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EXHIBIT 1
XXXXXXXXXX.XXX CORP.
FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
AUTHORIZED AGGREGATE ISSUE $1,500,000
SERIES A THROUGH F
CONVERTIBLE FOR COMMON STOCK OF THE COMPANY
MATURITY: OCTOBER 31, 2003
INVESTMENT AGREEMENT
BY AND BETWEEN
XXX ENTERPRISES, INCORPORATED
AND
XXXXXXXXXX.XXX CORP.
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XXXXXXXXXX.XXX CORP.
FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
AUTHORIZED AGGREGATE ISSUE $1,500,000
SERIES A THROUGH F
CONVERTIBLE FOR COMMON STOCK OF THE COMPANY
MATURITY: OCTOBER 31, 2003
$250,000 SERIES A FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
$250,000 SERIES B FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
$250,000 SERIES C FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
$250,000 SERIES D FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
$250,000 SERIES E FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
$250,000 SERIES F FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURES
Dated as of November 1, 2000
XXX ENTERPRISES, INCORPORATED, a Delaware corporation (the
"Purchaser"), agrees with XxxxXxxxxx.xxx Corp., a Florida corporation (the
"Company"), as follows:
1. AUTHORIZATION OF DEBENTURES
The Company will authorize the issue and sale of:
(a) $250,000 Series A Floating Rate Subordinated
Convertible Debentures (the "Series A Debenture"), such term to include
each Series A Debenture delivered from time to time in accordance with
this Agreement);
(b) $250,000 Series B Floating Rate Subordinated
Convertible Debentures (the "Series B Debenture"), such term to include
each Series B Debenture delivered from time to time in accordance with
this Agreement);
(c) $250,000 Series C Floating Rate Subordinated
Convertible Debentures (the "Series C Debenture"), such term to include
each Series C Debenture delivered from time to time in accordance with
this Agreement);
(d) $250,000 Series D Floating Rate Subordinated
Convertible Debentures (the "Series D Debenture"), such term to include
each Series D Debenture delivered from time to time in accordance with
this Agreement);
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(e) $250,000 Series E Floating Rate Subordinated
Convertible Debentures (the "Series E Debenture"), such term to include
each Series E Debenture delivered from time to time in accordance with
this Agreement); and
(f) $250,000 Series F Floating Rate Subordinated
Convertible Debentures (the "Series F Debenture"), such term to include
each Series F Debenture delivered from time to time in accordance with
this Agreement).
The Series A Debenture, Series B Debenture, Series C Debenture, Series D
Debenture, Series E Debenture and Series F Debenture shall be referred to in
this Agreement collectively as the "Debentures", such term to include any such
debentures issued in substitution therefor pursuant to Section 13 of this
Agreement. The Series A Debenture, Series B Debenture, Series C Debenture,
Series D Debenture, Series E Debenture and Series F Debenture shall be
substantially in the forms set out in EXHIBIT 1, EXHIBIT 2, EXHIBIT 3, EXHIBIT
4, EXHIBIT 5 and EXHIBIT 6 respectively, with such changes therefrom, if any, as
may be approved by Purchaser and the Company. Certain capitalized terms used in
this Agreement are defined in this Agreement or in SCHEDULE A. References to a
"Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an
Exhibit attached to this Agreement, and references to Sections are, unless
otherwise specified, references to Sections of this Agreement.
2. SALE AND PURCHASE OF DEBENTURE
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to Purchaser and Purchaser will purchase from the Company, at the
Closing and Additional Closings provided for in Section 3, Debentures in the
principal amount and in the Series specified in EXHIBITS 1 through 6, at the
purchase price of 100% of the principal amount thereof, and Reference Rate of
interest, redemption and conversion rights and other terms and conditions as
provided therein.
3. CLOSING AND ADDITIONAL CLOSINGS
3.1 Closing.
The sale and purchase of the Series A Debenture to be purchased by
Purchaser shall occur at a closing (the "Closing") on October 31, 2000 (the
"Closing Date"). At the Closing the Company will deliver to Purchaser the Series
A Debenture to be purchased by Purchaser in the form of a single Debenture (or
such greater number of Debentures in denominations of at least $50,000 as
Purchaser may request) registered in Purchaser's name (or in the name of
Purchaser's nominee). The Company acknowledges receipt of Purchaser's $100,000
payment on October 3, 2000, and (b) Purchaser's $150,000 payment on October 13,
2000 for the Series A Debenture. If at the Closing the Company shall fail to
tender such Debenture to Purchaser as provided above in this Section 3, or any
of the conditions specified in Section 4 shall not have been fulfilled to
Purchaser's satisfaction, Purchaser shall, at Purchaser's election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights Purchaser may have by reason of such failure or such nonfulfillment. The
Company shall deliver to Purchaser an Officer's Certificate and Secretary's
Certificate dated the Closing Date in a form reasonably acceptable to
Purchaser's counsel.
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3.2 Additional Closings.
The sale and purchase of the Series B - F Debentures to be purchased by
Purchaser shall occur at closings (the "Additional Closing") on the dates set
forth on SCHEDULE 3.2 (each an "Additional Closing Date"). At each Additional
Closing the Company will deliver the appropriate Series B - F Debentures to be
purchased by Purchaser in accordance with the each Additional Closing Date in
the form of a single Debenture (or such greater number of Debentures in
denominations of at least $50,000 as Purchaser may request) registered in
Purchaser's name (or in the name of Purchaser's nominee), against delivery by
Purchaser to the Company or its order of immediately available funds in the
amount of the purchase price therefor by wire transfer of immediately available
funds for the account of the Company or by Xxx check sent via courier for next
day delivery. If at any Additional Closing the Company shall fail to tender such
Debenture to Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to Purchaser's
reasonable satisfaction, Purchaser shall, at Purchaser's election, be relieved
of all further obligations under this Agreement, without thereby waiving any
rights Purchaser may have by reason of such failure or such nonfulfillment. The
Company shall deliver to Purchaser an Officer's Certificate and a Secretary's
Certificate dated the Additional Closing Date in a form reasonably acceptable to
Purchaser's counsel.
4. CONDITION TO CLOSING
The Purchaser's obligation to purchase and pay for the Debentures and
the Company's obligation to sell the Debentures to Purchaser at the Closing and
each Additional Closing is subject to the the condition that the Company shall
have performed and complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing and each Additional Closing after giving effect to the issue and sale of
the Debentures. No Default or Event of Default shall have occurred and be
continuing.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchaser on the Closing Date that:
5.1 Organization; Power and Authority.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the Properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and the Debentures and to perform the
provisions hereof and thereof.
5.2 Authorization, etc.
This Agreement and the Other Agreements and the sale of the Debentures
have been duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery of this
Agreement, each Other Agreement and each Debenture will constitute, a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as
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such enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3 No Undisclosed Liabilities.
Except as disclosed in the financial statements referred to in Section
5.5, such financial statements taken as a whole do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. With respect to the financial statements referred to in
Section 5.5, for the period ended September 30, 2000, there has been no change
in the financial condition, operations, business or Properties of the Company or
any of its Subsidiaries except changes disclosed in such financial statements
that individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
5.4 Organization and Ownership of Shares of Subsidiaries.
(a) SCHEDULE 5.4 is (except as noted therein) a complete
and correct list of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its capital
stock or similar equity interests outstanding owned by the Company and
each other Subsidiary.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in SCHEDULE 5.4 as
being owned by the Company and its Subsidiaries have been validly
issued, are fully paid and nonassessable and are owned by the Company
or another Subsidiary free and clear of any Lien (except as otherwise
disclosed in SCHEDULE 5.4).
(c) Each Subsidiary identified in SCHEDULE 5.4 is a
corporation or other legal entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal entity
and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to
which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or
other power and authority to own or hold under lease the Properties it
purports to own or hold under lease and to transact the business it
transacts and proposes to transact.
5.5 Financial Statements.
The Company has delivered to Purchaser copies of the financial
statements of the Company and its Subsidiaries as of the Closing, and additional
financial statements as required in Section 7.1 hereof. All of said financial
statements (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
5.6 Compliance with Laws, Other Instruments, etc.
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The execution, delivery and performance by the Company of this
Agreement and the Debentures will not
(a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any
Property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other material agreement or
instrument to which the Company or any Subsidiary is bound or by which
the Company or any Subsidiary or any of their respective Properties may
be bound or affected;
(b) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to
the Company or any Subsidiary; or
(c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the Company or
any Subsidiary.
5.7 Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement or the
Debentures.
5.8 Litigation; Observance of Statutes and Orders.
(a) Except as disclosed in SCHEDULE 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary
or any Property of the Company or any Subsidiary in any court or before
any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
under any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law,
ordinance, rule or regulation of any Governmental Authority, which
default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
5.9 Taxes.
Except as disclosed in writing to the Purchaser, the Company and its
Subsidiaries have filed all income tax returns that are required to have been
filed in any jurisdiction, and have paid all taxes shown to be due and payable
on such returns and all other taxes and assessments payable by them, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent, except for any taxes and assessments (a) the amount of
which is not individually or in the aggregate material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company and its Subsidiaries have previously furnished in writing to
Purchaser a complete and correct listing of any current violations of this
Section 5.9.
5.10 Title to Property, Leases.
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The Company and its Subsidiaries have good and sufficient title to
their respective material Properties, including all such Properties reflected in
the most recent audited balance sheet referred to in Section 5.5 or purported to
have been acquired by the Company or any Subsidiary after said date (except as
sold or otherwise disposed of in the ordinary course of business), in each case
free and clear of Liens prohibited by this Agreement, except for those defects
in title and Liens that, individually or in the aggregate, would not have a
Material Adverse Effect. All material leases are valid and subsisting and are in
full force and effect in all material respects.
