BAYTREE CAPITAL ASSOCIATES, LLC
INVESTMENT BANKERS
THE XXXXX BUILDING AT
00 XXXX XXXXXX
XXX XXXX, XXX XXXX 10005
212/509-1700 - FACSIMILE 2121363-4231
February 10, 1999
XxxxxXxxx.Xxx
000 Xxxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Mr. Xxxx Xxxxxxxx
President
Dear Xx. Xxxxxxxx:
This letter agreement (the "Agreement")confirms the terms and conditions of
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the exclusive engagement of Baytree Capital Associates, LLC ("Baytree")by
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XxxxxXxxx.Xxx, Inc., ("PhotoLoft") and its affiliates to render certain
financial advisory and investment banking services to PhotoLoft and any person,
corporation or other entity formed by or affiliated with such person (the
"Company") which participates in, or which was formed for the purpose of
effecting a Transaction (as hereinafter defined) and effecting a certain
Financing as hereinafter described. In the context of this Agreement,
"Transaction" shall mean, whether effected in one transaction or -a series of
transactions, (i) any merger, consolidation, reorganization, recapitalization or
other business combination pursuant to which the business of PhotoLoft is
combined with that of another entity (the "Merger Candidate"),whether or not
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PhotoLoft is the surviving entity in such business combination.
1. SERVICES. Pursuant to the terms and conditions set forth in this
Agreement, Xxxxxxx will assist PhotoLoft in negotiating and effecting: (i) a
Loan (as hereinafter described in subparagraph (a) if such is requested by
PhotoLoft; and (ii) a Transaction; and will act as the placement agent with
regard to obtaining the Financing (as hereinafter described in Paragraph 2) for
the Company. In this regard, Xxxxxxx proposes to undertake certain activities on
behalf of PhotoLoft, including, the following:
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(a) structuring and negotiating a loan (the "Loan") in the
principal amount of Two Hundred Fifty Thousand ($250,000) Dollars should said
loan be requested in writing by PhotoLoft prior to the consummation of the
Transaction, provided, however, that said Loan shall be subject to Baytree's
satisfactory completion of its due diligence review of PhotoLoft (as herein
further described in paragraph 2 (a) ). In the event that PhotoLoft shall
request the Loan, it shall simultaneously execute and deliver the Agreement and
Plan of Reorganization with regard to the Transaction arid execute and deliver
the Note (as hereinafter defined). Said Loan will be provided to PhotoLoft
within five (5) days of such a request on terms and conditions substantially in
the form of the Note (the "Note) as set forth in Annex B attached hereto;
(b) identifying a Merger Candidate which is a public company
within the meaning of Rule 15(c)-2 of the Securities Act of 1934;
(c) advising PhotoLoft as to the structure and form of the
Transaction;
(d) assisting PhotoLoft in obtaining appropriate information and
performing due diligence regarding the Merger Candidate;
(e) counseling PhotoLoft with respect to, and conducting,
negotiations with, the Merger Candidate regarding the Transaction;
(f) arranging for consummation of the Transaction;
(g) arranging for financing on behalf of the Company as otherwise
discussed in this Agreement;
(h) rendering such other financial advisory and investment banking
services as may from time to time be agreed upon by Xxxxxxx and PhotoLoft or the
Company.
Any obligations pursuant to this Paragraph I shall survive the termination
or expiration of this Agreement.
2. FINANCING.
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(a) Baytree shall arrange (i) the Loan (if one has been so requested
pursuant to Paragraph(a) and(ii) a financing (the "Financing") on behalf of the
Company. The Financing shall be arranged either by the conversion of the Loan
into equity of PhotoLoft or other funding or a combination of conversion and
other funding, and will be completed through a limited offering. The Financing
will be for a maximum of One Million ($1,000,000.00 US) Dollars and
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will be completed contemporaneously with consummation of the Transaction. The
limited offering comprising the Financing will be of Common Stock of the
Company. The Loan and the Financing will be subject to Xxxxxxx's successful and
satisfactory completion in Xxxxxxx's sole and absolute discretion of its due
diligence prior to the funding of the Loan or the Financing, such shall include,
but not be limited to, a review and analysis of PhotoLoft's financial status,
business plans and any pending or potential litigation. The placement of the
Common Stock will rely on Rule 504 of Regulation D ("Regulation D")promulgated
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under the U.S. Securities Act of 1933, as amended (the "Act"),and shall thereby
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be exempt from the registration requirements of the Act, provided, however, that
should Rule 504 of Regulation D be changed so that the exemption from
registration for stock so issued is altered then no further Financing as
contemplated in this Agreement will occur unless and until the parties to this
Agreement enter into a separate and distinct Agreement to continue with a
financing wherein the terms of said financing shall be specifically described.
