37
This Debenture and the Common Stock into which
it is convertible have not been registered
under the Securities Act of 1933, as amended
(the "Act") and may not be sold or otherwise
transferred without registration under the Act
or the favorable prior opinion of counsel for
the Company that registration is not required.
This Debenture has been issued pursuant to a
certain Executive Convertible Debenture
Purchase and Loan Agreement by and between the
registered holder hereof and the Company dated
as of August 29, 1996, to which reference is
made.
XXXX XXXXX, INC.
Executive Convertible Subordinated Debenture Due 2000
No. 96,001 Baltimore, Maryland
$535,000 August 29, 1996
Xxxx Xxxxx, Inc., a Maryland corporation, (the "Company")
for value received, hereby promises to pay to Xxxxxx X. Xxxxx
(the "Employee") the principal amount of $535,000 on August 29,
2000, with interest on the unpaid balance of such principal
amount at the rate of seven percent (7%) per annum from the date
hereof, payable annually on each anniversary of the date hereof,
at conversion (but only on the principal amount of the Debenture
being converted) and at maturity, until such unpaid balance shall
become due and payable (whether at maturity or at a date fixed
for prepayment or by declaration or otherwise). Payments of
principal and interest on this Debenture shall be made in lawful
money of the United States of America at the principal office of
the Company in the City of Baltimore and State of Maryland, or at
such other office or agency as the Company shall have designated
by written notice to the holder of this Debenture.
38
Conversion. On and subject to the terms and conditions set
forth below, all or any part of the unpaid principal amount of
this Debenture may be converted into Common Stock of the Company
at the price of $30.25 per share or, in case an adjustment of
such price has taken place, then at the price as last adjusted
and in effect at the date of the conversion (such price or such
price as last adjusted, as the case may be, being referred to
herein as the "Conversion Price"). No part of this Debenture may
be converted prior to August 29, 1997. Thereafter, at the
election of the holder, fifty percent (50%) of the original
principal amount shall be convertible into shares of Common Stock
of the Company on and after August 29, 1997; and one hundred
percent (100%) of the principal amount shall be convertible into
shares of Common Stock of the Company on and after August 29,
1998. If prior to August 29, 1998, the Employee shall cease to
be a full-time employee of the Company or any subsidiary of the
Company by reason of (i) the Company's termination of the
Employee's employment without Cause, as defined below, or (ii)
his or her death, disability (as defined in the Company's then
applicable long-term disability plan) or retirement in accordance
with the terms of the Company's then applicable retirement plan,
the Employee or his or her estate or the person to whom this
Debenture passes by will or by the laws of descent and
distribution shall be entitled to convert 100% of the principal
amount at any time within seven months after the later of (i)
such termination of employment or (ii) the date which is 30 days
after the 1997 annual meeting of the stockholders of the Company,
provided this Debenture has not been prepaid by the Company prior
to such date. Upon any conversion, the holder hereof shall
deliver to the Company a conversion notice which states that, to
the extent this Debenture is pledged to secure any indebtedness
of the Employee, a percentage of such indebtedness, equal to the
percentage of this Debenture being converted, has been paid in
full and discharged.
Promptly after a conversion of any portion of this
Debenture, the Company shall issue and deliver to the holder
effecting such conversion, registered in the name of such holder,
a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion and this Debenture (or
the specified portion hereof) shall immediately be cancelled. No
fractional shares shall be issued and no payment or adjustment
shall be made upon any conversion on account of any accrued
39
interest on the Debenture or any cash dividends on the Common
Stock issued upon such conversion. If any fractional interest in
a share of Common Stock would be deliverable upon such
conversion, the Company shall, in lieu of delivering the
fractional share therefor, pay to the holder an amount in cash
equal to the then current Market Price of such fractional
interest.
