Debenture No. E-3
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR
QUALIFICATION UNDER SUCH SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY, THAT THE SALE OR TRANSFER IS PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH SECURITIES LAWS.
ANCHOR PACIFIC UNDERWRITERS, INC.
10% Convertible Senior Subordinated Debenture, Series E
(convertible into shares of common stock)
____________$ Concord, California
___________, 2000
ANCHOR PACIFIC UNDERWRITERS, INC., a Delaware corporation (the
"Company"), for value received, hereby promises to pay to Xxxx North America
Holding, Inc. a California corporation, or such other person in whose name this
Debenture is registered on the Debenture Register (as that term is defined
below) (the "Holder"), the principal amount of ___________ Thousand Dollars
($_________), with simple interest on the unpaid balance of such principal
amount at the rate of ten percent (10%) per annum (or the maximum rate permitted
by law, whichever is less) from the date of this Debenture. Interest on the
outstanding principal balance shall be computed on the basis of a 360 day year
of twelve 30-day months and shall be paid to the Holder on June 1, 2000,
December 1, 2000 and June 1, 2001 (each, an "Interest Payment Date"). Each
Debenture delivered upon registration of transfer or in exchange for or in lieu
of this Debenture shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by this Debenture. This Debenture, together with the
other Series E Debentures issued to the Holder, shall be superior to all other
debentures of the Company, including without limitation those Series A, B, C and
D debentures in the aggregate principal amount of $554,000, and shall constitute
"Senior Debt" for purposes of such debentures.
The full principal amount of this Debenture, plus interest, will be
due and payable on December 1, 2001 (the "Maturity Date"). Payment of interest
and principal shall be made in lawful money of the United States of America by
wire transfer to an account designated by the Holder appearing on the Debenture
Register.
This Debenture is a duly authorized Debenture of the Company, Series
E, limited to the aggregate principal amount of $500,000.00.
1. Representations, Warranties and Covenants.
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1.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now
conducted and as proposed to be conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.
1.2 Valid Issuance of Debentures and Shares. The Debenture, when
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issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, and based
in part upon the representations of the Holder contained in the Subscription
Agreement pursuant to which this Debenture is being issued, will be issued in
compliance with all applicable federal and state securities laws. The shares of
the Company's Common Stock, $.02 par value per share, issuable upon conversion
of the Debentures (the "Shares") have been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of this Debenture,
shall be duly and validly issued, fully paid and nonassessable.
1.3 Compliance with Other Instruments. The Company is not in
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violation of or default under any provisions of its Certificate of Incorporation
or Bylaws as amended and in effect on and as of the date of this Debenture or of
any material provision of any instrument or contract to which it is a party or
by which it is bound or, to its knowledge, of any material provision of any
federal or state judgment, writ, decree, order, statute, rule or governmental
regulation applicable to the Company. Neither the execution, delivery and
issuance of this Debenture, nor the issuance of the Shares upon conversion
thereof, will result in: (a) any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, a default
under any such provision, instrument or contract; or (b) an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.
1.4 SEC Filings. The Company's Annual Report on Form 10-K for the
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fiscal year ended December 31, 1998 filed with the Securities and Exchange
commission (the "SEC") on March 3, 1999, and the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999, June 30, 1999 and September 30,
1999, including all exhibits to such filings (collectively, the "SEC Filings")
as of the respective dates of filing, were accurate and complete in all material
respects and complied in all material respects with the rules, regulations and
interpretations of the SEC.
1.5 Full Disclosure. The Company has provided Holder with all the
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information that Xxxxxx has requested for deciding whether to purchase the
Shares. Neither this Agreement nor the representations and warranties contained
herein, nor any other written statements or certificates made or delivered in
connection herewith, when read together, contains any untrue statement of a
material facts or omits to state a material fact necessary to make the
statements herein or therein not misleading.
