1
EXHIBIT 4.15
CREDIT DEPOT CORPORATION
NOTE PURCHASE AGREEMENT (the "Purchase Agreement") made as of
this 26th day of August, 1997 between Credit Depot Corporation, a Delaware
corporation with its principal offices at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxx 00000 (the "Company") and the undersigned subscriber (the
"Subscriber").
WHEREAS, the Company desires to issue up to $4,000,000 of
Secured Convertible Bridge Notes (the "Secured Notes") which are convertible
into the Company's Common Stock, $.001 par value (the "Common Stock") and
accompanying Warrants (the "Warrants") to purchase up to 10,000,000 shares of
the Company's Common Stock (the Secured Notes, the Warrants and the Common
Stock being referred to as the "Securities") and the Subscriber desires to
acquire that amount of Secured Notes set forth on the signature page hereof;
NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants hereinafter set forth, the parties hereto do hereby agree
as follows:
I. SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter
set forth, the Subscriber hereby subscribes for and agrees to purchase from the
Company such number of Secured Notes and accompanying Warrants as is set forth
upon the signature page hereof at a price equal to $1000 per $1000 face amount
of Secured Notes and 2,500 Warrants and the Company agrees to sell such Secured
Notes and Warrants to the Subscriber for said purchase price subject to the
Company's right to sell to the Subscriber such lesser amount of Secured Notes
and Warrants as it may, in its sole discretion, deem necessary or desirable.
The purchase price is payable by wire transfer or certified or bank check made
payable to Credit Depot Corporation, at or prior to the closing of this
Purchase Agreement. The Secured Notes and Warrants will be delivered by the
Company at the closing.
1.2 The Subscriber recognizes that the purchase of
the Securities involves a high degree of risk in that (i) no public market
exists for the Securities other than the underlying shares of Common Stock;
(ii) an investment in the Securities is highly speculative and only investors
who can afford the loss of their entire investment should consider investing in
the Company and the Securities; (iii) the Subscriber may not be able to
liquidate its investment; (iv) the Company requires substantial additional
capital to continue to meet its operating expenses and will be unable to do so
unless it obtains additional financing and as a result the investor's ability
to be repaid is dependent on the Company's obtaining additional financing, as
to which the Company has no commitment and (v) an investor could sustain the
loss of its entire investment.
2
1.3 The Subscriber represents as follows:
(a) The Subscriber represents that it is an "accredited
investor" as such term in defined in Rule 501 of Regulation D promulgated under
the United States Securities Act of 1933, as amended (the "Act"), and that it
is able to bear the economic risk of an investment in the Securities.
(b) The Subscriber acknowledges that it has significant prior
investment experience, including investment in non-listed and non-registered
securities, or it has employed the services of an investment advisor, attorney
or accountant to read all of the documents furnished or made available by the
Company to it in the Securities and to evaluate the merits and risks of such an
investment on its behalf, and that it recognizes the highly speculative nature
of this investment. The Subscriber acknowledges that it has carefully read the
Secured Note, the Guaranty (the "Guaranty") and the Security Agreement (the
"Security Agreement") attached hereto as Exhibits A, B and C, respectively, and
fully understands the contents thereof.
(c) The Subscriber represents that the Securities are being
purchased for its own account, for investment and not for distribution or
resale to others. The Subscriber agrees that it will not sell or otherwise
transfer such Securities unless they are registered under the Act or unless an
exemption from such registration is available.
(d) The Subscriber understands that the Securities have not
been registered under Act by reason of a claimed exemption under the provisions
of the Act which depends, in part, upon its investment intention. In this
connection, the Subscriber understands that it is the position of the
Securities and Exchange Commission ("SEC") that the statutory basis for such
exemption would not be present if its representation merely meant that its
present intention was to hold such securities for a short period, such as the
capital gains period of tax statutes, for a deferred sale, for a market rise,
assuming that a market develops, or for any other fixed period. The Subscriber
realizes that, in the view of the SEC, a purchase now with an intent to resell
after a pre-determined amount of time would represent a purchase with an intent
inconsistent with its representation to the Company, and the SEC might regard
such a sale or disposition as a deferred sale to which such exemptions are not
available.
(e) The Subscriber understands that there is no public market
for the Securities, other than the Common Stock issuable upon conversion of the
Secured Notes and the Common Stock issuable upon exercise of the Warrants. The
Subscriber understands that Rule 144 (the "Rule") promulgated under the Act
requires, among other conditions, a one year holding period prior to the resale
(in limited amounts) of securities acquired in a non-public offering without
having to satisfy the registration requirements under the Act. The Subscriber
understands and hereby acknowledges that the Company is the only person that
can register the Securities under the Act and is under no obligation to
register the Securities under the Act, with the exception of
2
3
certain registration rights set forth in Article III herein. The Subscriber
acknowledges that the Company may, if it desires, permit the transfer of the
Secured Notes, the Warrants or the Common Stock issuable upon conversion and/or
exercise thereof out of its name only when its request for transfer is
accompanied by an opinion of counsel reasonably satisfactory to the Company
that neither the sale nor the proposed transfer results in a violation of the
Act or any applicable state "blue sky" laws (collectively "Securities Laws")
and subject to the provisions of Section 1.3(f) hereof.
(f) The Subscriber consents to the placement of a legend on
any certificate or other document evidencing its Securities and the Common
Stock issuable upon conversion and/or exercise of such Securities stating that
they have not been registered under the Act and under applicable Securities
Laws and setting forth or referring to the restrictions on transferability and
sale thereof.
(g) The Subscriber understands that the Company will review
this Purchase Agreement and is hereby given authority by the undersigned to
call its bank or place of employment or otherwise review the financial standing
of the Subscriber; and it is further agreed that the Company reserves the
unrestricted right to reject or limit any subscription and to close the offer
at any time.
