EXHIBIT 10 (I) BRIDGE LOAN AGREEMENT
72
BRIDGE LOAN AGREEMENT dated this 3rd day of March 1999, by and between
Techscience Industries, Inc., a Delaware corporation with principal offices at 0
Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 ("TSCI") and XxxXxxxxx.xxx, Inc., a
privately owned California corporation with offices at 000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxx, Xxxxxxxxxx 00000 ("PPI"). TSCI and PPI are hereinafter
collectively referred to as the "Parties".
W I T N E S S E T H:
WHEREAS, the Parties have entered into a written Letter of Intent dated February
10, (the "LOI"); and
WHEREAS, the LOI contemplates the acquisition by TSCI of all of the issued and
outstanding shares of PPI's common stock, no par value per share from the
individual stock, warrant and option holders thereof solely in exchange for an
aggregate of 7,325,000 authorized but unissued shares of TSCI's common stock,
$.001 par value per (the "Reorganization"); and
WHEREAS, in anticipation of the closing of the Reorganization, PPI desires to
borrow funds from TSCI for the purpose of fostering and expediting the
development of PPI's business; and
WHEREAS, the TSCI is willing to solicit funds from individual investors (the
"Bridge Loan Lenders") and thereafter lend capital to PPI on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements herein contained, the Parties agree as follows:
1. THE BRIDGE LOAN.
1.1 THE BRIDGE LOAN. TSCI hereby lends to PPI and PPI hereby
accepts from TSCI the sum of One Hundred and Fifty Thousand and 00/100
($150,000) Dollars (the ABridge Loan"). The Bridge Loan shall be evidenced by a
secured, convertible promissory note in the form annexed hereto as Exhibit "A"
and hereby incorporated herein by reference (the "Note"). At the closing of the
Bridge Loan which shall take place via facsimile and overnight package delivery
service not later than March 3, 1999 (the "Closing"), PPI shall deliver to TSCI
a duly executed copy of the Note. The Bridge Loan proceeds shall be evidenced by
a Federal wire transfer effectuated at the Closing to such bank account as PPI
shall have advised TSCI in writing at least 24 hours prior to the Closing, or by
TSCI's business check payable to the order of PPI and delivered to PPI at the
Closing.
1.2 INTEREST RATE. PPI hereby agrees to pay to TSCI and TSCI
hereby accepts as interest on the Bridge Loan an amount equal to ten (10%)
percent per annum. Interest shall be computed on the basis of a year of 360 days
and actual days elapsed and
73
shall be payable in one lump sum on the Due Date of the Bridge Loan (as that
term is hereinafter defined).
1.3 TERM OF AGREEMENT. This Agreement shall be in effect until
the earlier of the full repayment of the Bridge Loan or the closing of the
Reorganization (the "Expiration Date"). In the event the Reorganization does not
close solely because of the failure of TSCI to have a net worth of $975,000, the
term of this Agreement shall be automatically extended to the earlier of the
closing date of the first equity or debt financing consummated by PPI or October
1, 1999 (the "Extended Date"). This Agreement may be terminated by TSCI upon the
occurrence of a Default as provided in Section 7.1 of this Agreement. Upon
either the effective date of termination, the Expiration Date or the Extended
Date, the entire unpaid principal amount of the Bridge Loan shall become
immediately due and payable without further notice or demand. Notwithstanding
any termination, and until all sums due hereunder shall have been paid and
satisfied, PPI shall continue to pay interest to TSCI as provided in Section 1.2
of this Agreement, and TSCI shall be entitled to retain its first lien and
security interest in the Collateral (as that term is hereinafter defined).
2. UTILIZATION OF THE BRIDGE LOAN
PPI hereby acknowledges and accepts that the Bridge Loan shall only be utilized
for working capital or other corporate purposes as set forth in PPI's business
plan as delivered to TSCI in February 1999.
3. COLLATERAL.
3.1 SECURITY INTEREST -FIRST LIEN. To secure the prompt
payment to TSCI of the interest and principal on the Bridge Loan, PPI hereby
grants to TSCI and/or to the Bridge Loan Lenders and TSCI hereby accepts, a
continuing first lien and security interest (the "First Lien") in and to: (i)
such number of authorized but unissued shares of PPI's common stock, no par
value per share, as shall, when added to the number of issued and outstanding
shares, shall equal fifty one (51%) percent of PPI's total issued and
outstanding common stock capitalization (the "Collateral Shares"); (ii) the
right and title to PPI's XxxXxxxxx.xxx domain name, website, website software
and any and all copyrights, trademarks, servicemarks owned by PPI or acquired by
PPI after the date of this Agreement; and (iii) any and all inventory, accounts
receivable or other tangible or intangible assets acquired by PPI after the date
of this Agreement (hereinafter collectively referred to as the "Collateral").
