LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of this 22nd day of
December, 2006 (the "Closing Date"), by and between XXXXXXX.XXX, INC., a
Delaware corporation (the "Borrower"), Vicis Capital Master Fund LLC, Xxxxxxx
Investments LLC, Xxxxxx X. Xxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx XxXxxxx, Xxxxx
Xxxxxxxx, Xxx Xxxxxxxxxx, Xxxx Xxxxxx, CSFN I LLC and Xxxx Xxxxxxxx (each a
"Lender" and collectively, the "Senior Subordinated Lenders").
RECITALS
A. The Borrower has asked the Senior Subordinated Lenders for a senior
subordinated term loan (the "Loan") in the principal amount of Three Million
Dollars ($3,000,000) to be used by the Borrower for capital expenditures,
general working capital and to pay all costs and expenses in connection with the
Loan. The Loan is evidenced by certain Senior Subordinated Promissory Notes of
even date herewith from the Borrower in favor of the Senior Subordinated Lenders
(each a "Note" and collectively the "Notes").
B. The holders of the Borrower's $10,038,710 aggregate principal amount
of Subordinated Debt issued pursuant to (i) an Amended Subordinated Promissory
Note in the sum of $4,838,710 and (ii) a Subordinated Promissory Note in the
principal sum of $5,200,000, each dated July 11, 2006 ("Existing Subordinated
Lenders") have agreed that the Loan shall be senior to the obligations of the
Borrower to the Existing Subordinated Lenders under the aforesaid subordinated
promissory notes ("Existing Subordinated Debt").
C. The Senior Subordinated Lenders are willing to make the Loan to the
Borrower upon the terms and subject to the conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises, the mutual agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Senior
Subordinated Lenders hereby agree as follows:
I. BORROWING; ISSUANCE OF WARRANTS
Section 1.1 THE LOAN. The Senior Subordinated Lenders agree to lend to
the Borrower and the Borrower agrees to borrow from the Senior Subordinated
Lenders, the principal sum of Three Million Dollars ($3,000,000) allocated among
the Senior Subordinated Lenders as set forth in EXHIBIT A. The Loan shall bear
interest and shall be repaid by the Borrower in the manner and at the times set
in the Notes.
Section 1.2 USE OF PROCEEDS. The proceeds of the Loan shall be used by
the Borrower for the purposes set forth in Recital A above, and, unless prior
written consent of the Senior Subordinated Lenders holding at least a majority
in outstanding principal amount of the Senior Subordinated Loans (the "Majority
Lenders") is obtained, for no other purpose.
Section 1.3 VOLUNTARY PREPAYMENT. Subject to the terms of that certain
Subordination Agreement dated as of the date hereof (as from time to time
amended in accordance with its terms, the "Subordination Agreement"), among the
Borrower, the guarantors named therein, Laurus Master Fund, Ltd. ("Senior
Lender"), the Existing Subordinated Lenders and the Senior Subordinated Lenders,
the Loan may be prepaid at any time, in whole or in part, without penalty or
premium, on three (3) days prior written notice.
Section 1.4 MANDATORY PREPAYMENTS.
(a) Subject to the terms of the Subordination Agreement, upon
the occurrence of a Change of Control (as hereinafter defined), the Senior
Subordinated Lenders shall have the right to require Borrower to prepay the Loan
including, without limitation, (i) the outstanding principal balance, (ii) all
accrued and unpaid interest (if any), and (iii) all other amounts then due under
the Note. For purposes of this Agreement, "Change of Control" means: (i) any
"person" (including any group of persons), as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than any trustee or other fiduciary holding securities
under an employee benefit plan of the Borrower), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, after the date hereof, of securities of the Borrower representing
more than fifty percent (50%) of the combined voting power of the Borrower's
then outstanding securities; (ii) individuals who at the Closing Date constitute
the Board, and any new director (other than a director (x) designated by a
person who has entered into an agreement with the Borrower to effect a
transaction described in clause (i), (iii) or (iv) of this subparagraph, or (y)
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
"person" (as hereinabove defined) other than the Board) whose election by the
Board or nomination for election by the Borrower's shareholders was approved by
a vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute at
least a majority thereof; (iii) the shareholders of the Borrower approve a
merger, reorganization or consolidation of the Borrower, other than a merger,
reorganization or consolidation which would result in (A) the beneficial owners
(as hereinabove defined) of the voting securities of the Borrower outstanding
immediately prior thereto continuing to beneficially own voting securities that
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the Borrower or such surviving entity outstanding
immediately after such merger, reorganization on or consolidation, and (B) no
"person" (as hereinabove defined) acquiring more than fifty percent (50%) of the
combined voting power of the Borrower's then outstanding securities; (iv) the
shareholders of the Borrower approve an agreement for the sale or disposition by
the Borrower of all or substantially all of the Borrower's assets or business to
an unaffiliated third party; or (v) the shareholders of the Borrower approve a
liquidation or dissolution of the Borrower.