(h) The Subscriber hereby represents that the address of
Subscriber furnished by it at the end of this Purchase Agreement is the
undersigned's principal residence if it is an individual or its principal
business address if it is a corporation or other entity.
1.4 The Subscriber represents that:
(a) The Subscriber has had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Company, and
all such questions, if any, have been answered to the full satisfaction of the
Subscriber;
(b) The Subscriber has such knowledge and expertise in
financial and business matters that the Subscriber is capable of evaluating the
merits and risks involved in an investment in the Securities;
(c) The Subscriber understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of Federal and State the Securities Laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgements and understandings of the Subscriber set forth
herein in order to determine the applicability of such exemptions and the
suitability of Subscriber to acquire the Securities;
(d) The Subscriber has full power and authority to execute
and deliver this Purchase Agreement and to perform the obligations of the
3
4
undersigned hereunder; and this Purchase Agreement is a legally binding
obligation of the undersigned in accordance with its terms; and
(e) Except as set forth in this Purchase Agreement, no
representations or warranties have been made to the Subscriber by the Company
or any agent, employee or affiliate of the Company and in entering into this
transaction, the Subscriber is not relying on any information, other than the
results of independent investigation by the Subscriber.
II. REPRESENTATIONS AND COVENANTS BY THE COMPANY
The Company represents and warrants to the Subscriber:
(a) Each of the Company and the Subsidiary Guarantors (as
such term is defined in the Security Agreement) is a corporation duly
organized, existing and in good standing under the laws of the State of
Delaware and has the corporate power to conduct the business which it conducts
and proposes to conduct and is duly qualified or licensed and in good standing
as a foreign corporation in each jurisdiction in which its ownership or leasing
of any properties or the character of its operations requires such
qualification or licensing, except where the failure to do so would not have a
material adverse effect on the Company and its subsidiaries or their respective
properties taken as a whole.
(b) The execution, delivery and performance of this Purchase
Agreement, the Securities and the Security Agreement by the Company have been
duly approved by the Board of Directors of the Company and all other actions
required to authorize and effect the offer and sale of the Securities will have
been duly taken and approved.
(c) The execution, delivery and performance of the Subsidiary
Guarantee by each Subsidiary Guarantor have been duly approved by the Board of
Directors of each Subsidiary Guarantor and all other actions required to
authorize and effect the Subsidiary Guarantee by each Subsidiary Guarantor will
have been taken and approved.
(d) The Securities have been duly and validly authorized and
are enforceable in accordance with their respective terms. The Security
Agreement is duly and validly authorized and enforceable in accordance with its
terms and the Secured Notes, when issued and paid for in accordance with the
terms hereof, will be fully paid and non-assessable and valid and binding
obligations of the Company enforceable in accordance with their respective
terms. The Common Stock issuable upon conversion of the Secured Notes and
exercise of the Warrants will upon issuance thereof and payment therefor in
accordance with their terms be fully paid and non-assessable.
4
5
(e) As to each Subsidiary Guarantor, the Subsidiary Guarantee
is duly and validly authorized and enforceable in accordance with its terms.
(f) The Company will at all times during the term of the
Securities have authorized and reserved a sufficient number of shares of Common
Stock to provide for conversion of the Secured Notes and exercise of the
Warrants.
(g) Each of the Company and the Subsidiary Guarantors has
obtained all licenses, permits, other governmental authorizations and required
consents necessary to the conduct of their respective businesses and the
execution, delivery and performance of this Purchase Agreement and the Notes,
Warrants, Security Agreement and Subsidiary Guaranty (as defined in the
Security Agreement); such licenses, permits, other governmental authorizations
and required consents obtained are in full force and effect; and the Company
and the Subsidiary Guarantors are in all material respects complying therewith.
Except for the consents, authorizations, orders and/or filings already obtained
and/or made, no consent, authorization or order of, and no filing with, any
court, government agency or other body is required of the Company or the
Subsidiary Guarantors for the issuance of (i) the Notes or the Warrants
pursuant to this Purchase Agreement or (ii) except with respect to applicable
Federal and state securities laws, Common Stock issuable on conversion of the
Notes or the exercise of the Warrants .
(h) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company or any of the Subsidiary
Guarantors is a party which could materially adversely affect the business,
property, financial condition or operations of the Company.
(i) Each of the Company and the Subsidiary Guarantors is not
in violation of or default under, nor will the execution and delivery of this
Purchase Agreement, the Security Agreement and the Subsidiary Guarantee, the
issuance of the Securities and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or therein
contemplated, result in a violation of or constitute a default under: (i) the
certificate of incorporation or by-laws of the Company or any Subsidiary
Guarantor; (ii) any agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, material contract,
indenture, mortgage, loan agreement, lease, joint venture or other agreement or
instrument to which the Company or any of the Subsidiary Guarantors is a party
or by which it or any of its properties may be bound; (iii) any material order,
rule, regulation, writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign, applicable to the Company or any
Subsidiary Guarantor or any of their respective properties. All filings by the
Company pursuant to the Securities Exchange Act of 1934, as amended, have been
timely filed during the past 12 months and contain no material misstatements
required to be stated therein or omit to state material facts necessary in
order to make the statements made
5
6
therein, in light of the circumstances under which they were made, not
misleading.
(j) The Company covenants that it shall provide
Subscriber with the opportunity to ask additional questions of and receive
answers (all of which information shall be limited to information in the public
realm) from the Company concerning the Company during the period which the
Subscriber owns any of the Securities;
III. REGISTRATION OF SECURITIES
3.1 Registration Rights. The Company agrees that the Company
shall use its best efforts to effect the registration under the Act and
registration or qualification under all applicable state securities laws of the
Common Stock issuable, or any other securities that may become issuable, upon
conversion of the Secured Notes and exercise of the Warrants (the "Registrable
Securities") on or before November 30, 1997.
