Contract
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
ALL
INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBJECT TO THE TERMS OF, THE
SUBORDINATION AGREEMENT, DATED AS OF JUNE 21, 2010, AS THE SAME MAY BE AMENDED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, BY AND AMONG XXXXXX
CAPITAL MASTER FUND, LTD., AS AGENT, VALUEACT SMALLCAP MASTER FUND, L.P., AS
SUBORDINATED CREDITOR, AND EACH OF THE COMPANY AND TWISTBOX ENTERTAINMENT, INC.,
AS OBLIGOR AND ALL OTHER PARTIES THERETO.
$___________
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Section
1.
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General.
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FOR VALUE
RECEIVED, NEUMEDIA, INC., a Delaware corporation (the “Company”), hereby promises to
pay to the order of ___________________ (“Investor”) the principal sum
of _____________________________ ($________________), or such lesser amount as
shall then equal the outstanding principal amount hereof, together with interest
(“Interest”) thereon at
a rate (the “Interest
Rate”) equal to 10.0% per annum from, and including, June 21, 2010 to,
but excluding, June 21, 2013, each computed on the basis of a year of 360 days
comprised of twelve 30 day months. All unpaid principal, together
with any then unpaid and accrued interest and other amounts payable hereunder,
shall be due and payable on the earlier of (i) June 21, 2013 (the “Maturity Date”) or (ii) when
such amounts become due and payable as a result of, and following, an Event of
Default in accordance with Section 3.
This Note (the “Note”) shall be prepayable
without penalty, in whole or in part, at any time at the Company’s option at
100% of the principal amount plus accrued but unpaid interest to and including
the date of prepayment. The Company shall provide written notice to
the Investor at least ten (10) days before any prepayment of this
Note. Any prepayments will be applied first to any accrued but unpaid
interest and then to unpaid principal.
Unless the context otherwise requires,
an accounting term not otherwise defined has the meaning assigned to it in
accordance with the United States generally accepted accounting principles
(“GAAP”).
Interest on this Note shall accrue
from, and including, the date hereof through and until repayment of the
principal amount of this Note and payment of all Interest in full, and shall be
payable in cash semi-annually in arrears on each January 1 and July 1 that the
Notes are outstanding or, if any such date shall not be a Business Day, on the
next succeeding Business Day to occur after such date (each date upon which
interest shall be so payable, an “Interest Payment Date”), to
holders of record on each preceding December 15 and June 15 to the applicable
Interest Payment Date, beginning on July 1, 2010, by wire transfer of
immediately available funds to an account at a bank designated in writing by the
Investor on reasonable notice.
Notwithstanding the foregoing
provisions of this Section 1, any overdue principal of, overdue Interest on, and
any other overdue amounts payable under, this Note shall bear interest, payable
on demand in immediately available funds, for each day from the date payment
thereof was due to the date of actual payment at a rate equal to the sum of (i)
the Interest Rate and (ii) an additional two percent (2.00%) per
annum. Subject to applicable law, any interest that shall accrue on
overdue interest on this Note as provided in the preceding sentence and shall
not have been paid in full in cash on or before the next Interest Payment Date
to occur after the date on which the overdue interest became due and payable
shall itself be deemed to be overdue interest on this Note to which the
preceding sentence shall apply. In addition, notwithstanding the
foregoing provisions of this Section 1, if an Event of Default has occurred and
is continuing, then, so long as such Event of Default is continuing, all
outstanding principal of this Note shall bear interest, after as well as before
judgment, at a rate equal to the sum of (i) the Interest Rate and (ii) an
additional two percent (2.00%) per annum.
Notwithstanding
anything to the contrary set forth herein, until (and including) the Interest
Payment Date occurring on January 1, 2012, the Company may, at its option, in
lieu of making any cash payment to the Investor with respect to the Interest
Payment Dates occurring on or before January 1, 2012, elect that the amount of
any Interest due and payable on such date be added to the principal amount then
due under this Note. This election by the Company to pay the Interest
by adding the amount of such payment to the principal under this Note is
hereafter referred to as the “PIK Election.” The
Company shall provide written notice of the PIK Election to the Investor at
least five (5) days before the applicable Interest Payment Date. For the
avoidance of doubt, immediately after each PIK Election, the outstanding
principal amount of this Note shall equal the sum of (i) the outstanding
principal amount of this Note immediately before the PIK Election, and (ii) the
amount of Interest otherwise due and payable on the applicable Interest Payment
Date.
