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EXHIBIT 10.12
THIS NOTE IS NON-NEGOTIABLE AND NON-TRANSFERABLE AND NO INTEREST SHALL BE PAID
EXCEPT TO THE PAYEE NAMED HEREIN EXCEPT AS OTHERWISE NOTED HEREIN.
NEITHER THIS NON-NEGOTIABLE CONVERTIBLE SUBORDINATED NOTE NOR THE SHARES OF
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (TOGETHER, THE "SECURITIES
LAWS") AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED OR
ENCUMBERED IN THE ABSENCE OF COMPLIANCE WITH SUCH SECURITIES LAWS AND UNTIL THE
ISSUER THEREOF SHALL HAVE RECEIVED AN OPINION FROM COUNSEL ACCEPTABLE TO IT
THAT THE PROPOSED DISPOSITION WILL NOT VIOLATE ANY APPLICABLE SECURITIES LAWS.
CONVERTIBLE SUBORDINATED NOTE
$4,800,000 September , 1997
FOR VALUE RECEIVED, Xxxxx/Xxxxxx, Inc, a Texas corporation (the "Company"),
promises to pay to Bank Compensation Strategies, Inc., a Minnesota corporation,
or its permitted assigns ("Holder"), in lawful money of the United States of
America, the principal sum of FOUR MILLION EIGHT HUNDRED THOUSAND DOLLARS
($4,800,000), together with interest in arrears on the unpaid principal balance
at a rate equal to EIGHT AND ONE-HALF PERCENT (8 1/2%) per annum, in the manner
provided below. Interest shall be calculated on the basis of a 360-day year of
twelve 30-day months.
This Note has been executed and delivered pursuant to and in accordance with
the terms and conditions of the Asset Purchase Agreement, dated September ,
1997 (the "Agreement"), by and among the Company, Xxxxxx, Xxxxxxxx X.
Xxxxxxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxx Xxxxxxxxxx ("Shareholders"), and is
subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used
in this Note without definition shall have the respective meanings set forth in
the Agreement.
1. PAYMENTS.
1.1 PRINCIPAL AND INTEREST. The principal amount of this Note shall be
due and payable on September 15, 2007. Interest on the unpaid principal balance
of this Note shall be due and payable quarterly on the fifteenth (15th) day of
March, June, September and December of each year, commencing December 15, 1997
until said principal amount of the Note is paid in full or upon conversion of
the Note in accordance with Section 6 hereof.
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1.2 MANNER OF PAYMENT. All payments of principal and interest on this
Note shall be made by check at 0000 Xxxx 00xx Xxxxxx, Xxxxx 000, Xxxxxxxxxxx,
XX 00000 or at such other place in the United States of America as Holder shall
designate to the Company in writing. If any payment of principal or interest on
this Note is due on a day which is not a Business day, such payment shall be
due on the next succeeding Business Day, and such extension of time shall not
be taken into account in calculating the amount of interest payable under this
Note. "Business Day" means any day other than a Saturday, Sunday or legal
holiday in the State of Texas.
1.3 PREPAYMENT. The Company may, without premium or penalty, at any time
and from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by the accrued interest on the amount of principal prepaid calculated to the
date of such prepayment. The Company shall provide Holder with not less than
forty-five (45) days written notice prior to such prepayment. In the event a
transaction described in Section 6.3 hereof is contemplated prior to or
contemporaneous with prepayment, said written notice shall include the
information specified in the notice made pursuant to Section 6.3 hereof.
1.4 RIGHT OF SETOFF. The Company shall have the right to withhold and
setoff against any amount due hereunder the amount of any claim for
indemnification or payment of damages to which the Company may be entitled
under the Agreement, as provided in Section 9 thereof.
