(herein collectively called "Events of Default") shall occur and be continuing:
(a) Borrower shall fail to pay (or shall state in writing an
intention not to pay or its inability to pay), not later than ten (10) days
after the due date, any installment of interest on or principal of, any
Debenture or any fee, expense or other payment required hereunder;
(b) Any representation or warranty made under this Loan Agreement,
or any of the other Loan Documents, or in any certificate or statement
furnished or made to Lender pursuant hereto or in connection herewith or with
the Loans hereunder, shall prove to be untrue or inaccurate in any material
respect as of the date on which such representation or warranty was made;
(c) Default shall occur in the performance of any of the covenants
or agreements of Borrower or of its Subsidiaries, if any, contained herein, or
in any of the other Loan Documents, which is not remedied within thirty (30)
days after written notice thereof to Borrower from Lender;
(d) Default shall occur in the payment of any material
indebtedness (other than the Obligation) of the Borrower or its Subsidiaries,
if any, or default shall occur in respect of any note, loan agreement or credit
agreement relating to any such indebtedness and such default shall continue for
more than the period of grace,
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if any, specified therein and any such indebtedness shall become due before its
stated maturity by acceleration of the maturity thereof or shall become due by
its terms and shall not be promptly paid or extended;
(e) Any of the Loan Documents shall cease to be legal, valid and
binding agreements enforceable against the Borrower in accordance with the
respective terms thereof or shall in any way be terminated or become or be
declared ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective rights, titles, interests, remedies, powers or
privileges intended to be created thereby;
(f) Borrower or its Subsidiaries, if any, shall (i) apply for or
consent to the appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself, or of all or substantially all of such Person's assets;
(ii) file a voluntary petition in bankruptcy, admit in writing that such Person
is unable to pay such Person's debts as they become due or generally not pay
such Person's debts as they become due; (iii) make a general assignment for the
benefit of creditors (iv) file a petition or answer seeking reorganization or
an arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws; (v) file an answer admitting the material allegations of, or
consent to, or default in answering, a petition filed against such Person in
any bankruptcy, reorganization or insolvency proceeding; or (vi) take corporate
action for the purpose of effecting any of the foregoing;
(g) An involuntary petition or complaint shall be filed against
Borrower or any of its Subsidiaries, if any, seeking bankruptcy or
reorganization of such Person or the appointment of a receiver, custodian,
trustee, intervenor or liquidator of such Person, or all or substantially all
of such Person's assets, and such petition or complaint shall not have been
dismissed within sixty (60) days of the filing thereof or an order, order for
relief, judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or complaint
seeking reorganization of Borrower or its subsidiary, if any, or appointing a
receiver, custodian, trustee, intervenor or liquidator of such Person, or of
all or substantially all of such Person's assets;
(h) Any final judgment(s) for the payment of money in excess of
the sum of $250,000 in the aggregate shall be rendered against Borrower or any
subsidiary and such judgment or judgments shall not be satisfied or discharged
at least ten (10) days prior to the date on which any of its assets could be
lawfully sold to satisfy such judgment;
(i) The Borrower shall fail to issue and deliver shares of Common
Stock as provided herein upon conversion of the Debenture; or
(j) The Borrower shall fail to submit Lender's nominee, if any,
for election to the Board of Directors of the Borrower or shall remove Lender's
nominee from the Board of Directors of Borrower other than for cause.
SECTION 8.02 REMEDIES UPON EVENT OF DEFAULT
If an Event of Default shall have occurred and be continuing for a period of
thirty (30) days, then Lender may exercise any one or more of the following
rights and remedies, and any other remedies provided in any of the Loan
Documents, as Lender in its sole discretion may deem necessary or appropriate:
(a) declare the unpaid Principal Amount (after application of any
payments or installments received by Lender) of, and all interest then accrued
but unpaid on, the Debentures and any other liabilities hereunder to be
forthwith due and payable, whereupon the same shall forthwith become due and
payable without presentment, demand, protest, notice of default, notice of
acceleration or of intention to accelerate or
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other notice of any kind, all of which Borrower hereby expressly waives,
anything contained herein or in the Debentures to the contrary notwithstanding;
(b) reduce any claim to judgment; and
(c) without notice of default or demand, pursue and enforce any of
Lender's rights and remedies under the Loan Documents, or otherwise provided
under or pursuant to any applicable law or agreement, all of which rights may
be specifically enforced.
SECTION 8.03 PERFORMANCE BY LENDER
Should Borrower fail to perform any covenant, duty or agreement contained
herein or in any of the other Loan Documents, Lender may perform or attempt to
perform such covenant, duty or agreement on behalf of Borrower. In such event,
Borrower shall, at the request of Lender, promptly pay any amount reasonably
expended by Lender in such performance or attempted performance to Lender at
its principal office in Dallas, Texas, together with interest thereon, at the
interest rate specified in the Debenture, from the date of such expenditure
until paid. Notwithstanding the foregoing, it is expressly understood that
Lender assumes no liability or responsibility for the performance of any duties
of Borrower hereunder or under any of the other Loan Documents.
SECTION 8.04 PAYMENT OF EXPENSES INCURRED BY LENDER
Upon the occurrence of a Default or an Event of Default, which occurrence is
not cured within the notice provisions, if any, provided herein, Borrower
agrees to pay and shall pay all costs and expenses (including Lender's
attorney's fees and expenses) reasonably incurred by Lender in connection with
the preservation and enforcement of Lender's rights under the Loan Agreement,
the Debentures, or any other Loan Document.
