AGREEMENT re Modification & Conversion
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Exus Networks, Inc. / New Canaan Investment Ptrs., LLC (0100803) o Page 1
AGREEMENT
re Modification and Conversion
THIS AGREEMENT made as of the 31th day of December, 2002 between Exus Networks,
Inc., a Nevada corporation having a principal office at 000 Xxxx 00xx Xx., Xxx
Xxxx, XX 00000 ("Borrower"), and New Canaan Investment Partners, LLC, a
Connecticut limited liability company having an address at 00 Xxxx Xxxxxx, Xxx
Xxxxxx, Xxxxxxxxxxx 00000 ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower is indebted to Lender pursuant to (i) a Commercial Term Loan
Promissory Note, dated December 31, 2001, by Exus Networks, Inc., as maker, and
payable to the order of New Canaan Investment Partners, LLC, in the original
principal amount of $300,000 (the "$300,000 Note"), (ii) a Commercial Term Loan
Promissory Note, dated January 14, 2002, by Exus Networks, Inc., as maker, and
payable to the order of New Canaan Investment Partners, LLC, in the original
principal amount of $100,000 (the "$100,000 Note"), and (iii) a Commercial Term
Loan Promissory Note, dated January 23, 2002, by Exus Networks, Inc., as maker,
and payable to the order of New Canaan Investment Partners, LLC, in the original
principal amount of $200,000 (the "$200,000 Note") (collectively, the "Notes");
and
WHEREAS, pursuant to a certain Security Agreement, dated December 31, 2001 (the
"Security Agreement"), between Borrower, as "Debtor," and Lender, as "Secured
Party," all Obligations of Borrower to Lender are secured by a first priority
continuing security interest in all existing and after acquired assets and
property of Borrower; and
WHEREAS, the Notes each contained provisions pursuant to which Lender could
convert Indebtedness into shares of Borrower's common stock; and
WHEREAS, pursuant to a certain agreement between Borrower and Lender, dated June
20, 2002 (the "1st Modification Agreement"), the parties agreed to modify the
Notes to, inter alia, extend the respective maturity dates of the Notes by one
year and to provide for accrued interest to be payable quarterly commencing
September 30, 2002, December 31, 2002, March 31, 2002, and on the respective
maturity dates; and
WHEREAS, Borrower wishes (i) to issue shares of its common stock to Lender in
payment and satisfaction of unpaid accrued interest on the Notes through
December 31, 2002, and in payment and satisfaction of a the principal balance of
the $300,000 Note and the $100,000 Note, and partial payment and satisfaction of
the principal balance of the $200,000 Note, and (ii) to have the maturity date
of the $200,000 Note extended; and
WHEREAS, Lender is willing to do so based on the representations, terms and
conditions set forth herein,
NOW, THEREFORE, in consideration of the premises, the representations, covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Borrower and
Lender, intending to be bound legally, agree as follows:
1. General Representations and Warranties. To induce Lender to enter into this
Agreement, Borrower represents, warrants, acknowledges and agrees as follows:
(a) Borrower is absolutely and unconditionally indebted to Lender
pursuant to the Notes in the amount of $513,040.99 for unpaid
principal, $27,344.00 unpaid accrued interest through June 30, 2002,
$25,652.04 unpaid accrued interest from July 1, 2002 through December
31, 2002, plus interest, as hereinafter provided, accruing on the
principal balance from and after January 1, 2003 (the "Indebtedness").
(b) Borrower has no defenses with respect to the Indebtedness or the
Security Agreement or any claims against Lender with respect to the
Indebtedness, the Security Agreement or otherwise, and to the extent
Borrower has or may have any such defenses or claims against Lender,
Xxxx Xxxxx, Xxxxxxx Xxxxxxxx or Xxxxxxx Xxxxxxxx , they are hereby
waived and released.
(c) Borrower is authorized to enter into this Agreement and, upon its
execution by Xxxxx X. Xxxxxx as President, this Agreement will be a
valid and legally enforceable obligation of the Borrower.
(d) With the exception that Borrower's principal office is now at 000
Xxxx 00xx Xx., Xxx Xxxx, XX 00000 and other than as disclosed in any
document filed by Borrower with the Securities and Exchange
Commission, Borrower reaffirms and restates to Lender, as of the date
hereof, the representations and warranties set forth in ss. 4 of the
Security Agreement.