If and whenever after the date hereof, the Company shall
issue or sell any shares of Common Stock (except upon conversion
of any securities outstanding at such date or pursuant to any
employee benefit plan approved by the stockholders of the
Company, its Board of Directors or any committee thereof before
or after such date) without consideration or for a consideration
per share less than an amount equal to 95% of the Market Price at
the time of such issue or sale, the Conversion Price shall be
reduced to a price (calculated to the nearest cent) determined by
multiplying the Conversion Price in effect immediately prior to
the time of such issue or sale by a fraction, (i) the numerator
of which shall be the sum of the aggregate number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the Market Price immediately prior to such issue or
sale, plus the aggregate consideration, if any, received by the
Company upon such issue or sale, and (ii) the denominator of
which shall be the product of the aggregate number of shares of
Common Stock outstanding immediately after such issue or sale,
multiplied by the Market Price immediately prior to such issue or
sale.
As used in this Debenture, Market Price shall mean the
average of the daily closing prices for 10 consecutive business
days prior to the day as of which Market Price is being
determined. The closing price for each day shall be the last
reported sale price on the New York Stock Exchange, or in case no
such reported sale takes place on such day, the average of the
reported closing bid and asked quotations in such system, or, if
the Common Stock ceases to be listed on the New York Stock
Exchange, the last reported sale price regular way in the over
the counter market, or if no such quotations are available, the
fair market price as determined by the Board of Directors of the
Company (whose determination shall be conclusive).
40
No adjustment of the Conversion Price, however, shall be
made in an amount less than $.25 per share (such amount to be
appropriately adjusted in the event of a stock dividend on the
outstanding shares of Common Stock or a subdivision combination),
but any such lesser adjustment shall be carried forward and shall
be made at the time of and together with the next subsequent
adjustment which together with any adjustments so carried forward
shall amount to $.25 (as adjusted) per share or more.
In case at any time the Company shall declare a dividend or
make any other distribution upon any class or series of its stock
payable in shares of Common Stock or securities convertible into
Common Stock, any shares of Common Stock or securities
convertible into Common Stock, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration.
In case the Company shall at any time subdivide its
outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock shall be combined
into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination shall be proportionately
increased.
In case at any time the Company shall be a party to any
transaction (including, without limitation, a merger,
consolidation, sale of all or substantially all of the Company's
assets, liquidation or recapitalization of the Common Stock) in
which the previously outstanding Common Stock shall be changed
into or exchanged for different securities of the Company (other
than by subdivision or combination of its outstanding shares of
Common Stock by reason of which an adjustment is made under the
preceding paragraph) or common stock or other securities of
another corporation or interests in a noncorporate entity or
other property (including cash) or includes or involves any
extraordinary dividend or spin-off of assets, the Board of
Directors shall by resolution prescribe such adjustment of the
Conversion Price as it believes to be equitable and fair to the
holder hereof. Such determination shall be final and binding on
the holder.
41
Each certificate representing shares of Common Stock issued
upon the conversion of this Debenture or in substitution or upon
transfer thereof may, as determined appropriate by the Company,
be stamped or otherwise imprinted with a legend in substantially
the following form:
"The shares represented by this certificate
have not been registered under the Securities
Act of 1933 and may not be transferred in the
absence of such registration or an exemption
therefrom under such Act."
Prepayment. This Debenture shall be prepaid by the Company
to the extent not previously converted, at the unpaid principal
amount hereof plus accrued and unpaid interest to the prepayment
date, 30 days after the Employee has ceased, for any reason, to
be a full-time employee of the Company or a subsidiary or
affiliate thereof, except that if such reason shall be the
Company's termination of the Employee's employment without Cause,
as defined below, or the death, disability (as defined in the
Company's then applicable long-term disability plan) or
retirement in accordance with terms of the Company's then
applicable retirement plan, such prepayment shall be on the last
day of the seventh month following the later of (i) such
termination of employment or, (ii) the date which is 30 days
after the 1997 annual meeting of the stockholders of the Company.
In the event of the bankruptcy or insolvency of the holder
hereof, the Company covenants that it will, upon request of the
holder (or any pledgee) hereof, purchase this Debenture at the
principal amount hereof plus any interest accrued and unpaid to
the date of such purchase.
Subordination. The indebtedness represented by this
Debenture and the payment of the principal hereof and interest
hereon is expressly subordinated in right of payment to the prior
payment in full of all Senior Debt (hereinafter defined).