3.2 Registration Procedures. When the Company is obligated to
effect the registration of Registrable Securities under the Act, the Company
will:
(a) prepare and file with the SEC a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective until the earlier of (i)
the date on which all Registrable Securities included in the registration
statement have been sold or (ii) two years after the effective date;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective and current
until the earlier of (i) the date on which all Registrable Securities have been
sold or (ii) two years after the effective date of such registration statement;
provided that such two year period shall be extended by any period after the
effective date of such registration statement when the registration statement
is not effective or current; during such period, if the registration statement
is not effective or current, the Company shall use its best efforts as may be
necessary to make such registration statement effective and current;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
6
7
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state securities
or blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within twenty (20) days following the mailing, by
first class mail, of a notice of the original filing of such registration
statement, such notice to be mailed within 5 business days of such filing,
except that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the SEC
for the amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the SEC, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under the Act or the
rules and regulations thereunder in connection with the distribution of Common
Stock by such holder;
(h) promptly prepare and file with the SEC and promptly
notify such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
(j) upon the effectiveness of such registration statement,
the Registrable Securities included in the registration statement shall be
listed on the Nasdaq National Market or the Nasdaq SmallCap Market if the other
shares of outstanding Common Stock of the Company are so listed and on each
national securities exchange on which the other shares of outstanding Common
Stock of the Company are then listed.
7
8
3.3 Agreements of the Holders of Registrable Securities. Each
holder of Registrable Securities hereby agrees to provide the Company, or its
agents or designees, with all information reasonably requested in connection
with the registration under the Act or any applicable state securities law of
any Registrable Securities.
3.4 Expenses.
(a) With respect to the registration pursuant to Section 3.1
hereof, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering (as specified in paragraph (b) below) in
connection therewith shall be borne by the Company, provided, however, that any
security holders participating in such registration shall bear their pro rata
share of the underwriting discount and commissions and transfer taxes, if any.
(b) The fees, costs and expenses of registration to be borne
by the Company as provided in paragraph (a) above shall include, without
limitation, all registration, filing, and NASD fees, printing expenses, fees
and disbursements of counsel and accountants, if any, for the Company, and all
legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered and qualified. Fees and disbursements of counsel
and accountants for the selling security holders and any other expenses
incurred by the selling security holders not expressly included above shall be
borne by the selling security holders.
8
9
3.5 Indemnification.
(a) The Company will indemnify and hold harmless each holder
of Registrable Securities which are included in a registration statement
pursuant to the provisions of Sections 3.1, hereof, its directors and officers,
and any underwriter (as defined in the Act) for such holder and each person, if
any, who controls such holder or such underwriter within the meaning of the
Act, from and against, and will reimburse such holder and each such underwriter
and controlling person with respect to, any and all loss, damage, liability,
reasonable cost and expense to which such holder or any such underwriter or
controlling person may become subject under the Act or otherwise, insofar as
such losses, damages, liabilities, reasonable costs or expenses are caused by
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, reasonable cost or expenses arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with written information furnished by such
holder, such underwriter or such controlling person in writing specifically for
use in the preparation thereof.
(b) Each holder of Registrable Securities included in a
registration pursuant to the provisions of Sections 3.1, hereof will indemnify
and hold harmless the Company, its directors and officers, any controlling
person and any underwriter from and against, and will reimburse the Company,
its directors and officers, any controlling person and any underwriter with
respect to, any and all loss, damage, liability, cost or expense to which the
Company or any controlling person and/or any underwriter may become subject
under the Act or otherwise, insofar as such losses, damages, liabilities,
reasonable costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in strict conformity with written information
furnished by or on behalf of such holder specifically for use in the
preparation thereof.
(c) If the indemnification provided for in subsection (a) and
(b) of this Section 3.5 is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the amount
9
10
paid or payable by such indemnified party referred to in subsections (a) and
(b) of this Section 3.5 in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other hand in connection with statements or omissions which
results in losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statements or
omissions. The parties agree that it would not be just and equitable if
contributions pursuant to this clause were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the first sentence of this
subsection (c). The amount paid by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the first sentence of
this subsection (c) shall be deemed to include any legal or other expense
reasonably incurred by such indemnified party in connection with investigating
or defending any loss, claim, damage, liability or proceeding which is the
subject of this clause. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything herein to the contrary, no person
who sold Common Stock shall have to indemnify or otherwise contribute an amount
to any other party in excess of the total proceeds received by such person from
the sale of Registrable Securities.
(d) Promptly after receipt by an indemnified party pursuant
to the provisions of subsection (a) or (b) of this Section 3.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
subsection (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in, and, to
the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel satisfactory to
such indemnified party, provided, however, if the defendants in any action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or in addition to those available to the indemnified party, or if there is
a conflict of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party or parties
have the right to select separate counsel to participate in the defense
10
11
of such action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said subsection (a) or (b) for
any legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of
the commencement of the action or (iii) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party.
3.6 The Company acknowledges that there is no adequate remedy at
law for its failure to comply with the provisions of this Article III and that
such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Article III may be specifically
enforced. In the event that the Company shall fail to file the Registration
Statement when required pursuant to Section 3.1 above or to keep the
Registration Statement effective as provided in this Article III or otherwise
fails to comply with its obligations and agreements in this Article III, then,
in addition to any other rights or remedies Subscribers may have at law or in
equity, including without limitation, the right of rescission, the Company
shall indemnify and hold harmless the Subscribers from and against any and all
manner or loss which they may incur as a result of such failure. In addition,
the Company shall also reimburse the Subscribers for any and all reasonable
legal fees and expenses incurred by them in enforcing their rights pursuant to
this Article III, regardless of whether any litigation was commenced.
