LOAN AGREEMENT
LOAN AGREEMENT, dated as of March__, 2002 (this "Agreement"), by and among
The Xxxxx Partnership Inc., a Nevada corporation with an address at 0 Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxx X0X 0XX, Xxxxxx Xxxxxxx (the "Borrower"), Ocean
Strategic Holdings Ltd., a Guernsey corporation with its administrative office
at 00 Xxxx Xx., Xx. Xxxxxx XX0 XXX Xxxxxx ("Ocean"), and Turbo International
Ltd., a corporation organized under the laws of the Bahamas with its registered
offices at Xxxxxxx House, 00 Xxxxxxx Xxxxxx, X.X. Xxx X-0000, Nassau, Bahamas
("Turbo"). Ocean and Turbo are each also individually referred to herein as the
"Lender" and collectively as the "Lenders."
WHEREAS, the Lenders have agreed to make a loan to the Borrower and the
Borrower has agreed to borrow from the Lenders the aggregate amount of Five
Hundred Thousand and no/100 U.S. Dollars ($500,000.00) (the "Loan"), ninety
percent (90%) of which shall be loaned by Ocean and ten percent (10%) of which
shall be loaned by Turbo, in accordance with the terms and conditions set forth
herein and in the secured convertible promissory note issued to Ocean, annexed
hereto and made a part hereof as Exhibit A (the "Ocean Note"), and the secured
convertible promissory note issued to Turbo, annexed hereto and made a part
hereof as Exhibit B (the "Turbo Note"), (the Ocean Note and the Turbo Note are
each also individually referred to herein as the "Note" and collectively as the
"Notes");
WHEREAS, in consideration for the Loan, the Borrower shall (a) cause to
be transferred to the Lenders, in proportion to their respective percentage of
the Loan, good and marketable title to ten percent (10%) of the issued and
outstanding shares of the capital stock of The Xxxxx Windjammer Resort and Spa
(Bahamas) Ltd., ("Windjammer"), a corporation organized under the laws of the
Bahamas and a wholly-owned subsidiary of The Xxxxx Capital Management Limited
("BCM"), a corporation organized under the laws of the British Virgin Islands
and a wholly-owned subsidiary of the Borrower; and (b) issue a redeemable
Warrant to each of the Lenders and/or their respective assigns to acquire, in
proportion to their respective percentage of the Loan, an aggregate of 3,000,000
shares, subject to adjustment as provided in this Agreement and in the Warrants
(the "Warrant Shares"), of the common stock, par value $.001 per share, of the
Borrower (the "Common Stock") at an exercise price of $.20 per share during the
three year period commencing on the date hereof; and
WHEREAS, the security for the Notes shall be 17,312,500 shares of the
Common Stock, pursuant to a pledge and security agreement dated even date
herewith among the Lenders and Xxxxxxx Financial Holdings Ltd., a corporation
organized under the laws of Belize ("Xxxxxxx"), annexed hereto and made a part
hereof as Exhibit C (the "Security Agreement");
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
SECTION 1. THE LOAN Subject to the terms and conditions of this Agreement, the
Lenders agree to loan to the Borrower and the Borrower agrees to borrow from the
Lenders the aggregate principal amount of Five Hundred Thousand and no/100 U.S.
Dollars ($500,000.00) to be distributed to the Borrower as set forth on Schedule
1 annexed hereto and made a part hereof, ninety percent (90%) of which shall be
loaned by Ocean and ten percent (10%) of which shall be loaned by Turbo, due and
payable in full ninety (90) days from the date hereof (the "Maturity Date"). The
date on which the Loan is disbursed to the Borrower is hereinafter sometimes
referred to as the Closing Date.
SECTION 2. NOTE; PAYMENTS The Loan shall be evidenced by the Notes and shall be
due and payable in full on the Maturity Date. Payment on the Notes shall be made
to the Lenders at their respective addresses set forth in Section 10.7 or such
other address as either Lender shall designate in writing.
SECTION 3. CONVERSION
3.1 If the Loan shall have not been repaid in its entirety within 120 days from
the date hereof, then the Ocean Note and the Turbo Note shall automatically be
converted into 45,000,000 and 5,000,000, respectively, duly issued, fully paid
and nonassessable shares of the Common Stock, (individually, the "Ocean
Conversion Shares" and the "Turbo Conversion Shares, " respectively, and
collectively, the "Conversion Shares") and the Notes shall be cancelled.
3.2 The Borrower shall deliver certificates representing the Conversion Shares
to Xxxxxx Gottbetter & Xxxxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("KGL") to be held by KGL as escrow agent (the "Escrow Agent") pursuant to the
terms and conditions of the escrow agreement annexed hereto and made a part
hereof as Exhibit D (the "Escrow Agreement"). The certificates representing the
Conversion Shares shall be registered in the names of Ocean and Turbo in the
denominations set forth in Schedule 3.2 annexed hereto.
3.3 Upon conversion pursuant to Section 3.1, the Lenders shall surrender the
Notes to the Escrow Agent together with the Notice of Automatic Conversion
annexed as Appendix I to the Conversion and Exercise procedures annexed here to
and made a part hereof as Exhibit J and the Escrow Agent shall within five
business days after its receipt of the Notes, deliver the Conversion Shares to
the Lenders and the cancelled Notes to the Borrower.