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(b) If the Borrower should consummate one or more equity
financings after the date hereof with gross proceeds of no less than $15,000,000
(the "Threshold"), then subject to the terms of the Subordination Agreement and
the rights of the Senior Subordinated Lenders under (c) below, all principal and
accrued interest on the Loan shall be due and payable at the closing of such
financing (a "Threshold financing").
(c) Upon the occurrence of a Threshold financing, each Senior
Subordinated Lender shall have the right, but not the obligation, to convert all
of the then principal and accrued interest due to such Senior Subordinated
Lender into shares of the equity securities sold in the Threshold transaction at
the lowest price per share paid in such financing and otherwise upon the same
terms and conditions as the Threshold financing. The Borrower agrees to fully
inform the Senior Subordinated Lenders with respect to any proposed Threshold
transaction and to take all appropriate and necessary action to enable the
Senior Subordinated Lenders to convert the Loan as herein provided.
Section 1.5 ISSUANCE OF WARRANTS.
(a) Subject to the terms and conditions of this Agreement, the
Borrower hereby agrees to issue to each Senior Subordinated Lender, as part of
its inducement to make the Loan, a warrant in the form attached hereto as
EXHIBIT B entitling such Senior Subordinated Lender to purchase such number of
shares of the Borrower's Common Stock specified opposite such Senior
Subordinated Lender's name on EXHIBIT A at an exercise price of $0.001 per
Common Share (collectively, the "Warrants").
(b) Each Lender shall be granted piggyback registration rights
with respect to the shares of Common Stock issuable upon exercise of the
Warrants, in accordance with the terms of the Registration Rights Agreement, the
form of which is attached hereto as EXHIBIT C.
II. THE FINANCING DOCUMENTS; OBLIGATIONS
This Agreement, the Note, the Guaranty (as hereinafter defined), and
any other instrument, agreement or document previously, simultaneously or
hereafter executed and delivered by the Borrower and/or any other person,
singularly or jointly with any other Person, evidencing, securing in connection
with the Obligations (as hereinafter defined), this Agreement, the Note and the
Guaranty are sometimes referred to herein collectively as the "Financing
Documents". "Obligations" as used in this Agreement means all of the obligations
for payment evidenced by the Financing Documents and all of the obligations to
perform and comply with all of the turns, covenant, conditions, stipulations and
agreements contained in the Financing Documents and all other obligations of the
Borrower to the Senior Subordinated Lenders, whether now existing or hereafter
created, whether direct or contingent.
III. UNCONDITIONAL OBLIGATIONS
The payment and performance by the Borrower of the Obligations shall be
absolute and unconditional, irrespective of any defense or any rights of
set-off, recoupment or counterclaim it might otherwise have against the Senior
Subordinated Lenders and the Borrower shall pay absolutely net all of the
Obligations, free of any deductions and without abatement, diminution or set-of;
and until payment in full of all of the Obligations, the Borrower: (a) will not
suspend
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or discontinue any payments provided for in the Note and (b) will perform and
observe all of its other agreements contained in this Agreement, including
(without limitation) all payments required to be made to the Senior Subordinated
Lenders.