2. Subordination.
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2.1 Subordination. The indebtedness evidenced by this Debenture is
subordinate and junior in right of payment to all Senior Debt (as such term is
defined below) to the extent provided herein, and the Holder, by such Xxxxxx's
acceptance hereof, agrees to the subordination herein provided and shall be
bound by the provisions hereof. Senior Debt shall continue to be Senior
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Debt and entitled to the benefits of these subordination provisions irrespective
of any amendment, modification or waiver of any term of the Senior Debt or
extension or renewal of the Senior Debt.
2.2 Senior Debt Defined. As used herein, the term "Senior Debt"
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shall mean the following whether now outstanding or subsequently incurred,
assumed or created: (a) all indebtedness (whether or not secured) of the Company
or its subsidiaries to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money; (b) such other
indebtedness of the Company or its subsidiaries issued prior to the date of this
Debenture, to the extent that the instrument creating or evidencing such
indebtedness provides that it shall constitute Senior Debt; (c) any indebtedness
issued in exchange for such Senior Debt, or any indebtedness arising from the
satisfaction of such Senior Debt by a guarantor; and (d) any deferrals,
renewals, or extensions of any such Senior Debt. Senior Debt shall not include
any of the Company's debentures, whether Series A, B, C, D or otherwise.
2.3 Default on Senior Debt. If the Company shall default in the
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payment of any principal of or interest on any Senior Debt when the same shall
become due and payable, whether at maturity or at a date fixed for prepayment or
by declaration of acceleration or otherwise, then, upon written notice of such
default to the Company by the holders of Senior Debt or any trustee therefor,
unless and until such default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, property, securities,
by set-off or otherwise) shall be made or agreed to be made on account of the
principal of or interest on this Debenture, or in respect of any redemption,
repayment, retirement, purchase or other acquisition of this Debenture.
2.4 Prior Payment of Senior Debt.
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(a) In the event of: (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Company; (ii) any proceeding for the
liquidation, dissolution or other winding up of the Company, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings;
(iii) any assignment by the Company for the benefit of creditors; or (iv) any
other marshalling of the assets of the Company, all Senior Debt (including any
interest thereon accruing after the commencement of any such proceedings) shall
first be paid in full before any payment or distribution, whether in cash,
securities or other property, shall be made to any Holder on account of the
principal or interest on this Debenture. Any payment or distribution, whether in
cash, securities or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the indebtedness evidenced by this
Debenture, to the payment of all Senior Debt at the time outstanding and to any
securities issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for these subordination provisions) be
payable or deliverable in respect of this Debenture shall be paid or delivered
directly to the holders of Senior Debt in accordance with the priorities then
existing among such holders until all Senior Debt (including any interest
thereon accruing after the commencement of any such proceedings) shall have been
paid in full. In the event of any such proceeding, after payment in full of all
sums owing with respect to Senior Debt, the Holder of this Debenture, together
with the holders of any obligations of the Company ranking on a parity with this
Debenture, shall be entitled to be paid from the remaining assets of the Company
the amounts at the time due and owing
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on account of unpaid principal of and interest on this Debenture and such other
obligations before any payment or other distribution, whether in cash, property
or otherwise, shall be made on account of any capital stock or any obligations
of the Company ranking junior to this Debenture and such other obligations.
(b) In the event that, notwithstanding the foregoing, any payment
or distribution of any character, whether in cash, securities or other property
(other than securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in these subordination provisions with respect to
the indebtedness evidenced by this Debenture, to the payment of all Senior Debt
at the time outstanding and to any securities issued in respect thereof under
any such plan of reorganization or readjustment), shall be received by any
Holder in contravention of any of the terms hereof, such payment or distribution
or security shall be received in trust for the benefit of, and shall be paid
over or delivered and transferred to, the holders of the Senior Debt at the time
outstanding in accordance with the priorities then existing among such holders
for application to the payment of all Senior Debt remaining unpaid, to the
extent necessary to pay all such Senior Debt in full. In the event of the
failure of any such Holder to endorse or assign any such payment, distribution
or security, each holder of Senior Debt is hereby irrevocably authorized to
endorse or assign the same.