2. DEFAULT.
2.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events with respect to Company shall constitute an event of default hereunder
("Event of Default"):
(a) If Company shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for fifteen (15) days
after the Holder notifies the Company thereof in writing; provided,
however, that the exercise by the Company in good faith of its right of
setoff pursuant to Section 1.4 above, whether or not ultimately determined
to be justified, shall not constitute an Event of Default; and provided,
further, that in the event the exercise of the right of setoff by the
Company is determined to be all or in part unjustified, in addition to any
other remedies and rights that the Holder may have against the Company, the
Company shall pay all the Holder's reasonable costs and expenses,
including reasonable legal fees, to collect this Note, including the
amount of the setoff.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), the Company shall (i) commence a
voluntary case or proceeding; (ii) consent to the entry of an order for
relief against it in an involuntary case; (iii) consent to the appointment
of a trustee, receiver, assignee, liquidator or similar official; (iv) make
an assignment for the benefit of its creditors; or (v) admit in writing its
inability to pay its debts as they become due
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(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against the Company in an
involuntary case, (ii) appoints a trustee, receiver, assignee, liquidator
or similar official for the Company or substantially all of the Company's
properties, or (iii) orders the liquidation of the Company, and in each
case the order or decree is not dismissed within 90 days.
(d) Any declared default of the company under any Senior Debt (as
defined below) that gives the holder thereof the right to accelerate such
Senior Debt, and such Senior Debt is in fact accelerated by the holder.
2.2 NOTICE BY THE COMPANY. The Company shall notify Holder in writing
within five days after the occurrence of any Event of Default of which the
Company acquires knowledge.
2.3 REMEDIES. Upon the occurrence of an Event of Default hereunder
(unless all Events of Default have been cured or waived by Xxxxxx), Holder may
(subject to the provisions of Section 3), at its option, (i) by written notice
to the Company, declare the entire unpaid principal balance of this Note,
together with all accrued interest thereon, immediately due and payable
regardless of any prior forbearance, and (ii) exercise any and all rights and
remedies available to it under applicable law, including, without limitation,
the right to collect from the Company all sums due under this Note. The Company
shall pay all reasonable costs and expenses incurred by or on behalf of Holder
in connection with Xxxxxx's exercise of any or call of its rights and remedies
under this Note, including, without limitation, reasonable attorneys' fees.
3. SUBORDINATION.
The indebtedness evidenced by this Note is hereby expressly subordinated,
to the extent and in the manner hereinafter set forth, in right of payment to
the prior payment in full of all the Company's Senior Debt, as hereinafter
defined.
3.1 SUBORDINATION; RESTRICTION ON SUBORDINATED DEBT. Anything in this
Note to the contrary notwithstanding, the indebtedness evidence by this Note,
including, without limitation, principal, premium, if any, and interest and any
and all fees, expenses, indemnities and all other monies owing at any time
pursuant to or in connection with this Note (the "Subordinated Debt") shall be
subordinated and junior to the extent set forth in subparagraphs (a) through
(c), inclusive, below, to all Senior Debt.
(a) If a Default or an Event of Default (as defined in Section 3.3
below) shall occur, then, unless and until such Default or Event of Default
shall have been remedied by indefeasible payment in full of all Senior Debt
in cash or otherwise cured, or expressly waived in writing by all affected
holders of Senior Debt, the Company shall not make and the Holder under
this Note shall not accept or receive any direct or indirect payment of or
on account of any Subordinated Debt; provided, however, the Holder under
this Note may receive and accept any direct or indirect payment on account
of any Subordinated Debt unless or until the
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Holder under this Note has received written notice of a Default or Event of
Default; for the purpose of this Section 3.1(a) written notice of Default or
Event of Default may be given to the Holder under this Note at the address set
forth in Section 1.2 hereof or such other place or places as the Holder or
Holders under this Note or any replacement hereof designate in writing to the
holder or holders of Senior Debt then outstanding at the notice address
maintained for such holder pursuant to the Purchaser Schedule maintained in
accordance with the Senior Note Agreement (as defined in Section 3.3 below) and
the SPSS Note Agreement (as defined in Section 3.3 below) and any such similar
schedule maintained under the Put Rights Agreement (as defined in Section 3.3
below).