The Collateral shall not represent the sole and exclusive collateral for the
Bridge Loan against which TSCI may seek redress. At the Closing, PPI shall agree
to hold a certificate representing the Collateral Shares in escrow for the
benefit of TSCI.
3.2 DISCLOSURE OF SECURITY INTEREST. PPI shall make
appropriate entries upon its financial statements and books and records
disclosing TSCI's First Lien in the Collateral.
74
3.3 SECURITY DOCUMENTS. At TSCI's request, PPI shall execute
and/or deliver to TSCI and/or to the Bridge Loan Lenders, at any time or times
hereafter, all security documents including but not limited to UCC-1 financing
statements that TSCI and/or to the Bridge Loan Lenders may reasonably request,
to evidence TSCI's and/or to the Bridge Loan Lender's security interest in the
Collateral. Upon the occurrence of a Default, PPI hereby irrevocably makes,
constitutes and appoints TSCI and/or to the Bridge Loan Lenders as PPI's true
and lawful attorney (and agent-in-fact) to sign the name of PPI on any security
documents evidencing the First Lien and to deliver any of the security documents
to such persons as TSCI and/or to the Bridge Loan Lenders, in its or their
discretion, may elect. PPI hereby specifically agrees and consents that a
carbon, photographic, photostatic, or other reproduction of this Agreement or of
a financing statement shall be and be deemed to be the legal equivalent of a
financing statement and may be filed with any county clerk as evidence of TSCI's
and/or to the Bridge Loan Lender's security interest in the Collateral.
3.4 PRIORITY. PPI hereby represents and warrants that the
First Lien has and shall have priority over any and all claims in and to the
Collateral that now exist or may hereinafter arise.
3.5 COVENANTS AS ADDITIONAL COLLATERAL. Commencing on the date
of this Agreement and continuing through the closing date of the Reorganization,
PPI covenants and agrees that the Standstill and Management Restrictions
contained in Sections 8 and 11 of the LOI shall remain in full force and effect.
As additional Collateral for the Bridge Loan, and only In the event the
Reorganization does not close solely because of the failure of TSCI to have a
net worth of $975,000, PPI hereby covenants and agrees with TSCI and/or the
individual Bridge Loan Lenders that PPI will give TSCI prior written notice of
its intention to consummate any of the following courses of action and will
either utilize the first $150,000 in proceeds from any such action to repay the
Bridge Loan or, if PPI receives securities of another entity, it will offer the
Bridge Loan Lenders the right to receive $150,000 worth of such securities:
(i) solicit or encourage any offer or enter into
any agreement for the sale, transfer or other disposition of any capital stock
or assets of PPI to or with any other entity or person, other than sales of
goods and services by PPI in the ordinary course of its business;
(ii) entertain or pursue any unsolicited offer for
any such sale, transfer or other disposition;
(iii) issuance of any shares of common stock for cash
or securities;
(iv) issuance of any additional classes of equity
securities or securities convertible into equity securities;
(v) make any acquisition of assets or stock of
another corporation or otherwise consummate any business combination; or
75
(vi) incur any material amount of indebtedness.
4. REPAYMENT
4.1 REPAYMENT AND REPAYMENT PROCEDURE. Unless TSCI and/or to
the Bridge Loan Lenders shall have exercised the conversion privileges of the
Note, repayment of the full amount of the principal and interest due on the
Bridge Loan shall be made by PPI to TSCI on the Expiration or Extended Date
unless TSCI and/or to the Bridge Loan Lenders shall have extended the same in
writing. In the event TSCI and/or to the Bridge Loan Lenders shall have
exercised the conversion privileges of the Note, repayment of the $100,000 of
the principal and all of the interest due on the Bridge Loan shall be made by
PPI to TSCI and/or to the Bridge Loan Lenders on the Expiration or Extended Date
unless TSCI and/or to the Bridge Loan Lenders shall have extended the same in
writing.