IV. REPRESENTATIONS AND WARRANTIES
To induce the Lender to make the Loan, the Borrower represents and
warrants to the Senior Subordinated Lenders that:
Section 4.1 SUBSIDIARIES. The Borrower has only the Subsidiaries listed
on Exhibit D attached hereto.
Section 4.2 GOOD STANDING. Borrower is a corporation, duly organized
and existing under the laws of the State of Delaware and is duly authorized to
do business and in good standing wherever the ownership of its property or the
conduct of its business requires such authorization.
Section 4.3 DUE AUTHORITY, COMPLIANCE WITH LAWS. Borrower has the right
and power and is duly authorized and empowered to enter into execute, deliver
and perform this Agreement, the Note and the other Financing Documents and this
Agreement and the other Financing Documents are valid and binding upon and
enforceable against Borrower in accordance with their respective terms. Borrower
has taken all action required to authorize the execution, delivery and
performance of this Agreement and the other Financing Documents and the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the other Financing Documents executed and
delivered by Borrower and the consummation of the transactions contemplated by
this Agreement will not conflict with, violate or be prevented by any existing
mortgage indenture, contract or agreement binding on Borrower or affecting its
property or any laws.
Section 4.4 NO DEFAULT. There is no Event of Default (as hereinafter
defined) and no event has occurred and no condition exists which with the giving
of notice or the passage of time would constitute an Event of Default. The
Borrower is not in default in any material respect under the terms of any other
agreement or instrument to which it maybe a party or by which any of its
properties may be bound or subject.
Section 4.5 CAPITALIZATION. The authorized capital stock of the
Borrower consists of (i) 20,000,000 shares of Common Stock, (ii) 1,000,000
shares of Preferred Stock, par value $0.001 per share, of which 5,000 shares are
designated as Series A Preferred Stock, 100,000 shares are designated as shares
of Series B Preferred Stock, 50,000 shares are designated as shares of Series C
Preferred Stock, and 1,530 shares are designated as shares of Series B Preferred
Stock. As of the date hereof 14,995,513 shares of Common Stock, no shares of
Series A Preferred Stock, 27,858.9673 shares of Sales B Preferred Stock,
8,452.0222 shares of Series C Preferred Stock, and 1,530 shares of Series D
Preferred Stock are issued and outstanding. All shares of the Borrower's issued
and outstanding capital stock have been duly authorized, are validly issued and
outstanding, and are fully paid and nonassessable.
Section 4.6 TITLE TO PROPERTIES. Borrower has good and marketable title
to all of its properties.
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Section 4.7 FINANCIAL STATEMENTS. The consolidated financial statements
of Borrower included in its Current Report on Form 8-K/A as filed with the
Securities and Exchange Commission on February 21, 2006 are complete and correct
and fairly present the financial position of Borrower and the results of its
operations as of the dates and for the periods referred to therein and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved. Such financial statements comply
in all material respects with applicable accounting requirements and the rules
and regulations of the Commission with respect thereto as in effect at the time
of filing.
Section 4.8 DISCLOSURE. All disclosure provided to the Senior
Subordinated Lenders regarding the Borrower and its subsidiaries is true and
correct and does not contain, any untrue statement of material fact or state any
material fact necessary in order to make the statements made therein in light of
the circumstances under which they are made, not misleading.
Section 4.9 INCORPORATION OF REPRESENTATIONS AND WARRANTIES. Each of
the representations and warranties set forth in Section 4 of that certain
Subordinated Securities Purchase Agreement between Senior Lender and the
Borrower dated December 22, 2006 (as amended from time to time, the "Laurus
Subordinated Securities Purchase Agreement") are hereby incorporated in this
Agreement by reference and shall be deemed to be representations and warranties
made by the Borrower to the Senior Subordinated Lenders as if set forth at
length herein.