5.11 Licenses, Permits, etc.
Except as disclosed in SCHEDULE 5.11, the Company and its Subsidiaries
own or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
are material, without known conflict with the rights of others, except for those
conflicts that, individually or in the aggregate, would not have a Material
Adverse Effect.
5.12 Compliance with ERISA.
The Company and each Subsidiary have operated and administered each
employee benefit plan subject to ERISA in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect.
5.13 Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Debentures or any similar securities, for sale to, or solicited any offer to buy
any of the same from, or otherwise approached or negotiated in respect thereof
with, any Person other than Purchaser, and not more than 39 other Institutional
Investors, each of which has been offered the Debentures at a private sale for
investment. Neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of the Debentures
to the registration requirements of Section 5 of the Securities Act.
5.14 Margin Regulations.
No part of the proceeds from the sale of the Debentures hereunder will
be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or
trading in any securities under such circumstances as to involve the Company in
a violation of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (112 CFR 220). Margin
stock does not constitute more than 1 % of the value of the consolidated assets
of the Company and its Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 1% of the value of such
assets. As used in this Section, the terms "margin stock" and "purpose of buying
or carrying" shall have the meanings assigned to them in said Regulation G.
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5.15 Existing Indebtedness.
The Company has disclosed to Purchaser a complete and correct list of
all outstanding Indebtedness of the Company and its Subsidiaries as of the date
hereof (the "Existing Indebtedness"), since which date there has been no
material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its Subsidiaries.
Neither the Company nor any Subsidiary is in default and no waiver of default is
currently in effect in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary, and no event or condition exists
with respect to any Indebtedness of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment. SCHEDULE
5.15 contains a complete and correct listing of the Existing Indebtedness of the
Company to which the Debentures are subordinated (collectively, the "Senior
Existing Indebtedness").
5.16 Foreign Assets Control Regulations, etc.
Neither the sale of the Debentures by the Company hereunder nor its use
of the proceeds thereof will violate the Trading with the Enemy Act, as amended,
or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
5.17 Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as
amended, or the Federal Power Act, as amended.
5.18 Disclosure.
This Agreement (including without limitation the Schedules and Exhibits
hereto) does not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained herein in the light of
the circumstances under which they were made, not misleading.
5.19 Transactions With Affiliates.
Except for employment agreements and stock option agreements which have
been previously been disclosed in the Company's Securities Act and Exchange Act
filings and which are listed on SCHEDULE 5.19 or Indebtedness listed in SCHEDULE
5.15, no director, officer, employee or stockholder of the Company, or member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or any member of the family of any such person,
has a substantial interest or is an officer, director, trustee, partner or
holder of more than 5% of the outstanding capital stock thereof, is a party to
any Material transaction with the Company, including any Material contract,
agreement or other arrangement providing for the employment of, furnishing of
services by, rental of real or personal Property from, or otherwise requiring
payments to, any such person or firm.
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5.20 Additional Disclosures.
The Company has provided Purchaser with the latest version of (a) its
Business Plan and (b) most recent draft of the Company's budget for the fiscal
year 2000, both of which are complete and correct as of the date hereof. The
Company will apply the proceeds from the sale of the Debentures consistent with
the Business Plan.
5.21 Authorized Capital Stock.
The authorized capital stock of the Company on this date of this
Agreement is set forth on SCHEDULE 5.21. The Company covenants and agrees that
at the time of any Conversion Date (as defined in Section 8.6), 6,902,429 shares
(reduced to reflect conversions previously made under Section 8.6) of the
Company's Common Stock, par value 0.001 per share ("Common Stock"), will be
validly authorized, issued and outstanding, fully paid and nonassessable, free
from all preemptive rights, taxes, Liens and charges with respect to the issue
thereof, with no personal liability attaching to the ownership thereof. On the
date of this Agreement, there are 6,902,429 shares of Common Stock reserved for
issuance in connection with Purchaser's conversion rights set forth in Section
8.6. The Company covenants and agrees that it will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Common Stock to provide for issuance in connection with your conversion rights
set forth in Section 8.6. The Company further covenants and agrees the Company
will from time to time take all such action as may be required to assure that
the stated or par value per share of Common Stock is at all times equal to or
less than the effective conversion price per share of Common Stock issuable upon
conversion of the Debentures. As of the date of this Agreement SCHEDULE 5.21
sets forth shares of Common Stock reserved for issuance in connection with
options which have been granted or are currently committed to be granted or have
not yet been exercised. As of the date of this Agreement the number of shares of
Common Stock and number of subscriptions, warrants, options, convertible
securities and other rights (contingent or other) to purchase or otherwise
acquire equity securities of the Company are set forth in SCHEDULE 5.21. The
designations, powers, preferences rights, qualifications, limitations and
restrictions on the date of this Agreement in respect of each class and series
of authorized capital stock of the Company are set forth in SCHEDULE 5.21. The
Company on the date of this Agreement has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any of its equities securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof except as set forth in this Agreement, the Registration Rights
Agreement of even date by and between the Company and Purchaser (the
"Registration Rights Agreement") and SCHEDULE 5.21. The Company on the date of
this Agreement is not a party to any voting trusts or agreements, stockholders
agreements, pledge agreements, buy-sell agreements, agreements containing rights
of first refusal or preemptive rights, and there are no proxies relating to any
securities of the Company, except for this Agreement. To the knowledge of the
Company's Chief Financial Officer, assuming the accuracy of the representations
and warranties contained in SCHEDULE 5.21, all of the outstanding securities of
the Company have been issued in compliance with all applicable U.S. and Canadian
securities laws concerning the issuance of securities.
5.22 Intellectual Property; Proprietary Information of Third
Parties.
The Company is in compliance as of the date of this Agreement with all
of its representations, warranties and covenants with respect to the
Intellectual Property, as defined in the First Amendment to the Loan and
Security Agreement made and dated as of September 19, 2000 among Purchaser and
XxxxXxxxxx.Xxx Corp., a Florida corporation, and its Wholly-Owned Subsidiaries
Xceedx Technologies Inc. and WelcomeTo Search Engine Inc., corporations
organized under the laws of the province of British Columbia, Canada (the
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"Borrowers"), which amends that certain Loan and Security Agreement dated as of
August 16, 2000, among the Borrowers and the Purchaser (the "Loan and Security
Agreement").
6. REPRESENTATIONS OF THE PURCHASER
6.1 Purchase for Investment.
Purchaser represents that the Debentures are being purchased for its
account and not with a view to the distribution or resale thereof, provided that
the disposition of Purchaser's Property shall at all times be within Purchaser's
control. Purchaser understands that the Debentures have not been registered
under the Securities Act (or similar Canadian laws) and applicable U.S. blue sky
laws and may be resold in the United States only if registered pursuant to the
provisions of the Securities Act and applicable U.S. blue sky laws or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that the
Company is not required to register the Debentures.
6.2 Organization; Power and Authority.
The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Purchaser has the corporate power and authority to own or
hold under lease the Properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the Other Agreements and the Debentures and to
perform the provisions hereof and thereof.
6.3 Authorization, etc.
This Agreement and the Other Agreements and the purchase of Debentures
have been duly authorized by all necessary corporate action on the part of the
Purchaser, and this Agreement constitutes, and upon execution and delivery this
Agreement and the Registration Rights Agreement will constitute, a legal, valid
and binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
6.4 Disclosure.
Purchaser's representations and warranties do not contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained herein, in the light of the circumstances under which they
were made, not misleading.
6.5 Government Authorization.
No consent, approval or authorization of, or registration, filing or
declaration with any Governmental Authority is required in connection with the
execution, delivery or performance by the Purchaser of this Agreement or the
Debentures.
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7. INFORMATION AS TO COMPANY
7.1 Financial and Business Information.
The Company shall deliver to each holder of the Debentures:
(a) Quarterly Statements -- within 60 days after the end
of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal year),
duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes
in shareholders' equity and cash flows of the Company and its
Subsidiaries, for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly
financial statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified
above of copies of the Company's Quarterly Report on Form 10-QSB (or
equivalent form applicable to the Company) prepared in compliance with
the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section
7.1 (a);
(b) Annual Statements -- within 120 days after the end of
each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company
and its Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes
in shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by an opinion thereon of independent
certified public accountants of recognized standing, which opinion
shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made
in accordance with generally accepted auditing standards, and that such
audit provides a reasonable basis for such opinion in the
circumstances, provided that the delivery within the time period
specified above of the Company's Annual Report on Form 10-KSB (or
equivalent form applicable to the Company) for such fiscal year
(together with the Company's annual report to shareholders, if any,
prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements
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therefor and filed with the Securities and Exchange Commission shall
be deemed to satisfy the requirements of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming
available, one copy of (i) each financial statement, report, notice or
proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic report,
each registration statement (other than on Form S-8 or similar form)
that shall have become effective (without exhibits except as expressly
requested by such holder), and each final prospectus and all amendments
thereto filed by the Company or any Subsidiary with the Securities and
Exchange Commission;
(d) Notice of Default or Event of Default -- promptly,
and in any event within five days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default, a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) Requested Information -- with reasonable promptness,
such other data and information relating to the business, operations,
affairs, financial condition, assets or Properties of the Company or
any of its Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Debentures as from time
to time may be reasonably requested by any such holder of Debentures,
including, without limitation, a complete and correct version of its
Business Plan and Annual Budget in at least such form and content as
delivered to Purchaser as of the date hereof.
