SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of August 9, 2001, is between
XXXXXXXX.XXX, INC., a Nevada corporation ("Debtor"), and GENESIS ALTERNATIVE
INVESTMENTS, LLC ("Secured Party").
W I T N E S S E T H:
WHEREAS, Secured Party has agreed to extend credit to Debtor under the
terms of a Convertible Promissory Note dated as of even date herewith (the
"Note").
WHEREAS, to induce Secured Party to extend credit, Debtor has agreed to
pledge and grant a security interest in the Collateral (as hereinafter defined)
as security for the Liabilities (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein without definition
and defined in the Offer Letter or Guaranty are used herein as defined therein.
In addition, as used herein:
"Accounts" means any "account," as such term is defined in the Uniform
Commercial Code, and, in any event, shall include, without limitation,
"health-care-insurance receivables," as such term is defined in Revised
Article 9.
"Chattel Paper" means any "chattel paper," as such term is defined in
the Uniform Commercial Code, including but not limited to Electronic
Chattel Paper.
"Collateral" shall have the meaning ascribed thereto in Section 3
hereof.
"Contracts" means all contracts, undertakings, or other agreements
(other than rights evidenced by Chattel Paper, Documents or Instruments) in
or under which a Debtor may now or hereafter have any right, title or
interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.
"Copyrights" means any copyrights, rights and interests in copyrights,
works protectable by copyrights, copyright registrations and copyright
applications, including, without limitation, the copyright registrations
and applications listed on Schedule III attached hereto, and all renewals
of any of the foregoing, all income, royalties, damages and payments now
and hereafter due and/or payable under or with respect to any of the
foregoing,
including, without limitation, damages and payments for past, present and
future infringements of any of the foregoing and the right to xxx for past,
present and future infringements of any of the foregoing.
"Deposit Accounts" means any "deposit accounts," as such term is
defined in Revised Article 9.
"Documents" means any "documents," as such term is defined in the
Uniform Commercial Code.
"Electronic Chattel Paper" means any "electronic chattel paper," as
such term is defined in Revised Article 9.
"Equipment" means any "equipment," as such term is defined in the
Uniform Commercial Code and, in any event, shall include, Motor Vehicles.
"Event(s) of Default" means any "Default", as such term is defined in
the Note.
"Fixtures" means all of the following now owned or hereafter acquired
by Debtor: plant fixtures; business fixtures; other fixtures and storage
facilities, wherever located; and all additions and accessions thereto and
replacements therefor.
"General Intangibles" means any "general intangibles," as such term is
defined in the Uniform Commercial Code, and, in any event, shall include,
without limitation, all right, title and interest in or under any Contract,
models, drawings, materials and records, claims, literary rights, goodwill,
rights of performance, Copyrights, Trademarks, Patents, warranties, rights
under insurance policies and rights of indemnification, and shall also
include Payment Intangibles.
"Goods" means any "goods", as such term is defined in the Uniform
Commercial Code.
"Letter-of-credit Rights" means any "letter-of-credit rights, as such
term is defined in Revised Article 9.
"Instruments" means any "instrument," as such term is defined in the
Uniform Commercial Code, and shall include, without limitation, promissory
notes, drafts, bills of exchange, trade acceptances, letters of credit, and
Chattel Paper.
"Inventory" means any "inventory," as such term is defined in the
Uniform Commercial Code, and, in any event, shall include, without
limitation, all Inventory as defined in the Credit Agreement.
"Investment Property" means any "investment property," as such term is
defined in the Uniform Commercial Code.
"Liabilities" shall mean all obligations and liabilities of Debtor
under or in respect of this Agreement and the Note, together with all other
indebtedness, obligations and liabilities of the Debtor to the Secured
Party from time to time.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Patents" means any patents and patent applications, including,
without limitation, the inventions and improvements described and claimed
therein, all patentable inventions and those patents and patent
applications listed on Schedule IV attached hereto, and the reissues,
divisions, continuations, renewals, extensions and continuations-in-part of
any of the foregoing, and all income, royalties, damages and payments now
or hereafter due and/or payable under or with respect to any of the
foregoing, including, without limitation, damages and payments for past,
present and future infringements of any of the foregoing and the right to
xxx for past, present and future infringements of any of the foregoing.
"Payment Intangibles" means any "payment intangibles," as such term is
defined in Revised Article 9.
"Permitted Liens" means those liens and encumbrances described on
Schedule VII attached hereto.
"Person" means any natural person, corporation, partnership, trust,
limited liability company, association, governmental authority or unit, or
any other entity, whether acting in an individual, fiduciary or other
capacity.
"Proceeds" means "proceeds," as such term is defined in the Uniform
Commercial Code and, in any event, includes, without limitation, (a) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable
with respect to any of the Collateral, (b) any and all payments (in any
form whatsoever) made or due and payable from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of
all or any part of the Collateral by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (c) any and all other amounts from time to time paid or
payable under, in respect of or in connection with any of the Collateral.
"Representative" means any Person acting as agent, representative or
trustee on behalf of the Secured Party from time to time.
"Supporting Obligations" means any "supporting obligations," as such
term is defined in Revised Article 9.
"Trademarks" means any trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos, other business identifiers, prints and labels on
which any of the foregoing have appeared or appear, all
registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, the trademarks and applications
listed in Schedule V attached hereto and renewals thereof, and all income,
royalties, damages and payments now or hereafter due and/or payable under
or with respect to any of the foregoing, including, without limitation,
damages and payments for past, present and future infringements of any of
the foregoing and the right to xxx for past, present and future
infringements of any of the foregoing.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect from time to time in the State of California.
Section 2. Representations, Warranties and Covenants of Debtor. Debtor
represents and warrants to, and covenants with, the Secured Party as follows:
(a) Debtor is the owner of the Collateral in which it purports to
grant a security interest pursuant to Section 3 hereof (subject, with
respect to after acquired Collateral, to Debtor acquiring the same) and no
lien other than Permitted Liens exists or will exist upon such Collateral
at any time;
(b) this Agreement is effective to create in favor of Secured Party
for the benefit of the Secured Party a valid security interest in and lien
upon all of Debtor's right, title and interest in and to the Collateral,
and, upon the filing of appropriate Uniform Commercial Code financing
statements in the jurisdictions listed on Schedule I attached hereto, such
security interest will be duly perfected in all the Collateral (other than
Instruments not constituting Chattel Paper prior to July 1, 2001), and upon
delivery of the Instruments to the Secured Party or its Representative,
duly endorsed by Debtor or accompanied by appropriate instruments of
transfer duly executed by Debtor, the security interest in the Instruments
will be duly perfected;
(c) all of the Equipment, Inventory and Goods owned by Debtor is
located at the places as specified on Schedule I attached hereto. Except as
disclosed on Schedule I, none of the Collateral is in the possession of any
bailee, warehousemen, processor or consignee. The chief place of business,
chief executive office and the office where Debtor keeps its books and
records are located at the place as specified on Schedule I. Debtor
(including any Person acquired by Debtor) does not do business and has not
done business during the past five (5) years under any trade name or
fictitious business name except as disclosed on Schedule II attached
hereto;
(d) no Copyrights, Patents or Trademarks listed on Schedules III, IV
and V, respectively, if any, have been adjudged invalid or enforceable or
have been canceled, in whole or in part, or are not presently subsisting.
Each of such Copyrights, Patents and Trademarks is valid and enforceable.
Debtor is the sole and exclusive owner of the entire and unencumbered
right, title and interest in and to each of such Copyrights, Patents and
Trademarks, identified on Schedules III, IV and V, as applicable, as being
owned by Debtor, free and clear of any liens, charges and encumbrances,
including without limitation licenses, shop rights and covenants by Debtor
not to xxx third persons. Debtor has adopted, used and
is currently using, or has a current bona fide intention to use, all of
such Trademarks and Copyrights. Debtor has no notice of any suits or
actions commenced or threatened with reference to the Copyrights, Patents
or Trademarks owned by it;
(e) Debtor agrees to deliver to the Secured Party an updated Schedule
I, II, III, IV, V and/or VII within five (5) days of any change thereto;
(f) all Deposit Accounts maintained by Debtor are described on
Schedule VI hereto, which description includes for each such account the
name of the Debtor maintaining such account, the name, address and
telephone and telecopy numbers of the financial institution at which such
account is maintained, the account number and the account officer, if any,
of such account. No Debtor shall open any new Deposit Accounts unless
Debtor shall have given Secured Party ten (10) Business Days' prior written
notice of its intention to open any such new accounts. Debtor shall deliver
to Secured Party a revised version of Schedule VI showing any changes
thereto within five (5) Business Days of any such change. Debtor hereby
authorizes the financial institutions at which Debtor maintains an account
to provide Secured Party with such information with respect to such account
as Secured Party from time to time reasonably may request, and Debtor
hereby consents to such information being provided to Secured Party;
(g) Debtor's Federal Employer Identification Number is listed below
its signature on the signature pages hereto.