ARTICLE IX - REGISTRATION RIGHTS
SECTION 9.01 DEMAND FOR REGISTRATION
(a) Subject to the Holder's right to convert the Debenture under
the Loan Agreement, the Borrower hereby agrees to register, subject to the
terms and conditions set forth herein, all or any portion of the Registerable
Securities at any time it shall receive a written request from the Holders of
at least fifty percent (50%) of the Registerable Securities Then Outstanding
(or a lesser percent if the anticipated aggregate offering price, net of
underwriting discounts and commissions, would exceed $1,000,000) that the
Borrower file a registration statement under the 1933 Act covering the
registration of at least a majority of the Registerable Securities Then
Outstanding. The Borrower shall, within 20 days of its receipt thereof, give
written notice of such request to all Holders of record of Registerable
Securities. The Holders of said Registerable Securities shall then have 15
days from the date of mailing of such notice by the Borrower to request that
all or a portion of their respective Registerable Securities be included in
said registration. The Borrower hereby agrees, subject to the limitations
hereof, to use its best lawful efforts to effect as soon as reasonably
possible, and in any event (if legally possible, and as allowed by the SEC, and
if no factor outside the Borrower's reasonable control prevents it) within 150
days of the receipt of the initial written registration request, to effect the
registration under the 1933 Act of all Registerable Securities which the
Holders thereof (the "Initiating Holders") have requested.
(b) If the Initiating Holders intend to distribute the
Registerable Securities covered by their request by means of an underwriting,
they shall so advise the Borrower as a part of their request made pursuant to
this Loan Agreement and the Borrower shall include such information in the
written notice to the other Holders of
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Registerable Securities referred to in Section 9.01(a). In such event, the
right of any Holder to include his/her Registerable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registerable Securities in the
underwriting (unless otherwise mutually agreed by the Borrower, the
underwriter, a majority in interest of the Initiating Holders and such Holder)
is limited to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Borrower as
provided in Section 9.03(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by
mutual agreement of the Borrower and a majority in interest of the Initiating
Holders, which agreement shall not be unreasonably withheld. Notwithstanding
any other provision of this Section 9.01, if the underwriter advises the
Initiating Holders and the Borrower in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holder(s) shall so advise all Holders of Registerable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registerable Securities that may be included in the underwriting shall be
allocated on a pro rata basis among all Holders that have requested to
participate in such registration.
(c) Borrower shall utilize Rule 144 if said exemption, in the
Borrower's sole determination, meets its distribution requirements.
(d) Notwithstanding the foregoing, if the Borrower shall furnish
to the Initiating Holders a certificate signed by the President of the Borrower
stating that in the good faith judgment of the Board of Directors of the
Borrower, it would be materially detrimental to the Borrower and its
shareholders for such registration statement to be filed at that time, and it
is therefore essential to defer the filing of such registration statement, the
Borrower shall have the right to defer the commencement of such a filing for a
period of not more than 180 days after receipt of the request of the Initiating
Holders; provided, however, that at least 12 months must elapse between any two
such deferrals.
SECTION 9.02 "PIGGY-BACK" REGISTRATION
If, but without any obligation to do so, the Borrower proposes to register any
of its capital stock under the 1933 Act in connection with the public offering
of such securities for its own account or for the account of its security
holders, other than Holders of Registerable Securities pursuant hereto (a
"Piggy-Back Registration Statement"), (except for (i) a registration relating
solely to the sale of securities to participants in the Borrower's stock plans
or employee benefit plans; or (ii) a registration relating solely to an SEC
Rule 145 transaction or any rule adopted by the SEC in substitution thereof or
in amendment thereto), then:
(a) The Borrower shall give written notice of such determination
to each Holder of Registerable Securities, and each such Holder shall have the
right to request, by written notice given to the Borrower within 15 days of the
date that such written notice was mailed by the Borrower to such Holder, that a
specific number of Registerable Securities held by such Holder be included in
the Piggy-Back Registration Statement (and related underwritten offering, if
any);
(b) If the Piggy-Back Registration Statement relates to an
underwritten offering, the notice given to each Holder shall specify the name
or names of the managing underwriter or underwriters for such offering. In
addition such notice shall also specify the number of securities to be
registered for the account of the Borrower and for the account of its
shareholders (other than the Holders of Registerable Securities), if any;
(c) If the Piggy-Back Registration Statement relates to an
underwritten offering, each Holder of Registerable Securities to be included
therein must agree (i) to sell such Holder's Registerable Securities on the
same basis as provided in the underwriting arrangement approved by the
Borrower; and (ii) to timely complete
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and execute all questionnaires, powers of attorney, indemnities, hold-back
agreements, underwriting agreements and other documents required under the
terms of such underwriting arrangements or by the SEC or by any state
securities regulatory body;
(d) If the managing underwriter or underwriters for the
underwritten offering under the Piggy-Back Registration Statement determines
that inclusion of all or any portion of the Registerable Securities in such
offering would adversely affect the ability of the underwriters for such
offering to sell all of the securities requested to be included for sale in
such offering at the best price obtainable therefor, the aggregate number of
Registerable Securities that may be sold by the Holders shall be limited to
such number of Registerable Securities, if any, that the managing underwriter
or underwriters determine may be included therein without such adverse effect
as provided below. If the number of securities proposed to be sold in such
underwritten offering exceeds the number of securities that may be sold in such
offering, there shall be included in the offering, first, up to the maximum
number of securities to be sold by the Borrower for its own account and for the
account of other stockholders (other than Holders of Registerable Securities),
as they may agree among themselves, and second, as to the balance, if any,
Registerable Securities requested to be included therein by the Holders thereof
(pro rata as between such Holders based upon the number of Registerable
Securities initially proposed to be registered by each), or in such other
proportions as the managing underwriter or underwriters for the offering may
require; provided, however, that in the event that the number of securities
proposed to be sold in such underwritten offering exceeds the number of
securities that may be sold in such offering pursuant to the terms and
conditions set forth above and the Piggy-Back Registration Statement is a
result of public offering by the Borrower of its securities for its own
account, there shall be included in the offering, first, up to the maximum
number of securities to be sold by the Borrower for its own account and second,
as to the balance, if any, securities to be sold for the account of the
Borrower's stockholders (both the Holders of Registerable Securities requested
and such other stockholders of the Borrower requested to be included therein)
on a pro rata basis;
(e) Holders of Registerable Securities shall have the right to
withdraw their Registerable Securities from the Piggy-Back Registration
Statement, but if the same relates to an underwritten offering, they may only
do so during the time period and on the terms agreed upon among the
underwriters for such underwritten offering and the Holders of Registerable
Securities.