3.4 The Conversion Shares shall have the registration rights set forth in the
registration rights agreement annexed hereto and made a part hereof as Exhibit E
(the "Registration Rights Agreement").
3.5 The Borrower shall pay all expenses, issuance taxes and other charges
payable for the preparation, execution and delivery of certificates representing
the Conversion Shares to be issued in connection with conversion of the Notes.
3.6 If the Loan shall have been repaid in its entirety within 120 days from the
date hereof, the Notes shall be cancelled and the Lenders shall surrender the
Notes to the Escrow Agent and the Escrow Agent shall within five business days
after its receipt of the Notes, deliver the cancelled Notes and the Conversion
Shares to the Borrower.
SECTION 4. CONDITIONS PRECEDENT TO THE LOAN The disbursement of the Loan shall
be subject to the satisfaction or waiver by the Lenders of the following
conditions precedent:
4.1. The Lenders shall have received their respective Notes, duly executed and
delivered by the Borrower.
4.2. The Lenders shall have received certificates representing good and
marketable title to ten percent (10%) of the issued and outstanding shares of
the capital stock of Windjammer (the "Windjammer Shares"), in proportion to
their respective percentage of the Loan, free and clear of any and all liens,
claims, encumbrances and adverse interests of any kind (collectively, "Liens"),
in negotiable form, duly endorsed in blank or with stock transfer powers duly
endorsed in blank attached thereto; provided, however, that the Lenders shall
take a second position only to an institutional lender approved by the Lenders,
which approval shall not be unreasonably withheld, in connection with real
estate financing on the Windjammer Project.
4.3 The Lenders shall have received the Shareholders' Agreement dated even date
herewith among the Lenders, BCM and Windjammer, annexed hereto and made a part
hereof as Exhibit F, duly executed and delivered by BCM and Windjammer.
4.4. The Lenders shall have received the Security Agreement duly executed and
delivered by Xxxxxxx as well as originals, each duly executed by Xxxxxxx, of all
financing statements under the Uniform Commercial Code, stock powers and other
documents and instruments required by the Lenders in connection with the
Security Agreement.
4.5 Ocean shall have received a Warrant issued to Ocean and/or its assigns, in
the form of Exhibit G annexed hereto and made a part hereof (the "Ocean
Warrant"), pursuant to which Ocean and/or its assigns shall have the right to
acquire 2,700,000 Warrant Shares, subject to adjustment as provided in this
Agreement and in the Warrant, at an exercise price of $.20 per share during the
three year period commencing on the date hereof. Such Warrant Shares shall have
the registration rights set forth in the Registration Rights Agreement and shall
be held in escrow by the Escrow Agent pursuant to this Agreement and the Escrow
Agreement. Certificates representing such Warrant Shares shall be registered in
the name of Ocean and/or its assigns in the denominations set forth in Schedule
4.5 annexed hereto.
4.6 Turbo shall have received a Warrant issued to Turbo and/or its assigns, in
the form of Exhibit H annexed hereto and made a part hereof (the "Turbo
Warrant"), pursuant to which Turbo and/or its assigns shall have the right to
acquire 300,000 Warrant Shares, subject to adjustment as provided in this
Agreement and in the Warrant, at an exercise price of $.20 per share during the
three year period commencing on the date hereof. Such Warrant Shares shall have
the registration rights set forth in the Registration Rights Agreement and shall
be held in escrow by the Escrow Agent pursuant to this Agreement the Escrow
Agreement. Certificates representing such Warrant Shares shall be registered in
the name of Turbo and/or its assigns in the denominations set forth in Schedule
4.6 annexed hereto.
4.7 The Lenders and the Escrow Agent shall have received the Escrow Agreement
duly executed and delivered by the Borrower.
4.8 The Escrow Agent shall have received the Conversion Shares and the Warrant
Shares for placement in escrow pursuant to this Agreement and the Escrow
Agreement.
4.9. The Lenders shall have received the Registration Rights Agreement, duly
executed and delivered by the Borrower, in connection with registration of the
Conversion Shares and the Warrant Shares under the Securities Act of 1933, as
amended (the "Securities Act").
4.10 The Borrower shall have delivered to the Escrow Agent the duly executed
Power-of-Attorney, annexed hereto and made a part hereof as Exhibit I, pursuant
to Section 6A.11 hereof.
4.11 The Borrower shall have delivered to the Escrow Agent a duly executed
letter of resignation of Xxxxxx X. Xxxxx as a director and officer of the
Borrower (the "The Xxxxx Resignation").
4.12. The Lenders shall have received a legal opinion of counsel to the Company,
substantially in the form annexed as Exhibit K hereto, addressed to the Lenders.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF THE BORROWER As a material
inducement to the Lenders to enter into this Agreement, the Borrower hereby
represents and warrants that:
5.1 The Borrower is a corporation, duly incorporated, validly existing and in
good standing under the laws of the state of Nevada, with the requisite
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Borrower has no subsidiaries
other than as set forth on Schedule 5.1 attached hereto (collectively, the
"Subsidiaries"). Except as set forth on Schedule 5.1, each of the Subsidiaries
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the full corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Except as set forth on Schedule 5.1, each of
the Borrower and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not, individually or in the aggregate, have a material
adverse effect on the results of operations, assets, prospects, or financial
condition of the Borrower and the Subsidiaries, taken as a whole (a "Material
Adverse Effect").