IV. MISCELLANEOUS
4.1 All notices, consents and other communications under this
Purchase Agreement shall be in writing and shall be deemed to have been duly
given (a) when delivered by hand, (b) one business day after the business day
of transmission if sent by telex or telecopier (with receipt confirmed),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) one business day after the business day of deposit with the carrier, if
sent for next business day delivery by Express Mail, Federal Express or other
recognized express delivery service (receipt requested), in each case addressed
to the Company at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxxxx, Xx., and to the Subscriber at its address indicated on the
last page of this Purchase Agreement (or to such other addresses, telex numbers
and the telecopier numbers as a party may designate as to itself by notice to
the other parties).
4.2 This Purchase Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Purchase
11
12
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
4.3 This Purchase Agreement shall be binding upon and inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Purchase Agreement sets forth the
entire agreement and understanding between the parties as to the subject matter
thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
4.4 Notwithstanding the place where this Purchase Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of New York. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this Purchase
Agreement shall be adjudicated before a court located in New York and they
hereby submit to the exclusive jurisdiction of the courts of the State of New
York and of the federal courts in New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Purchase Agreement or
any acts or omissions relating to the sale of the securities hereunder, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall furnish
in writing to the other.
4.5 This Purchase Agreement may be executed in counterparts. Upon the
execution and delivery of this Purchase Agreement by the Subscriber, this
Purchase Agreement shall become a binding obligation of the Subscriber with
respect to the purchase of Securities as herein provided; subject, however, to
the right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or to delete other persons as subscribers.
4.6 The holding of any provision of this Purchase Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Purchase Agreement, which shall remain in full
force and effect.
4.7 It is agreed that a waiver by either party of a breach of any
provision of this Purchase Agreement shall not operate, or be construed, as a
waiver of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Purchase Agreement.
12
13
4.9 The Company agrees to pay, at closing, the fees and expenses of
counsel to Thieme Fonds International, which fees and expenses are not to
exceed $9,000.
4.10 The Company recognizes that the rights of the holders of
the Secured Notes and Warrants under this Purchase Agreement are unique and,
accordingly, the holders of the Secured Notes and Warrants shall, in addition
to such other remedies as may be available to any of them at law or in equity,
have the right to enforce their rights hereunder by actions for injunctive
relief and specific performance to the extent permitted by law. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this Purchase
Agreement and hereby agrees to waive in any action for specific performance the
defense that a remedy at law would be adequate. This Purchase Agreement is not
intended to limit or abridge any rights of the holders of the Secured Notes and
Warrants which may exist apart from this Purchase Agreement.
13
14
IN WITNESS WHEREOF, the parties have executed this Purchase
Agreement as of the day and year first written above. The execution of this
Purchase Agreement also constitutes agreement to the Security Agreement and the
undersigned shall be a party to such agreements to the same extent as if the
undersigned executed those agreements directly.
------------------------------ ------------------------------------
Signature of Subscriber(s)
------------------------------ ------------------------------------
Name of Subscriber(s)
[please print]
------------------------------ ------------------------------------
Address of Subscriber(s)
------------------------------ ------------------------------------
Social Security or Taxpayer
Identification Number of Subscriber(s)
------------------------------
Amount of Secured Notes
Subscribed For
Subscription Accepted:
CREDIT DEPOT CORPORATION
By:
--------------------------------
Date:
------------------------------
14
15
EXHIBIT A
10% Convertible Secured Notes due October 31, 1997
No.1 $350,000
CREDIT DEPOT CORPORATION promises to pay to the order of _________ or its
registered assigns (the "Noteholder") the principal sum of Three Hundred and
Fifty Thousand ($350,000) United States Dollars on October 31, 1997, together
with interest therein as provided herein (the "Maturity Date").
This Note is payable pursuant to terms hereinafter set forth and set forth in
the Security Agreement dated as of July 30, 1997 among Credit Depot Corporation,
a Delaware corporation, Credit Depot Corporation of North Carolina, a Delaware
corporation, Credit Depot Corporation of Ohio, a Delaware corporation, Credit
Depot Corporation of South Carolina, a Delaware corporation, Credit Depot
Corporation of Tennessee, a Delaware corporation, Credit Depot Corporation of
Florida, a Delaware corporation, Credit Depot Corporation of Indiana, a Delaware
corporation, Credit Depot Corporation of Georgia, a Delaware corporation, Credit
Depot Corporation of Illinois, a Delaware corporation, Credit Depot Corporation
of Missouri, a Delaware corporation, Credit Depot Corporation of Michigan, a
Delaware corporation, Credit Depot Corporation of Virginia, a Delaware
corporation and Cash Back Mortgage Corp., a Delaware corporation, each a
guarantor of the Company's obligations hereunder.
Dated: July 30, 1997
CREDIT DEPOT CORPORATION
BY:
----------------------
(CORPORATE SEAL)
10% SECURED CONVERTIBLE NOTE DUE OCTOBER 31, 1997
16
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER SECTIONS OF THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THE NOTE AND COMMON STOCK WHICH MAY BE
ISSUED UPON CONVERSION HEREOF (COLLECTIVELY THE "SECURITY") MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A ("RULE 144A") THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUER THAT SUCH
SECURITY MAY BE OFFERED, RESOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
OR DISPOSED OF, ONLY (1) (A) TO A PERSON WHO THE HOLDER REASONABLY BELIEVED IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) PURSUANT TO ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS) OR (D) TO THE COMPANY, AND (2) IN EACH CASE,
IN ACCORDANCE WITH APPLICABLE BLUE SKY LAWS AND THE SECURITIES LAWS OF ANY OTHER
APPLICABLE DOMESTIC OR FOREIGN JURISDICTION. THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT THAT THE SECURITY
EVIDENCED HEREBY IS SUBJECT TO THE FOREGOING RESALE RESTRICTIONS.
