EXHIBIT 10.28
SUBSCRIPTION AND PURCHASE AGREEMENT
12% Subordinated Promissory Notes Due August 31, 2003
THIS SUBSCRIPTION AND PURCHASE AGREEMENT (the "Agreement") dated as of the
_________day of _________________, 200_, by and between RENAISSANCE
ENTERTAINMENT CORPORATION, a Colorado corporation (the "Company"), and
______________(the "Investor"). Investor and the other persons who have entered
into similar Subscription and Purchase Agreements with the Company are herein
collectively referred to as the "Investors."
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth in this Agreement, the Company and the
Investor mutually agree as follows:
ARTICLE 1
DESCRIPTION OF PROPOSED FINANCING
1.1 AUTHORIZATION OF THE NOTES. The Company has authorized the issuance
and sale of a maximum of $1,000,000 aggregate principal amount of twelve percent
(12%) Subordinated Promissory Notes Due August 31, 2003 in Units, each
consisting of two promissory notes of equal principal amount (A Notes and B
Notes). The A Notes and the B Notes shall be identical except that the B Notes
shall be convertible to the Company's Common Stock as provided in Section 8.
Each note shall be in the principal amount of One Thousand Dollars ($1,000) or a
multiple thereof (the A Notes and B Notes issued pursuant to this Agreement and
the other notes being issued pursuant to similar Subscription and Purchase
Agreements entered into between the Company and Investors being herein referred
to collectively as the "Notes"). The Notes shall be in substantially the form
attached as Appendices A and B to this Agreement.
1.2 PURCHASE AND SALE OF THE NOTES. Subject to the terms and conditions
of this Agreement and in reliance upon the representations and warranties
contained herein, the Company agrees to sell to Investors the principal amount
of Notes, equally divided into A Notes and B Notes for which each such Investor
shall subscribe. The exact amount of each Investor's subscription is set forth
in section 16.2 hereof.
1.3 CLOSING. Closing(s) of the purchase and sale of the Notes
contemplated by this Agreement (herein the "Closing") shall take place at such
times as agreed between the Company and the Investors. At the Closing, the
Company shall deliver to each Investor two or more Notes made payable to the
order of such Investor, against delivery to the Company by the Investor of a
certified or cashier's check or other form of payment acceptable to the Company
in the amount of the purchase price of the Notes subscribed for in section 16.2
below.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors that:
2.1 DISCLOSURE. The Company has fully provided the Investor with all the
information which the Investor has requested for deciding whether to purchase
the Notes, and all information which the Company reasonably believes is
necessary to enable the Investor to make an informed decision, including copies
of the Company's annual report on Form 10-KSB for the year ended December 31,
2000 and the Company's quarterly report on Form 10-QSB for the quarter ended
September 30, 2001.
2.2 BINDING OBLIGATION. This Agreement and each additional agreement
expressly contemplated by this Agreement, constitute a valid and legally binding
obligation of the Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor represents and warrants that:
3.1 HIGH RISK INVESTMENT. The Investor is aware that investment in the
Notes involves risks. The Investor represents that Investor has read and
carefully considered the disclosures set forth in the documents referred to in
section 2.1 above and in this Subscription and Purchase Agreement, and
understands that an investment in the Notes should be considered only by a
person able to withstand a total loss of such investment.
3.2 BINDING OBLIGATION. This Agreement and each additional agreement
expressly contemplated by this Agreement, constitute a valid and legally binding
obligation of the Investor.
3.3 CORPORATE INVESTORS. If the Investor is a corporation, it hereby
represents and warrants that:
(a) ORGANIZATION AND STANDING. The Investor is a corporation duly
and validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all requisite corporate power and
authority to own its properties and to carry on its business as now
conducted.
(b) AUTHORIZATION. All corporate action on the part of the Investor,
its officers and directors necessary for the authorization, execution and
delivery of this
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Agreement and all additional agreements expressly contemplated by this
Agreement and the performance of all obligations of the Investor hereunder
have been taken.
ARTICLE 4
FEDERAL AND OTHER SECURITIES LAWS
4.1 INVESTMENT REPRESENTATIONS AND WARRANTIES. The Investor further
represents and warrants that:
(a) INVESTMENT EXPERIENCE. The Investor represents that Investor is
experienced in evaluating and extending financing to companies such as the
Company, has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of the
investment, and has the ability to bear the economic risks of the
investment and to make an informed investment decision with respect
thereto. The Investor further represents that Investor has read the
documents referred to in section 2.1 above and that Investor has had,
during the course of the transaction and prior to the purchase of the
Notes, the opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of the Offering and to obtain
additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to or to
which Investor had access.
(b) INVESTOR REPRESENTATIVE. If the Investor has used the services
of a Purchaser Representative, the Investor has received confirmation in
writing from such Purchaser Representative concerning the specific details
of any and all past, present or future relationships, actual or
contemplated, between himself or his affiliates and the Company or any of
its affiliates, and any compensation received or to be received as a result
of any such relationships.
(c) ACQUISITION FOR INVESTMENT FOR INVESTOR'S OWN ACCOUNT. This
Agreement is made with the Investor in reliance upon Investor's
representation to the Company, which by its acceptance hereof the Investor
hereby confirms and which by acceptance of any Note, the Holder thereof
shall also confirm, that the Notes are being and the shares of Common Stock
issuable upon conversion of the B Notes will be, unless such shares have
been registered pursuant to the Securities Act of 1933, as amended (the
"1933 Act") and applicable state blue sky laws, acquired for investment for
Investor's own account, not as a nominee or agent and not with a view to
the sale or distribution of any part thereof, and that Investor has no
present intention of selling, granting participation in, or otherwise
distributing the same. Any resales of the Notes or any shares of Common
Stock issued upon the conversion of the B Note will be in conformity with
applicable law. By executing this Agreement, Investor further represents
that Investor does not have any contract, undertaking, agreement, or
arrangement with any person in violation of any United
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States federal or state law to sell, transfer, or grant participations to
such person, or to any third person, with respect to the Notes or any
shares of Common Stock issued upon the conversion of the B Notes. Investor
realizes that the basis for the exemption from the registration
requirements of the 1933 Act, relied upon by the Company in connection with
the sale of the Notes, may not be present if, notwithstanding such
representation, the Investor has in mind merely acquiring the Notes for a
fixed or determinable period and selling the Notes in the future, and
Investor hereby confirms the absence of any such intention.
(d) TRANSFER OR DISPOSITION OF SECURITIES. The Investor understands
that the Notes and any shares of Common Stock issued upon the conversion of
the B Notes may not be sold, transferred, or otherwise disposed of without
registration under the 1933 Act, and that in the absence of an effective
registration statement, such securities must be held indefinitely. The
Investor represents that, in the absence of an effective registration
statement, it will sell, transfer, or otherwise dispose of such securities
only in a manner consistent with the representations set forth herein and
in accordance with the provisions of this Agreement.
4.2 CERTIFICATE LEGENDS. The Investor agrees that the Notes and any
shares of Common Stock issued upon the conversation of the B Notes shall bear a
legend in substantially the following form, and by which the Investor agrees to
be bound:
THE SECURITY DESCRIBED HEREIN HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR UNDER THE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. NO SALE OR DISTRIBUTION OF THIS SECURITY
MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND APPLICABLE STATE BLUE
SKY LAWS.