In connection with their purchase of the Common stock in the Financing, the
purchasers will receive Two Hundred Thousand (200,000) shares of the Common
Stock of the Company for every One Hundred Thousand ($ 100,000 US) Dollars so
invested and a prorata number of shares for any portion thereof so invested.
Xxxxxxx shall not be deemed an agent of the Company nor an agent of
PhotoLoft for any other purpose. Any proceeds shall be paid, less the Expense
Allowance and legal fees reimbursement (each as defined in Paragraph 4 below),
to the Company at a closing held with respect to the sale of the Common Stock in
the Financing (the "Closing" against delivery of certificates representing the
securities sold. The Company agrees that until the later of the termination of
the Offering Period, or twelve (12) months from the Closing, it will not,
directly or indirectly, seek to arrange or place any equity or convertible
security financing, without Baytree's prior written consent except if such
financing is a sale of securities of nonconvertible debt. Additionally, the
Company agrees that upon Closing, the Company shall grant Baytree a right of
first refusal for a period of twenty-four (24) months from the Closing with
respect to any sale of securities by the Company except if the sale is either
pursuant to an underwritten public offering or is of securities of
non-convertible debt and except for the issuance of securities upon the exercise
of currently outstanding options and warrants. Baytree shall have ten (10)
business days following receipt of written notice from the Company setting forth
the terms of any proposed financing to be conducted by it (a "Notice"), to
exercise the right of first refusal by presenting a letter of intent for a
proposed financing on the same or better economic terms as presented to the
Company. In the event Xxxxxxx fails to exercise this right to present a letter
of intent for a proposed financing, the Company shall be free to sell such
securities in the manner, amount and for the prices and terms set forth in the
Notice without liability to Baytree, subject to Xxxxxxx's right of consent for a
period of twelve (12) months as set forth above.
(b) In the event that the Loan shall have been converted to stock
pursuant to the terms of the Note, then and in that event Baytree shall be
deemed to have provided the Company that portion of the Financing contemplated
in subparagraph (a) hereof
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and shall therefore be entitled to all Fees and Expenses provided for in
Paragraph 4 of this Agreement.
This Agreement does not constitute an understanding or a commitment,
express or implied, by Xxxxxxx to provide any of the Financing from its own
account. Any obligations pursuant to this Paragraph 2 shall survive the
termination or expiration of this Agreement.
3. REGISTRATION RIGHTS Baytree shall receive one "Piggyback"
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registration right for the shares of Common Stock representing fees or other
compensation to Baytree.
4. FEES AND EXPENSES PhotoLoft agrees to cause the Company to pay
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Baytree for its services as follows:
(a) Baytree shall receive a placement fee in cash and shares of
the Common Stock of the Company(the "Placement Fee") herein equal to Ten
Thousand ($10,000.) Dollars and Twenty Five Thousand (25,000) shares of the
Company's Common Stock for each gross One Million ($ 1,000,000.00 US) Dollars
raised in the Financing and a pro rata amount of cash and number of shares for
any part of One Million ($1,000,000.00 US) Dollars so raised. The Placement Fee
and Xxxxxxx's Expense Allowance (as hereinafter defined) with respect to the
Financing shall be payable concurrently with Closing (or each Closing if more
than one).
(b) In addition to any other fees payable to Baytree hereunder,
if at any time commencing with the date hereof and ending twenty-four (24)
months after termination of this Agreement or the closing of the Transaction
(whichever is later) a party introduced to PhotoLoft or the Company by Baytree
or by any broker-dealers selected by Xxxxxxx to participate in the Financing
shall purchase or commit to purchase any securities (other than those offered in
the Financing) of PhotoLoft, the Company or any person or entity controlled by
or under common control with PhotoLoft, the Company, or such other person (which
commitment the Company shall have accepted or shall subsequently accept),
Baytree shall receive as compensation the Placement Fee that would have been
payable and issuable had such purchases occurred in connection with the
Financing, regardless of the type of securities so purchased or the form of
payment therefor.