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Section
2.
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Repurchase Right Upon
a Fundamental Change.
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Notwithstanding
anything to the contrary contained herein and in addition to any other right of
the Investor, upon the occurrence of a Fundamental Change the Investor shall
have the right for a period of thirty days, by written notice to the Company, to
require the Company to repurchase all of this Note on the repurchase date that
is five Business Days after the date of delivery of such notice to the Company
at a price equal to 100% of the outstanding principal amount under this Note
plus all accrued and unpaid interest on such principal amount to, but excluding,
the date of such repurchase plus any other amounts due hereunder. A
“Fundamental Change”
shall be deemed to have occurred upon the occurrence of any of the following
events: (a) a consolidation or merger of the Company with or into any other
corporation or corporations, (b) a sale of all or substantially all of the
assets of the Company, (c) the issuance and/or sale by the Company in a single
or integrated transaction of shares of common stock (or securities convertible
into shares of common stock) constituting a majority of the shares of
common stock outstanding immediately following such issuance (treating all
securities convertible into shares of common stock as having been fully
converted and all options and other rights to acquire shares of common stock or
securities convertible into shares of common stock as having been fully
exercised), (d) any other form of acquisition or business combination where the
Company is the target of such acquisition and where a change in
control occurs such
that the Person or entity seeking to acquire the Company has the power to elect
a majority of the board of directors of the Company as a result of the
transaction (each such event an "Acquisition"), and (e) any
liquidation, dissolution or winding up of the Company, provided, however, that
(A) any conversion of this Note into equity of the Company, (B) the exercise of
any rights under a Warrant Agreement between the Company and each of the
purchasers of this Note and the issuance of shares of capital stock of the
Company in respect of such exercise or (C) the issuance of any capital stock or
options, rights or warrants to purchase capital stock of the Company to Rob
Xxxxx, Xxxxxx, Xxxxx Xxxxx, Xxxx Xxxxxxxxx or any of their respective
affiliates, shall not constitute a change of control. A “Person” means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or government or
other entity.
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Section
3.
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Events of
Defaults.
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The
occurrence of any of the following shall constitute an “Event of Default” under this
Note:
(a) The
Company shall fail to pay any principal owing under this Note when due;
or
(b) The
Company shall fail to pay any interest owing under this Note when due, and such
failure shall continue for fourteen (14) days; or
(c) The
Company, Twistbox Entertainment, Inc., a Delaware corporation (a wholly owned
subsidiary of the Company and defined herein as the “Guarantor”) or any Subsidiary
shall fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Note (other than those specified in clauses (a) or
(b) above), the Guarantee and Security Agreement, dated the date hereof, among
the Company, the Guarantor, the Subsidiaries party thereto, Investor and Xxxxxx
Capital Management, LLC (as the same may be amended, supplemented or otherwise
modified from time to time, and together with all other documents, agreements
and instruments executed in connection therewith, the “Guarantee and Security
Agreement”), and, to the extent such failure is capable of being cured,
such failure shall continue for fourteen (14) days after notice is given to the
Company by the Investors holding more than 25% of the aggregate principal
balance of the Notes then outstanding; or
(d) The
Guarantor, the Company or any Subsidiary shall (i) fail to make any payment when
due under the terms of any bond, debenture, note or other evidence of
Indebtedness (as defined below) to be paid by the Guarantor, the Company or such
Subsidiary (excluding this Note, which default is addressed by clauses (a) and
(b) above, but including any other evidence of Indebtedness of the Guarantor,
the Company or such Subsidiary) and such failure shall continue beyond any
period of grace provided with respect thereto, or (ii) default in the observance
or performance of any other agreement, term or condition contained in any such
bond, debenture, note or other evidence of Indebtedness, and the effect of such
failure or default is to cause, or permit the holder thereof to cause,
Indebtedness of the Guarantor, the Company and the Subsidiaries in an aggregate