2.5 No Impairment of Rights. Nothing contained herein shall impair,
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as between the Company and the Holder, the obligation of the Company to pay such
Holder the principal of and interest on this Debenture or prevent such Holder
from exercising all rights, powers and remedies otherwise permitted by
applicable law or hereunder upon an Event of Default (as defined below)
hereunder, all subject to the rights of the holders of the Senior Debt to
receive cash, securities or other property otherwise payable or deliverable to
the Holder of this Debenture.
2.6 Subrogation. Upon the payment in full of all Senior Debt, the
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Holders of the Debentures, together with all other subordinated debt of the
Company ranking on a parity therewith, shall be subrogated to all rights of any
holders of Senior Debt to receive any further payments or distributions
applicable to the Senior Debt until the indebtedness evidenced by the Debentures
shall have been paid in full, and such payments or distributions received by the
Holders thereof, by reason of such subrogation, of cash, securities or other
property which otherwise would be paid or distributed to the holders of Senior
Debt, shall, as between the Company and its creditors other than the holders of
Senior Debt, on the one hand, and such Holders on the other hand, be deemed to
be a payment by the Company on account of Senior Debt and not on account of the
Debentures.
2.7 No Impairment of Security Interest. The provisions of this
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Debenture shall not impair any rights, remedies or powers of any secured
creditor of the Company in respect of any security interest. The securing of any
obligations of the Company otherwise ranking on a parity with the Debentures or
ranking junior to such Debentures shall not be deemed to prevent such
obligations from constituting, respectively, obligations ranking on a parity
with such Debentures or ranking junior to such Debentures.
2.8 Amendment of Subordination Provisions. No modification or
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amendment of the subordination provisions contained in Section 2 hereof in a
manner adverse to the holders of Senior Debt may be made without the consent of
all holders of Senior Debt.
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2.9 Undertaking. By its acceptance of this Debenture, the Holder
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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 Section 2 hereof.
3. Restrictions on Issuance of Additional Debt. Except for
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amendments to and refinancings of Senior Debt existing as of the date hereof,
the Company shall not create, assume or incur any additional indebtedness
ranking on par with, or senior to, this Debenture without the prior written
consent of the Holder with respect thereto.
4. Default.
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4.1 Event of Default. Each of the following events shall be an Event
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of Default hereunder:
(a) Default in the payment of any interest on this Debenture
when due, continued for two (2) business days.
(b) Default in the payment of the principal on the Maturity
Date.
(c) Material default in the performance of any of the covenants
or agreements of the Company contained in this Debenture continued for thirty
(30) days after notice thereof (provided, however, that if the default cannot
reasonably be corrected within such period, there shall be no event of default
if corrective action is instituted promptly and is pursued diligently until the
default is corrected).
(d) If a petition in involuntary bankruptcy is filed against the
Company under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation under the law of any
jurisdiction, whether now or hereafter in effect, and is not stayed or dismissed
within thirty (30) days after such filing, or if the Company shall make an
assignment for the benefit of creditors, or shall file a voluntary petition in
bankruptcy, or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, or shall seek or consent to or
acquiesce in the appointment of any trustee, receiver or liquidator of the
Company or of all or any substantial part of the properties of the Company, or
commence voluntary or involuntary dissolution proceedings.
(e) Default under Senior Debt that gives the holder thereof the
right to accelerate such Senior Debt, and such Senior Debt is in fact
accelerated by such holder.
4.2 Remedies on Default, etc.
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(a) If an Event of Default occurs and is continuing after the
expiration of any applicable grace period, the Holder may declare the Debenture
immediately due and payable .
(b) In case of a default in the payment of any principal or
interest due on this Debenture, the Company shall pay to the Holder thereof the
amount owing together with: (i)
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simple interest on the amount owing at the rate per annum equal to the lower of
(x) twelve percent (12%) or (y) the maximum rate permitted under applicable law
on the amounts past due; and (ii) such additional amount as shall be sufficient
to cover the cost and expenses of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
(c) No right, power or remedy conferred by this Debenture upon
any Holder shall be exclusive of any other right, power or remedy referred to
herein or now or hereafter available at law, in equity, by statute or otherwise.