(c) It shall be the Company's obligation to bear all of its
expenses in connection with the Transaction and the Financing, which expenses
shall include, but are not limited to the following: printing and duplication
costs, postage and mailing expenses with respect to the transmission of offering
materials, registrar and transfer agent fees, accounting fees and issue and
transfer taxes, if any. In addition, PhotoLoft will cause the Company to pay to
Baytree a non-accountable expense allowance of Thirty Thousand ($30,000.00 US)
Dollars with respect to the Transaction and Financing, which shall include the
fees and reasonable
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disbursements of Xxxxxxx's and the Merger Candidate's legal counsel incurred in
connection with the Transaction and Financing (collectively, the
Any obligation pursuant to this Paragraph 4 shall survive the termination
or expiration of this Agreement.
(d) Following the provision of a Merger Candidate into which there
shall have been any merger, consolidation, reorganization, recapitalization or
other business combination pursuant to Paragraph I of this Agreement, the
Company agrees that six hundred twenty five thousand (625,000) shares of the
Common Stock of the Merger Candidate shall remain with the original shareholders
of the Merger Candidate.
Any obligation pursuant to this Paragraph 4 shall survive the
termination or expiration of this Agreement.
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS.
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(a) PhotoLoft represents and warrants and shall cause the Company to so
represent and warrant that this Agreement has been duty authorized, executed and
delivered by the Company and constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms- The
Company further represents and warrants that consummation of the transactions
contemplated herein will not conflict with or result in a breach of any of the
terms, provisions or conditions of any written agreement to which it is a party.
(b) PhotoLoft has not done, and shall cause the Company not to do
anything that may be considered a direct selling effort in the United States or
which could reasonably be expected to result in general preconditioning of the
United States Market for the Securities of the Company. Subject to the
requirements of law, the Company shall not make any public announcement of the
Financing without the prior written consent of Baytree and in any event, shall
make no such disclosure which could be deemed to be a general solicitation or
directed selling effort within the meaning of Regulation D under the Act,
(c) Baytree covenants that it will comply with all Rules and Regulations
applicable to Regulation D with regard to this Offering. Further, Baytree
represents and warrants that this Agreement has been duly authorized, executed
and delivered by it and constitutes its valid and binding agreement enforceable
against it in accordance with its terms. Baytree further represents and warrants
that consummation of the transactions contemplated herein will not conflict with
or result in a breach of any of the terms, provisions or conditions of any
written agreement to which it is a party.
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(d) PhotoLoft represents, warrants, and covenants that at the time of
any Loan and /or Financing contemplated herein there shall be no liens,
encumbrances or security interest in any assets of PhotoLoft (or any
subsidiaries or affiliates), said unencumbered assets shall include but not be
limited to the intellectual or proprietary property of PhotoLoft which property
shall include but not be limited to, any and all copyrights issued to, titled
to, or claimed by PhotoLoft.
(e) The PhotoLoft represents and PhotoLoft shall cause the Company to
so represent that upon the completion of the Transaction it shall cause a
nominee identified by Xxxxxxx to be added to the Company's Board of Directors
for the maximum term provided for in the Company's By Laws.
(f) PhotoLoft represents and shall cause the Company to so represent
that they have One Million Dollars ($1,000,000) of eligibility pursuant to Rule
504 of Regulation D. In the event that it is deter-mined that the Company has
less than One Million Dollars of eligibility, then the amount undertaken in
connection with any Financing shall be reduced to the amount of the Company's
remaining Rule 504 eligibility.
(g) The Company acknowledges that Xxxxxxx's undertaking to perform the
Financing described in Paragraph 2 is on a best efforts basis.
(h) PhotoLoft represents and warrants and shall cause the Company to so
represent and warrant that the post Transaction capitalization of the Company
shall be as set forth on Annex C attached hereto.
6. TERM. The term of this Agreement with regard to the completion
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of the Transaction shall be ninety (90) days from the date of the execution of
this Agreement. This Agreement may be renewed upon mutual written agreement of
Baytree and PhotoLoft and/or the Company. PhotoLoft agrees to cause the Company
to pay Baytree any fees specified in Paragraph 4 if the events specified therein
shall occur during the term of this Agreement or within two years after the
termination or expiration of this Agreement. Any obligation pursuant to this
Paragraph 6 shall survive the termination or expiration of this Agreement.
Notwithstanding anything in this Agreement to the contrary, in the event
that Xxxxxxx shall have failed to arrange for and fund the Loan within thirty
(30) days of the date of a request for such Loan then and in that event this
Agreement shall be null and void and of no further force or effect.