Section 4.10 SEC REPORTS. The Borrower has filed all reports (the "SEC
Reports") required to be filed by it with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933 (the "Securities Act") and
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, on a
timely basis or has timely filed a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension
except that Borrower has not yet filed its Annual Report on Form 10-K for the
fiscal year ended July 1, 2006 and its Quarterly Report on Form 10-Q for the
fiscal quarter ended November 1, 2006. The SEC Reports, along with the
Borrower's registration statement filed with the Commission on Form S-1 (File
No.333-131254), and subsequently withdrawn by the Borrower and the Company's
Revised Preliminary Information Statement on Schedule 14C and filed with the SEC
on October 4, 2006 are herein referred to as the "SEC Filings." As of their
respective dates, the SEC filings complied as to form in all material respects
with (i) the requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder and (ii) any SEC
comments received or otherwise conveyed to the Company with respect to any
previously filed SEC Filing except that the Borrower has not yet responded to
(x) the letter received from the SEC on May 2, 2006 commenting on the Form S-1
filed with the SEC and (g) the letter received from the SEC on November 1, 2006
relating to the Company's filing of its Revised Schedule 14C. In addition, none
of the SEC Filings, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were mad; not misleading.
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V. CONDITIONS OF LENDING
The obligation of the Senior Subordinated Lenders to make the Loan
hereunder is subject to the following conditions precedent:
Section 5.1 APPROVAL OF COUNSEL FOR THE SENIOR SUBORDINATED LENDERS.
All legal matters incident to the Loan and all documents necessary in the
opinion of the Senior Subordinated Lenders to make the Loan shall be
satisfactory in all material respects to respective counsel for the Senior
Subordinated Lenders.
Section 5.2 SUPPORTING DOCUMENTS. The Senior Subordinated Lenders shall
receive on the date hereof: (a) a certificate of the Secretary of the Borrower,
certifying that attached thereto is a true, complete and correct copy of
resolutions adopted by the Board of Directors of the Borrower authorizing the
execution and delivery of this Agreement, the Note and the other Financing
Documents, and the Obligations and (b) such other documents as the Senior
Subordinated Lenders may reasonably require the Borrower to execute; in form and
substance acceptable to the Senior Subordinated Lenders.
Section 5.3 FINANCING DOCUMENTS. All of the Financing Documents
required by the Senior Subordinated Lenders shall be executed, delivered at the
sole expense of the Borrower. Borrower shall pay all reasonable expenses of the
Senior Subordinated Lenders including but not limited to, legal counsel fees and
costs, travel expenses, accounting and other due diligence costs.
Section 5.4 SUBORDINATION AGREEMENT. The Senior Subordinated Lenders
and Existing Subordinated Lenders shall have entered into a subordination
agreement in form and substance satisfactory to the Senior Subordinated Lenders.
Section 5.5 GUARANTY. The Senior Subordinated Lenders shall have
received an unconditional guaranty in form and substance satisfactory to the
Senior Subordinated Lenders (the "Guaranty") from each of the Subsidiaries
listed on EXHIBIT D.
Section 5.6 WARRANTS. Each Lender shall have received a Warrant in
accordance with the terms of Section 1.5(a), and the Registration Rights
Agreement shall have been executed and delivered by the Borrower in accordance
with the terms of Section 1.5(b).
VI. COVENANTS OF BORROWER
Until payment in full and the performance of all of the Obligations
hereunder:
Section 6.1 INCORPORATION OF COVENANTS. The covenants set forth in
Section 6 (other than Section 6.5, Section 6.8 and Section 6.14) of the Laurus
Subordinated Securities Purchase Agreement are hereby incorporated in this
Agreement by reference and shall be deemed to be covenants made by Borrower to
the Senior Subordinated Lenders as if set forth at length herein.
Section 6.2 BOOKS AND RECORDS. The Borrower shall permit the Senior
Subordinated Lenders, or any Person authorized by the Senior Subordinated
Lenders, to inspect and examine Borrower's records and books (regardless of
where maintained) and. all supporting vouchers and
6
data and to make copies and extracts therefrom at all reasonable times and as
often as may be requested by the Senior Subordinated Lenders. In addition, the
Borrower will furnish or cause to be furnished to the Senior Subordinated
Lenders internally prepared financial statements of the Borrower as of the close
of each fiscal quarter and fiscal year, in a form reasonably acceptable to the
Senior Subordinated Lenders.