5.2 The Borrower has the requisite corporate power and authority to enter into
and to consummate the transactions contemplated hereby and by each other
Transaction Document (as defined below) and to otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and each of the other Transaction Documents by the Borrower and the
consummation by it of the transactions contemplated hereby and thereby has been
duly authorized by all necessary action on the part of the Borrower. Each of
this Agreement and each of the other Transaction Documents has been or will be
duly executed by the Borrower and when delivered in accordance with the terms
hereof or thereof and will constitute the valid and binding obligation of the
Borrower enforceable against the Borrower in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. "Transaction Documents" means
this Agreement and all exhibits and schedules hereto and all other documents,
instruments and writings required pursuant to this Agreement and the exhibits
hereto.
5.3 The authorized, issued and outstanding capital stock of the Borrower is set
forth on Schedule 5.3. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Borrower
by virtue of this Agreement. Except as disclosed in Schedule 5.3 and except for
the Ocean Warrant and the Turbo Warrant (collectively, the "Warrants") to be
issued pursuant to this Agreement, there are no outstanding options, warrants,
script, rights to subscribe to, registration rights, calls or commitments of any
character whatsoever relating to securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire, any shares of the Common Stock, or contracts, commitments,
understandings, or arrangements by which the Borrower or any Subsidiary is or
may become bound to issue additional shares of the Common Stock, or securities
or rights convertible or exchangeable into shares of the Common Stock. Neither
the Borrower nor any Subsidiary is in violation of any of the provisions of
their respective Certificates of Incorporation, bylaws or other charter
documents.
5.4 The Conversion Shares, Warrants and Warrant Shares have been duly and
validly authorized for issuance, offer and sale pursuant to this Agreement and
constitute the valid and binding obligations of the Borrower enforceable in
accordance with their respective terms. The Borrower has and at all times while
the Warrants are outstanding will continue to maintain an adequate reserve of
shares of the Common Stock to enable it to perform its obligations under this
Agreement and the Warrants. When issued in accordance with the terms hereof, the
Conversion Shares, the Warrants and the Warrant Shares will be duly authorized,
validly issued, fully paid and non-assessable.
5.5 The execution, delivery and performance of this Agreement and the other
Transaction Documents by the Borrower and the consummation by the Borrower of
the transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of its Certificate of Incorporation or
bylaws (each as amended through the date hereof) or (ii) be subject to obtaining
any of the consents referred to in Section 5.6, conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Borrower is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Borrower or its Subsidiaries is
subject (including, but not limited to, those of other countries and the federal
and state securities laws and regulations), or by which any property or asset of
the Borrower or its Subsidiaries is bound or affected, except in the case of
clause (ii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Borrower and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
5.6 Except as specifically set forth in Schedule 5.6, neither the Borrower nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, or make any filing or registration with, any court or other federal, state,
local or other governmental authority or other person or entity in connection
with the execution, delivery and performance by the Borrower of this Agreement
and each of the other Transaction Documents, except for the filing of a
registration statement relating to the Conversion Shares and the Warrant Shares
contemplated by the Registration Rights Agreement with the Securities and
Exchange Commission (the "Commission").
5.7 Except as specifically disclosed in Schedule 5.7, there is no action, suit,
notice of violation, proceeding or investigation pending or threatened against
or affecting the Borrower or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
relates to or challenges the legality, validity or enforceability of any of the
Transaction Documents, the Conversion Shares or the Warrant Shares, (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Borrower
to perform fully on a timely basis its obligations under the Transaction
Documents.
5.8 Except as set forth in Schedule 5.8 hereto, neither the Borrower nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement or the Transaction Documents, (y) have a Material Adverse Effect or
(z) adversely impair the Borrower's ability or obligation to perform fully on a
timely basis its obligations under this Agreement or the Transaction Documents.
5.9 No fees or commission will be payable by the Borrower to any investment
banker, broker, placement agent or bank or otherwise with respect to the
consummation of the transactions contemplated hereby except as provided in
Section 6A.14 hereof.
5.10 The Disclosure Documents (as defined below) are accurate in all material
respects and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
"Disclosure Documents" means (a) the Schedules required to be furnished to the
Lenders by or on behalf of the Borrower pursuant to Section 5 hereof and (b) all
reports required to be and as filed by the Borrower with the Commission under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") during the
two (2) year period prior to the date hereof.
5.11 The Common Stock is registered under the Exchange Act, the Borrower is
subject to the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act, and, except as set forth in Schedule 5.11 hereto, the Borrower is
current in its reporting requirements.
5.12 The Common Stock is listed on the NASD Over-the-Counter Bulletin Board and
has been duly registered with the Commission in accordance with section 12(b) of
the Exchange Act and the National Association of Securities Dealers (the
"NASD"). Said Common Stock is the only "equity security" (as defined in the
Exchange Act) of Borrower required to be registered under Section 12 of the
Exchange Act.