5. REPRESENTATIONS AND WARRANTIES OF PPI.
5.1 PPI HEREBY REPRESENTS AND WARRANTS TO TSCI AS FOLLOWS:
(a) AUTHORIZATION, VALIDITY AND ENFORCEABILITY OF
THIS AGREEMENT. PPI has the power and authority (corporate and otherwise) to
execute, deliver and perform this Agreement. PPI has taken all necessary
corporate action to authorize its execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by PPI and
constitutes the legal, valid and binding obligation of PPI, enforceable against
PPI in accordance with its terms. The execution and performance of this
Agreement will not result in a breach of or violate the terms of any other
agreement to which PPI is a party or by which the Collateral may be bound or
affected;
(b) ORGANIZATION AND QUALIFICATIONS. PPI (i) is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) is qualified to do business and is in good
standing in every jurisdiction where the failure to be so qualified and in good
standing would have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to conduct its business and to own its property as
currently owned and conducted;
(c) OWNERSHIP OF THE COLLATERAL. PPI owns the
Collateral free and clear of any and all liens, claims or encumbrances of any
nature or description. The Collateral Shares when delivered to the Escrowee will
be duly and validly issued, fully paid and non-assessable with no personal
liability attaching to the ownership thereof;
(d) CONSENTS AND APPROVALS. No consent, approval,
authorization, license or order of, registration or filing with, or notice to,
any federal, state, local, foreign or other court, administrative agency or
commission, other governmental authority or regulatory body is necessary to be
obtained, made or given by PPI in connection with the
76
execution, delivery and performance by PPI of this Agreement or the consummation
by PPI of the transactions contemplated hereunder;
(e) BROKERS. Neither PPI, nor its officers, directors
nor any of their affiliates have engaged, consented to, or authorized any
broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement. PPI hereby indemnifies and holds
TSCI harmless from any and all liability arising out of the claim by any
individual, firm or entity to compensation as a finder or broker in connection
with the transaction represented by this Agreement;
(f) DISCLOSURE. No representation or warranty by PPI
contained in this Agreement and no statement contained in any certificate, list,
exhibit, or other instrument specified in this Agreement, contains or will
contain any untrue statement of a material fact or omits or will omit a material
fact necessary to make the statements contained herein, in light of the
circumstances in which they are made, not misleading;
(g) LITIGATION AND OTHER CLAIMS. There are no
actions, suits or proceedings now pending or threatened which may impair PPI's
ability to perform this Agreement. PPI is not a party to an agreement in
settlement or compromise any suit or cause of action, instituted or threatened,
which may impair PPI's ability to perform this Agreement or which may adversely
affect the Collateral; and
(h) RESERVATION FOR ISSUANCE. PPI will reserve an
aggregate of 100,000 shares of its common stock, no par value per share, for
issuance to TSCI upon TSCI's exercise of the conversion privileges of the Note.
6. REPRESENTATIONS AND WARRANTIES OF TSCI
6.1 CONSENTS. No consents of governmental and other regulatory
agencies, foreign or domestic, or of other parties are required to be received
by or on the part of TSCI to enable him to enter into and carry out this
Agreement in all material respects.
6.2 BINDING NATURE OF AGREEMENT. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly reviewed and approved by TSCI and no other proceedings on the part of
TSCI are necessary to authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein.
6.3 LITIGATION; COMPLIANCE WITH LAW. TSCI hereby warrants that
he is not aware of any litigation, pending or other, that would prohibit him
from entering into this Agreement, making the Bridge Loan or implementing the
same as provided herein.
6.4 AUTHORITY; NO BREACH. TSCI has the power and authority to
execute, deliver and perform this Agreement. TSCI has taken all necessary action
to authorize his
77
execution, delivery and performance of this Agreement. This Agreement has been
duly executed and delivered by TSCI and constitutes the legal, valid and binding
obligation of TSCI, enforceable against TSCI in accordance with its terms. The
execution and performance of this Agreement will not result in a breach of or
violate the terms of any other agreement to which TSCI is a party or by which
the Bridge Loan or the Shares may be bound or affected.
6.5 BROKERS. TSCI has not engaged, consented to, or authorized
any broker, finder, investment banker or other third party to act on TSCI's
behalf, directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement. TSCI hereby indemnifies and holds
PPI harmless from any and all liability arising out of the claim by any
individual, firm or entity to compensation as a finder or broker in connection
with the transaction represented by this Agreement.
