EXHIBIT 10.1
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PERFECT LINE, INC.
$700,000
Secured Bridge Notes due December 31, 2003
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NOTE PURCHASE AND SECURITY AGREEMENT
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Dated March 7, 2003
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PERFECT LINE, INC.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Secured Bridge Notes due December 31, 2003
March 7, 2003
To Each of the Purchasers Listed in
the Attached Schedule A:
Ladies and Gentlemen:
Perfect Line, Inc., a corporation organized under the laws of the State of
Indiana (the "Company"), agrees with you as follows and Interactive Motorsports
and Entertainment Corp., a corporation organized under the laws of the State of
Indiana (the "Parent Company") agrees as provided in Article 13:
ARTICLE 1. AUTHORIZATION OF ISSUANCE OF NOTES.
The Company has authorized the issue and sale of $700,000 in aggregate
principal amount of its Secured Bridge Notes due December 31, 2003 (such notes
being referred to herein as the "Notes"). The Notes shall be substantially in
the form set out in Exhibit 1, with such changes therefrom, if any, as may be
approved by the Purchasers and the Company. The Notes shall bear the legend set
forth on the form of Note set out in Exhibit 1 and shall include such other
notations, legends or endorsements as required by law. The terms and provisions
contained in the Notes shall constitute, and are hereby expressly made, a part
of this Agreement and, accordingly, the Company and the Purchasers, by their
execution and delivery of this Agreement, expressly agree to such terms and
provisions and to be bound thereby.
ARTICLE 2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company agrees
to sell, and each Purchaser agrees, severally but not jointly, to purchase from
the Company, the aggregate principal amount of Notes set forth opposite such
Purchaser's name in Schedule A at a purchase price per Note equal to 100% of the
principal amount thereof. The obligations hereunder of each Purchaser are
several and not joint, and each of the Purchasers shall have no obligation and
no liability to any Person for the performance or nonperformance hereunder by
any other Purchaser.
ARTICLE 3. CLOSING.
The sale and purchase of the Notes contemplated hereby shall occur at the
offices of Leagre Xxxxxxxx & Xxxxxxx LLP, 1400 First Indiana Plaza, 000 X.
Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 at 9:00 a.m. (ET), on the date of
this Agreement (the "Closing") or on such other business day as may be agreed
upon by the Company and the Purchasers in writing. At the Closing, the Company
will deliver to each of the Purchasers the Notes to be purchased by such
Purchaser in the form of a single Note dated the date of the Closing (the
"Closing Date") and made payable to such Purchaser, against delivery by such
Purchaser to the Company by wire transfer of immediately available funds in the
amount of the purchase price.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants the following to each of the
Purchasers, as of the date hereof:
Section 4.1 Organization; Power and Authority. The Company is a corporation
validly existing under the laws of the State of Indiana. The Company has the
corporate power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it transacts, to
execute and deliver this Agreement and the Notes and to perform the provisions
hereof and thereof.
Section 4.2 Authorization, etc. This Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 4.3 Disclosure. Schedule 4.3 identifies all reports filed by the
Parent Company with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for its last
fiscal year and all reports filed by it for subsequent periods and events (such
reports, the "Parent SEC Reports"). The Parent SEC Reports (i) were prepared in
all material respects in accordance with the requirements of the Securities Act
of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing)
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, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or in the Parent SEC Reports), and each fairly presents in
all material respects the consolidated financial position of the Parent Company
and its subsidiaries as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
Except as listed in the Schedule 4.3, since the date of the financial
statements contained in the most recent Parent SEC Report there has been no
event or occurrence relating to the Parent Company or its subsidiaries which, in
the reasonable judgment of the Company, after consultation with the Parent
Company, will be required to be disclosed in a Parent SEC Report on Form 8-K or
which would have a material adverse effect on the Parent Company and its
subsidiaries and which has not been disclosed to the Purchasers in a Schedule
hereto or in a Parent SEC Report on Form 8-K.
Section 4.4 Compliance with Laws, Other Instruments, etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will
not:
(a) violate, result in any breach of, or constitute a default under, or
result in the creation of any lien in respect of any property of the
Company under, (i) any indenture, loan or credit agreement to which
the Company is bound or by which the Company or any of its properties
may be bound, (ii) any lease, mortgage, deed of trust or other
agreement or instrument to which the Company is bound or by which the
Company or any of its properties may be bound, in each case that is
material in relation to the business, operations, financial condition,
assets, or properties of the Company and its subsidiaries taken as a
whole ("Material") or (iii) the articles of incorporation or by-laws
of the Company;
(b) violate or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority (as defined in Section 4.5) that
is applicable and Material to the Company; or
(c) violate any provision of any statute or other rule or regulation of
any Governmental Authority that is applicable and Material to the
Company.