THIS SECURITY MAY NOT BE TRANSFERRED TO AN EMPLOYEE BENEFIT PLAN, TRUST OR
ACCOUNT THAT IS EITHER SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), OR DESCRIBED IN SECTION 4975 (E)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED ("CODE"), UNLESS SUCH TRANSFER SATISFIES THE
REQUIREMENTS OF CERTAIN PROHIBITED TRANSACTION EXEMPTIONS.
Capitalized terms used herein have the meanings assigned to them in the Security
Agreement (as defined below) unless otherwise indicated.
1. INTEREST. Credit Depot Corporation, a Delaware corporation (the
"Company"), promises to pay interest to the order of _____________ on the
principal amount of this Note at the rate and in the manner specified below. So
long as the Company is not in default hereunder, the
2
17
Company as an entirety resulting in any distribution to the Company's
stockholders, on or before the Termination Date, the Holder shall have the right
to exercise this Warrant commencing at such time through the Termination Date
which shall entitle the Holder to receive, in lieu of Warrant Shares, the kind
and amount of securities and property (including cash) receivable by a holder of
the number of shares of Warrant Shares into which this Warrant might have been
exercisable immediately prior thereto. For purposes of this Warrant, the term
"Warrant Shares" shall include such securities and property. This Warrant may be
exercised by presentation and surrender hereof to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the Purchase
Form annexed hereto duly executed and accompanied by payment of the Exercise
Price for the number of Warrant Shares specified in such form. Such payment may
be made, at the option of the Holder, by check or wire transfer As soon as
practicable after each such exercise of the Warrant, but not later than two
business days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificates representing the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or the
Holder's designee. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the rights of the Holder thereof to purchase the balance
of the Warrant Shares purchasable thereunder. Upon receipt by the Company of
this Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the holder
of record of the Warrant Shares issuable upon such exercise, notwithstanding
that the stock transfer books of the Company shall then be closed or that
certificates representing such shares shall not then be physically delivered to
the Holder.
(b) Notwithstanding anything herein to the contrary, this Warrant may
not be transferred separately from the Note prior to the Commencement Date.
SECTION 2. RESERVATION OF SHARES.
The Company shall at all times reserve for issuance and/or delivery
upon exercise of this Warrant such number of Warrant Shares as shall be required
for issuance and delivery upon exercise of this Warrant.
SECTION 3. FRACTIONAL SHARES.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of this Warrant. With respect to any fraction of a
share called for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the current market value
of a share, determined as follows:
3
18
(a) If the Common Stock is listed on a national securities exchange or
admitted to unlisted trading privileges on such exchange or listed for trading
on NASDAQ, the current market value shall be the last reported sale price of the
Common Stock on such exchange or system on the last business day prior to the
date of exercise of this Warrant or if no such sale is made on such day, the
average of the closing high bid and low asked prices for such day on such
exchange or system; or
(b) If the Common Stock is not so listed or admitted to unlisted
trading privileges but bid and asked prices are reported by the National
Quotation Bureau, Inc., the current market value shall be the average of last
reported high bid and low asked prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise of this
Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the current
market value shall be an amount, the book value of a share thereof as at the end
of the fiscal quarter of the Company ending immediately prior to the date of the
exercise of the Warrant.
SECTION 4. EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
This Warrant is exchangeable, without expense, at the option of the
Holder, upon presentation and surrender hereof to the Company or at the office
of its stock transfer agent, if any, for other warrants of different
denominations entitling the holder thereof to purchase in the aggregate the same
number of shares of Common Stock purchasable hereunder. The term "Warrant" as
used herein includes any Warrants into which this Warrant may be divided or
exchanged. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
execute and deliver a new Warrant of like tenor and date. Any such new Warrant
executed and delivered shall constitute an additional contractual obligation on
the part of the Company, whether or not this Warrant so lost, stolen, destroyed,
or mutilated shall be at any time enforceable by anyone.
4
19
SECTION 5. RIGHTS AND LIABILITIES OF THE HOLDER.
The Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder in the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in the Warrant and are not enforceable
against the Company except to the extent set forth herein. No provision of this
Warrant, in the absence of affirmative action by the Holder to purchase the
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the Holder, shall give rise to any liability of the Holder for the Exercise
Price or as a shareholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
SECTION 6. ADJUSTMENTS, NOTICE PROVISIONS AND RESTRICTIONS ON
ISSUANCE OF ADDITIONAL SECURITIES.
SECTION 6.1 Adjustment of Exercise Price. The Exercise Price in effect from time
to time shall be subject to adjustment, as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding shares of its capital stock that is payable in
shares of its Common Stock, (ii) subdivide, split or reclassify the outstanding
shares of its Common Stock into a greater number of shares, or (iii) combine or
reclassify the outstanding shares of its Common Stock into a smaller number of
shares, the Exercise Price in effect immediately after the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be adjusted so that it shall equal the price
determined by multiplying the Exercise Price in effect immediately prior thereto
by a fraction, of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such dividend, distribution, split,
subdivision, combination or reclassification, and of which the denominator shall
be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, split, subdivision, combination or reclassification. Any
shares of Common Stock issuable in payment of a dividend shall be deemed to have
been issued immediately prior to the record date for such dividend for purposes
of calculating the number of outstanding shares of Common Stock of the Company
under this Section 6. Such adjustment shall be made successively upon the
occurrence of each event specified above.
(b) In case the Company fixes a record date for the issuance to holders
of its Common Stock of rights, options, warrants or convertible or exchangeable
securities generally entitling such holders to subscribe for or purchase shares
of Common Stock at a price per share less than the Current Market Price (as such
term is defined in Subsection 6.1(d) hereof) per share of Common Stock on such
record date, the Exercise Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying
5
20
the Exercise Price in effect immediately prior thereto by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered would
purchase at the Current Market Price per share, and of which the denominator
shall be the number of shares of Common Stock outstanding on such Record Date
plus the number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made successively on each date whenever a
record date is fixed.