Section 3. Collateral. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Liabilities, Debtor hereby pledges and grants to the Secured Party, a lien on
and security interest in and to all of Debtor's right, title and interest in the
following property and interests in property, whether now owned by Debtor or
hereafter acquired and whether now existing or hereafter coming into existence
and wherever located (all being collectively referred to herein as
"Collateral"):
(a) the Instruments of Debtor, together with all payments thereon or
thereunder;
(b) all Accounts;
(c) all Inventory;
(d) all General Intangibles;
(e) all Equipment;
(f) all Documents;
(g) all Contracts;
(h) all Goods;
(i) all Investment Property;
(j) all Fixtures;
(k) all Letter-of-credit rights;
(l) Deposit Accounts, including without limitation the balance from
time to time in all bank and depository accounts maintained by Debtor; and
(m) all other tangible and intangible property of Debtor, including,
without limitation, all Proceeds, products, accessions, rents, profits,
income, benefits, substitutions, additions and replacements of and to any
of the property of Debtor described in the preceding clauses of this
Section 3 (including, without limitation, any proceeds of insurance thereon
and all rights, claims and benefits against any Person relating thereto)
and all books, correspondence, files, records, invoices and other papers,
including without limitation all tapes, cards, computer runs, computer
programs, computer files and other papers, documents and records in the
possession or under the control of Debtor or any computer bureau or service
company from time to time acting for Debtor.
Debtor and Secured Party acknowledge that revised Article 9 of the UCC, in
the form or substantially in the form approved in 2001 by the American Law
Institute and the National Conference of Commissioners on Uniform State Law
("Revised Article 9"), has been adopted in the State of New York. Grantor and
Secured Party hereby agree that upon the effective date in New York of Revised
Article 9 to the transactions contemplated hereby, all references in this
Agreement to sections of the UCC shall be deemed to refer to the equivalent
corresponding sections of Revised Article 9.
Section 4. Covenants; Remedies. In furtherance of the grant of the pledge
and security interest pursuant to Section 3 hereof, Debtor hereby agrees with
the Secured Party, for the benefit of Secured Party and the Lenders, as follows:
4.1. Delivery and Other Perfection; Maintenance, etc.
(a) Delivery of Instruments. Debtor shall deliver and pledge to the
Secured Party or its Representative any and all Instruments, duly endorsed
and/or accompanied by such instruments of assignment and transfer executed
by Debtor in such form and substance as the Secured Party or its
Representative may request; provided, that so long as no Event of Default
shall have occurred and be continuing, Debtor may retain for collection in
the ordinary course of business any Instruments received by Debtor in the
ordinary course of business, and the Secured Party or its Representative
shall, promptly upon request of a Debtor, make appropriate arrangements for
making any other Instruments pledged by Debtor available to Debtor for
purposes of presentation, collection or renewal (any such arrangement to be
effected, to the extent deemed appropriate by the Secured Party or its
Representative, against trust receipt or like document).
(b) Other Documents and Actions. Debtor shall give, execute, deliver,
file and/or record any financing statement, notice, instrument, document,
agreement or other papers that may be necessary or desirable (in the
reasonable judgment of the Secured Party or its Representative) to create,
preserve, perfect or validate the security interest granted pursuant hereto
or to enable the Secured Party or its Representative to exercise and
enforce the rights of the Secured Party hereunder with respect to such
pledge and security interest, provided that notices to account debtors in
respect of any Accounts, Payment Intangibles or Instruments shall be
subject to the provisions of clause (e) below.
(c) Books and Records. Debtor shall maintain at its own cost and
expense complete and accurate books and records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with
the Collateral. Upon the occurrence and during the continuation of any
Event of Default, Debtor shall deliver and turn over any such books and
records (or true and correct copies thereof) to the Secured Party or its
Representative at any time on demand. Debtor shall permit any
representative of the Secured Party to inspect such books and records at
any time during reasonable business hours and will provide photocopies
thereof at Debtor's expense to the Secured Party upon request of the
Secured Party.
(d) Motor Vehicles. Debtor shall, promptly upon the request of the
Secured Party or its Representative, cause the Secured Party to be listed
as the lienholder on each certificate of title or ownership covering any
items of Equipment, including Motor Vehicles.
(e) Notice to Account Debtor; Verification. (i) Upon the occurrence
and during the continuance of any Event of Default, upon request of the
Secured Party or its Representative, Debtor shall promptly notify (and
Debtor hereby authorizes the Secured Party and its Representative so to
notify) each account debtor in respect of any Accounts, Payment Intangibles
or Instruments that such Collateral has been assigned to the Secured Party
hereunder, and that any payments due or to become due in respect of such
Collateral are to be made directly to the Secured Party, and (ii) the
Secured Party and its Representative shall have the right at any time or
times to make direct verification with the account debtors of any and all
of the Accounts and Payment Intangibles.
(f) Intellectual Property. Debtor represents and warrants that the
Copyrights, Patents and Trademarks listed on Schedules III, IV and V,
respectively, constitute all of the registered Copyrights and all of the
Patents and Trademarks now owned by Debtor. If Debtor shall (i) obtain
rights to any new patentable inventions, any registered Copyrights or any
Patents or Trademarks, or (ii) become entitled to the benefit of any
registered Copyrights or any Patents or Trademarks or any improvement on
any Patent, the provisions of this Agreement above shall automatically
apply thereto and Debtor shall give to Secured Party prompt written notice
thereof. Debtor hereby authorizes Secured Party to modify this Agreement by
amending Schedules III, IV and V, as applicable, to include any such
registered Copyrights or any such Patents and Trademarks. Debtor shall have
the duty (i) to prosecute diligently any patent, trademark, or service xxxx
applications pending as of the
date hereof or hereafter, (ii) to make application on unpatented but
patentable inventions and on trademarks, copyrights and service marks, as
appropriate, (iii) to preserve and maintain all rights in the Copyrights,
Patents and Trademarks, to the extent material to the operations of the
business of Debtor and (iv) to ensure that the Copyrights, Patents and
Trademarks are and remain enforceable, to the extent material to the
operations of the business of Debtor. Any expenses incurred in connection
with Debtor's obligations under this Section 4.1(f) shall be borne by
Debtor. Debtor shall abandon any right to file a patent, trademark or
service xxxx application, or abandon any pending patent, application or any
other Copyright, Patent or Trademark without the written consent of Secured
Party, which consent shall not be unreasonably withheld.
(g) Further Identification of Collateral. Debtor will, when and as
often as requested by the Secured Party or its Representative, furnish to
the Secured Party or such Representative, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as the Secured Party or its Representative
may reasonably request, all in reasonable detail.
(h) Control of Certain Collateral. Debtor will take any and all
actions required or requested by the Secured Party, from time to time, to
(i) cause the Secured Party to obtain exclusive control of any Investment
Property, Letter-of-credit Rights or Electronic Chattel Paper owned by
Debtor in a manner acceptable to the Secured Party and (ii) obtain from any
issuers of Investment Property or any letter-of-credit and such other
Persons, for the benefit of the Secured Party, written confirmation of and
consent to the Secured Party's control over such Investment Property and
Letter-of-credit Rights. For purposes of this Section 4.1(h), the Secured
Party shall have exclusive control of Investment Property if (i) such
Investment Property consists of certificated securities and a Debtor
delivers such certificated securities to the Secured Party (with
appropriate endorsements if such certificated securities are in registered
form); (ii) such Investment Property consists of uncertificated securities
and either (x) a Debtor delivers such uncertificated securities to the
Secured Party or (y) the issuer thereof agrees, pursuant to documentation
in form and substance satisfactory to the Secured Party, that it will
comply with instructions originated by the Secured Party without further
consent by Debtor, and (iii) such Investment Property consists of security
entitlements and either (x) the Secured Party becomes the entitlement
holder thereof or (y) the appropriate securities intermediary agrees,
pursuant to the documentation in form and substance satisfactory to the
Secured Party, that it will comply with entitlement orders originated by
the Secured Party without further consent by any Debtor.
(i) Marking of Chattel Paper. Debtor will not create any Chattel Paper
without placing a legend on the Chattel Paper acceptable to Secured Party
indicating that Secured Party has a security interest in the Chattel Paper.
Without limiting the foregoing, Debtor shall place such a legend on the
first page of the Chattel Paper and on each page upon which a signature or
initial appears. Debtor shall not create more than one original Chattel
Paper for any underlying transaction.
