Note No.__________
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR
QUALIFICATION UNDER SUCH SECURITIES LAWS OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY, THAT THE SALE OR TRANSFER IS PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH
SECURITIES LAWS.
ANCHOR PACIFIC UNDERWRITERS, INC.
10% Subordinated Bridge Note,
(and Warrant to Purchase Shares of Common Stock)
$ Concord, California
_____________, 1996
ANCHOR PACIFIC UNDERWRITERS, INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to
________________________ or such other person in whose name this Note is
registered on the Note Register (as that term is defined below) (the
"Holder"), the principal amount of _________ Thousand Dollars ($_________),
with simple interest on the unpaid balance of such principal amount at the
rate of ten percent (10%) per annum from the date of this Note. Interest on
the outstanding principal balance shall be due and payable to the Holder on
the Maturity Date as that term is defined below. Each Note delivered upon
registration of transfer or in exchange for or in lieu of this Note shall
carry the rights to interest accrued and unpaid, and to accrue, which were
carried by this Note.
The full principal amount of this Note, plus interest, will be due and
payable on _____________, 1997 (the "Maturity Date"). Payment of interest and
principal shall be made in lawful money of the United States of America by
wire transfer to an account designated by the Holder appearing on the Note
Register.
This Note is a duly authorized Note of the Company, limited to the
aggregate principal amount of $_________.
1. REPRESENTATIONS, WARRANTIES AND COVENANTS.
1.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties.
1.2 VALID ISSUANCE OF NOTES AND SHARES. The Note, when issued, sold
and delivered in accordance with the terms hereof for the consideration
expressed herein, will be a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, and based in part
upon the representations of the Holder contained in the Subscription Agreement
pursuant to which this Note is being issued, will be issued in compliance with
all applicable federal and state securities laws. The shares of the Company's
Common Stock, $.02 par value per share, issuable upon exercise of the Warrant
(the "Shares") have been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of this Note, shall be duly and validly
issued, fully paid and nonassessable.
1.3 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of or default under any provisions of its Certificate of Incorporation
or Bylaws as amended and in effect on and as of the date of this Note or of any
material provision of any instrument or contract to which it is a party or by
which it is bound or, to its knowledge, of any material provision of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company. The execution, delivery and issuance of this Note
will not result in any such violation or be in conflict with or constitute, with
or without the passage of time and giving of notice, a default under any such
provision, instrument or contract or an event which
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results in the creation of any lien, charge or encumbrance upon any assets of
the Company.
2. SUBORDINATION.
2.1 SUBORDINATION. The indebtedness evidenced by this Note is
subordinate and junior in right of payment to all Senior Debt (as such term is
defined below) to the extent provided herein, and the Holder, by such Xxxxxx's
acceptance hereof, agrees to the subordination herein provided and shall be
bound by the provisions hereof. Senior Debt shall continue to be Senior Debt
and entitled to the benefits of these subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Debt or
extension or renewal of the Senior Debt. The Note shall rank PARI PASSU in
right of payment with the 10% Convertible Subordinated Debentures and the 10%
Convertible Subordinated Debentures, Series A issued by the Company in 1995.
2.2 SENIOR DEBT DEFINED. As used herein, the term "Senior Debt"
shall mean the following whether now outstanding or subsequently incurred,
assumed or created: (a) all indebtedness (whether or not secured) of the Company
or its subsidiaries to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money; (b) such other
indebtedness of the Company or its subsidiaries to the extent that the
instrument creating or evidencing such indebtedness provides that it shall
constitute Senior Debt; (c) any indebtedness issued in exchange for such Senior
Debt, or any indebtedness arising from the satisfaction of such Senior Debt by a
guarantor; and (d) any deferrals, renewals, or extensions of any such Senior
Debt.
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2.3 DEFAULT ON SENIOR DEBT. If the Company shall default in the
payment of any principal of or interest on any Senior Debt when the same shall
become due and payable, whether at maturity or at a date fixed for prepayment or
by declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Debt or any trustee therefor,
unless and until such default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, property, securities,
by set-off or otherwise) shall be made or agreed to be made on account of the
principal of or interest on this Note, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of this Note.