5. Conversion.
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5.1 Conversion Rights. The Holder may at any time, and from time to
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time, prior to the first to occur of the Maturity Date or the date fixed by the
Company for redemption of this Debenture (the "Redemption Date"), convert this
Debenture or any portion of the principal amount hereof which is $5,000 or an
integral multiple of $5,000, into Shares, at a conversion price of $0.50 per
Share (the "Conversion Price"), subject to adjustment in certain events
described below.
The number of Shares that the Holder shall receive upon any such
conversion shall be determined by dividing the principal amount of this
Debenture to be so converted by the Conversion Price in effect at the time of
such conversion. In the event that this Debenture is called for redemption, the
right to convert the Debenture shall terminate at the close of business on the
Redemption Date and will be lost if not exercised prior to that time unless the
Company defaults in making the payment due upon redemption. In the event of a
partial conversion of this Debenture, the Company shall execute and deliver to
the Holder a new Debenture in the aggregate principal amount equal to and in
exchange for the unconverted portion of the principal amount of the Debenture so
surrendered for conversion.
5.2 Effect of Conversion; Issuance of Shares on Conversion.
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Conversion of this Debenture shall be deemed to have been made at the close of
business on the date that the Debenture shall have been surrendered for
conversion, accompanied by written notice of election to convert in the form of
Exhibit "A" attached hereto (or such other form reasonably acceptable to the
Company), and thereupon the Holder shall have no further rights hereunder,
except with respect to the receipt of accrued interest due hereunder and the
Shares issuable upon conversion of this Debenture. As soon as practicable after
full or partial conversion of this Debenture, the Company shall pay to the
Holder all interest accrued hereunder with respect to the portion of the
Debenture so converted to the date of conversion. In addition, as soon as
practicable after full or partial conversion of this Debenture, the Company
shall, at its expense, cause to be issued in the name of, and delivered to, the
Holder a certificate or certificates for the number of Shares to which the
Holder shall be entitled on such conversion, together with any other securities
and property to which the Holder is entitled on such conversion under the terms
of this Debenture. No fractional shares will be issued on conversion of this
Debenture. If on any conversion of this Debenture a fraction of a share results,
the Company will pay the cash value of that fractional share, calculated on the
basis of the then effective Conversion Price.
5.3 Adjustments to Conversion Price.
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(a) If the Company shall at any time while this Debenture is
outstanding
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subdivide the outstanding shares of its Common Stock, the Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased, and if the Company shall at any time while this
Debenture is outstanding combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before that combination shall be
proportionately increased. Except as otherwise provided below, any adjustment
under this Section 5.3 shall become effective at the close of business on the
date the subdivision or combination becomes effective. A dividend on any
security of the Company payable in Common Stock, or a split of the Company's
Common Stock, shall be considered a subdivision of Common Stock for purposes of
this Section 5.3 at the close of business on the record date with respect to
such dividend or stock split. A reverse split of the Company's Common Stock
shall be considered a combination of Common Stock for purposes of this Section
5.3 at the close of business on the record date with respect to such reverse
stock split.
(b) In the event the Company, at any time or from time to time
while this Debenture is outstanding, shall make or issue, or fix a record date
for the determination of holders of Common Stock entitled to receive, a dividend
or other distribution with respect to the Company's Common stock payable in
securities of the Company other than shares of Common Stock, then and in each
such event, provisions shall be made so that the Holder shall receive upon
conversion hereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Company which he would
have received had this Debenture been converted into Common Stock on the date of
such event and had the Holder thereafter, during the period from the date of
such event to and including the conversion date, retained such securities
receivable by him.
(c) If while this Debenture is outstanding, the Shares issuable
upon conversion of this Debenture shall be changed into the same or a different
number of shares of any other class or classes of stock of the Company, whether
by recapitalization, reclassification or other exchange (other than a
subdivision or combination of shares, or a capital reorganization, merger or
sale of assets, provided for elsewhere in Section 5.3 hereof), the Holder shall,
upon the conversion of this Debenture, be entitled to receive, in lieu of the
Shares which the Holder would have become entitled to receive but for such
change, a number of shares of such other class or classes of stock that would
have been subject to receipt by the Holder if he had exercised his right of
conversion of this Debenture immediately before that change.