7. DEFAULT: RIGHTS AND REMEDIES ON DEFAULT
7.1 DEFAULT. The occurrence of any one or more of the
following events shall constitute a Default:
(a) PPI's fails or neglects to perform, keep or
observe any material term, provision, condition or covenant contained in this
Agreement which is required to be performed, kept or observed by PPI and the
same is not cured to TSCI's reasonable satisfaction within ten (10) days after
TSCI gives PPI notice identifying such Default; or
(b) A Default shall occur, and any applicable cure
period shall have expired, under any agreement, document or instrument, other
than this Agreement, now or hereafter existing, to which PPI is a party, but
only if that default has a material adverse effect upon the Collateral or a
material adverse effect upon any of the covenants, representations or warranties
contained in this Agreement; or
(c) The Collateral or any of PPI's other assets are
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors and the same is not cured within ten (10) days
thereafter; an application is made by any individual, firm or entity other than
TSCI for the appointment of a receiver, trustee, or custodian for the Collateral
or any of PPI's other assets and the same is not dismissed within ten (10) days
after the application therefor; or
(d) An application is made by PPI for the appointment
of a receiver, trustee or custodian for the Collateral or any of PPI's other
assets; a petition under any section or chapter of the Bankruptcy Code or any
similar law or regulation is filed by or against PPI or any guarantor of
liabilities and is not dismissed within ten (10) days after filing; PPI makes an
assignment for the benefit of its creditors or any case or proceeding is filed
by or against PPI for its dissolution, liquidation, or termination; PPI ceases
to
78
conduct its business as now conducted or is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business affairs; or
(e) A notice of lien, levy or assessment is filed of
record with respect to all or any substantial portion of PPI's assets by the
United States, or by any state, county, municipal or other government agency, or
any taxes or debts owing to any of the foregoing become a lien or encumbrance
upon the Collateral or a material portion of PPI's assets and such lien or
encumbrance is not released within ten (10) days after its creation; or
(f) Judgement is rendered against PPI on an uninsured
claim of $10,000.00 or more and PPI fails either to commence appropriate
proceedings to appeal such judgement within the applicable appeal period or,
after such appeal is filed, PPI fails to diligently prosecute such appeal or
such appeal is denied.
7.2 ACCELERATION OF THE LIABILITIES. Upon and after the
occurrence of a Default, all of the monies due any payable under the Bridge Loan
may, at the option of TSCI and/or to the Bridge Loan Lenders and without demand,
notice, of legal process of any kind, (including without limitation notice of
acceleration, notice of intent to acceleration, notice of intent to accelerate
or notice of intent to demand), be declared, and immediately shall become due
and payable.
7.3 REMEDIES. Upon and after the occurrence of a Default, TSCI
and/or to the Bridge Loan Lenders shall have the following rights and remedies:
(a) All of the rights and remedies of a secured party
under the New Jersey Uniform Commercial Code or other applicable law with
respect to the Collateral, all of which rights and remedies shall be cumulative,
and none exclusive, to the extent permitted by law, in addition to any other
rights and remedies against the Collateral contained in this Agreement.
8. CONDITIONS TO CLOSING
8.1 MUTUAL CONDITIONS TO CLOSING. The obligation of the
Parties to otherwise perform their respective obligations hereunder shall be
subject to the satisfaction of the following mutual conditions on or prior to
the Closing:
(a) No order, decree, judgment or injunction shall
have been issued by any governmental authority of competent jurisdiction and
shall be in effect which restrains or prohibits the consummation of the Bridge
Loan and/or the issuance of the First Lien;
(b) The Parties shall have executed and delivered to
one another the Escrow Agreement and this Agreement prior to the Closing Date;
79
(c) TSCI's and PPI's representations and warranties
contained herein shall be true and correct in all material respects as of the
date hereof and, except for such representations and warranties which are given
as of a specific date or as of the date hereof, as of the Closing Date as if
made on and as of the Closing Date;
(d) The Parties shall have performed in all respects
all agreements and covenants to be performed by such Party hereunder on or prior
to the Closing;
(e) All instruments, resolutions, certificates and
documents required to carry out this Agreement, or incidental thereto, and all
other relevant legal matters, shall be reasonably satisfactory in all respects
to the Parties and their respective counsel; and
(f) PPI shall have received from TSCI a duly executed
investment letter in the form annexed hereto.
8.2 CONDITIONS TO THE OBLIGATIONS OF PPI . The obligation of
PPI to execute and deliver the Note to TSCI at the Closing and to originally
issue and hold the Collateral Shares in escrow at the Closing shall (in addition
to those specified in Section 8.1) be subject to the delivery by TSCI of a check
representing the gross proceeds of the Bridge Loan on or prior to the Closing.
8.3 CONDITIONS TO THE OBLIGATIONS OF TSCI. The obligation of
TSCI to execute and perform this Agreement and to make the Bridge Loan to PPI at
the Closing shall be subject to the satisfaction of the following conditions (in
addition to those specified in Section 8.1) on or prior to the Closing:
(a) The execution and deliver to TSCI of the Note;
(b) The original issuance of the Collateral Shares
and the holding of the same in escrow by PPI; and
(c) The execution and deliver to TSCI of a UCC-1
Financing Statement evidencing the First Lien.
9. TERMINATION
9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by mutual agreement in writing of TSCI and PPI;
and
(b) by either TSCI or PPI by written notice to the
other Party (i) if the Closing shall not have occurred by March 5, 1999,
PROVIDED, HOWEVER, that the right to terminate this Agreement pursuant to clause
(i) shall not be available to any Party whose failure to fulfill any of its
obligations under this Agreement resulted in the Closing not occurring by such
date; or (ii) if any governmental authority of competent jurisdiction shall
80
have issued an injunction, decree or order or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Closing and such injunction,
decree or order, or other action shall have become final and nonappealable.