amount of One Million Dollars ($1,000,000) or more to become due prior to its
stated date of maturity; or
(e) An
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of the
Guarantor, the Company or any Subsidiary or its debts, or of a substantial part
of its assets, under any federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Guarantor, the Company or any Subsidiary or for a substantial part of
the Guarantor’s, the Company’s or such Subsidiary’s assets, and, in any such
case, such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be entered;
or
(f) The
Guarantor, the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (e) of this Section, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Guarantor, the Company or any Subsidiary or for a
substantial part of the Guarantor’s, the Company’s or such Subsidiary’s assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors or (vi) take any action for the purpose of effecting any of the
foregoing; or
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(g) One
or more judgments for the payment of money in an amount in excess of Five
Million Dollars ($5,000,000) in the aggregate, outstanding at any one time,
shall be rendered against the Guarantor, the Company and the Subsidiaries and
the same shall remain undischarged for a period of sixty (60) days during which
execution shall not be effectively stayed, or any judgment, writ, assessment,
warrant of attachment, or execution or similar process shall be issued or levied
against a substantial part of the property of the Guarantor, the Company or any
Subsidiary and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within sixty (60) days after issue or
levy; or
(h) Any
Note or the Guarantee and Security Agreement shall be asserted in writing by the
Guarantor, the Company or any Subsidiary not to be in full force and effect, or
the Guarantor, the Company or any Subsidiary shall disavow any of its
obligations thereunder; or
(i) Any
Lien purported to be created under the Guarantee and Security Agreement shall be
asserted by the Company or any Subsidiary not to be, a valid and perfected Lien
on any Collateral, with the priority required by the Guarantee and Security
Agreement; or
(j) The
Company shall have failed to make filings within sixty (60) days of the date
hereof with the United States Patent and Trademark Office in respect of the
security interests granted in the Company’s Trademarks (as defined in the
Guarantee and Security Agreement) to the Investor under the Guarantee and
Security Agreement; or
(k) Any
Event of Default under and as defined in the Guarantee and Security Agreement
shall have occurred.
(l) Guarantor
is in default under the VAC Note (as defined below).
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Section
4.
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Rights Of Investor
Upon Default.
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Upon the occurrence or existence of any
Event of Default (other than an Event of Default referred to in Sections 3(e) or
3(f) hereof) and at any time thereafter during the continuance of such Event of
Default, the Investor may, upon the approval of Investor holding more than 25%
of the aggregate principal balance of the Notes then outstanding, by written
notice to the Company, declare all outstanding amounts payable by the Company
hereunder to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived,
anything contained herein to the contrary notwithstanding. Upon the occurrence
or existence of any Event of Default described in Sections 3(e) or 3(f) hereof,
immediately and without notice, all outstanding amounts payable by the Company
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein to the contrary
notwithstanding. In addition to the foregoing remedies, upon the
occurrence or existence of any Event of Default, the Investor may exercise, upon
the approval of Investor holding more than a majority of the aggregate principal
balance of the Notes, any other right, power or remedy permitted to it by law,
either by suit in equity or by action at law, or both.
4
Section
5. Conversion
Rights. This Note is convertible into capital stock of the
Company (the “Conversion
Shares”) in accordance with the conversion rights specified in Schedule 1 attached
hereto and incorporated herein by this reference.
Section
6. [Reserved].
Section
7. Negative
Covenants. Until all
principal and interest and any other amounts due and payable under this Note
have been paid in full in cash, the Company shall not, and shall not permit any
Subsidiary to, without the prior written approval of the Investor holding a
majority in principal amount of the Notes:
(a) Indebtedness. Incur,
create, assume or permit to exist any Indebtedness, except
(i) Indebtedness
under that certain Amended and Restated Senior Subordinated Secured Note, dated
of even date herewith (the “VAC
Note”), made by Guarantor in favor of ValueAct SmallCap Master Fund, L.P.