ARTICLE 5
CONDITIONS TO INVESTOR'S OBLIGATIONS AT THE CLOSING
The obligations of the Investor under section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING DATE. The
representations and warranties of the Company contained in Article 2 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing.
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5.2 PERFORMANCE. The Company shall have conformed and complied with all
agreements and conditions contained in this Agreement required to be performed
or complied with by it on or before the Closing.
5.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state, that are required in connection with the lawful issuance and sale of the
Notes pursuant to this Agreement shall have been duly obtained and shall be
effective on and as of the Closing.
5.4 DELIVERY OF NOTES. The Investor shall have received two or more Notes
at the Closing.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING
The obligations of the Company under section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions as to the Investor:
6.1 REPRESENTATIONS AND WARRANTIES TRUE ON THE CLOSING. The
representations and warranties of the Investor contained in Articles 3 and 4
shall be true on and as of the Closing with the same force and effect as if they
had been made at the Closing.
6.2 QUALIFICATIONS. All authorizations, approvals, or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Notes pursuant to this Agreement shall have been duly obtained and shall be
effective on and as of the Closing.
6.3 PAYMENT OF PURCHASE PRICE. Investor shall have delivered to the
Company the total consideration for the Notes which the Investor is purchasing
at the Closing.
ARTICLE 7
NOTES
7.1 PRINCIPAL AND INTEREST PAYMENTS. The Company shall pay interest to
the registered holders of the Notes (the "Holders") on the principal amount of
the Notes on the first business day of each calendar quarter (the "Interest
Payment Dates") of each year commencing on March 1, 2002, at the rate of Twelve
Percent (12%) per annum, accruing from the date of issuance after as well as
before maturity and default and after judgment. Accrued but unpaid interest
shall bear interest at the rate of Twelve Percent (12%) per annum until paid,
commencing with the date on which such interest was due and payable. Unless, in
the case of a B Note, earlier converted into Common Stock in accordance with
Article 8 hereof, in the case of any Note or accelerated in accordance with
Article 12, the
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entire outstanding amount of the Notes and all accrued but unpaid interest
shall be due and payable in full on August 31, 2003.
7.2 REISSUE OF NOTES. No Note shall be reissued with respect to the
principal amount of any Notes which are paid pursuant to this Agreement, and the
Company shall cancel and terminate any Note which has been fully paid or
presented to it for exchange pursuant to any of the provisions of this
Agreement.
7.3 REGISTRATION AND TRANSFER OF NOTES.
(a) The Company shall, at all times while any Notes are outstanding,
act as the registrar of the Notes and shall cause to be kept at its
principal office in the City of Louisville, Colorado, or in such other
place or places and by such other registrar or registrars, if any, as the
Company may designate, a register in which shall be entered the names and
addresses of the Holders of Notes and particulars of the Notes held by them
respectively and of all transfers of Notes.
(b) No transfer of a Note shall be valid unless made by the Holder
or his executors or administrators or other legal representatives or his or
their attorney duly appointed by an instrument in writing in form and
execution satisfactory to the Company, upon compliance with the provisions
of this Agreement and the Notes and such other requirements as the Company
and/or other registrar may reasonably prescribe. Unless such transfer shall
have been duly entered on the appropriate register and/or noted on such
Note by the Company or other registrar, the person in whose name a Note is
registered shall be deemed to be the owner thereof.
7.4 EXCHANGES OF NOTES. Notes are issuable in denominations of One
Thousand Dollars ($1,000) and multiples thereof. Notes of any authorized
denomination may be exchanged for Notes of any other authorized denomination or
denominations, any such exchange to be for Notes of the same type, A Notes or B
Notes, of an equivalent aggregate principal amount, as requested by the Holders,
and bearing the same interest rate and date of maturity as the original Notes.
Any exchange of Notes may be made at the offices of the Company or at the
offices of any registrar where a register is maintained for the Notes pursuant
to the provisions of section 7.3. Any Notes tendered for exchange together with
a sum sufficient to cover any tax or other governmental charge payable in
connection with the transfer shall be surrendered to the Company or appropriate
registrar and shall be cancelled.
ARTICLE 8
CONVERSION
8.1 RIGHT OF CONVERSION. At any time prior to maturity, the Holders of
the Notes shall have the right from time to time to convert all or a portion of
the principal balance of their B Notes unpaid and outstanding from time to time
into shares of the Common Stock
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of the Company; such conversion shall be made at the conversion price in effect
at the time of conversion, determined as hereinafter provided (the "Conversion
Price"). The initial Conversion Price shall be Thirty Cents ($.30) per share.
Such right of conversion is conditioned upon the Holder's agreement to convert a
minimum principal amount of the Notes of Five Thousand Dollars ($5,000) at any
time such Holder elects to exercise Holder's conversion rights unless, at the
time the Holder elects to convert the Note, Holder holds less than Five Thousand
Dollars ($5,000) in principal amount of the B Notes, in which instance, the
entire amount shall be converted.
8.2 EXERCISE OF CONVERSION RIGHT.
(a) In order to exercise the conversion right provided in section
8.1, a Holder of the B Notes shall surrender the B Notes at the office of
the Company or other registrar appointed by the Company, together with a
conversion notice in the form attached to the B Note as Exhibit A thereto.
Such Holder shall thereupon be deemed the holder of the underlying shares
of Common Stock, and the principal amount so converted of such B Notes
shall be deemed to have been paid in full. No adjustments with respect to
interest or dividends shall be made on the portion of any B Note converted
under this section. Thereupon such Holder and/or, subject to the terms of
this Agreement, including payment of all applicable stamp or security
transfer taxes or other governmental charges, Holder's nominee(s) or
assignee(s), shall be entitled to be entered in the books of the Company
as of the Date of Conversion (or such later date as is specified in
subsection 8.2(b)) as the holder of the number of shares of Common Stock
into which the applicable principal amount of such B Note is convertible
in accordance with the provisions of this Article 8 and, as soon as
practicable thereafter, the Company shall deliver to such Holder and/or,
subject as aforesaid, the Holder's nominee(s) or assignee(s), a
certificate or certificates for such shares of Common Stock and, if
applicable, a check for any amount payable under section 8.5.
(b) For the purposes of this Article 8, a B Note shall be deemed to
be surrendered for conversion in the case of section 8.1, on the date
(herein called "Date of Conversion") on which it is surrendered by delivery
to the Company at its principal office in Louisville, Colorado, or other
registrar, if any, appointed by the Company and of which the Holder of the
Note is notified in writing, and, in the case of a Note surrendered by
mailing or other means of transmission, on the date on which it is received
by the Company at its principal office in Louisville, Colorado, or other
registrar, if any, appointed by the Company and of which the Holder is
notified in writing; provided that if a B Note is surrendered for
conversion on a day on which the register of Common Stock is closed, the
person or persons entitled to receive Common Stock shall become the holder
or holders of record of such shares or Common Stock as at the date on which
such register is next reopened.
(c) The Holder of any B Note of which part only is converted shall
upon the exercise of its right of conversion, surrender the said B Note to
the Company or other
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registrar, if any, and the Company or other registrar, if any, shall cancel
the same and shall without charge forthwith certify and deliver to the
Holder a new B Note or B Notes in an aggregate principal amount equal to
the unconverted part of the principal amount of the B Note so surrendered,
provided that such new B Note(s) shall be issued only in denominations of
One Thousand Dollars ($1,000) or multiples thereof.