Upon any distribution of assets of the Company upon any
dissolution, winding up, liquidation or reorganization of the
Company, whether in bankruptcy, insolvency, reorganization or
receivership proceedings or upon an assignment for the benefit of
42
creditors or any other marshaling of the assets and liabilities
of the Company or otherwise,
(a) the holders of all Senior Debt shall be first
entitled to receive payment in full of the principal
thereof (and premium, if any) and interest due thereon,
or provision shall be made for such payment in money or
money's worth, before the holders of this Debenture
shall be entitled to receive any payment on account of
the principal of or interest on the indebtedness
evidenced by this Debenture;
(b) any payment by, or distribution of assets of,
the Company of any kind or character, whether in cash,
property or securities, to which the holders of this
Debenture would be entitled except for the provisions
hereof shall be paid or delivered by the person making
such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the holders of Senior Debt or
their representative or representatives or to the
trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Debt may have
been issued, ratably accordingly to the aggregate
amounts remaining unpaid on account of the Senior Debt
held or represented by each, to the extent necessary to
make payment in full of all Senior Debt remaining
unpaid after giving effect to any concurrent payment or
distribution (or provision therefor) to the holders of
such Senior Debt; and
(c) in the event that, notwithstanding the
foregoing, any payment by, or distribution of assets
of, the Company of any kind or character, whether in
cash, property or securities shall be received by the
holder of this Debenture before all Senior Debt is paid
in full, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over to the
holders of such Senior Debt or their representative or
representatives or to the trustee or trustees under any
indenture under which any instruments evidencing any of
such Senior Debt may have been issued, ratably as
aforesaid, for application to the payment of all Senior
43
Debt remaining unpaid until all such Senior Debt shall
have been paid in full, after giving effect to any
concurrent payment or distribution (or provision
therefor) to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the
holder of this Debenture shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of
cash, property or securities of the Company applicable to the
Senior Debt until all amounts owing on this Debenture shall be
paid in full, and, as between the Company, its creditors (other
than holders of Senior Debt) and the holders of this Debenture,
no such payment or distribution made to the holders of Senior
Debt by virtue of the provisions hereof which otherwise would
have been made to the holder of this Debenture shall be deemed to
be a payment by the Company on account of the Senior Debt, it
being understood that the provisions hereof are and are intended
solely for the purpose of defining the relative rights of the
holder of this Debenture, on the one hand, and the holders of the
Senior Debt, on the other hand.
Events of Default; Acceleration. If any of the following
conditions or events ("Events of Default") shall occur for any
reason whatsoever (and whether such occurrence shall be voluntary
or involuntary or come about or be effected by operation of law
or otherwise) and be continuing:
(a) there shall be any default in the payment of
the principal of this Debenture, when the same becomes
due and payable, whether at the stated maturity or at a
date fixed for prepayment or by declaration or
otherwise; or
(b) there shall be any default in the payment of
any interest on this Debenture, for more than ten days
after the same becomes due and payable; or
(c) there shall be any default in the performance
of or compliance with any covenant contained herein and
such default shall not have been remedied within 30
days after written notice thereof shall have been
received by the Company from the holder of this
Debenture; or
44
(d) the Company or Xxxx Xxxxx Xxxx Xxxxxx,
Incorporated (i) shall make an assignment for the
benefit of creditors, or (ii) shall be generally not
paying its debts as they become due, or (iii) shall
commence a case under the Federal bankruptcy laws, or
(iv) shall file any petition or answer seeking for
itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or
regulation, or (v) shall file any answer admitting or
not contesting the material allegations of a petition
filed against such corporation in any such proceeding,
or (vi) shall seek or consent to or acquiesce in the
appointment of any trustee, custodian, receiver or
liquidator of such corporation or of all or any part of
the properties of such corporation, or (vii) shall take
any action for the purpose of any of the foregoing; or
(e) without the consent or acquiescence of the
Company or Xxxx Xxxxx Xxxx Xxxxxx, Incorporated, an
order shall be entered constituting an order for relief
or approving a petition for relief or reorganization or
any other petition seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or other similar relief under any present
or future statute, law or regulation, or if any such
petition shall be filed against any such corporation
and such petition shall not be dismissed within 30
days, or if, without the consent or acquiescence of any
such corporation, an order shall be entered appointing
a trustee, custodian, receiver or liquidator of such
corporation or of all or any part of the properties of
such corporation and such order shall remain unstayed
and in effect for more than 30 days;
then, and in any such event, the holder hereof (which term shall
include any pledgee hereof) may at any time thereafter (unless
all defaults shall theretofore have been remedied) at his or her
option, by written notice or notices to the Company, declare this
Debenture to be due and payable, whereupon the same shall
forthwith mature and become due and payable, together with
interest accrued thereon, without presentment, demand, protest or
further notice, all of which are hereby waived.