2.4 PRIOR PAYMENT OF SENIOR DEBT.
(a) In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or
other similar proceeding relating to the Company; (ii) any proceeding for
the liquidation, dissolution or other winding up of the Company, voluntary
or involuntary, whether or not involving insolvency or bankruptcy
proceedings; (iii) any assignment by the Company for the benefit of
creditors; or (iv) any other marshaling of the assets of the Company, all
Senior Debt (including any interest thereon accruing after the commencement
of any such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made
to any Holder on account of the principal or interest on this Note. Any
payment or distribution, whether in cash, securities or other property
(other than securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment the payment of which is
subordinate, at least to the extent provided in these subordination
provisions with respect to the indebtedness evidenced by this Note, to the
payment of all Senior Debt at the time outstanding and to any securities
issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for these subordination
provisions) be payable or deliverable in respect of this Note shall be paid
or delivered directly to the holders of
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Senior Debt in accordance with the priorities then existing among such
holders until all Senior Debt (including any interest thereon accruing
after the commencement of any such proceedings) shall have been paid in
full. In the event of any such proceeding, after payment in full of
all sums owing with respect to Senior Debt, the Holder of this Note,
together with the holders of any obligations of the Company ranking on
a parity with this Note, shall be entitled to be paid from the
remaining assets of the Company the amounts at the time due and owing
on account of unpaid principal of and interest on this Note and such
other obligations before any payment or other distribution, whether in
cash, property or otherwise, shall be made on account of any capital
stock or any obligations of the Company ranking junior to this Note and
such other obligations.
(b) In the event that, notwithstanding the foregoing, any
payment or distribution of any character, whether in cash, securities or
other property (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the indebtedness evidenced by this
Note, to the payment of all Senior Debt at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization
or readjustment), shall be received by any Holder in contravention of any
of the terms hereof, such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or delivered
and transferred to, the holders of the Senior Debt at the time outstanding
in accordance with the priorities then existing among such holders for
application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all such Senior Debt in full. In the event of the
failure of any such Holder to endorse or assign any such payment,
distribution or security, each holder of Senior Debt is hereby irrevocably
authorized to endorse or assign the same.
2.5 NO IMPAIRMENT OF RIGHTS. Nothing contained herein shall impair,
as between the Company and the Holder, the
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obligation of the Company to pay such Holder the principal of and interest on
this Note or prevent such Holder from exercising all rights, powers and
remedies otherwise permitted by applicable law or hereunder upon an Event of
Default (as defined below) hereunder, all subject to the rights of the
holders of the Senior Debt to receive cash, securities or other property
otherwise payable or deliverable to the Holder of this Note.
2.6 SUBROGATION. Upon the payment in full of all Senior Debt, the
Holders of the Notes, together with all other subordinated debt of the Company
ranking on a parity therewith, shall be subrogated to all rights of any holders
of Senior Debt to receive any further payments or distributions applicable to
the Senior Debt until the indebtedness evidenced by the Notes shall have been
paid in full, and such payments or distributions received by the Holders
thereof, by reason of such subrogation, of cash, securities or other property
which otherwise would be paid or distributed to the holders of Senior Debt,
shall, as between the Company and its creditors other than the holders of Senior
Debt, on the one hand, and such Holders on the other hand, be deemed to be a
payment by the Company on account of Senior Debt and not on account of the
Notes.
2.7 NO IMPAIRMENT OF SECURITY INTEREST. The provisions of this Note
shall not impair any rights, remedies or powers of any secured creditor of the
Company in respect of any security interest. The securing of any obligations of
the Company otherwise ranking on a parity with the Notes or ranking junior to
such Notes shall not be deemed to prevent such obligations from constituting,
respectively, obligations ranking on a parity with such Notes or ranking junior
to such Notes.