7.2 Officer's Certificate.
Each set of financial statements delivered to a holder of Debentures
pursuant to Section 7.1 (a) or Section 7.1 (b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the
Company was in compliance with the requirements of Section 10.1 through
Section 10.6, inclusive, during the quarterly or annual period covered
by the statements then being furnished (including with respect to each
such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and to the best of such officer's
knowledge no condition or event that constitutes a Default or an Event
of Default existed during the period covered by the statements or, if
any such condition or event existed or exists specifying the nature and
period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
7.3 Inspection.
The Company shall permit the representatives of each holder of
Debentures:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice
to the Company, to visit the principal executive office of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the Company's officers, and, with the consent of the
Company (which consent will not be unreasonably withheld) to
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visit the other offices and Properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then
exists, at the expense of the Company, to visit and inspect any of the
offices or Properties of the Company or any Subsidiary, to examine all
their respective books of account, records, reports and other papers,
to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times and as
often as may be requested.
8. REDEMPTION OF THE DEBENTURES
8.1 Optional Redemption. The Debentures will not be redeemable
prior to October 31, 2003, unless (x) the quoted price on any securities
exchange registered under the Securities Exchange Act of 1934 or through NASDAQ
of the Common Stock (the "Quoted Price") shall have equaled or exceeded 130% of
the Conversion Price (as defined in Section 8.6) for at least thirty consecutive
days ended with five trading days prior to the date notice of such optional
redemption is given, and (y) the Company delivers notice to the Purchaser that
the Company in good faith intends to file a registration statement for a United
States public offering within twenty days of such notice. The notice shall
provide for a redemption date (the "Optional Redemption Date") not less than
fifteen days from the date thereof. The Company will redeem the principal amount
of the Debentures at a redemption price of 100% of principal amount, plus
accrued interest to the Optional Redemption Date. The Company may redeem the
principal amount of the Debentures to be redeemed pursuant to this paragraph 8.1
by subtracting 100 percent of the principal amount of the Debentures that
Debenture Holder shall have converted to Common Stock, which the Debenture
Holder has delivered to the Company for cancellation. The Company may redeem the
amount of the Debentures only once pursuant to this Section 8.1.
8.2 Mandatory Redemption. The Company will redeem the principal
amount of the Debentures on October 31, 2003 (the "Mandatory Redemption Date"),
at a redemption price of 100% of principal amount, plus accrued interest to the
Mandatory Redemption Date. The Company may redeem the principal amount of the
Debentures to be redeemed pursuant to this Section 8.2 by subtracting 100
percent of the principal amount of the Debentures that Debenture Holder shall
have converted to Common Stock, which the Debenture Holder has delivered to the
Company for cancellation. The Company may redeem the amount of the Debentures
only once pursuant to this Section 8.2. There shall be no earlier redemption of
the Debentures without Purchaser's prior written consent.
8.3 Notice of Redemption.
Notice of the mandatory redemption date will be mailed at least thirty
days but not more than sixty days before the Mandatory Redemption Date to the
Debenture Holder at its registered address in accordance with the notice
provisions hereof in this Agreement.
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8.4 Allocation of Partial Prepayments.
In the case of each partial prepayment of the Debentures, the
principal amount of the Debentures to be prepaid shall be allocated among all of
the Debentures at the time outstanding in proportion, as nearly as practicable,
to the respective unpaid principal amounts thereof not theretofore called for
prepayment, without distinguishing among the different Series.
8.5 Maturity; Surrender, etc.
In the case of each prepayment of Debentures pursuant to this Section
8, the principal amount of each Debenture to be prepaid shall mature and become
due and payable on the date fixed for such prepayment, together with interest on
such principal amount accrued to such date. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest, as aforesaid, interest on such principal amount
shall cease to accrue. Any Debenture paid or prepaid in full shall be
surrendered to the Company and cancelled and shall not be reissued, and no
Debenture shall be issued in lieu of any prepaid principal amount of any
Debenture.
8.6 Conversion.
A Debenture Holder may convert any Debenture, in whole or in part,
into fully paid and non-assessable Common Stock of the Company at any time
before the close of business on the Optional Redemption Date or Mandatory
Redemption Date, as the case may be (each such conversion is a "Conversion
Date"), subject at all times thereafter to the benefits of the Registration
Rights Agreement in accordance with the terms thereof and the terms of the
Debentures attached as EXHIBITS 1 through 6. If the Debenture is called for
redemption, the holder may convert it at any time before the close of business
on the Optional Redemption Date or Mandatory Redemption Date, as the case may
be. The Debenture shall be converted, subject to adjustment as provided in
Section 5 of each Debenture, on the basis of the aggregate of (a) one (1) share
of Common Stock of the Company for each $0.2173 of principal debt balance due on
the Debenture (the "Conversion Price"), and (b) one (1) share of Common Stock of
the Company times the quotient of (i) the accrued interest on the Debenture to
the Conversion Date divided by (ii) the Quoted Price as defined in Section 8.1
hereof (the "Interest Conversion Rate"). No fraction of a share of Common Stock
shall be deliverable in payment of principal or accrued interest on the
Debenture, but any fraction of a share shall be rounded upwards to the nearest
whole share.
9. AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Debentures are
outstanding:
9.1 Compliance with Law.
The Company will, and will cause each of its Subsidiaries to, comply
with all laws, ordinances or governmental rules or regulations to which each of
them is subject, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective Properties or to the conduct of
their respective businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect.
9.2 Insurance.
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The Company will, and will cause each of its Subsidiaries to, maintain,
with financially sound and reputable insurers, insurance with respect to their
respective Properties and businesses against such casualties and contingencies,
of such types, on such terms and in such amounts (including deductibles,
co-insurance and self-insurance, if adequate reserves are maintained with
respect thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly situated.
9.3 Maintenance of Properties.
The Company will, and will cause each of its Subsidiaries to, maintain
and keep, or cause to be maintained and kept, their respective Properties in
good repair, working order and condition (other than ordinary wear and tear), so
that the business carried on in connection therewith may be properly conducted
at all times, provided that this Section shall not prevent the Company or any
Subsidiary from discontinuing the operation and the maintenance of any of its
Properties if such discontinuance is desirable in the conduct of its business
and the Company has concluded that such discontinuance would not, individually
or in the aggregate, have a Material Adverse Effect.
9.4 Payment of Taxes.
As soon as practical after the date hereof (but not more than 90 days
after the date hereof), the Company will, and will cause each of its
Subsidiaries to, file all income tax or similar tax returns required to be filed
in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges,
or levies payable by any of them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, provided that
neither the Company nor any Subsidiary need pay any such tax or assessment if
(a) the amount, applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate proceedings,
and the Company or a Subsidiary has established adequate reserves therefor in
accordance with GAAP on the books of the Company or such Subsidiary or (b) the
nonpayment of all such taxes and assessments in the aggregate would not
reasonably be expected to have a Material Adverse Effect.
9.5 Corporate Existence, etc.
The Company will at all times preserve and keep in full force and
effect its corporate existence. Subject to Section 10.3 and Section 10.4, the
Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Subsidiaries and all rights and franchises of
the Company and its Subsidiaries unless, in the good faith judgment of the
Company, the termination of or failure to preserve and keep in full force and
effect such corporate existence, right or franchise would not, individually or
in the aggregate, have a Material Adverse Effect.
9.6 Update of Disclosure Materials.
The Company will update its disclosures to the Purchaser referenced in
Sections 5.9, 5.15 and 5.20.
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10. NEGATIVE COVENANTS
The Company covenants that, so long as Purchaser has purchased all of
the Series A-F Debentures, and so long as any of the Debentures are outstanding:
10.1 Total Indebtedness.
The Company will not, and will not permit any Subsidiary to, at any
time, directly or indirectly create, incur, issue, assume, guaranty or otherwise
become liable with respect to any Indebtedness outstanding other than (a) the
Existing Indebtedness existing on the Closing Date and each Additional Closing
Date as contemplated under the terms of the Series A - F Debentures or (b)
Indebtedness incurred in respect of and not exceeding the amount of any Lien
permitted under clauses (i), (ii), (iii), (iv), (v), and (vi) of Section
10.6(a), unless the consent of the Purchaser shall have been obtained.
10.2 Subsidiary Indebtedness.
The Company will not, at any time, permit any Subsidiary to have any
Indebtedness outstanding other than the Existing Indebtedness of a Subsidiary
existing on the Closing Date and described in SCHEDULE 5.15 or an extension,
renewal or refunding of the Existing Indebtedness, provided that the principal
amount of such extended, renewed or refunded Existing Indebtedness does not
exceed the principal amount of the Existing Indebtedness outstanding immediately
prior to such extension, renewal or refunding;
10.3 Mergers, Consolidations, etc.
The Company shall not consolidate with or merge with any other
corporation or convey, transfer or lease substantially all of its assets in a
single transaction or series of transactions to any Person or change its
jurisdiction of incorporation without obtaining the prior written consent of
Purchaser. No such conveyance, transfer or lease of substantially all of the
assets of the Company shall have the effect of releasing the Company or any
successor corporation that shall theretofore have become such in the manner
prescribed in this Section 10.3 from its liability under this Agreement or the
Debentures.
10.4 Sales of Assets.
(a) Transfers of Property. The Company will not, and will
not permit any Subsidiary to, sell (including, without limitation, any
sale and subsequent leasing as lessee of such Property), lease as
lessor, transfer, or otherwise dispose of a Substantial Part of the
Property of the Company and the Subsidiaries (individually, a
"Transfer" and collectively, "Transfers"), except Transfers from a
Subsidiary to the Company.