Section 4.5 Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes. For purposes of this Agreement
"Governmental Authority" means the government of (a) the United States of
America or any state or other political subdivision thereof, or (b) any
jurisdiction in which the Company or any of its subsidiary conducts all or any
part of its business, or which asserts jurisdiction over any properties of the
Company or any of its Subsidiary.
Section 4.6 Private Offering by the Company. Assuming the truth and
correctness of the representations and warranties of the Purchasers set forth in
Article 5, the sale of the Notes hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
Section 4.7 Use of Proceeds. The Company will apply the proceeds of the
sale of the Notes in accordance with Schedule 4.7.
Section 4.8 Satisfaction of Prior Debt. The debt and other obligations
which constituted the consideration supporting the Financing Statement on Form
UCC-1 filed by Perfect Line Investments, LLC with the Indiana Secretary of
State, on June 21, 2001, as filing number 200100003493113 and which purports to
place a lien on certain assets of Perfect Line, LLC (a predecessor of the
Company), have been satisfied in full and no further debt or obligation exists
in favor of Perfect Line Investments, LLC.
ARTICLE 5. REPRESENTATIONS AND COVENANTS OF THE PURCHASERS
Each Purchaser (as to itself only) represents and warrants the following to
the Company:
Section 5.1 Purchase for Investment. Such Purchaser is purchasing the Notes
and the Equity Consideration (as defined in Section 13.2) (collectively, the
Securities") to be purchased by it solely for its own account and not as nominee
or agent for any other person and not with a view to, or for offer or sale in
connection with, any distribution thereof (within the meaning of the Securities
Act) that would be in violation of the securities laws of the United States of
America or any state thereof, without prejudice, however, to its right at all
times to sell or otherwise dispose of all or any part of said Securities
pursuant to a registration statement under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act, and subject,
nevertheless, to the disposition of its property being at all times within its
control.
Section 5.2 Accredited Investor. Such Purchaser is knowledgeable,
sophisticated and experienced in business and financial matters. Such Purchaser
acknowledges that the Securities have not been registered under the Securities
Act and understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or such sale is permitted
pursuant to an available exemption from such registration requirement; it is
able to bear the economic risk of its investment in the Securities and is
presently able to afford the complete loss of such investment; it is an
Accredited Investor as defined in Rule 501(a) under Regulation D promulgated by
the Securities and Exchange Commission; and it has been afforded access to
information about the Company and its financial condition and business
sufficient to enable it to evaluate its investment in the Securities.
Section 5.3 Authorization. Such Purchaser has taken all actions necessary
to authorize it (a) to execute, deliver and perform all of its obligations under
this Agreement, (b) to perform all of its obligations under the Securities and
(c) to consummate the transactions contemplated hereby and thereby. This
Agreement is a legally valid and binding obligation of such Purchaser
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 5.4 Restricted Securities. Each of the Purchasers and each
subsequent holder of any Securities, by its acceptance thereof agrees that no
transfer or sale (including, without limitation, by pledge or hypothecation) of
Securities by any holder of Securities which is otherwise permitted hereunder,
other than a transfer or sale to the Company, shall be effective, unless such
transfer or sale is made:
(a) pursuant to an effective registration statement under the Securities
Act and a valid qualification under applicable state securities or
"blue sky" laws; or
(b) without such registration or qualification as a result of the
availability of an exemption therefrom and, if requested by the
Company, counsel for such holder of Securities shall have furnished
the Company with an opinion, satisfactory in form and substance to the
Company, to the effect that no such registration is required because
of the availability of an exemption from the registration requirements
of the Securities Act.
ARTICLE 6. PREPAYMENT OF THE NOTES
Section 6.1 Optional Prepayments. The Company may, at its option, prepay
the principal amount of the Notes, in whole or in part, at any time and from
time to time, without premium or penalty.
Section 6.2 Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes, the principal amount of the Notes to be prepaid shall
be allocated among all of the Notes at the time outstanding in proportion, as
nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore prepaid.