(b) In the event of any insolvency, bankruptcy, liquidation,
reorganization or other similar proceedings, or any receivership proceedings in
connection therewith, relative to the Company, and in the event of any
proceedings for voluntary liquidation, dissolution or other winding up of the
Company, whether or not involving insolvency or bankruptcy proceedings, then
all "Senior Debt shall first be indefeasibly paid in full and in cash before
any payment is made of or on account of any Subordinated Debt.
(c) In any of the proceedings referred to in subparagraph (b) above, any
payment or distribution of any kind or character whether in cash, property,
stock or obligations, which may be payable or deliverable by the Company in
respect of this Note shall be paid or delivered directly to the holders of
Senior Debt (or to a banking institution selected by the court or Person making
the payment or delivery or designated by any holder of Senior Debt) for the
ratable application in payment thereof in accordance with the priorities then
existing among such holders, unless and until all Senior Debt shall have been
indefeasibly paid in full and in cash.
(d) In the event any of the proceedings referred to in paragraph (b)
above, the holder of this Note will, at the Required Holder(s) request, file
any claim, proof of claim or other instrument of similar character necessary to
enforce the obligations of the Company in respect of the Subordinated Debt. In
the event that the holder of this Note should fail to take such action
requested by the Required holder(s), the Required Holder(s) may, as
attorney-in-fact for the holder of this Note, take such action on behalf of the
holder of this Note, and the holder of this Note hereby irrevocably appoints
the Required Holder(s) as attorney-in-fact for the holder of this Note to
demand, sue for, collect and receive any and all such moneys, dividends or
other assets and give acquittance therefor and to file any claim, proof of
claim or other instrument of similar character and to take such other
proceedings in the Required Holder(s) own name(s) or in the name of the Holder
of this Note as the Required Holder(s) may deem necessary or advisable for the
enforcement of the terms contained in this Note; and the Holder of this Note
will execute and deliver to the Required Holder(s) such other and further power
of attorney or other instruments as the Required Holder(s) may request in order
to accomplish the foregoing.
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(e) If any payment or distribution of any character, whether in cash,
securities or other property, shall be received by the Holder of this Note in
contravention of any of the terms of this Note and before all the Senior Debt
shall have been indefeasibly paid in full and in cash, such payment or
distribution shall be received in trust for the benefit of the holders of the
Senior Debt at the time outstanding and shall forthwith be paid over or
delivered and transferred to the holders of the Senior Debt for the ratable
application in payment thereof in accordance with the priorities then existing
among such holders.
(f) The Holder of this Note will not commence any action or proceeding,
including, without limitation, any action to recover on a right of setoff or
similar right or remedy, against the Company to recover all or any part of the
Subordinated Debt or join with any creditor, unless the holders of the Senior
Debt shall also join, in bringing any proceedings against the Company under any
bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the Federal or any
state government unless and until all Senior Debt shall be indefeasibly paid in
full and in cash.
(g) Payment of the Subordinated Debt will not be secured by any security
interest or lien and the holder of this Note will neither request nor permit
any Person to guarantee or act as a surety for the payment of the Subordinate
Debt, unless all Senior Debt has been indefeasibly paid in full and in cash.
(h) The amount, the rate of interest charged, or the time, place, manner,
terms or amount of principal or interest payments of this Note, may not be
altered in any fashion, and the principal owing with respect to this Note may
not be paid prior to the scheduled date of payment thereof, without, in each
instance, the prior express written consent of the Required Holder(s) unless
all Senior Debt has been indefeasibly paid in full and in cash; provided,
however, the Holder under this Note may be entitled to waive defaults, defer
the time of payments, change the place for payments, and change the manner of
payments so long as no acceleration of payments occurs.
(i) Subject to the rights, if any, of the holders of Senior Debt under
this Section 3 to receive cash, securities or other properties otherwise
payable or deliverable to Holder under this Note and to restrict the Holder's
commencement of proceedings, nothing contained in this Section 3 shall impair,
as between the Company and the Holder, the obligation of the Company, subject
to the terms and conditions hereof, to pay to the Holder the principal hereof
and interest hereon as and when the same become due and payable, or shall
prevent the Holder under this Note, upon default hereunder, from exercising all
rights, powers and remedies otherwise provided herein or by applicable law.
