EXHIBIT 10.1
SENIOR SECURED NOTE PURCHASE AGREEMENT
This SENIOR SECURED NOTE PURCHASE AGREEMENT ("Agreement") is
entered into as of this 14th day of October, 1997 between American Film
Technologies, Inc., 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the
"Company") on the one hand, and the lenders who have executed the signature
page hereof (collectively, the "Lenders") on the other hand. The Notes with
respect to Xxxxxxx shall be substantially in the form of Exhibit A-1 hereto
and made a part hereof and the Notes with respect to the other Lenders shall
be in the form of Exhibit A-2 attached hereto and made a part hereof.
W I T N E S S E T H:
WHEREAS, the Company is in need of additional capital to
continue to finance its operations and to continue its business; and
WHEREAS, Lenders are each willing to lend to the Company the
amounts set forth below their names on the signature page hereto and made a
part hereof and the Company is willing to borrow an aggregate amount of up to
One Million Dollars ($1,000,000) pursuant to two-year promissory notes secured
by all of the assets of the Company (the "Notes"), such Notes having a first
priority security interest in all of the assets of the Company (the
"Collateral") which security interest is pari passu with the security
interests granted to the holders of the other Notes. Said Notes shall bear no
interest and shall be convertible into the $.002 par value per share common
stock of the Company (the "Common Stock") at a rate of Three Cents ($.03) per
share (the "Note"); and
WHEREAS, the Company is willing to sell to the Lenders the
Notes pursuant to the terms thereof and such other terms and conditions as set
forth herein; and
WHEREAS, the Board of Directors of the Company has
authorized and approved of the sale of the Notes to the Lenders and with
respect to Xx. Xxxxxxx as the Company's Chief Executive Officer and President,
in conformity with the provisions of Section 16(b)-3 of the Securities
Exchange Act of 1934, as amended, containing certain additional restrictions
on the sale or transfer of the Note and the ability of Xx. Xxxxxxx to convert
his Note into Common Stock; and
NOW, THEREFORE, in consideration of the foregoing, the
mutual promises contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Company and
the Lenders agree as follows:
1. Purchase and Sale of the Note. Upon satisfaction of the
conditions set forth in Sections 2 and 3 below, the Company shall sell to each
of the Lenders, and each of the Lenders shall purchase from the Company, a
Note in the principal amount set forth below such Lender's name on the
signature page hereof (the "Loan").
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2. Registration Undertaking. The Company agrees to grant the
Lenders "piggy-back" registration rights with respect to the shares of Common
Stock into which the Notes are convertible (the "Shares") in accordance with
the "Registration Undertaking" attached hereto and made a part hereof as
Exhibit "B".
3. Conditions Precedent, Delivery of the Note.
a. The obligations of the Company hereunder shall
be subject to and conditioned upon the satisfaction of all of the following
conditions:
(i) The execution and delivery of this
Agreement by the Lenders;
(ii) The completion, execution and
delivery by each of the Lenders to the
Company of the Lender's Questionnaire,
attached hereto as Exhibit "C";
(iii) Closing of the Loan and delivery of
the principal amount of the Notes to the
Company on or before 5:00 pm New York time
on October 31, 1997; and
(iv) All of the representations and
warranties of the Lenders contained herein
remain true and correct.
(b) The obligations of the Lenders hereunder shall be subject to and
conditioned upon the satisfaction of the following conditions: the execution
and delivery by the Company of this Agreement, the Security Agreement,
attached hereto as Exhibit "D", the Registration Undertaking and the Notes by
the Company; and
(c) Upon satisfaction of all of the conditions precedent set forth in
Section 3(a) and 3(b) above, the Company shall cause to be delivered to the
Lenders at the addresses set forth in Section 8(b) below the Notes each
containing a restrictive legend substantially similar to that set forth in
Section 7 below, the Registration Undertaking and a Security Agreement and
related documents to grant to the Lenders a first priority security interest
in the Collateral, which security interest is pari passu with the security
interests granted to the holders of the other Notes (the "Security Agreement").
4. Representations of the Company. The Company represents
and warrants that:
(a) the Company is duly incorporated and in good
standing in the State of Delaware;
(b) upon issuance, the Note will be (i) validly
issued, fully paid and nonassessable; and (ii) free of any liens or
encumbrances;
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(c) the Loan has been duly authorized and approved
by the Company;
(d) the consummation of the Loan as contemplated by
this Agreement does not violate the terms of the Company's Certificate of
Incorporation or By- Laws: and
(e) upon the execution of this Agreement, the
Security Agreement, and the filing with the appropriate governmental bodies of
such other security documents as may be necessary, the Lenders shall receive a
first priority security interest in the Collateral, which security interest is
pari passu with the security interests granted to the holders of the other
Notes.