Section 6.3 Maturity; Surrender, etc. In the case of each prepayment of
Notes pursuant to this Article 6, the principal amount of each Note to be
prepaid shall mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued to such
date. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest, as
aforesaid, interest on such principal amount shall cease to accrue. Any Note
paid or prepaid in full shall be surrendered to the Company and cancelled and
shall not be reissued, and no Note shall be issued in lieu of any prepaid
principal amount of any Note.
ARTICLE 7. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of principal, on any Note when the
same becomes due and payable, whether at maturity or at a date fixed
for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on any Note for
more than 10 business days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a) and
(b) of this Article 7) and such default is not remedied within 60 days
after the earlier of (i) the Chief Executive Officer or Chief
Financial Officer obtaining actual knowledge of such default and (ii)
the Company receiving written notice of such default from any holder
of a Note (any such written notice to be identified as a "notice of
default" and to refer specifically to this paragraph (c) of Article
7); or
(d) any representation or warranty made by the Company in Article 4 or
Section 9.2 of this Agreement proves to have been false in any
material respect on the Closing Date and the fact that such
representation or warranty was false on the Closing Date could
reasonably be expected to have a material adverse effect on the
ability of the Company to perform its obligations under this Agreement
and the Notes; or
(e) the Company (i) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (ii) makes an
assignment for the benefit of its creditors, (iii) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (iv) is adjudicated as insolvent or to be
liquidated, or (v) takes corporate action for the purpose of any of
the foregoing; or
(f) a court or Governmental Authority of competent jurisdiction enters an
order appointing, without consent by the Company, a custodian,
receiver, trustee or other officer with similar powers with respect to
it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation
of the Company, or any such petition shall be filed against the
Company and such petition shall not be dismissed within 60 days.
ARTICLE 8. REMEDIES ON DEFAULT, ETC.
Section 8.1 Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (e) or (f) of Article 7 has occurred, all the Notes then
outstanding shall automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, any
holder or holders of a majority in principal amount of the Notes at
the time outstanding may at any time at its or their option, by notice
or notices to the Company, declare all the Notes then outstanding to
be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b) of Article 7
has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at
its or their option, by notice or notices to the Company, declare all
the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this Section 8.1, whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus all accrued and unpaid interest
thereon, shall all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of which are hereby
waived.
Section 8.2 Security. The obligations of the Company to the Purchasers
under the Notes are secured by a grant of a security interest in certain assets
of the Company as more fully set forth in Article 9. As a result, Purchasers
shall have the rights and remedies of a secured creditor with respect to certain
assets as more fully set forth in Article 9. Additionally and as further
security for the Notes, the Parent Company will guarantee the Company's
obligations under the Notes and this Agreement.
Section 8.3 Other Remedies. Subject to certain limitations set forth in
Section 9.7(f) with respect to the exercise of remedies with respect to the
Collateral (as defined in Section 9.1), if any Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 8.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.
Section 8.4 Rescission. At any time after any Notes have been declared due
and payable pursuant to clause (b) or (c) of Section 8.1, the holders of not
less than a majority in aggregate principal amount of the Notes then
outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences. No rescission and annulment under this Section
8.4 will extend to or affect any subsequent Event of Default or impair any right
consequent thereon.
Section 8.5 No Waivers or Election of Remedies, Expenses, etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company will pay to
the holder of each Note on demand such further amount as shall be sufficient to
cover all reasonable costs and expenses of such holder incurred in any
enforcement or collection under this Article 8, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
ARTICLE 9. GRANT OF SECURITY INTEREST AND LICENSE TO USE SOFTWARE
Section 9.1 Security Interest in Collateral. As security for the payment
and performance of all obligations of the Company to the Purchasers under the
Notes and this Agreement and all modifications, substitutions, renewals and
extensions of any such obligations, together with interest at the rates provided
in the Notes and costs of collection and attorneys' fees and without relief from
valuation and appraisement laws (collectively, the "Liabilities"), the
Purchasers shall have, and the Company does hereby grant to the Purchasers, a
security interest in the following items of personal property (collectively, the
"Collateral"):
(a) The Company's simulators specified on Schedule 9.1(a), whether now
owned or hereafter acquired, specifically including, without
limitation, improvements, accessories, attachments, and parts thereto;
and
(b) All products and proceeds of each of the foregoing, specifically
including, without limitation, (i) any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to the Company from
time to time, (ii) any and all payments of any form whatsoever made or
due and payable to the Company from time to time in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the foregoing by any Governmental Authority or any
person or entity acting under color of Governmental Authority, (iii)
to the extent of the value of Collateral, claims arising out of the
loss, nonconformity, or interference with the use of, defects or
infringement of rights in, or damage to, the Collateral, and (iv) any
and all other amounts from time to time paid or payable under or in
connection with any of the foregoing, whether or not in lieu thereof.