SECTION 9.03 OBLIGATIONS OF THE BORROWER
Whenever required to effect the registration of any Registerable Securities
pursuant to this Loan Agreement, the Borrower shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registerable Securities and use its best lawful efforts to
cause such registration statement to become effective, and keep such
registration statement effective until the sooner of all such Registerable
Securities having been distributed, or until 120 days have elapsed since such
registration statement became effective (subject to extension of this period as
provided below);
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement, or 120 days have elapsed since such registration
statement became effective (subject to the extension of this period as provided
below);
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(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registerable Securities owned by them;
(d) Use its best lawful efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Borrower shall not be required in connection
therewith or as a condition thereto to qualify as a broker-dealer in any states
or jurisdictions or to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Borrower and the Holders of a majority of the Registerable
Securities to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(f) Notify each Holder of Registerable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing; and
(g) In the event of the notification provided for in Section
9.03(f) above, the Borrower shall use its best efforts to prepare and file with
the SEC (and to provide copies thereof to the Holders) as soon as reasonably
possible an amended prospectus complying with the 1933 Act, and the period
during which the prospectus referred to in the notice provided for in Section
9.03(f) above cannot be used and the time period prior to the use of the
amended prospectus referred to in this Section 9.03(g) shall not be counted in
the 120 day period of this Section 9.03.
SECTION 9.04 FURNISH INFORMATION
(a) It shall be a condition precedent to the obligations of the
Borrower to take any action pursuant to this Article IX that the selling
Holders shall furnish to the Borrower any and all information reasonably
requested by the Borrower, its officers, directors, employees, counsel, agents
or representatives, the underwriter or underwriters, if any, and the SEC or any
other Governmental Authority, including but not limited to (i) such information
regarding themselves, the Registerable Securities held by them, and the
intended method of disposition of such securities, as shall be required to
effect the registration of their Registerable Securities, and (ii) the identity
of and compensation to be paid to any proposed underwriter or broker-dealer to
be employed in connection therewith.
(b) In connection with the preparation and filing of each
registration statement registering Registerable Securities under the 1933 Act,
the Borrower shall give the Holders of Registerable Securities on whose behalf
such Registerable Securities are to be registered and their underwriters, if
any, and their respective counsel and accountants, at such Holders' sole cost
and expense (except as otherwise set forth herein), such access to copies of
the Borrower's records and documents and such opportunities to discuss the
business of the Borrower with its officers and the independent public
accountants who have certified its
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financial statements as shall be reasonably necessary in the opinion of such
Holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the 1933 Act.
SECTION 9.05 EXPENSES OF DEMAND REGISTRATION
Except as set forth below, all expenses, other than underwriting discounts and
commissions incurred in connection with not more than two demand registrations
pursuant to Section 9.01 above, including, without limitation, all
registration, filing and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Borrower, and the reasonable fees and
disbursements of one counsel for the selling Holders, shall be borne by the
Borrower; provided, however, that the Borrower shall not be required to pay for
any expenses of any registration proceeding which was commenced prior to July
12, 1998, pursuant to Section 9.01, or if the registration request is
subsequently withdrawn at the written request of the Holders of the majority of
the Registerable Securities subject to such registration.
SECTION 9.06 EXPENSES OF PIGGY-BACK REGISTRATION
Each Holder shall bear and pay all commissions and discounts attributable to
the inclusion of such Holder's Registerable Securities in any registration,
filing or qualification of Registerable Securities pursuant to Section 9.02 and
the reasonable fees and disbursements of the counsel for the selling Holders.
SECTION 9.07 INDEMNIFICATION REGARDING REGISTRATION RIGHTS
If any Registerable Securities are included in a registration statement under
this Article IX:
(a) To the extent permitted by law, the Borrower will indemnify
and hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the 0000 Xxx) for such Holder and each person, if
any, who controls such Holder or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages, liabilities joint or
several) or any legal or other costs and expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action to which they may become subject under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims,
damages, costs, expenses or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact with respect to the Borrower or its
securities contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements therein; (ii) the omission or alleged omission to state therein a
material fact with respect to the Borrower or its securities required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Borrower of the 1933 Act, the
1934 Act, any federal or state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law.
Notwithstanding the foregoing, the indemnity agreement contained in this
Section 9.07(a) shall not apply and the Borrower shall not be liable (i) in any
such case for any such loss, claim, damage, costs, expenses, liability or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person; or (ii) for amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the prior written consent of the Borrower, which consent shall
not be unreasonably withheld.
(b) To the extent permitted by law, each Holder who participates
in a registration pursuant to the terms and conditions of this Loan Agreement
shall indemnify and hold harmless the Borrower, each of its directors and
officers who have signed the registration statement, each Person, if any, who
controls the Borrower within the meaning of the 1933 Act or the 1934 Act, each
of the Borrower's employees, agents, counsel and representatives, any
underwriter and any other Holder selling securities in such registration
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statement, or any of its directors or officers, or any person who controls such
Holder, against any losses, claims, damages, costs, expenses, liabilities
(joint or several) to which the Borrower or any such director, officer,
controlling person, employee, agent, representative, underwriter, or other such
Holder, or director, officer or controlling person thereof, may become subject,
under the 1933 Act, the 1934 Act or other federal or state law, only insofar as
such losses, claims, damages, costs, expenses or liabilities or actions in
respect thereto arise out of or are based upon any Violation, in each case to
the extent and only to the extent that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such. Each such Holder will indemnify any legal or
other expenses reasonably incurred by the Borrower or any such director,
officer, employee, agent representative, controlling person, underwriter or
other Holder, or officer, director or of any controlling person thereof, in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 9.07(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, costs, expenses, liability or action if such
settlement is effected without the prior written consent of the Holder, which
consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this
Section 9.07 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 9.07,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
of such counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 9.07,
except to the extent that the failure results in a failure of actual notice to
the indemnifying party and such indemnifying party is materially prejudiced in
its ability to defend such action solely as a result of the failure to
give such notice.