(c) In case the Company fixes a record date for the making of a
distribution to all holders of shares of its Common Stock (i) of shares of any
class of capital stock other than its Common Stock or (ii) of evidences of its
indebtedness or (iii) of assets (other than dividends or distributions referred
to in Subsection 6.1(a) hereof) or (iv) of rights, options, warrant or
convertible or exchangeable securities (excluding those rights, options,
warrants or convertible or exchangeable securities referred to in Subsection
6.1(b) hereof), then in each such case the Exercise Price in effect immediately
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding on such record date
multiplied by the Current Market Price (as such term is defined in Subsection
6.1(d) hereof) per share on such record date, less the aggregate fair value as
determined in good faith by the Board of Directors of the Company of said shares
or evidences of indebtedness or assets or rights, options, warrants or
convertible or exchangeable securities so distributed, and of which the
denominator shall be the total number of shares of Common Stock outstanding on
such record date multiplied by such Current market Price per share. Such
adjustment shall be made successively each time such a record date is fixed. In
the event that such distribution is not so made, the Exercise Price then in
effect shall be readjusted to the Exercise Price which would then be in effect
if such record date had not been fixed.
(d) For the purpose of any computation under Subsection 6.1(a), 6.1(b)
or 6.1(c) hereof, the "Current Market Price" per share at any date (the
"Computation Date") shall be deemed to be the average of the daily current
market value of the Common Stock as determined in accordance with the provisions
of Section 3 hereof over twenty consecutive trading days ending the trading day
before such date; provided, however, upon the occurrence, prior to the
Computation Date, of any event described in Subsections 6.1(a), 6.1(b) or 6.1(c)
which shall have become effective with respect to market transactions at any
time (the "Market-Effect Date") on or after the beginning of such 20-day period,
the current market value, as determined in accordance with the provisions of
Section 3 hereof for each trading day preceding the Market-Effect Date shall be
adjusted, for purposes of calculating such average, by multiplying such Closing
Price by a fraction the numerator of which is the Exercise Price as in effect
immediately after the Market-Effect Date and the
6
21
denominator of which is the Exercise Price immediately prior to the
Market-Effect Date, it being understood that the purpose of this proviso is to
ensure that the effect of such event on the market price of the Common Stock
shall, as nearly as possible, be eliminated in order that the distortion in the
calculation of the Current Market Price may be minimized.
(e) Notwithstanding anything herein to the contrary, in addition to any
other adjustment required to be made pursuant to the provisions hereof, the
Exercise Price will also be reduced to a price equal to the sales price per
share of Common Stock issued by the Company or issuable on conversion or
exercise of convertible or exercisable securities issued by the Company on and
after the date hereof and through the Termination Date if such price is lower
than the Exercise Price. In no event will such price adjustment increase the
Exercise Price, as otherwise adjusted pursuant to the terms hereof. There shall
be no limitation on the number of adjustments made pursuant to this subsection
(e).
(f) All calculations under this Section 6.1 shall be made to the
nearest cent.
SECTION 6.2 Adjustment of Number of Shares. Upon each adjustment of the Exercise
Price pursuant to Subsection 6.1 hereof, this Warrant shall thereupon evidence
the right to purchase, in addition to any other securities to which the Holder
is entitled to purchase, that number of Warrant Shares (calculated to the
nearest one-hundred thousandth of a share) obtained by multiplying the number of
shares of Common Stock purchasable upon exercise of the Warrant immediately
prior to such adjustment by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment.
SECTION 6.3 Verification of Computations. The Company shall select a firm of
independent public accountants, which may be the Company's independent auditors,
and which selection may be changed from time to time, to verify the computations
made in accordance with this Section 6. The certificate, report of other written
statement of any such firm shall be conclusive evidence of the correctness of
any computation made under this Section 6. Promptly upon its receipt of such
certificate, report or statement from such firm of independent public
accountants, the Company shall deliver a copy thereof to the Holder.
SECTION 6.4 Warrant Certificate Amendments. Irrespective of any adjustments
pursuant to this Section 6, Warrant Certificates theretofore or thereafter
issued need not be amended or replaced, but Warrant Certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments and
which legend and/or notice has been provided by the Company to the Holder,
provided the Company may, at its option, issue new Warrant Certificates
evidencing Warrants in the form attached hereto to reflect any adjustment in the
Exercise Price and the number of Warrant Shares evidenced
7
22
by such Warrant Certificates and deliver the same to the Holder in substitution
for existing Warrant Certificates.
SECTION 7. OFFICER'S CERTIFICATE.
Whenever the Exercise Price, the number of Warrant Shares underlying
this Warrant or either of them shall be adjusted as required by the provisions
of the foregoing Section, the Company shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office and with its stock
transfer agent, if any, an officer's certificate showing the adjusted Exercise
Price and number of Warrant shares determined as herein provided, setting forth
in reasonable detail the facts requiring such adjustment, including a statement
of the number of additional shares of Common Stock, if any, and such other facts
as shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder or any holder of a Warrant
executed and delivered pursuant to Section 1 hereof and the Company shall,
forthwith after each such adjustment, mail a copy by certified mail of such
certificate to the Holder or any such holder.
SECTION 8. NOTICES TO WARRANT HOLDERS.