Section 9.2 Representations and Warranties with respect to the Collateral.
The Company represents and warrants to the Purchasers that:
(a) The exact corporate name of the Company and its state of incorporation
are each correctly stated in the preamble to this Agreement.
(b) All Collateral is lawfully owned by the Company, free and clear of any
prior security interest, pledge, sale, assignment, transfer or other
encumbrance other than Permitted Encumbrances (as defined below); the
Company has the unencumbered right to pledge, sell, assign or transfer
the Collateral subject to the Permitted Encumbrances and to subject
the Collateral to the security interest in favor of the Purchasers
herein; except in respect of Permitted Encumbrances, no financing
statement covering all or any portion of the Collateral is on file in
any public office other than in favor of the Purchasers; and the
security interest herein constitutes a legal and valid, first priority
security interest in the Collateral.
(c) Schedule 9.1(a) is a true and correct address for the location of the
simulators that are subject to the security interest.
(d) For purposes of this Article 9, "Permitted Encumbrance" means
(i) liens for taxes and assessments or governmental charges or levies
and liens securing claims or demands of carriers, warehousemen,
mechanics, material men, landlords, repairmen or other like
liens;
(ii) other liens incidental to the normal conduct of the business of
the Company or any subsidiary or the ownership of its property
which are not incurred in connection with the incurrence of
indebtedness and which do not, in the aggregate, materially
impair the use of such property in the operation of the business
of the Company and its subsidiaries taken as a whole or the value
of such property for the purposes of such business; and
(iii) liens securing the Notes.
(e) None of the Collateral is attached to real estate so as to constitute
a fixture.
Section 9.3 Agreements Concerning Collateral.
(a) Except with prior written notice to the Purchasers, the simulators
will be kept at the locations set forth on Schedule 9.1(a) hereto.
(b) The Company will keep the Collateral in good order and repair,
ordinary wear and tear excepted, and will not waste or destroy the
Collateral or any portion thereof, except in the case of obsolete
Collateral which is no longer used or useful in Company's business.
(c) Company may from time to time substitute Collateral, provided that the
substituted Collateral is not subject to any lien or other encumbrance
(other than Permitted Encumbrances) and has a fair market value at
least equal to the fair market of the Collateral for which it is
substituted.
(d) The Company shall not permit any item of Collateral to become a
fixture to real estate or an accession to any other property not
subject to the Purchasers' security interest herein without the prior
written consent of the Purchasers.
Section 9.4 General Provisions Concerning Collateral.
(a) All Collateral acquired after the date hereof will be acquired by the
Company free of any lien, security interest or encumbrance, except
Permitted Encumbrances.
(b) The Company agrees to do such reasonable acts and things and deliver
or cause to be delivered such other documents as the Purchasers may
deem necessary to establish and maintain a valid security interest in
the Collateral (free of all other liens and claims except Permitted
Encumbrances) to secure the payment and performance of the Notes and
to defend title to the Collateral against any person claiming any
interest therein adverse to the Purchasers. The Company authorizes the
Purchasers, at the expense of the Company, to execute and file a
financing statement or statements on its behalf in those public
offices deemed advisable or necessary by the Purchasers to protect the
security interests of the Purchasers herein granted.
Section 9.5 Insurance.
(a) The Company shall have and maintain at all times, with respect to
Collateral, insurance written by companies acceptable to the
Purchasers covering risks customarily insured against by companies
engaged in business similar to that of the Company in reasonable
amounts, containing such terms, in such form, and for such periods
customarily maintained by companies engaged in business similar to
that of the Company. Such insurance shall be payable to the Company
and the Purchasers as their interests may appear.
(b) All such insurance policies shall carry standard, non-contributory
lender's loss payable clauses and endorsements in favor of the
Purchasers. The insurance certificates evidencing the Company's
compliance with the above shall be deposited with the Purchasers, and
in the event the Company fails to file and maintain such insurance,
the Purchasers may, at its option, purchase such insurance and the
cost of such insurance shall become a Liability secured by these
presents and all sums expended shall bear interest at the rate of
interest set forth in the Notes until paid. The Company shall pay all
insurance premiums promptly when due. The Company hereby assigns to
the Purchasers the proceeds of all such insurance, including, without
limitation, any premium refunds, to the extent of the Liabilities,
shall direct the insurer to make payment of any losses or refunds
directly to the Purchasers, and appoints the Purchasers its
attorney-in-fact to endorse any draft, check or other form of payment
made by such insurer.