(j) Subject to the payment in full of all Senior Debt and until this Note
shall be paid in full, the Holder shall be subrogated to the rights of the
holders of Senior Debt (to the extent of payments or distributions previously
made to such holders of Senior Debt pursuant
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to the provisions of Section 3.2 above) to receive payments or
distributions of assets of the Company applicable to the Senior Debt.
No such payments or distributions applicable to the Senior Debt shall,
as between the Company and its creditors, other than the holders of
Senior Debt and the Holder, be deemed to be a payment by the Company
to or on account of this Note; and for the purposes of such
subrogation, no payments or distributions to the holders of Senior
Debt to which the Holder would be entitled except for the provisions
of this Section 3 shall, as between the Company and its creditors,
other than the holders of Senior Debt and the Holder, be deemed to be
a payment by the Company to or on account of the Senior Debt.
(k) By its acceptance of this Note, the Holder agrees to execute
and deliver such documents as may be reasonably requested from time to
time by the Company or the lender of any Senior Debt in order to
implement the foregoing provisions of this Section 3.
3.2 RIGHTS OF HOLDERS OF SENIOR DEBT. The subordination provisions
of this Note shall be deemed a continuing offer to all holders of Senior Debt
to act in reliance on such provisions (but no such reliance shall be required
to be proven to receive the benefits hereof) and may be enforced by such
holders, and no right of any present or future holder of any Senior Debt to
enforce subordination as provided in this Note shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any non-compliance by
the Company with the terms, provisions and covenants of this Note. Without in
any way limiting the generality of the foregoing, the holders of Senior Debt
may, at any time and from time to time, without the consent of or notice to the
Holder, and without impairing or releasing the subordination provided in this
Note or the obligations hereunder of the Holder to the holders of Senior Debt,
do any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, or waive defaults
under Senior Debt, or otherwise amend or supplement in any manner Senior Debt
or any instrument evidencing the same or any agreement under which Senior Debt
is outstanding; (ii) release any Person liable in any manner for the payment or
collection of Senior Debt; (iii) sell, exchange, release or otherwise deal with
all or any part of the property by whomsoever at any time pledged or mortgaged
to secure, or howsoever securing, Senior Debt; (iv) exercise or refrain from
exercising any rights against the Company and any other Person, including any
guarantor or surety; and (v) apply any sums, by whomsoever paid or however
realized, to Senior Debt.
3.3 DEFINITIONS FOR THE PURPOSES OF THIS SECTION 3 ONLY.
"DEFAULT" shall mean a Default as such term is defined under any
of the Senior Note Agreement, the SPSS Note Agreement, the Put Rights
Agreement, the Working Capital Note Agreement or the Medium Term Note.
"EVENT OF DEFAULT" shall mean an Event of Default as such term is
defined under any of the Senior Note Agreement, the SPSS Note Agreement, the
Put Rights Agreement, the Working Capital Note Agreement or the Medium Term
Note.
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"MEDIUM TERM NOTE" shall mean that certain Medium Term Note dated
of even date herewith (as the same may be amended, modified, supplemented or
restated from time to time) between the Company and Bank Compensation
Strategies, Inc., a Minnesota corporation.
"PERSON" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, a limited liability company, an
unincorporated organization and a government or any department or agency
thereof.
"PUT RIGHTS AGREEMENT" shall mean that certain Put Rights
Agreement dated of even date herewith (as the same may be amended, modified,
supplemented or restated from time to time) among the Company, Great-West Life
& Annuity Insurance Company, Life Investors Insurance Company of America and
Nationwide Life Insurance Company; the term "Put Notes" shall mean any and all
Put Notes of the Company issued pursuant to the Put Rights Agreement.