(e) Upon execution and delivery of this Agreement, each of the Notes
and all the Indebtedness represented thereby will be cancelled and
have no force and effect other than the $200,000 Note which shall be
modified in accordance with the terms of paragraph 3 below.
2. Conversion of Indebtedness; Issuance of Shares. In payment and
satisfaction of all of the Indebtedness except for $187,500 of the
principal balance of the $200,000 Note and interest accruing thereon
from and after January 1, 2003, Borrower shall issue and deliver to
Lender on or before January 24, 2003, time being of the essence with
respect to this deadline, shares of Borrower's common stock to Lender,
as follows:
(a) Shares; Number of Shares.
(i) The greater of 25,000,000 shares of common stock or an amount
which is 15% of Borrower's issued and outstanding shares of
common stock.
(ii) No Dilution. Until and through December 31, 2005, Lender
shall be protected against its shareholder interest being
diluted. During that period each time additional shares of
Borrower's common stock are issued to others, i.e. not to
Borrower, Lender will also issue such shares of Borrower's common
stock as are necessary for Lender to maintain ownership of 15% of
Borrower's issued and outstanding shares of common stock, except
that this provision shall not apply and no additional shares are
required to be issued to Lender under the following
circumstances:
(1) The issuance of registered shares of common stock at $.04 per share or
greater in consideration for cash; or
(2) The issuance of shares of common stock in connection with an accretive
acquisition by Borrower paid for in such shares where Lender, in its sole and
absolute discretion, has given its prior written consent.
(3) If the Lender transfers, sells or in any other manner disposes any of the
shares issued to it pursuant to this paragraph 2, the amount of disposed shares
shall proportionately reduce the percentage the Lender is entitled to (for
example, if Lender disposes of 5,000,000 shares, Lender shall be entitled to
maintain 12% of Borrower's issued and outstanding shares).
The shares issued to Lender pursuant to this ss. 2(a) herein, including any
additional shares issued pursuant to the foregoing antidilution provisions, are
herein referred to as the "Shares."
(b) Registration; Etc. Lender acknowledges and understands that the Shares
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), or under the securities laws of any state or other
jurisdiction, and that the issuance and sale of the Shares to Lender is
being made in reliance upon exemptions from registration underss.ss.4(2)
(and Regulation D thereunder) and 4(6) of the Securities Act. Lender will
not sell or otherwise transfer the Shares without registration under the
Securities Act or applicable state securities laws or an exemption
therefrom. Lender represents that it is acquiring the Shares for its own
account, for investment and not with a view of resale or distribution,
except in compliance with the Securities Act. Lender has not offered or
sold any portion of the Shares nor does it have any present intention of
dividing the Shares with others or of selling, distributing or otherwise
disposing of an portion of the Shares either currently or after the passage
of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance in violation of
the Securities Act. Furthermore, Borrower has no obligation to register the
Shares, except under the circumstances set forth in this ss. 2(b).
(i) Legend. Lender acknowledges that certificates for the Shares shall
be stamped or otherwise endorsed with a legend substantially in the
following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("THE SECURITIES ACT) AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICALBE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE OR THAT COMPLIANCE WITH THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR ANY STATE SECURITIES LAWS IS NOT
OTHERWISE REQUIRED.
At Lender's request, Borrower will issue new certificates without
this legend with respect to any of the Shares which are
registered pursuant to an effective registration statement.
(ii) Registration Rights. Borrower grants the following
registration rights to holders of the Shares:
(1) If Borrower at any time proposes to register any of its common shares under
the Securities Act for sale to the public, whether for its own account or for
the account of other shareholders or both, except with respect to registration
statements on Forms X-0, X-0 or another form not available with respect to the
Shares, provided the Shares are not otherwise registered for resale by the
holder pursuant to an effective registration statement, each such time Borrower
will give at least thirty (30) days' prior written notice to the holder of those
registrable Shares of Borrower's intention to do so. Upon the written request of
the holder of the registrable Shares, Borrower will cause such registrable
Shares as to which registration shall have been request to be included with the
shares to be covered by the registration statement proposed to be filed by
Borrower, all to the extent required to permit the sale or other disposition of
the registrable Shares by the holder thereof.