(d) If the indemnification provided for in this Section 9.07 is
unavailable to an indemnified party under this Section in respect of any
losses, claims, damages, costs, expenses, liabilities or actions referred to
herein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, costs, expenses, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Borrower, on the one hand and of the Holder, on the other, in connection
with the Violation that resulted in such losses, claims, damages, costs,
expenses, liabilities or actions. The relative fault of the Borrower, on the
one hand, and of the Holder, on the other, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of the
material fact or the omission to state a material fact relates to information
supplied by the Borrower or by the Holder, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Borrower, on the one hand, and the Holders, on the other
hand, agree that it would not be just and equitable if contribution pursuant to
this Section 9.07 were determined by a pro rata allocation or by any other
method of allocation which does not take account of tile equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of losses, claims, damages,
costs, expenses, liabilities and actions referred to in the immediately
preceding
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paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses incurred by such indemnified party
in connection with defending any such action or claim. Notwithstanding the
provisions of this Section 9.07, neither the Borrower nor the Holders shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities were offered to the public exceeds the amount of
any damages which the Borrower or each such Holder has otherwise been required
to pay by reason of such Violation. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation.
SECTION 9.08 REPORTS UNDER THE 1934 ACT
So long as the Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, with a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of the Borrower to the public without registration or pursuant to a
registration on Form S-3, if applicable, the Borrower agrees to use its best
lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other
documents required of the Borrower under the 1933 Act and the 1934 Act;
(c) Use its best efforts to include all Common Stock covered by
such registration statement on NASDAQ if the Common Stock is then quoted on
NASDAQ, or list all Common Stock covered by such registration statement on such
securities exchange on which any of the Common Stock is then listed; or, if the
Common Stock is not then quoted on NASDAQ or listed on any national securities
exchange, use its best efforts to have such Common Stock covered by such
registration statement quoted on NASDAQ or, at the option of the Borrower,
listed on a national securities exchange; and
(d) Furnish to any Holder, so long as the Holder owns any
Registerable Securities, forthwith upon request (i) a copy of the most recent
annual or quarterly report of the Borrower and such other SEC reports and
documents so filed by the Borrower; and (ii) such other information (but not
any opinion of counsel) as may be reasonably requested by any Holder seeking to
avail himself of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
SECTION 9.09 ASSIGNMENT OF REGISTRATION RIGHTS
Subject to the terms and conditions of the Loan Agreement and the Debentures,
the right to cause the Borrower to register Registerable Securities pursuant to
this Loan Agreement may be assigned by Holder to any transferee or assignee of
such securities; provided that said transferee or assignee is a transferee or
assignee of at least ten percent (10%) of the Registerable Securities and
provided that the Borrower is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; and provided, further, that such assignment shall be effective
only if immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act, it
being the intention that so long as Holder holds any Registerable Securities
hereunder, either Holder or its transferee or assignee of at least ten percent
may exercise the demand right to registration and piggyback registration rights
hereunder. Other than as set forth above, the parties hereto hereby agree that
the registration rights hereunder shall not be
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transferable or assigned and any contemplated transfer or assignment in
contravention of this Loan Agreement shall be deemed null and void and of no
effect whatsoever.
SECTION 9.10 OTHER MATTERS
(a) Each Holder of Registerable Securities hereby agrees by
acquisition of such Registerable Securities that, with respect to each offering
of the Registerable Securities, whether each Holder is offering such
Registerable Securities in an underwritten or non-underwritten offering, such
Holder will comply with Rules 10b-2, 10b-6 and 10b-7 of the 1934 Act and such
other or additional anti-manipulation rules then in effect until such offering
has been completed, and in respect of any non-underwritten offering, in writing
will inform the Borrower, any other Holders who are selling shareholders, and
any national securities exchange upon which the securities of the Borrower are
listed, that the Registerable Securities have been sold and will, upon the
Borrower's request, furnish the distribution list of the Registerable
Securities. In addition, upon the request of the Borrower, each Holder will
supply the Borrower with such documents and information as the Borrower may
reasonably request with respect to the subject matter set forth and described
in this Section 9.10.
(b) Each Holder of Registerable Securities hereby agrees by
acquisition of such Registerable Securities that, upon receipt of any notice
from the Borrower of the happening of any event which makes any statement made
in the registration statement, the prospectus or any document incorporated
therein by reference, untrue in any material respect or which requires the
making of any changes in the registration statement, the prospectus or any
document incorporated therein by reference, in order to make the statements
therein not misleading in any material respect, such Holder will forthwith
discontinue disposition of Registerable Securities under the prospectus related
to the applicable registration statement until such Holder's receipt of the
copies of the supplemented or amended prospectus, or until it is advised in
writing by the Borrower that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are
incorporated by reference in the prospectus.
(c) The Borrower hereby agrees not to effect any public sale or
other distribution of its equity securities, or any securities convertible into
or exchangeable or exercisable for such equity securities, during the period
commencing on the 7th day prior to, and ending on the 120th day (subject to
extension as provided in Section 9.03 hereof) following the effective date of
any underwritten demand registration, other than pursuant to Form S-8.
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SECTION 9.11 TERMINATION OF RIGHTS
(a) The Holders' right to demand registration and to participate
in a Piggy-Back Registration, as granted to Holders under this Article IX,
shall terminate on June 30, 2006, or after the Holder has exercised two demand
registration rights at the expense of the Borrower as provided in Article IX of
this Loan Agreement, whichever is first to occur.