9.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 9.1, this Agreement shall thereafter
become void and have no effect, and no Party hereto shall have any liability to
the other Party hereto in respect thereof, except (i) for this Section 9.2
(solely for purposes of clause (ii) of this Section 9.2), and (ii) nothing
herein will relieve any party from liability for any breach of any of its
representations, warranties, covenants or agreements contained in this Agreement
prior to such termination.
10. MISCELLANEOUS
10.1 REPRESENTATIONS AND WARRANTIES TO SURVIVE CLOSING. All
representations and warranties contained herein or in any schedule or
certificate delivered pursuant hereto or any writing signed by the parties on
the date hereof shall survive consummation of the transactions contemplated
under this Agreement, except that each representation and warranty shall expire
on the earlier of (i) six months from the date that the Party for whose benefit
such representation or warranty is made has actual knowledge of the inaccuracy
of any representation or the breach of any warranty and (ii) the first
anniversary of the Closing Date.
10.2 ENTIRE AGREEMENT; SEVERABILITY. This Agreement contains
the entire understanding of the Parties with respect to the subject matter
hereof and thereof and supersedes all prior agreements and understandings, oral
or written with respect to such matters and any writing signed by the Parties on
the date hereof. There are no representations, warranties or covenants other
than those set forth herein. This Agreement shall be binding upon the respective
successors of the Parties. In the event that any provision of this Agreement
shall be declared unenforceable by a court of competent jurisdiction, such
provision, to the extent declared unenforceable, shall be stricken and the
remainder of this Agreement shall remain binding on the Parties hereto. However,
in the event any such provision shall be declared unenforceable due to its
scope, breadth or duration, then it shall be modified to the scope, breadth or
duration permitted by law and shall continue to be fully enforceable as so
modified.
10.3. ASSIGNMENTS; AMENDMENTS; WAIVERS. This Agreement shall
not be assignable by either Party except upon written notice of such assignment
to the other Party. This Agreement may not be modified or amended except by a
written instrument signed by authorized representatives of each Party hereto and
referring specifically to this Agreement. Any term, provision or condition of
this Agreement may be waived in writing at any time by the Party which is
entitled to the benefit thereof.
10.4. NOTIFICATION OF CERTAIN MATTERS. Each Party (the "First
Party") shall give prompt notice to the other Party of (i) the occurrence or
nonoccurrence of any event, the
81
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty of the First Party contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing and (ii) any
material failure of the First Party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 10.4
shall not limit or otherwise affect the remedies available hereunder to the
other Party.
10.5. PUBLIC ANNOUNCEMENTS. Each Party hereto agrees that it
will not disseminate any press release or public announcement concerning the
transaction contemplated hereby to any party, without the other Party's prior
written consent which shall not be unreasonably withheld. Each Party agrees to
cause any of its advisors, whether financial, accounting, legal or otherwise,
not to disseminate any of such information to any other party without the other
Party's prior written consent which shall not be unreasonably withheld.
10.6. NOTICES. Unless otherwise specifically provided for
elsewhere in this Agreement, any notices and other communications required to be
given pursuant to this Agreement shall be in writing and shall be effective upon
delivery by hand, overnight package delivery service or upon receipt if sent by
mail (registered or certified mail, postage prepared, return receipt requested)
or upon transmission if sent by telex or facsimile (with request for
confirmation of receipt in a manner customary for communications of such
respective type), except that if notice is received by telex or facsimile after
5:00 P.M. local time on a business day at the place of receipt, it shall be
effective as of the following business day. Notices are to be addressed to the
Parties at the address first listed above or to such other respective addresses
as either PPI or TSCI shall designate to the other by notice in writing,
provided that notice of a change of address shall be effective only upon
receipt.
10.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, which together shall be considered one and the same agreement
and each of which shall be deemed an original.
10.8 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement
shall be deemed to have been made, executed and delivered in, and shall be
governed by and interpreted under and construed in all respects in accordance
with the laws of the State of New Jersey, irrespective of the place of domicile
or residence of any Party. In the event of a controversy arising out of the
interpretation, construction, performance or breach of this Agreement, the
Parties hereby agree and consent to the jurisdiction and venue of the Superior
Court of the State of New Jersey, Xxxxxx County and/or the United States
District Court for the District of New Jersey; and further agree and consent
that service or process by mail or overnight package delivery service in any
such action or proceeding outside of the State of New Jersey and Xxxxxx County
shall be tantamount to service in person within the State of New Jersey and
Xxxxxx County and shall confer personal jurisdiction and venue upon either of
the said courts.