Except as expressly set forth above, the Company makes no
representations or warranties of any kind or nature to the Lenders.
5. Representations of Lenders. Each of the Lenders
represents and warrants in favor of the Company that:
(a) Lender is acquiring the Note and the Shares for
its own account, for investment purposes only, and not with a view to or for
the Loan, distribution or assignment thereof, in whole or in part;
(b) that the offer and Loan of the Note and the
Shares is intended to be exempt from registration under the Securities Act of
1933, as amended (the "Act"), and under the laws of any other jurisdiction;
that the Company does not intend and is under no obligation to so register the
Note or the Shares, except as expressly set forth in the Registration
Undertaking; that the Note and the Lender will not sell, assign, pledge or
otherwise transfer the Shares unless they are subsequently registered under
the Act or pursuant to an exemption therefrom; and that legends to the
foregoing effect will be placed on the Certificates evidencing the Notes and
the Shares;
(c) Lender has the financial ability to bear the
economic risk of its investment in the Company, including its possible loss,
has adequate means of providing for his current needs and personal
contingencies and has no need for liquidity with respect to its investment in
the Company;
(d) Lender has the knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Shares and has obtained, in its judgment,
sufficient information from the Company to evaluate the merits and risks of an
investment in the Note and the Shares;
(e) Lender is an "accredited investor" as such term
is defined in Rule 501(a) of Regulation D, promulgated under the Securities
Act of 1933, as amended;
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(f) Lender has been provided an opportunity to
obtain information concerning the offering, the Company and all other
information to the extent the Company or its representatives possess such
information or can acquire it without unreasonable effort or expense;
(g) Lender has been given the opportunity to ask
questions of and receive answers from the representatives of the Company
concerning the Company, the Note and the Shares, the terms and conditions of
the Loan and other matters pertaining to this investment, and has been given
the opportunity to obtain additional information necessary to verify the
accuracy of the information provided in order for it to evaluate the merits
and risks of an investment in the Company to the extent the representatives
possess such information or can acquire it without unreasonable effort or
expense, and has not been furnished any offering literature or prospectus
except the SEC Documents, as hereinafter defined;
(h) Lender has determined that its investment in
the Company through its purchase of the Note is a suitable investment for it
and that at this time it can bear a complete loss of its investment;
(i) In making his decision to invest in the Company
through the purchase of the Note the Lender has relied solely upon independent
investigations made by it;
(j) Lender has reached the age of majority in the
state in which it resides and is a bona fide resident and domiciliary of the
state set forth on the signature page.
(k) Lender represents and acknowledges that it has
received, read and understood the following documents:
(i) The Company's Form 10-K Report for its
fiscal year ended June 30, 1996;
(ii) The Company's Form 10-Q Reports for
the fiscal quarters ended September 30,
1996, December 31, 1996, March 31,1997;
(iii) The Company's Notice of Meeting and
Proxy Solicitation Materials dated January
31, 1997 with respect to its Annual
Meeting of Shareholders held on February
26, 1997; and
(iv) The Company's draft Form 10-K Report
for its fiscal year ended June 30, 1997.
(Said documents included in (i), (ii), (iii) and (iv) above are hereinafter
collectively referred to as the "SEC Documents", attached hereto and made a
part hereof as Exhibit "E").
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(l) Lender is not subscribing as a result of or
subsequent to:
(i) any advertisement, article, notice or
other communication published in any
newspaper, magazine or similar media or
broadcast over television or radio; or
(ii) any seminar or meeting whose
attendees, including the Lender, had been
invited as result of, subsequent to or
pursuant to any of the foregoing.
(m) Any information which the Lender has heretofore
furnished to the Company with respect to its financial position and business
experience, including without limitation its Lender's Questionnaire, attached
hereto as Exhibit "C", is complete and correct as of the date of this
Agreement and if there should be any material change in such information at
any time prior to or after acceptance of the Loan, the Lender will immediately
furnish such revised or corrected information to the Company.
(n) Lender and/or Lender's investment advisors, if
any, have carefully read and reviewed this Agreement, Exhibit "C" hereto and
the SEC Documents and understand the risks of, and other considerations
relating to, a purchase of Loan, including, but not limited to, the risks set
forth under "Risk Factors" contained in item (iv) of the SEC Documents. In
connection therewith, Lender is aware of the fact that the Company emerged
from a Chapter 11 Bankruptcy proceeding in October 1995, has not engaged in
ongoing business operations in over four years and will need significant
financing in order to remain in business and significant additional financing
thereafter to implement its business plan.