(d) The Holder of a B Note surrendered for conversion in accordance
with this section shall be entitled to receive accrued and unpaid interest
on the principal amount thereof being converted to the Interest Payment
Date on or next preceding the Date of Conversion thereof, but there shall
be no payment or adjustment by the Company on account of any interest
accrued or accruing thereon from the latest Interest Payment Date and the
Common Stock issued upon such conversion shall rank only in respect of
dividends declared in favor of shareholders of record on and after the Date
of Conversion or such later date as such Holder shall become the holder of
record of such Common Stock pursuant to subsection 8.2(b), from which
applicable date they will for all purposes be and be deemed to be issued
and outstanding as fully paid and nonassessable shares of Common Stock.
8.3 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be subject
to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to holders
of Common Stock who have elected to receive a dividend in shares in lieu of
cash), (ii) subdivide its outstanding shares of Common Stock, (iii) reduce,
consolidate or combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any shares of the Company, the conversion price in effect
immediately prior thereto shall be adjusted to that amount determined by
multiplying the Conversion Price in effect immediately prior to such date
by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding on such date before giving effect to such
division, subdivision, reduction, combination or consolidation or stock
dividend and of which the denominator shall be the number of shares of
Common Stock after giving effect thereto. Such adjustment shall be made
successively whenever any such effective date or record date shall occur.
An adjustment made pursuant to this subsection (a) shall become effective
retroactively, immediately after the record date in the case of a dividend
and shall become effective immediately after the effective date in the case
of a subdivision, reduction, consolidation, combination or
reclassification.
(b) In case the Company shall issue rights or warrants to all or
substantially all holders of its Common Stock entitling them (for a period
expiring within 45 days after the record date mentioned below) to subscribe
for or purchase shares of Common Stock (or securities convertible into
Common Stock) at a price per share (the "Offering Price") less than the
fair market value per share of Common Stock (as
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defined in subsection (d) below) at the record date mentioned below, the
price per share at which the B Notes may thereafter be converted into
Common Stock shall be determined by dividing the price per share for which
the B Notes were theretofore convertible into Common Stock by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate Offering Price of the total
number of shares so offered would purchase at such fair market value. Such
adjustment shall be made whenever such rights or warrants are issued, and
shall become effective retroactively, immediately after the record date for
the determination of shareholders entitled to receive such rights or
warrants.
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness, shares of any
class of the Company's stock other than Common Stock or assets (excluding
cash dividends) or rights or warrants to subscribe (excluding those
referred to in subsection (b) above), then in each such case the price per
share at which the B Notes may thereafter be converted into Common Stock
shall be determined by dividing the price per share for which the B Notes
were theretofore convertible into Common Stock by a fraction, of which the
numerator shall be the fair market value per share of Common Stock (as
defined in subsection (d) below) on the date of such distribution and of
which the denominator shall be such fair market value per share of the
Common Stock, less the then fair market value (as determined by the board
of directors of the Company, whose determination shall be conclusive, and
described in a statement, which will have the applicable resolutions of the
board of directors attached thereto, filed with the Company) of the portion
of the assets or evidences of indebtedness or shares so distributed or of
such subscription rights or warrants applicable to one share of the Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective retroactively immediately after the record date
for the determination of stockholders entitled to receive such
distribution.
(d) For the purpose of any computation under subsections 8.3(b) or
(c), the fair market value per share of Common Stock at any date shall be
(i) the average of the mean of the closing bid and asked prices of the
Common Stock for any 10 consecutive trading days commencing not more than
30 trading days before the relevant date, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers, Inc. (the "NASD") or the Nasdaq Stock
Market ("NASDAQ")), or, (ii) in the event the Common Stock is listed on a
stock exchange or on the NASDAQ National Market System (or other national
market system), the fair market value per share shall be the average of the
closing prices on the exchange or on the NASDAQ Market System (or other
national market system), as the case may be, for any 10 consecutive trading
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days commencing not more than 30 trading days before the relevant date, as
reported in the Wall Street Journal (or, if not so reported, as otherwise
reported by the stock exchange, NASDAQ, other national market system).
(e) If the Common Stock issuable upon the conversion of the B Notes
shall be changed into the same or a different number of shares of any class
or classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger, consolidation or
sale of assets provided for in this section 8.3), then, and in each such
event, each Holder of B Notes shall have the right thereafter to convert
such B Notes into the kind and amount of shares of Common Stock and other
securities and property receivable upon such reorganization,
reclassification, or other change by the Holders of the number of shares of
Common Stock into which such B Notes might have been converted, as
reasonably determined by the Company's board of directors, immediately
prior to such reorganization, reclassification, or change, all subject to
further adjustment as provided herein.
(f) If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
section 8.3) or a merger or consolidation of the Company with or into
another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part of
such reorganization, merger, consolidation or sale, provision shall be made
as reasonably determined by the Company's board of directors so that the
Holders of the B Notes shall thereafter be entitled to receive upon
conversion of such B Notes, the number of shares of stock or other
securities or property of the Company or of the successor corporation
resulting from such merger or consolidation or sale, to which a Holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation or sale.
(g) The adjustments provided for in this section 8.3 are cumulative
and shall apply to successive divisions, subdivisions, reductions,
combinations, consolidations, issues, distributions or other events
contemplated herein resulting in any adjustment under the provisions of
this section, provided that, notwithstanding any other provision of this
section, no adjustment of the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Conversion Price then in effect; provided, however, that any adjustments
which by reason of this subsection (g) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(h) Upon each adjustment of the Conversion Price, the Company shall
give prompt written notice thereof addressed to the registered Holders of B
Notes at the address of such Holders as shown on the records of the
Company, which notice shall state the Conversion Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares
issuable upon the conversion of such
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Holder's B Notes, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(i) In the event of any question arising with respect to the
adjustments provided for in this section 8.3, such question shall be
conclusively determined by a firm of independent certified public
accountants appointed by the Company (who may be the auditors of the
Company) and acceptable to the Holders of at least 50% of the principal
amount of the B Notes outstanding; such accountants shall have access to
all necessary records of the Company and such determination shall be
binding upon the Company, and the Holders.
8.4 RESERVATION OF SHARES. The Company agrees that, so long as any B
Notes shall remain outstanding, the Company shall at all times reserve and keep
available, free from preemptive rights, out of its authorized capital stock for
the purpose of issue upon conversion of the B Notes, the full number of shares
of Common Stock then issuable upon exercise of the B Notes.
8.5 FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the B Notes. If, upon
conversion of any B Notes as an entirety, the registered Holder would, except
for the provisions of this section 8.5, be entitled to receive a fractional
share of Common Stock, then an amount equal to such fractional share multiplied
by the then fair market value of shares of the Company's Common Stock shall be
paid by the Company to such registered Holder. For purposes of such valuation,
fair market value shall be determined as provided by subsection 8.3(d) hereof.
8.6 VALIDITY OF SHARES. The Company agrees that all shares of Common
Stock which may be issued upon conversion of the B Notes will, upon issuance, be
legally and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof.
8.7 SHAREHOLDER RIGHTS. Until conversion, and then only to the extent
that a portion of the principal of the B Notes remains unconverted, the Holders
of the Notes shall have no rights as shareholders of the Company.