(b) Transfers of Subsidiary Stock. The Company will not,
and will not permit any Subsidiary to, Transfer any shares of the stock
(or any warrants, rights or options to purchase stock or other
Securities exchangeable for or convertible into stock) of a Subsidiary
(such stock, warrants, rights, options and other Securities herein
called "Subsidiary Stock"), nor will any Subsidiary issue, sell or
otherwise dispose of any of its own Subsidiary stock; provided,
however, that the foregoing restrictions do not apply to:
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(i) the issuance by a Subsidiary of any of its
own Subsidiary stock to the Company or a Wholly-Owned Subsidiary;
(ii) Transfers by a Subsidiary of any of
Subsidiary Stock to the Company or a Wholly-Owned Subsidiary; and
(iii) the issuance by a Subsidiary of directors'
qualifying shares.
For purposes of determining the book value of Property constituting Subsidiary
Stock being Transferred as provided in clause (iv) above, such book value shall
be deemed to be the aggregate book value of all assets of the Subsidiary that
shall have issued such Subsidiary Stock.
(c) Subsidiary Mergers, etc. Any merger or consolidation of any
Subsidiary with or into any Person that results in a Person other than the
Company or a Wholly-Owned Subsidiary owning Subsidiary stock of such Subsidiary
shall be deemed to be a Transfer of the Subsidiary stock of such Subsidiary.
10.5 Investments.
The Company will not, and will not permit any Subsidiary to, make any
Investment other than:
(a) Investments in Property to be used in the ordinary course of
business of the Company and the Subsidiaries;
(b) Investments consisting of current assets arising from the sale
of goods and services in the ordinary course of business of the Company and the
Subsidiaries;
(c) Investments in the ordinary course of business of the Company
and the Subsidiaries in one or more Subsidiaries or any corporation that
concurrently with such Investment becomes a Subsidiary;
(d) Investments existing on the Closing Date and listed in
SCHEDULE 5.15;
(e) Investments in United States or Canadian Governmental
Securities, provided that such Investments mature within 365 days from the date
of acquisition thereof;
(f) Investments in certificates of deposit or banker's acceptances
maturing within 365 days from the date of acquisition thereof issued by any bank
or trustee;
(g) Investments in commercial paper having, at the time of
acquisition, an assigned rating of at least "Al" by S&P or "P1" by Xxxxx'x (or
an equivalent rating by another credit rating agency of recognized national
standing in the United States of America), provided that such commercial paper
matures within 270 days from the date of acquisition thereof;
(h) Investments in Repurchase Agreements;
(i) Investments in any tax-exempt obligation of any State of the
United States of America or province of Canada or municipality thereof that at
the time of acquisition thereof have an assigned rating of at least "AA" by S&P
or "Aa2" by Xxxxx'x (or an equivalent rating by another credit rating agency of
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recognized national standing in the United States of America), provided that
such obligations mature within 365 days from the date of acquisition thereof;
(j) Investments not otherwise included in clause (a) through
clause (i) above upon the prior written consent of the Purchaser.
10.6 Liens.
(a) Negative Pledge. The Company will not, and will not permit any
Subsidiary to, cause or permit, or agree or consent to cause or permit in the
future (upon the happening of a contingency or otherwise), any of their
respective Properties, whether now owned or hereafter acquired, at any time to
be subject to a Lien except:
(i) Liens for taxes, assessments or other similar
governmental charges that are not yet due and payable;
(ii) Liens incurred or deposits made in the ordinary
course of business in respect of statutory obligations or claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords
and other like Persons, provided that the obligations secured by such
Liens shall not be in default and the title of the Company or the
Subsidiary, as the case may be, to, and its right to use, the Property
subject to such Lien, is not materially adversely affected thereby;
(iii) Liens incurred or deposits made in the ordinary
course of business not incurred in connection with the borrowing of
material amounts of money;
(iv) Xxxxx, arising in connection with court proceedings,
(A) in the nature of attachments, remedies and
judgments, provided that the execution or other enforcement of
such Xxxxx is effectively stayed and the claims secured
thereby are being actively contested in good faith and by
appropriate proceedings, and
(B) securing appeal bonds, supersedeas bonds and
other similar Liens arising in connection with court
proceedings (including, without limitation, surety bonds and
letters of credit) or any other instrument serving a similar
purpose,
provided that each judgment secured by a Xxxx described in this clause
(iv) is, within 60 days after entry thereof, discharged or the
enforcement thereof is stayed pending appeal, or is discharged within
60 days after the expiration of such stay;
(v) reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions and other similar
title exceptions or encumbrances affecting real Property, provided they
do not in the aggregate materially detract from the value of such real
Property or materially interfere with their use in the ordinary conduct
of the owning Person's business;
(vi) Liens on Property of the Company or a Subsidiary,
provided that such Liens secure only obligations owing to the Company
or any other Subsidiary;
(vii) Liens outstanding on the Closing Date and listed in
SCHEDULE 5.15;
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(viii) any Lien on Property that is acquired or constructed
by the Company or any Subsidiary after the Closing Date that secures
Indebtedness incurred by the owner of such Property to pay for all or a
portion of the related purchase price or construction costs of such
Property or any improvement thereon, provided that
(A) such Lien shall not extend to or cover any
Property other than Property or any improvement thereon
acquired or constructed after the Closing Date with the
proceeds of the Indebtedness secured thereby (and shall not
secure Indebtedness other than such Indebtedness) and, if
required by the terms of the instrument originally creating
such Lien, other Property that is an improvement to or is
acquired for specific use in connection with such acquired
Property;
(B) such Lien shall secure Indebtedness in an
amount not exceeding 100% of the lesser of (1) the cost of
acquisition or construction of the Property to which such
Indebtedness relates and (2) the Fair Market Value of the
Property to which such Indebtedness relates, determined, in
each case, at the time of the incurrence of such Indebtedness;
and
(C) such Lien shall be created contemporaneously
with, or within 180 days after, the acquisition or substantial
completion of such Property;
(ix) any Lien existing on Property of a Person immediately
prior to its being consolidated with or merged into the Company or a
Subsidiary or its becoming a Subsidiary, or any Lien existing on any
Property acquired by the Company or any Subsidiary at the time such
Property is so acquired (whether or not the Indebtedness secured
thereby shall have been assumed), provided that
(A) no such Lien shall have been created or
assumed in contemplation of such consolidation or merger or
such Person's becoming a Subsidiary or such acquisition of
Property; and
(B) each such Lien shall extend solely to the
item or items of Property so acquired and, if required by the
terms of the instrument originally creating such Lien, other
Property that is an improvement to or is acquired for specific
use in connection with such acquired Property;
(x) Liens securing renewals, extensions (as to time) and
refinancing of Indebtedness secured by Xxxxx permitted by clause (vii),
clause (viii) or clause (ix) of this Section 10.6(a), provided that
(A) the amount of Indebtedness secured by each
such Lien is not increased in excess of the amount of
Indebtedness outstanding on the date of such renewal,
extension or refinancing, and the maturity of such
Indebtedness is not shortened;
(B) none of such Liens is extended to include
any additional Property of the Company or any Subsidiary; and
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(C) immediately after such renewal, extension or
refunding, no Default or Event of Default would exist.
(b) Equal and Ratable Lien; Equitable Lien. In case any
Property shall be subjected to a Lien in violation of Section 10.6(a),
the Company will forthwith make or cause to be made provision whereby
the Debentures will be secured equally and ratably as to such Property
with all other obligations secured thereby pursuant to such agreements
and instruments as shall be approved by the Purchaser (and, in
connection therewith, the Company shall pay any applicable stamp tax,
documentary tax, recording fee or tax or other similar tax), and the
Company will promptly cause to be delivered to each holder of a
Debenture an opinion of independent counsel satisfactory to the
Purchaser to the effect that such agreements and instruments are
enforceable (subject to customary bankruptcy exceptions not related to
fraudulent conveyances) in accordance with their terms, and in any such
case the Debentures shall have the benefit, to the fullest extent that,
and with such priority as, the holders of Debentures may be entitled
under applicable law, of an equitable Lien on such Property (and any
proceeds thereof) securing the Debentures (provided that,
notwithstanding the foregoing, each holder of Debentures shall have the
right to elect at any time, by delivery of written notice of such
election to the Company, to cause the Debentures held by such holder
not to be secured by such Lien or such equitable Lien). Any violation
of this Section 10.6 will constitute an Event of Default, whether or
not any such provision is made pursuant to this Section 10.6(b).
10.7 Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, enter
into, directly or indirectly, any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of Properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Subsidiary), except in the ordinary
course of business pursuant to the reasonable requirements of the Company's or
such Subsidiary's business and upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate.