(“VAC”);
(ii) guarantees
of the VAC Note under (x) that certain Amended and Restated Guaranty Agreement,
dated of even date herewith, made by the Company in favor of VAC, (y) that
certain Amended and Restated Guarantee and Security Agreement, among the
Company, Guarantor, the Subsidiaries party thereto, the investors party thereto
and VAC, and (z) the guarantee given by AMV Holding Limited and the debenture
securing such guarantee dated August 23, 2008;
(iii) Indebtedness
under this Note and the Guarantee and Security Agreement; and
(iv) unsecured
Indebtedness, provided the Indebtedness is expressly subordinate in right of
payment to this Note on terms acceptable to Investor.
“Indebtedness” means (i) all
indebtedness, whether or not contingent, for borrowed money or for the deferred
purchase price of property or services (but excluding trade accounts payable in
the ordinary course of business not overdue for more than sixty (60) days), (ii)
any other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (iii) all obligations under financing leases or letters of credit,
(iv) all obligations in respect of acceptances issued or created, (v) all
liabilities secured by any lien on any property, and (vi) all guarantee
obligations, in each case including the principal amount thereof, any accrued
interest thereon and any prepayment premiums or fees or termination fees with
respect thereto.
(b) Affiliate
Transaction. Excluding (x) the transactions with Affiliates as
of the date hereof and as set forth on Exhibit A hereto (each, an “Existing Affiliate
Transaction”) and (y) transactions between or among the Company, the
Guarantor and its Subsidiaries, enter into any transaction, including, without
limitation, the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate (each, an “Affiliate Transaction”),
unless
(i) the
Affiliate Transaction is in the ordinary course of and pursuant to the
reasonable requirements of the Company’s or such Subsidiary’s business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would obtain in a comparable arm’s length transaction with a Person not an
Affiliate; and
(A) if
the Affiliate Transaction or series of related Affiliate Transactions involves
aggregate consideration less than or equal to $2,000,000, the Company shall
deliver to the Investor a resolution of the Board of Directors of the Company
set forth in an officers’ certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors of
the Company; and
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(B) if
the Affiliate Transaction or series of related Affiliate Transactions involves
aggregate consideration greater than $2,000,000, the Company shall either
deliver to the Investor an opinion as to the fairness to the Company of such
Affiliate Transaction from financial point of view issued by an accounting,
appraisal or investment banking firm of national standing or shall receive the
Investor’s affirmative written consent.
For the avoidance of doubt, this
covenant shall not prohibit or restrict any distribution of any cash among or
between the Company, the Guarantor or any direct or indirect wholly-owned
Subsidiaries of the Company or the Guarantor.
(c) Dividends. Declare or make,
or agree to declare or make, directly or indirectly, any dividends on any Equity
Interests (as defined in the Guarantee and Security Agreement) or apply any of
its property or assets to the purchase, redemption or other retirement of, or
set apart any sum for the payment of any dividends on, or for the purchase,
redemption or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any Equity Interests, except repurchases
of equity incentive grants issued to employees, officers, directors and agents
of the Company and its Subsidiaries in the ordinary course of business, provided
that such repurchases shall not exceed $150,000 in any twelve (12) month
period.
(d) Subsidiaries. Create, own or
acquire any Subsidiary (other than any Subsidiary owned as of the date hereof),
except that the Company and its wholly-owned subsidiaries may create or own
wholly-owned Subsidiaries, provided that any such Subsidiary created or owned in
reliance of this Section7(d) shall execute a joinder to the Guarantee and
Security Agreement in form and substance satisfactory to the Investor in its
sole discretion.
(e) Management. Pay any
compensation (including, without limitation, base salary, bonus and benefits),
management fees or other payments of any kind to Xxx Xxxxx and/or Xxxxxx Capital
Management, LLC or any of its affiliates in the aggregate in any
twelve (12) month period in excess of $360,000 provided however that
the Company may only make cash payments thereon up to $180,000 in any such
twelve (12) month period and any amounts not paid in cash shall be deferred
until the VAC Note is paid in full; provided further that
all or part of the deferred portion may be paid in kind by issuance of Company
common stock on such terms as may be approved by the disinterested directors of
the Company’s Board of Directors (which shall, for such purposes, not include
Xxx Xxxxx, Xxxxx Xxxxx and Xxxx Xxxxxxxxx).
Section
8. Defenses.
The
obligations of the Company under this Note shall not be subject to reduction,
limitation, impairment, termination, defense, set-off, counterclaim or
recoupment for any reason.