8.8 NOTICE OF CERTAIN EVENTS. If at the time:
(a) the Company shall declare any dividend or distribution payable
to the Holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the Holders
of Common Stock any additional shares of stock of any class or other
rights;
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(c) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation or business organization; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give the registered
Holders of the B Notes written notice, by certified or registered mail, of the
date on which a record shall be taken for such dividend, distribution or
subscription rights or for determining shareholders entitled to vote upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and of the date when any such transaction shall take
place, as the case may be. Such notice shall also specify the date as of which
the Holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least thirty (30) days prior to the transaction in question and not
less than twenty (20) days prior to the record date in respect thereto.
ARTICLE 9
PREPAYMENT
9.1 OPTIONAL PREPAYMENT. Subject to section 9.2 hereof, the Company may,
at its option, at any time prepay all, or from time to time any part, of the
Notes by payment of principal plus accrued interest to date of prepayment.
9.2 SELECTION OF NOTES TO BE PREPAID. If less than all the Notes are to
be prepaid, the particular Notes to be prepaid shall be selected not more than
60 days prior to the Prepayment Date by the Company, from the outstanding Notes
not previously paid, in such manner as the Company deems fair and equitable;
provided, however, that no B Notes may be prepaid prior to the prepayment of all
outstanding A Notes. Portions of the principal of Notes of a denomination larger
than $1,000 may be selected for prepayment. The portions of the principal of
Notes so selected for partial prepayment shall be equal to $1,000, or an
integral multiple thereof.
For all purposes of this Agreement, unless the context otherwise requires,
all provisions relating to the prepayment of Notes shall relate, in the case of
any Note prepaid or to be prepaid only in part, to the portion of the principal
of such Notes which has been or is to be prepaid.
9.3 NOTICE OF PREPAYMENT. Notice of prepayment shall be given by
first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days
prior to the date selected by
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the Company for prepayment (the "Prepayment Date"), to each Holder of Notes to
be prepaid. All notices of prepayment shall state:
(1) the Prepayment Date,
(2) the Prepayment Price,
(3) if less than all outstanding Notes are to be prepaid, the
identification (and, in the case of partial prepayment, the respective
principal amounts) of the Notes to be prepaid to the Holder to whom the
notice is given,
(4) that on the Prepayment Date, the Prepayment Price will become
due and payable upon each such Note, and that interest thereon shall cease
to accrue on said date,
(5) the place where such Notes are to be surrendered for repayment,
and
(6) in the case of B Notes, that the holder thereof shall have the
right to convert such note at any time prior to the Prepayment Date.
9.4 NOTES PREPAID IN PART. Any Note which is to be prepaid only in part
shall be surrendered at the office or agency of the Company and the Company
shall execute and deliver to the Holder of such Note without service charge, a
new Note or Notes, of the same type (A or B) of any authorized denomination as
requested by such Holder in aggregate principal amount equal to and in exchange
for the unprepaid portion of the principal of the Notes so surrendered.
ARTICLE 10
SUBORDINATION
10.1 SUPERIOR INDEBTEDNESS. For purposes of this Agreement and
specifically this Article 10 and Article 12 hereof, the term "Superior
Indebtedness" shall be indebtedness currently outstanding or hereinafter
incurred of the Company defined as follows:
The principal of, and accrued and unpaid interest on (a) indebtedness
of the Company incurred in the ordinary course of business for money
borrowed or in respect of letters of credit issued for its own account to
(i) any bank or trust company organized under the laws of the United States
or any state; (ii) any savings and loan association; or (iii) to the Xxxxx
Mortgage Trust or associated investment group or entity; (b) obligations of
the Company incurred pursuant to agreements to factor the accounts
receivable of the Company; (c) purchase money obligations entered into in
the ordinary course of business, evidenced by notes, lease-purchase
agreements, purchase contracts or agreements, or similar instruments for
the payment of which the Company is responsible or liable, by guarantees or
otherwise; (d) obligations of
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the Company incurred in the ordinary course of business under any agreement
to lease, or lease of, any real or personal property which are required to
be capitalized in accordance with generally accepted accounting principles,
or any other agreement to lease, or lease of, any real or personal property
for the benefit of the Company which, by the terms thereof, are expressly
designated as Superior Indebtedness; and (e) any modification, renewal,
extension or refunding of any such indebtedness, guarantee or obligation;
in every case, whether such indebtedness, guarantee or obligation, or such
modification, renewal, extension or refunding thereof, was outstanding on
the date of execution of this Agreement or thereafter created, incurred or
assumed.
10.2 AGREEMENT OF SUBORDINATION. The Company agrees, and each Holder of
Notes issued hereunder by acceptance thereof likewise agrees, that all Notes
shall be issued subject to the provisions of this Article 10; each person
holding any Note, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. All Notes issued
hereunder shall, to the extent and in the manner hereinafter set forth, be
subordinated and subject in right of payment or satisfaction to the prior
payment of Superior Indebtedness.
10.3 PAYMENTS TO NOTE HOLDERS. No payment on account of principal of, or
premium, if any, or interest on, the Notes shall be made if any default or event
of default with respect to any Superior Indebtedness which permits the holders
thereof (or a trustee on their behalf) to accelerate the maturity thereof shall
have occurred and be continuing.
Upon any payment by the Company, or distribution of assets of the Company
of any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding-up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon Superior Indebtedness shall first be paid in full, or payment
thereof provided for, in money or money's worth, in accordance with its terms,
before any payment is made on account of the principal of, or interest on the
Notes; and upon any such dissolution or winding-up or liquidation or
reorganization any payment by the Company, or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes would be entitled, except for the provisions of
this Article 10, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution directly to the holders of the Superior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Superior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay Superior Indebtedness up to the amount set forth in section
10.2 above (depending on the date of such occurrence) in money or money's worth,
after giving effect to any concurrent payment or distribution to or for the
holders of Superior Indebtedness, before any payment or distribution is made to
the Holders of the Notes.
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In the event that notwithstanding the preceding paragraphs, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the preceding paragraphs shall be received
by the Holders of the Notes, such payment or distribution shall be paid over or
delivered to the holders of Superior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any Superior Indebtedness may have been issued,
as their respective interests may appear, for application to the payment of
Superior Indebtedness remaining unpaid to the extent necessary to pay Superior
Indebtedness in money or money's worth in accordance with its terms, after
giving effect to any concurrent payment or distribution to or for the holders of
such Superior Indebtedness.
10.4 SUBROGATION OF NOTES. Subject to the payment of Superior Indebtedness
as provided above and subject to applicable law, the rights of the Holders of
the Notes shall be appropriately subrogated to the rights of the holders of
Superior Indebtedness to receive payments or distributions of cash, property or
securities of the Company to the extent applicable to the Superior Indebtedness
until the principal of and interest on the Notes shall be paid in full; and, for
the purposes of such subrogation, no payments or distributions to the holders of
the Superior Indebtedness of any cash, property or securities to which the
Holders of the Notes would be entitled except for the provisions of this Article
10, and no payment over pursuant to the provisions of this Article 10 to the
holders of Superior Indebtedness by Holders of the Notes, as between the
Company, its creditors other than holders of Superior Indebtedness, and the
Holders of the Notes, be deemed to be a payment by the Company to or on account
of the Superior Indebtedness. It is understood that the provisions of this
Article 10 are and are intended solely for the purpose of defining the relative
rights of the Holders of the Notes, on the one hand, and the holders of the
Superior Indebtedness, on the other hand.