11. EVENTS OF DEFAULT
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
on any Debenture or Note issued pursuant to the Loan and Security
Agreement when the same becomes due and payable, whether at maturity or
at a date fixed for prepayment or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest
on any Debenture or Note issued pursuant to the Loan and Security
Agreement for more than five Business Days after the same becomes due
and payable; or
(c) the Company defaults in the performance of or
compliance with any term not referred to in clauses (a) and (b) of this
Section 11 and contained in Section 10.1 through Section 10.6
heretofore under the Other Agreements, including, without limitation,
the Loan and Security Agreement and such default is not remedied within
5 days after the earlier of (i) a Responsible Officer obtaining actual
knowledge of such default and (ii) the Company receiving written notice
of such default from any holder of a
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Debenture (any such written notice to be identified as a "notice of
default" and to refer specifically to this clause (c) of Section 11);
or
(d) the Company defaults in the performance of or
compliance with any term contained herein (other than those referred to
in clauses (a), (b) and (c) of this Section 11) and such default is not
remedied within 30 days after the earlier of (i) a Responsible Officer
obtaining actual knowledge of such default and (ii) the Company
receiving written notice of such default from any holder of a Debenture
(any such written notice to be identified as a "notice of default" and
to refer specifically to this clause (d) of Section 11); or
(e) any representation or warranty made in writing by or
on behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or incorrect
in any material respect on the date as of which made; or
(f) (i) the Company or any Significant Subsidiary is in
default (as principal or as guarantor or other surety) in the payment
of any principal of or premium or interest on any Indebtedness that is
outstanding in an aggregate principal amount of at least $250,000
beyond any period of grace provided with respect thereto, or
(ii) the Company or any Significant Subsidiary is
in default in the performance of or compliance with any term
of any evidence of any Indebtedness in an aggregate
outstanding principal amount of at least $250,000 or of any
mortgage, indenture or other agreement relating thereto or any
other condition exists, and as a consequence of such default
or condition such Indebtedness has become, or has been
declared due and payable before its stated maturity or before
its regularly scheduled dates of payment; or
(g) the Company or any Significant Subsidiary
(i) is generally not paying, or admits in
writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to
the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its
creditors,
(iv) consents to the appointment of a custodian,
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; or
(h) a court or Governmental Authority of competent
jurisdiction enters an order appointing, without consent by the Company
or any of its Significant Subsidiaries, a custodian, receiver, trustee
or
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other officer with similar powers with respect to it or with respect to
any substantial part of its Property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage of
any bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Significant Subsidiaries, or any such petition shall be filed against
the Company or any of its Significant Subsidiaries and such petition
shall not be dismissed within 60 days; or
(i) a final judgment or judgments for the payment of
money aggregating in excess of $50,000 are rendered against one or more
of the Company and its Significant Subsidiaries and which judgments are
not, within 90 days after entry thereof, bonded, discharged or stayed
pending appeal, or are not discharged within 90 days after the
expiration of such stay.
12. REMEDIES ON DEFAULT, ETC.
12.1 Acceleration.
(a) If an Event of Default with respect to the Company
described in clause (g) or clause (h) of Section 11 (other than an
Event of Default described in clause (g) (i) or described in clause
(g)(vi) by virtue of the fact that such clause encompasses clause
(g)(i)) has occurred, all the Debentures then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, the Purchaser may at any time at its or their option, by
notice or notices to the Company, declare all the Debentures then
outstanding to be immediately due and payable.
(c) If any Event of Default described in clause (a) or
clause (b) of Section 11 has occurred and is continuing, any holder or
holders of Debentures at the time outstanding affected by such Event of
Default may at any time, at its or their option, by notice or notices
to the Company, declare all the Debentures held by it or them to be
immediately due and payable.
Upon any Debentures becoming due and payable under this Section 12.1,
whether automatically or by declaration, such Debentures will forthwith mature
and the entire unpaid principal amount of such Debentures, plus (x) all accrued
and unpaid interest thereon (to the full extent permitted by applicable law),
shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby waived.
12.2 Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Debentures have become or have been declared
immediately due and payable under Section 12.1, the holder of any Debenture at
the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Debenture, or for an injunction against a violation of any of the terms hereof
or thereof, or in aid of the exercise of any power granted hereby or thereby or
by law or otherwise.
12.3 Rescission.
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At any time after any Debentures have been declared due and payable
pursuant to clause (b) or clause (c) of Section 12.1, the Purchaser, by written
notice to the Company, may rescind and annul any such declaration and its
consequences if (a) the Company has paid all overdue interest on the Debentures,
all principal on any Debentures that are due and payable and are unpaid other
than by reason of such declaration, and all interest on such overdue principal
and (to the extent permitted by applicable law) any overdue interest in respect
of the Debentures, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17, and (c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to the Debentures. No rescission and annulment under this
Section 12.3 will extend to or affect any subsequent Event of Default or Default
or impair any right consequent thereon.
12.4 No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any
Debenture in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Debenture upon any
holder thereof shall be exclusive of any other right, power or remedy referred
to herein or therein or now or hereafter available at law, in equity, by statute
or otherwise. Without limiting the obligations of the Company under Section 15,
the Company will pay to the holder of each Debenture on demand such further
amount as shall be sufficient to cover all costs and expenses of such holder
incurred in any enforcement or collection under this Section 12, including,
without limitation, reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF DEBENTURES.
13.1 Registration of Debentures.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Debentures. The name and
address of each holder of one or more Debentures, each transfer thereof and the
name and address of each transferee of one or more Debentures shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Debenture shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof, and
the Company shall not be affected by any notice or knowledge to the contrary.
The Company shall give to any holder of a Debenture, promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Debentures.
13.2 Transfer and Exchange of Debentures.
Upon surrender of any Debenture at the principal executive office of
the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Debenture or its attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Debenture or part thereof), the
Company shall execute and deliver, at the Company's expense (except as provided
below), one or more new Debentures (as requested by the holder thereof) in
exchange therefor, of the same Series as such surrendered Debenture and in an
aggregate principal amount equal to the unpaid principal amount of the
surrendered Debenture. Except with respect to the transfer of a Debenture from
the Purchaser to an Affiliate, the Company may reasonably require an opinion of
counsel of the transferee that such transfer is exempt from the registration
requirements of the Securities Act and applicable U.S. blue sky laws. Each such
new Debenture shall be payable to such Person as such holder may request and
shall be substantially in the form of EXHIBIT 1,
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EXHIBIT 2, EXHIBIT 3, EXHIBIT 4, EXHIBIT 5 or EXHIBIT 6 as applicable. Each such
new Debenture shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Debenture or dated the date of the
surrendered Debenture if no interest shall have been paid thereon. The Company
may require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Debentures. Debentures shall
not be transferred in denominations of less than $100,000, provided that if
necessary to enable the registration of transfer by a holder of its entire
holding of Debentures, one Debenture may be in a denomination of less than
$100,000. Any transferee, by its acceptance of a Debenture registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.1.
13.3 Replacement of Debentures.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
Debenture (which evidence shall be, notice from Purchaser of such ownership and
such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if the holder of
such Debenture is, or is a nominee for, an original Purchaser or is a
"qualified institutional buyer" (as such term is defined in Rule
144A(a)(1) under the Securities Act), such Person's own unsecured
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Debenture, dated and bearing interest from the date to which interest shall have
been paid on such lost, stolen, destroyed or mutilated Debenture or dated the
date of such lost, stolen, destroyed or mutilated Debenture if no interest shall
have been paid thereon.
14. PAYMENTS ON DEBENTURES
14.1 Place of Payment.
Subject to Section 14.2, payments of principal and interest becoming
due and payable on the Debentures shall be made at the principal office of the
Purchaser. The Purchaser may at any time, by notice to the Company of a
Debenture, change the place of payment of the Debentures.
14.2 Home Office Payment.
So long as Purchaser or Purchaser's nominee shall be the holder of any
Debenture, and notwithstanding anything contained in Section 14.1 or in such
Debenture to the contrary, the Company will pay all sums becoming due on such
Debenture for principal and interest by the method and at the address specified
for such purpose by Purchaser, or by such other method or at such other address
as Purchaser shall have from time to time specified to the Company in writing
for such purpose, without the presentation or surrender of such Debenture or the
making of any notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or prepayment in
full of any Debenture, Purchaser shall surrender such Debenture for
cancellation, reasonably promptly after any such request (and in any event
within 45 days of such request), to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 14.1. Prior to any sale or other disposition of any
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Debenture held by Purchaser or Purchaser's nominee Purchaser will, at
Purchaser's election, either endorse thereon the amount of principal paid
thereon and the last date to which interest has been paid thereon or surrender
such Debenture to the Company in exchange for a new Debenture or Debentures
pursuant to Section 13.2. The Company will afford the benefits of this Section
14.2 to any Institutional Investor that is the direct or indirect transferee of
any Debenture purchased by Purchaser under this Agreement and that has made the
same agreement relating to such Debenture as Purchaser has made in this Section
14.2.
15. EXPENSES, ETC.
15.1 Transaction Expenses.
The Company will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel) incurred by Purchaser or holder of a Debenture (provided that if the
interests of all of the holders of the Debentures are substantially identical,
the Company shall be obligated to pay the reasonable attorneys' fees of a
special counsel and, if reasonably required, local or other counsel,
representing all of the holders of the Debentures) in connection with: (a) the
costs and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement or the Debentures or
in responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the Debentures, or by reason
of being a holder of any Debenture, and (b) the costs and expenses, including
financial advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out
or restructuring of the transactions contemplated hereby and by the Debentures.
The Company will pay, and will save Purchaser and each other holder of a
Debenture harmless from, all claims in respect of any fees, costs or expenses,
if any, of brokers and finders (other than those retained by Purchaser).
15.2 Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Debenture, the enforcement, amendment or waiver of
any provision of this Agreement or the Debentures, and the termination of this
Agreement; provided, however, that the period of survival (i) with respect to
the representations and warranties in Sections 5.1 and 5.2 shall continue
indefinitely; and (ii) in the case of any other representation and warranty in
Section 5, shall end upon the conversion of the last Debenture to Common Stock.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Debentures, the purchase or
transfer by Purchaser of any Debenture or portion thereof or interest therein
and the payment of any Debenture until conversion of the last Debenture to
Common Stock, and may be relied upon by any subsequent holder of a Debenture,
regardless of any investigation made at any time by or on behalf of Purchaser or
any other holder of a Debenture. All statements contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed representations and warranties of the Company under
this Agreement. Subject to the preceding sentence, this Agreement and the
Debentures embody the entire agreement and understanding between Purchaser and
the Company and supersede all prior agreements and understandings relating to
the subject matter hereof.