5.13 The Borrower has delivered to the Lenders a true and correct schedule of
liabilities as set forth on Schedule 5.13.
5.14 If at any time during the three year period commencing on the date hereof,
the Borrower shall desire to enter into any financing arrangement, it shall
first offer any such financing arrangement to the Lenders on the identical terms
and conditions as those offered by or to any third party. The Lenders shall have
72 hours from receipt of written notification from the Borrower of any such
financing arrangement to notify the Borrower in writing of their acceptance of
any such financing.
SECTION 6. COVENANTS So long as all or any portion of the Notes remains
outstanding, the Borrower hereby agrees as follows:
6.1 The Borrower shall comply in all material respects with all applicable laws,
rules, regulations and orders of, and restrictions imposed by, governmental
authorities, the violation of which could reasonably be expected to have a
Material Adverse Effect.
6.2 The Borrower shall allow representatives of the Lenders, upon reasonable
prior notice to the Borrower, to inspect, copy and make extracts of all
applicable records, and all properties, of the Borrower at any reasonable time
for any reasonable purpose.
6.3 The Borrower shall promptly notify the Lenders of any litigation instituted,
or to the Borrower's knowledge, threatened against the Borrower.
SECTION 6A. OTHER AGREEMENTS OF THE PARTIES
6A.1 The Conversion Shares and the Warrants are being issued pursuant to
Regulation S of the Securities Act. The Conversion Shares, the Warrants and the
Warrant Shares will bear restrictions on transfer, and will carry a restrictive
legend with respect to the exemption from registration under the Securities Act.
The transfer and resale of the Conversion Shares, the Warrants and the Warrant
Shares may be made only pursuant to registration under the Securities Act or an
exemption from such registration.
6A.2 As long as the Lenders own any Conversion Shares, Warrants or Warrant
Shares, the Borrower will furnish to the Lenders, promptly after they have been
prepared, its annual report and other reports and filings required by Section
13(a) or 15(d) of the Exchange Act that are not available on XXXXX (the
"Non-Xxxxx Filings").
6A.3 The Borrower shall, on a continuing basis, (i) advise the Lenders promptly
after obtaining knowledge of, and, if requested by the Lenders, confirm such
advice in writing, of (A) the issuance by any state securities commission of any
stop order suspending the qualification or exemption from qualification of the
Conversion Shares, the Warrants or the Warrant Shares, for offering or sale in
any jurisdiction, or the initiation of any proceeding for such purpose by any
state securities commission or other regulatory authority, or (B) any event that
makes any statement of a material fact made in the Disclosure Documents untrue
or that requires the making of any additions to or changes in the Disclosure
Documents in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, (ii) use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Conversion Shares, the
Warrants or the Warrant Shares under any state securities or Blue Sky laws, and
(iii) if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Conversion Shares, the Warrants or the Warrant Shares under
any such laws, and use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time.
6A.4 The Borrower shall furnish the Lenders, without charge, as many copies of
the Non-Xxxxx Filings and any amendments or supplements thereto as the Lenders
may reasonably request. The Borrower consents to the use of the Disclosure
Documents and any amendments and supplements to any of them by the Lenders in
connection with resales of the Conversion Shares, the Warrants or the Warrant
Shares.
6A.5 If any event shall occur as a result of which, in the reasonable judgment
of the Borrower or the Lenders, it becomes necessary or advisable to amend or
supplement any of the Disclosure Documents in order to make the statements
therein, in the light of the circumstances at the time such Disclosure
Document(s) were delivered to the Lenders, not misleading, or if it becomes
necessary to amend or supplement any of the Disclosure Documents to comply with
applicable law, the Borrower shall promptly prepare an appropriate amendment or
supplement to each such document in form and substance reasonably satisfactory
to both the Lenders and Borrower so that (i) as so amended or supplemented, each
such document will not include an untrue statement of material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to the Lenders,
not misleading and (ii) the Disclosure Documents will comply with applicable
law.
6A.6 The Borrower shall, for so long as any of the Conversion Shares, Warrants
or Warrant Shares remains outstanding and during any period in which the
Borrower is not subject to Section 13 or 15(d) of the Exchange Act, make
available to any registered holder of the Conversion Shares, Warrants or Warrant
Shares in connection with any sale thereof and any prospective purchaser of such
Conversion Shares, Warrants or Warrant Shares from such holder, such information
in accordance with Rule 144(c) promulgated under the Securities Act as is
required to sell the Conversion Shares, Warrants or Warrant Shares under Rule
144 promulgated under the Securities Act.
6A.7 The Borrower shall not (i) distribute any offering materials in connection
with the offering and sale of the Conversion Shares, Warrants or Warrant Shares
other than the Disclosure Documents and any amendments and supplements thereto
prepared in compliance herewith or (ii) solicit any offer to buy or sell the
Conversion Shares, Warrants, or Warrant Shares by means of any form of general
solicitation or advertising.
6A.8 If not otherwise publicly available, the Borrower shall furnish to the
Lenders, promptly after filing with the Commission, a copy of all financial
statements for any period subsequent to the period covered by the financial
statements included in the Disclosure Documents until the full exercise of the
Warrants.