Nothing contained in this Article 10 or elsewhere in this Agreement or in
the Notes is intended to or shall impair, as between the Company, its creditors
other than the holders of Superior Indebtedness, and the Holders of the Notes,
the obligation of the Company, which is absolute and unconditional, to pay to
the Holders of the Notes the principal of and interest on the Notes as and when
the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders of the Notes and
creditors of the Company other than the holders of Superior Indebtedness, nor
shall anything herein prevent the Holder of any Note from exercising all
remedies otherwise permitted by applicable law upon default under this
Agreement, subject to the rights, if any, under this Article 10 of the Holders
of Superior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Upon any payment or
distribution of assets of the Company referred to in this Article 10, the
Holders of the Notes shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, or other person making
such payment or distribution, delivered to the Holders of the Notes, for the
purpose of ascertaining the persons entitled to
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participate in such distribution, the holders of the Superior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
The terms "paid in full" and "payment in full" as used in this Article 10
with respect to Superior Indebtedness mean the receipt, in cash or securities
(taken at their market value at the time of the receipt thereof), of the
principal amount of the Superior Indebtedness (and any premium due thereof) and
full interest thereon to the day of such payment of principal and all other
amounts due to holders of Superior Indebtedness pursuant to the provisions of
the instruments providing therefor.
10.5 NO IMPAIRMENT OF SUBORDINATION. No right of any present or future
holder of any Superior Indebtedness to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Agreement, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.
ARTICLE 11
REMEDIES
11.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be occasioned by the provisions of this Article 11 or be
voluntary or involuntary or be effected by operation of law pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any Note when the
same becomes due and payable, and continuance of such default for a period
of thirty (30) days;
(2) default in the payment of the principal of any Note when the
same becomes due and payable;
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Agreement (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this section specifically dealt with), and continuance of such default or
breach for a period of sixty (60) days after there has been given, by
registered or certified mail, to the Company by the Holders of at least
Thirty Percent (30%) in principal amount of the outstanding Notes, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder;
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(4) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Company or for any
substantial part of its property, or ordering the winding-up or liquidation
of its affairs and such decree or order shall remain unstayed and in effect
for a period of sixty (6O) consecutive days; or
(5) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or for any
substantial part of its property, or shall make any general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action in furtherance of any of the
foregoing.
11.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of
Default occurs and is continuing, then and in every such case the Holders of not
less than Thirty Percent (30%) in principal amount of the Notes outstanding may
declare the principal of all the Notes to be immediately due and payable, by a
notice in writing to the Company and upon any such declaration such principal
shall become immediately due and payable.
At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained, the
Holders of a majority in principal amount of Notes outstanding, by written
notice to the Company, may rescind and annul such declaration and its
consequences if:
(1) the Company has paid or deposited into a trust account a sum
sufficient to pay:
(a) all overdue installments of interest on all Notes,
(b) the principal of any Notes which have become due otherwise
than by such declaration of acceleration and interest thereon at the
rate borne by the Notes,
(c) to the extent that payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
the Notes, and
(2) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such acceleration, have
been cured or waived as provided in section 11.8.
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No such rescission shall affect any subsequent default or impair any
right consequent thereon.
11.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY HOLDERS. The
Company covenants that if:
(1) default is made in the payment of any installment of interest on
any Note when such interest becomes due and payable and such default
continues for a period of thirty (30) days, or
(2) default is made in the payment of the principal of any Note at
the maturity thereof,
the Company, will, upon demand of the Holders hereof pursuant to section 11.2,
pay to such Holders, the whole amount then due and payable on the Notes for
principal and interest, with interest upon the overdue principal and, to the
extent that payment of such interest shall be legally enforceable, upon overdue
installments of interest, at the rate borne by such Notes.
If the Company falls to pay such amounts forthwith upon such demand, the
Holders or any one of them may institute a judicial proceeding for the
collection of the sums so due and unpaid, and may prosecute such proceeding to
judgment or final decree, and may enforce the same against the Company or any
other obligor upon the Notes and collect the monies adjudged or decreed to be
payable in the manner provided by law out of the property of the Company or any
other obligor upon this Note, wherever situated.
11.4 UNCONDITIONAL RIGHT OF NOTE HOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Subject to the provisions of this Agreement, the Holder of any Note
shall have the right which is absolute and unconditional to receive payment of
the principal of and interest on such Note on the respective dates expressed in
such Note and to institute suit for the enforcement of any such payment and such
right shall not be impaired without the consent of such Holder.
11.5 RESTORATION OF RIGHTS AND REMEDIES. If any Note Holder has instituted
any proceeding to enforce any right or remedy under this Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to such Note Holder, then and in every such case the
Company and the Note Holder shall, subject to any determination in such
proceeding, be restored severally and respectively to their former positions
hereunder, and thereafter all rights and remedies of the Note Holder shall
continue as though no such proceeding had been instituted.
11.6 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred
upon or reserved to the Note Holders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at
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law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
11.7 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Holder of
this Note to exercise any right or remedy accruing upon any Event of Default
shall impair any such right or remedy or constitute a waiver of any such Event
of Default or an acquiescence therein. Every right and remedy given by this
Article or by law or the Holder may be exercised from time to time, and as often
as may be deemed expedient, by such Holder.
11.8 WAIVER OF PAST DEFAULTS. The Holders of a majority in principal
amount of the outstanding Notes may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences, except a default
(1) in the payment of the principal of or interest on any Note; or
(2) in respect of a covenant or provision of this Agreement which
under Article 12 cannot be modified or amended without the consent of the
Holder of each outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Agreement; but no such waiver shall extend to any subsequent or other
default or impair any right consequent thereon.
ARTICLE 12
SUPPLEMENTAL AGREEMENTS REGARDING NOTES
12.1 SUPPLEMENTAL AGREEMENTS WITH CONSENT OF NOTE HOLDERS. With or without
notice to any Note Holder but with the consent of the Holders of not less than
66-2/3% in principal amount of the then outstanding Notes, the Company, when
authorized by a duly adopted board resolution, and the Note Holders may enter
into an agreement or agreements supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Holders of the
Notes under this Agreement; provided, however, that no such supplemental
agreement as it relates to the Notes and the terms and conditions thereof shall,
without the consent of the Holder of each outstanding Note affected thereby:
(1) change the date of maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon, or change the coin or currency in
which, the principal of any Note or interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on or
after the date of maturity thereof;
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(2) reduce the percentage in principal amount of the outstanding
Notes, the consent of whose Holders is required for any such supplemental
agreement or the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Agreement or certain defaults
hereunder and their consequences) provided for in this Agreement;
(3) modify any of the provisions of this section, except to increase
any such percentage or to provide that certain other provisions of this
Agreement cannot be modified or waived without the consent of the Holder of
each Note affected thereby; or
(4) adversely affect the right to convert the B Notes as provided in
Article 8 hereof.
It shall not be necessary for any consent or authorization of Note Holders
under this section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such consent or authorization shall
approve the substance thereof.
12.2 EFFECT OF SUPPLEMENTAL AGREEMENTS. Upon the execution of any
supplemental agreement under this Article, this Agreement shall be modified in
accordance therewith, and such supplemental agreement shall form a part of this
Agreement for all purposes; and every holder of Notes theretofore or thereafter
delivered hereunder shall be bound thereby.