(d) If while this Debenture is outstanding, there shall be a
merger or consolidation of the Company with or into another corporation (other
than a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company),
or the sale of all or substantially all of the Company's properties and assets
to any other person, then, as a part of such merger, consolidation or sale,
lawful provision shall be made so that the Holder shall thereafter be entitled
to receive upon conversion of this Debenture, during the period specified in
this Debenture, the number of shares of stock or other securities or property of
the Company, or of the successor corporation resulting from such merger,
consolidation or sale, to which a holder of the Shares deliverable upon
conversion of this Debenture would have been entitled on such merger,
consolidation or sale if this Debenture had been converted immediately before
such merger, consolidation or sale. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5.3 with
respect to the rights of the Holder after such merger, consolidation or sale to
the end that the provisions of this Section 5.3
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(including adjustments of the Conversion Price then in effect and number of
shares purchasable upon conversion of this Debenture) shall continue to be
applicable after that event and shall be as nearly equivalent to the provisions
hereof as may be practicable.
(e) In the event that, following the date of this Debenture, the
Company shall issue shares of Common Stock (or other securities directly or
indirectly convertible into Common Stock) without consideration or for
consideration less than the Conversion Price then in effect, the Conversion
Price shall concurrently be reduced to equal such consideration per share.
(f) The Company shall promptly and in any case not later than
ten (10) days after the date of any adjustment of the Conversion Price give
written notice of such adjustment and the number of Shares or other securities
issuable upon conversion of this Debenture, by first-class mail, postage
prepaid, to the registered Holder at the Holder's address as shown on the
Debenture Register. The certificate shall state such adjustment and show in
reasonable detail the facts on which such adjustment is based.
(g) The form of this Debenture need not be changed because of
any adjustment in the Conversion Price or in the number of Shares issuable upon
its conversion. A Debenture issued after any adjustment on any partial
conversion or upon replacement may continue to express the same Conversion Price
and the same number of Shares (appropriately reduced in the case of partial
conversion) as are stated on this Debenture as initially issued, and that
Conversion Price and that number of Shares shall be considered to have been so
changed as of the close of business on the date of the adjustment.
6. Registration of Transfer and Exchange.
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6.1 Debenture Register. The Company shall cause to be kept at the
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principal office of the Company a register (the "Debenture Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration and the transfer of the Debenture subject to the
provisions regarding transferability contained in this Debenture. Upon surrender
for registration of transfer of any Debenture at the principal office of the
Company, the Company shall execute and deliver, in the name of the designated
transferee or transferees, one or more new Debentures in minimum denominations
of $5,000 and integral multiples of $5,000.
6.2 Transfer of Debentures. At the time the Debenture is presented
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or surrendered for registration of transfer it shall (if so required by the
Company) be duly endorsed, or be accompanied by a written instrument of transfer
in form satisfactory to the Company, duly executed by the Holder thereof or his
attorney duly authorized in writing. No service charge shall be made for any
registration of transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer of the Debentures.
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6.3 Replacement Debenture.
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(a) If the Debenture is mutilated and is surrendered to the Company,
the Company shall execute and deliver in exchange therefor a new Debenture of
like tenor and principal amount and bearing a number not contemporaneously
outstanding. If there shall be delivered to the Company: (i) evidence to its
satisfaction of the destruction, loss or theft of the Debenture; and (ii) such
security or indemnity as may be required by it to save the Company and any agent
harmless. Then, in the absence of notice to the Company that the Debenture has
been acquired by a bona fide purchaser, the Company shall execute and deliver,
in lieu of any such destroyed, lost or stolen Debenture, a new Debenture of like
tenor and principal amount and bearing a number not contemporaneously
outstanding. In the event such mutilated, destroyed, lost or stolen Debenture
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Debenture, retire such Debenture.