This Note
is a senior secured obligation of the Company. The Company’s
obligations under this Note are (i) guaranteed by the Guarantor and by the
subsidiaries of the Guarantor and (ii) secured by a security interest in
substantially all of the assets of the Company, the Guarantor and such
Subsidiaries, in each case pursuant to the terms and provisions of the Guarantee
and Security Agreement. This Note is subject to the terms and
provisions of the Guarantee and Security Agreement and the Investor, by its
acceptance of this Note, hereby acknowledges and agrees to such terms and
provisions.
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Section
9. Transfer of Note; Lost or
Stolen Note.
(a) The
Investor may sell, transfer or otherwise dispose of all or any part of this Note
(including without limitation pursuant to a pledge) to any Person or
entity. From and after the date of any such sale, transfer or
disposition, the transferee hereof shall be deemed to be the holder of a Note in
the principal amount acquired by such transferee, and the Company shall, as
promptly as practicable, issue and deliver to such transferee a new Note
identical in all respects to this Note, in the name of such transferee and, if
such transferee acquires less than the entire principal amount of this Note, the
Company shall contemporaneously issue to the Investor a new Note identical in
all respects to this Note, representing the outstanding balance of this Note.
The Company shall be entitled to treat the original Investor as the holder of
this entire Note unless and until it receives written notice of the sale,
transfer or disposition hereof.
(b) Upon
receipt by the Company of evidence of the loss, theft, destruction or mutilation
of this Note, and (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Company, and upon surrender and
cancellation of this Note, if mutilated, the Company shall execute and deliver
to the Investor a new Note identical in all respects to this Note.
Section
10. Attorneys’ and Collection
Fees.
Should
the indebtedness evidenced by this Note or any part hereof be collected at law
or in equity or in bankruptcy, receivership or other court proceedings, the
Company agrees to pay, in addition to the principal and interest due and payable
hereon, all costs of collection, including reasonable attorneys’ fees and
expenses, incurred by the Investor or its agent in collecting or enforcing this
Note.
Section
11. Indemnification.
(a) The
Company shall indemnify the Investor, and any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Investor (each an “Affiliate” of the Investor)
(each such Person being called an “Indemnitee”) against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including the fees, charges, disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee by a third
party arising out of, in connection with, or as a result of (i) the execution or
delivery of this Note, the Guarantee and Security Agreement or any agreement or
instrument contemplated hereby or thereby, the performance by the parties hereto
of their respective obligations hereunder or the consummation of or the use of
the proceeds therefrom, (ii) the breach by the Company or any Subsidiary of any
representation, warranty, covenant or agreement contained herein or in the
Guarantee and Security Agreement, or (iii) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by judgment of a court of
competent jurisdiction to have primarily resulted from the gross negligence or
willful misconduct of such Indemnitee.
(b) To
the extent permitted by applicable law, the Company shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of, in
connection with, or as a result of, this Note, the Guarantee and Security
Agreement or any agreement or instrument contemplated hereby or thereby, or the
use of the proceeds thereof, other than claims predicated upon the gross
negligence or willful misconduct of such Indemnitee.
Section
12. Waivers.
(a) The
Company hereby waives presentment, demand for payment, notice of dishonor,
notice of protest and all other notices or demands in connection with the
delivery, acceptance, performance or default of this Note. No delay
by the Investor in exercising any power or right hereunder shall operate as a
waiver of any power or right, nor shall any single or partial exercise of any
power or right preclude other or further exercise thereof, or the exercise
thereof, or the exercise of any other power or right hereunder or otherwise; and
no waiver whatsoever or modification of the terms hereof shall be valid unless
set forth in writing by the Investor and then only to the extent set forth
therein.
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(b) The
Company covenants (to the extent that it may lawfully do so) that it shall not
at any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Note; and the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Investor, but shall suffer and permit the
execution of every such power as though no such law has been
enacted.
Section
13. Amendments.
No
amendment, modification or other change to, or waiver of any provision of, this
Note may be made unless such amendment, modification or change is set forth in
writing and is signed by the Company and Investor holding more than 75% of the
aggregate principal balance of the Notes.