(j) Compliance with Loan Documents. Debtor shall comply with the
provisions of the Loan Documents applicable thereto, including, without
limitation, maintenance of insurance, restrictions on dispositions, and
providing Secured Party and its representatives the right to inspections
with respect to the Collateral.
4.2 Other Liens. Debtor will not create, permit or suffer to exist, and
will defend the Collateral against and take such other action as is necessary to
remove, any lien or other encumbrance on the Collateral except Permitted Liens,
and will defend the right, title and interest of the Secured Party in and to the
Collateral and in and to all Proceeds thereof against the claims and demands of
all Persons whatsoever.
4.3 Preservation of Rights. Whether or not any Event of Default has
occurred or is continuing, the Secured Party and its Representative may, but
shall not be required to, take any steps the Secured Party or its Representative
deems necessary or appropriate to preserve any Collateral or any rights against
third parties to any of the Collateral, including obtaining insurance of
Collateral at any time when Debtor has failed to do so, and Debtor shall
promptly pay, or reimburse the Secured Party for, all expenses incurred in
connection therewith.
4.4 Name Change; Location; Bailees.
(a) Debtor will notify Secured Party promptly in writing prior to any
change in Debtor's name, identity or corporate structure, or the proposed
use by Debtor of any tradename or fictitious business name other than any
such name set forth on Schedule II attached hereto.
(b) Except for the sale of Inventory in the ordinary course of
business and except as expressly permitted by the Credit Agreement, Debtor
will keep the Collateral at the locations specified in Schedule I
applicable to Debtor. Debtor will give Secured Party thirty (30) day's
prior written notice of any change in Debtor's chief place of business,
state of organization or of any new location for any of the Collateral.
(c) If any Collateral is at any time in the possession or control of
any warehousemen, bailee, consignee or processor, Debtor shall, upon the
request of Secured Party or its Representative, notify such warehousemen,
bailee, consignee or processor of the lien and security interest created
hereby and shall instruct such Person to hold all such Collateral for
Secured Party's account subject to Secured Party's instructions.
4.5 Deposit Accounts.
(a) At Secured Party's request, on or prior to the Closing Date, or at
any time thereafter, the Secured Party and Debtor shall enter into a bank
agency agreement ("Bank Agency Agreement"), in a form specified by the
Secured Party, with each financial institution with which Debtor maintains
from time to time any Deposit Accounts (general or special), which
financial institutions are set forth on Schedule VI attached hereto.
Pursuant to the Bank Agency Agreements and pursuant hereto, Debtor grants
and shall grant to the Secured
Party a continuing lien upon, and security interest in, all such Deposit
Accounts and all funds at any time paid, deposited, credited or held in
such accounts (whether for collection, provisionally or otherwise) or
otherwise in the possession of such financial institutions, and each such
financial institution shall act as the Secured Party's agent in connection
therewith. Following the Closing Date, no Debtor shall establish any
Deposit Account with any financial institution unless prior thereto, at the
request of Secured Party, the Secured Party and Debtor shall have entered
into a Bank Agency Agreement with such financial institution.
(b) Upon the Secured Party's request, Debtor shall establish lock-box
or blocked accounts (collectively, "Blocked Accounts") in Debtor's name
with such banks as are acceptable to the Secured Party ("Collecting
Banks"), subject to irrevocable instructions in a form specified by the
Secured Party, to which the obligors of all Accounts and payment
intangibles shall directly remit all payments on Accounts and payment
intangibles and in which Debtor will immediately deposit all cash payments
for Inventory or other cash payments constituting proceeds of Collateral in
the identical form in which such payment was made, whether by cash or
check. In addition, the Secured Party may establish one or more depository
accounts at each Collecting Bank or at a centrally located bank
(collectively, the "Depository Account"). From and after receipt by any
Collecting Bank of written notice from the Secured Party to such Collecting
Bank that an Event of Default has occurred and is continuing, all amounts
held or deposited in the Blocked Accounts held by such Collecting Bank
shall be transferred to the Depository Account. Subject to the foregoing,
Debtor hereby agrees that all payments received by the Secured Party
whether by cash, check, wire transfer or any other instrument, made to such
Blocked Accounts or otherwise received by the Secured Party and whether in
respect of the Accounts or as proceeds of other Collateral or otherwise
will be the sole and exclusive property of the Secured Party for the
benefit of the Secured Party. Debtor, and any of its affiliates, employees,
agents and other Persons acting for or in concert with Debtor shall, acting
as trustee for the Secured Party, receive, as the sole and exclusive
property of the Secured Party, any moneys, checks, notes, drafts or other
payments relating to and/or proceeds of Accounts, Payment Intangibles or
other Collateral which come into the possession or under the control of
Debtor or any affiliates, employees, agent or other Persons acting for or
in concert with Debtor, and immediately upon receipt thereof, Debtor or
Persons shall deposit the same or cause the same to be deposited in kind,
in a Blocked Account.
4.6 Events of Default, Etc. During the period during which an Event of
Default shall have occurred and be continuing:
(a) Debtor shall, at the request of the Secured Party or its
Representative, assemble the Collateral at such place or places as may be
reasonably designated by the Secured Party or its Representative;
(b) the Secured Party or its Representative may make any reasonable
compromise or settlement deemed desirable with respect to any of the
Collateral and may extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, any of the Collateral;
(c) the Secured Party shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform Commercial
Code (whether or not said Uniform Commercial Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the Secured
Party were the sole and absolute owner thereof (and Debtor agrees to take
all such action as may be appropriate to give effect to such right);
(d) the Secured Party or its Representative in their discretion may,
in the name of the Secured Party or in the name of Debtor or otherwise,
demand, xxx for, collect or receive any money or property at any time
payable or receivable on account of or in exchange for any of the
Collateral, but shall be under no obligation to do so;
(e) the Secured Party or its Representative may take immediate
possession and occupancy of any premises owned, used or leased by Debtor
and exercise all other rights and remedies of an assignee which may be
available to the Secured Party; and
(f) the Secured Party may, upon ten (10) Business Days' prior written
notice to Debtor of the time and place (which notice Debtor hereby agrees
is commercially reasonable notification for purposes hereof), with respect
to the Collateral or any part thereof which shall then be or shall
thereafter come into the possession, custody or control of the Secured
Party or its Representative, sell, lease, assign or otherwise dispose of
all or any part of such Collateral, at such place or places as the Secured
Party deems best, and for cash or for credit or for future delivery
(without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Secured Party or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public sale
(or, to the extent permitted by law, at any private sale) and thereafter
hold the same absolutely, free from any claim or right of whatsoever kind,
including any right or equity of redemption (statutory or otherwise), of
Debtor, any such demand, notice and right or equity being hereby expressly
waived and released. The Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from
time to time by announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
4.6 shall be applied in accordance with Section 4.9 hereof.
4.7 Deficiency. If the proceeds of sale, collection or other
realization of or upon the Collateral are insufficient to cover the costs and
expenses of such realization and the payment in full of the Liabilities, Debtor
shall remain liable for any deficiency.
4.8 Private Sale. Debtor recognizes that the Secured Party may be unable to
effect a public sale of any or all of the Collateral consisting of securities by
reason of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Act"), and applicable state securities laws, but may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire such
Collateral for their own account for investment and not with a view to the
distribution or resale thereof. Debtor acknowledges and agrees that any such
private sale may result in prices and other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner. The Secured Party shall be under no obligation
to delay a sale of any of the Collateral to permit Debtor to register such
Collateral for public sale under the Act, or under applicable state securities
laws, even if Debtor would agree to do so. The Secured Party shall not incur any
liability as a result of the sale of any such Collateral, or any part thereof,
at any private sale provided for in this Agreement conducted in a commercially
reasonable manner, and Debtor hereby waives any claims against the Secured Party
arising by reason of the fact that the price at which the Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Liabilities, even if the Secured Party accepts the first offer received and does
not offer the Collateral to more than one offeree.
Debtor further agrees to do or cause to be done all such other acts and
things as may be necessary to make such sale or sales of any portion or all of
any such Collateral valid and binding and in compliance with any and all
applicable laws, regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities, domestic or
foreign, having jurisdiction over any such sale or sales, all at Debtor's
expense, provided that Debtor shall be under no obligation to take any action to
enable any or all of such Collateral to be registered under the provisions of
the Act. Debtor further agrees that a breach of any of the covenants contained
in this Section 4.8 will cause irreparable injury to the Secured Party, that the
Secured Party has no adequate remedy at law in respect of such breach and, as a
consequence, agrees that each and every covenant contained in this Section 4.8
shall be specifically enforceable against Debtor, and Debtor hereby waives and
agrees not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred and is
continuing.