6A.9 From the date hereof through the full exercise of the Warrants, the
Borrower shall not and shall cause the Subsidiaries not to, without the prior
written consent of the Lenders, (i) amend its certificate or articles of
incorporation, by-laws or other charter documents so as to adversely affect any
rights of the Lenders; (ii) split, combine or reclassify its outstanding capital
stock; (iii) declare, authorize, set aside or pay any dividend or other
distribution with respect to the Common Stock; (iv) redeem, repurchase or offer
to repurchase or otherwise acquire shares of its Common Stock; or (v) enter into
any agreement with respect to any of the foregoing.
6A.10 The Borrower shall (a) use its best efforts to maintain the listing of its
Common Stock on the OTCBB or such other exchange on which the Common Stock is
then listed until expiration of the period during which the Warrants may be
exercised and (b) shall provide to the Lenders evidence of such listing.
6A.11 To effectuate the terms and provisions of this Agreement and its exhibits,
the Borrower hereby agrees to give a power of attorney as is evidenced by
Exhibit I annexed hereto. All acts done under such power of attorney are hereby
ratified and approved and neither the Attorney-in-Fact nor any designee or agent
thereof shall be liable for any acts of commission or omission, for any error of
judgment or for any mistake of fact or law, as long as the Attorney-in-Fact is
operating within the scope of the power of attorney and this Agreement and its
exhibits. The power of attorney, being coupled with an interest, shall be
irrevocable while any of the Notes remain outstanding, any of the Warrants
remains unexercised or any portion of this Agreement or its exhibits remains
unsatisfied. In addition, the Borrower shall give the Attorney-in-Fact
resolutions executed by the Board of Directors of the Borrower which authorize
future issuances of the Warrant Shares for the Warrants, and which resolutions
state that they are irrevocable while any of the Notes remain outstanding, any
of the Warrants remains unexercised or any portion of this Agreement or its
exhibits remains unsatisfied.
6A.12 In accordance with the Registration Rights Agreement, the Borrower shall
qualify the Conversion Shares and the Warrant Shares under the securities or
Blue Sky laws of such jurisdictions as the Lenders may reasonably request and
shall continue such qualification at all times through the forth anniversary of
the date the Loan is disbursed to the Borrower; provided, however, that neither
the Borrower nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to take
any action that would subject the Borrower to general service of process in any
such jurisdiction where it is not then so subject or subject the Borrower to any
material tax in any such jurisdiction where it is not then so subject.
6A.13 Until the earlier of (a) the Maturity Date and (b) the full exercise of
the Warrants, the Borrower and each Subsidiary will not, in a single transaction
or a series of related transactions, (i) consolidate with or merge with or into
any other entity, or (ii) permit any other entity to consolidate with or merge
into it, unless (w) either (A) the Borrower shall be the survivor of such merger
or consolidation or (B) the surviving entity shall expressly assume by
supplemental agreement all of the obligations of the Borrower under this
Agreement and the Transaction Documents; (x) immediately before and immediately
after giving effect to such transactions (including any indebtedness incurred or
anticipated to be incurred in connection with the transactions), no event of
default shall have occurred and be continuing; (y) if the Borrower is not the
surviving entity, such surviving entity's common shares will be listed on either
The New York Stock Exchange, American Stock Exchange, Nasdaq National Market or
Nasdaq SmallCap Market, or the OTCBB on or prior to the closing of such
transaction(s) and (z) the Borrower shall have delivered to Lenders an officers'
certificate and opinion of counsel, each stating that such consolidation, merger
or transfer complies with this Agreement and the Transaction Documents, that the
surviving entity agrees to be bound thereby and that all conditions precedent in
this Agreement relating to such transaction(s) have been satisfied.
6A.14 The Borrower will pay the following fees and expenses in connection with
the transactions contemplated hereby (a) to KGL (i) $15,000 for document
preparation fees, and (ii) all reasonable disbursements and expenses incurred by
KGL in connection with such document preparation fees and (b) $5,000 to the
Escrow Agent for the escrow agent fee. The fees and expenses set forth in (a)
and (b) will be paid to KGL by deducing the amount of such fees and expenses
from the Loan proceeds to be received by the Borrower hereunder prior to
disbursement thereof to the Borrower pursuant to Schedule 1.
6A.15 Until the Loan is repaid in full, the Borrower hereby agrees that it shall
not offer or issue in excess of 5,000,000 shares of the Common Stock, either
directly or indirectly through any convertible/exchangeable security, without
the prior written consent of the Lenders.
6A.16 In the event that the Loan is repaid in full but the Windjammer Project
shall not have Closed within ninety (90) days from the date hereof, the Borrower
hereby agrees that the Lenders shall have the sole option to receive an
interest, free and clear of any and all liens, on the same terms and conditions
as the acquisition of a certain parcel of real estate located in St. Kitts for
$30,000,000 contemplated by Windjammer (the "Windjammer Project"), in each and
every other next succeeding purchase, agreement to purchase, option to purchase,
hypothecation, transfer or other transaction similar in nature to the Windjammer
Project (individually, a "Transaction" and collectively, "Transactions")
contemplated or undertaken by the Borrower, directly or indirectly, until such
time as the Lenders shall have received an aggregate ownership interest of
$3,000,000 in one or more Transactions; provided, however, that in no event
shall the Lenders interest exceed twenty-five percent (25%) of any one
Transaction. Within three (3) business days of the Borrower's execution of a
letter of intent or any similar written term sheet (the "Terms") in connection
with a Transaction, the Borrower shall notify the Lenders of such Transaction
and deliver a copy of the Terms of such Transaction to the Lenders. Upon the
Borrower's receipt of the due diligence materials for such Transaction, the
Borrower shall promptly deliver same to the Lenders and the Lenders shall have
five (5) business days from their receipt of all of the due diligence materials
for such Transaction to accept the Transaction.