ARTICLE X - DIRECTORS AND BOARD MEETING ATTENDANCE
SECTION 10.01 BOARD REPRESENTATION OR ATTENDANCE BY LENDER DESIGNEE
(a) Borrower herewith agrees that Lender shall have the right from
time to time, at Lender's option and so long as there is $100,000 face value of
Debentures that have not been fully converted or redeemed, to designate a
nominee to the Board of Directors of the Borrower, which designee is subject to
the written approval of Borrower which approval shall not be unreasonably
withheld. Borrower will, at all times, use its reasonable best efforts to
secure the election of such designee as a Director of the Borrower, provided
that such designee may, at his or her option, elect to serve only as an
"Advisory Director" with all the rights of the Directors in regards to notice
and attendance at meetings of the Board of Directors, or committees thereof,
but without voting rights. All reasonable costs and expenses incurred by such
Designee as a Director or Advisory Director, or by Lender on behalf of such
Designee, shall be reimbursed by Borrower, consistent with payment policies
accorded to other independent directors.
(b) Further, though Lender may waive, from time to time, its right
to require a Board Designee, in such event it shall be entitled, at its own
expense, to have a representative of the Lender attend meetings of the Board of
Directors of the Borrower or of its Subsidiaries and such representative may
serve as an observer but without voice in matters under discussion except as
requested.
(c) Any such Designee or representative of the Lender shall, if
requested to do so, absent himself or herself from the meeting in the event of,
and so long as, the Directors are considering and acting on matters pertaining
to any rights or obligations of the Borrower or the Lender under the Loan
Agreement, the Debenture, or the other Loan Documents. Borrower will provide
Lender's designated representative with the same notice of Board meetings and
information as the Borrower shall provide to its duly elected Directors.
SECTION 10.02 BORROWER'S RIGHT TO REQUEST LENDER TO PROVIDE AN ADVISOR AND A
DIRECTOR NOMINEE
(a) Lender herewith agrees that, so long as no Default or Event of
Default exists under the Loan Agreement and so long as the Debentures have not
been fully converted or redeemed, Lender will, at the written request of
Borrower, use its reasonable best efforts to provide, from time to time, a
person or persons, reasonably believed knowledgeable in investor relations,
such person or persons to be available to consult with, and serve as advisor
to, the Borrower about its communications with its shareholders and with the
general investment public. Further, if requested by Borrower, at least one
such person will be available to serve as a nominee to the Board of Directors
of the Borrower provided that such nominee may, at his or her option, elect to
serve only as an "Advisory Director" with all the rights of the Directors in
regards to notice and attendance at meetings of the Board of Directors, or
committees thereof, but without voting rights. All reasonable costs and
expenses incurred by such person or persons, or by Lender on behalf of such
persons, shall be reimbursed by Borrower, consistent with payment policies
accorded to other independent directors.
SECTION 10.03 LIMITATION OF AUTHORITY OF PERSONS DESIGNATED AS A DIRECTOR
NOMINEE
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It is provided and agreed that the actions and advice of any person while
serving pursuant to Section 10.01 or 10.02 as an advisor to the Borrower or as
a member of Borrower's Board of Directors, or while serving solely as a
representative of Lender in attendance at meetings of the Board of Directors,
shall be construed to be the actions and advice of that person alone and not be
construed as actions of the Lender as to any notice of requirements or rights
of Lender under this Loan Agreement, the Debenture or the other Loan Documents;
nor as actions of the Lender to approve modifications, consents, amendments or
waivers thereof; and all such actions or notices shall be deemed actions or
notices of the Lender only when duly provided in writing and given in
accordance with the provisions of this Loan Agreement.
SECTION 10.04 NON-LIABILITY OF LENDER
The provisions of Section 10.01 and 10.02 notwithstanding, the relationship
between Borrower and Lender is, and shall at all times remain, solely that of
borrower and lender, and except for the agreement to use its best efforts to
provide a knowledgeable advisor (whose actions and advice shall be deemed to be
solely advised by such person in an individual capacity and not advice by
Lender), Lender neither undertakes nor assumes any responsibility or duty to
the Borrower to review, inspect, supervise, pass judgment upon, or inform
Borrower of any matter in connection with any phase of Borrower's business,
operations, or condition, financial or otherwise. Borrower shall rely entirely
upon its own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment, or information supplied to Borrower by
Lender, or any representative or agent of Lender, in connection with any such
matter is for the protection of Lender, and neither Borrower nor any third
party is entitled to rely thereon.
ARTICLE XI - AGENCY
SECTION 11.03 AGENCY
(a) Renaissance Capital Partners II, Ltd. hereby designates and
appoints Renaissance Capital Group, Inc. ("Renaissance Group") as its Agent
under this Agreement and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers as are set forth herein or therein, together with such
other powers as are reasonable incidental thereto. In performing its functions
and duties under this Agreement, the Agent shall act solely as agent of the
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any of the
Borrowers. The Agent may perform any of its duties under this Agreement, or
under the other Loan Documents, by or through its agents or employees.
(b) The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement or in the other Loan Documents.
Except as expressly provided herein, the duties of the Agent shall be
mechanical and administrative in nature. The Agent shall have and may use its
sole discretion with respect to exercising or refraining from taking any
actions which the Agent is expressly entitled to take or assert under this
Agreement and the other Loan Documents. The Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender. Nothing in
this Agreement or any of the other Loan Documents, express or implied, is
intended to or shall be construed to impose upon the Agent any obligations in
respect of this Agreement or any of the other Loan Documents except as
expressly set forth herein or therein. If the Agent seeks the consent or
approval of the Majority in Interest to the taking or refraining from taking
any action hereunder, the Agent shall send notice thereof to each Lender. The
Agent shall promptly notify each Lender any time that the Majority in Interest
have instructed the Agent to act or refrain from acting pursuant hereto. The
Agent may employ agents, co-agents and attorneys-in-fact and shall not be
responsible to the Lenders or the Borrower, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of
any such agents or attorneys-in-fact selected by it with reasonable care.