12.3 REFERENCE IN NOTES TO SUPPLEMENTAL AGREEMENTS. Notes delivered after
the execution of any supplemental agreement pursuant to this Article may bear a
notation as to any matter provided for in such supplemental agreement. If the
Company shall so determine, new Notes so modified as to conform, in the opinion
of the board of directors, to any such supplemental agreement may be prepared,
executed and delivered by the Company in exchange for outstanding Notes.
12.4 MODIFICATION OF SUBORDINATION PROVISIONS. No supplemental agreement
shall directly or indirectly modify any provision of this Agreement so as to
affect adversely the rights of any holder of Superior Indebtedness at the time
outstanding without the written consent of such holder.
ARTICLE 13
COVENANTS
13.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Agreement.
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13.2 MONEY FOR NOTE PAYMENTS TO BE HELD IN TRUST.
(a) COMPANY AS PAYING AGENT. While the Company acts as its own
paying agent, it will, on or before each due date of the principal of, and
premium, if any, or interest on any of the Notes, segregate and hold in
trust for the benefit of the persons entitled thereto a sum sufficient to
pay the principal, and premium, if any, or interest so becoming due until
such sums shall be paid to such persons or otherwise disposed of as herein
provided.
(b) OUTSIDE PAYING AGENT. Whenever the Company shall have one or
more paying agents, it will, on or prior to each due date of the principal
of or interest on any Notes, deposit with, or make available to, the paying
agent a sum sufficient to pay the principal, or interest so becoming due,
such sum to be held in trust for the benefit of the persons entitled to
such principal, or interest.
(c) UNCLAIMED PAYMENTS. If any money deposited with any paying
agent, or then held by the Company, in trust, for the payment of the
principal of or interest on any Note is undeliverable and remains unclaimed
for three years after such principal or interest has become due and
payable, such money shall be paid to the Company on the written request of
the Company, or, if then held by the Company, shall be discharged from such
trust; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of such paying agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that such paying agent, before being required to make
any such repayment, may at the expense of the Company cause to be published
once, in a newspaper of general circulation in the county in which the
Company then has its principal place of business, notice that such money
remains unclaimed and that, after a date specified therein, which shall be
not less than thirty (30) days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the
Company.
13.3 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, including the corporate existence of any successor corporation,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any right or franchise if the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Note Holders.
ARTICLE 14
MISCELLANEOUS
14.1 SURVIVAL OF WARRANTIES. The warranties, representations and covenants
contained in or made pursuant to this Agreement shall survive the execution and
delivery
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of this Agreement and the Closing(s) and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Company or the Investors, as the case may be.
14.2 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and no party shall be liable or bound to another party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
14.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado as applied to agreements among Colorado
residents entered into and to be performed entirely within Colorado.
14.4 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
14.5 NOTICES. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or seven (7) days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid, addressed to the Company at 000
Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000, and to the Investor at
the address specified below or at such other address as a party may designate by
ten (10) days' advance written notice to the other parties.
14.6 EXPENSES. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
offering, and each Investor shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
14.7 EFFECT OF AMENDMENT OR WAIVER. The Investor hereby acknowledges that,
by the operation of Articles 10, 11 and 12 hereof, the Holders of Notes have
certain rights and powers to diminish or change certain rights of the Holders of
Notes, including Holders who have not agreed or consented thereto, under this
Agreement.
14.8 RIGHTS OF INVESTORS. Each Holder of Notes shall have the absolute
right to exercise or refrain from exercising any right or rights that such
holder may have by reason of this Agreement or any Note or share of Common
Stock, including without limitation the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such holder shall not incur any
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liability to any other holder or holders of such securities with respect to
exercising or refraining from exercising any such right or rights.
14.9 SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provisions shall be excluded from
this Agreement, and the balance of this Agreement shall be interpreted as if
such provisions were so excluded and shall be enforceable in accordance with its
terms.
14.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The term this "Agreement"
as used herein includes this and similar Subscription and Purchase Agreements
entered into in connection with the offering of up to $1,000,000 aggregate
principal amount of Notes.
ARTICLE 15
SUBSCRIPTION
15.1 SUBSCRIPTION AMOUNT. The undersigned hereby subscribes for $________
in principal amount of Notes in Units, each consisting of two promissory notes
of equal principal amount (an A Note and a B Note) and shall tender at Closing a
certified check or bank draft in the amount of_____________________Dollars
($_________) payable to the Company in full payment for such subscription.
15.2 RESALE COMPLIANCE. The undersigned agrees to comply with the 1933 Act
and the rules and regulations promulgated thereunder, and any other relevant
securities legislation and policies governing the purchase, holding and resale
of the Notes subscribed for, including, without limitation, applicable state
blue sky laws.
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The undersigned acknowledges that this subscription shall not be effective
unless accepted by the Company as indicated below.
Entered into this______day of________, 200_.
--------------------------------------
(Name) (Please Print)
--------------------------------------
(Signature)
--------------------------------------
(Mailing Address)
--------------------------------------
(Registration Instructions)
THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE______DAY
OF___________200_.
RENAISSANCE ENTERTAINMENT
CORPORATION
By:
----------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board of Directors and
Chief Executive Officer
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APPENDIX A
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE 1933 ACT") OR UNDER THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. NO REGULATORY BODY HAS ENDORSED THESE SECURITIES. NO
SALE OR DISTRIBUTION OF THE SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
1933 ACT AND APPLICABLE STATE BLUE SKY LAWS.
No._______ $____________
RENAISSANCE ENTERTAINMENT CORPORATION
SUBORDINATED PROMISSORY NOTE DUE 2003
A NOTE
THIS NOTE is one of a duly authorized issue of Notes of Renaissance
Entertainment Corporation, a corporation duly organized and existing under the
laws of the State of Colorado (the "Company"), designated as its 12%
Subordinated Notes due August 31, 2003, in an aggregate principal amount not
exceeding $1,000,000, issued pursuant to that certain Subscription and Purchase
Agreement dated ______________________, 200_, between the Company and the
original purchasers of the Notes (the "Purchase Agreement"). Reference is hereby
made to the Purchase Agreement for a complete description of the rights and
obligations of, and limitations and restrictions on, the Company and the Holder
of this Note. The terms and conditions of the Note noted hereinafter are subject
in every respect to the terms and conditions of the Purchase Agreement. In the
event of a conflict between the provisions of this Note and the Purchase
Agreement, the Purchase Agreement shall control.