7. INDEMNIFICATION. In addition to the payment of fees and
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reimbursement of fees and expenses provided for above, and regardless of whether
the Transaction or the
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Financing are consummated, PhotoLoft agrees to indemnify and to cause the
Company to indemnify Baytree and any broker-dealers who participate in the
Financing, as set forth in Annex A, attached hereto, which is incorporated by
reference as if fully set forth herein. This Paragraph 7 shall survive the
termination or expiration of this Agreement.
8. INFORMATION. PhotoLoft recognizes and confirms that in
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performing its duties pursuant to this Agreement, Baytree and broker-dealers
selected by it to participate in the Financing will be using and relying on
data, material, and other information (the "Information") or ("Offering
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Materials")furnished by PhotoLoft and the Merger Candidate or their respective
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employees and representatives. In connection with Xxxxxxx's activities on
PhotoLoft's behalf, PhotoLoft will cooperate with Xxxxxxx and will furnish
Baytree with all information concerning PhotoLoft the Transaction and, to the
extent available to PhotoLoft the Merger Candidate, which Xxxxxxx deems
appropriate and will provide Baytree with access to PhotoLoft's officers,
directors, employees, independent accountants and legal counsel for the purpose
of performing Xxxxxxx's obligations pursuant to this agreement. To the extent
that PhotoLoft has access to the officers, directors, employees, independent
accountants and legal counsel of the Merger Candidate, it will provide such
access to Baytree for the purpose of performing Baytree's obligations pursuant
to this Agreement. PhotoLoft hereby agrees and represents that all Information
(a) furnished to Baytree pursuant to this Agreement, and (b) contained in any
filing by PhotoLoft with any court or governmental or regulatory agency,
commission or instrumentality (each, an "Agency")shall, at all times during the
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period of the engagement of Baytree hereunder, be accurate and complete in all
material respects and that, if the Information provided by PhotoLoft becomes
materially inaccurate, incomplete or misleading during the term of Xxxxxxx's
engagement hereunder, the Company shall so advise Xxxxxxx in writing.
Accordingly, Xxxxxxx assumes no responsibility for the accuracy and completeness
of the Information. In rendering its services hereunder, Xxxxxxx will be using
and relying upon the Information without independent verification thereof or
independent evaluation of any of the assets or liabilities of PhotoLoft or the
Merger Candidate. All Information that is not publicly available will be treated
in strict confidence, and will not be revealed, or used (except in the
performance of Xxxxxxx's duties under this Agreement) by Xxxxxxx unless legally
compelled as determined in good faith by counsel to Baytree.
9. DISCLOSURE. PhotoLoft agrees that, except as compelled by law,
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rule or regulation, it will not disclose and will cause the Company not to
disclose the services or advice to be provided by Xxxxxxx under this Agreement
publicly or to any third party without the prior written approval of Xxxxxxx.
10. SEVERABILITY. If any provision of this Agreement shall be held
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or made invalid by a statute, rule, regulation, decision of a tribunal or
otherwise, the remainder of this
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Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
11. AUTHORIZATION. PhotoLoft and Baytree represent and warrant that
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each has all requisite power and authority, and all necessary authorizations, to
enter into and carry out the terms and provisions of this Agreement.
12. SUCCESSORS. This Agreement and all rights, liabilities and
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obligations hereunder shall be binding upon and inure to the benefit of each
party's successors but may not be assigned without the prior written approval of
the other party. Any such approval shall not be unreasonably withheld.
13. HEADINGS. The descriptive headings of the Paragraphs of this
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Agreement are inserted for convenience only, do not constitute a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement.
14. NO BROKERS. PhotoLoft represents and warrants to Baytree that
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there are no brokers, representatives or other persons which have an interest in
or claim for compensation due to Baytree from any transaction contemplated
herein.
15. NOTICES. Any notice or other communication to be given to
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PhotoLoft hereunder may be given by delivering the same in writing to the
address set forth above, and any notice or other communication to be given to
Baytree may be given by delivering the same to Baytree Capital Associates, LLC,
00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx Xxxxxxx, Principal,
or in each case, such other address of which a party shall have received notice.
Any notice or other communication hereunder shall be deemed given three days
after deposit in the mail if mailed by certified mail, return receipt requested,
or on the day after deposit with an overnight courier service for next day
delivery, or on the date personally delivered.