(o) Lender will be the only person with a direct or
indirect interest in their Note and their Shares purchased pursuant to this
Agreement.
(p) Lender acknowledges, represents, agrees and is
aware that:
(i) no Federal or state agency has passed
upon the Loan or the Note or the Shares
issuable in connection therewith or made
any findings or determinations as to the
fairness of this investment;
(ii) there are substantial risks of loss
of investment incidental to the purchase
of the Note and the Shares;
(iii) the investment is an illiquid
investment;
(iv) the representations, warranties,
agreements, undertakings and
acknowledgments made by the Lender in this
Agreement are made with the intent that
they be relied upon by the Company and its
officers in determining his suitability as
a Lender of the Note and the Shares, and
shall survive the acceptance by the
Company of this subscription, In addition,
the
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Lender agrees to notify the Company
immediately of any change in any
representation, warranty or other
information relating to the undersigned
set forth herein;
(v) Lender has read and understood the SEC
Documents.
(q) Lender represents, warrants and agrees in favor
of the Company that Lender has determined to make this investment based on its
own investigation of the Company and its prospects, that neither the Company
nor any of its officers, directors, employees, agents, representatives or
attorneys have made any representations to Lender concerning the business or
prospects of the Company, that Lender has the business sophistication to
determine on its own whether or not to make this investment.
6. Indemnification. The Lenders understand the
meanings and legal consequences of the representations and warranties
contained in this Agreement and severally but not jointly agree to indemnify
and hold harmless the Company and its officers and directors from and against
any loss, damage, liability, claim and expense whatsoever, including but not
limited to any and all legal expenses, due to or arising out of a breach of
any representation or warranty by such Lender, whether contained in this
Agreement or the Lender's Questionnaire, or any failure by them to fulfill any
covenants or agreements set forth herein or therein or arising out of the Loan
or distribution by such Lender of the Note or any Shares in violation of the
Act or any applicable state securities laws. Notwithstanding any of the
representations, warranties, acknowledgments or agreements made herein by such
Lender, such Lender does not thereby or in any other manner waive any rights
granted to the Lender under Federal or state securities laws.
7. Legend. The Lenders agree that all Certificates
representing the Shares shall have endorsed thereon the following legends:
(A) "THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS,
INCLUDING BUT NOT LIMITED TO THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") NOR APPROVED BY ANY FEDERAL OR STATE REGULATORY AGENCY, INCLUDING BUT
NOT LIMITED TO THE SECURITIES AND EXCHANGE COMMISSION, AND MAY NOT BE OFFERED
FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR
INDIRECTLY, NOR MAY THE SECURITIES BE TRANSFERRED ON THE BOOKS OF THE
CORPORATION, WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
UNITED STATES FEDERAL OR STATE SECURITIES LAWS, INCLUDING BUT NOT LIMITED TO
THE ACT, OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE DISCRETION OF THE CORPORATION, TO BE EVIDENCED BY AN
OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT
NO VIOLATION OF SUCH
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REGISTRATION OR QUALIFICATION PROVISIONS WOULD RESULT FROM
ANY PROPOSED TRANSFER OR ASSIGNMENT."; and
(B) such other legend as may be required
by the state securities laws applicable for each Lender.
8. MISCELLANEOUS.
(a) Finders Fees. The Company and the
Lenders acknowledge that neither have directly or indirectly, dealt with
anyone acting as a broker, finder or in a similar capacity, or has incurred
any obligation for any brokerage, finders' or similar fee or commission in
connection with this Agreement or any of the transactions contemplated hereby.
(b) Notices. All notices and other
communications required or permitted hereunder shall be in writing and shall
be deemed to have been given (i) upon delivery, if personally delivered, sent
by commercial over night courier (e.g. Federal Express or DHL), or telefaxed
with confirmation copy sent the same day by U.S. mail (postage prepaid); or
(ii) upon the expiration of the fifth (5th) business day after deposit, if
mailed by , registered or certified U.S. mail return receipt requested,
postage prepaid. All notices shall be addressed to each party at the following
address:
If to the Company:
American Film Technologies, Inc.
c/o Xxxxxx X. Xxxxxxx
Chief Executive Officer
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
With a copy to:
Xxxxx X. Xxxxxx, Esq.