FOR VALUE RECEIVED, the Company promises to pay to ______________________
the registered holder hereof (the "Holder"), the principal sum of
_____________________Dollars ($________), on August 31, 2003, subject to
acceleration in certain events, and to pay interest on the principal sum
outstanding from time to time quarterly in arrears on the first business day of
each calendar quarter of each year ("Interest Payment Dates"), after as well as
before maturity and default and after judgment, at the rate of 12% per
annum accruing from the date of initial issuance. Payment of interest shall
commence on April 1, 2002 (and shall be pro rated for such period from the date
of initial issuance) and shall continue on the first business day of each
succeeding calendar quarter until payment in full of the principal sum has been
made or duly provided for. All accrued and unpaid interest shall bear interest
at the same rate as the due date of the interest payment until paid but shall
not be subject to conversion. March 15, June 15, September 15 and December 15 of
each year shall serve as the record date (the "Record Date") for determining
ownership of this Note with respect to payments of interest to be made on the
following Interest Payment Date. The interest so payable on any Interest Payment
Date will, as provided in the Purchase Agreement, be paid to the person in whose
name this Note (or one or more predecessor Notes) is registered on the records
of the Company regarding registration and transfers of the Notes (the "Note
Register") at the Record Date for such Interest Payment Date; provided, however,
that the Company's obligation to a transferee of this Note arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Purchase Agreement. The principal of, and interest on, this
Note are payable in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts, at
the address last appearing on the Note Register of the Company as designated in
writing by the Holder from time to time. The Company will pay interest on this
Note by sending a check for such interest due, less any amounts required by law
to be deducted, to the registered holder of this Note and addressed to such
holder at the last address appearing on the Note Register. The forwarding of
such check shall constitute a payment of interest hereunder and shall satisfy
and discharge the liability for interest on this Note to the extent of the sum
represented by such check plus any amounts so deducted unless such check is not
paid at par.
This Note is subject to the following additional provisions:
1. The Notes are issuable in denominations of One Thousand Dollars
($1,000) and multiples thereof. As provided in the Purchase Agreement, the Notes
are exchangeable for an equal aggregate principal amount of Notes of different
authorized denominations, as requested by the Holders surrendering the same. No
service charge will be made for such registration of transfer or exchange;
however, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with the transfer or exchange of
this Note.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments.
3. This Note has been issued subject to investment representations and
may be transferred or exchanged only as provided in the Purchase Agreement.
Prior to due presentment for transfer of this Note, the Company and any agent of
the Company may treat the person in whose name this Note is duly registered on
the Company's Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
-2-
4. If an Event of Default occurs and is continuing, the Holders of not
less than Thirty Percent (30%) in principal amount of the 12% Subordinate
Promissory Notes then outstanding may declare the principal of all such Notes to
be immediately due and payable in the manner and to the extent provided in the
Purchase Agreement, and such declarations may be in certain events rescinded, in
the manner and with the effect provided in the Purchase Agreement.
5. This Note is subordinated and subject in right of payment to the prior
payment or satisfaction of Superior Indebtedness of the Company. Each Holder of
this Note, by accepting the same, agrees to and shall be bound by this
subordination.
6. The Purchase Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Purchase Agreement at any time by the Company with the consent of the Holders of
Sixty-six and Two-thirds Percent (66-2/3%) in aggregate principal amount of all
such Notes at the time outstanding. The Purchase Agreement also contains
provisions permitting the Holders of a majority of the aggregate principal
amount of all such Notes at the time outstanding, on behalf of the Holders of
all the Notes, to waive compliance by the Company with certain provisions of the
Purchase Agreement and certain past defaults under the Purchase Agreement and
their consequences. Any such consent or waiver shall be conclusive and binding
upon all Holders and upon all future Holders of this Note and of any note issued
upon registration of transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note.
7. Except with respect to the rights of the holders of Superior
Indebtedness as set forth in this Note and in the Purchase Agreement, no
reference herein to the Purchase Agreement and no provision of this Note or of
the Purchase Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Note at the time, place and rate, and in the coin or currency, herein
prescribed. This Note and all other Notes now or hereafter issued under the
Purchase Agreement are direct obligations of the Company. This Note ranks
equally and ratably with all other Notes now or hereafter issued under the
Purchase Agreement.
8. No recourse shall be had for the payment of the principal of, or the
interest on, this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Purchase Agreement or any Purchase
Agreement supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
9. The Holder of this Note, by acceptance hereof, agrees that this Note
is being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Note except under circumstances which will not result
in a violation of the 1933 Act or any applicable
-3-
state Blue Sky law. This Note unless such requirement is waived by the Company,
shall bear a legend in substantially the following form:
THE SECURITIES DESCRIBED HEREIN, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT",) OR UNDER
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO SALE OR
DISTRIBUTION OF THESE SECURITIES MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND APPLICABLE
STATE BLUE SKY LAWS.
10. All terms used in this Note which are defined in the Purchase
Agreement shall have the meanings assigned to them in the Purchase Agreement.
11. This Note shall be governed by and construed in accordance with the
laws of the State of Colorado.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
RENAISSANCE ENTERTAINMENT
CORPORATION
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board of Directors and
Chief Executive Officer
Dated:__________________, 200_.
-0-
XXXXXXXX X
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR UNDER THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES. NO REGULATORY BODY HAS ENDORSED THESE SECURITIES. NO
SALE OR DISTRIBUTION OF THE SECURITIES MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
1933 ACT AND APPLICABLE STATE BLUE SKY LAWS.
No.________ $__________
RENAISSANCE ENTERTAINMENT CORPORATION
SUBORDINATED PROMISSORY NOTE DUE 2003
CONVERTIBLE B NOTE
THIS NOTE is one of a duly authorized issue of Notes of Renaissance
Entertainment Corporation, a corporation duly organized and existing under the
laws of the State of Colorado (the "Company"), designated as its 12%
Subordinated Notes due August 31, 2003, in an aggregate principal amount not
exceeding $1,000,000, issued pursuant to that certain Subscription and Purchase
Agreement dated ____________________, 200_, between the Company and the original
purchasers of the Notes (the "Purchase Agreement"). Reference is hereby made to
the Purchase Agreement for a complete description of the rights and obligations
of, and limitations and restrictions on, the Company and the Holder of this
Note. The terms and conditions of the Note noted hereinafter are subject in
every respect to the terms and conditions of the Purchase Agreement. In the
event of a conflict between the provisions of this Note and the Purchase
Agreement, the Purchase Agreement shall control.
FOR VALUE RECEIVED, the Company promises to pay to _________________
_____________the registered holder hereof (the "Holder"), the principal sum of
________________________Dollars ($________), on August 31, 2003, subject to
acceleration in certain events, and to pay interest on the principal sum
outstanding from time to time quarterly in arrears on the first business day of
each calendar quarter of each year ("Interest Payment Dates"), after as well as
before maturity and default and after judgment, at the rate of 12% per
annum accruing from the date of initial issuance. Payment of interest shall
commence on April 1, 2002 and shall be pro rated for such period from the date
of initial issuance) and shall continue on the first business day of each
succeeding calendar quarter until payment in full of the principal sum has been
made or duly provided for. All accrued and unpaid interest shall bear interest
at the same rate as the due date of the interest payment until paid but shall
not be subject to conversion. March 15, June 15, September 15 and December 15 of
each year shall serve as the record date (the "Record Date") for determining
ownership of this Note with respect to payments of interest to be made on the
following Interest Payment Date. The interest so payable on any Interest Payment
Date will, as provided in the Purchase Agreement, be paid to the person in whose
name this Note (or one or more predecessor Notes) is registered on the records
of the Company regarding registration and transfers of the Notes (the "Note
Register") at the Record Date for such Interest Payment Date; provided, however,
that the Company's obligation to a transferee of this Note arises only if such
transfer, sale or other disposition is made in accordance with the terms and
conditions of the Purchase Agreement. The principal of, and interest on, this
Note are payable in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts, at
the address last appearing on the Note Register of the Company as designated in
writing by the Holder from time to time. The Company will pay interest on this
Note by sending a check for such interest due, less any amounts required by law
to be deducted, to the registered holder of this Note and addressed to such
holder at the last address appearing on the Note Register. The forwarding of
such check shall constitute a payment of interest hereunder and shall satisfy
and discharge the liability for interest on this Note to the extent of the sum
represented by such check plus any amounts so deducted unless such check is not
paid at par.