6A.17 The Borrower hereby agrees that the Lenders shall have the right, at the
Lenders' option, to loan up to $500,000 in four (4) separate Transactions upon
the same terms and conditions as this Agreement, except as set forth on Schedule
6A.17, at any time for the greater of (a) three (3) years from the date of the
closing of the Windjammer Project, or (b) while any loan made pursuant to this
Agreement or any subsequent agreement by the Lenders to the Borrower is
outstanding or (c) while the Borrower is in default in any transaction with the
Lenders (individually, a "Loan Right" and Collectively, "Four Loan Rights").
Within three (3) business days of the Borrower's execution of a letter of intent
or any similar written term sheet (the "Terms") in connection with a
Transaction, the Borrower shall notify the Lenders of such Transaction and
deliver a copy of the Terms such Transaction to the Lenders. Upon the Borrower's
receipt of the due diligence materials for such Transaction, the Borrower shall
promptly deliver same to the Lenders and the Lenders shall have five (5)
business days from their receipt of all of the due diligence materials for such
Transaction to accept the Transaction. The Borrower shall have the right to
acquire from the Lenders any and all of the Four Loan Rights in consideration
for (i) $750,000 and (ii) the Lenders' right to retain the immediately next
succeeding Loan Right, by notifying the Lenders of the Borrower's exercise of
such right within 10 days prior thereto.
6A.18 The Borrower hereby agrees that it shall take all corporate action
necessary to ensure that upon the Closing Date Xxxxxx X. Xxxxx shall be a duly
elected member of the Board of Directors of the Borrower.
6A.19 Exhibit J sets forth the procedures with respect to the conversion of the
Notes and the exercise of the Warrants, including the forms of Notice of
Conversion and Notice of Exercise to be provided upon conversion or exercise,
and such other information and instructions as may be reasonably necessary to
enable the Lenders or any permitted transferee(s) to effectuate conversion or
exercise smoothly and expeditiously. Upon each and every exercise by the Lenders
the aggregate number of Warrant Shares that the Lenders shall be entitled to
exercise shall be subject to adjustment based upon the following formula;
provided, however, that in no event shall the aggregate number of Warrant Shares
that the Lenders are entitled to be less than 2,000,000:
No. of Warrant Shares = ([the total number of issued and outstanding shares
of the Common Stock] x 0.05) - 2,000,000
The Borrower agrees that, at any time the aggregate number of Warrant Shares to
which the Lenders are entitled exceeds 3,000,000 shares, the Borrower shall
issue additional stock certificates in the names of each of the Lenders, in
proportion to their respective percentage of the Loan, and deliver same to the
Escrow Agent to be held in escrow pursuant to this Agreement and the Escrow
Agreement. In the event that the aggregate number of Warrant Shares to which the
Lenders are entitled is less than 3,000,000 shares, then the Escrow Agent shall
return to the Borrower such excess number of Warrant Shares held in escrow by
the Escrow Agent.
SECTION 7. THE LENDERS MAY PERFORM If the Borrower fails to perform any
agreement contained herein or in the Notes, the Lenders may cure such event of
default, and the expenses of the Lenders incurred in connection therewith shall
be payable by the Borrower.
SECTION 8. INDEMNITY
8.1 Indemnification:
(a) The Borrower shall, without limitation as to time, indemnify and
hold harmless Global Emerging Markets, Ltd.("GEM"), GEM Advisors, Inc.("XXXX")
and the Lenders and their respective officers, directors, agents, employees and
affiliates, each person or entity who controls GEM, XXXX or the Lenders (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (each such person or entity, a "Control Person") and the officers,
directors, agents, employees and affiliates of each such Control Person, to the
fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, costs of
preparation and attorneys' fees) and expenses (collectively, "Losses"), as
incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by the Borrower under this
Agreement or any other Transaction Document.
(b) Each Lender, severally and not jointly, shall without limitation as
to time, indemnify and hold harmless the Borrower, its officers, directors,
agents and employees, each Control Person and the officers, directors, agents
and employees of each Control Person, to the fullest extent permitted by
application law, from and against any and all Losses, as incurred, arising out
of, or relating to, a breach or breaches of any representation, warranty,
covenant or agreement by such Lender under this Agreement or the other
Transaction Documents.
8.2 If any action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened (collectively, "Proceeding") shall be brought or
asserted against any person or entity entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the person or
entity from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impeded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose and such counsel employed by
the Indemnified Party shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section) shall be paid to the
Indemnified Party, as incurred, within ten (10) Business Days of written notice
thereof to the Indemnifying Party.