2.8 AMENDMENT OF SUBORDINATION PROVISIONS. No modification or
amendment of the subordination provisions contained in Section 2 hereof in a
manner adverse to the holders of Senior Debt may be made without the consent of
all holders of Senior Debt.
2.9 UNDERTAKING. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably requested from time
to time by the Company or the
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lender of any Senior Debt in order to implement the foregoing provisions of
Section 2 hereof.
3. NO RESTRICTIONS ON ISSUANCE OF ADDITIONAL DEBT. Nothing contained
in this Note shall restrict the Company from creating, assuming or incurring
any additional indebtedness, whether ranking junior to, on par with, or
senior to, this Note, or require the Company to obtain the consent of the
Holder with respect thereto.
4. DEFAULT.
4.1 EVENT OF DEFAULT. Each of the following events shall be an Event
of Default hereunder:
(a) Default in the payment of any interest on this Note
when due, continued for thirty (30) business days.
(b) Default in the payment of the principal on the Maturity
Date.
(c) Material default in the performance of any of the
covenants or agreements of the Company contained in this Note continued for
thirty (30) days after notice thereof (provided, however, that if the
default cannot reasonably be corrected within such period, there shall be
no event of default if corrective action is instituted promptly and is
pursued diligently until the default is corrected).
(d) If a petition in involuntary bankruptcy is filed
against the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation under the law
of any jurisdiction, whether now or hereafter in effect, and is not stayed
or dismissed within thirty (30) days after such filing, or if the Company
shall make an assignment for the benefit of creditors, or shall file a
voluntary petition in bankruptcy, or shall be adjudicated a bankrupt or
insolvent, or shall file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall seek or
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consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Company or of all or any substantial part of the
properties of the Company, or commence voluntary or involuntary
dissolution proceedings.
(e) Default under Senior Debt that gives the holder thereof the
right to accelerate such Senior Debt, and such Senior Debt is in fact
accelerated by such holder.
4.2 REMEDIES ON DEFAULT, ETC.
(a) If an Event of Default occurs and is continuing after the
expiration of any applicable grace period, the Holder may declare the Note
immediately due and payable.
(b) In case of a default in the payment of any principal or
interest due on this Note, the Company shall pay to the Holder thereof the
amount owing together with: (i) simple interest on the amount owing at the
rate per annum equal to the lower of (x) twelve percent (12%) or (y) the
maximum rate permitted under applicable law on the amounts past due; and
(ii) such additional amount as shall be sufficient to cover the cost and
expenses of collection, including, without limitation, reasonable
attorneys' fees, expenses and disbursements.
(c) No right, power or remedy conferred by this Note upon any
Holder shall be exclusive of any other right, power or remedy referred to
herein or now or hereafter available at law, in equity, by statute or
otherwise.
5. NOTES.
5.1 NOTE REGISTER. The Company shall cause to be kept at the
principal office of the Company a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration and the transfer of the Note subject to the
provisions regarding transferability contained in this Note. Upon surrender for
registration of transfer of any Note at the principal office of the Company, the
Company shall execute and deliver, in the name
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of the designated transferee or transferees, one or more new Notes in minimum
denominations of $20,000 and integral multiples of $10,000; or as otherwise
agreed.
5.2 TRANSFER OF NOTES. At the time the Note is presented or
surrendered for registration of transfer it shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company, duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of the Notes.
5.3 REPLACEMENT NOTE.
(a) If the Note is mutilated and is surrendered to the Company,
the Company shall execute and deliver in exchange therefor a new Note of
like tenor and principal amount and bearing a number not contemporaneously
outstanding. If there shall be delivered to the Company: (i) evidence to
its satisfaction of the destruction, loss or theft of the Note; and
(ii) such security or indemnity as may be required by it to save the
Company and any agent harmless, then, in the absence of notice to the
Company that the Note has been acquired by a bona fide purchaser, the
Company shall execute and deliver, in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding. In the event such mutilated,
destroyed, lost or stolen Note has become or is about to become due and
payable, the Company in its discretion may, instead of issuing a new Note,
retire such Note.