Jeffer, Mangels, Xxxxxx & Xxxxxxx LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, CA. 90067
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If to Lenders:
Xxxxxx X. Xxxxxxxxx
c/x Xxxxxx Brothers
3 World Financial Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxx Xxxxxxxxxx, Esq.
c/o Heller, Erhman, White & XxXxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
York Capital Management, L.P.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxx
Xxxxxx X. Xxxxxxx
c/o American Film Technologies, Inc
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx X. Xxxxx
c/o Olshan Xxxxxxxx Frome & Xxxxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx Xxxx Family Trust
c/o Aegis Capital Corporation
00 X. Xxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx Xxxxxx, Xxx Xxxx 00000-0000
Xxxxxx X. Xxxxxx Irrevocable Trust
c/o Xxxxxx Xxxx, Trustee
00 X. Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxx, Xxx Xxxx 00000-0000
or to such other address as the addressee shall have furnished to the other
parties hereto in the manner prescribed by this section.
(c) Entire Agreement. This Agreement,
together with any related documents referred to in this Agreement, constitutes
the entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings between them or
any of them as to such subject matter. No amendment,
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change or modification of this Agreement be valid unless in writing and signed
by all of the parties hereto.
(d) Waiver, Amendment and Modification. No
breach of any provision hereof can be waived unless in writing. Waiver of any
one breach of any provision hereof shall not be deemed to be a waiver of any
other breach of the same or any other provision hereof. This Agreement may
only be amended or modified by an instrument in writing executed by each of
the parties hereto.
(e) Severability. In case any one or more
of the provisions contained in this Agreement shall for any reason be held to
be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement and such invalid, illegal and unenforceable provision shall be
reformed and construed so that it will be valid, legal and enforceable to the
maximum extent permitted by law.
(f) 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.
(g) Section Headings. The headings
contained in this Agreement are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement. Should there
be any conflict between any such heading and the section at the head of which
it appears, the section and not such heading shall control.
(h) Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the laws of the
State of California. The parties hereby consent to the exclusive jurisdiction
and venue of the Superior Courts for the State of California located in the
County of Los Angeles for the resolution of any disputes arising out of this
Agreement.
(i) Successors and Assigns. All of the
terms and provisions contained herein shall inure to the benefit of and shall
be binding upon the parties hereto and their respective heirs, legal or
personal representatives, successors and assigns.
(j) Further Assurances. Each of the
parties hereto shall execute and deliver any and all additional papers,
documents, and other assurances, and shall do any and all acts and things
reasonably necessary in connection with the performance of their obligations
hereunder and to carry out the intent of the parties hereto.
(k) Advice of Counsel. The parties hereto,
and each of them, represent and warrant that in executing this Agreement, they
have had an opportunity to read and understand this Agreement and to discuss
and review the Agreement and their legal rights and obligations with respect
thereto and the subject matter thereof with independently selected legal
counsel ("Counsel") and in negotiating and executing this Agreement have
relied solely upon their own judgment, belief and knowledge, and on the
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advice and recommendations of Counsel concerning the nature, extent and
duration of their rights and claims.
(l) Construction. This Agreement shall not
be construed against the party preparing it. Accordingly, any uncertainty or
ambiguity shall not be interpreted against any one party and any rule of
construction that a document is to be construed against the drafting party
shall not be applicable.
(m) Counterparts. This Agreement may be
executed in Counterparts, each of which, when so executed and delivered, shall
be an original; however, such counterparts together shall constitute but one
and the same Agreement.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the day and year first set forth above.
AMERICAN FILM TECHNOLOGIES,
INC.
By: ______________________________________
Xxxxxx X. Xxxxxxx
Chief Executive Officer
LENDERS:
YORK CAPITAL MANAGEMENT, L.P.
By: __________________________________,
Name: Xxxxxx Xxxxxxxx
Its: General Partner
$50,000
----------------------------------------
Xxxx Xxxxxxxxxx
$50,000.00
------------------------------------------
Xxxxxx X. Xxxxxxxxx
$100,000.00
------------------------------------------
Xxxxxx X. Xxxxxxx
$400,000.00
------------------------------------------
Xxxxxx X. Xxxxx
$36,000.00
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------------------------------------------
Xxxxxx Xxxx
$10,000.00
XXXXXX X. XXXXXX IRREVOCABLE
TRUST
By:
---------------------------------------
Xxxxxx Xxxx, as Trustee
$64,000.00
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SCHEDULE 1
Lender Amount
------ ------
Xxxxxx X. Wetlzer $ 400,000
York Capital Management, L.P. $ 50,000
Xxxxxx X. Xxxxxxxxx $ 100,000
Xxxx Xxxxxxxxxx $ 50,000
Xxxxxx X. Xxxxx $ 36,000
Xxxxxx Xxxx $ 10,000
Xxxxxx Xxxxxx $ 64,000
--------
Total: $ 710,000
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