(b) Upon the issuance of any new Debenture under this Section 6.3, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith.
(c) Any new Debenture issued pursuant to this Section 6.3 in lieu of
any destroyed, lost or stolen Debenture shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Debenture shall be at any time enforceable by anyone.
(d) The provisions of this Section 6.3 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Debentures.
7. Limitations on Disposition. The Holder understands that this
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Debenture, the Shares issuable upon conversion of this Debenture and any other
securities issued under this Debenture are "restricted securities" under the
federal securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable restrictions such securities may be resold without registration under
the Securities Act of 1933, as amended (the "Act") only in certain limited
circumstances. In this connection, the Holder represents that it is familiar
with Rule 144 under the Act and the limitations imposed thereby and by the Act.
The Holder further agrees not to make any disposition of all or any
portion of this Debenture, the Shares or any other securities issued hereunder
unless and until: (a) there is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or (b) the Holder shall have (i)
notified the Company of the proposed disposition and shall have furnished the
Company with a reasonably detailed statement of the circumstances surrounding
the proposed disposition; and (ii) furnished the Company with an opinion of
counsel, satisfactory to the Company, that such disposition will not require
registration of the securities under the Act.
The Holder understands that this Debenture, the Shares and any other
securities issued hereunder may bear the following legend, together with any
other legend required by law:
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"The securities represented hereby have not been registered under the
Securities Act of 1933, or any state securities laws. These
securities may not be sold or transferred in the absence of an
effective registration statement or qualification under such
securities laws or an opinion of counsel, satisfactory to the Company,
that the sale or transfer is pursuant to an exemption from the
registration or qualification requirements of any applicable
securities laws."
8. Limitations on Dividends and Distributions. So long as this Debenture
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is outstanding, the Company shall not declare, pay, make or set apart any sum
for a dividend or other distribution (whether in cash or other property) with
respect to any class of capital stock of the Company (other than dividends or
distributions payable in its capital stock), or for the redemption, retirement,
purchase or other acquisition for value of any share of any class of capital
stock of the Company or any warrants or rights to purchase any class of capital
stock of the Company.
9. Registration Rights.
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9.1 Definitions. For purposes of Section 9 hereof, terms not
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otherwise defined herein shall have the following meanings:
(a) The terms "register," "registered" and "registration" refer to
the preparation and filing of a registration statement in compliance with the
Act and the rules promulgated thereunder, and the declaration of the
effectiveness of such registration statement, or the taking of similar action
under a successor statute or regulation.
(b) The term "Registrable Securities" means the Shares issuable
upon conversion of the Debenture, and any securities issued or issuable with
respect to such Shares by way of a stock dividend or stock split or in
connection with a combination or shares, recapitalization, merger, consolidation
or other reorganization.
(c) The term "Rights Holder" or "Rights Holders" means any
registered holder or holders of Registrable Securities.
(d) The term "Prospectus" means a prospectus that complies with
applicable provisions of the Act.
9.2 Piggyback Registration.
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(a) If, at any time following the date of the issuance of this
Debenture, the Company proposes to register any of its securities under the Act
(other than in connection with a merger pursuant to a Form S-4 Registration
Statement or an employee stock compensation plan pursuant to a Form S-8
Registration Statement), it will give written notice by registered mail, at
least thirty (30) days prior to the filing of each such registration statement,
to the Rights Holder of its intention to do so. If the Rights Holder notifies
the Company within twenty (20) days after receipt of any such notice of its
desire to include any Registrable Securities in such proposed registration
statement, the Company shall afford such Rights Holder the opportunity to have
any of the Registrable Securities registered under such registration statement
and included in any underwriting
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involved with respect thereto.