Section 6.3 PRESERVATION OF CORPORATE EXISTENCE. Borrower will preserve
and maintain its cot existence and good standing in each state where it conducts
business. Borrower shall not merge or consolidate with or into any other person
or entity (a "Person") or liquidate or wind down its business or enter into any
agreement with respect thereto.
Section 6.4 PAYMENT OF TAXES AND CLAIMS. Borrower will duly pay and
discharge when due and payable, all taxes, assessments and governmental and
other charges, levies or claims levied or imposed, which are, or which if unpaid
might become, a lien or charge upon the properties, assets, franchises, earnings
or business Borrower; PROVIDED, HOWEVER, that nothing contained in this
paragraph shall require Borrower to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge, levy or claim so long as Borrower
in good faith shall contest the validity thereof by appropriate proceedings and
shall set aside on its books adequate reserves with respect thereto in
accordance with such accounting practices and otherwise satisfactory to the
Senior Subordinated Lenders.
Section 6.5 CONDUCT OF BUSINESS. Borrower shall conduct and operate its
business in all material respects in accordance with all applicable material
local, state and federal ordinances, resolutions and laws.
Section 6.6 INSURANCE. Borrower shall maintain insurance in an amount,
nature and with carriers covering property damage to any of Borrower's
properties business interruption insurance, public liability insurance including
coverage for contractual liability, product liability and workers' compensation,
and any other insurance which is usual for Borrower's business.
Section 6.7 ADDITIONAL SUBSIDIARIES. If any additional Subsidiary of
the Borrower is formed or acquired after the Closing Date as permitted pursuant
to the terms hereof; the Borrower will, within three business days after such
formation or acquisition cause such Borrower to execute and deliver to the
Senior Subordinated Lenders an additional Guaranty in form and substance
reasonably acceptable to the Senior Subordinated Lenders.
VII. EVENTS OF DEFAULT
The occurrence of one or more of the following events shall be "Events
of Default" under this Agreement, and the terms "Event of Default" or "default"
shall mean, whenever they are used in this Agreement, the events specified in
the definition of "Event of Default" specified in the Note or any one or more of
the following events, provided that the rights of the Senior Subordinated
Lenders upon the occurrence of an Event of Default shall be limited as set forth
in Section 7 of the Subordination Agreement.
Section 7.1 BREACH OF REPRESENTATION AND WARRANTIES. Any material
representation or warranty made herein or in any report, certificate, opinion
(including any opinion of counsel for the Borrower), financial statement or
other instrument furnished in connection with the
7
Obligations or with the execution and delivery of any of the Financing
Documents, shall prove to have been false or misleading when made in any
material respect.
Section 7.2 OTHER DEFAULTS. Default shall be made by the Borrower in
the due observance or performance of any other term, covenant or agreement
herein contained, which default shall remain unremedied for ten (10) days after
written notice thereof to the Borrower by the Senior Subordinated Lenders;
unless the nature of the failure is such that (a) it cannot be cured within the
ten (10) day period, (b) the Borrower institutes corrective action within the
ten (10) day period, and (c) the Borrower completes the cure within a period of
an additional thirty (30) days.
Section 7.3 DEFAULT UNDER OTHER FINANCING DOCUMENTS. An Event of
Default shall occur under any of the other Financing Documents and such Event of
Default is not cured within any applicable grace period provided therein.
Section 7.4 BANKRUPTCY. The Borrower or any Guarantor shall voluntarily
commence any proceeding under any reorganization, bankruptcy or similar law or
consent to or fail to contest or have dismissed within 60 days any such
proceeding or apply for a receiver or similar official or make an assignment to
the benefit of creditors or otherwise take any similar action.
VIII. RIGHTS AND REMEDIES UPON DEFAULT
Section 8.1 GENERALLY. Upon the occurrence of an Event of Default
subject to the terms of the Subordination Agreement the Senior Subordinated
Lenders shall have the rights and remedies set forth in the Note.
IX. MISCELLANEOUS
Section 9.1 NOTICES. All notices requests and demands to or upon the
parties to this Agreement shall be in writing and shall be deemed to have been
given or made when delivered by hand on a business day, or two (2) days after
the date when deposited in the mail, postage prepaid by registered or certified
mail, return receipt requested, or when sent by overnight courier on the
business day next following the day on which the notice is delivered to such
overnight courier addressed as follows:
Borrower: XXXXXXX.XXX, INC.