82
10.9. NO THIRD PARTY BENEFICIARIES. This Agreement is for the
benefit of the parties hereto and is not intended to confer upon any other
Person any rights or remedies hereunder.
10.10 SPECIFIC PERFORMANCE. Each of the parties hereto agrees
that any breach by it of any provision of this Agreement would irreparably
injure the other party and that money damages would be an inadequate remedy
therefor. Accordingly, each of the parties hereto agrees that the other shall be
entitled to one or more injunctions enjoining any such breach or requiring
specific performance of this Agreement and consents to the entry thereof, this
being in addition to any other remedy to which the non-breaching party is
entitled at law or equity.
10.11 CAPTIONS, GENDER. The captions herein are included for
convenience of reference and shall be ignored in the construction or
interpretation hereof. Gender, tense, singular(ity) and plural(ity) shall be
read and construed in the context required by grammar, syntax, common sense and
the intent of the parties.
IN WITNESS WHEREOF, each of the Parties has executed this Agreement on the date
first written above.
XxxXxxxxx.xxx, Inc
By: /s/ XXXXXX X. XXXXXX
-------------------------------------
Xxxxxx X. Xxxxxx, President
Techscience Industries, Inc.
BY: /s/ XXXXX X. XXXX
-------------------------------------
Xxxxx X. Xxxx, President
83
EXHIBIT "A"
10% SECURED CONVERTIBLE PROMISSORY NOTE
March 1, 1999 $150,000
FOR VALUE RECEIVED, XxxXxxxxx.xxx, Inc., a privately owned California
corporation with offices at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx
94707(hereinafter referred to as the "Maker") promises to pay to the order of
Techscience Industries, Inc., a Delaware corporation with principal offices at 0
Xxxxxxxx Xxxxx, Xxxxxxxxxx, Xxx Xxxxxx 00000 and/or and/or to the Bridge Loan
Lenders, as that term is defined in a Bridge Loan Agreement between the Maker
and the Holder dated March 3, 1999 (the "Bridge Agreement"), to which this Note
is attached as an exhibit (hereinafter collectively referred to as the "Holder")
in lawful money of the United States of America, the principal sum of One
Hundred Fifty Thousand and 00/100 ($150,000) Dollars with interest at a rate of
ten (10%) percent per annum.
1. PAYMENTS.
a. INTEREST. An interest payment of One Thousand Two Hundred
and Fifty and 00/100 ($1,250) Dollars shall be payable per month for each month
this promissory note (the "Note") remains unpaid. All accrued interest shall be
paid on either April 1, 1999 or such later date as shall be mutually agreed upon
by the Maker and the Holder or the closing date of the Reorganization (as that
term is defined in the Bridge Loan Agreement, whichever sooner occurs (the "Due
Date"). In the event that the required interest payment shall not be paid when
due, and shall remain unpaid for a period of five business (5) days or more,
then a late charge of two (2%) percent shall be due and owing for each month or
any portion thereof that such payment shall remain unpaid. In the event the
Reorganization does not close solely because of the failure of the Holder to
have a net worth of $975,000, the Due Date of this note shall automatically
extended to the earlier of the closing date of the first equity or debt
financing consummated by PPI or October 1, 1999 (the "Extended Due Date").
b. PRINCIPAL. Payment of the full principal amount due under
this Note shall be made on the Due Date or the Extended Due Date. In the event
that the principal shall not be paid on the Due Date, and shall remain unpaid
for a period of five business (5) days or more, then a late charge of two (2%)
percent shall be due and owing for each month or any portion thereof that such
payment shall remain unpaid.
2. EVENTS OF DEFAULT. The Maker shall be in default hereunder if: (a)
The Maker shall fail to pay interest on this Note when due and the failure shall
continue for a period of five (5) days after notice of such default has been
received from the Holder; or; (b) a Default as defined in Section 7 of the
Bridge Agreement.
84
3. CONVERSION OPTION.
a. The Holder shall have the right, at the Holder's option, to
convert an aggregate of Fifty Thousand ($50,000) Dollars of the principal due
and payable on this Note into fully paid and non-assessable but unregistered
(i.e. restricted) shares of the Maker's common stock, no par value per share
(the "Convertible Shares") on the basis of one Convertible Share for each $.50
in amount of principal due and owing on this Note as of the date of conversion,
up to a maximum of 100,000 Convertible Shares if the entire $50,000 amount of
principal is converted. In the event the Maker shall have closed the
Reorganization when the Holder exercises its conversion privilege, the Maker
shall deliver to the Holder an aggregate of 100,000 shares of the Holder's
common stock, $.01 par value per share received by the Maker from the Holder in
the Reorganization (the "New Convertible Shares").