4.9 Application of Proceeds. The proceeds of any collection, sale or other
realization of all or any part of the Collateral, and any other cash at the time
held by the Secured Party under this Agreement, shall be applied:
first, to payment of all expenses payable or reimbursable under this
Agreement or the Note;
second, to payment of all accrued unpaid interest on the Liabilities;
third, to payment of principal of the Liabilities;
fourth, to payment of any other amounts owing constituting
Liabilities; and
last, any remainder shall be for the account of and paid to Debtor.
4.10 Attorney-in-Fact. Debtor hereby irrevocably constitutes and appoints
the Secured Party, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Debtor and in the name of Debtor or in its own name, from time to time
in the discretion of the Secured Party, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action and to execute
and deliver any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives the Secured Party the power and right,
on behalf of Debtor, without notice to or assent by Debtor, to do the following
upon the occurrence and during the continuation of any Event of Default:
(a) to ask, demand, collect, receive and give acquittance and receipts
for any and all moneys due and to become due under any Collateral and, in
the name of Debtor or its own name or otherwise, to take possession of and
endorse and collect any checks, drafts, notes, acceptances or other
Instruments for the payment of moneys due under any Collateral and to file
any claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Party for the purpose
of collecting any and all such moneys due under any Collateral whenever
payable and to file any claim or to take any other action or proceeding in
any court of law or equity or otherwise deemed appropriate by the Secured
Party for the purpose of collecting any and all such moneys due under any
Collateral whenever payable;
(b) to pay or discharge charges or liens levied or placed on or
threatened against the Collateral other than the Permitted Liens, to effect
any insurance called for by the terms of this Agreement and to pay all or
any part of the premiums therefor;
(c) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due, and to become due
thereunder, directly to the Secured Party or as the Secured Party shall
direct, and to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in respect of
or arising out of any Collateral;
(d) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other Documents constituting or relating to the Collateral;
(e) to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right in respect of
any Collateral;
(f) to defend any suit, action or proceeding brought against Debtor
with respect to any Collateral;
(g) to settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such discharges or
releases as the Secured Party may deem appropriate; and
(h) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Secured Party were the absolute owners thereof for
all purposes, and to do, at the Secured Party's option and at Debtor's
expense, at any time, or from time to time, all acts and things which the
Secured Party reasonably deems necessary to protect, preserve or realize
upon the Collateral and the Secured Party's lien therein, in order to
effect the intent of this Agreement, all as fully and effectively as Debtor
might do.
Debtor hereby ratifies, to the extent permitted by law, all that such
attorneys lawfully do or cause to be done by virtue hereof. The power of
attorney granted hereunder is a power coupled with an interest and shall be
irrevocable until the Liabilities are indefeasibly paid in full.
Debtor also authorizes the Secured Party, at any time from and after the
occurrence and during the continuation of any Event of Default, (x) to
communicate in its own name with any party to any Contract with regard to the
assignment of the right, title and interest of Debtor in and under the Contracts
hereunder and other matters relating thereto and (y) to execute, in connection
with any sale of Collateral provided for in Section 4.5 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
4.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, Debtor shall:
(a) file such financing statements, assignments for security and other
documents in such offices as may be necessary or as the Secured Party or
the Representative may request to perfect the security interests granted by
Section 3 of this Agreement;
(b) at Secured Party's request, deliver to the Secured Party or its
Representative the originals of all Instruments together with, in the case
of Instruments constituting promissory notes, allonges attached thereto
showing such promissory notes to be payable to the order of a blank payee;
and
(c) at Secured Party's request, deliver to the Secured Party or its
Representative the originals of all Motor Vehicle titles, duly endorsed
indicating the Secured Party's interest therein as lienholder.
Debtor hereby authorizes Secured Party to file a financing statement
describing the Collateral
4.12 Termination. This Agreement and the liens and security interests
granted hereunder shall not terminate until satisfaction of and the full and
complete performance and indefeasible satisfaction of all the Liabilities (other
than contingent indemnification obligations), whereupon the Secured Party shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral to or on the order of Debtor. The Secured Party shall also execute
and deliver to Debtor upon such termination such Uniform Commercial Code
termination statements, certificates for terminating the liens on the Motor
Vehicles (if any) and such other documentation as shall be reasonably requested
by Debtor to effect the termination and release of the liens and security
interests in favor of the Secured Party affecting the Collateral.
4.13 Further Assurances.
(a) At any time and from time to time, upon the written request of the
Secured Party or its Representative, and at the sole expense of Debtor,
Debtor will promptly and duly execute and deliver any and all such further
instruments, documents and agreements and take such further actions as the
Secured Party or its Representative may reasonably require in order for the
Secured Party to obtain the full benefits of this Agreement and of the
rights and powers herein granted in favor of the Secured Party, including,
without limitation, using Debtor's best efforts to secure all consents and
approvals necessary or appropriate for the assignment to the Secured Party
of any Collateral held by Debtor or in which Debtor has any rights not
heretofore assigned, the filing of any financing or continuation statements
under the Uniform Commercial Code with respect to the liens and security
interests granted hereby, transferring Collateral to the Secured Party's
possession (if a security interest in such Collateral can be perfected by
possession), placing the interest of the Secured Party as lienholder on the
certificate of title of any Motor Vehicle and obtaining waivers of liens
from landlords and mortgagees. Debtor also hereby authorizes the Secured
Party and its Representative to file any such financing or continuation
statement without the signature of Debtor to the extent permitted by
applicable law.
(b) Upon the request of the Secured Party, Debtor shall procure
insurers' acknowledgements of any assignments of key man life insurance
policies which may be assigned to the Secured Party as additional security
for the Liabilities (if any) and will take all such further action as
required by any insurer or the Secured Party in connection with any such
assignment.
4.14 Limitation on Duty of Secured Party. The powers conferred on the
Secured Party under this Agreement are solely to protect the Secured Party's
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and neither the
Secured Party nor its Representative nor any of their respective officers,
directors, employees or agents shall be responsible to Debtor for any act or
failure to act, except for willful misconduct. Without limiting the foregoing,
the Secured Party and any Representative shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in their
possession if such Collateral is accorded treatment substantially equivalent to
that which the relevant Secured Party or any Representative, in its individual
capacity, accords its own property consisting of the type of Collateral
involved, it being understood and agreed that neither the Secured Party nor any
Representative shall have any responsibility for taking any necessary steps
(other than steps taken
in accordance with the standard of care set forth above) to preserve rights
against any person with respect to any Collateral.
Also without limiting the generality of the foregoing, neither the Secured
Party nor any Representative shall have any obligation or liability under any
Contract or license by reason of or arising out of this Agreement or the
granting to the Secured Party of a security interest therein or assignment
thereof or the receipt by the Secured Party or any Representative of any payment
relating to any Contract or license pursuant hereto, nor shall the Secured Party
or any Representative be required or obligated in any manner to perform or
fulfill any of the obligations of Debtor under or pursuant to any Contract or
license, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or license, or to present or file any claim, or
to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.
Section 5. Miscellaneous. -
5.1 No Waiver. No failure on the part of the Secured Party or any of its
Representatives to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Secured Party or
any of its Representatives of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The rights and remedies hereunder provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights and
remedies provided by law.
5.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws and decisions of the State of New York,
without regard to conflict of law principles thereof.
5.3 Notices. All notices, approvals, requests, demands and other
communications hereunder shall be in writing and delivered by hand or by
nationally recognized overnight courier, or sent by first class mail or sent by
telecopy (with such telecopy to be confirmed promptly in writing sent by first
class mail), sent:
(a) if to Debtor, to: xxxxxxxx.xxx, inc.
00 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: CEO
Facsimile: (000) 000-0000
(b) if to Secured Party, to: Genesis Alternative Investments, LLC
c/o Atlas Capital Services, LLC
000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxxxx
Facsimile: 000-000-0000
or to such other address or addresses or telecopy number or numbers as any party
hereto may most recently have designated in writing to the other party by such
notice. All such communications shall be deemed to have been given or made (i)
if delivered in person, when delivered, (ii) if delivered by telecopy, on the
date of transmission if transmitted on a business day before 4:00 p.m. New York
time, otherwise on the next business day, (iii) if delivered by overnight
courier, one (1) business day after delivery to the courier properly addressed
and (iv) if mailed, three (3) business days after deposited in the United States
mail, certified or registered.
5.4 Amendments, Etc. The terms of this Agreement may be waived, altered or
amended only by an instrument in writing duly executed by Debtor sought to be
charged or benefited thereby and the Secured Party. Any such amendment or waiver
shall be binding upon the Secured Party and Debtor sought to be charged or
benefited thereby and their respective successors and assigns.