(2) All fees and expenses incurred in connection with the registration of the
registrable Shares, including without limitation, all registration and filing
fees, fees and disbursements of counsel and accountants for Borrower, fees and
expenses (including reasonable counsel fees) incurred in connection with
complying with state securities or "blue sky" laws, transfer taxes, and fees of
transfer agents and registrars shall be borne by Borrower. All fees and expenses
incurred with the sale of the registrable Shares, including without limitation,
underwriting discounts, selling commissions and stock transfer taxes applicable
to the registrable Shares, shall be borne by Lender.
(3) Until at least two (2) years after the effectiveness of the registration
statement pursuant to which Shares have been registered, Borrower will comply in
all respects with its reporting and filing obligations under the Securities Act.
(4) If the managing underwriter of the registration determines that there must
be a limitation of the number of shares to be included in the registration, the
number of shares that may be included in the registration shall be allocated
(a) first, to Borrower and
(b) second, to Lender and any other holders of registration rights in
proportion to the respective amounts of securities.
(c) Representations and Covenants by Borrower re Shares. Borrower
represents and warrants to Lender as follows:
(i) Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada.
(ii) As of the effective date of this Agreement, the number of issued
and outstanding shares of Borrower's common stock is 136,000,000.
(iii) Borrower has complied in all material respects with the
requirements of the Securities Act and the rules and regulations
promulagated thereunder, and other applicable federal, state and local
securities laws, rules and regulations.
(iv) Lender has access to all filings made by Borrower with Securities
and Exchange Commission (the "SEC"), including without limitation, its
Annual Report on Form 10-KSB for the fiscal year ended December 31,
2001, and its current Quarterly Reports. Borrower represents that none
of those filings contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) Representations and Covenants by Lender re Shares. Lender represents
and warrants to Borrower as follows:
(i) Lender is sophisticated to expect, demand and understand the kind
of information about Borrower that would ordinarily be set forth in a
registration statement covering the Shares, has access to such
information by virtue of its relationship to Borrower or economic
bargaining power and will take all Shares which may be issued to it
with non-distributive intent. Additionally, Lender has access to and
has carefully read all filings made by Borrower with the Security and
Exchange Commission, including, without limitation, its Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2001, and its
Current Quarterly Reports.
(ii) Lender recognizes that an investment in the Shares involves
substantial risks, including loss of the entire amount of such
investment.
(iii) In the absence of an effective registration statement under the
Securities Act covering the Shares, Lender shall not offer, sell,
transfer or otherwise dispose of the Shares without first obtaining an
opinion of counsel, reasonably satisfactory to Borrower and its
counsel, that the disposition may be made without registration of the
Shares in question under the Act and any applicable state "blue sky"
securities rules and regulations.
(iv) Lender acknowledges that the SEC filings by Borrower indicate
that Borrower does not currently have sufficient funds to maintain its
existence; that there is a negative value to the assets of Borrower;
and Borrower is, among other things, contemplating a reverse stock
split.
(v) Lender is not subscribing for the Shares as a result of or
pursuant to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or meeting.
(vi) Lender's undersigned's overall commitment to investments which
are not readily marketable is not disproportionate to the Lender's net
worth and an investment in the Shares will not cause such overall
commitment to become excessive.
(vii) Lender is purchasing the Shares for its own account and the
Lender is the sole legal and beneficial owner of the Shares and has
not pre-arranged any sale of the Shares.
(viii) Lender represents that it is an "accredited investor" as
defined in Rule 501(a) of Regulation D of the Securities Act.
(ix) Lender recognizes that the representations, warranties and
agreements of Lender contained herein and in any other writing
delivered in connection with the transactions contemplated hereby
shall be true and correct in all respects on and as of the date of the
issuance of the Shares as if made on and as of such date and shall
survive the execution and delivery of this Agreement and the issuance
of the Shares to Lender.
(x) Lender agrees to comply with all applicable rules and regulations
of the Securities Act of 1933 and the Securities Exchange Act of 1934,
including without limitation, timely filing Forms 3,4 and 5 and
Schedule 13D, and to provide copies to Borrower simultaneous with the
transmission of any filings with the SEC.
(e) Rule 144 Requirements. Borrower agrees to (i) make and keep
current public information about Borrower available, as those terms
are understood and defined in Rule 144, (ii) to file with the SEC in a
timely manner all reports and other documents required of Borrower
under the Act, and (iii) to furnish to any holder of registrable
Shares upon request a written statement by Borrower as to its
compliance with the reporting requirements of Rule 144 and the
Securities Act, a copy of Borrower's most recent annual or quarterly
report, and such other documents and reports as such holder may
reasonably request to avail itself of any similar rule or regulation
of the SEC allowing the holder to sell any such Shares without
registration..