17. AMENDMENT AND WAIVER
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17.1 Requirements.
This Agreement and the Debentures may be amended, and the observance of
any term hereof or of the Debentures may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Purchaser, except that (a) no amendment or waiver of any of the provisions of
Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used
therein), will be effective as to Purchaser unless consented to by Purchaser in
writing, and (b) no such amendment or waiver may, without the written consent of
the holder of each Debenture at the time outstanding affected thereby, (i)
subject to the provisions of Section 12 relating to acceleration or rescission,
change the amount or time of any prepayment or payment of principal of, or
reduce the rate or change the time of payment or method of computation of
interest of the Debentures.
17.2 Solicitation of Holders of Debentures.
(a) Solicitation. The Company will provide each holder of
the Debentures (irrespective of the amount of Debentures then owned by
it) with sufficient information, sufficiently far in advance of the
date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver
or consent in respect of any of the provisions hereof or of the
Debentures. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the
provisions of this Section 17 to each holder of outstanding Debentures
promptly following the date on which it is executed and delivered by,
or receives the consent or approval of, the requisite holders of
Debentures.
(b) Payment. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Debentures as consideration for or as an
inducement to the entering into by any holder of Debentures of any
waiver or amendment of any of the terms and provisions hereof unless
such remuneration is concurrently paid, or security is concurrently
granted, on the same terms, ratably to each holder of Debentures then
outstanding even if such holder did not consent to such waiver or
amendment.
17.3 Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Debentures and is binding upon them and upon
each future holder of any Debenture and upon the Company without regard to
whether such Debenture has been marked to indicate such amendment or waiver. No
such amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and the
holder of any Debenture nor any delay in exercising any rights hereunder or
under any Debenture shall operate as a waiver of any rights of any holder of
such Debenture.
18. NOTICES
Any notices required or permitted to be sent hereunder shall be
delivered personally or mailed by certified mail return receipt requested, or
delivered by overnight courier service to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, or transmitted by
facsimile transmission, and shall be deemed to have been given upon delivery if
delivered personally, when confirmation of transmission is received if
transmitted by facsimile, three business days after mailing if mailed, or one
business day after delivery to the courier if delivered by overnight courier
service:
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If to the Purchaser, to the addresses set forth on the stock record
books of the Company;
with a copy to:
Xxx Enterprises, Incorporated
000 X. Xxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Phone: (000)000-0000
Fax: (000)000-0000
Lane & Xxxxxxxx
000 X. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: X. Xxxx Xxxxxxxx III, Esq.
Phone: (000)000-0000
Fax: (000)000-0000
If to the Company:
XxxxXxxxxx.xxx Corp.
000 - 0000 Xxxx Xxxxxxxx
Xxxxxxxxx, XX X0X 0X0
Attention: President
Phone: (000)000-0000
Fax: (000)000-0000
with a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Duane, Morris & Heckscher, LLP
000 X. Xxxxx Xxxxx Xxxx, Xxx. 0000
Xxxxxxx, XX 00000-0000
Phone: (000)000-0000
Notices under this Section 18 will be deemed given only when actually received.
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19. REPRODUCTION OF DOCUMENTS
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by Purchaser at the Closing (except the
Debentures themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to Purchaser, may be reproduced
by Purchaser by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and Purchaser may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by Purchaser in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Debentures from contesting any such reproduction
to the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION
For the purposes of this Section 20, "Confidential Information" means
information delivered to Purchaser by or on behalf of the Company or any
Subsidiary in connection with the transactions contemplated by or otherwise
pursuant to this Agreement that is proprietary in nature and that was clearly
marked or labeled or otherwise adequately identified when received by Purchaser
as being confidential information of the Company or such Subsidiary, provided
that such term does not include information that
(a) was publicly known or otherwise known to Purchaser
prior to the time of such disclosure;
(b) subsequently becomes publicly known through no act
or omission by Purchaser or any Person acting on Purchaser's behalf;
(c) otherwise becomes known to Purchaser other than
through disclosure by the Company or any Subsidiary; or
(d) constitutes financial statements delivered to
Purchaser under Section 7.1 that are otherwise publicly available,
Purchaser will maintain the confidentiality of such Confidential Information in
accordance with procedures adopted by Purchaser in good faith to protect
confidential information of third parties delivered to Purchaser, provided that
Purchaser may deliver or disclose Confidential Information to
(i) Purchaser's directors, officers, employees,
agents, attorneys and affiliates, (to the extent such
disclosure reasonably relates to the administration of the
investment represented by Purchaser's Debentures);
(ii) Purchaser's financial advisors and other
professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the
terms of this Section 20;
(iii) any other holder of any Debenture;
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(iv) any Institutional Investor to which
Purchaser sells or offers to sell such Debenture or any part
thereof or any participation therein (if such Person has
agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section
20);
(v) any Person from which Purchaser offers to
purchase any Security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section
20);
(vi) any federal or state regulatory authority
having jurisdiction over Purchaser;
(viii) the National Association of Insurance
Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information
about Purchaser's investment portfolio; or
(viii) any other Person to which such delivery or
disclosure may be necessary or appropriate:
(w) to effect compliance with any law,
rule, regulation or order applicable to Purchaser,
(x) in response to any subpoena or
other legal process,
(y) in connection with any litigation
to which Purchaser is a party, or
(z) if an Event of Default has
occurred and is continuing, to the extent Purchaser
may reasonably determine such delivery and
disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and
remedies under Purchaser's Debentures and this
Agreement.
Each holder of a Debenture, by its acceptance of a Debenture, will be deemed to
have agreed to be bound by and to be entitled to the benefits of this Section
20 as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Debenture of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASER
Purchaser shall have the right to substitute any one of Purchaser's
Affiliates as the purchaser of the Debentures that Purchaser has agreed to
purchase hereunder, by written notice to the Company, which notice shall be
signed by both Purchaser and such Affiliate, shall contain such Affiliate's
agreement to be bound by this Agreement and shall contain a confirmation by
such Affiliate of the accuracy with respect to it of the representations set
forth in Section 6. Upon receipt of such notice, wherever the word "Purchaser"
is used in this Agreement (other than in this Section 21), such word shall be
deemed to refer to such Affiliate in lieu of Purchaser. In the event that such
Affiliate is so substituted as a purchaser hereunder and such Affiliate
thereafter transfers to Purchaser all of the Debentures then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever the
word "Purchaser" is used in this Agreement (other than in this Section 21),
such
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word shall no longer be deemed to refer to such Affiliate, but shall refer to
Purchaser, and Purchaser shall have all the rights of an original holder of the
Debentures under this Agreement.
22. MISCELLANEOUS
22.1 Successors and Assigns.
All covenants and other agreements contained in this Agreement by or
on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any
subsequent holder of a Debenture) whether so expressed or not.
22.2 Payments Due on Non-Business Days.
Anything in this Agreement or the Debentures to the contrary
notwithstanding, any payment of principal or interest on any Debenture that is
due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day.
22.3 Severability.
Any provision of this Agreement that 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 hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
22.4 Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant
contained herein, so that compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse compliance with any
other covenant. Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.6 Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF IOWA
EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
22.7 No Recourse Against Others.
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A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under this
Agreement for any claim based on, in respect of, or by reason of such
obligations or their creation. Purchaser by executing this Agreement waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of each Debenture.
If Purchaser is in agreement with the foregoing, please sign the form
of agreement on the accompanying counterpart of this Agreement and return it to
the Company, whereupon the foregoing shall become a binding agreement between
Purchaser and the Company.
PURCHASER: COMPANY:
XXX ENTERPRISES, INCORPORATED XXXXXXXXXX.XXX CORP.
By: By: /s/ XXXX X. XXXXXX
------------------------------- -----------------------------------
Xxxxxxx X. Xxxxxxxx Xxxx X. Xxxxxx
Vice President - Interactive Media President & Chief Executive Officer
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SCHEDULE A
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"AFFILIATE" means, at any time, and with respect to any Person, any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person. As used in this definition, "CONTROL" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"AGREEMENT" means this Agreement as it may from time to time be
amended or supplemented.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"CAPITAL LEASE" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and
the incurrence of a liability in accordance with GAAP.
"CONVERSION DATE" AND "CONVERSION PRICE" are defined in Section 8.6.
"DEBENTURE" or "DEBENTURES" are defined in Section 1.
"DEFAULT" means an event or condition the occurrence or existence of
which would, with the lapse of time or the giving of notice or both, become an
Event of Default.
"DEFAULT RATE" means that rate of interest referred in the Debentures.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
"EVENT OF DEFAULT" is defined in Section 11.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, with respect to any Property at any time,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed
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and willing buyer, and an informed and willing seller, under no compulsion to
buy or sell, respectively.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" means
(a) the government of
(i) the United States of America, Canada or any
State, Province or other political subdivision
thereof, or
(ii) any jurisdiction in which the Company or
any Subsidiary conducts all or any part of its
business, or which asserts jurisdiction over any
Properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to,
any such government.
"GUARANTY" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person:
(a) to purchase such indebtedness or obligation or any
Property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
make available funds for the purchase or payment of such indebtedness
or obligation;
(c) to lease Properties or to purchase Properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness
or obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the subject
of such Guaranty shall be assumed to be direct obligations of such obligor.