This Note is subject to the following additional provisions:
1. The Notes are issuable in denominations of One Thousand Dollars
($1,000) and multiples thereof. As provided in the Purchase Agreement, the Notes
are exchangeable for an equal aggregate principal amount of Notes of different
authorized denominations, as requested by the Holders surrendering the same. No
service charge will be made for such registration of transfer or exchange;
however, the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection with the transfer or exchange of
this Note.
2. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this Note any amounts required to be withheld
under the applicable provisions of the United States income tax laws or other
applicable laws at the time of such payments.
3. This Note has been issued, and any shares of Common Stock to be issued
upon the conversion hereof will be issued, subject to investment representations
and may be transferred or exchanged only as provided in the Purchase Agreement.
Prior to due presentment for transfer of this Note, the Company and any agent of
the Company may treat the person in whose name this Note is duly registered on
the Company's Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
-2-
4. If an Event of Default occurs and is continuing, the Holders of not
less than Thirty Percent (30%) in principal amount of the 12% Subordinate
Promissory Notes then outstanding may declare the principal of all such Notes to
be immediately due and payable in the manner and to the extent provided in the
Purchase Agreement, and such declarations may be in certain events rescinded, in
the manner and with the effect provided in the Purchase Agreement.
5. This Note is subordinated and subject in right of payment to the prior
payment or satisfaction of Superior Indebtedness of the Company. Each Holder of
this Note, by accepting the same, agrees to and shall be bound by this
subordination.
6. Subject to the provisions of the Purchase Agreement, the Holder of
this B Note is entitled, at its option, at any time until maturity hereof to
convert the principal amount of this B Note or any portion of the principal
amount hereof which is at least Five Thousand Dollars ($5,000) or, if at the
time of such election to convert the aggregate principal amount of all B Notes
registered to the Holder is less than Five Thousand Dollars ($5,000), then the
whole amount thereof, into shares of Common Stock of the Company at a conversion
price equal to Thirty Cents ($.30) for each share of Common Stock (or at the
current adjusted conversion price if an adjustment has been made as provided in
the Purchase Agreement), upon surrender of this B Note to the Company at its
office in Louisville, Colorado, with the form of conversion notice attached
hereto as Exhibit A executed by the Holder of this B Note evidencing such
Holder's intention to convert this B Note or a specified portion (as above
provided) hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. No amount of accrued but unpaid interest shall be
subject to conversion. As provided in the Purchase Agreement, the conversion
price is subject to adjustment in certain events. Subject to the foregoing, no
adjustment is to be made upon any conversion for dividends on securities issued
on such conversion or for interest accrued hereon. As further provided in the
Purchase Agreement, in the case of any capital reorganization, certain
reclassifications of the Common Stock, the consolidation or merger of the
Company with or into any other corporation or the disposition of the properties
and assets of the Company, as, or substantially as, an entirety to any other
corporation, this B Note shall thereafter cease to be convertible into Common
Stock and shall be convertible into the shares of stock or other securities or
property (including cash) to which the holders of Common Stock are entitled upon
such capital reorganization, reclassification, consolidation, merger or
disposition. No fractions of shares or scrip representing fractions of shares
will be issued on conversion, but an adjustment in cash will be made for any
fractional interest as provided in the Purchase Agreement.
7. The Purchase Agreement permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Purchase Agreement at any time by the Company with the consent of the Holders of
Sixty-six and Two-thirds Percent (66-2/3%) in aggregate principal amount of all
such Notes at the time outstanding. The Purchase Agreement also contains
provisions permitting the Holders of a majority of the aggregate principal
amount of all such Notes at the time outstanding, on behalf of the Holders of
all the Notes, to waive compliance by the Company with certain provisions of the
Purchase Agreement and certain past
-3-
defaults under the Purchase Agreement and their consequences. Any such consent
or waiver shall be conclusive and binding upon all Holders and upon all future
Holders of this Note and of any note issued upon registration of transfer hereof
or in exchange herefor or in lieu hereof whether or not notation of such consent
or waiver is made upon this Note.
8. Except with respect to the rights of the holders of Superior
Indebtedness as set forth in this Note and in the Purchase Agreement, no
reference herein to the Purchase Agreement and no provision of this Note or of
the Purchase Agreement shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, and interest on,
this Note at the time, place and rate, and in the coin or currency, herein
prescribed. This Note and all other Notes now or hereafter issued under the
Purchase Agreement are direct obligations of the Company. This Note ranks
equally and ratably with all other Notes now or hereafter issued under the
Purchase Agreement.
9. No recourse shall be had for the payment of the principal of, or the
interest on, this Note, or for any claim based hereon, or otherwise in respect
hereof, or based on or in respect of the Purchase Agreement or any Purchase
Agreement supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
10. The Holder of this Note, by acceptance hereof, agrees that this Note
is being acquired, and any shares of Common Stock acquired pursuant to the
conversion of this B Note will be acquired, for investment and that such Holder
will not offer, sell or otherwise dispose of this Note or such Common Stock
except under circumstances which will not result in a violation of the 1933 Act
or any applicable state Blue Sky law. This Note and any certificate for shares
of Common Stock issued upon conversion hereof, unless such requirement is waived
by the Company, shall bear a legend in substantially the following form:
THE SECURITIES DESCRIBED HEREIN, HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT",) OR UNDER
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO SALE OR
DISTRIBUTION OF THESE SECURITIES MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND APPLICABLE
STATE BLUE SKY LAWS.
11. All terms used in this Note which are defined in the Purchase
Agreement shall have the meanings assigned to them in the Purchase Agreement.
12. This Note shall be governed by and construed in accordance with the
laws of the State of Colorado.
-4-
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
RENAISSANCE ENTERTAINMENT
CORPORATION
By:
-----------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board of Directors and
Chief Executive Officer
Dated:__________________, 200_.
-5-
EXHIBIT A
NOTICE OF CONVERSION
TO: RENAISSANCE ENTERTAINMENT CORPORATION
The undersigned Holder of this Note hereby irrevocably elects to convert
this Note, or portion hereof (which is at least $5,000, unless the undersigned
holds B Notes aggregating less than $5,000, in which event, the amount converted
shall be the entire amount of principal of such B Notes) below designated, into
shares of Common Stock of Renaissance Entertainment Corporation in accordance
with the terms of the Purchase Agreement dated , 200_, and directs that the
shares issuable and deliverable upon such conversion, together with any check in
payment for fractional shares and any B Notes representing any unconverted
principal amount hereof, be issued and delivered to the undersigned unless a
different name has been indicated below. If shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer
taxes, if any, payable with respect thereto.
Dated_______________
--------------------------------------------
Signature of Holder
Principal Amount to be Converted
--------------------------------------------
THE NOTES AND SHARES OF COMMON STOCK ACQUIRED UPON CONVERSION THEREOF ARE
TRANSFERABLE ONLY AS PROVIDED IN THE PURCHASE AGREEMENT.
Provide the following information if shares of Common Stock and/or Notes are to
be issued otherwise than to the Holder. Please print name and address (including
zip code) of other person.
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Social Security or Other Taxpayer
Identifying Number
-6-