"REQUIRED HOLDER(s)" shall mean the holder or holders of at least
50.1% of the aggregate principal amount of the Senior Debt from time to time
outstanding.
"SENIOR DEBT" shall mean all obligations (whether now outstanding
or hereafter incurred), for the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise including, without limitation,
principal, premium, if any, interest (including interest incurred after the
filing of any of the proceedings referred to in Section 3.1(b) above) and any
and all fees, expenses, indemnities and all other monies whether now owing or
hereafter incurred in respect of (i) the Senior Notes or the Senior Note
Agreement (ii) the SPSS Notes or the SPSS Note Agreement, (iii) the Put Notes
or the Put Rights Agreement, (iv) the Working Capital Notes or the Working
Capital Note Agreement, or (v) the Medium Term Note; provided, however, that
notwithstanding anything contained herein to the contrary, Senior Debt shall
not include more than $4,000,000 aggregate principal amount of Working Capital
Notes and $5,700,000 aggregate principal amount of Medium Term Note, together
with premium, if any, interest (including interest incurred after the filing of
any of the proceedings referred to in Section 3.1(b) above) and any and all
fees, expenses, indemnities and all other monies whether now owing or hereafter
incurred in respect of such Working Capital Notes or Medium Term Note.
"SENIOR NOTE AGREEMENT" shall mean that certain Note Agreement
dated of even date herewith (as the same may be amended, modified, supplemented
or restated from time to time) among the Company, Great-West Life & Annuity
Insurance Company, Life Investors Insurance Company of America and Nationwide
Life Insurance Company; the term "Senior Notes" shall mean any and all Senior
Secured Notes of the Company issued pursuant to the Senior Note Agreement.
"SPSS NOTE AGREEMENT" shall mean that certain Note and Warrant
Purchase Agreement dated of even date herewith (as the same may be amended,
modified, supplemented or restated from time to time) among the Company,
Great-West Life & Annuity Insurance Company, Life Investors Insurance Company
of America and Nationwide Life Insurance Company; the term
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"SPSS Notes shall mean any and all Second Priority Senior Secured
Notes of the Company issued pursuant to the SPSS Note Agreement.
"WORKING CAPITAL NOTE AGREEMENT" shall mean that certain note
agreement evidencing the Company's revolving working capital facility entered
into pursuant to paragraph 5S of the Senior Note Agreement and the SPSS Note
Agreement (as the same may be amended, modified, supplemented or restated from
time to time) between the Company and General American Life Insurance Company;
the term "Working Capital Notes" shall mean any and all promissory notes of the
Company issued pursuant to the Working Capital Note Agreement.
4. TRANSFERABILITY.
4.1 Except as otherwise provided in Sections 4.2 and 7.5 below,
Holder is prohibited from transferring its right, title and interest in this
Note.
4.2 Holder shall have the right at any time, at its option, to
transfer all of its right, title and interest in this Note to Xxxxxxxx X.
Xxxxxxxxxxx, Xxxxxxx X. Xxxxxxx and Xxxxxx Xxxxxxxxxx (hereinafter referred to
collectively as "shareholders" and individually as a "Shareholder"). Upon
written notice from Holder of such transfer, the Company shall execute and
deliver to said Shareholders new notes in such principal amounts (which
together may not exceed the then outstanding principal amount of this Note) as
set forth in written instructions provided from Xxxxxx. In addition, the Holder
shall have the right at any time, at its option, to transfer all of its right,
title and interest in the Conversion rights set forth in Sections 5 and 6
hereof ("Conversion Rights") to the Shareholders separately from this Note. To
the extent the Conversion Rights have been transferred separately to the
Shareholders, (a) the Shareholders shall have no further right to transfer the
Conversion Rights, voluntarily or involuntarily, by operation of law or
otherwise, without the prior written consent of the Company, which consent
shall not be unreasonably withheld; (b) no person or entity other than the
Shareholder shall have the right to exercise the Conversion Rights without the
prior written consent of the Company, which consent shall not be unreasonably
withheld; and (c) as a condition of the exercise of such Conversion Rights an
appropriate portion of this Note will be surrendered to the Company by the
Holder contemporaneously with the exercise of the Conversion Rights.