16. ARBITRATION. In the case of any dispute, question, controversy
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or claim arising among the parties hereto which shall arise out of or in
connection with this Agreement, the same shall be submitted to arbitration
before a panel of three arbitrators in New York, New York, in accordance with
the rules of the American Arbitration Association. One arbitrator shall be
appointed by the party or parties bringing the claims ("Claimant") and one
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arbitrator shall be appointed by the party or parties defending the claim
("Respondent").The arbitrators selected by such parties shall be selected within
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thirty (30) days after notification by the Claimant to the Respondent that it
has determined to submit such dispute, question, controversy or claim to
arbitration. The two arbitrators so selected shall select a third arbitrator
within thirty (30) days after the selection of the arbitrator selected by such
parties. Should a party fail to select an arbitrator within the specified time
period, or should the arbitrators selected by the parties fail to select a third
arbitrator, the missing arbitrator or arbitrators shall be appointed by the New
York, New York office of the American Arbitration Association. The decision of
the panel shall be final and binding on the parties and enforceable in any court
of competent jurisdiction. The costs of the arbitration will be imposed upon the
Claimant and Respondent as determined by the arbitration panel or, failing such
determination, will be home equally by the
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Claimant and the Respondent. The successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees in addition to any other
relief to which it may be entitled.
In the event of any dispute, question, controversy or claim arising among
the parties hereto which shall arise out of or in connection with this
Agreement, the parties shall keep the proceeding related to such controversy in
strict confidence and shall not disclose the nature of said dispute, the status
of the proceeding or any testimony, documents or information obtained or
exchanged in the course of said proceeding without the express written consent
of all parties to such dispute unless either party is legally compelled to make
any such disclosure.
Please confirm that the foregoing correctly sets forth our agreement by
signing the enclosed letters in the space provided and returning them to us for
execution, whereupon we will send you a fully executed original letter which
shall constitute a binding agreement as of the date first above written.
Very truly yours,
BAYTREE CAPITAL ASSOCIATES, LLC
By: /s/ Xxxxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx, Principal
Agreed to and accepted as of the above date
XXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx, President
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ANNEX A: INDEMNIFICATION
PhotoLoft agrees to indemnify and to cause the Company to indemnify
Baytree, any broker-dealers who participate in the Financing, and their
respective employees, directors, officers, agents, affiliates, and each person,
if any, who controls them within the meaning of either Section 20 of the
Securities Exchange Act of 1934 or Section 15 of the Securities Act of 1933
(each such person, including Xxxxxxx and such broker-dealers, is referred to as
"Indemnified Party") from and against any losses, claims, damages and
liabilities, joint or several including all legal or other expenses reasonably
incurred by an Indemnified Party in connection with the preparation for or
defense of any threatened or pending claim, action or proceeding, whether or not
resulting in any liability ("Damages"), to which such Indemnified Party, in
connection with its services or arising out of its engagement hereunder, may
become subject under any applicable Federal or state law or otherwise, including
but not limited to liability (i) caused by or arising out of an untrue statement
or an alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact necessary in order to make a statement not
misleading in light of the circumstances under which it was made, (ii) caused by
or arising out of any act or failure to act or (iii) arising out of Xxxxxxx's
engagement or the rendering by any Indemnified Party of its services under this
Agreement; provided, however, that neither PhotoLoft nor the Company will be
liable to the Indemnified Party hereunder to the extent that any Damages are
found in a final non-appealable judgment by a court of competent jurisdiction to
have resulted from the gross negligence, bad faith or willful misconduct of the
Indemnified Party seeking indemnification hereunder.
These indemnification provisions shall be in addition to any liability
which PhotoLoft and/or the Company may otherwise have to any Indemnified Party.
If for any reason, other than a final non-appealable judgment finding an
Indemnified Party liable for Damages for its gross negligence, bad faith, or
willful misconduct the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then PhotoLoft
shall and shall cause the Company, to contribute to
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the amount paid or payable by an Indemnified Party as a result of such Damages
in such proportion as is appropriate to reflect not only the relative benefits
received by PhotoLoft or the Company, as the case may be and its shareholders on
the one hand, and Baytree on the other, but also the relative fault of PhotoLoft
or the Company, as the case may be, and the Indemnified Party as well as any
relevant equitable considerations, subject to the limitation that in no event
shall the total contribution of all Indemnified Parties to all such Damages
exceed the amount of fees actually received and retained by Xxxxxxx and the
broker-dealers selected by Xxxxxxx that participate in the placement of the
Common Stock.