No right of indemnification under this Section 8 shall be available as
to a particular Indemnified Party if there is a non-appealable final judicial
determination that such Losses arise solely out of the negligence or bad faith
of such Indemnified Party in performing the obligations of such Indemnified
Party under this Agreement or a breach by such Indemnified Party of its
obligations under this Agreement.
8.3 If a claim for indemnification under this Section 8 is unavailable to an
Indemnified Party or is insufficient to hold such Indemnified Party harmless for
any Losses in respect of which this Section 8 would apply by its terms (other
than by reason of exceptions provided in this Section 8.3), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Party on the other and the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether there was a judicial determination
that such Losses arise in part out of the negligence or bad faith of the
Indemnified Party in performing the obligations of such Indemnified Party under
this Agreement or the Indemnified Party's breach of its obligations under this
Agreement. The amount paid or payable by a party as a result of any Losses shall
be deemed to include any attorneys' or other fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for in
this Section was available to such party.
8.4 The indemnity and contribution agreements contained in this Section are in
addition to any obligation or liability that the Indemnifying Parties may have
to the Indemnified Parties.
SECTION 9. EVENTS OF DEFAULT; REMEDIES
9.1 An event of default shall be deemed to have occurred upon the occurrence of
any of the following events:
(a) any amount payable on the Loan shall not be paid on the
Maturity Date and shall not have been cured within thirty (30)
days from the Maturity Date; or
(b) except with respect to Section 6A.5, a material breach or
failure of performance by the Borrower of any covenant,
condition or agreement on its part to be observed or performed
contained in this Agreement or the Notes which shall not have
been cured within five (5) business days after receipt by the
Borrower of notice thereof given by the Lenders; or
(c) any material breach or failure of performance by the Borrower
under Section 6A.5.
(d) any material representation or warranty made by the Borrower
herein shall prove to have been false or breached in any
material respect on and as of the date on which made; or
(e) the Borrower shall be adjudged to be insolvent or unable to
pay its debts as they mature or any receiver, trustee,
liquidator, custodian or like officer be appointed to take
custody, possession or control of any property of the
Borrower; or
(f) there shall be in effect any statute, rule, law or regulation
that prohibits the disbursement of the Loan or if the
disbursement of the Loan would violate any non-appealable
final judgment, order, decree, ruling or injunction of any
court of or governmental authority having competent
jurisdiction; or
(g) the Borrower's Common Stock is not registered under Section 12
of the Exchange Act; or
(h) except as set forth in Schedule 5.11, the Borrower is not
current in its reporting obligations under Section 13 or
15(d) of the Exchange Act; or
(i) an event occurs prior to the disbursement of the Loan
requiring the Borrower to report such event to the SEC on Form
8-K and not otherwise set forth in Schedule 9.1, provided,
however, such event shall only include the following items
under Form 8-K: Item 1, Item 2 to the extent that any event is
reported under Item 2 that involves a change in the nature of
the Borrower's business; Item 3; or Item 4 (provided further,
that as to Item 4, only if the event requires disclosure under
Item 304(a)(1)(iv) under Regulation S-B); or
(j) trading in the Common Stock has been suspended, delisted, or
otherwise ceased by the Commission or the NASD or other
exchange or the Nasdaq (whether the National Market or
otherwise), except for any suspension of trading of limited
duration solely to permit dissemination of material
information regarding the Borrower, and not reinstated within
ten (10) business days; or
(k) the transfer agent for the Common Stock fails to deliver
certificates for the Conversion Shares and/or the Warrant
Shares as required by this Agreement.
9.2 If an event of default shall have occurred and be continuing:
(a) The Lenders may (by written notice delivered to the Borrower)
declare all or any portion of the Loan immediately due and
payable.
(b) The Xxxxx resignation shall become effective.
(c) The Lenders shall also be entitled to exercise all their
rights and remedies as may exist at law or as set forth in
this Agreement and/or the Notes.
SECTION 10. MISCELLANEOUS
10.1 Except as set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Borrower
shall pay the fees of the Escrow Agent and all stamp and other taxes and duties
levied in connection with the issuance of the Conversion Shares and the Warrants
and, upon exercise thereof, the Warrant Shares, pursuant hereto. The Lenders
shall be responsible for any taxes payable by the Lenders that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement or any other Transaction Document.
10.2 All covenants and agreements in this Agreement by or on behalf of any of
the parties shall bind and inure to the benefit of their respective successors
and assigns, including any subsequent holder of the Notes. This Agreement may
not be assigned by the Borrower unless the Lenders shall have given prior
written consent thereto.
10.3 Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under applicable law, then such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement.
10.4 This Agreement may be executed in separate counterparts and delivered by
facsimile transmission, each of which when so executed and delivered shall be
deemed to be an original hereof, and all of which when taken together shall
constitute one and the same agreement.
10.5 Descriptive headings in this Agreement are inserted for convenience of
reference only and are not intended to be part of or affect the meaning or
interpretation of this Agreement.