5. CONVERSION.
5.1 VOLUNTARY CONVERSION. At any time after December 31, 1997, the
Holder shall have the right, at the Holder's option, at any time prior to
payment in full of the principal balance of this Note, to convert this Note, in
accordance with the provisions of Section 5.2 hereof, in whole or in part, into
fully paid and nonassessable shares of Common Stock of the Company (the "Common
Stock"). The number of shares of Common Stock into which this Note may be
converted ("Conversion Shares") shall be determined by dividing the outstanding
principal amount of the Note to be converted together with all accrued interest
thereon to the date of conversion by $2.95 (the "Conversion Price"). It is a
condition to the exercise of any right of conversion pursuant to this
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Section 5.1 that the Holder enter into the Stockholders Agreement between the
Company and its stockholders. The Company has provided the Holder a copy of its
current Stockholders Agreement and shall provide the Holder a copy of any
amendment thereto or any new stockholders agreement as soon as it is reasonably
available, but in any event not later than the notice of prepayment set forth
in Section 1.3 hereof.
5.2 CONVERSION PROCEDURE.
(a) NOTICE OF CONVERSION PURSUANT TO SECTION 5.1. Before the Holder
shall be entitled to convert this Note into shares of Common Stock, it
shall surrender this Note at the office of the Company and shall give
written notice by mail, postage prepaid, to the Company at its principal
corporate office, of the election to convert all or a portion of this Note
pursuant to Section 5.1, and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. If this Note is converted in part only, the Company shall execute
and deliver a new note to the Holder thereof in the principal amount equal
to the portion of this Note not so converted.
(b) MECHANICS AND EFFECT OF CONVERSION. No fractional shares of
Common Stock shall be issued upon conversion of this Note. Upon the
conversion of this Note pursuant to Section 5.1 above, the Holder shall
surrender this Note, duly endorsed, at the principal office of the
Company. At its expense, the Company shall, as soon as practicable
thereafter, issue and deliver to such Holder at such principal office a
certificate or certificates for the number of shares of Common Stock to
which the Holder shall be entitled upon such conversion (bearing such
legends as are required by the Agreement and applicable state and federal
securities laws in the opinion of counsel to the Company), together with a
new note for the principal amount of the Note that was not converted. In
the event of any conversion of this Note pursuant to Section 5.1 above,
such conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of this Note, and the
person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date and shall
be bound by the terms of the Stockholders' Agreement. Upon conversion of
all or a portion of this Note, the Company shall be forever released from
all its obligations and liabilities under this Note, to the extent of the
principal amount so converted.
5.3 ADDITIONAL CONDITIONS TO CONVERSION. As a condition of the
issuance of shares of Common Stock to the Holder of this Note upon conversion,
the Company may require that the Holder make investment representations with
respect to the Common Stock similar in form and substance to the undertakings
contained in Section 3(a)(iv) of the Agreement and further may require that any
certificate for shares of Common Stock bear a legend similar in form and
content to the legend specified in Section 2(i) of the Agreement. In the event
that the Company is taxed as a Sub-Chapter S Corporation on the date of
conversion, the Company may, at its option, require as a
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condition of the issuance of shares of Common Stock to the Holder, that the
Holder deliver to the Company an opinion of counsel reasonably acceptable to it
that the issuance of Company Common Stock to the Holder as a result of the
conversion will not terminate the Company's Sub-Chapter S status.
6. CONVERSION PRICE ADJUSTMENTS.
6.1 ADJUSTMENTS FOR STOCK SPLITS AND SUBDIVISIONS. In the event the
Company should at any time or from time to time after the date of issuance
hereof fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date if fixed), the Conversion
Price of this Note shall be appropriately decreased so that the number of
shares of Common Stock issuable upon conversion of this Note shall be increased
in proportion to such increase of outstanding shares.