Promptly after receipt by the Indemnified Party of notice of any claim or
of the commencement of any action in respect of which indemnity may be sought,
the Indemnified Party will notify PhotoLoft or the Company in writing of the
receipt or commencement thereof and PhotoLoft or the Company shall have the
right to assume the defense of such claim or action (including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of fees
and expenses of such counsel), provided that the Indemnified Party shall have
the right to control its defense if, in the opinion of its counsel, the
Indemnified Party's defense is unique or separate to it as the case may be, as
opposed to a defense pertaining to PhotoLoft or the Company In any event, the
Indemnified Party shall have the right to retain counsel reasonably satisfactory
to PhotoLoft or the Company, at PhotoLoft's or the Company's expense, to
represent it in any claim or action in respect of which indemnity may be sought
and agrees to cooperate with PhotoLoft or the Company and PhotoLoft's or the
Company's counsel in the defense of such claim or action, it being understood,
however, that PhotoLoft or the Company shall not, in connection with any one
such claim or action or separate, but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys, for all the Indemnified Parties unless the defense
of one Indemnified Party is unique or separate from that of another Indemnified
Party subject to the same claim or action. In the event that PhotoLoft or the
Company does not promptly assume the defense of a claim or action, the
Indemnified Party shall have the right to employ counsel reasonably satisfactory
to PhotoLoft or the Company, at PhotoLoft's or, the Company's expense, to defend
such claim or action. The omission by an Indemnified Party to promptly notify
PhotoLoft or the Company of the receipt or commencement of any claim or action
in respect of which indemnity may be sought will relieve PhotoLoft or the
Company from any liability PhotoLoft or the Company may have to such Indemnified
Party only to the extent that such a delay in notification materially prejudice
PhotoLoft's or the Company's defense of such claim or action. PhotoLoft or the
Company shall not be liable for any settlement of any such claim or action
effected without its written consent, which shall not be unreasonably withheld
or delayed. Any obligation pursuant to this Annex shall survive the termination
or expiration of this Agreement.
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ANNEX B: FORM OF PROMISSORY NOTE
$250,000 February -, 1999
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FOR VALUE RECEIVED, XXXXXXXXX.XXX, INC. (the "Maker"), a California corporation,
with offices at 000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000,
hereby promises to pay to the order of (the "Payee"),
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residing at (or with a business office located
at) , the principle sum of Two Hundred Fifty
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Thousand ($250,000.00 US) Dollars, together with interest on the principal
amount outstanding from the date hereof until payment in full.
The principal amount of this Note together with all interest then accrued
shall be payable three months from the date hereof (the "Due Date"). However,
the term of this Note shall automatically be extended for an additional three
months from the original Due Date in the event that the conversion of this Note
as hereinafter described has not been completed by the original Due Date.
Interest on outstanding principal shall accrue at the rate of nine (9%) percent
per annum from the date hereof and shall be paid on the Due Date. All interest
shall be calculated on the basis of a 365 day year, counting the actual number
of days elapsed from the date of this Note to the Due Date. Interest on any
overdue payments of principal and interest due hereunder shall accrue and be
payable at the rate of twelve (12%) percent per annum, based on the actual
number of days elapsed from the date such principal or interest payment was due
to the date of actual payment.
The principal of this Note may be prepaid in whole or in part without
premium or penalty, at any time. The Maker shall prepay the principal and
accrued interest of this Note, as and to the extent that the Maker receives
proceeds (net of expenses) (1) from the sale of common stock of the Maker prior
to the Due Date, or (2) as a part of being acquired by a public company prior to
the Due Date.
Maker shall offer the Payee the option to convert this note into shares of
common stock of any corporation which acquires at least fifty-one (51%) percent
of the Maker at any time prior to the Due Date. The terms of the issuance of
such shares shall be part of a structure wherein it is contemplated that such
corporation shall have 13,000,000 shares of common stock outstanding after the
acquisition of Maker (but before the conversion of a maximum of $250,000 of
Notes or further financing). In connection with said acquisition, it is
contemplated that the company shall issue 12,375,000 shares to the shareholders
of the Maker and shall undertake a financing by selling 2,000,000 shares at $.50
per share (the "Offering Shares"). The shares issuable upon conversion of this
Note shall be a part of the Offering Shares and shall be converted at $.50 per
share.