3. Modification of $200,000 Note. Lender agrees that, notwithstanding anything
to the contrary, the $200,000 Note shall be modified as follows:
(b) Principal Balance. Upon the timely issuance of the Shares, as
aforesaid, the unpaid principal balance as of January 1, 2003, shall be
$187,500.00.
(c) Maturity Date. The maturity date is extended to December 31, 2004, when
the principal balance, unpaid accrued interest thereon, and any other sums
due thereunder or under the Security Agreement are due and payable.
(d) Interest. From and after January 1, 2003, interest on the principal
balance shall accrue at the rate of eight (8.0%) percent per annum and
shall be due and payable each December 31st. and on the maturity date, by
acceleration or otherwise.
(e) Prepayment. Borrower shall be entitled to prepay all or any portion of
the principal balance and accrued interest thereon at any time without
premium or penalty.
(f) Notice. Lender agrees to provide Borrower with a 30 business days' cure
period upon any default under the $200,000 Note.
(g) Security Agreement. Upon payment in full of the principal and accrued
interest on the $200,000 Note as modified herein, the Security Agreement
shall automatically be terminated and have no further force and effect.
4. Default. Borrower's failure to timely issue the Shares as provided herein
shall constitute and be a default under the $200,000 Note and the Security
Agreement. After the issuance of the 25,000,000 Shares as provided herein,
notwithstanding any of the terms of the Security Agreement, the only default
under the $200,000 Note and Security Agreement can be the non-payment by
Borrower of interest or principal when due and payable under the $200,000 Note.
Accordingly, the term "Obligations" in the Security Agreement shall only relate
to the $200,000 Note, as modified herein.
5. Effectiveness. This Agreement shall supersede and replace the 1st
Modification Agreement in its entirety. Except as expressly provided herein, the
terms and conditions of the $200,000 Note and the Security Agreement shall
remain in full force and effect as originally executed, nothing herein shall be
construed or deemed to be a waiver by Lender of any rights or remedies, and all
references to the Notes or any of the Notes in the Security Agreement or any
other agreements shall mean the $200,000 Note as modified hereby.
6. Binding Effect; Successor and Assigns. This Agreement shall inure to the
benefit of and be binding upon Borrower and Lender and their respective
successors and assigns. In case any provision in this Agreement shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts and by facsimile, each of
which shall be an original, but all of which together shall constitute one
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed and delivered by all the
parties hereto. The paragraph headings used in this Agreement are for
convenience of reference only and are not to affect the construction hereof or
to be taken into consideration in the interpretation hereof. This Agreement may
not be amended except in writing.
7. Counterparts. This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
The execution of this Agreement by any party hereto will not become effective
until counterparts hereof have been executed and delivered by all the parties
hereto. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
8. Notices. All notices, demand, requests or other communications required,
permitted or desired to be given under this Agreement must be in writing and
shall be deemed to have been properly given if (i) delivered by hand during
normal business hours (i.e., a Monday through Friday, which is not a state or a
federal holiday, from 9:00 o'clock AM to 5:00 o'clock PM), (ii) by overnight
courier, or (iii) if deposited with the United States Postal Service, by
registered or certified mail, postage prepaid, return receipt requested, in each
instance to the party at their address first set forth above or at such other
address as may have been specified by written notice given in accordance with
this paragraph. Notices, demands, requests and other communications delivered as
aforesaid shall be deemed given on the date the same is delivered by hand or by
overnight courier, or the 3rd business day after being deposited with the United
States Postal Service in accordance with this ss. 8.
9. Governing Law. The Notes, as modified hereby, and the Security Agreement
shall continue to be governed by the laws of the State of Connecticut. This
Agreement shall otherwise be governed by the laws of the State of New York (but
not its conflicts of law provisions).
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed
instrument as of the date first above written.
Witnessed by: EXUS NETWORKS, INC.
By:
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Xxxxx X. Xxxxxx
Its President
Duly Authorized
NEW CANAAN INVESTMENT PARTNERS, LLC
By:
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Xxxxxxx X. Xxxxxxxx
Its Manager
Duly Authorized