6.2 ADJUSTMENTS FOR REVERSE STOCK SPLITS. If the number of shares of
Common Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date of such combination, the Conversion Price for this Note shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion hereof shall be decreased in proportion to such decrease in
outstanding shares.
6.3 NOTICES OF RECORD DATE, ETC. If the event of:
(a) Any taking by the Company of a record of the holders of any class
of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash
dividend payable out of earned surplus at the same rate as that or of the
last such cash dividend theretofore paid) or other distribution or any
right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right; or
(b) Any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all of the assets of the Company to any other person
or any consolidation or merger involving the Company; or
(c) Any voluntary or involuntary dissolution, liquidation or winding
up of the Company;
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then the Company will mail to the Holder at least twenty (20) days prior to the
earliest date specified therein, a notice specifying:
(i) The date on which any such record is to be taken for the purpose
of such dividend, distribution or right, and the amount and character of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right; and
(ii) The date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up is
expected to become effective and the record date for determining
stockholders entitled to vote thereon and a description thereof.
6.4 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common solely for the purpose of effecting the conversion of this Note such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of this Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the entire outstanding principal amount of this Note,
in addition to such other remedies as shall be available to the holder of this
Note, the Company will use its best efforts to take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares to such number of shares as shall be sufficient for such
purposes.
7. MISCELLANEOUS.
7.1 WAIVER. The rights and remedies of Holder under this Notes shall be
cumulative and not alternative. No waiver by Holder of any right or remedy
under this Note shall be effective unless in a writing signed by Xxxxxx.
Neither the failure nor any delay in exercising any right, power or privilege
under this Note will operate as a waiver of such right, power or privilege and
no single or partial exercise of any such right, power or privilege by Holder
will preclude any other or further exercise of such right, power or privilege
or the exercise of any other right, power or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right of Holder arising out of
this Note can be discharged by Xxxxxx, in whole or in part by a waiver or
renunciation of the claim or right unless in a writing, signed by Xxxxxx; (b)
no waiver that may be given by Holder will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on Company will
be deemed to be a waiver of any obligation of Company or of the right of Holder
to take further action without notice or demand as provided in this Note.
Company hereby waives presentment, demand, protest and notice of dishonor and
protest.
7.2 NOTICES. Any notice required or permitted to be given hereunder shall
be given by the Company to the Holder or the Holder to the Company in
accordance with Section 11(h) of the Agreement.
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7.3 SEVERABILITY. If any provision in this Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Note will remain in full force and effect. Any provision of this Note held
invalid or unenforceable only in part or degree will remain in full force and
effect to the extent not held invalid or unenforceable.
7.4 GOVERNING LAW. This Note will be governed by the laws of the State
of Minnesota without regard to conflicts of laws principles.
7.5 PARTIES IN INTEREST. This Note shall bind the Company and its
successors and assigns. This Note shall not be assigned by Holder without the
express prior written consent of Company, except as follows:
(a) by will or in default thereof by operation of law;
(b) by gift to the Holder's spouse, children, grandchildren or
parents or a trust for the benefit of such persons;
(c) by gift to any other third party but only with the express
written consent of the Company, which consent shall not be unreasonably
withheld; and
(d) to a revocable trust created by the Holder, of which the Holder
is the primary beneficiary during his lifetime.
7.6 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Note are provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the words
"hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the
date first stated above.
XXXXX/XXXXXX, INC.
By: ______________________________
Title:____________________________
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NOTICE OF CONVERSION
(To Be Signed Only Upon Conversion of Note)
TO XXXXX/XXXXXX, INC.
The undersigned, the holder of the foregoing Note, hereby surrenders such
Note for conversion into shares of Common Stock of XXXXX/XXXXXX, INC., to the
extent of $_____ of the unpaid principal amount of such Note, and requests that
the certificates for such shares be issued in the name of, and delivered to,
_______ whose address is _________________.
Dated: ______________________
__________________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Note)
__________________________________________
(Address)
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