Section 9.6 Purchasers May Defend Title. In the event the Company fails to
pay any taxes, assessments, premiums, or fees, or fails to discharge any liens
or claims against the Collateral required to be paid or discharged by the
Company, or fails to purchase, maintain and file with the Purchasers any
insurance required by this Agreement, or if any such insurance is inappropriate
to the situation, in the Purchasers's reasonable discretion, the Purchasers may,
without demand or notice, pay any such taxes, assessments, premiums or fees, or
pay, acquire, satisfy or discharge any liens or claims asserted against the
Collateral (without any obligation to determine the validity thereof), or
purchase any such insurance. All sums so expended by the Purchasers shall become
a Liability secured by these presents and shall bear interest at the rate of
interest set forth in the Notes until paid.
Section 9.7 Remedies.
(a) Upon the occurrence and during the continuation of any Event of
Default and subject to compliance with Section 9.7(f) below, the
Purchasers shall have, in addition to all other rights and remedies,
the remedies of a secured party under the Indiana Uniform Commercial
Code (regardless of whether the Code has been enacted in the
jurisdiction where rights or remedies are asserted) including, without
limitation, the right to take possession of the Collateral, and for
that purpose the Purchasers may, so far as the Company can give
authority therefor, enter upon any premises on which the Collateral
may be situated and remove the same therefrom. The Purchasers shall
give to the Company at least ten (10) days' prior written notice of
the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition is to
be made. The Company hereby irrevocably appoints the Purchasers and
Purchasers' designees from time to time its true and lawful
attorneys-in-fact, with full power of substitution in the premises
upon the occurrence and during the continuance of an Event of Default
(i) to demand, collect, receipt for, settle, compromise, adjust, xxx
for, foreclose or realize upon the Collateral in such manner as the
Purchasers may determine; and (ii) to do all things necessary to carry
out this Article 9 of the Agreement. Subject to compliance with
Section 9.7(f), the Company hereby ratifies and approves all acts of
such attorneys. Neither Purchasers nor any attorney will be liable for
any acts or omissions nor for any error of judgment or mistake of fact
or law, absent gross negligence, bad faith or wilful misconduct. This
power, being coupled with an interest, is irrevocable until the
Liabilities have been fully satisfied.
(b) Except as otherwise expressly set forth herein, Company waives demand,
notice, protest, notice of acceptance of this Agreement, notice of
loans made, credit extended, Collateral received or delivered or other
action taken in reliance hereon and all other demands and notices of
any description. With respect to both Liabilities and Collateral, the
Company assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange, or
release of Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial
payments thereon and the settlement, compromise or adjustment of any
thereof, all in such manner and at such time or times as the
Purchasers may deem advisable. The Purchasers shall have no duty as to
the collection or protection of the Collateral, or any income
therefrom, nor as to the preservation of rights against prior parties
nor as the preservation of any rights pertaining thereto beyond the
safe custody thereof. The Purchasers may exercise their rights with
respect to Collateral without resorting or regard to other Collateral
or sources of reimbursement for any Liability. The Purchasers shall
not be deemed to have waived any of these rights as to or under
Liabilities or Collateral unless such waiver be in writing and signed
by the Purchasers. No delay or omission on the part of the Purchasers
in exercising any right shall operate as a waiver of such right or any
other right. A waiver on any one occasion shall not be construed as a
bar to the exercise of any right on any future occasion. All rights
and remedies of the Purchasers as to or under the Liabilities or
Collateral whether evidenced hereby or by any other instrument or
papers shall be cumulative and may be exercised singly, successively
or together. The Purchasers may, from time to time, without notice to
the Company (a) retain or obtain a security interest in any property
of any other person, in addition to the Collateral, to secure any of
the Liabilities; (b) retain or obtain the primary or secondary
liability of any party or parties, in addition to the Company with
respect to any of the Liabilities; (c) extend or renew for any period
(whether or not longer than the original period) or release or
compromise any liability of any party or parties primarily or
secondarily liable to the Purchasers under the Agreements or the
Notes; (d) release its security interest in any of the property
securing any of the Liabilities and permit any substitution or
exchange for any such property; and (e) subject to Section 9.7(f),
resort to the Collateral for the payment of any of the Liabilities
whether or not it shall have resorted to any other property or shall
have proceeded against any party primarily or secondarily liable for
any of the Liabilities.