(b) Notwithstanding the provisions of Section 9 hereof: (i) the
Company shall have the right at any time after it shall have given written
notice pursuant to said Section 9 (irrespective of whether a written request for
inclusion of any Registrable Securities shall have been made) to elect not to
file any such proposed registration statement, or to withdraw the same after the
filing but prior to the effective date thereof; and (ii) in the event a
registration under Section 9 hereof relates to an underwritten public offering
which does not include any securities being offered and sold on behalf of
selling shareholders, the inclusion of any Registrable Securities may, at the
election of the Company, be conditioned upon the Rights Holder agreement that
the public offering of such Registrable Securities shall not commence until
ninety (90) days after the effective date of such registration.
(c) The rights of the Rights Holder pursuant to Section 9 hereof
shall be conditioned upon such Rights Holder's participation in the underwriting
with respect thereto and the inclusion of such Rights Holder's Registrable
Securities in such underwriting (unless otherwise mutually agreed by the
Company, the managing underwriter or, if none, a majority of the underwriters,
and such Rights Holder) to the extent provided herein.
(d) Notwithstanding any other provision of this Debenture, if the
managing underwriter or, if none, a majority of the underwriters, determines
that marketing factors require a limitation of the number of shares to be
underwritten or a complete exclusion of such shares, such underwriter or
underwriters may limit the number of Registrable Securities that may be included
in the registration and underwriting or exclude all of the Registrable
Securities, as appropriate. In the case of an underwritten registration in which
the number of Registrable Securities that may be included is limited, the
Company shall advise the Rights Holder of the limited number of Registrable
Securities that may be included in the registration, and the number of
Registrable Securities that may be included in the registration and underwriting
shall be allocated among all Rights Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities entitled to
inclusion in such registration held by such Rights Holders at the time of filing
the registration statement.
(e) The Company shall (together with all Rights Holders proposing to
distribute their securities through an underwriting) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
the underwriting.
9.3 Expenses. All expenses incurred in connection with any registration
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pursuant to this Debenture, including without limitation, all registration,
filing and qualification fees, printing expenses, fees and disbursements of
counsel for the Company, and expenses of any special audits incidental to or
required by such registration, shall be borne by the Company; provided however
the Company shall not be required to pay:
(a) fees of legal counsel of any Rights Holder, or underwriters'
fees, discounts, commissions or expenses relating to Registrable Securities; and
11
(b) for expenses that the Company is prohibited from paying under
Blue Sky laws or by Blue Sky administrators.
9.4 Company Responsibilities. In the case of a registration effected by
------------------------
the Company pursuant to this Debenture, the Company shall use its best efforts
to keep the Rights Holder advised in writing as to the initiation, effectiveness
and completion of such registration. At its expense the Company shall:
(a) prepare and file a registration statement (and such amendments
and supplements thereto) with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become and remain effective
for a period of one hundred eighty (180) days or until the Rights Holder or
Rights Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs;
(b) furnish such number of copies of a Prospectus in conformity with
the requirements of applicable law, and such other documents incident thereto as
a Rights Holder from time to time may reasonably request; and
(c) use every reasonable effort to register or qualify the
Registrable Securities covered by such registration statement under the state
Blue Sky laws of such jurisdictions as the Company's Board of Directors may
reasonably determine, and do any and all other acts and things which may be
necessary under said Blue Sky laws to enable the sellers of the Registrable
Securities to consummate the public sale or other disposition of the Registrable
Securities owned by them in such jurisdictions, except that the Company shall
not for any purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein the Registrable Securities are so
qualified.
9.5 Indemnification.
---------------
(a) The Company shall indemnify the Rights Holder, each of the Rights
Holder's officers and directors, and each person controlling such Rights Holder,
with respect to such registration effected pursuant to Section 9.2 hereof, and
each underwriter, if any, and each person who controls any underwriter of the
Registrable Securities, against all claims, losses, damages and liabilities (or
actions in respect thereto) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement or related Prospectus, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, or any violation by the Company of
any rule or regulation promulgated under any securities law applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, and shall reimburse the Rights Holder, each of the
Rights Holder's officers and directors, and each person controlling such Rights
Holder, each such underwriter and each person who controls any such underwriter,
for any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
provided that the Company shall not be liable in any such case to the extent
that any such claim, loss, damage or liability arises out of or is based on any
untrue statement or omission based upon written information furnished to the
Company in an instrument duly executed by such Rights Holder or underwriter
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specifically for use therein.
