Exhibit 10.6.2
THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITY AS PERMITTED BY
THE SECURITIES PURCHASE AGREEMENT PURSUANT TO WHICH THE SECURITIES WERE ISSUED.
Original Issue Date: November 4, 2004
$____________
10% SENIOR SECURED DEBENTURE
THIS 10% SECURED DEBENTURE is one of a series of duly authorized and
issued 10% Senior Secured Debentures of Innovative Drug Delivery Systems, Inc. a
Delaware corporation, having a principal place of business at 000 Xxxx 00xx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000 (the "Company"), designated as its 10%
Secured Debenture (the "Debentures") for an aggregate principal amount equal to
$1,000,000.
FOR VALUE RECEIVED, the Company promises to pay to ______________ or
its registered assigns (the "Holder"), the principal sum of $_____________ on
the earlier of (a) November 4, 2005 and (b) the Public Offering Date (the
"Maturity Date"), and to pay interest to the Holder on the then outstanding
principal amount of this Debenture in accordance with the provisions hereof.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. For the purposes hereof, in addition to the
terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement,
and (b) the following terms shall have the following meanings:
"Bankruptcy Event" means any of the following events: (a) the
Company or any Significant Subsidiary (as such term is defined in Rule
1.02(s) of Regulation S-X) thereof commences a case or other proceeding
under any bankruptcy, reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction relating to the Company or any Significant
Subsidiary thereof; (b) there is commenced against the Company or any
Significant Subsidiary thereof any such case or proceeding that is not
dismissed within 60 days after commencement; (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or
any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Significant Subsidiary
thereof suffers any appointment of any custodian or the like for it or
any substantial part of its property that is not discharged or stayed
within 60 days; (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors; (f) the
Company or any Significant Subsidiary thereof calls a meeting of its
creditors with a view to arranging a composition, adjustment or
restructuring of its debts; (g) the Company or any Significant
Subsidiary thereof, by any act or failure to act, expressly indicates
its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of
the foregoing; or (h) an application for the appointment of a receiver
or liquidator for the Company or any of its material assets.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday in the United States or a
day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.
"Change of Control Transaction" means the occurrence after the
date hereof of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether
through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 50% of the voting securities
of the Company, or (ii) a replacement at one time or within a one year
period of more than one-half of the members of the Company's board of
directors which is not approved by a majority of those individuals who
are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any
date whose nomination to the board of directors was approved by a
majority of the members of the board of directors who are members on
the date hereof), or (iii) the execution by the Company of an agreement
to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i) or (ii).
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.001 per
share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"Debenture Register" shall have the meaning set forth in
Section 2(b).
"Event of Default" shall have the meaning set forth in
Section 6.2
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fundamental Transaction" shall mean (A) the Company effects
any merger or consolidation of the Company with or into another Person,
(B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer
or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to
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tender or exchange their shares for other securities, cash or property,
or (D) the Company effects any reclassification of the Common Stock or
any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or
property.
"Late Fees" shall have the meaning set forth in the second
paragraph to this Debenture.
"New York Courts" shall have the meaning set forth in Section
6(e).
"Original Issue Date" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"Public Offering Date" the date that the Company registers the
Common Stock pursuant to Section 12 under the Exchange Act, merges into
a corporation already registered pursuant to Section 12 or becomes
public under the Exchange Act in any other manner.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of November 4, 2004, to which the Company and the original
Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
"Subsidiary" shall have the meaning given to such term in the
Purchase Agreement.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
Section 2. Interest.
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a) Payment of Interest in Cash. The Company shall pay interest, in
cash, to the Holder on the then outstanding principal amount of this Debenture
at the rate of 10% per annum, payable monthly, in arrears, on the last day of
each month for the period beginning on the Initial Issuance Date and ending on
the Maturity Date or such earlier or later time when this Debenture is paid or
prepaid in full (except that, if any such date is not a Business Day, then such
payment shall be due on the next succeeding Business Day) (each such date, an
"Interest Payment Date").
b) Interest Calculations. Interest shall be calculated on the
basis of a 360-day year and shall accrue daily commencing on the Original Issue
Date until payment in full of the principal sum, together with all accrued and
unpaid interest and other amounts which may become due hereunder, has been made.