(c) The Company shall pay to the Purchasers on demand any and all
reasonable expenses, including reasonable attorneys' fees, incurred or
paid by the Purchasers in protecting or enforcing its rights as to or
under the Liabilities or the Collateral. After deducting all of such
expenses, the residue of any proceeds of collection or sale of the
Collateral shall be applied to the payment of principal or interest on
Liabilities in such order of preference as the Purchasers may
determine, proper allowance for interest on Liabilities not then due
being made, and any excess shall be returned to the Company. To the
extent that Company makes a payment or payments to the Purchasers or
the Purchasers enforces their security interest and lien, and such
payments or the Proceeds of such enforcement are set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee or
receiver or any other party under any insolvency law, state or federal
law, common law or equitable cause, then to the extent of such
recovery, the liability or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as
if such payment had not been made or such enforcement or set-off had
not occurred and shall be Liabilities secured by the Collateral. The
Purchasers may, at any time or times, pay, acquire, satisfy, or
discharge any security interest, lien, encumbrance or claim asserted
by any person against the Collateral. The Purchasers shall have no
obligation to determine the validity thereof. All sums paid by the
Purchasers under the provisions of this paragraph and any existing or
other charges relating thereto shall be repaid to the Purchasers by
Company on demand, shall be deemed an advance to the Company and shall
bear interest at the rate of interest provided in the Notes.
(d) If, at any time after payment in full of all Liabilities and
termination of the Purchasers's security interest, any payments on the
Liabilities previously made by the Company or any other Person must be
disgorged by the Purchasers for any reason whatsoever, including,
without limitation, the insolvency, bankruptcy or reorganization of
the Company or such Person, this Agreement and the Purchasers's
security interests herein shall be reinstated as to all disgorged
payments as though such payments had not been made, and the Company
shall sign and deliver to the Purchasers all documents, and shall do
such other acts and things, as may be necessary to re-perfect the
Purchasers's security interest.
(e) The Company, on its own behalf and on behalf of its successors and
assigns, hereby expressly waives all rights, if any, to require a
marshaling of assets by the Purchasers or to require the Purchasers's
first resort to some or any portion of the Collateral before
foreclosing upon, selling or otherwise realizing on any other portion
thereof.
(f) Notwithstanding anything in this Section 9.7 to the contrary no action
may be taken by the Purchasers pursuant to this Article 9, unless
agreed to in writing by Purchasers holding a majority of the aggregate
outstanding principal amount of the Notes with a copy of such written
agreement delivered to the Company prior to the taking of any such
action.
Section 9.8 Grant of License to Use Software.
(a) The Company hereby grants each of the Purchasers a worldwide, royalty
free, non-exclusive license to use the Company's proprietary software
that is loaded into the simulators that constitute the Collateral
(collectively, the "Software") in event the Purchasers exercise their
rights as secured creditors of the Company pursuant to Section 9.7
with respect to the Collateral. The Software may only be used by the
Purchasers in conjunction with the Collateral on which the Software
has been loaded by the Company. Purchaser may not transfer or assign
the Software to any person except in connection with a sale of the
Collateral pursuant to the exercise of their remedies under Section
9.7, and any person to whom the Software is assigned in that manner
must enter into an agreement, as a condition to the transfer, whereby
they accept the terms of this License. Each Purchaser agrees that it
shall not, and shall not permit any person to alter, modify or adapt
the Software in any manner including, but not limited to, translating,
decompiling, disassembling or attempting to create derivative works.
Each Purchaser agrees that it shall not, and shall not permit any
other person to, attempt to reverse engineer the Software. This
license and a Purchaser's right to use the Software as provided herein
automatically terminates if such Purchaser fails to comply with any of
the foregoing provisions.
(b) The Company retains all rights not expressly granted and nothing in
this Section 9.9 constitutes a waiver of the Company's rights under
the United States copyright laws or any other federal or state law.
(c) The Software is licensed to the Purchasers "AS IS" and the Company
makes no warranty as to the functionality of the Software.
(d) In no event will the Company be liable for direct, indirect, special,
incidental or consequential damages arising out of the use of, or
inability to use, the Software, even if advised of the possibility of
such damages.
(e) All rights and licenses granted under or pursuant to this Section 9.9
by the Company to the Purchasers are, and shall otherwise be deemed to
be, for the purposes of Section 365(n) of the United States Bankruptcy
Code (the "Bankruptcy Code"), "licenses or rights to intellectual
property" as defined under Section 101(52) of the Bankruptcy Code.