Section
14. Governing Law; Jurisdiction;
Consent to Service of Process; Waiver of Jury Trial.
(a) THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA.
(b) THE
COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF THE STATE OF
CALIFORNIA SITTING IN LOS ANGELES COUNTY AND OF THE UNITED STATES’ DISTRICT
COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT IN CONNECTION WITH THIS NOTE, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURT IN THE STATE
OF CALIFORNIA OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT INVESTOR MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE COMPANY OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) THE
COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT
MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE OR THE GUARANTEE AND SECURITY AGREEMENT IN ANY COURT
REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.
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(d) EACH
PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 16. NOTHING IN THIS AGREEMENT WILL
AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.
(e) EACH
PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE, THE GUARANTEE AND SECURITY
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
Section
15. Successors and
Assigns.
The terms
and conditions of this Note shall inure to the benefit of and be binding upon
the respective successors (whether by merger or otherwise) and permitted assigns
of the Company and the Investor. The Company may not assign its
rights or obligations under this Note.
Section
16. Notices.
Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be delivered in accordance with the Guarantee and
Security Agreement.
Section
17. Entire
Agreement.
The
Notes, the Guarantee and Security Agreement and the other Secured Transaction
Documents (as defined in the Guarantee and Security Agreement) constitute the
full and entire understanding and agreement between the parties with regard to
the subjects hereto and thereof.
Section
18. Headings.
The
headings used in this Note are used for convenience only and are not to be
considered in construing or interpreting this Note.
Section
19. Severability.
In case
any one or more of the provisions of this Note shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the fullest
extent permitted by law.
[Signature
Page Follows]
9
IN WITNESS WHEREOF, the Company has
caused this Note to be duly executed by its duly authorized officer as of the
date indicated below.
Date: ________,
2010
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By:
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Name:
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Title:
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10
EXHIBIT
A
Existing
Affiliate Transactions
Xxxxxx
management agreement - $90,000 per quarter through September 2011;
Xxxxxx –
rental sublet of Century City office – month to month – presently at $5,000 per
month; and
Berkshire
holdings - rental of Xxxxxxx Oaks office premises - $21,000 per month
through July 15, 2010.
11
SCHEDULE
1
CONVERSION
RIGHTS
1. Conversion.
1.1 Common
Stock. In lieu of repayment of this Note, Investor shall have
the right, at the option of Investor at any time, on one or more occasion,
exercisable by written notice (“Investor’s Section 1.1
Exercise Notice”) from Investor to the Company, to convert all or any
part of the accrued and unpaid principal and interest due Investor under this
Note (the “Outstanding
Note Amount”), as of the date of Investor’s Section 1.1 Exercise Notice,
into shares of the Company’s Common Stock (the “Common Stock”) at a
conversion price in an amount equal to $0.15 per share of Common
Stock.
1.2 No Other
Conversion. Except as set forth in Sections 1.1 above, this
Note shall not otherwise be convertible into the Common Stock or any other
capital stock of the Company.
1.3 No Fractional
Shares. The Company shall not be required to issue fractional
shares of the Common Stock upon the conversion of this Note. If any
fraction of a share of the Common Stock would, except for the provisions of this
paragraph, be issuable on the conversion of this Note (or specified portion
thereof), the Company shall pay an amount in cash calculated by it to be equal
to the then fair market value per share of the Common Stock as reasonably
determined by the Board of Directors of the Company, multiplied by such fraction
computed to the nearest whole cent.
2. Adjustments Upon
Capitalization and Corporate Changes. If at any time prior to
the Maturity Date, any of the outstanding shares of the capital stock of the
Company are changed into, or exchanged for, a different number or kind of shares
or securities of the Company through reorganization, merger, recapitalization or
reclassification, or if the number of such outstanding shares is changed through
a stock split, stock dividend, stock consolidation or similar capital
adjustment, or if the Company makes a distribution in partial liquidation or any
other comparable extraordinary distribution with respect to any of its shares of
capital stock, an appropriate adjustment shall be made by the Board (and
approved by a majority of the disinterested members of the Board), if necessary,
in the number, kind or conversion price of shares into which this Note is
convertible.
12