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"HOLDER" means, with respect to any Note, the Person in whose name
such Note is registered in the register maintained by the Company pursuant to
Section 13.1.
"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) all obligations of such Person for borrowed money;
(b) all obligations of such Person for the deferred
purchase price of Property acquired by such Person (excluding accounts
payable arising in the ordinary course of business, but including all
obligations created or arising under any conditional sale or other
title retention agreement with respect to any such Property);
(c) all obligations of such Person required to be
included on its balance sheet in accordance with GAAP in respect of
Capital Leases;
(d) all obligations for borrowed money secured by any
Lien existing on Property owned by such Person (whether or not such
obligations have been assumed by such Person or recourse in respect
thereof is available against such Person); and
(e) any Guaranty of such Person of any obligation or
liability of another Person of a type described in any of clause (a)
through clause (d), inclusive, of this definition.
"INSTITUTIONAL INVESTOR" means any Purchaser and any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.
"INTEREST CONVERSION PRICE" is defined in Section 8.6.
"INVESTMENT" means any investment, made in cash or by delivery of
Property, by the Company or any Subsidiary:
(a) in any Person, whether by acquisition of stock,
indebtedness or other obligation or Security, or by loan, guaranty,
advance, extension of credit, capital contribution or otherwise; or
(b) in any Property.
Investments shall be valued at cost less any net return of capital through the
sale or liquidation thereof or other return of capital thereon.
"LIEN" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or
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Capital Lease, upon or with respect to any Property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust
agreements and all similar arrangements).
"MATERIAL" means an annualized amount, obligation, claim, loss or
liability, whether accrued or fixed, absolute or contingent, or matured or
unmatured in excess of $50,000.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or Properties of the
Company and its Subsidiaries taken as a whole, or (b) the ability of the
Company to perform its obligations under this Agreement and the Debentures, or
(c) the validity or enforceability of this Agreement or the Debentures.
"MOODY'S" means Xxxxx'x Investors Service, Inc.
"OFFICER'S CERTIFICATE" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"OTHER AGREEMENTS" shall mean the Debentures, Loan and Security
Agreement and the Notes issued thereunder, Registration Rights Agreement and
any other instrument delivered pursuant hereto or thereto.
"PERSON" means an individual, partnership, corporation, limited
liability company, limited liability partnership, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
"PROPERTY" means real or personal property of any kind, tangible or
intangible, xxxxxx or inchoate.
"REPURCHASE AGREEMENTS" means any written agreement
(a) that provides for (i) the transfer of one or more United
States Governmental Securities in an aggregate principal amount at least equal
to the amount of the Transfer Price (defined below) to the Company or any of
its Subsidiaries from an Acceptable Bank or an Acceptable Broker-Dealer against
a transfer of funds (the "Transfer Price") by the Company or such Subsidiary to
such Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous
agreement by the Company or such Subsidiary, in connection with such transfer
of funds, to transfer to such Acceptable Bank or Acceptable Broker-Dealer the
same or substantially similar United States Governmental Securities for a price
not less than the Transfer Price plus a reasonable return thereon at a date
certain not later than 365 days after such transfer of funds;
(b) in respect of which the Company or such Subsidiary shall have
the right, whether by contract or pursuant to applicable law, to liquidate such
agreement upon the occurrence of any default thereunder; and
4
36
(c) in connection with which the Company or such Subsidiary, or
an agent thereof, shall have taken all action required by applicable law or
regulations to perfect a Lien in such United States Governmental Securities.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc.
"SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time.
"SECURITY" means "security" as defined by Section 2(1) of the
Securities Act.
"SENIOR FINANCIAL OFFICER" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"SERIES" means any or all of any series of Notes issued hereunder.
"SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would
at such time constitute a "significant subsidiary" (as such term is defined in
Regulation S-X of the Securities and Exchange Commission as in effect on the
Closing Date) of the Company.
"SUBSIDIARY" means, as to any Person, any corporation, association or
other business entity in which such Person or one or more of its Subsidiaries
or such Person and one or more of its Subsidiaries owns sufficient equity or
voting interests to enable it or them (as a group) ordinarily, in the absence
of contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of
its Subsidiaries). Unless the context otherwise clearly requires, any reference
to a "Subsidiary" is a reference to a Subsidiary of the Company,
"SUBSIDIARY STOCK" is defined in Section 10.4(b).
"SUBSTANTIAL PART" means, at any time, with respect to any Transfer of
Property, any portion of Property of the Company and the Subsidiaries if the
book value of the Property subject to such Transfer, when added to the book
value of all other Property of the Company and the Subsidiaries that was
subject to a Transfer during the then most recently ended period of 12
consecutive calendar months, exceeds an amount equal to 15% of consolidated
total assets, determined as at the beginning of such 12 month period.
"TRANSFER" is defined in Section 10.4.
"WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary 100% of
all of the equity interests (except directors' qualifying shares) and voting
interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries at such time.
5
37
SCHEDULE 3.2
SCHEDULE OF ADDITIONAL CLOSING DATES
Closing Date
------------
SERIES A $250,000 Floating Rate Subordinated Convertible Debenture November 1, 2000
SERIES B $250,000 Floating Rate Subordinated Convertible Debenture November 1, 2000
SERIES C $250,000 Floating Rate Subordinated Convertible Debenture December 1, 2000
SERIES D $250,000 Floating Rate Subordinated Convertible Debenture January 1, 2001
SERIES E $250,000 Floating Rate Subordinated Convertible Debenture March 1, 2001
SERIES F $250,000 Floating Rate Subordinated Convertible Debenture May 1, 2001
38
SCHEDULE 5.4
SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK
XxxxXxxxxx.xxx Corp. has the following wholly owned subsidiary companies:
- WelcomeTo Search Engine Inc., which is 100% owned by
XxxxXxxxxx.xxx Corp.
- Xceedx Technologies Inc., which is 100% owned by
XxxxXxxxxx.xxx Corp
39
SCHEDULE 5.8
CERTAIN LITIGATION
NONE
40
SCHEDULE 5.11
PATENTS, ETC.
NONE
41
SCHEDULE 5.15
EXISTING INDEBTEDNESS
The following schedule details the status of existing indebtedness for
XxxxXxxxxx.xxx Corp. and its wholly owned subsidiaries WelcomeTo Search Engine
Inc. and Xceedx Technologies Inc.
XXXXXXXXXX.XXX CORP.: The following list details all of the outstanding
Existing Indebtedness as of October 26, 2000.
- Canadian Imperial Bank of Commerce (CIBC) Demand Installment
Loan. The loan bears interest at the bank prime rate plus 1%
and is repayable in equal monthly principal and interest
installments of $2,317.80 (Cdn.) from February 2000 through
February 2015, unless the loan is called on demand by the
bank. The loan is collateralized by a general security
agreement on substantially all of the Company's assets, the
maintenance of a compensating balance of approximately
$16,860 (Cdn. $25,000) provided by one of the Company's
officers, a collateral mortgage security for $165,724 (Cdn.
$250,000) providing the bank a first security interest in the
personal property of two of the Company's officers and the
assignment of a life insurance policy on the Company's
president. As of September 30, 2000 the balance outstanding
was $166,087 and at October 26, 2000 it was approximately
$165,724.
- Unsecured shareholder loan with the President & CEO and Chief
Operating Officer & CFO for $250,000 (Cdn.). The loan bears
interest at 10% and is repayable in equal monthly principal
and interest installments of $2,236.22 (Cdn.) commencing July
20, 2000. As of September 30, 2000 the balance outstanding
was $249,935 (Cdn.) and at October 26, 2000 it was $249,712
(Cdn.)
- Unsecured shareholder loans with the President & CEO. The
demand loans bear interest at 19.5% for $25,000 (Cdn.) and
9.5% for $25,000 (Cdn.). As of September 30, 2000 and at
October 26, 2000 the balance outstanding was $50,000.
- Unsecured shareholder loans with the Chief Operating Officer
& CFO. The demand loans bear interest at 10.25% for $25,000
(Cdn.) and 4.5% for $50,000 (Cdn.). As of September 30, 2000
and at October 26, 2000 the balance outstanding was $50,000.
- Xxx Enterprises Promissory Notes that total $290,000 at
October 26, 2000 and all bearing interest at the prime rate
of interest announced in The Wall Street Journal:
- August 17, 2000 for $125,000 principal
- August 28, 2000 for $125,000 principal
- September 19, 2000 for $40,000 principal
WELCOME TO SEARCH ENGINE INC.: None
2
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XCEEDX TECHNOLOGIES INC None
3
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SCHEDULE 5.19
TRANSACTIONS WITH AFFILIATES
NONE
44
SCHEDULE 5.21
AUTHORIZED CAPITAL STOCK
The authorized share capital of XxxxXxxxxx.xxx Corp. as of October 26, 2000 is
50,000,000 common stock at a par value of $0.0001 per common share.
As of October 26, 2000 XxxxXxxxxx.xxx Corp. had issued and outstanding common
shares of 23,008,098.
On August 25, 1999, the shareholders approved the creation of the
XxxxXxxxxx.xxx Corp. Corporate Stock Option Plan, which reserved 2,000,000
shares of common stock. As of October 26, 2000 1,515,000 of these options have
been granted to employees and directors, leaving a balance in the reserve of
485,000. The majority of the options granted to date are exercisable over a
four year period and vest on a cumulative basis at 1/3 per year.