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All principal and interest payments hereunder are payable in lawful money
of the United States of America to the Payee at the address first shown above,
or at such other address as may be directed by Xxxxx, in immediately available
funds.
The Maker hereby waives presentment, demand, dishonor, protest, notice of
protest, diligence and any other notice or action otherwise required to be given
or taken under the law in connection with the delivery, acceptance, performance,
default, enforcement or collection of this Note, and expressly agrees that this
Note, or any payment hereunder, may be extended, modified or subordinated (by
forbearance or otherwise) from time to time, without in any way affecting the
liability of the Maker.
In the event that (a) the Maker shall fail to pay when due, any payment of
principal or interest due hereunder and such failure to pay is not cured within
ten (10) days of the date such payment was due, or (b) if the maker shall (i)
make a general assignment for the benefit of creditors; (ii) be adjudicated a
bankrupt or insolvent; (iii) file a voluntary petition in bankruptcy-, (iv) take
advantage of any bankruptcy or insolvency law or statute of the United States of
America or any state or jurisdiction thereof now or hereafter in effect; (v)
have a petition or proceeding filed against the Maker under any bankruptcy or
insolvency law or statute of the United States of America or any state or
jurisdiction thereof, which petition or proceeding is not dismissed within
forty-five (45) days from the date of commencement thereof; or (vi) have a
receiver, trustee, custodian, conservator or other person appointed by any court
to take charge of the Maker's affairs, assets or business and such appointment
is not vacated or discharged within forty-five (45) days thereafter; then, and
upon the happening of any such event, the Payee, at Xxxxx's option, by written
notice to the Maker, may declare the entire indebtedness evidenced by this Note
immediately due and payable, whereupon the same shall forthwith mature and
become immediately due and payable without presentment, demand, protest or
further notice.
In the event that Maker shall fail to pay when due any principal or
interest payment, and the Payee shall exercise or endeavor to exercise any of
its remedies hereunder, the Maker shall pay all reasonable costs and expenses
incurred in connection therewith including, without limitation, reasonable
attorneys' fees, and the Payee may take judgment for all such amounts in
addition to all other sums due hereunder.
No consent or waiver by the Payee with respect to any action or failure to
act by maker which, without such consent or waiver, would constitute a breach of
any provision of this Note shall be valid and binding unless in writing and
signed by the Payee.
All agreements between the Maker and the Payee are expressly limited to
provide that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the
13
Payee for the use, forbearance or detention of the indebtedness evidenced hereby
exceed the maximum amount which the Payee is permitted to receive under
applicable law. If, from any circumstances whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by law, then, without the
necessity of any action by Payee or Maker, the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if from any
circumstance the Payee should ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the principal balance hereof, and not to
the payment of interest. As used herein, the term "applicable law" shall mean
the law in affect as of the date hereof, provided, however, that in the event
there is a change in the law which results in a higher permissible rate of
interest, then this Note shall be governed by such new law as of its effective
date. This provision shall control every other provision of all agreements
between the Maker and the Payee.
This Note shall be governed by and construed in accordance with the laws of
the State of New York, except to the extent that such laws are superseded by
Federal enactments.
If any covenant or other provision of the Note is invalid, illegal, or
incapable of being enforced by reason of any rule of law or public policy, all
other covenants and provisions of the Note shall nevertheless remain in full
force and effect, and no covenant or provision shall be deemed dependent upon
any other covenant or provision.
IN WITNESS WHEREOF, the Maker, by its duly authorized officer, has
executed this Note as of the date first above written.
XXXXXXXXX.XXX, INC.
By: /s/ Xxxx Xxxxxxxx
------------------------------
Xxxx Xxxxxxxx, President
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ANNEX C
-------
XXXXXXXXX.XXX CAPITALIZATION TABLE
SHARES PERCENTAGE
---------- -----------
ORIGINAL XXXXXXXXX.XXX SHAREHOLDERS. . 12,375,000 82.36%
---------- -----------
INVESTORS. . . . . . . . . . . . . . . 2,000,000 13.31%
---------- -----------
ORIGINAL MERGER CANDIDATE SHAREHOLDERS 625,000 4.16%
---------- -----------
BAYTREE. . . . . . . . . . . . . . . . 25,000 0.17%
---------- -----------
TOTAL. . . . . . . . . . . . . . . . . 15,025,000 100.00%
-------------------------------------- ---------- -----------
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