45
Any accounting terms used herein and not otherwise defined
shall have the meaning assigned to them by generally accepted
accounting principles. For purposes of this Debenture, "Senior
Debt" means the principal of, premiums (if any) and interest on
any and all indebtedness of the Company for borrowed money (other
than indebtedness represented by debentures substantially
identical to this Debenture now or hereafter issued to employees
of the Company or any of its affiliates) outstanding on the
original issue date of this Debenture, or thereafter incurred,
unless by the terms of the instrument evidencing or securing such
debt or by valid agreement it is so provided that such debt is
not senior in right of payment to this Debenture.
The term "Cause" as used herein shall mean (i) failure by
the Employee to perform the Employee's duties or follow the
reasonable directions of the Board of Directors of the Company;
(ii) fraud, embezzlement, misappropriation; or any gross or
wilful misconduct of the Employee in connection with his
employment by the Company; (iii)the Employee being adjudicated a
bankrupt, making an assignment for the benefit of creditors,
being declared insolvent or otherwise availing Employee (except
as a creditor) of any bankruptcy or insolvency law, whether now
or hereafter enacted; (iv) any violation of any statutory or
common law fiduciary duty or duty of loyalty to the Company or
any of the Company's clients; (v) any finding or adjudication by
a court, government agency or regulatory authority (including,
without limitation, the United States Securities and Exchange
Commission, the National Association of Securities Dealers, Inc.,
and any state securities commission) that the Employee has
violated any law, rule or regulation relating to the regulation
of investment advisers or securities, which finding or
adjudication, in the reasonable judgment of the Board, could have
a significant adverse effect on the reputation or business of the
Company or any of its affiliates; (vi) any order, judgment or
decree (whether entered by consent or after trial or
adjudication) of any court, government agency or regulatory
authority which censures or imposes any sanctions on the Employee
in connection with investment broker, investment advisory or
securities related activities or which enjoins, bars, suspends or
otherwise limits the Employee from acting as a securities
analyst, securities broker, investment adviser, an advisory
affiliate or associated person of a securities broker-dealer or
of an investment adviser, or from engaging in any activity in
connection with the purchase or sale of securities; (vii) the
reasonable determination by the Board that the Employee has
46
committed an act which, in the Board's reasonable opinion, after
investigation, is reasonably likely to lead to any such order,
judgment or decree; (viii) substance abuse; or (ix) conviction of
a criminal offense punishable by imprisonment (whether or not the
Employee is, in fact, imprisoned) or the entry of a guilty plea
in any such proceeding.
Except as specifically permitted by the Company in its sole
discretion, this Debenture is not transferable by the holder
otherwise than by will or the laws of descent and distribution.
No assignment or transfer of this Debenture, or of the rights
represented, whether voluntary or involuntary, by operation of
law or otherwise, except with the specific consent of the Company
or by will or the laws of descent and distribution, shall vest in
the assignee or transferee any interest or right herein
whatsoever.
This Debenture is made and delivered in the City of
Baltimore, State of Maryland, and shall be governed by the laws
of the State of Maryland, other than the conflict of laws
provisions thereof.
Xxxx Xxxxx, Inc.
By: /s/ Xxxxxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
Senior Vice President