b. On presentation to the Maker of a duly executed Notice of
Conversion in the form annexed hereto as Exhibit "A" together with this Note,
the Holder shall be entitled, subject to the limitations herein contained, to
receive in exchange therefor a certificate or certificates for 100,000 fully
paid and non-assessable Convertible Shares or New Convertible Shares. At the
closing referenced in the Notice of Conversion (the "Closing"), the Maker shall
deliver a certificate or certificates representing the Convertible Shares or New
Convertible Shares against the Holder's delivery of the original executed copy
of this Note, which shall thereafter be and be deemed to be null and void and
paid in full to the extent of the Holder's conversion. In the event the Holder
converts less than the full $50,000 in principal into Convertible Shares or New
Convertible Shares, the Maker shall deliver a new Note to the Holder in the
unpaid principal amount. The Maker shall deliver certificated representing the
Convertible Shares or New Convertible Shares registered such name or names as
the Holder shall specify in writing to the Maker.
c. This Note shall be deemed to have been converted and the
person converting the same to have become the holder of record of Convertible
Shares or New Convertible Shares, for the purpose of receiving dividends and for
all other purposes whatever as of the date when the Notice of Conversion and
this Note are surrendered to the Maker as aforesaid. The Maker shall be required
to make any such conversion, and the surrender of this Note shall be effective
for such purpose, regardless of whether the books for the transfer of any class
of stock of the Maker are closed for any purpose.
d. The Maker shall, so long as any portion of the principal
amount of this Note shall remain unpaid, reserve and keep available solely for
the purpose of effecting the conversion of this Note, such number of Convertible
Shares or New Convertible Shares as shall from time to time be sufficient to
effect the conversion of the unpaid convertible principal balance of this Note.
e. The Maker shall pay any and all taxes which may be imposed
upon it with respect to the issuance and delivery of the Convertible Shares or
New Convertible Shares upon the conversion of this Note as herein provided. Upon
any conversion of this Note, as herein provided, no adjustment or allowance
shall be made for accumulated dividends on the Convertible Shares or New
Convertible Shares. All rights to dividends, if any, shall
85
commence as of the date of Notice of Conversion, and nothing in this sentence
shall be deemed to impose upon the Maker any obligation to pay any dividends
which shall theretofore be declared and shall be payable to holders of
Convertible Shares or New Convertible Shares, of record as of a date prior to
such conversion even though the payment date for such dividend is subsequent to
the date of conversion.
4. INVESTMENT REPRESENTATIONS. The Holder has been advised, and by the
acceptance of this Note, agree and acknowledges that none of the Convertible
Shares or New Convertible Shares issuable upon conversion of this Note shall
have been registered under the Securities Act of 1933, as amended (the "Act") or
under any state securities law; and that in including the conversion option in
this Note, the Maker is relying upon an exemption from registration based upon
the Holder's investment representations. In this regard, the Holder hereby
represents and warrants to the Maker, that: (a) in the event the Holder avails
itself of the conversion feature of this Note, the Holder will acquire the
Convertible Shares or New Convertible Shares for investment purposes and without
a view to the transfer or resale thereof; (b) in the event the Holder avails
itself of the conversion feature of this Note, the Holder will hold the
Convertible Shares or New Convertible Shares for one year or as otherwise
required by law; (c) any sale of the Convertible Shares or New Convertible
Shares will be accomplished only in accordance with the Act and the rules and
regulations of the Securities and Exchange Act adopted thereunder; (d) as a
condition precedent to any conversion hereunder, the Holder will deliver to the
Maker a duly executed standard form of investment letter; and (e) the Holder
hereby consents to the continuance or issuance by the Maker of a stop transfer
order against any and all certificates representing the Convertible Shares or
New Convertible Shares on the books and records of the Maker and/or its transfer
agent; and consents to the Maker placing an investment legend on any and all
certificates representing the Convertible Shares or New Convertible Shares.
5. ADJUSTMENT OF CONVERSION RATE. The conversion rate provided herein
shall be subject to adjustment from time to time only as follows: If, as a
result of a reorganization, recapitalization or stock split, the outstanding
shares of common stock of the Maker are increased or decreased, or changed into
or exchanged for a different number or kind of shares of stock or securities of
the Maker, or of another corporation, or changed into or exchanged for cash, or
if all or substantially all of the Maker's properties and assets are distributed
to the holders of the Maker's common stock, or if there is a distribution upon
the shares of the Maker's common stock, by way of a spin-off of any shares of
capital stock or other securities of any subsidiary or other corporation or
entity, then, upon any conversion hereof after the record date for determination
of the holders of the shares of the Maker's common stock entitled to participate
in any such event, the Holder hereof shall be entitled to receive such kind and
number of shares of stock or securities or other property or cash as he would
have been entitled to receive had he owned the Convertible Shares or New
Convertible Shares issuable upon conversion at the time of that record date. If
the event involves another corporation or another entity, then the Maker shall,
as part of the transaction, make adequate provision for the holder hereof
thereafter to receive the
86
securities, property or cash to which he is entitled under this Section.