5.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of each of the parties
hereto, provided, that Debtor shall not assign or transfer its rights hereunder
without the prior written consent of the Secured Party.
5.6 Counterparts; Headings. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.
5.7 Severability. If any provision hereof is invalid and unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Secured Party and its
Representative in order to carry out the intentions of the parties hereto as
nearly as may be possible and (b) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be duly executed and delivered as of the day and year first above written.
DEBTOR:
XXXXXXXX.XXX, INC.
By: XXXXXXX X. XXXXXXXX
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and CEO
SECURED PARTY:
GENESIS ALTERNATIVE INVESTMENTS, LLC
By: /s/ XXXXX XXXXXX
----------------------------------
Name: Xxxxx Xxxxxx
Title: Secretary
SCHEDULE I
(LOCATION OF ALL EQUIPMENT, INVENTORY AND GOODS OF THE DEBTOR)
PRINCIPLE OFFICE
----------------
00 XXXXXXXX XXXX
XXXXXX, XX 00000
CO-LOCATION
-----------
000 XXXXXXXXXX XXXXXX
XXXXXX, XX 00000
SALES OFFICE
------------
000 XXXXX XXXXXXXX XXXXXX, XXXXX 000
XXXXXX XXXX, XX 00000
SCHEDULE II
(TRADE NAMES OF THE DEBTOR)
XXXXXXXX.XXX
SCHEDULE III
(LISTS OF COPYRIGHTS)
NONE
SCHEDULE IV
(LISTS OF PATENTS)
PATENT APPLICATION NO. 09/375,384
FILED 8/17/99
FOR: METHOD AND SYSTEM FOR DISTRIBUTING OTHERWISE UNAVAILABLE WORKS OVER THE
INTERNET
SCHEDULE V
(LISTS OF TRADEMARKS)
SERIAL NUMBER 75/008579
XXXX BOOKTECH
Schedule VI
(lists of Deposit Accounts of the Debtor)
FLEET BANK 002763-5834
FLEET BANK 002763-5850
FLEET BANK 941837-7121
WINCHESTER CO-OPERATIVE BANK 00-00-0000000000
WINCHESTER SAVINGS BANK 00-00-000000000
SCHEDULE VII
(PERMITTED LIENS)
SECURED PARTY FILING TYPE FILING NUMBER FILING DATE
------------- ----------- ------------- -----------
COPYTRON, INC UCC-1 00736275 8/8/00
BOSTON FINANCIAL, CORP UCC-1 200100682100 3/16/01
VERUS INVESTMENTS
HOLDINGS INC UCC-1 200103447210 6/22/01
CONVERTIBLE PROMISSORY NOTE
THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES THAT MAY BE ACQUIRED
PURSUANT TO THE CONVERSION HEREOF HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION THEREOF AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND LAWS.
XXXXXXXX.XXX, INC.
CONVERTIBLE PROMISSORY NOTE
DUE OCTOBER 8, 2001
August 9, 2001
FOR VALUE RECEIVED, the undersigned, xxxxxxxx.xxx, inc., a Nevada
corporation (the "Company"), promises to pay to the order of Genesis Alternative
Investments, LLC, or its registered assigns (the "Holder"), the principal sum of
ONE HUNDRED THOUSAND DOLLARS in the lawful currency of the United States of
America (US$100,000) on October 8, 2001 (the "Maturity Date"), with interest
thereon from time to time as provided herein.
1. INTEREST. The Company promises to pay interest on the principal amount
of this Note from the date hereof until maturity at the rate of ten percent
(10%) per annum. Interest shall accrue daily and be paid, together with the
principal amount hereof, on the Maturity Date. Interest on this Note shall be
paid by wire transfer of immediately available funds to an account designated by
the Holder. Interest on this Note shall accrue from the date of issuance until
repayment of the principal and payment of all accrued interest in full. Interest
shall be computed on the basis of a 365-day year. Notwithstanding the foregoing
provisions of this Section 1, but subject to applicable law, upon the occurrence
and during the continuance of a Default (as defined below), principal of and
unpaid interest on this Note shall bear interest, from the date of the
occurrence of such Default until such Default is cured or waived, payable on
demand in immediately available funds, at a rate equal to 12% per annum.
2. PREPAYMENT.
2.1 VOLUNTARY PREPAYMENT. The Company, at its option, may at any time,
after 10 days notice, prepay all or any portion of this Note, by paying an
amount equal to the outstanding principal amount of this Note, or the portion of
this Note called for prepayment, together with interest accrued and unpaid
thereon to the date fixed for prepayment and all other amounts due under this,
without penalty or premium.
2.2 MANDATORY PREPAYMENT If an Equity Financing (as hereinafter defined)
shall have been consummated, the outstanding principal balance of this Note,
together with accrued and unpaid interest thereon, shall, at the election of the
Holder, be paid in full by wire transfer of immediately available funds to an
account designated by the Holder, to the extent that the Holder shall not have
elected to convert this Note pursuant to Section 5 hereof.
3. COLLATERAL. This Note is secured by a Security Agreement dated as of
even date herewith (the "Security Agreement") and is secured by the Collateral
under and as defined in the Security Agreement, to which reference is hereby
made for a xxxxxx statement thereof. In addition to the foregoing, the Company,
Holder, and Verus International, Inc. have executed an Inter-creditor Agreement,
dated of even date herewith (the "Inter-creditor Agreement") which provides,
amongst others, that payments received in respect of the Collateral will be
distributed on a pari passu basis and shall contain a drag along provision upon
two-thirds or greater participation.
4. DEFAULTS AND REMEDIES.
4.1 DEFAULT. A "Default" shall occur if:
(i) the Company shall default in the payment of the principal or
interest of this Note when and as the same shall become due and
payable, whether at maturity, or a date fixed for prepayment, or
by acceleration or otherwise or the Company shall fail, upon
notification from the Holder of its election to exercise its
conversion right pursuant to Section 5 hereof, to convert this
Note into Conversion Stock (as hereinafter defined) pursuant to
the terms of this Note; or
(ii) the Company shall default in the due observance or
performance of any covenant, condition or agreement on the part
of the Company to be observed or performed pursuant to the terms
hereof or pursuant to the Security Agreement, and such default is
not remedied or waived within fifteen (15) days after receipt by
the Company of written notice of such default; or
(iii) any representation, warranty, certification or statement
made by or on behalf of the Company in this Note or the Security
Agreement, or in any certificate or other document delivered
pursuant hereto or thereto shall have been incorrect in any
material respect when made; or
(iv) the Company or any of its subsidiaries shall default (as
principal or guarantor) in the payment of principal of any
indebtedness for borrowed money (other than this Note), when and
as the same shall become due and payable whether at stated
maturity, by acceleration or otherwise; or
(v) any event or condition shall occur that may result in the
acceleration of the maturity of any indebtedness of the Company
or any of its subsidiaries (other than this Note); or
(vi) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (a) relief in respect of the Company or any
subsidiary of the Company, or of a substantial part of its
property or assets, under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (b)
the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or
any subsidiary of the Company, or for a substantial part of its
property or assets, or (c) the winding up or liquidation of the
Company or any subsidiary of the Company; and such proceeding or
petition shall continue undismissed for 30 days, or an order or
decree approving or ordering any of the foregoing shall be
entered; or
(vii) the Company or any subsidiary of the Company shall (a)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (b) consent
to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition
described in clause (vi) of this Section 5.1, (c) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or
any subsidiary of the Company, or for a substantial part of its
property or assets, (d) file an answer admitting the material
allegations of a petition filed against it in any such
proceeding, (e) make a general assignment for the benefit of
creditors, or (f) take any action for the purpose of effecting
any of the foregoing; or
(viii) one or more judgments for the payment of money in an
aggregate amount in excess of $50,000 (to the extent not covered
by insurance) shall be rendered against the Company or any
subsidiary of the Company and the same shall remain undischarged
for a period of 30 days during which execution shall not be
effectively stayed, or any action shall be legally taken by a
judgment creditor to levy upon assets or properties of the
Company or any subsidiary of the Company to enforce any such
judgment; or
(ix)The Company's Board of Directors resolves by proper corporate
procedure to, or an order, judgment or decree is entered to,
wind-up, dissolve or liquidate the Company; or
(x) The Company ceases or takes material actions to cease
operating and carrying on its business as it is now conducted.