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ARTICLE XII - MISCELLANEOUS
SECTION 12.01 STRICT COMPLIANCE
Any waiver by Lender of any breach or any term or condition of this Loan
Agreement or the other Loan Documents shall not be deemed a waiver of any other
breach, nor shall any failure to enforce any provision of this Loan Agreement
or the other Loan Documents operate as a waiver of such provision or of any,
other provision, nor constitute nor be deemed a waiver or release of the
Borrower for anything arising out of, connected with or based upon this Loan
Agreement or the other Loan Documents.
SECTION 12.02 WAIVERS AND MODIFICATIONS
All modifications, consents, amendments or waivers (herein "Waivers") of any
provision of this Loan Agreement, the Debentures or any other Loan Documents,
and any consent to departure therefrom, shall be effective only if the same
shall be in writing by Lender and then shall be effective only in the specific
instance and for the purpose for which given. No notice or demand given in any
case shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand. No failure to
exercise, and no delay in exercising, on the part of Lender, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right. The rights of Lender hereunder and under the other Loan
Documents shall be in addition to all other rights provided by law.
SECTION 12.03 NOTICES
(a) Any notices or other communications required or permitted to
be given by this Loan Agreement or any other documents and instruments referred
to herein must be (i) given in writing and personally delivered, mailed by
prepaid certified, registered mail or sent by overnight service such as Federal
Express; or (ii) made by telex or facsimile transmission delivered or
transmitted to the party to whom such notice or communication is directed, with
confirmation thereupon given in writing and personally delivered or mailed by
prepaid certified or registered mail.
(b) Any notice to be mailed, sent or personally delivered shall be
mailed or delivered to the principal offices of the party to whom such notice
is addressed, as that address is specified herein on the signature page hereof.
Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is mailed, postage prepaid, or
sent by overnight service or personally delivered or, if transmitted by telex
or facsimile transmission, on the day that such notice is transmitted;
provided, however, that any notice by telex or facsimile transmission, received
by any Borrower or Lender after 4:00 p.m., Standard Time at the recipient's
address, on any day, shall be deemed to have been given on the next succeeding
day. Any party may change its address for purposes of this Loan Agreement by
giving notice of such change to the other parties pursuant to this Section
12.03.
SECTION 12.04 CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION
Any suit, action or proceeding against the Borrower with respect to this Loan
Agreement, the Debentures or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of Texas, County of Dallas,
or in the United States courts located in the State of Texas as Lender in its
sole discretion may elect, and Borrower hereby submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding. Borrower hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of Texas
may be brought upon, and Borrower hereby irrevocably appoints, the CT
Corporation, Dallas, Texas, as its true and lawful attorney-in-fact in the
name, place and stead of Borrower to accept such service of any and all such
writs, process and summonses.
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Borrower hereby irrevocably waives any objections which it may now or hereafter
have to the laying of venue of any suit, action or proceeding arising out of or
relating to this Loan Agreement or any Debenture brought in the courts located
in the State of Texas, County of Dallas, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any such court
has been brought in any inconvenient forum.
SECTION 12.05 ARBITRATION
(a) Upon the demand of the Lender or Borrower (collectively the
"parties"), made before the institution of any judicial proceeding or not more
than 60 days after service of a complaint, third party complaint, cross-claim
or counterclaim or any answer thereto or any amendment to any of the above, any
Dispute (as defined below) shall be resolved by binding arbitration in
accordance with the terms of this arbitration clause. A "Dispute" shall
include any action, dispute, claim, or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now existing
or hereafter occurring between the parties arising out of, pertaining to or in
connection with this Agreement, any document evidencing, creating, governing,
or securing any indebtedness guaranteed pursuant to the ten-ns hereof, or any
related agreements, documents, or instruments (the "Documents"). The parties
understand that by this Agreement they have decided that the Disputes may be
submitted to arbitration rather that being decided through litigation in court
before a judge or jury and that once decided by an arbitrator the claims
involved cannot later be brought filed, or pursued in court. IF BORROWER SHALL
FAIL TO PAY (OR SHALL STATE IN WRITING AN INTENTION NOT TO PAY OR ITS INABILITY
TO PAY), NOT LATER THAN TEN (10) DAYS AFTER THE DUE DATE, ANY INSTALLMENT OF
INTEREST ON OR PRINCIPAL OF, ANY DEBENTURE OR ANY FEE, EXPENSE OR OTHER PAYMENT
REQUIRED HEREUNDER, LENDER MAY, AT ITS SOLE OPTION, ENFORCE ITS RIGHT OUTSIDE
THE ARBITRATION PROVISION FOUND IN THIS SECTION 12.05 OR ANY DEBENTURE.
(b) Arbitrations conducted pursuant to this Agreement, including
selection of arbitrators, shall be administered by the American Arbitration
Association ("Administrator") pursuant to the Commercial Arbitration rules of
the Administrator. Arbitrations conducted pursuant to the terms hereof shall
be governed by the provisions of the Federal Arbitration Act (Title 9 of the
United States Code), and to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of Texas. Judgment upon any
award rendered hereunder may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
91 or similar governing state law. Any party who fails to submit to binding
arbitration following a lawful demand by the opposing party shall bear all
costs and expenses, including reasonable attorney's fees, incurred by the
opposing party in compelling arbitration of any Dispute.
(c) No provision of, nor the exercise of any rights under, this
arbitration clause shall limit the right of any party to (i) foreclose against
any real or personal property collateral or other security; (ii) exercise
self-help remedies (including repossession and setoff rights); or (iii) obtain
provisional or ancillary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver from a
court having jurisdiction. Such rights can be exercised at any time except to
the extent such action is contrary to a final award or decision in any
arbitration proceeding. The institution and maintenance of an action as
described above shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the Dispute to arbitration, nor render
inapplicable the compulsory arbitration provisions hereof. Any claim or
Dispute related to exercise of any self-help, auxiliary or other exercise of
rights under this section shall be a Dispute hereunder.