10.6 The parties hereto acknowledge that the transactions contemplated by this
Agreement and the exhibits hereto bear a reasonable relation to the state of New
York. This Agreement shall be enforced in accordance with, and all questions
regarding the construction, validity, interpretation and purpose of this
agreement shall be governed by, the internal laws of the state of New York,
without giving effect to provisions thereof regarding conflict of laws. Any
action to enforce the terms of this Agreement or any of its exhibits shall be
brought exclusively in the state and/or federal courts situate in the county and
state of New York. Service of process in any action by either Lenders to enforce
the terms of this Agreement may be made by serving a copy of the summons and
complaint, in addition to any other relevant documents, by commercial overnight
courier to the Borrower at its principal address set forth in this Agreement.
10.7 Any notice provided for in this Agreement must be in writing and must be
either (a) hand delivered, (b) mailed by registered or certified first class
mail, postage prepaid with return receipt requested, (c) sent by reputable
overnight courier service for next business morning delivery, or (d) sent by
telecopy to the recipient at the address/telecopy number below indicated:
If to Ocean: Ocean Strategic Holdings Ltd.
00 Xxxx Xxxxxx
Xx. Xxxxxx XX0 XXX Xxxxxx
Attn.:
Telephone:
Facsimile:
With a copy to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn.: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Turbo: Turbo International Ltd.
Xxxxxxx Xxxxx
00 Xxxxxxx Xxxxxx
P.O. Box N-7755
Nassau, Bahamas
Attn.:
Telephone:
Facsimile:
With a copy to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn.: Xxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Borrower: The Xxxxx Partnership Inc.
0 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxx X0X 0XX
Xxxxxx Xxxxxxx
Attn.:
Telephone:
Facsimile:
With a copy to: Vanderkam & Xxxxxxx
000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn.: Xxxxx Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
or such other address/telecopy number or to the attention of such other person
as the recipient party shall have specified by prior written notice to the
sending party.
Any notice under this Agreement shall be deemed to have been given (i) on the
date such notice is hand delivered, (ii) three (3) days after the date of
mailing if mailed by certified or registered mail, (iii) on the business day
next following the day notice is sent via overnight courier service, or (iv) as
of the beginning of the next day if such notice is sent by telecopy.
10.8 This Agreement and all exhibits and schedules hereto embody the complete
agreement and understanding between the parties with respect to the subject
matter hereof and thereof and supersedes and preempts any prior understandings,
agreements and/or representations by or between the parties, written or oral,
related to the subject matter hereof in any way.
10.9 Notwithstanding any rule of law or custom to the contrary, neither this
Agreement nor any other agreement or document collateral to or otherwise
relating to this Agreement shall be interpreted or construed against any party
merely by reason of the fact that such agreement or document was prepared by or
at the direction of such party or that such party caused this Agreement to be
drafted.
[Signature page to Follow]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
The Xxxxx Partnership Inc.
By:
------------------------------
Name:
Title:
Ocean Strategic Holdings Ltd.
By:
------------------------------
Name:
Title:
Turbo International Ltd.
By:
------------------------------
Name:
Title:
Schedule 1
(a) $150,000 upon execution and delivery of this agreement, less $10,000 to be
paid to KGL pursuant to Section 6A.14;
(b) $50,000 upon the Lender's and/or the Borrower's receipt of all of the
Transaction Documents duly executed and delivered pursuant to this
Agreement, less $5,000 to be paid to KGL pursuant to Section 6A.14;
(c) 100,000 upon the Borrower's filing of its (i) annual report on Form 10-K
for the year ended December 31, 2001 and amendment to its current report on
Form 8-K dated December 5, 2001 containing all of the financial statements
to be filed in connection there with, less any expenses to be paid to KGL
pursuant to Section 6A.14; and
(d) $200,000 upon the Lenders receipt of a copy of a written loan commitment to
the Borrower from a reputable lending institution approved by the Lenders,
which approval shall not be unreasonably withheld, for no less than
$18,000,000, less $5,000 to be paid to KGL pursuant to Section 6A.14.
Schedule 3.2
Ocean Strategic Holdings Ltd. 27 certificates each for 100,000 shares
Turbo International Ltd. 6 certificates each for 50,000 shares
Schedule 4.5
Schedule 4.6
Schedule 5.1
Subsidiaries
Schedule 5.3
Capitalization
Schedule 5.6
Consents and Approvals
Schedule 5.7
Litigation and Claims
Schedule 5.8
Defaults and Violations
Schedule 5.11
Delinquent Reports
Schedule 6A.17
Conversion Shares
(a) First option to loan $500,000 - The secured convertible promissory
note shall be convertible into 20,000,000 shares of Common Stock
and the Warrants shall entitle the holder to acquire 2,000,000
shares at an exercise price of $.30 per share
(b) Second option to loan $500,000 - The secured convertible
promissory note shall be convertible into 15,000,000 for shares of
Common Stock and the Warrants shall entitle the holder to acquire
1,500,000 shares at an exercise price of $.35 per share.
(c) Third option to loan $500,000 - The secured convertible promissory
note shall be convertible into 10,000,000 for shares of Common
Stock and the Warrants shall entitle the holder to acquire
1,000,000 shares at an exercise price of $.40 per share.
(d) Fourth option to loan $500,000 - The secured convertible
promissory note shall be convertible into 5,000,000 for shares of
Common Stock and the Warrants shall entitle the holder to acquire
500,000 shares at an exercise price of $.45 per share.
Schedule 9.1
Form 8-K Disclosure Obligations