Interest hereunder will be paid to the Person in whose name this Xxxxxxxxx is
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registered on the records of the Company regarding registration and transfers of
Debentures (the "Debenture Register").
c) Late Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at the rate of 18% per annum (or such lower
maximum amount of interest permitted to be charged under applicable law) ("Late
Fee") which will accrue daily, from the date such interest is due hereunder
through and including the date of payment.
d) Prepayment. The Company may prepay all or any portion of the
principal amount of this Debenture without the prior written consent of the
Holder at any time without any prepayment premium or discount.
Section 3. Registration of Transfers and Exchanges.
--------- ---------------------------------------
a) Different Denominations. This Debenture is exchangeable for an
equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service
charge will be made for such registration of transfer or exchange.
b) Investment Representations. This Debenture has been issued
subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state securities laws and
regulations.'
c) Reliance on Debenture Register. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the Company
may treat the Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and for all other purposes, whether or not this Debenture is
overdue, and neither the Company nor any such agent shall be affected by notice
to the contrary.
Section 4. Negative Covenants. So long as any portion of this
Debenture is outstanding, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly:
a) Indebtedness. Other than equipment leases of up to $25,000 in
the aggregate for any 12 month period, enter into, create, incur, assume or
suffer to exist any indebtedness or liens of any kind, on or with respect to any
of its property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom that is senior to, or pari passu
with, in any respect, the Company's obligations under the Debentures without the
prior consent of the Holder, which consent may be withheld in the sole
discretion of the Holder;
b) Repayment of Indebtedness. Repay any principal due and owing on
any promissory notes, debentures, or other forms of indebtedness, other than (i)
periodic interest payments due and owing thereunder and (ii) repayment due of
any principal amount due or becoming due under this Debenture; provided, nothing
contained in this section shall prohibit the Company from making any payments
with respect to trade payables made in the ordinary course of the Company's
business;
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c) Repayment of Shares. Repay, repurchase or offer to repay,
repurchase or otherwise acquire more than any shares of its Common Stock or
other equity securities or as otherwise permitted by the Transaction Documents;
or
d) Bylaws. Amend its certificate of incorporation, bylaws or other
charter documents so as to adversely affect any rights of the Holder in its
capacity as a holder of the Debentures;
e) Loans and Investments. Lend or advance money, credit or
property to any person or entity, or invest in (by capital contribution or
otherwise), or purchase or repurchase the stock or indebtedness or assets or
properties of any person or entity, or agree to do any of the foregoing, other
than in the ordinary course of business, without the prior written consent of
the Holder.
f) Guarantees. Assume, endorse or otherwise become or remain
liable in connection with the obligations (including accounts payable) of any
other person or entity, other than in the ordinary course of business.
g) Sale of Assets, Dissolution, Etc. Transfer, sell, assign, lease
or otherwise dispose of any of its properties or assets, or any assets or
properties necessary or desirable for the proper conduct of its business, or
transfer, sell, assign or otherwise dispose of any of its accounts, or contract
rights to any person or entity, or change the nature of its business, wind-up,
liquidate or dissolve, or agree to any of the foregoing, other than in the
ordinary course of business, without the prior written consent of the Holder.
h) Acquisition of Assets. Permit the purchase, acquisition or
lease of assets of any person or entity, other than in the ordinary course of
business, without the prior written consent of Holder.
i) Compensation. The Company must not increase the compensation of
any of its officers or consultants making more than $100,000 per year, hire any
relative of any officer, director or shareholder of the Company, or pay a bonus
to any such person.
j) Subsidiaries. Establish or form a partially or wholly owned
Subsidiary.
k) No Further Issuance of Securities. Other than as contemplated
in the currently proposed private placement memorandum, or as otherwise
contemplated herein or in the Transaction Documents, the Company hereby
expressly agrees not to create, issue or permit the issuance of any additional
securities of the Company or of any of its Subsidiaries, if any, or any rights,
options or warrants to acquire any such securities, without the prior written
consent of the Holder. The Company shall provide the Holder with a true and
correct copy of the final private placement memorandum prior to its
dissemination.
l) No Dividends; No Redemption. Declare any dividend, pay or set
aside for payment any dividend or other distribution, in cash, stock, or other
property, or make any payment to any related parties, including to any preferred
stockholders, as a dividend, redemption, or otherwise, other than the payment of
salaries in the ordinary course of business.