(b) Upon the issuance of any new Note under this Section 5.3,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses connected therewith.
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(c) Any new Note issued pursuant to this Section 5.3 in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost
or stolen Note shall be at any time enforceable by anyone.
(d) The provisions of this Section 5.3 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect
to the replacement or payment of mutilated, destroyed, lost or stolen
Notes.
6. LIMITATIONS ON DISPOSITION. The Holder understands that this
Note, the Shares issuable upon exercise of the Warrant and any other securities
issued under this Note are "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable restrictions
such securities may be resold without registration under the Securities Act of
1933, as amended (the "Act") only in certain limited circumstances. In this
connection, the Holder represents that it is familiar with Rule 144 under the
Act and the limitations imposed thereby and by the Act.
The Holder further agrees not to make any disposition of all or any portion
of this Note and the Shares issuable upon the exercise of the Warrant unless and
until: (a) there is then in effect a Registration Statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or (b) the Holder shall have (i) notified the
Company of the proposed disposition and shall have furnished the Company with a
reasonably detailed statement of the circumstances surrounding the proposed
disposition; and (ii) furnished the Company with an opinion of counsel,
satisfactory to the Company, that such disposition will not require registration
of the securities under the Act.
The Holder understands that this Note, the Shares issuable upon the
exercise of the Warrant may bear the following legend, together with any other
legend required by law:
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"The securities represented hereby have not been registered under the
Securities Act of 1933, or any state securities laws. These securities may
not be sold or transferred in the absence of an effective registration
statement or qualification under such securities laws or an opinion of
counsel, satisfactory to the Company, that the sale or transfer is pursuant
to an exemption from the registration or qualification requirements of any
applicable securities laws."
7. LIMITATIONS ON DIVIDENDS AND DISTRIBUTIONS. So long as this Note
is outstanding, the Company shall not declare, pay, make or set apart any sum
for a dividend or other distribution (whether in cash or other property) with
respect to any class of common stock of the Company (other than dividends or
distributions payable in its common stock), or for the redemption, retirement,
purchase or other acquisition for value of any share of any class of common
stock of the Company or any warrants or rights to purchase any class of common
stock of the Company.
8. REDEMPTION. The Company shall have no right to redeem the Note
prior to the Maturity Date. In the event that during the term of this Note
the Company receives five million dollars ($5,000,000) or more through the
sale of its capital stock the Holder shall have a one-time right, after
giving ten (10) days' written notice, to require the Company to redeem all or
a portion of the Note, with interest adjusted through the date of redemption.
9. MISCELLANEOUS.
9.1 AMENDMENT. The provisions of this Note may be amended or
modified only with the written consent of the Company and the Holder.
9.2 ENTIRE AGREEMENT. This Note constitute the entire agreement
among the parties with regard to the subject matter hereof, and supersedes and
replaces any and all prior to contemporaneous agreements, written or oral. The
terms and conditions of this Note shall inure to the benefit of, and be binding
upon, the respective successors and assigns of the
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parties. Nothing in this Note is intended to confer on any third party any
rights, liabilities or obligations, except as specifically provided.
9.3 HEADINGS. The titles and subtitles used in this Note are for
convenience only and are not to be used in construing or interpreting this Note.
9.4 SEC FILINGS. During the term of this Note the Company shall
promptly forward to the Holder annual and periodic reports and proxy statements
required to be filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
9.5 GOVERNING LAW. This Note shall be governed by the internal laws
of the State of California as applicable to transactions performed in California
between California residents.
9.6 ATTORNEYS' FEES. The prevailing party in any action or
proceeding between the parties arising out of or related to this Note shall be
entitled to recover all reasonable expenses, including without limitation
attorneys' fees and costs, incurred in connection with any such action or
proceeding.
IN WITNESS WHEREOF, the undersigned have executed this Note on the date
first above written.
ANCHOR PACIFIC UNDERWRITERS, INC.
By:
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Xxxxx X. Xxxxxxxx
President
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