4.2 Acceleration. If a Default occurs under clauses 4.1(vi), (vii) or
(ix), then the outstanding principal of and all accrued interest on this Note
shall automatically become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are expressly waived. If any
other Default occurs, the Holder, by written notice to the Company, may declare
the principal of and accrued interest on this Note to be due and payable
immediately. Upon such declaration, such principal and interest shall become
immediately due and payable. The Holder may rescind an acceleration and its
consequences if all existing Defaults shall have been cured or waived in
writing, except nonpayment of principal or interest that has become due solely
because of the acceleration, and if the rescission would not conflict with any
judgment or decree. Any notice or rescission shall be given in the manner
specified in Section 12 hereof.
5. CONVERSION.
5.1 CONVERSION PROCEDURE.
(a) The Holder may elect at anytime by prior written notice to
the Company (a "Conversion Notice") to have all or a portion of
the unpaid principal amount of this Note, together with all
accrued and unpaid interest thereon converted into a number of
shares of the Conversion Stock (as hereinafter defined)
determined by dividing the outstanding principal amount of this
Note plus all accrued and unpaid interest, by the Conversion
Price (as hereinafter defined) then in effect (the date of any
such conversion, a "Conversion Date").
(b) Except as otherwise expressly provided herein, the conversion
of this Note shall be deemed to have been effected as of the
close of business on the Conversion Date. At such time as such
conversion has been effected, the rights of the Holder as a
holder of this Note shall cease to the extent of the conversion
hereof, and the "Person" or "Persons" (which shall include any
natural person, firm, partnership, association, corporation,
limited liability company or trust) in whose name or names any
certificate or certificates for shares of Conversion Stock are to
be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock
represented thereby.
(c) As soon as possible after a conversion has been effected (but
in any event within five Business Days), the Company shall
deliver to the converting Holder a certificate or certificates
representing the number of shares of Conversion Stock issuable by
reason of such conversion in such name or names and such
denomination or denominations as the converting Holder has
specified, and, if the Holder has elected to convert this Note in
part, the payment due under Section 2.2 hereof; provided that
this Note has been surrendered for conversion at the principal
office of the Company; and provided further that if the Person in
whose name such certificate is to be issued is a transferee of
such Holder, the provisions of Section 9 shall apply to such
transfer.
(d) The issuance of certificates for shares of Conversion Stock
upon conversion of this Note shall be made without charge to the
Holder hereof for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such conversion
and the related issuance of shares of Conversion Stock. Upon
conversion of this Note, the Company shall take all such actions
as are necessary in order to insure that the Conversion Stock
issuable with respect to such conversion shall be validly issued,
fully paid and non assessable.
(e) The Company shall not close its books against the transfer of
Conversion Stock issued or issuable upon conversion of this Note
in any manner which interferes with the timely conversion of this
Note. The Company shall assist and cooperate with any Holder
required to make any governmental filings or obtain any
governmental approval prior to or in connection with the
conversion of this Note (including, without limitation, making
any filings required to be made by the Company).
(f) Except as otherwise expressly agreed in writing between the
Holder and the Company, upon a conversion of this Note, this Note
shall be converted into Conversion Stock.
5.2 CONVERSION PRICE. The Conversion Price shall be (a) the lower of
(i) $ 0.25, or (ii) the average of the three (3) lowest AMEX
reported closing prices during the sixty (60) Trading Days prior
to the date of the Conversion Notice, or (iii) for the average
closing price report by the AMEX for the five trading days prior
to the date of the Conversion Notice, or (b) if Holder opts for
the Conversion Stock issued in connection with an Equity
Financing, the price paid by investors in such Equity Financing.
The conversion price will be subject to the same customary
adjustments for changes in the capital structure, e.g. stock
splits, stock dividend, etc. "Trading Day" means a day upon which
AMEX is trading securities.
5.3 CONVERSION STOCK. For purposes hereof, "Conversion Stock" means
the common stock of the Company or, at Holder's option, any
equity securities of the type and series issued to the purchasers
in an Equity Financing.
5.4 EQUITY FINANCING. For purposes hereof, "Equity Financing" means
the sale for cash to an entity unaffiliated with the Company of
equity securities or other instruments convertible into or
exchangeable or exercisable for equity securities of the Company,
excluding the issuance of options to employees and issuances of
securities upon exercise, conversion or exchange of currently
outstanding securities. For the purposes of Section 5.4 hereof
only, an Equity Financing must be for at least $250,000.
5.5 REGISTRATION. The Company shall, within 120 days after the date
of this Note and at all times thereafter, maintain not less than
3,000,000 shares of registered but unissued common stock for the
purpose of satisfying the Holder's conversion rights under this
Section 5. In addition, the Company shall, within 120 days after
the Conversion Date, register any other Conversion Stock.
6. SUITS FOR ENFORCEMENT.
(a) The Holder may proceed to protect and enforce its rights by suit
in equity, action at law or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement
contained in the this Note or the Security Agreement or in aid of
the exercise of any power granted in this Note or the Security
Agreement, or may proceed to enforce the payment of this Note, or
to enforce any other legal or equitable right of the Holder of
this Note.
(b) The Holder may direct the time, method and place of conducting
any proceeding for any remedy available to it.
(c) In case of any Default under this Note, the Company will pay to
the Holder such amount as shall be sufficient to cover the
reasonable costs and expenses of such Holder due to such Default,
including, without limitation, the reasonable costs of its
counsel, whether or not suit is brought.
7. REMEDIES CUMULATIVE. No remedy herein conferred upon the Holder is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise. To the extent permitted by
applicable law, the Company and the Holder severally waive presentment for
payment, demand, protest and notice of dishonor.
8. Remedies Not Waived. No course of dealing between the Company and the
Holder or any delay on the part of the Holder in exercising any rights hereunder
shall operate as a waiver of any right including those rights under this Note or
the Security Agreement.
9. HOLDER; TRANSFER.
(a) The term "Holder" as used herein shall also include any
transferee of this Note whose name has been recorded by the
Company in the register referred to in Section 9 (b). Each
transferee of this Note acknowledges that this Note has not been
registered under the Securities Act or any state securities laws,
and may not be transferred except pursuant to an effective
registration statement under the Securities Act or pursuant to an
applicable exemption from the requirements. of the Securities Act
and applicable state securities laws.
(b) The Company shall maintain a register in its office for the
purpose of registering this Note and any transfer thereof, which
register shall reflect and identify, at all times, the ownership
of any interest in this Note. Upon the issuance of this Note, the
Company shall record the name of the initial purchaser of this
Note in such register as the first Holder. Thereafter, the
Company shall duly record in such register the name of any Person
to whom this Note has been transferred in accordance with Section
9 (a) above.
(c) The Holder shall have the right to transfer part or all of its
interest in this Note solely to "accredited investors" (within
the meaning of Rule 501 of Regulation D under the Securities Act)
so long as said transfer is accomplished in compliance with all
applicable securities laws and provisions of the Intercreditor
Agreement. Any such transfer shall be at the transferor's
expense. Prior to any such transfer, the Holder shall notify the
Company of its intention to effect such transfer and provide the
Company, upon request, with documentation in form and substance
satisfactory to the Company evidencing that such proposed
transfer complies with this Section 9 (c). The Company will act
in an expeditious manner to execute all transfer documents.
10. REPLACEMENT OF NOTE. On receipt by the Company of an affidavit of an
authorized representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Note (and in the case of any such
mutilation, on surrender and cancellation of such Note), the Company, at its
expense, will promptly execute and deliver, in lieu thereof, a new Note of like
tenor. If required by the Company, such Holder must provide indemnity sufficient
in the reasonable judgment of the Company to protect the Company from any loss
which they may suffer if a lost, stolen or destroyed Note is replaced.
11. COVENANTS BIND SUCCESSORS AND ASSIGNS. All of the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
12. NOTICES. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return
receipt requested, telecopier (with receipt confirmed), courier service or
personal delivery as follows: (a) if to the Holder, at 000 Xxxxxxxx, Xxxxx 000,
Xxx Xxxx, Xxx Xxxx 00000, or at such other address or number as the Holder shall
have furnished to the Company in writing, or (b) if to the Company, at 00
Xxxxxxxx Xxxx, Xxxxxx, XX 00000, attention: Chief Executive Officer, or at such
other address or number as the Company shall have furnished to the Holder in
writing. All such notices and communications shall be deemed to have been duly
given when: delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; if mailed, five
Business Days after being deposited in the mail, postage prepaid; or if
telecopied, when receipt is acknowledged. "Business Day" means a day on which
banks open for business in New York, New York, other than a Saturday or Sunday.
13. PAYMENTS. All payments of principal of and interest on this Note shall
be paid in lawful money of the United States of America by wire transfer of
immediately available funds to an account designated by the Holder.
14. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE
WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE.
15. SEVERABILITY. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
16. HEADINGS. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Company has executed this Note as of the date first
written above.
XXXXXXXX.XXX, INC.