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m) Agreement. Enter into any agreement with respect to the
foregoing of this Section 4.
Section 5. Affirmative Covenants. So long as any portion of this
Debenture is outstanding and unless the Holder otherwise consents in writing,
the Company will:
a) Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments and other governmental charges which may lawfully be levied or
assessed upon the income or profits of the Company, or upon any property, real,
personal or mixed, belonging to the Company, or upon any part thereof, and also
any lawful claims for labor, material and supplies which if unpaid, might become
a lien or charge against any such property; provided, however, the Company shall
not be required to pay any such tax, assessment, charge, levy or claim so long
as the validity thereof shall be actively contested in good faith by proper
proceedings; but, provided further that any such tax, assessment, charge, levy
or claim shall be paid or bonded in a manner satisfactory to the Holder upon the
commencement of proceedings to foreclose any lien securing the same.
b) Business and Existence. Do or cause to be done all things
necessary to preserve and to keep in full force and effect any licenses
necessary to the business of the Company, its corporate existence and rights of
its franchises, trade names, trademarks, and permits which are reasonably
necessary for the continuance of its business; and continue to engage
principally in the business currently operated by the Company.
c) Insurance and Properties. Keep its business and properties
insured at all times with responsible insurance companies and carry such types
and amounts of insurance as are required by all federal, state and local
governments in the areas which the Company does business and as are usually
carried by entities engaged in the same or similar business similarly situated.
In addition, the Company shall maintain in full force and effect policies of
liability insurance in amounts at least equal to that currently in effect.
d) Maintain Property and Assets. Maintain its property and assets
in good order and repair and, from time to time, make all needed and proper
repairs, renewals, replacements, additions and improvements thereto, so that the
business carried on may be properly and advantageously conducted at all times in
accordance with prudent business management, and maintain annually adequate
reserves for maintenance thereof.
e) True Books. Keep true books of record and account in which
full, true and correct entries will be made of all of its dealings and
transactions, and set aside on its books such reserves as may be required by
GAAP, consistently applied, with respect to all taxes, assessments, charges,
levies and claims referred to in (a) above, and with respect to its business in
general, and include such reserves in interim as well as year-end financial
statements.
f) Right of Inspection. Permit any person designated by the
Holder, at the Holder's expense, to visit and inspect any of the properties,
books and financial reports of the Company, all at such reasonable times upon
three (3) Business Days prior notice to Company, and as often as the Holder may
6
reasonably request, provided the Holder does not unreasonably interfere with the
daily operations of the Company and Xxxxxx executes a confidentiality agreement.
g) Observance of Laws. Conform to and duly observe all laws,
regulations and other valid requirements of any regulatory authority with
respect to the conduct of its business except those that would not cause a
Material Adverse Effect, as determined in the reasonable discretion of the
Holder.
h) Company's Knowledge of Default. Upon an officer or director of
the Company obtaining knowledge of, or threat of, an Event of Default hereunder,
cause such officer to promptly, within no more than five (5) Business Days,
deliver to the Holder notice thereof specifying the nature thereof, the period
of existence thereof, and what action the Company has taken and/or proposes to
take with respect thereto.
i) Notice of Proceedings. Upon an officer or director of the
Company obtaining knowledge of any material litigation, dispute or proceedings
being instituted or threatened against the Company, or any attachment, levy,
execution or other process being instituted against any assets of the Company,
cause such officer to promptly, within no more than five (5) Business Days, give
the Holder written notice of such litigation, dispute, proceeding, levy,
execution or other process.
j) Financial Covenants. Commencing on the six month anniversary of
the date of this Debenture and continuing for so long as any portion of this
Debenture remains outstanding, the Company must maintain the following ratios:
(i) Cash Interest Coverage. A Consolidated EBITDA ratio,
based on any of the Company's quarterly financial statements (as
determined on the last day of each fiscal quarter for the
immediately preceding quarter), of 2.0 or greater. The
Consolidated EBITDA ratio is defined as Consolidated EBITDA
divided by interest expense (Consolidated EBITDA / interest
expense).