So long as this Warrant shall be outstanding, (i) if the Company shall
pay any dividend or make any distribution upon the Common Stock, (ii) if the
Company shall offer to the holders of its Common Stock rights to subscribe for,
purchase, or exchange property for any shares of any class of stock, or any
other rights or options or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall cause
to be sent by overnight mail or courier service to the Holder, at least fifteen
days prior to the date specified in (x) or (y) below, as the case may be, a
notice containing a brief description of the proposed action and stating the
date on which (x) a record is to be taken for the purpose of such dividend,
distribution or subscription rights, or (y) such reclassification,
reorganization, consolidation, merger, conveyance, lease, dissolution,
liquidation or winding up is to take place and the date, if any is to be fixed,
as of which the holders of Common Stock or other securities shall receive cash
or other property deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or winding up.
8
23
SECTION 9. RECLASSIFICATION, REORGANIZATION OR MERGER.
In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the Company, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger with a subsidiary in which merger the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease or
conveyance to another corporation of the property of the Company as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
the Company shall, as a condition precedent to such Reorganization transaction,
cause effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant at any time prior to the expiration of the
Warrant, to receive in lieu of the amount of securities otherwise deliverable,
the kind and amount of shares of stock and other securities and property
receivable upon such Reorganization by a holder of the number of shares of
Common Stock which might have been purchased upon exercise of this Warrant and
the warrants included in the Shares immediately prior to such Reorganization.
Any such provision shall include provision for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Warrant. The foregoing provisions of this Section 9 shall similarly apply to
successive Reorganizations.
SECTION 10. ISSUE TAX.
The issuance of certificates representing the Warrant Shares upon the
exercise of this Warrant as well as securities underlying the Share Warrants
shall be made without charge to the Holder for any issuance tax in respect
thereof.
SECTION 11. EXCHANGE PROVISIONS
At any time during which this Warrant is exercisable in accordance with
its terms, the Holder may, at its option, exchange this Warrant, in whole or in
part (a "Warrant Exchange"), into the number of Warrant Shares determined in
accordance with this Section 11, by surrendering this Warrant at the principal
office of the Company or at the office of its stock transfer agent, accompanied
by a notice stating such Holder's intent to effect such exchange, the number of
Warrant Shares to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for the shares issuable upon such Warrant Exchange and, if
9
24
applicable, a new warrant of like tenor evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within seven (7) days following the Exchange Date. In
connection with any Warrant Exchange, this Warrant shall represent the right to
subscribe for and acquire the number of Warrant Shares (rounded to the next
highest integer) equal to (i) the number of Warrant Shares specified by the
Holder in its Notice of Exchange (the "Total Number") less (ii) the number of
Warrant Shares equal to the quotient obtained by dividing (A) the product of the
Total Number and the existing Exercise Price by (B) the Fair Market Value. "Fair
Market Value" "Fair Market Value" shall mean: (1) if the Common Stock is listed
on a National Securities Exchange or admitted to unlisted trading privileges on
such exchange or listed for trading on the NASDAQ system, Fair Market Value
shall be the average of the last reported sale prices of the Common Stock on
such exchange or system for the twenty (20) business days ending on the last
business day prior to the date for which the determination is being made; or (2)
if the Common Stock is not so listed or admitted to unlisted trading privileges,
Fair Market Value shall be the average of the means of the last reported bid and
asked prices reported by the National Quotation Bureau, Inc. for the twenty (20)
business days ending on the last business day prior to the date for which the
determination is being made; or (3) if the Common Stock is not so listed or
admitted to unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be the book value thereof as at the end of
the most recent fiscal year of the Company ending prior to the Exchange Date,
determined in accordance with generally accepted accounting principles.
10
25
SECTION 12. GOVERNING LAW, JURISDICTION AND VENUE.
This Warrant shall be governed by and construed and enforced in
accordance with the laws of the State of New York. The Company hereby consents
to the exclusive jurisdiction and venue of the courts of the State of New York
located in New York County, New York with respect to any matter relating to this
Warrant and the performance of the Company's obligations hereunder and the
Company hereto hereby further consents to the personal jurisdiction of such
courts. Any action suit or proceeding brought by or on behalf of the Company
relating to such matters shall be commenced, pursued, defended and resolved only
in such courts and any appropriate appellate court having jurisdiction to hear
an appeal from any judgment entered in such courts.
CREDIT DEPOT CORPORATION
By:
-------------------
[SEAL]
Dated: , 1997
--------------
Attest:
----------------------------
Secretary
11
26
PURCHASE FORM
Dated ________________, 19__
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing ___________ Warrant Shares and
hereby makes payment of ____________ in payment of the actual exercise price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name________________________________________________________
(Please typewrite or print in block letters)
Address_____________________________________________________
Signature___________________________________________________
12
27
EXHIBIT B
FORM OF NOTATION ON NOTE
RELATING TO SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, each of Credit Depot Corporation of North
Carolina, Credit Depot Corporation of Ohio, Credit Corporation of South
Carolina, Credit Depot Corporation of Tennessee, Credit Depot Corporation of
Florida, Credit Depot Corporation of Indiana, Credit Depot Corporation of
Georgia, Credit Depot Corporation of Illinois, Credit Depot Corporation of
Missouri, Credit Depot Corporation of Michigan, Credit Depot Corporation of
Virginia and Cash Back Mortgage Corporation (hereinafter collectively referred
to as the "Guarantors," which term includes any successor or additional
Guarantors under the Security Agreement (the "Agreement") referred to in the
Note upon which this notation is endorsed), jointly and severally, (i) has
unconditionally guaranteed (a) the due and punctual payment of the principal of,
premium, if any, with respect to and interest on the Notes, whether at maturity
or an interest payment date, by acceleration, call for redemption or otherwise,
(b) the due and punctual payment of interest on the overdue principal of the
Notes, (c) the due and punctual performance of all other obligations of the
Company to the Securityholders, all in accordance with the terms set forth in
the Loan Documents (as defined in the Agreement), and (d) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise and (ii) has agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Custodian or any Holder in enforcing any rights under this Subsidiary Guarantee;
provided, that the maximum liability of a Guarantor pursuant to this Subsidiary
Guarantee shall be limited by the following paragraph. Capitalized terms used
herein have the meanings assigned to them in the Loan Agreement unless otherwise
indicated.