Notwithstanding the foregoing, the conversion rate shall not be adjusted by
virtue of the Reorganization.
6. WAIVER OF PRESENTMENT, ETC. The Maker of this Note hereby waives
presentment for payment, demand, notice of non-payment and dishonor, protest and
notice of protest; and waives trial by jury in any action or proceeding arising
on, out of, under or by reason of this Note.
The rights and remedies of the Holder hereof under this Note shall be
deemed cumulative, and the exercise of any right or remedy shall not be regarded
as barring any other remedy or remedies. The institution of any action to
recovery any portion of the indebtedness evidenced by this Note shall not be
deemed a waiver of any other right of the Holder hereof.
7. STATUS OF REGISTERED HOLDER. The Maker may treat the registered
holder of this Note as the absolute owner of this Note for the purpose of making
payments of interest and for all other purposes and shall not be affected by any
notice to the contrary.
8. NOTICES. Any notice required or contemplated by this Note shall be
deemed sufficiently given if sent by registered or certified mail or via
overnight courier to the Maker at its principal office or to the Holder at the
Holder's address shown on the books of the Maker or at such other address as the
Holder may delegate in a notice for that purpose and shall be deemed to have
been sent on the date of mailing or the airbill.
9. HEADINGS. The headings in this Note are solely for convenience of
reference and shall not affect its interpretation.
10. ASSIGNMENTS. This Note is binding upon and shall inure to the
benefit of the Maker and the Holder and their respective successors. Neither the
Maker nor the Holder shall assign or transfer any rights or obligations
hereunder, except that the Maker may, with the express prior written consent of
the Holder, assign or transfer this Note to a successor corporation in the event
of a merger, consolidation or transfer or sale of all or substantially all of
the assets of the Maker (other than the Reorganization as defined in the Bridge
Agreement), provided that no such further assignment shall relieve the Maker
from liability for the obligations assumed by it hereunder.
11. LAWS OF THE STATE OF NEW JERSEY. This Note shall be deemed to be
made, executed and delivered in, governed by and interpreted under and construed
in all respects in accordance with the laws of the State of New Jersey,
irrespective of the place of domicile or residence of any Holder. In the event
of a controversy arising out of the interpretation, construction, performance or
breach of this Agreement, the Maker and the Holder hereby agree and consent to
the jurisdiction and venue of the Superior Court of the State of New Jersey,
Xxxxxx County and/or the United States District Court for the District of New
Jersey; and further agree and consent that l service or process by mail or
overnight package delivery service in any such action or proceeding outside of
the State of New Jersey and Xxxxxx County shall be tantamount to service in
person within the State of New
87
Jersey and Xxxxxx County and shall confer personal jurisdiction and venue upon
either of the said courts.
The acceptance of any installments or payments by the Holder hereof
after the due date herein, or the waiver of any other or subsequent breach or
default shall not prevent the Holder hereof from immediately pursuing any or all
of his remedies.
XxxXxxxxx.xxx, Inc
By: /s/ XXXXXX X. XXXXXX
------------------------------------
Xxxxxx X. Xxxxxx, President
ACCEPTED:
Techscience Industries, Inc.
By: /s/ XXXXX X. XXXX
------------------------------------
Xxxxx X. Xxxx, President
88
NOTICE OF CONVERSION
(To be signed only upon conversion of the Note.)
To: XxxXxxxxx.xxx, Inc. or Techscience Industries, Inc.
The undersigned, the holder of this Note, hereby irrevocably elects to
exercise the conversion rights represented by this Note for, and to acquire
thereunder, pursuant to and in accordance with the terms of this Note, an
aggregate of ___________ shares of Common Stock, no par value per share (the
"PPI Shares") of XxxXxxxxx.xxx, Inc. ("PPI") or an aggregate of ___________
shares of Common Stock, $.01 par value per share (the "TSCI Shares") of
Techscience Industries, Inc. ("TSCI") at a conversion price of $.50 per PPI or
TSCI Share, and requests that the certificate(s) for such PPI or TSCI Shares be
issued in the name of and be delivered to the undersigned at the address
appearing on the books and records of PPI or TSCI, and if such PPI or TSCI
Shares shall not be all of the PPI or TSCI Shares converted thereunder, that a
new Note of like tenor for the balance of the unpaid and unconverted principal
amount due hereunder be delivered to the undersigned.
Dated:________________________ ________________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Note)
89