(d) Arbitrator(s) shall resolve all Disputes in accordance with
the applicable substantive law of the State of Texas. Arbitrator(s) may make
an award of attorneys' fees and expenses if permitted by law or
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the agreement of the parties. All statutes of limitation applicable to any
Dispute shall apply to any proceeding in accordance with this arbitration
clause. Any arbitrator selected to act as the only arbitrator in a Dispute
shall be required to be a practicing attorney with not less than 5 years
practice in commercial law in the State of Texas. With respect to a Dispute in
which the claims or amounts in controversy do not exceed five hundred thousand
dollars ($500,000), a single arbitrator shall be chosen and shall resolve the
Dispute. In such case the arbitrator shall have authority to render an award up
to but not to exceed five hundred thousand dollars ($500,000) including all
damages of any kind whatsoever, costs, fees and expenses. Submission to a
single arbitrator shall be a waiver of all parties' claims to recover more than
five hundred thousand dollars ($500,000). A Dispute involving claims or
amounts in controversy exceeding five hundred thousand dollars ($500,000) shall
be decided by a majority vote of a panel of three arbitrators ("Arbitration
Panel"), one of whom must possess the qualifications to sit as a single
arbitrator in a Dispute decided by one arbitrator. If the arbitration is
consolidated with one conducted pursuant to the terms of an agreement between
the Lender and the Borrower related to the indebtedness guaranteed, then the
Arbitration Panel shall be one which meets the criteria set forth between the
Lender and Borrower. Arbitrator(s) may, in the exercise of their discretion,
at the written request of a party (i) consolidate in a single proceeding any
multiple party claims that are substantially identical and all claims arising
out of a single loan or series of loans including claims by or against
borrower(s), guarantors, sureties and/or owners of collateral if different from
the Borrower; and (ii) administer multiple arbitration claims as class actions
in accordance with Rule 23 of the Federal Rules of Civil Procedure. The
arbitrator(s) shall be empowered to resolve any dispute regarding the terms of
this Agreement or the arbitrability of any Dispute or any claim that all or any
part (including this provision) is void or voidable but shall have no power to
change or alter the terms of this Agreement. The award of the arbitrator(s)
shall be in writing and shall specify the factual and legal basis for the
award.
(e) To the maximum extent practicable, the Administrator, the
arbitrator(s) and the parties shall take any action necessary to require that
an arbitration proceeding hereunder be concluded within 180 days of the filing
of the Dispute with the Administrator. The arbitrator(s) shall be empowered to
impose sanctions for any party's failure to proceed within the times
established herein. Arbitration proceedings hereunder shall be conducted in
Texas at a location determined by the Administrator. In any such proceeding a
party shall state as a counterclaim any claim which arises out of the
transaction or occurrence or is in any way related to the Documents which does
not require the presence of a third party which could not be joined as a party
in the proceeding, The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of the Documents and repayment in full of
sums owed to Lender by Borrower unless the parties otherwise expressly agree in
writing. Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by applicable law or
regulation.
SECTION 12.06 INVALID PROVISIONS
If any provision of any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the term of this Loan
Agreement, such provision shall be fully severable, such Loan Document shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of such Loan Document, and the remaining provisions
of such Loan Document shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
from such Loan Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision shall be added as part of such Loan Document a
provision mutually agreeable to Borrower and Lender as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. In the event Borrower and Lender are unable to agree
upon a provision to be added to the Loan Document within a period of ten (10)
business days after a provision of the Loan Document is held to be illegal,
invalid or unenforceable, then a provision acceptable to independent
arbitrators, such to be selected in accordance with
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the provisions of the American Arbitration Association, as similar in terms to
the illegal, invalid or unenforceable provision as is possible and be legal,
valid and enforceable shall be added automatically to such Loan Document. In
either case, the effective date of the added provision shall be the date upon
which the prior provision was held to be illegal, invalid or unenforceable.
SECTION 12.07 MAXIMUM INTEREST RATE
(a) Regardless of any provision contained in any of the Loan
Documents, Lender shall never be entitled receive, collect or apply as interest
on the Debentures any amount in excess of interest calculated at the Maximum
Rate, and, in the event that any Lender ever receives, collects or applies as
interest any such excess, the amount which would be excessive interest shall be
deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of the Obligation is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds interest
calculated at the Maximum Rate, Borrower and Lender shall, to the maximum
extent permitted under applicable law (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof; and (iii) amortize, pro rate,
allocate and spread, in equal parts, the total amount of interest throughout
the entire contemplated term of the Debentures; provided that, if the
Debentures are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds interest calculated at the Maximum Rate, Lender
shall refund to Borrower the amount of such excess or credit the amount of such
excess against the principal amount of the Debentures and, in such event,
Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest
non-usurious rate of interest (if any) permitted by applicable law on such day
that at any time, or from time to time, may be contracted for, taken, reserved,
charged or received on the Indebtedness evidenced by the Debentures under the
laws which are presently in effect of the United States of America and the
State of Texas or by the laws of any other jurisdiction which are or may be
applicable to the holders of the Debentures and such Indebtedness or, to the
extent permitted by law, under such applicable laws of the United States of
America and the State of Texas or by the laws of any other jurisdiction which
are or may be applicable to the holder of the Debentures and which may
hereafter be in effect and which allow a higher maximum non-usurious interest
rate than applicable laws now allow.
SECTION 12.08 PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURES
(a) The Lender shall have the right to enter into a participation
agreement with any other Lender with respect to the Debentures, or to sell all
or any part of the Debentures, but any participation or sale shall not affect
the rights and duties of such Lender hereunder vis-a-vis Borrower. In the
event that all or any portion of this Loan shall be, at any time, assigned,
transferred or conveyed to other parties, any action, consent or waiver (except
for compromise or extension of maturity), to be given or taken by Lender
hereunder (herein "Action"), shall be such action as taken by the holders of a
majority in amount of the Principal Amount of the Debentures then outstanding,
as such holders are recorded on the books of the Borrower and represented by
Lender's Agent as described in subsection (b) below.