(b) The Rights Holder shall, if Registrable Securities held by or
issuable to the Rights Holder are included in the securities as to which such
registration is being effected, indemnify the Company, each of its directors and
officers who sign such registration statement, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of the Act, and each other Rights
Holder, each of such Rights Holder's officers and directors and each person
controlling such Rights Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement or related Prospectus, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
the Company, such Rights Holders, such directors, officers, persons, or
underwriters for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement or related Prospectus in
reliance upon and in conformity with written information furnished to the
Company in an instrument duly executed by such Rights Holder specifically for
use therein.
(c) Each party entitled to indemnification under this Section 9.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may he sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense; and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 9.5. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement, which does
not include as an unconditional term thereof, the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
9.6 Rights Holder's obligations. The Rights Holder shall furnish to the
---------------------------
Company such written information regarding such Rights Holder and the
distribution proposed by such Rights Holder as the Company may reasonably
request in writing and as shall be required in connection with any registration
referred to in this Debenture.
9.7 Assignment. The rights granted to the Rights Holder pursuant to this
----------
Debenture may be assigned to a transferee or assignee of the Debenture or any of
the Registrable Securities, provided that the transferee or assignee is an
affiliated entity of the Rights Holder and the Company is given written notice
at the time of or within 10 days after said transfer, stating the name and
address of said transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being assigned.
13
10. Miscellaneous.
-------------
10.1 Amendment. The provisions of this Debenture may be amended or
---------
modified only with the written consent of the Company and the Holder.
10.2 Entire Agreement. This Debenture constitutes the entire
----------------
agreement among the parties with regard to the subject matter hereof, and
supersedes and replaces any and all prior to contemporaneous agreements, written
or oral. The terms and conditions of this Debenture shall inure to the benefit
of, and be binding upon, the respective successors and assigns of the parties.
Nothing in this Debenture is intended to confer on any third party any rights,
liabilities or obligations, except as specifically provided.
10.3 Headings. The titles and subtitles used in this Debenture are
--------
for convenience only and are not to be used in construing or interpreting this
Debenture.
10.4 SEC Filings. During the term of this Debenture the Company
-----------
shall promptly forward to the Holder annual and periodic reports and proxy
statements required to be filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934.
10.5 Governing Law. This Debenture shall be governed by the internal
-------------
laws of the State of California as applicable to transactions performed in
California between California residents.
10.6 Attorneys' Fees. The prevailing party in any action or
---------------
proceeding between the parties arising out of or related to this Debenture shall
be entitled to recover all reasonable expenses, including without limitation
attorneys, fees and costs, incurred in connection with any such action or
proceeding.
14
IN WITNESS WHEREOF, the undersigned have executed this Debenture on
the date first above written.
ANCHOR PACIFIC UNDERWRITERS, INC.
By:
-------------------------------
Xxxxx X. Xxxxxxxx
President/CEO
15
Exhibit "A"
Form of Conversion Notice
To Anchor Pacific Underwriters, Inc.:
The undersigned Holder hereby irrevocably exercises the option to convert this
Debenture, or portion hereof (which is in the amount of not less than $5,000 and
in increments of not less than $5,000 thereafter) below designated, into shares
of the Company's Common Stock, $.02 par value per share, in accordance with the
terms of the Debenture, and directs that the shares issuable and deliverable
upon such conversion, together with any check in payment for fractional shares
and any Debentures representing any unconverted principal amount hereof, be
issued and delivered to the undersigned unless a different name has been
indicated below. If shares or Debentures are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto. Any amount required to be paid by the undersigned
on account of interest accompanies this Debenture.
Dated:
--------------- -----------------------------
Signature
----------------------------
Taxpayer Identification Number
Principal Amount to be Converted: $
---------------
If shares or Debentures are to be registered in the name of a person other than
the Holder, please print such person's name and address below:
Name:
----------------------
Address:
----------------------
----------------------
A-1