By: /s/ XXXXXXX X. XXXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and CEO
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE OFFERED OR TRANSFERRED BY SALE,
ASSIGNMENT, PLEDGE OR OTHERWISE UNLESS (I) A REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 IS IN EFFECT OR (II) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, WHICH OPINION IS SATISFACTORY TO THE COMPANY, TO
THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
XXXXXXXX.XXX, INC.
00 XXXXXXXX XXXX
XXXXXX, XXXX. 00000
COMMON STOCK PURCHASE WARRANT
DATE OF ISSUANCE: AUGUST 9, 2001
RIGHT TO PURCHASE 400,000 SHARES OF COMMON STOCK (SUBJECT TO ADJUSTMENT)
For value received, XXXXXXXX.XXX, INC., a Nevada corporation (the
"COMPANY"), hereby grants to GENESIS ALTERNATIVE INVESTMENTS, LLC or its
registered assigns (the "REGISTERED HOLDER"), the right to purchase from the
Company 400,000 shares (as adjusted pursuant to Section 3 hereof) of the
Company's Common Stock, $.00042 par value per share, at a price of $0.31 per
share (as adjusted pursuant to Section 3 hereof, the "EXERCISE PRICE"). The
amount and kind of securities purchasable pursuant to the rights granted under
this Warrant and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms have the
meanings set forth below:
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such Person.
"COMMON STOCK" means the Company's Common Stock, $.00042 par value per
share.
"CURRENT MARKET PRICE" means as to any security the average of the
daily closing prices for the 30 consecutive business days commencing 45 business
days before the day in question. The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the reported closing bid and asked prices
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, the average of the
highest reported bid and lowest reported asked prices as furnished by the
National Association of Securities Dealers, Inc.'s Automated Quotation System,
or the nearest comparable system, or, in the absence of either, as determined by
the Board Directions in its good faith discretion.
"DATE OF ISSUANCE" shall have the meaning specified in Section 8 of
this Warrant.
"PERSON" means an individual, a partnership, a corporation, a trust, a
joint venture, a limited liability company, an unincorporated organization, a
government or any department or agency thereof or any other entity.
"SALE TRANSACTION" means
(a) any of the following: (i) a merger or consolidation of the Company
with or into another issuer; or (ii) the exchange or sale of all or a portion of
the outstanding shares of the Company for securities of another issuer, or other
consideration provided by such issuer or another party to such transaction; and
in the case of either (i) or (ii), the Company's shareholders prior to the
transaction, do not possess, immediately after such transaction, more than 50%
of the voting power of any one or more of the following: (x) the Company; (y)
such other issuer; or (z) such other constituent party to the transaction; or
(b) a sale (other than in the ordinary course of business) of more
than 90% of the Company's assets to a third party not an Affiliate of the
Company immediately prior to such transaction.
"WARRANTS" means this Warrant and all stock purchase warrants issued
in exchange therefor pursuant to the terms thereof.
"WARRANT STOCK" means shares of the Company's authorized but unissued
Common Stock issuable upon the exercise of the Warrants; provided that if there
is a change in the class of securities issuable upon exercise of the Warrant,
then the term "WARRANT STOCK" will mean one share of the security issuable upon
exercise of the Warrant if such security is issuable in shares, or will mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
2. Exercise of Warrant.
2.1. Exercise Period. The Registered Holder may exercise this Warrant,
in whole or in part (but not as to a fractional share of Warrant Stock), at any
time and from time to time after its Date of Issuance and prior to 5:00 p.m.
(New York time) on the day preceding the Five Year Anniversary Date of the Date
of Issuance (the "EXERCISE PERIOD").
-2-
2.2. Exercise Procedure.
(a) This Warrant will be deemed to have been exercised at such time as
the Company has received all of the following items (the "Exercise Date"):
(i) a completed Exercise Agreement, as described below, executed
by the Person exercising all or part of the purchase rights represented by this
Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in Exhibit II
hereto, evidencing the assignment of this Warrant to the Purchaser; and
(iv) a check payable to the Company in an amount equal to the
product of the Exercise Price multiplied by the number of shares of Warrant
Stock being purchased upon such exercise.
(b) Certificates for shares of Warrant Stock purchased upon exercise
of this Warrant will be delivered by the Company to the Purchaser within ten
days after the Exercise Date. Unless this Warrant has expired or all of the
purchase rights represented hereby have been exercised, the Company will prepare
a new Warrant, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised. The
Company will, within such ten day period, deliver such new Warrant to the Person
designated for delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise of this Warrant will
be deemed to have been issued to the Purchaser on the Exercise Date, and the
Purchaser will be deemed for all purposes to have become the record holder of
such Warrant Stock on the Exercise Date.
(d) The issuance of certificates for shares of Warrant Stock upon
exercise of this Warrant will be made without charge to the Registered Holder or
the Purchaser for any issuance tax in respect thereof or any other cost incurred
by the Company in connection with such exercise and the related issuance of
shares of Warrant Stock; provided, however, that if the shares of Warrant Stock
are to be issued in a name other than that of the Registered Holder, then such
Warrant Stock shall be delivered only when the person requesting such delivery
has paid to the Company the amount of transfer taxes or charges required in
connection with such issuance, if any.
(e) The Company will not close its books for the transfer of this
Warrant or of any share of Warrant Stock issued or issuable upon the exercise of
this Warrant in any manner which interferes with the timely exercise of this
Warrant. The Company will from time to time take all such action as may be
necessary to assure that the par value per share of the unissued Warrant Stock
acquirable upon exercise of this Warrant is at all times equal to or less than
the Exercise Price then in effect.
-3-
2.3. Exercise Agreement. The Exercise Agreement will be substantially
in the form set forth in Exhibit I hereto, except that if the shares of Warrant
Stock are not to be issued in the name of the Registered Holder of this Warrant,
the Exercise Agreement will also state the name of the Person to whom the
certificates for the shares of Warrant Stock are to be issued, and if the number
of shares of Warrant Stock to be issued does not include all the shares of
Warrant Stock purchasable hereunder, it will also state the name of the Person
to whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered.
2.4. Fractional Shares. If a fractional share of Warrant Stock would
be issuable upon exercise of the rights represented by this Warrant, the Company
will, within ten days after the Exercise Date, deliver to the Purchaser a check
payable to the Purchaser in lieu of such fractional share, in an amount equal to
the Current Market Price of such fractional share as of the close of business on
the Exercise Date.
3. Exercise Price and Adjustment of Number of Shares.
3.1. General.
(a) The initial Exercise Price will be $.31 per share. The
Exercise Price and the number of shares issuable upon exercise of this Warrant
will be subject to adjustment from time to time pursuant to this Section 3.
(b) Reorganization, Reclassification, Merger or Sale. In case the
Company shall effect a reorganization, reclassification of the outstanding
common stock, merger, exchange of shares, consolidation, sale, lease or other
disposition of the Company's assets, including a Sale Transaction (collectively,
a "Reorganization Transaction"), and, pursuant to the terms of such
Reorganization Transaction, shares of stock or other securities, property or
assets of the Company, successor or transferee or an affiliate thereof are to be
received by or distributed to the holders of Common Stock, then each Registered
Holder shall be provided with written notice from the Company informing each
Registered Holder of the terms of such Reorganization Transaction, and of the
record date thereof for any distribution pursuant thereto, at least 20 days in
advance of such record date, and each Registered Holder shall have, in addition
to the rights provided for herein (or in the event the Common Stock is changed
into a different security or is extinguished, then in lieu of the right to
receive Common Stock upon exercise hereof), the right to receive, at the
holder's election, either (i) upon exercise of the Warrants held by such Holder,
the number of shares of stock or other securities, property or assets of the
Company, successor transferee or affiliate thereof or cash receivable upon or as
a result of such Reorganization Transaction, by a holder of the number of shares
of Common Stock for which such Registered Holder's Warrants are then exercisable
immediately prior to such event or (ii) the securities into which the Warrants
are converted into, upon, or as a result of, such Reorganization Transaction. In
the event of a Sale Transaction, as specified in Section 4 hereof, the exercise
of the Warrant must occur prior to the closing of the Sale Transaction, as the
Warrant is canceled upon the closing of such Sale Transaction. The provisions of
this paragraph (b) of this Subsection 3.1 shall similarly apply to successive
Reorganization Transactions discussed herein, but not to successive Sale
Transactions as the Warrant is cancelled upon the closing of the first such Sale
Transaction pursuant to Section 4. Exercise of the Warrant, in the case of a
Sale Transaction, may, at the option of the Registered Holder, be made
contingent upon the closing thereof.