ARTICLE 10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by a Purchaser of any Note or portion thereof or interest therein and the
payment of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of such
Purchaser or any other holder of a Note. This Agreement and the Notes embody the
entire agreement and understanding between the Purchasers listed on the
signature page hereto, the Company and the Parent Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
ARTICLE 11. AMENDMENT AND WAIVER
Section 11.1 Requirements. This Agreement and the Notes may be amended, and
the observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the holders of a majority of the outstanding principal amount of the
Notes, except that no such amendment or waiver may, without the written consent
of the holder of each Note at the time outstanding affected thereby, (a) subject
to the provisions of Article 8 relating to acceleration or rescission, change
the amount or time of any prepayment or payment of principal of, or reduce the
rate or change the time of payment or method of computation of interest on the
Notes, or (b) change the percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver or (c)
amend Sections 7(a), 7(b), or Articles 8, 9 or 11.
Section 11.2 Binding Effect, etc. Any amendment or waiver consented to as
provided in this Article 11 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
ARTICLE 12. NOTICES
All notices and communications provided for hereunder shall be in writing
and sent (a) by hand delivery, or (b) by telecopy, or (c) by registered or
certified mail with return receipt requested (postage prepaid), or (d) by a
recognized overnight delivery service (with charges prepaid). Any such notice
must be sent:
(i) if to a Purchaser, to the Purchaser at the address specified on
Schedule A, or at such other address as the Purchaser shall have
specified to the Company in writing,
(ii) if to any other holder of any Note, to such holder at such address as
such other holder shall have specified to the Company in writing, or
(iii)if to the Company, to the Company at its address set forth on page 1
of this Agreement to the attention of Chief Financial Officer, or at
such other address as the Company shall have specified to the holder
of each Note in writing, and in any event, with a copy (which shall
not constitute notice) to Leagre Xxxxxxxx & Xxxxxxx LLP, 1400 First
Indiana Plaza, 000 X. Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000,
Attention: Xxxxxxx X. Xxxxxx.
Notices delivered by personal delivery or telecopy will be deemed given
when actually received. Notices delivered by registered or certified mail shall
be deemed delivered four (4) business days after being sent. Notices delivered
by overnight delivery service shall be deemed delivered the next business day
after being sent.
ARTICLE 13. COVENANTS OF PARENT COMPANY AND XXXXXXX X. XXXXXXXXX
Section 13.1 Guaranty. As additional consideration to the Purchasers, the
Parent Company agrees to execute each Note as a guarantor.
Section 13.2 Equity Consideration. On each monthly anniversary of the Notes
and on December 31, 2003, IMTS will reserve for the benefit of the Purchasers a
number of common shares of Parent Company which have a market value (based on
the weighted average price for Parent Company's common shares on the OTC
Bulletin Board during that period of one month) equal to 1% of the outstanding
principal amount of the Notes (in the case of the December 31, 2003 payment, the
amount shall be prorated). The common shares (the "Equity Consideration") shall
be issued at the earlier of December 31, 2003 or the payment of the Notes.
Section 13.3 Information Rights. So long as the Note issued to Ropart
remains outstanding, unless otherwise directed by Ropart, the Parent Company
shall deliver to Ropart the following items:
(a) a copy of any management letters to the board of directors prepared by
the Parent Company's independent accounting firm's;
(b) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects
of the Parent Company's operations or financial affairs given to the
Parent Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
(c) promptly (but in any event within five (5) business days) after the
discovery or receipt of notice of any default under any material
agreement to which the Parent Company or any of its subsidiaries is a
party or any other material adverse change, event or circumstance
affecting the Parent Company or any subsidiary (including, without
limitation, the filing of any material litigation against the Parent
Company or any subsidiary or the existence of any dispute with any
person which involves a reasonable likelihood of such litigation being
commenced); and
(d) within ten (10) days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Parent Company sends to its
shareholders and copies of all registration statements and all
regular, special or periodic reports which it files, or (to its
knowledge) any of its officers or directors file with respect to the
Parent Company, with the Securities and Exchange Commission or with
any securities exchange on which any of its securities are then
listed, and copies of all press releases and other statements made
available generally by the Parent Company to the public concerning
material developments in the Parent Company's and its subsidiaries'
businesses.