(b) Assignment or sale shall be effective, on the books of the
Borrower, only upon (i) endorsement of the Debenture, or part thereof, to the
proposed new holder, along with a current notation of the amount of payments or
installments received and net Principal Amount yet unfunded or unpaid, and
presentment of such
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Debenture to the Borrower for issue of a replacement Debenture, or Debentures,
in the name of the new holder; (ii) a designation by the holders of a single
Lender's Agent for Notice, such agent to be the sole party to whom Borrower
shall be required to provide notice when notice to Lender is required hereunder
and who shall be the sole party authorized to represent Lender in regard to
modification or waivers under the Debenture, the Loan Agreement or other Loan
Documents; and (iii) delivery of an opinion of counsel, reasonably satisfactory
to Borrower, that transfer shall not require registration or qualification
under applicable state or federal securities laws.
(c) So long as the Borrower is not in default hereunder, the
Lender shall not sell or assign an interest in the Debentures or rights under
the Loan Agreement to any Person that the Borrower reasonably identifies to
Lender as being engaged as a competitor.
SECTION 12.09 CONFIDENTIALITY
(a) All financial reports or information which are furnished to
Lender, or its director designee or other representatives, pursuant to this
Loan Agreement or pursuant to the Debentures or other Loan Documents shall be
treated as confidential unless and to the extent that such information has been
otherwise disclosed by the Borrower, but nothing herein contained shall limit
or impair Lender's right to disclose such reports to any appropriate
Governmental Authority, or to use such information to the extent pertinent to
an evaluation of the Obligation or to enforce compliance with the terms and
conditions of this Loan Agreement, or to take any lawful action which Lender
deems necessary to protect its interests under this Loan Agreement.
(b) Lender, its director designees, and agents shall use their
reasonable best efforts to protect and preserve the confidentiality of such
information except for such disclosure as shall be required for compliance by
Lender or its director designees with SEC reporting requirements or otherwise
as a matter of law. The provisions of Section 5.01 (a)(1) and (6)
notwithstanding, Borrower may refuse to provide information as required
pursuant thereto to an assignee or successor in interest to the Lender unless
and until such assignee or successor shall have executed an agreement to
maintain the confidentiality of the information as provided herein.
SECTION 12.10 BINDING EFFECT
The Loan Documents shall be binding upon and inure to the benefit of Borrower
and Lender and their respective successors, assigns and legal representatives;
provided, however, that Borrower may not, without the prior written consent of
Lender, assign any rights, powers, duties or obligations thereunder.
SECTION 12.11 NO THIRD PARTY BENEFICIARY
The parties do not intend the benefits of this Loan Agreement to inure to any
third party, nor shall this Loan Agreement be construed to make or render
Lender liable to any materialman, supplier, contractor, subcontractor,
purchaser or lessee of any property owned by Borrower, or for debts or claims
accruing to any such persons against Borrower. Notwithstanding anything
contained herein or in the Debentures, or in any other Loan Document no conduct
by any or all of the parties hereto, before or after signing this Loan
Agreement nor any other Loan Document shall be construed as creating any right,
claim or cause of action against Lender, or any of its officers, directors,
agents or employees, in favor of any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrower, nor to
any other person or entity other than Borrower.
SECTION 12.12 ENTIRELY
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This Loan Agreement and the Debentures and the other Loan Documents issued
pursuant thereto contain the entire agreement between the parties and supersede
all prior agreements and understandings, if any, relating to the subject matter
hereof and thereof.
SECTION 12.13 HEADINGS
Section headings are for convenience of reference only and, except as a means
of identification of reference, shall in no way affect the interpretation of
this Loan Agreement.
SECTION 12.14 SURVIVAL
All representations and warranties made by Borrower herein shall survive
delivery of the Debentures and the making of the Loans.
SECTION 12.15 MULTIPLE COUNTERPARTS
This Loan Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same agreement, and any of the
parties hereto may execute this Loan Agreement by signing any such counterpart.
SECTION 12.16 GOVERNANCE LAW
THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND DELIVERED, AND IS
INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS OF
SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS
LOAN AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS.
SECTION 12.17 REFERENCE TO BORROWER
The term Borrower shall mean Biodynamics International, Inc., Biodynamics
International (United States), Inc., Biodynamics International (Deutschland),
GmbH, and Biodynamics For Partnerships, Inc. where the context of the agreement
makes such other reference appropriate. (signature page follows)
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IN WITNESS WHEREOF, the undersigned has caused this Loan Agreement to
be executed, sealed, and delivered, as of the day and year first above written.
Address for Notice: CO-BORROWER
Biodynamics International, Inc. Biodynamics International, Inc.
0000 Xxxxx 00, Xxxxx 000
Xxxxxxxxxx, XX 00000 By: By:
------------------------------
Attest by:
-----------------------
Address for Notice: CO-BORROWER
Biodynamics International, Inc. Biodynamics International
0000 Xxxxx 00, Xxxxx 000 (Xxxxxx Xxxxxx), Inc.
Xxxxxxxxxx XX 00000 By:
By:
----------------------------
Title:
---------------------------
Attest by:
-----------------------
Address for Notice: CO-BORROWER
Biodynamics International, Inc. Biodynamics International
0000 Xxxxx 00, Xxxxx 000 (Deutschland), GmbH
Xxxxxxxxxx XX 00000 By:
By:
------------------------------
Attest by:
-------------------------
Address for Notice: CO-BORROWER
Biodynamics International, Inc. Biodynamics For Partnerships
0000 Xxxxx 00, Xxxxx 000
Xxxxxxxxxx, XX 00000 By:
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Attest by:
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39
Address for Notice: LENDER
8080 North Central Expressway, Renaissance Capital Partners II, Ltd.
Xxxxx 000, XX 00
Xxxxxx, Xxxxx 00000
(000) 000 0000 (telephone) By:
(000) 000-0000 (fax) ---------------------------------
Renaissance Capital Group, Inc.
Managing General Partner
Xxxxxxx Xxxxxxxxx, President
Attest by:
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Title: Secretary
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