-4-
(c) Subdivision or Combination of Common Stock. If the Company
declares a dividend or other distribution payable to its holders of Common Stock
in shares of Common Stock or subdivides its outstanding shares of Common Stock
into a larger number or combines its outstanding shares of Common Stock into a
smaller number, then the Exercise Price in effect immediately prior to such
dividend, subdivision or combination, as the case may be, shall be
proportionately and appropriately increased or decreased.
(d) Notice of Adjustment. Whenever the Exercise Price shall be
adjusted as provided in this Subsection 3.1, the Company shall forthwith file,
at the office of the transfer agent for the Warrants, at the principal office of
the Company or at such other place as may be designated by the Company, a
statement, certified by the chief financial officer of the Company, showing in
detail the facts requiring such adjustment and the Exercise Price that shall be
in effect after such adjustment. The Company shall also cause a copy of such
statement to be sent by first class mail, postage prepaid to each Registered
Holder at such Holder's address as shown in the records of the Company.
3.2. Adjustment to Number of Shares of Common Stock Issuable upon
Exercise. Upon each adjustment of the Exercise Price pursuant to Section 3.1(c)
hereof, the total number of shares of Common Stock issuable upon the exercise of
this Warrant shall be such number of shares of Common Stock (calculated to the
nearest 1/100th of a share) issuable at the Exercise Price in effect immediately
prior to such adjustment multiplied by a fraction, the numerator of which shall
be the Exercise Price in effect immediately prior to such adjustment and the
denominator of which shall be the Exercise Price in effect immediately after
such adjustment.
4. Cancellation of Warrant. This Warrant shall be canceled upon the earlier
of: (a) the expiration of the Exercise Period; or (b) the closing of a Sale
Transaction.
5. Registration Rights; Reservation of Common Stock. The Company will at
all times reserve and keep available for issuance upon the exercise of Warrants
such number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants, and upon
such issuance such shares of Common Stock will be validly issued, fully paid and
nonassessable. In addition to the foregoing, the Company shall, within 120 days
after the Date of Issuance and at all times thereafter, maintain not less than
400,000 shares of registered but unissued common stock for the purpose of
satisfying the Holder's rights under this Section 5. In addition, the Company
shall, within 120 days after the Exercise Date, register any other Warrant
Stock.
6.
7. No Voting Rights; Limitations of Liability. This Warrant will not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder to purchase Warrant Stock, and no enumeration in
this Warrant of the rights or privileges of the Registered Holder, will give
rise to any liability of such Holder for the Exercise Price of Warrant Stock
acquirable by exercise hereof or as a stockholder of the Company.
-5-
8. Warrant Transferable.
8.1. Subject to the transfer conditions referred to in paragraph (b),
below, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Registered Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
principal office of the Company, provided that any transfer tax relating to such
transaction shall be paid by the holder requesting the same.
8.2. Each Registered Holder of this Warrant acknowledges that this
Warrant has not been registered under the Securities Act of 1933 (the "Act"),
and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise
in the absence of (i) an effective registration statement as to this Warrant or
such Warrant Stock under the Act (or any similar statute then in effect), or
(ii) an opinion of counsel for the Company to the effect that such registration
is not, under the circumstances, required. The certificate(s) representing the
Warrant Stock issued upon exercise of this Warrant will bear a legend similar to
the legend on the first page of this Warrant.
9. Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants will
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender, provided that any transfer tax relating to such
transaction shall be paid by the holder requesting the same. The date the
Company initially issues this Warrant, as set forth on the face thereof, will be
deemed to be the "Date of Issuance" of this Warrant regardless of the number of
times new certificates representing the unexpired and unexercised rights
formerly represented by this Warrant are issued.
10. Notice of Certain Actions.
In case at any time:
(a) the Company shall declare any discretionary dividend or other
distribution upon its common stock payable in securities;
(b) 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 its assets or
stock to, another corporation;
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(d) the Company shall enter into an agreement or adopt a plan for
the purpose of effecting a consolidation, merger, or sale of all or
substantially all of its assets or stock, other than a merger where the Company
is the surviving corporation and the terms of the Company's capital stock remain
unchanged; then, in any one or more of said cases, the Company shall give
written notice that 20 days prior to such event, except in the case of an
involuntary dissolution, by first class mail, postage prepaid, to the registered
owner of this Warrant, of the date on which (a) the books of the Company shall
close or a record shall be taken for such dividend,
-6-
distribution or subscription rights, or (b) such reorganization, registration
statement filing, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the owners of any class of capital stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their capital stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding-up, as the
case may be.
11. Representations of Registered Holder. The Registered Holder
acknowledges that the Company will rely on the information and on the
representations set forth herein, and the undersigned hereby represents,
warrants and agrees that:
11.1. The Registered Holder has not received any general solicitation
or general advertising regarding the exercise of the Warrant.
11.2. The Registered Holder has sufficient knowledge and experience in
financial and business matters so that he or it is able to evaluate the merits
and risks of exercising the Warrant as well as substantial experience in
previous private and public purchases of securities.
11.3. The Registered Holder understands that an investment in the
Company involves significant risk. The Registered Holder does not require the
funds to be used to exercise this Warrant or the Warrant Stock for his liquidity
or other needs, possesses the ability to bear the economic risk of holding the
this Warrant or the Warrant Stock purchased hereunder indefinitely and can
afford a complete loss of its investment in the this Warrant or the Warrant
Stock.
11.4. During the transaction and prior to exercise, the Registered
Holder has had full opportunity to ask questions of and receive answers from the
Company and its officers and authorized representatives regarding the terms and
conditions of the Warrant and the transactions contemplated hereby, as well as
the affairs of the Company and related matters. The Registered Holder confirms
that he does not desire to receive any further information.
11.5. The Registered Holder understands that the exercise price of the
Warrant being purchased hereby has been arbitrarily determined and does not
necessarily bear any relationship to investment criteria such as projected
earnings, discounted cash flow, book value or other measures of value.
11.6. The Registered Holder understands that the Warrant has not been
filed with or reviewed by the Commission nor the securities department of any
state because of the private or limited nature of this offering as defined by
applicable laws, and that the Warrant and the Warrant Stock have not been
registered with the Commission under the Act nor with the securities department
of any state in reliance upon an exemption therefrom for non-public offerings.
-7-
11.7. The Registered Holder is a bona fide resident of the state set
forth as his "address" below and further represents that (a) if a corporation,
partnership, trust or other form of business organization, it has a principal
office within such state; and (b) if an individual, he has his principal
residence in such state.
11.8. The Registered Holder represents and warrants that the Warrant
and the Warrant Stock is or will be acquired for investment purposes and not
with a view to or for sale or distribution. The Registered Holder represents
that there is no contract, undertaking, agreement or arrangement with any person
to sell, transfer or pledge to such person or anyone else the Warrant and the
Warrant Stock or any part thereof, and the Registered Holder has no present
plans to enter into such contract, undertaking, agreement or arrangement and
will neither directly or indirectly seek to assign, transfer or sell the same in
any way inconsistent with the legend which is being placed on the Warrant.
12. Miscellaneous.
12.1. Amendment and Waiver. The provisions of the Warrants may be
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only with the affirmative
consent or approval of the Company and of the Registered Holder.
12.2. Notices. Any notices required to be sent to the Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by first class mail, postage prepaid, and will be deemed to have been
given when so delivered or sent.
12.3. Descriptive Headings: Governing Law. The descriptive headings of
the paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and interpretation
of this Warrant will be governed by the laws of the State of New York without
giving effect to the conflicts of laws principles thereof. Any dispute arising
hereunder shall be adjudicated exclusively in the Federal and State courts
located in New York County, New York, and the Company and the holder of this
Warrant waives any claims of inconvenient forum in connection therewith.
-8-
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal on this ___
day of _______, 2001.
XXXXXXXX.XXX, INC.
BY: /s/ XXXXXXX XXXXXXXX,
-------------------------------
ATTEST: XXXXXXX XXXXXXXX,
CHAIRMAN AND CEO
--------------------------
SECRETARY
REGISTERED HOLDER
GENESIS ALTERNATIVE
INVESTMENTS, LLC
BY: ______________________________
NAME:
ADDRESS:
-9-
EXHIBIT I
EXERCISE AGREEMENT
Dated: ___________________
To: GENESIS ENERGY GROUP, INC.
000 XXXXXXXX, XXXXX 000
XXX XXXX, XX 00000
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase shares of the Warrant Stock
covered by such Warrant and makes payment herewith in full for such Warrant
Stock at the price per share provided by such Warrant.
Signature ___________________________
Address ___________________________
___________________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant with respect to
the number of shares of the Warrant Stock covered thereby set forth below, unto:
Name of Assignee Address No of Shares
---------------- ------- ------------