(ii) Cash Flow Coverage Ratio. The ratio of (a) the Company's
cash flow to (b) the sum of (i) the Company's consolidated interest
expense plus (ii) the Company's scheduled payments of principal
(including the principal component of capital leases) to be paid
during the 12 months following any date of determination shall at all
times exceed 1.5 to 1.0. Compliance with the ratio will be tested as
of the last day of each month, with cash flow and interest expense
being calculated for the twelve months then ended.
(iii) Current Ratio. The Company will at all times maintain a
current ratio of not less than 1.5 to 1.0 (the "Current Ratio"). The
Current Ratio shall be calculated and tested quarterly as of the last
day of each fiscal quarter of the Company.
(iv) Actual versus Budget. The Company shall on a quarterly
basis achieve 75 percent of its budgeted revenue and income. The budget
numbers shall be those delivered to the Holder contemporaneously
herewith and then on an annual calendar basis.
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(v) Net Worth. The Company shall, at all times following
December 31, 2004, maintain a positive net worth.
k) Certificate of Covenant Compliance. Within 30 days of the last
day of each March, June, September and December, the Company will issue a
Certificate of Covenant Compliance, executed by either the Chief Executive
Officer or Chief Financial Officer in the form of Exhibit X attached hereto. If
the Company is not in compliance with the covenants specified in this Section 5,
the Company will modify the Certificate of Covenant Compliance by stating the
exception and providing a detailed explanation of the non-compliance.
Section 6. Events of Default.
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a) "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment of (A) the principal amount of
any Debenture, or (B) interest (including Late Fees) on, or liquidated
damages in respect of, any Debenture, in each case free of any claim
of subordination, as and when the same shall become due and payable
(whether on the Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any other
covenant or agreement contained in this Debenture or any of the other
Transaction Documents which failure is not cured, if possible to cure,
within the earlier to occur of (A) 5 Business Days after notice of
such default sent by the Holder or by any other Holder and (B)10
Business Days after the Company shall become or should have become
aware of such failure;
(iii) a default or event of default (subject to any grace or
cure period provided for in the applicable agreement, document or
instrument) shall occur under (A) any of the Transaction Documents
other than the Debentures, or (B) any other material agreement, lease,
document or instrument to which the Company or any Subsidiary is bound
and not cured;
(iv) any representation or warranty made herein, in any other
Transaction Documents, in any written statement pursuant hereto or
thereto, or in any other report, financial statement or certificate
made or delivered to the Holder or any other holder of Debentures
shall be untrue or incorrect in any material respect as of the date
when made or deemed made;
(v) there shall have occurred a Bankruptcy Event;
(vi) the Company or any Subsidiary shall default in any of its
obligations under any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
which there may be issued, or by which there may be secured or
evidenced any indebtedness for borrowed money or money due under any
8
long term leasing or factoring arrangement of the Company in an amount
exceeding $150,000, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable.
(vii) the Company shall be a party to any Change of Control
Transaction or Fundamental Transaction, shall agree to sell or dispose
of all or in excess of 33% of its assets in one or more transactions
(whether or not such sale would constitute a Change of Control
Transaction) or shall redeem or repurchase any its outstanding shares
of Common Stock or Common Stock Equivalents;
(viii) the Company shall fail for any reason to pay in full the
amount of cash due pursuant to a Buy-In of the Warrant within 5
Business Days after notice therefor is delivered hereunder or shall
fail to pay all amounts owed on account of an Event of Default within
5 Business Days of the date due;
(ix) the Company shall fail to have available a sufficient
number of authorized and unreserved shares of Common Stock to issue to
such Holder upon exercise of the Warrants in full and not remedied as
permitted in the Transaction Documents;
(x) the Company shall redeem any of the Common Stock
Equivalents;
(xi) upon the reasonable determination by the Holder that there
has been a Material Adverse Effect; or
(xii) the occurrence of an Activity Event of Default (as
defined in Section 5.1(f)(ii) of the Purchase Agreement).