000 Xxxxxxx 0, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Lenders: Vicis Capital Master Fund LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: 000-000-0000
Xxxxxxx Investments LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
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Xxxxxx X. Xxxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
Xxxxxxx Xxxxxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
Xxxxxx XxXxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
Xxxxx Xxxxxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
Xxx Xxxxxxxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
Xxxx Xxxxxx
c/o Kidd & Company, LLC
00 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone No.: 000-000-0000
CSFN I LLC
x/x Xxxxx Xxxxx Xxxxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Xxxx Xxxxxxxx
XX Xxx 0000
Xxxxx Xxxxx, XX 00000
Telephone No. 000-000-0000
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By written notice each party to this Agreement may change the address
to which notice is given to that party.
Section 9.2 ENTIRE AGREEMENT. The Financing Documents shall completely
and fully supersede all other agreements, both written and oral, between the
Senior Subordinated Lenders and the Borrower relating to the Obligations.
Neither the Senior Subordinated Lenders nor the Borrower shall hereafter have
any rights under such prior agreements but shall look solely to the Financing
Documents for definition and determination of all of their respective rights,
liabilities and responsibilities relating to the Obligations.
Section 9.3 SURVIVAL OF AGREEMENT; SUCCESSORS AND ASSIGNS. All
covenants, agreements, representations and warranties made by the Borrower
herein and in any certificate in the Financing Documents and in any other
instruments or documents delivered pursuant hereto shall survive the making by
the Senior Subordinated Lenders of the Loan and the execution and delivery of
the Note and are made irrespective of any due diligence conducted by the Senior
Subordinated Lenders, and shall continue in full force and effect so long as any
of the Obligations are outstanding and unpaid. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors of such party; and all covenants, promises and agreements by or on
behalf of the Borrower which are contained in this Agreement shall inure to the
benefit of the successors of the Senior Subordinated Lenders, and all covenants,
promises and agreed by or on behalf of the Senior Subordinated Lenders which are
contained in this Agreement shall inure to the benefit of the permitted
successors of the Borrower. This Agreement may not be assigned by the Borrower.
Section 9.4 COUNTERPARTS. This Agreement may be executed in any number
of counterparts all of which together shall constitute a single instrument.
Section 9.5 MODIFICATIONS. No modification or waiver of any provision of this
Agreement or of any other Financing Documents, nor consent to any
departure by
the Borrower therefrom, shall in any event be effective unless the same shell be
in writing signed by the Majority Lenders; and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in the same similar or other circumstance.
Section 9.6 HEADINGS. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect any of the terms
hereof.
Section 9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN
DELIVERED AT AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 9.8 VENUE. BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS
AGREEMENT, THE NOTE OR THE OTHER FINANCING
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DOCUMENTS, MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK LOCATED IN NEW
YORK, NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT
OF NEW YORK. BORROWER, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF
ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING, AND FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS
RELATING TO SUCH ACTION OR PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY
MAIL IN THE MANNER PROVIDED FOR IN THIS AGREEMENT. BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED
ON ANY ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON
CONVENIENS OR ANY SIMILAR BASIS. BORROWER SHALL NOT BE ENTITLED IN ANY SUCH
ACTION OR PROCEEDING TO ASSERT ANY DEFENSE XXXX OR ALLOWED UNDER THE LAWS OF ANY
STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS ALSO GIVEN OR
ALLOWED BY THE LAWS OF THE STATE OF NEW YORK NOTHING IN THIS AGREEMENT SHALL
AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF THE SENIOR
SUBORDINATED LENDERS TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
Section 9.9 WAIVER OF JURY TRIAL. BORROWER HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, INCLUDING THE FINANCING DOCUMENTS.