XxxxXxxxxx.xxx Corp. is currently in the process of soliciting proxies from its
shareholders to increase the reserve under the Corporate Stock Option Plan from
2,000,000 to 3,000,000. This increase is scheduled for a vote at the company
Annual General Meeting on November 29, 2000. If approved by the shareholders,
this would increase the reserve to 3,000,000 and leave an un-issued reserve of
1,485,000 if no additional options are granted to employees or directors before
November 29, 2000.
As of October 26, 2000 XxxxXxxxxx.xxx Corp. has 3,193,898 warrants outstanding
at exercisable prices between $0.25 and $2.00 and expiry dates between June
10, 2000 and June 13, 2002.
2
45
SCHEDULE 10.5(D)
EXISTING INVESTMENTS
XXXXXXXXXX.XXX CORP. OWNS SHARES OF ITS SUBSIDIARIES
NORMAL BANK OPERATING ACCOUNTS
46
EXHIBIT 1
FORM OF $250,000 SERIES A FLOATING RATE SUBORDINATED
CONVERTIBLE DEBENTURES DUE OCTOBER 31, 2003
47
EXHIBIT 1
XXXXXXXXXX.XXX CORP.
SERIES A FLOATING RATE SUBORDINATED CONVERTIBLE DEBENTURE
AUTHORIZED ISSUE: $250,000
CONVERTIBLE FOR COMMON STOCK OF THE COMPANY
DATE OF ISSUANCE: NOVEMBER 1, 2000
MATURITY: OCTOBER 31, 2003
FOR VALUE RECEIVED, XXXXXXXXXX.XXX CORP., a Florida
corporation (the "Company"), hereby promises to pay to XXX ENTERPRISES,
INCORPORATED (the "Debenture Holder"), a Delaware corporation, or its
registered successors or assigns, upon presentation and surrender of this
Debenture, the principal sum of $250,000 on October 31, 2003, with interest on
such sum or the unpaid balance thereof at a rate per annum equal to one (1%)
percent less than the Reference Rate, hereinafter defined, from time to time in
effect, and changing in an amount equal to each increase or decrease in the
Reference Rate. Interest after maturity or interest on any overdue installment
of interest shall be payable on demand.
"Reference Rate" shall mean at any time the national prime
rate of interest on the Business Day (as defined below) preceding the end of
each calendar quarter as published in the Wall Street Journal. Each change in
the Reference Rate hereon shall take effect on the effective date of the
change. Interest shall be computed on the basis of a year consisting of 360
days and paid for actual days elapsed.
Upon an Event of Default, the holder hereof may, at its
option, declare the entire unpaid principal of and accrued interest on this
Debenture immediately due and payable, without demand or presentment, both of
which are hereby waived.
Interest will accrue on the then unpaid principal amount
hereof from the most recent date to which interest has been paid or, if no
interest has been paid, from the date hereof until the principal hereof shall
have become due and payable.
Any payment of principal of or on this Debenture that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation
of the interest payable on such next succeeding Business Day. "Business Day"
means any day other than a Saturday, a Sunday or a day on which commercial
banks in New York City are required or authorized to be closed.
Payments of both principal and interest are to be made at the
Debenture Xxxxxx's
48
principal office, which address is: 400 Xxxxxx Building, 000 Xxxxx Xxxx Xxxxxx,
Xxxxxxxxx, Xxxx 00000 or such other place as the holder hereof shall designate
to the Company in writing, in lawful money of the United States of America.
This Debenture is one of a Series of a Floating Rate Subordinated Convertible
Debentures, Authorized Aggregate Issue $1,500,000 (herein called the
"Debentures"), issued pursuant to a Investment Agreement, dated as of November
1, 2000 (as from time to time amended, the "Investment Agreement"), between the
Company and the Debenture Holder named therein and is entitled to the benefits
thereof. Capitalized terms used herein and not otherwise defined herein have
the meanings specified in the Investment Agreement.
1. Registered Debenture and Owner. This Debenture is a
registered Debenture and, as provided in the Investment Agreement, upon
surrender of this Debenture for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Debenture for a like principal amount and in the same issue will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Debenture is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
2. Optional Redemption. The Debenture will not be
redeemable prior to October 31, 2003, unless (x) the quoted price on any
securities exchange registered under the Securities Exchange Act of 1934 or
through NASDAQ of the Common Stock (the "Quoted Price") shall have equaled or
exceeded 130% of the Conversion Price (as defined in Section 4) for at least
thirty consecutive days ended with five trading days prior to the date notice
of such optional redemption is given or (y) the Company delivers notice to the
Purchaser that the Company in good faith intends to file a registration
statement for a United States public offering within twenty days of such
notice. The notice shall provide for a redemption date (the "Optional
Redemption Date") not less than fifteen days from the date thereof. The Company
will redeem the principal amount of the Debenture at a redemption price of 100%
of principal amount, plus accrued interest to the Optional Redemption Date. The
Company may redeem the principal amount of the Debenture to be redeemed
pursuant to this paragraph 2 by subtracting 100 percent of the principal amount
of the Debenture that Debenture Holder shall have converted to Common Stock,
which the Debenture Holder has delivered to the Company for cancellation. The
Company may redeem the amount of this Debenture only once pursuant to this
paragraph 2.
3. Mandatory Redemption. The Company will redeem the
principal amount of the Debenture on October 31, 2003 (the "Mandatory
Redemption Date"), at a redemption price of 100% of principal amount, plus
accrued interest to the Mandatory Redemption Date. The Company may redeem the
principal amount of the Debenture to be redeemed pursuant to this paragraph 3
by subtracting 100 percent of the principal amount of this Debenture that
Debenture Holder shall have converted to Common Stock, which the Debenture
Holder has delivered to the Company for cancellation. The Company may redeem
the amount of this Debenture only once pursuant to this paragraph 3.
49
4. Notice of Redemption. Notice of the mandatory
redemption date will be mailed at least thirty days but not more than sixty
days before the Mandatory Redemption Date to the Debenture Holder at its
registered address in accordance with the notice provisions of the Investment
Agreement.
5. Conversion. A Debenture Holder may convert any
Debenture, in whole or in part, into fully paid and non-assessable Common Stock
(as defined below) of the Company at any time before the close of business on
the earlier to occur of the Optional Redemption Date or Mandatory Redemption
Date, as the case may be, subject to the benefits of the Registration Rights
Agreement by and between the Company and the Purchaser dated October 20, 2000.
"Common Stock" means the shares of capital stock, par value $0.001 per share,
of the Company. The Debenture shall be converted, subject to adjustment as
provided in Section 5, on the basis of the aggregate of (a) one (1) share of
Common Stock of the Company for each $0.2173 of principal debt balance due on
the Debenture (the "Conversion Price") and (b) one (1) share of Common Stock of
the Company times the quotient of (i) the accrued interest on the Debenture to
the Conversion Date divided by (ii) the Quoted Price as defined in paragraph 2
hereof (the "Interest Conversion Rate"). No fraction of a share of Common Stock
shall be deliverable in payment of principal or accrued interest on the
Debenture, but any fraction of a share shall be rounded upwards to the nearest
whole share.
6. Anti-Dilution Rights. The Conversion Price from time
to time in effect shall be subject to adjustment from time to time as follows
(a) In case the Company shall at any time subdivide the
outstanding shares of Common Stock, or shall issue a stock
dividend on its outstanding Common Stock, the Conversion
Price in effect immediately prior to such subdivision or the
issuance of such dividend shall be proportionately decreased,
and in case the Company shall at any time combine the
outstanding shares of Common Stock, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased, effective at the close of business
on the date of such subdivision, dividend or combination, as
the case may be.
(b) The Conversion Price shall be adjusted for dividends
or distributions on Common Stock payable in the Company's
stock; subdivisions, combinations or certain
reclassifications of Common Stock; distributions to all
holders of Common Stock of certain rights to purchase Common
Stock at less than the current market price at the time;
distributions to such holders of assets or debt securities of
the Company or certain rights to purchase securities of the
Company (excluding cash dividends or distributions from
current or retained earnings). The Company shall not issue
Common Stock and rights, warrants or securities convertible
into Common Stock at a purchase or conversion price less than
$0.2173 during the term of the Investment Agreement.
The Debenture Holder shall give notice to the Company of its
election to cause conversion under Section 5 hereof, in accordance with the
notice provisions of the Investment
50
Agreement at least fifteen days but not more than thirty days prior to the
conversion date, which notice shall specify said conversion date, the number of
shares of Common Stock to be issued upon such conversion and the amount of
accrued interest to said conversion date. Within ten days of receipt of the
conversion notice, Debenture Holder shall receive the shares of Common Stock to
which it shall be entitled upon conversion of this Debenture and the amount of
cash payable in respect of accrued interest on this Debenture to said
conversion date.
7. Subordination. The Debentures are subordinated only
to the Senior Existing Indebtedness, as defined in the Investment Agreement by
and between the Company and the Debenture Holder (the "Investment Agreement").
The Senior Existing Indebtedness must be paid before the Debentures may be
paid. The Company agrees, and the Debenture Holder by accepting this Xxxxxxxxx
agrees, to the Senior Existing Indebtedness subordination.
8. Defaults and Remedies. If an Event of Default, as
defined in the Investment Agreement, occurs and is continuing, the principal of
this Debenture may be declared or otherwise become due and payable in the
manner, at the price and with the effect provided in the Investment Agreement.
9. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under this Debenture for any claim based on,
in respect of, or by reason of such obligations or their creation. Debenture
Holder by accepting this Debenture waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the
Debenture.
10. Authentication. This Debenture shall not be valid
until executed by the President of the Company, whose signature shall be
guaranteed.
THIS DEBENTURE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE
OF IOWA EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
XXXXXXXXXX.XXX CORP.
By:
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