b) Remedies Upon Event of Default. If any Event of Default occurs,
the full principal amount of this Debenture, together with interest and other
amounts owing in respect thereof, to the date of acceleration shall become, at
the Holder's election, immediately due and payable in cash. Commencing 5 days
after the occurrence of any Event of Default that results in the eventual
acceleration of this Debenture, the interest rate on this Debenture shall accrue
at the rate of 18% per annum, or such lower maximum amount of interest permitted
to be charged under applicable law. All Debentures for which the full principal
amount hereunder shall have been paid in accordance herewith shall promptly be
surrendered to or as directed by the Company. The Holder need not provide and
the Company hereby waives any presentment, demand, protest or other notice of
any kind, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Xxxxxx at any time prior to payment hereunder and the Holder
shall have all rights as a Debenture holder until such time, if any, as the full
payment under this Section shall have been received by it. No such rescission or
annulment shall affect any subsequent Event of Default or impair any right
consequent thereon.
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Section 7. Miscellaneous.
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a) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth above,
facsimile number 212.554.4554, ATTN: XX. XXXX XXXXXXXXXXX or such other address
or facsimile number as the Company may specify for such purposes by notice to
the Holders delivered in accordance with this Section. Any and all notices or
other communications or deliveries to be provided by the Company hereunder shall
be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Xxxxxx appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, interest and
liquidated damages (if any) on, this Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other
Debentures now or hereafter issued under the terms set forth herein.
c) Security Interest. This Debenture is a direct debt obligation
of the Company and, pursuant to the Security Documents, is secured by a first
priority security interest in all of the assets of the Company and certain other
collateral for the benefit of the Holders.
d) Lost or Mutilated Debenture. If this Debenture shall be
mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in
exchange and substitution for and upon cancellation of a mutilated Debenture, or
in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated, lost, stolen
or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Debenture, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
e) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Debenture shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by any of the
Transaction Documents (whether brought against a party hereto or its respective
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affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York,
Borough of Manhattan (the "New York Courts"). Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, or such
New York Courts are improper or inconvenient venue for such proceeding. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and,
prosecution of such action or proceeding.
f) Waiver. Any waiver by the Company or the Holder of a breach of
any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
g) Severability. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances. If it
shall be found that any interest or other amount deemed interest due hereunder
violates applicable laws governing usury, the applicable rate of interest due
hereunder shall automatically be lowered to equal the maximum permitted rate of
interest. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of or interest on this Debenture as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
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h) Next Business Day. Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.
i) Headings. The headings contained herein are for convenience
only, do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.
j) Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Documents. Notwithstanding any provision to the contrary contained in any
Transaction Documents, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the Maximum Rate, and, without limiting the
foregoing, in no event shall any rate of interest or default interest, or both
of them, when aggregated with any other sums in the nature of interest that the
Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed
by law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the
new maximum contract rate of interest allowed by law will be the Maximum Rate
applicable to the Transaction Documents from the effective date of such increase
or decrease forward, unless such application is precluded by applicable law. If
under any circumstances whatsoever, interest in excess of the Maximum Rate is
paid by the Company to any Purchaser with respect to indebtedness, if any,
evidenced by the Transaction Documents, such excess shall be applied by such
Purchaser to the unpaid principal balance of any such indebtedness or be
refunded to the Company, the manner of handling such excess to be at such
Purchaser's election in the event any principal amount remains outstanding.
*********************
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
By:___________________________________
Name:
Title:
13
EXHIBIT X
---------
I, the undersigned hereby represent that Innovative Drug Delivery
Systems, Inc. is in compliance with all of its covenants specified in Sections 4
and 5 of that certain Debenture originally dated as of November 4, 2004,
executed by Innovative Drug Delivery Systems, Inc., with its principal place of
business at 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, in favor of
______________, with its principal place of business at ______________________
INNOVATIVE DRUG DELIVERY SYSTEMS, INC.
By:___________________________________
Name:
Title:
