EXHIBIT 10.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
XXXX PHARMACEUTICALS, LLC
CONVERTIBLE PROMISSORY NOTE
$____________ Dated: June __, 2007
("ORIGINAL PRINCIPAL AMOUNT") (the "ISSUANCE DATE")
WHEREAS, Xxxx Pharmaceuticals, LLC, a Florida limited
liability company (the "COMPANY" or the "BORROWER") are offering in a private
placement to accredited investors, as defined by Rule 501 promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT") (such offering, the
"BRIDGE OFFERING"), up to $5,000,000 in convertible bridge notes (as amended,
modified and supplemented from time to time, this "CONVERTIBLE NOTE" or "NOTE"
or "AGREEMENT" and together with other Convertible Notes issued in the Bridge
Offering, the "CONVERTIBLE NOTES" or "NOTES") issued by the Borrower;
WHEREAS, in connection with the Bridge Offering, the Borrower
wishes to borrow from the holder designated below the principal amount of
____________________ (US$__________) (the "PRINCIPAL"); and
WHEREAS, in connection with the Bridge Offering, Synovics
Pharmaceuticals, Inc. ("SYNOVICS") has agreed to issue shares of its Series B
Convertible Preferred Stock, par value $0.001 per share (the "SERIES B PREFERRED
STOCK" or the "SERIES B SHARES" to the Holders (defined below) pursuant to the
terms set forth below.
FOR VALUE RECEIVED the Borrower, hereby promises to pay to
_____________________ (the "PAYEE" or "HOLDER"; all Holders may be collectively
referred to as the "HOLDERS"), or its registered assigns, the principal amount
of _____________________ ($____________) together with interest thereon
calculated from the date hereof in accordance with the provisions of this
Convertible Note.
Certain capitalized terms are defined in SECTION 12 hereof.
1. PAYMENT OF INTEREST. Interest shall accrue at a rate equal to six percent
(6%) per annum (the "INTEREST RATE"), beginning on the Issuance Date, on the
unpaid principal amount of this Convertible Note outstanding from time to time;
PROVIDED THAT, so long as any Event of Default has occurred and is continuing,
interest shall be deemed to accrue, to the extent permitted by law, at the rate
of 18% per annum from the date on which such Event of Default occurs on the
unpaid principal amount of this Convertible Note outstanding from time to time
through the date on
which such Event of Default ceases to exist. Interest shall be computed on the
basis of the actual number of days elapsed and a 360-day year. In no event shall
any interest to be paid hereunder exceed the maximum rate permitted by law. In
any such event, this Note shall automatically be deemed amended to permit
interest charges at an amount equal to, but no greater than, the maximum rate
permitted by law.
2. MATURITY DATE; PAYMENTS. (a) Unless converted pursuant to Section 4 below,
the entire principal amount of this Convertible Note and all accrued but unpaid
interest thereon shall be due and payable in full in cash in immediately
available funds on the six (6) month anniversary of the Issuance Date (the
"MATURITY DATE"). Any overdue principal and overdue interest together with any
interest thereon shall be due and payable upon demand.
(b) The Borrower may, with ten (10) Business Days' prior
written notice delivered to the Holder, prepay all or any part of the Principal
of, and accrued and unpaid interest on, this Note, without payment of any
premium or penalty. All payments on this Note shall be applied first to accrued
interest hereon, then to any outstanding fees and expenses, and the balance to
the payment of Principal hereof.
(c) Payments of Principal of, and interest on, this Note shall
be made by check sent to the Holder's address set forth on the signature page
hereto or to such other address as the Holder may designate for such purpose
from time to time by written notice to the Borrower, in such coin or currency of
the United States of America as at the time of payment shall be legal tender for
the payment of public and private debts. Alternatively, Principal of, and
interest on, this Note with respect to the Maturity Date may be paid by
electronic wire transfer in accordance with instructions provided by the Holder
to the Borrower at least ten (10) Business Days prior to the Maturity Date.
(d) The obligations to make the payments provided for in this
Note are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment, or adjustment whatsoever. The Borrower
hereby expressly waives demand and presentment for payment, notice of
non-payment, notice of dishonor, protest, notice of protest, bringing of suit,
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of and without any notice, diligence, act, or
omission with respect to the collection of any amount called for hereunder.
3. PLEDGE; GUARANTY.
(a) Subject to Section 9(e), this Note is senior indebtedness
of the Borrower.
(b) This Note is secured by a pledge by Xxxxxx X. Xxxx
("XXXX") of all of his right, title, and interest in and to 2,000,000 shares of
common stock, par value $0.001 per share, of Synovics ("COMMON STOCK"), pursuant
to a Pledge Agreement, dated as of the date hereof and attached hereto as
EXHIBIT A, to be entered into between Lane and the Holder (the "PLEDGE") on the
Issuance Date.
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4. CONVERSION. (a) In the event a Qualified Equity Financing (as defined in
Section 12) is consummated prior to the Maturity Date, the Principal amount of
this Convertible Note plus accrued and unpaid interest thereon shall
automatically be converted into a number of shares of Synovics' Series C
Preferred Stock (the "SERIES C PREFERRED" or the "CONVERSION SHARES") obtained
by dividing (x) 110% of the unpaid Principal and accrued and unpaid interest on
this Note by (y) the price paid by investors per share (such price, the
"CONVERSION PRICE") in the Qualified Equity Financing. The Company shall give
Payee not less than three (3) days' prior written notice of the closing of any
Qualified Equity Financing. The Series C Preferred to be issued upon any such
conversion shall have the same rights, preferences and privileges as the
securities issued in the Qualified Equity Financing. Concurrently with such
automatic conversion, the Payee shall also be entitled to receive its
proportionate share of any warrants, options, rights or other securities issued
to investors in the Qualified Equity Financing and shall be entitled to the same
registration and other rights granted to the holders of securities issued in the
Qualified Equity Financing under the agreements relating thereto. No fractional
shares shall be issued upon a conversion into Conversion Shares. In lieu of any
fractional shares to which Payee would otherwise be entitled, the Company shall
pay cash equal to such fraction multiplied by the Conversion Price.
(b) As soon as possible after any conversion of this
Convertible Note has been effected, the Company shall deliver to the converting
holder an original certificate or certificates representing the number of
Conversion Shares issuable by reason of such conversion in such name or names
and such denomination or denominations as the converting holder has specified;
PROVIDED, HOWEVER, that the Borrower shall not be required to deliver such
certificate or certificates until the Holder has surrendered this original Note
and the certificates representing the Series B Preferred Stock to Borrower for
cancellation.
(c) The issuance of certificates for Conversion Shares upon
conversion of this Convertible Note in the name of the party converting this
Note shall be made without charge to the Holder for any issuance tax in respect
thereof or other cost incurred by Synovics or the Company in connection with
such conversion and the related issuance of shares of Conversion Shares. Upon
conversion of this Convertible Note, Synovics shall take all such actions as are
necessary in order to insure that the Conversion Shares issuable with respect to
such conversion and the shares of Common Stock underlying such Conversion Shares
shall be validly issued, fully paid and nonassessable.
(d) Except as required by applicable law, Synovics shall not
close its books against the transfer of Conversion Shares issued or issuable
upon conversion of this Convertible Note in any manner which interferes with the
timely conversion of this Convertible Note. Synovics shall assist and cooperate
with any holder of this Convertible Note required to make any governmental
filings or obtain any governmental approval prior to or in connection with the
conversion of this Convertible Note (including, without limitation, making any
filings required to be made by Synovics).
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(e) Synovics shall at all times during which this Note may be
converted into Conversion Shares reserve and keep available out of its
authorized but unissued shares of preferred stock, solely for the purpose of
issuance upon conversion hereunder, such number of shares of preferred stock
sufficient to issue the Series C Preferred issuable upon conversion. All
Conversion Shares shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges (except for any such
liens created by the Holder). Synovics shall take all such actions as may be
necessary to assure that all Conversion Shares may be so issued without
violation of any applicable law or governmental regulation or any requirements
of any domestic securities exchange upon which such shares of capital stock.
5. METHOD OF PAYMENTS.
(a) PAYMENT. So long as the Payee or any of its nominees shall
be the holder of any Convertible Note, and notwithstanding anything contained
elsewhere in this Convertible Note to the contrary, the Borrower will pay all
sums for principal, interest, premiums or otherwise becoming due on this
Convertible Note held by the Payee or such nominee not later than 5:00 p.m. New
York time, on the date such payment is due, in immediately available funds, in
accordance with the payment instructions that the Payee may designate in
writing, without the presentation or surrender of such Convertible Note or the
making of any notation thereon, except in the case of any payment of any amounts
due and payable on the Maturity Date, which amounts shall be paid upon surrender
of this Note for cancellation. Any payment made after 5:00 p.m. New York time,
on a Business Day will be deemed made on the next following Business Day. If the
due date of any payment in respect of this Note would otherwise fall on a day
that is not a Business Day, such due date shall be extended to the next
succeeding Business Day, and interest shall be payable on any principal so
extended for the period of such extension. All amounts payable under this
Convertible Note shall be paid free and clear of, and without reduction by
reason of, any deduction, set-off or counterclaim. The Borrower will afford the
benefits of this Section to the Payee and to each other Person holding this
Convertible Note.
(b) TRANSFER AND EXCHANGE. Subject to applicable law, upon
surrender of any Convertible Note for registration of transfer or for exchange
to the Borrower at its principal office, the Borrower at its sole expense will
execute and deliver in exchange therefor a new Convertible Note or Convertible
Notes, as the case may be, as requested by the holder or transferee, which
aggregate the unpaid principal amount of such Convertible Note, registered as
such holder or transferee may request, dated so that there will be no loss of
interest on the Convertible Note and otherwise of like tenor; provided that this
Convertible Note may not be transferred by Payee to any Person other than
Payee's affiliates without the prior written consent of the Borrower (which
consent shall not be unreasonably withheld or delayed). The issuance of new
Convertible Notes shall be made without charge to the holder(s) of the
surrendered Convertible Note for any issuance tax in respect thereof or other
cost incurred by the Borrower in connection with such issuance, provided that
each Convertible Noteholder shall pay any transfer taxes associated therewith.
The Borrower shall be entitled to regard the registered holder of this
Convertible Note as the holder of the Convertible Note so registered for all
purposes until the Borrower or its agent, as applicable, is required to record a
transfer of this Convertible Note on its register.
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(d) REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Convertible Note and, in the case of any such loss, theft or destruction of
any Convertible Note, upon receipt of an indemnity reasonably satisfactory to
the Borrower or, in the case of any such mutilation, upon the surrender and
cancellation of such Convertible Note, the Borrower, at its expense, will
execute and deliver, in lieu thereof, a new Convertible Note of like tenor and
dated the date of such lost, stolen, destroyed or mutilated Convertible Note.
6. WARRANTS. Upon the closing of a Qualified Equity Financing (such date, the
"CLOSING DATE") in addition to the Conversion Shares and other securities
described in Section 4(a) issued to Holder in connection with the conversion of
the Convertible Notes, Synovics shall issue to the Holder warrants (the "BRIDGE
WARRANTS") to purchase a number of shares of Common Stock (the "WARRANT SHARES")
equal to forty percent (40%) of the number of shares of Common Stock issuable to
Holder upon conversion of Holder's Conversion Shares receivable upon conversion
of the Convertible Notes held on the Closing Date; PROVIDED, HOWEVER, that (i)
if the initial closing of the Qualified Equity Financing takes place more than
ninety (90) days and less than one hundred twenty (120) days following the final
closing of the Bridge Offering, then the number shares of Common Stock into
which the Bridge Warrants are exercisable shall be forty five percent (45%) of
the number of shares of Common Stock issuable to Holder upon conversion of
Holder's Conversion Shares receivable upon conversion of the Convertible Notes
held on the Closing Date; and (ii) if the initial closing of the Qualified
Equity Financing takes place more than one hundred and twenty (120) days after
the final closing of the Bridge Offering, then the number shares of Common Stock
into which the Bridge Warrants are exercisable shall be fifty percent (50%) of
the number of shares of Common Stock issuable to Holder upon conversion of
Holder's Conversion Shares receivable upon conversion of the Convertible Notes
upon conversion of the Convertible Notes held on the Closing Date. The exercise
price and all other terms of the Bridge Warrants shall be identical to those of
the warrants issued to investors in the Qualified Equity Financing, provided
that, if no warrants are issued to investors in the Qualified Equity Financing,
the Bridge Warrants shall have the same terms as the warrants issued to the
Placement Agent in connection with the Qualified Equity Financing, provided
further, that in such latter event, the Bridge Warrants shall not be exercisable
on a net issuance or "cashless" basis.
7. GRANT OF STOCK. As additional consideration for the Holders' investment,
Synovics shall issue a share certificate to Axiom Capital Management, Inc.
("AXIOM"), as nominee for the Holders, for one million (1,000,000) shares of
Synovics' Series B Convertible Preferred Stock. Such Series B Shares shall (i)
be convertible into shares of Common Stock on a 1:15 basis and (ii) have
full-ratchet anti-dilution protection. Upon the occurrence of any Event of
Default, the Holders may, at their option, convert the Series B Shares into
Common Stock. The Series B Shares shall be surrendered to Synovics upon the
consummation of a Qualified Equity Financing as partial consideration for the
Conversion Shares. Except upon the occurrence of an Event of Default, neither
Axiom nor the Holder may sell, pledge, transfer, encumber, or otherwise dispose
or convert any of the Series B Shares without the prior written consent of
Synovics.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby makes the
following representations and warranties to the Purchaser as of the Issuance
Date:
5
(a) ORGANIZATION AND QUALIFICATION; MATERIAL ADVERSE EFFECT.
The Company is a limited liability company duly formed and existing in good
standing under the laws of the State of Florida and has the requisite power to
own its properties and to carry on its business as now being conducted. The
Company does not have any subsidiaries other than the subsidiaries listed on
Schedule 8(a) attached hereto. The Company is a wholly owned subsidiary of
Synovics. The Company is duly qualified to do business as a foreign limited
liability company and is in good standing in every jurisdiction in which the
nature of the business conducted or property owned by it makes such
qualification necessary other than those in which the failure so to qualify
would not have a Material Adverse Effect. Synovics is a corporation duly
incorporated and existing in good standing under the laws of Nevada and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. Synovics does not have any subsidiaries other than the
subsidiaries listed on Schedule 8(a) attached hereto. Except as listed in
Schedule 8(a), Synovics is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on
the business, operations, properties, prospects or financial condition of any of
the Company, Synovics, and subsidiaries, if any, and which is (either alone or
together with all other adverse effects) material to the Company, Synovics, and
subsidiaries, if any, taken as a whole, and any material adverse effect on the
transactions contemplated under this Note.
(b) AUTHORIZATION; ENFORCEMENT. (i) Except with respect to the
Series B Shares, each of the Company and Synovics has all requisite power and
authority, corporate and otherwise, to enter into and perform, as applicable,
the Notes and any other ancillary document contemplated hereunder (collectively,
the "TRANSACTION DOCUMENTS") and to issue the Notes and the Series B Shares in
accordance with the terms hereof, (ii) except with respect to the Series B
Shares, the execution and delivery of the Transaction Documents by the Company
and Synovics and the consummation by them of the transactions contemplated
hereby and thereby, including the issuance of the Notes, have been duly
authorized by all necessary action, corporate and otherwise, and no further
consent or authorization of the Company, Synovics or the applicable Board of
Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) the Transaction Documents have been duly executed and delivered
by the Company, (iv) the Transaction Documents constitute valid and binding
obligations of the Company and Synovics enforceable against each of the Company
and Synovics, as applicable, except (A) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application, and
(B) to the extent the indemnification provisions contained in the Notes may be
limited by applicable federal or state securities laws and (v) subject to any
requisite action to be taken by Synovics and upon issuance of the Series B
Shares and the Common Stock issuable upon conversion thereof and payment
therefor in accordance with the terms of the Transaction Documents, the Series B
Shares and the Common Stock issuable upon conversion thereof will be duly
authorized, validly issued, fully paid and non-assessable, free and clear of any
and all liens, claims and encumbrances except to the extent of the authorized
amount of Common Stock of Synovics available at the time of conversion of the
Series B Shares into shares of Common Stock.
6
(c) CAPITALIZATION. As of the date hereof, the authorized
capital stock of Synovics consists of 45,000,000 shares of Common Stock and
600,000 shares of Class A Preferred Stock, of which as of the date hereof, (i)
29,714,630 shares of Common Stock and 118,370 shares of Class A Preferred Stock
are issued and outstanding, and (ii) 10,016,915 shares of Common Stock are
issuable and reserved for issuance pursuant to Synovics' stock option plans or
securities exercisable or exchangeable for, or convertible into, shares of
Common Stock (excluding any possible conversion of the 2006 Notes (as defined
below), the Asia Pacific Note (as defined below) and any Common Stock issuable
upon exercise of any purchase right under the Rights Agreement (as defined
below)). No shares of Series B Preferred Stock and Series C Preferred Stock have
been authorized. All of such outstanding shares have been, or upon issuance will
be, validly issued, fully paid and nonassessable. As of the date hereof, except
as disclosed in Synovics' most recent annual report on Form 10-K filed with the
Securities and Exchange Commission (the "SEC") and subsequent public filings
including, without limitation, any exhibits referred to or attached to such Form
10-K and subsequent public filings (collectively, the "SEC FILINGS") under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), (i) no shares
of Synovics' capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by Synovics, (ii)
there are no outstanding debt securities of the Company, Synovics or any of
their respective Subsidiaries, (iii) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of Synovics or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which Synovics or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of Synovics or
any of its subsidiaries or options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of Synovics or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which Synovics
or any of its Subsidiaries is obligated to register the sale or resale of any of
their securities under the Securities Act of 1933, as amended ("SECURITIES ACT"
or "1933 ACT"), (v) there are no outstanding securities of Synovics or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which Synovics
or any of its Subsidiaries is or may become bound to redeem a security of
Synovics or any of its Subsidiaries, and (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance or conversion, as applicable, of the Note or Bridge
Warrants. Synovics has made available to the Holder true and correct copies of
Synovics' organizational documents, as amended and as in effect on the date, and
the terms of all securities convertible or exchangeable into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
(d) [Intentionally Deleted]
(e) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by each of the Company and Synovics and the
consummation by the Company and Synovics of the transactions contemplated hereby
and thereby and issuance of the Notes and Series B Shares will not (i) except as
set forth in Section 8(b), result in a violation of the Certificate of Formation
or Operating Agreement of the Company or the Articles of Incorporation, any
certificate of designations, preferences and rights of any outstanding series of
preferred stock of Synovics or the By-laws of Synovics; (ii) conflict with, or
constitute a default
7
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company,
Synovics or any of their respective Subsidiaries is a party, or (iii) to each of
the Company's and Synovics' knowledge result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed ("PRINCIPAL MARKET"), applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of clause (ii), such
conflicts that would not have a Material Adverse Effect.
(f) ABSENCE OF LITIGATION. Except as disclosed in the SEC
Filings, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the Company, Synovics or their
respective Subsidiaries threatened against or affecting the Company, Synovics,
or their respective Subsidiaries, the Common Stock or any of the Company's or
Synovics' officers or directors in their capacities as such, the effect of which
would be reasonably likely to have a Material Adverse Effect.
(g) NO INTEGRATED OFFERING. Neither the Company, Synovics nor
any of their affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Notes to the Purchaser to be integrated with prior offerings by
the Company or Synovics such that registration of the Notes under the Securities
Act would be required or under any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the Principal
Market, nor will the Company, Synovics or any of their Subsidiaries take any
action or steps that would cause the offering of the Notes to be integrated with
other offerings such that registration of the Notes under the Securities Act
would be required.
(h) EMPLOYEE RELATIONS. Except as disclosed in the SEC
Filings, neither the Company, Synovics nor any of their respective Subsidiaries
is involved in any labor dispute nor, to the knowledge of the Company, Synovics
or any of their respective Subsidiaries, is any such dispute threatened, the
effect of which would be reasonably likely to result in a Material Adverse
Effect. Except as disclosed in the SEC Filings, neither the Company, Synovics
nor any their respective Subsidiaries is a party to a collective bargaining
agreement.
(i) INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the
SEC Filings, the Company, Synovics and their respective Subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as now
conducted. Except as disclosed in the SEC Filings, the Company, Synovics and
their respective Subsidiaries do not have any knowledge of any infringement by
the Company, Synovics or their respective Subsidiaries of trademark, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar rights
of others, or of any such development of similar or identical trade secrets or
technical
8
information by others and there is no claim, action or proceeding being made or
brought against, or to the knowledge of the Company and Synovics, being
threatened against, the Company, Synovics or their respective Subsidiaries
regarding trademarks, trade name rights, patents, patent rights, inventions,
copyrights, licenses, service names, service marks, service xxxx registrations,
trade secrets or other infringement.
(j) COMPLIANCE WITH LAW. The business of the Company, Synovics
and their respective Subsidiaries has been and is presently being conducted so
as to comply with all applicable material federal, state and local governmental
laws, rules, regulations and ordinances.
(k) ENVIRONMENTAL LAWS. Except as disclosed in the SEC
Filings, the Company, Synovics and their respective Subsidiaries (i) are, to the
knowledge of the Company and Synovics, in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license or
approval where such noncompliance or failure to receive permits, licenses or
approvals referred to in clauses (i), (ii) or (iii) above could have,
individually or in the aggregate, a Material Adverse Effect.
(l) DISCLOSURE. No representation or warranty by the Company
or Synovics in this Agreement, nor in any certificate, Schedule or Exhibit
delivered or to be delivered pursuant to this Agreement: contains or will
contain any untrue statement of material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading. Each of the SEC Filings complied, when so filed, in all material
respects with the Exchange Act and the applicable rules and regulations of the
SEC thereunder and such SEC Filings do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. To the knowledge of the Company, Synovics and their respective
Subsidiaries at the time of the execution of this Agreement, there is no
information concerning the Company, Synovics and their respective Subsidiaries
or their respective businesses which has not heretofore been disclosed or made
available to the Holders (or disclosed in the SEC Filings) that would have a
Material Adverse Effect.
(m) TITLE. Except as disclosed in the SEC Filings, the
Company, Synovics and their respective Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property, including but not limited to intellectual property, owned by
them which is material to the business of the Company, Synovics and their
respective Subsidiaries, in each case free and clear of all liens, encumbrances
and defects except such as do not materially and adversely affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company, Synovics or any of their respective Subsidiaries.
Any real property and facilities held under lease by the Company, Synovics or
any of their respective Subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company, Synovics and their respective Subsidiaries.
9
(n) INSURANCE. Except as disclosed in the SEC Filings, the
Company, Synovics and each of their respective Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company and Synovics believes to be
prudent and customary for a company of Synovics' size and resources in the
businesses in which the Company, Synovics and their respective Subsidiaries are
engaged.
(o) REGULATORY PERMITS. Except as disclosed in the SEC
Filings, to the knowledge of the Company and Synovics, the Company, Synovics and
their respective Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities, necessary to conduct their respective businesses, and neither the
Company, Synovics nor any of their respective Subsidiaries has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
(p) FOREIGN CORRUPT PRACTICES ACT. To the knowledge of the
Company and Synovics, neither the Company, Synovics, nor any director, officer,
agent, employee or other person acting on behalf of the Company, Synovics or any
Subsidiary has, in the course of acting for, or on behalf of, the Company or
Synovics, directly or indirectly used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; directly or indirectly made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or any similar treaties of
the United States; or directly or indirectly made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government or party official or employee.
(q) TAX STATUS. Except as disclosed in the SEC Filings and
except for Synovics' most recent federal and state tax returns, the Company,
Synovics and each of their respective Subsidiaries has made or filed all United
States federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and all such
returns, reports and declarations are true, correct and accurate in all material
respects. The Company and Synovics have paid all taxes and other governmental
assessments and charges, due by them and payable including, without limitation
those shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith, for which adequate reserves have
been established, in accordance with generally accepted accounting principles
("GAAP").
(r) ABSENCE OF UNDISCLOSED LIABILITIES. The Company, Synovics
and their respective Subsidiaries have no material obligations or liabilities of
any nature (matured, fixed or contingent) other than (i) those adequately
provided for in the Company's financial statements or otherwise disclosed in the
SEC Filings, (ii) those obligations incurred in the ordinary course of business
in amounts consistent with prior periods which have not had and will not have a
Material Adverse Effect on the Company or Synovics, (iii) as a result of any
future restatement of Synovics' consolidated financial statements arising out of
Emerging Issue Task Force 0019 and amortization of certain intangible assets of
Synovics and/or its subsidiaries (the "RESTATEMENT").
10
(s) FINANCIAL STATEMENTS. The financial statements of the
Company and Synovics have been prepared from the books and records of the
Company and Synovics, respectively, in accordance with GAAP, and fairly present
in all material respects the financial condition of the Company and Synovics,
respectively, as at their respective dates, and the results of its operations
and cash flows for the periods covered thereby except to the extent that such
financial statements are amended by any Restatement.
(t) RESTRICTIONS ON BUSINESS ACTIVITIES. There is no judgment,
order, decree, writ or injunction binding upon the Company, Synovics or their
respective Subsidiaries or, to the knowledge of the Company, Synovics or any of
their respective Subsidiaries, threatened that has or could prohibit or impair
the conduct of their respective businesses as currently conducted or any
business practice of the Company, Synovics or any of their respective
Subsidiaries, including the acquisition of property, the provision of services,
the hiring of employees or the solicitation of clients, in each case either
individually or in the aggregate.
(u) EVENTS OF DEFAULT. Except as disclosed in the SEC Filings
or forth on SCHEDULE 8(u) neither the Company nor Synovics has defaulted on any
debts or duties to pay money (including any guaranty).
9. COVENANTS OF THE COMPANY. The Company covenants and agrees as follows:
(a) CONSOLIDATION, MERGER AND SALE. The Company will not (i)
consolidate or merge with or into (or permit any subsidiary to consolidate or
merge with or into) any other person, or (ii) sell or otherwise dispose of (or
permit any subsidiary to sell or otherwise dispose of) a material portion of its
property or assets in one or more transactions to, any other person or entity or
enter into (or permit any subsidiary to enter into) an agreement with respect to
any of the foregoing.
(b) RESTRICTED PAYMENTS. Except for any payments to Synovics
in the ordinary course of business or to satisfy Synovics' obligations under the
BOI Facility (as defined below) or Senior Creditor Indebtedness (as defined
below), the Company will not, and will not permit any of its subsidiaries to
declare or pay any dividends on, or make any other distribution or payment on
account of, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any equity interests of any class of the Company or any subsidiary,
whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash, property or in
obligations of the Company or any of its subsidiaries.
(d) NOTICE OF QUALIFIED EQUITY FINANCING. At least three (3)
days prior to the closing of any Qualified Equity Financing, the Company shall
provide Payee with written notice of such projected closing date, specifying the
terms of the transaction, including the proposed purchase price of the Series C
Preferred to be paid in such Qualified Equity Financing and the conversion price
thereof. The Company shall promptly provide telephonic notice to Payee of any
adjournments or rescheduling of such projected closing date.
(d) CONVERTIBLE NOTES. All Convertible Notes shall be on the
same terms and shall be in substantially the same form. All payments to the
holder of any Convertible Note
11
shall be made to all holders of Convertible Notes, pro rata, based on the
aggregate principal amount plus accrued but unpaid interest outstanding on such
Convertible Notes at such time.
(e) SENIOR STATUS; NO ASSIGNMENT. This Note is subordinate
only to the rights and remedies of Bank of India, New York Branch ("BOI") under
that certain credit facility of Ten Million Five Hundred Thousand Dollars
($10,500,000) between BOI and Synovics (the "BOI FACILITY") and ranks PARI PASSU
to Borrower's outstanding indebtedness in the principal amount of $1,500,000
plus accrued but unpaid interest ("SENIOR CREDITOR INDEBTEDNESS") to Princeton
Holdings Trust ("PHT") and 2133820 Ontario, Inc. ("ONTARIO"; together with BOI
and PHT, the "SENIOR CREDITORS"). Subject to the rights of the Senor Creditors
and except for Permitted Indebtedness, the Company shall not, without the prior
written consent of Holders holding a majority of the aggregate outstanding
principal amount of the Convertible Notes incur or otherwise become liable with
respect to any Indebtedness that would rank senior or PARI PASSU to the
Convertible Notes in order of payment.
(f) DEFAULT NOTICE. The Borrower covenants and agrees with the
Holder that, so long as any amount remains unpaid on the Note, (i) the Borrower
shall deliver to the Holder, promptly after the Borrower shall obtain knowledge
of the occurrence of any Event of Default (as hereinafter defined) or any event
which with notice or lapse of time or both would become an Event of Default (an
Event of Default or such other event being a "DEFAULT"), a notice specifying
that such notice is a "NOTICE OF DEFAULT" and describing such Default in
reasonable detail, and, in such Notice of Default or as soon thereafter as
practicable, a description of the action the Borrower has taken or proposes to
take with respect thereto, (ii) the Borrower will not create, incur, assume, or
permit to exist any Lien (as defined below) on or with respect to any of
Borrower's properties except for Permitted Liens (as defined below), and the
Borrower will notify the Holder in writing at least ten (10) days prior to the
consummation of any transaction resulting in a Change of Control (as defined
below).
(g) TAX ELECTIONS. Neither the Borrower nor Synovics shall
make or authorize any person to make an election to have the Borrower classified
or taxed as a corporation for federal income tax purposes or any applicable
state or local income or franchise tax purposes.
(h) AUTHORIZATION & ISSUANCE OF SHARES. Synovics shall
authorize and issue the Series B Shares as soon as possible but in no event
later than ten (10) days following the Issuance Date.
10. EVENTS OF DEFAULT. If any of the following events takes place before the
Maturity Date (each, an "EVENT OF DEFAULT"), Holders holding a majority of the
aggregate outstanding principal amount of the Convertible Notes at their option
may declare all principal of and accrued and unpaid interest thereon and all
other amounts payable under the Convertible Notes immediately due and payable;
PROVIDED, HOWEVER, that the Convertible Notes shall automatically become due and
payable without any declaration in the case of an Event of Default specified in
clauses (g) or (h) below:
(a) A default in the payment of the Principal or any accrued
interest on this Note, when and as the same shall become due and payable, which
default is not cured within three (3) Business Days following such Event of
Default.
12
(b) A default in the performance, or a breach, of any other
covenant or agreement of the Borrower in this Note or any of the Transaction
Documents and continuance of such default or breach for a period of fifteen (15)
days after receipt of notice from the Holder as to such default or breach or
after the Borrower had or should have had knowledge of such default or breach.
(c) A default in the performance, or a breach, of any covenant
or other agreement of the Borrower contained in loan documents executed in
connection with the BOI Facility.
(d) Any representation, warranty, or certification made by the
Borrower pursuant to this Note or the Transaction Documents shall prove to have
been false or misleading as of the date made in any material respect.
(e) A final judgment or judgments for the payment of money in
excess of $500,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Borrower and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be procured,
within 60 days from the date of entry thereof and the Borrower shall not, within
such 60-day period, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(f) The entry of a decree or order by a court having
jurisdiction adjudging the Borrower bankrupt or insolvent, or approving a
petition seeking reorganization, arrangement, adjustment, or composition of or
in respect of the Borrower, under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency, or
other similar law, and the continuance of any such decree or order unstayed and
in effect for a period of 60 days; or the commencement by the Borrower of a
voluntary case under federal bankruptcy law, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency, or other similar
law, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under federal bankruptcy law or any other
applicable federal or state law, or the consent by it to the filing of such
petition or to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, or similar official of the Borrower or of any substantial part of
its property, or the making by it of an assignment for the benefit of creditors,
or the taking of corporate action by the Borrower in furtherance of any such
action.
(g) The Company, or its parent, Synovics, or any other
subsidiary of Synovics, (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, other than (A) as disclosed in
the SEC Filings; and (B) as arising out of a promissory note in the principal
amount of $1,500,000 held by the Senior Creditors, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization of arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law or any jurisdiction, (iii) makes an assignment
for the benefit of creditors, (iv) consents to the appointment of a custodian,
13
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the purpose of
any of the foregoing.
(h) A default occurs in the payment of any material
indebtedness of the Borrower or Synovics, or any subsidiary of Synovics, which
is not cured pursuant to the terms under which such debt was incurred after
demand thereof other than (A) as disclosed in the SEC Filings; and (B) as
arising out of the Senior Creditor Indebtedness.
(i) The occurrence of a Change of Control. "CHANGE OF CONTROL"
shall mean (i) a sale or transfer of all or substantially all of the assets of
the Borrower; (ii) a merger of the Borrower into another entity (with such other
entity being the surviving entity) or other form of corporate reorganization of
the Borrower in which outstanding interests in the Borrower are exchanged for
securities or other consideration (other than a mere re-domiciling transaction
or change of corporate entity); or (iii) any other transaction by which Synovics
does not hold, directly or indirectly, at least a majority of the voting control
of the Borrower.
(j) An attachment or execution is levied against any
substantial part of Company's assets that is not released within 30 days;
(k) Company dissolves, liquidates or ceases business activity,
or transfers any major portion of its assets other than in the ordinary course
of business; or
(l) the occurrence of any Material Adverse Effect resulting
from any Restatement.
11. REMEDIES UPON DEFAULT. (a) Upon the occurrence of an Event of Default
referred to in Sections 10(g) or (h), the Principal amount then outstanding of,
and the accrued interest on, this Note shall automatically become immediately
due and payable without presentment, demand, protest, or other formalities of
any kind, all of which are hereby expressly waived by the Borrower. Upon the
occurrence of an Event of Default referred to other than in Sections 10(g) or
(h), the Holder, by five (5) Business Days notice in writing given to the
Borrower (during which time, the Borrower may cure such Event of Default), may
declare the entire principal amount then outstanding of, and accrued interest
on, this Note to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, without presentation,
demand, protest, or other formalities of any kind, all of which are expressly
waived by the Borrower.
(b) Upon the occurrence of an Event of Default, the Holder
shall seek satisfaction of any remedy sought for an Event of Default in the
following order of priority: first from the assets of the Borrower as a senior
unsecured creditor, second from the Series B Shares and third from the Pledge.
Except as set forth in this Section 11(b), no remedy herein conferred upon the
Holder is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
14
(c) The Holder may institute such actions or proceedings in
law or equity, or other appropriate proceedings, as it shall deem expedient for
the protection of its rights and may prosecute and enforce its claims against
all assets of the Borrower in accordance with this Note, and in connection with
any such action or proceeding shall pursuant to the terms herein be entitled to
receive from the Borrower payment of the outstanding Principal plus accrued
interest to the date of payment plus reasonable and accountable expenses of
enforcement or collection, including, without limitation, attorneys' fees and
expenses.
12. DEFINITIONS.
"2006 NOTES" means the $3,345,000 in convertible bridge notes
offered to investors in a private placement transaction.
"ASIA PACIFIC NOTE" means the convertible bridge note in the
principal amount of $1,500,000 issued by Synovics to Asia Pacific Investment
Holdings Limited.
"BUSINESS DAY" means a day (other than a Saturday or Sunday)
on which banks generally are open in New York, New York for the conduct of
substantially all of their activities.
"CONVERTIBLE NOTEHOLDER" with respect to any Convertible Note,
means at any time each Person then the record owner hereof and "Convertible
Noteholders" means all of such Convertible Noteholders collectively.
"EQUITY FINANCING" means the issuance of stock of the Company
and/or securities convertible into stock to one or more investors for cash
following the date of issuance of this Convertible Note.
"INDEBTEDNESS" shall mean all obligations, contingent and
otherwise, that should, in accordance with generally accepted accounting
principles of the United States consistently applied, be classified upon the
Borrower's balance sheet as liabilities, but in any event including, without
limitation, liabilities secured by any mortgage on property owned or acquired
subject to such mortgage, whether or not the liability secured thereby shall
have been assumed, and also including, without limitation, (i) all guaranties,
endorsements and other contingent obligations, in respect of Indebtedness of
others, whether or not the same are or should be so reflected in said balance
sheet, except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and (ii)
the present value of any lease payments due under leases required to be
capitalized in accordance with applicable Statements of Financial Accounting
Standards, determined in accordance with applicable Statements of Financial
Accounting Standards.
"LIEN" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction.
15
"PERMITTED INDEBTEDNESS" shall mean and include the following:
(i) indebtedness to trade creditors incurred in the ordinary course of business,
(ii) indebtedness secured by Permitted Liens, (iii) any refinancings,
modifications, amendments and restatements of the BOI Facility or Senior
Creditors Indebtedness, (iv) a revolving or factoring credit facility of up to
$5,000,0000 ("REVOLVING FACILITY").
"PERMITTED LIENS" shall mean and include the following: (i)
Liens for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith and for
which adequate reserves have been set aside on its books; (ii) Liens of
carriers, warehousemen, mechanics, materialmen, repairmen, vendors, and
landlords incurred in the ordinary course of business for sums not overdue by
more than sixty (60) days or being contested in good faith and for which
adequate reserves have been set aside on its books; (iii) deposits under
workers' compensation, unemployment insurance and social security laws or to
secure the performance of bids, tenders, contracts (other than for the repayment
of borrowed money) or leases, or to secure statutory obligations or surety,
appeal bonds or performance or to secure indemnity, performance or other similar
bonds in the ordinary course of business; (iv) Liens securing obligations under
a capital lease if such Liens do not extend to property other than the property
leased under such capital lease; (v) Liens upon any equipment acquired or held
by the Borrower to secure the purchase price of such equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such equipment,
so long as such Lien extends only to the equipment financed, and any accessions,
replacements, substitutions and proceeds (including insurance proceeds) thereof
or thereto and any extension, renewal or replacement thereof; (vi) Liens in
favor of the Bank of India, New York Branch with respect to its credit facility
to Synovics in the principal sum of $10,500,000 ; (vii) liens arising solely by
virtue of any statutory provisions related to banker's liens, rights of setoff
or similar rights and remedies as to deposit accounts or the funds maintained
with a creditor depository institution (viii) liens arising out of a Revolving
Facility.
"PERSON" means any person or entity of any nature whatsoever,
specifically including, without limitation, an individual, a firm, a company, a
corporation, a partnership, a limited liability company, a trust or other
entity.
"PLACEMENT AGENT" means Axiom Capital Management, Inc.
"QUALIFIED EQUITY FINANCING" shall mean an Equity Financing
resulting in cash proceeds to the Company of not less than $9,000,000 (including
100% of the principal amount of the Convertible Notes and the principal amount
of 2006 Notes that opt to convert into Series C Preferred in connection with
such Equity Financing).
"RIGHTS AGREEMENT" shall mean that certain Rights Agreement
effective as of September 8, 2006 between Synovics and Continental Stock
Transfer & Trust Company.
"SUBSIDIARIES" shall mean the subsidiaries of the Company and
Synovics, as applicable, set forth in Schedule 8(a).
13. EXPENSES OF ENFORCEMENT, ETC. The Company agrees to pay all reasonable and
accountable fees and expenses incurred by the Payee in connection with the
negotiation,
16
execution and delivery of this Convertible Note (including the reasonable and
accountable fees and expenses of counsel to the placement agent for the Payees).
The Company agrees to pay all reasonable and accountable fees and expenses
incurred by the Payee in connection with any amendments, modifications, waivers,
extensions, renewals, renegotiations or "workouts" of the provisions hereof or
incurred by the Payee in connection with the enforcement or protection of its
rights in connection with this Convertible Note, or in connection with any
pending or threatened action, proceeding, or investigation relating to the
foregoing, including but not limited to the reasonable fees and disbursements of
counsel for the Payee. The Company agrees to indemnify the Payee and its
directors, managers, affiliates, partners, members, officers, employees and
agents against, and agrees to hold the Payee and each such person and/or entity
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable and accountable counsel fees and expenses,
incurred by, or asserted against, the Payee or any such person and/or entity
arising out of, in any way connected with, or as a result of (i) the
consummation of the loan evidenced by this Convertible Note and the use of the
proceeds thereof or (ii) any claim, litigation, investigation or proceedings
relating to any of the foregoing, whether or not the Payee or any such person
and/or entity is a party thereto other than any loss, claim, damage, liability
or related expense incurred or asserted against the payee or any such person on
account of the payee's or such person's gross negligence or willful misconduct.
14. AMENDMENT AND WAIVER. The provisions of this Convertible Note may not be
modified, amended or waived, and the Company may not take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
without the written consent of the Holder.
15. REMEDIES NOT WAIVED. No course of dealing between the Borrower and the Payee
or any delay on the part of the Payee in exercising any rights hereunder shall
operate as a waiver of any right of the Payee.
16. ASSIGNMENTS. Subject to applicable law, the Payee may assign, participate,
transfer or otherwise convey this Convertible Note and any of its rights or
obligations hereunder or interest herein to any affiliate of Payee and to any
other Person that the Borrower consents to (such consent not to be unreasonably
withheld or delayed), and this Convertible Note shall inure to the benefit of
the Payee's successors and assigns. The Borrower shall not assign or delegate
this Convertible Note or any of its liabilities or obligations hereunder.
17. HEADINGS. The headings of the sections and paragraphs of this Convertible
Note are inserted for convenience only and do not constitute a part of this
Convertible Note.
18. SEVERABILITY. If any provision of this Convertible Note is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Convertible Note will remain in full force and effect. Any provision of
this Convertible Note held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
19. CANCELLATION. After all principal, premiums (if any) and accrued interest at
any time owed on this Convertible Note have been paid in full, or this
Convertible Note has been
17
converted this Convertible Note will be surrendered to the Company for
cancellation and will not be reissued.
20. MAXIMUM LEGAL RATE. If at any time an interest rate applicable hereunder
exceeds the maximum rate permitted by law, such rate shall be reduced to the
maximum rate so permitted by law.
21. PLACE OF PAYMENT AND NOTICES. Payments of principal and interest are to be
delivered to the Convertible Noteholder of this Convertible Note at the
following address: ________________________________________, or at such other
address as such Convertible Noteholder has specified by prior written notice to
the Company. No notice shall be deemed to have been delivered until the first
Business Day following actual receipt thereof at the foregoing address.
22. WAIVER OF JURY TRIAL. THE PAYEE AND THE BORROWER EACH HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS CONVERTIBLE NOTE
AND/OR THE TRANSACTIONS CONTEMPLATED HEREUNDER.
23. SUBMISSION TO JURISDICTION. Any legal action or proceeding with respect to
this Convertible Note may be brought in the courts of the State of New York or
of the United States of America sitting in New York County, and, by execution
and delivery of this Convertible Note, the Company hereby accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The Company hereby irrevocably waives, in connection with
any such action or proceeding, any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which they may now or hereafter have to the bringing of any such
action or proceeding in such respective jurisdictions. Nothing herein shall
affect the right of the Payee to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company in
any other jurisdiction.
24. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS CONVERTIBLE NOTE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR
PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE
OF NEW YORK.
18
IN WITNESS WHEREOF, the parties have executed and the Company
has delivered this Convertible Note on the date first written above.
BORROWERS:
XXXX PHARMACEUTICALS, LLC
By:
-----------------------------------
Name:
Title:
PLEDGOR:
By:
-----------------------------------
Name: Xxxxxx X. Xxxx
EXHIBIT A
---------
LANE PLEDGE AGREEMENT
---------------------
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "AGREEMENT") dated as of July __,
2007 (the "EFFECTIVE DATE"), is by and between Xxxxxx X. Xxxx (the "PLEDGOR")
and Axiom Capital Management, Inc. ("AXIOM").
R E C I T A L S:
- - - - - - - -
WHEREAS, investors (the "SECURED PARTIES") of a bridge note
offering made loans to Xxxx Pharmaceuticals, LLC (the "COMPANY" or "BORROWER")
pursuant to a Convertible Promissory Note in the form attached hereto as EXHIBIT
A (the "NOTE");
WHEREAS, Axiom is acting as agent of the Secured Parties
(Axiom acting as such agent and any successor or successors to Axiom acting in
such capacity being hereinafter referred to as the "AGENT");
WHEREAS, Pledgor has agreed to pledge the Collateral (as
defined below) to the Agent as security for Borrower's payment obligations under
the Note.
NOW THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SECURITY INTEREST AND PLEDGE
----------------------------
Section 1.01. SECURITY INTEREST AND PLEDGE. Pledgor hereby
pledges and grants to Agent for the benefit of the Secured Parties a first
priority security interest in the following property (such property being
hereinafter sometimes called the "COLLATERAL"):
(a) all of Pledgor's right, title and interest in and to
2,000,000 common shares, par value $0.001 per share, of Synovics
Pharmaceuticals, Inc. (the "SYNOVICS STOCK"); and
(b) all proceeds of the foregoing Synovics Stock including,
without limitation, distributions, dividends, stock dividends, securities, and
other property, rights, and interests that Pledgor is at any time entitled to
receive on account of the same.
Section 1.02. OBLIGATIONS; DELIVERY OF CERTIFICATES. The
Collateral shall secure the following obligations, indebtedness, and liabilities
(all such obligations, indebtedness, and liabilities being hereinafter sometimes
called the "OBLIGATIONS"): the obligations and indebtedness of Pledgor to the
Secured Parties evidenced by the Note; all costs and expenses
incurred by the Secured Parties to preserve and maintain the Collateral, collect
the obligations herein described, and enforce this Agreement; and all
extensions, renewals, and modifications of any of the foregoing. If the
securities referenced in Section 1.01(a) above are certificated, such
certificates shall be delivered by Pledgor to the Agent for the benefit of the
Secured Parties on the Effective Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Pledgor represents and warrants to the Secured Parties that:
Section 2.01. TITLE. Pledgor owns, and with respect to
Collateral acquired after the date hereof, Pledgor will own, legally and
beneficially, the Collateral free and clear of any lien, security interest,
pledge, claim, or other encumbrance or any right or option on the part of any
third person to purchase or otherwise acquire the Collateral or any part
thereof, except for the security interest granted hereunder. The Collateral is
not subject to any restriction on transfer or assignment except for compliance
with applicable federal and state securities laws and regulations promulgated
thereunder. Pledgor has the unrestricted right to pledge the Collateral as
contemplated hereby. All of the Collateral has been duly and validly issued and
is fully paid and nonassessable.
Section 2.02. FIRST PRIORITY PERFECTED SECURITY INTEREST. This
Agreement creates in favor of the Secured Parties a first priority perfected
security interest in the Collateral.
ARTICLE III
AFFIRMATIVE AND NEGATIVE COVENANTS
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Pledgor covenants and agrees with the Agent that until the
Obligations are satisfied and performed in full or this Agreement is otherwise
terminated:
Section 3.01. DELIVERY. Prior to or concurrently with the
execution and delivery of this Agreement, Pledgor shall deliver to the Agent all
certificate(s) identified in Section 1.01(a) hereof, accompanied by undated
stock powers duly executed in blank.
Section 3.02. ENCUMBRANCES. Pledgor shall not create, permit,
or suffer to exist, and shall defend the Collateral against, any lien, security
interest, or other encumbrance on the Collateral except the pledge and security
interest of Secured Parties hereunder, and shall defend Pledgor's rights in the
Collateral and Secured Parties' security interest in the Collateral against the
claims of all persons and entities.
Section 3.03. SALE OF COLLATERAL. Pledgor shall not sell,
assign, pledge or otherwise dispose of or encumber the Collateral or any part
thereof without the prior written consent of the Agent.
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Section 3.04. FURTHER ASSURANCES. At any time and from time to
time, upon the request of the Agent, and at the sole expense of Pledgor, Pledgor
shall promptly execute and deliver all such further instruments and documents
and take such further action as Agent may deem necessary or desirable to
preserve and perfect Secured Parties' security interest in the Collateral and
carry out the provisions and purposes of this Agreement. Pledgor authorizes
Agent to file a financing statement covering the Collateral or any part thereof.
In addition, Pledgor shall, at the Agent's request, execute and deliver such
further documents and take such further actions as the Agent shall reasonably
request to perfect and maintain the Company's security interest in the
Collateral, or in any part thereof, or sell or otherwise dispose of the
Collateral, or any part thereof.
ARTICLE IV
RIGHTS OF AGENT AND PLEDGOR
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Section 4.01. POWER OF ATTORNEY. Pledgor hereby irrevocably
constitutes and appoints Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead and in the name of Pledgor or in its
own name, from time to time in Agent's discretion, to take any and all action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives Agent the power and right on behalf of
Pledgor and in its own name to do any of the following, without notice to or the
consent of Pledgor:
(i) to demand, xxx for, collect, or receive in the name of
Pledgor or in its own name, any money or property at any time payable
or receivable on account of or in exchange for any of the Collateral
and, in connection therewith, endorse checks, notes, drafts,
acceptances, money orders, or any other instruments for the payment of
money under the Collateral;
(ii) to pay or discharge taxes, liens, security interests, or
other encumbrances levied or placed on or threatened against the
Collateral;
(iii) (A) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any Collateral; (B) to sign and endorse
any proxies, stock powers, verifications, notices, and other documents
relating to the Collateral; (C) to commence and prosecute any suit,
actions or proceedings at law or in equity to enforce any other right
in respect of any Collateral; (D) to defend any suit, action, or
proceeding brought against Pledgor with respect to any Collateral; (E)
to settle, compromise, or adjust any suit, action, or proceeding
described above and, in connection therewith, to give such discharges
or releases as Agent may deem appropriate; (F) to exchange any of the
Collateral for other property upon any merger, consolidation,
reorganization, recapitalization, or other readjustment of the issuer
thereof; (G) to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely
as though
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Agent were the absolute owner thereof for all purposes, and to do, at
Agent's option and Pledgor's expense, at any time, or from time to
time, all acts and things which Agent deems necessary to protect,
preserve, or realize upon the Collateral and Secured Parties' security
interest therein; and (H) to complete, execute and file with the SEC
one or more notices of proposed sale of securities pursuant to Rule
144.
This power of attorney is a power coupled with an interest and
shall be irrevocable. Agent shall be under no duty to exercise or withhold the
exercise of any of the rights, powers, privileges, and options expressly or
implicitly granted to Agent in this Agreement, and shall not be liable for any
failure to do so or any delay in doing so. Agent shall not be liable for any act
or omission or for any error of judgment or any mistake of fact or law in its
individual capacity or in its capacity as attorney-in-fact except acts or
omissions resulting from its willful misconduct, bad faith or gross negligence.
This power of attorney is conferred on Agent solely to protect, preserve, and
realize upon its security interest in the Collateral.
Section 4.02. TERMINATION. Upon the payment in full of the
Obligations this Agreement shall terminate, and Agent shall forthwith assign,
transfer, and deliver to the Pledgor, against its receipt, the Collateral then
held by it hereunder.
ARTICLE V
DEFAULT
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Section 5.01. EVENTS OF DEFAULT. If the Borrower shall
experience an "EVENT OF DEFAULT" as such term is defined in Section 10 of the
Note, then the Parties have agreed that, for the purposes of this Agreement, the
Obligations shall become immediately due and payable.
Section 5.02. RIGHTS AND REMEDIES. Upon the occurrence of an
Event of Default, subject to Section 11(b) of the Note, Agent shall have the
following rights and remedies:
(i) Agent may direct the Pledgor to sell the Collateral
and deliver the proceeds to it to be applied against
the Obligations or directly sell the Collateral in
the name of the Pledgor and apply the proceeds of
such sale against the Obligations.
(ii) In addition to all other rights and remedies granted
to Agent in this Agreement and in any other
instrument or agreement securing, evidencing, or
relating to the Obligations, Agent shall have all of
the rights and remedies of a secured party under the
Uniform Commercial Code as adopted by the State of
New York.
(iii) Agent may cause any or all of the Collateral held by
it to be transferred into the name of the Secured
Parties or the name or names of Secured Parties'
nominee or nominees.
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(iv) Pledgor hereby acknowledges and confirms that Agent
may be unable to effect a public sale of any or all
of the Collateral by reason of certain prohibitions
contained in the U.S. Securities Act of 1933, as
amended, and applicable state securities laws and may
be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will
be obligated to agree to acquire any shares of the
Collateral for their own respective accounts for
investment and not with a view to distribution or
resale thereof. Pledgor further acknowledges and
confirms that any such private sale may result in
prices or other terms less favorable to the seller
than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made
in a commercially reasonable manner, and Agent shall
be under no obligation to take any steps in order to
permit the Collateral to be sold at a public sale.
Section 5.03. NO RIGHTS UNTIL EVENT OF DEFAULT. Until an Event
of Default occurs and is continuing, the Agent shall have no right to vote,
sell, pledge, hypothecate, transfer, encumber or otherwise dispose of any of the
Collateral.
ARTICLE VI
MISCELLANEOUS
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Section 6.01. EXPENSES. Pledgor agrees to pay and to hold
Agent and Secured Parties harmless from and against all fees and all excise,
sales, stamp, and other taxes payable in connection with this Agreement or the
transactions contemplated hereby.
Section 6.02. NO WAIVER; CUMULATIVE REMEDIES. No failure on
the part of the Agent to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege under this Agreement preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege. The rights and remedies provided for in this Agreement are cumulative
and not exclusive of any rights and remedies provided by law.
Section 6.03. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of Pledgor and Secured Parties and their
respective heirs, successors, and assigns, except that Pledgor may not assign
any of its rights or obligations under this Agreement without the prior written
consent of the Agent.
Section 6.04. AMENDMENT; ENTIRE AGREEMENT. THIS AGREEMENT
EMBODIES THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY
AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS,
WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
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ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL
AGREEMENTS AMONG THE PARTIES HERETO. THE PROVISIONS OF THIS AGREEMENT MAY BE
AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTIES HERETO.
Section 6.05. NOTICES. All notices and other communications
provided for in this Agreement shall be given or made in writing, mailed by
certified mail return receipt requested, or hand delivered to the intended
recipient at the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party at such other address as shall be designated
by such party in a notice to the other party given in accordance with this
Section. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when personally delivered or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid.
Section 6.06. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York and the applicable laws of the United States of America. This
Agreement has been entered into in New York County, New York, and it shall be
deemed performable for all purposes in New York County, New York. Any action or
proceeding against Pledgor under or in connection with this Agreement or any
other instrument or agreement securing, evidencing, or relating to the
Obligations or any part thereof may be brought in any state or federal court in
New York County, New York. Pledgor hereby irrevocably (i) submits to the
nonexclusive jurisdiction of such courts, and (ii) waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in such court or that such court is an inconvenient forum. Pledgor agrees that
service of process upon it may be made by certified or registered mail, return
receipt requested, at its address specified or determined in accordance with the
provisions of Section 6.05 of this Agreement. Nothing in this Agreement or any
other instrument or agreement securing, evidencing, or relating to the
Obligations or any part thereof shall affect the right of Agent to serve process
in any other manner permitted by law or shall limit the right of Agent to bring
any action or proceeding against Pledgor or with respect to any of the
Collateral in any state or federal court in any other jurisdiction. Any action
or proceeding by Pledgor against Agent shall be brought only in a court located
in New York County, New York.
Section 6.07. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument. Execution and
delivery of this Agreement by facsimile transmission (including the delivery of
documents in Adobe PDF format) shall constitute execution and delivery of this
Agreement for all purposes, with the same force and effect as execution and
delivery of an original manually signed copy hereof.
Section 6.08. SEVERABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
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Section 6.09. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, PLEDGOR HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF AGENT IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
Section 6.10 No Secured Parties shall have the right to
institute any suit, action or proceeding in equity or at law for the foreclosure
or other realization upon any Collateral subject to this Agreement or for the
execution of any trust or power hereof or for the appointment of a receiver, or
for the enforcement of any other remedy under or upon this Agreement; it being
understood and intended that no one or more of the Secured Parties shall have
any right in any manner whatsoever to affect, disturb or prejudice the lien and
security interest of this Agreement by its or their action or to enforce any
right hereunder, and that all proceedings at law or in equity shall be
instituted, had and maintained by the Agent in the manner herein provided for
the benefit of the Secured Parties.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
PLEDGOR:
By:
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Name: Xxxxxx X. Xxxx
Address for Notices:
AGENT:
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By:
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Name:
Title:
Address for Notices:
Schedule 8(a)
1. Xxxx Pharmaceuticals, LLC
2. Andapharm LLC
3. Xxxx Pharmaceuticals, Inc.
4. Andapharm, Inc.
5. LipoGenics, Inc.
6. Bionutrics Health Products, Inc.
7. Synovics Laboratories, Inc.
8. Nutrition Technology Corporation
9. InCon International Ltd.
10. Cosmedics, Inc.
Schedule 8(u)
Note in the principal amount of $250,000 issued to Princeton Holdings Trust.