Section 9.10 INDEMNIFICATION. Borrower agrees to indemnify and hold
harmless, the Senior Subordinated Lenders, the Senior Subordinated Lenders'
officers, directors, employees and agents (each an "Indemnified Party," and
collectively, the "Indemnified Parties" from and against any and all claims,
liabilities, losses, damages, costs and expenses (whether or not such
Indemnified Party is a party to any litigation), including without limitation,
reasonable attorney fees and costs and costs of investigation, document
production, attendance at depositions or other discovery, incurred by any
Indemnified Party with respect to, arising out of or as a consequence of (a)
this Agreement or any of the other Financing Documents including without
limitation, any failure of Borrower to pay when due (at maturity, by
acceleration or otherwise) any principal, interest fee or any other amount due
under this Agreement or the other Financing Documents, or any other Event of
Default, or any breach or alleged bitch of any representation, warranty or
covenant contained in this Agreement or any other Financing Document (b) the use
by Borrower of any proceeds advanced hereunder (c) the transactions contemplated
hereunder or (d) any claim, demand, action or cause of action being asserted
against (i) Borrower by any other Person, or (ii) any indemnified Party by
Borrower in connection with the transactions contemplated hereunder.
Notwithstanding anything herein or elsewhere to the contrary; Borrower shall not
be obligated to indemnify or hold harmless any Indemnified Party from any
liability loss or damage resulting from the gross negligence, willful misconduct
or unlawful actions of such Indemnified Party.
11
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the day and year first above written.
Borrower:
XXXXXXX.XXX, INC.
By:
---------------------------------
Name:
Title:
Lenders:
XXXXXXX INVESTMENTS LLC
By:
---------------------------------
Name:
Title:
VICIS CAPITAL MASTER FUND LLC
By:
---------------------------------
------------------------------------
Xxxxxx X. Xxxxxx
------------------------------------
Xxxxxxx Xxxxxxxx
------------------------------------
Xxxxxx XxXxxxx
------------------------------------
Xxxxx Xxxxxxxx
------------------------------------
Xxx Xxxxxxxxxx
------------------------------------
Xxxx Xxxxxx
------------------------------------
CSFN I LLC
------------------------------------
Xxxx Xxxxxxxx
12
EXHIBIT A
--------------------------------- ------------------------- -----------------------------
LENDER ALLOCATION OF LOAN NUMBER OF SHARES OF
COMMON STOCK ISSUABLE
UPON EXERCISE OF WARRANT
--------------------------------- ------------------------- -----------------------------
Vicis Capital Master Fund LLC $500,000 5,000,000
--------------------------------- ------------------------- -----------------------------
Xxxxxxx Investments LLC $650,000 2,904,762
--------------------------------- ------------------------- -----------------------------
Xxxxxx X. Xxxxxx $200,000 893,773
--------------------------------- ------------------------- -----------------------------
Xxxxxxx Xxxxxxxx $850,000 3,798,534
--------------------------------- ------------------------- -----------------------------
Xxxxxx XxXxxxx $100,000 446,886
--------------------------------- ------------------------- -----------------------------
Xxxxx Xxxxxxxx $75,000 335,165
--------------------------------- ------------------------- -----------------------------
Xxx Xxxxxxxxxx $75,000 335,165
--------------------------------- ------------------------- -----------------------------
Xxxx Xxxxxx $150,000 670,330
--------------------------------- ------------------------- -----------------------------
CSFN I LLC $300,000 -0-
--------------------------------- ------------------------- -----------------------------
Xxxx Xxxxxxxx $100,000 1,000,000
--------------------------------- ------------------------- -----------------------------
EXHIBIT B
Form of Warrant
(See Attached)
EXHIBIT C
Form of Registration Rights Agreement
(See Attached)
EXHIBIT D
SUBSIDIARIES
XXXXXXX ADVANCED AESTHETICS, INC.
ADVANCED AESTHETICS SUB, INC.
ADVANCED AESTHETICS, LLC
XXXXXXX ADVANCED AESTHETICS, LLC
ANUSHKA PBG, LLC
ANUSHKA BOCA, LLC
WILD HARE, LLC
XXXXXXXX CORPORATION
ANUSHKA PBG ACQUISITION SUB, LLC
ANUSHKA BOCA ACQUISITION SUB, LLC
WILD HARE ACQUISITION SUB, LLC