Section 13.4 Access Rights. So long as the Note issued to Ropart remains
outstanding, the Parent Company shall permit any representatives designated by
Ropart, upon reasonable notice and during normal business hours to (i) visit and
inspect any of the properties of the Parent Company and its subsidiaries, (ii)
examine the corporate and financial records of the Parent Company and its
subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the
affairs, finances and accounts of any such entity with the directors, officers,
and key employees of the Parent Company and its subsidiaries
Section 13.5 Xxxxxxxxx Guaranty. As additional consideration to Ropart
Asset Management Fund, LLC ("Ropart") to loan the Company $500,000 pursuant to
this Agreement, Xxxxxxx X. Xxxxxxxxx agrees to execute a personal guaranty
substantially in the form of Exhibit B attached hereto.
ARTICLE 14. SPECIAL COVENANTS RELATING ROPART'S PURCHASE
Section 14.1 Confidentiality. As a condition precedent to being granted
special information rights with respect to the Parent Company and its
subsidiaries pursuant to Section 13.3 and access to managers of the Company's
business pursuant to Section 13.4, Ropart agrees to execute and deliver to the
Company a Confidentiality Agreement substantially in the form attached hereto as
Exhibit C.
Section 14.2 Agreement Not to Trade. As further inducement to granting the
special rights under Section 13.3 and Section 13.4, Ropart agrees not to execute
any market trades in the Parent Company's securities so long as Ropart has
utilized, within the preceding six months, the rights provided in Section 13.4
and so long thereafter as Ropart has possession of any nonpublic information
without the prior written consent of the Parent Company. Ropart acknowledges
that the Parent Company will consent only if it determines, in its sole
discretion, that any information in the possession of Ropart is not "material"
within the meaning of the federal securities laws.
ARTICLE 15. MISCELLANEOUS
Section 15.1 Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 15.2 Payments Due on Non-Business Days. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other than a business day shall be
made on the next succeeding business day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
business day.
Section 15.3 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 15.4 Construction. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers to action
to be taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such person.
Section 15.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 15.6 No Personal Liability. Except as provided in Section 13.5 of
this Agreement and as specified in Exhibit B attached hereto, no director,
officer, employee, incorporator, member or shareholder of the Company, the
Parent Company or any subsidiary of the Company will have any liability for any
obligations of the Company, the Parent Company or any subsidiary of the Company
under the Notes or this Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of a Note by
accepting such Note waives and releases all such liability. The waiver and
release will be part of the consideration for issuance of the Notes.
Section 15.7 Governing Law. THIS AGREEMENT, THE NOTES AND ALL ISSUES
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF INDIANA (WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW).
* * * * *
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterpart of this Agreement and return it to the
Company, whereupon the foregoing shall become a binding agreement between you
and the Company.
Very truly yours,
PERFECT LINE, INC.
By: ____________________________
Xxxxxxx X. Xxxxxxxxx
Chairman and Chief Executive Officer
INTERACTIVE MOTORSPORTS AND ENTERTAINMENT CORP.
By: ____________________________
Xxxxxxx X. Xxxxxxxxx
Chairman and Chief Executive Officer
CORPORATE ACKNOWLEDGEMENT
STATE OF INDIANA )
) SS:
COUNTY OF XXXXXX )
On this ___ day of March, 2003, before me, the undersigned officer,
personally appeared Xxxxxxx X. Xxxxxxxxx, known personally to me to be the
Chairman and Chief Executive Officer Officer of each of the above-named
corporations and acknowledged that he, as an officer of each of the above-named
corporations and being authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the name of each of the
above-named corporations by himself as an officer of each of the above-named
corporation.
Witness my hand and notarial seal this ____ day of March, 2003.
My Commission Expires:
------------------------------ ------------------------------------------
Notary Public
My County of Residence:
------------------------------ ------------------------------------------
Printed Name
COUNTERPART SIGNATURE PAGE
ROPART ASSET MANAGEMENT FUND, LLC
By :
----------------------------------------
Manager
TAMPA BAY FINANCIAL, INC.
By:
-----------------------------------------
Xxxx X. Xxxxx, Xx., Chairman of
The Board and Chief Executive
Officer
--------------------------------------------
Xxxxxxx X. Xxxxxxxxx
--------------------------------------------
Xxxx Xxxxxx
OMITTED SCHEDULES
NUMBER DESCRIPTION
A Purchasers
4.3 Parent Company SEC Reports
4.7 Use of Proceeds
9.1(A) Location and Identification of Simulators