Each Guarantor and by its acceptance hereof each Holder hereby confirms
that it is the intention of all such parties that the guarantee by such
Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Code, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
Federal or state law. To effectuate the foregoing intention, the Holders and
such Guarantor hereby irrevocably agree that the obligations of such Guarantor
under the Subsidiary Guarantee shall be limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Subsidiary Guarantee, result in such Guarantor's obligations
under the Subsidiary Guarantee not constituting such fraudulent transfer or
conveyance.
1
28
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantors shall have any personal liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator, unless otherwise provided by any provision of
applicable law which cannot be waived.
This Subsidiary Guarantee shall be binding upon the Guarantors and
their successors and assigns and shall inure to the benefit the Securityholders
and, in the event of any transfer or assignment of rights by any Securityholder,
the rights and privileges herein conferred upon such party shall automatically
extend to and be vested in such transferee or assignee, all subject to the terms
and conditions hereof. The undersigned waive notice of acceptance, notice of
non-payment, notice of nonperformance, protest and notice of protest with
respect to the obligations contained herein and in the Note and Loan Documents
and agree to be bound by the terms of the Note.
CREDIT DEPOT CORPORATION OF NORTH CAROLINA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF OHIO
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF SOUTH CAROLINA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF TENNESSEE
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
2
29
CREDIT DEPOT CORPORATION OF FLORIDA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF INDIANA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF GEORGIA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF ILLINOIS
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF MISSOURI
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CREDIT DEPOT CORPORATION OF MICHIGAN
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
3
30
CREDIT DEPOT CORPORATION OF VIRGINIA
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
CASH BACK MORTGAGE CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxxx
--------------------------------------
Title: President
--------------------------------------
4
31
EXHIBIT C
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement"), made as of this 30th day
of July, 1997, by and among CREDIT DEPOT CORPORATION, a Delaware corporation
located at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxx 00000, (the "Debtor"), the
securityholder whose signature appears on the signature page attached hereto
(the "Noteholders" or "Holders") and Thieme Consulting, Inc., 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as agent (the "Holders' Agent") for
the ratable benefit of the Holders of the Notes (in such capacity the "Secured
Party").
W I T N E S S E T H:
WHEREAS, the Debtor has entered into that certain Note Purchase Agreement
of even date herewith (the "Purchase Agreement"), and
WHEREAS, pursuant to the Purchase Agreement, the Debtor may issue up to
$4,000,000 in principal amount of its 10% Convertible Secured Notes due October
31, 1997 (the "Notes") and accompanying Warrants (the "Warrants") to purchase
up to 10,000,000 shares of the Debtor's Common Stock;
WHEREAS, the Secured Party has agreed to act as collateral agent for the
Holders of the Notes for the purposes of attachment and perfection of the
security interest of such Holders in the Collateral (as hereinafter defined);
WHEREAS, to secure the performance of the obligations under the Purchase
Agreement, the Notes and this Security Agreement (collectively the "Loan
Documents"), the Debtor has granted to Secured Party an additional security for
all of the obligations and indebtedness of the Debtor under the Loan Documents,
and the Holders have required that the Debtor, and the Debtor has agreed, to
grant a first perfected security interest in and to certain assets of Debtor,
upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
0. DEFINITIONS
32
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such person, whether through the
ownership of voting securities, by agreement or otherwise; provided, that
beneficial ownership of 10% or more of the voting securities of a person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent, Conversion Agent or
co-registrar.
"Annual Reports" is defined in Section 7(b).
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
State Law for the relief of Debtors.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capitalized Lease Obligation" means, with respect to any person for any
period, an obligation of such person in excess of $1.5 million to pay rent or
other amounts under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such obligation
shall be the capitalized amount thereof determined in accordance with such
principles.
"Capital Stock" of any person means any and all shares, interests, right
to purchase, warrants, options, participation's, or other equivalents of or
interests in (however designated) the common or preferred equity of such
person, including, without limitation, partnership interests.
"Collateral" means all property and interests in property and proceeds
thereof as defined in Section 2.
"Common Stock" means the Common Stock, $.001 par value per share, of the
Company as it exists on the date of this Agreement as originally signed or as
it may be constituted from time to time.
"Default" means any event that is or with the passing of time or the
giving of notice, or both, would be an Event of Default.
2
33
"Distribution" means any dividend, payment or distribution on or with
respect to Capital Stock or other Equity Interest, whether in cash, Capital
Stock, other securities, assets or property of any kind or nature, provided
that all Distributions other than in cash shall be valued at the higher of the
(i) value thereof on the Company or its Subsidiary's books calculated in
accordance with GAAP, or (ii) the fair market value thereof based upon a good
faith determination of the Company's Board of Directors and certified in an
Officers' Certificate delivered to the Custodian.
"Equity Interest" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equivalent Reports" is defined in Section 6(b)
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means, as of any date, generally accepted accounting principles
consistently applied in the United States which are in effect on the date of
this Security Agreement and not indulging any interpretations or regulations
that have been proposed but have not been enacted. Except as may otherwise be
specified, accounting terms used in this Security Agreement will have the
meanings specified under GAAP.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any person, the obligations
of such person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, and (ii) other agreements or
arrangements designed to protect such person against fluctuations in interest
rates.
"Holders' Agent" is defined in Section 9(e).
"Indebtedness" of any person as of any date means and includes, without
duplication, (i) all indebtedness, obligations and liabilities of such person
in respect of borrowed money including all interest, fees and expenses owed
with respect thereto (whether or not the recourse of the lender is to the whole
of the assets of such person or only to a portion thereof), or evidenced by
bonds, notes, debentures or similar instruments, or representing the deferred
and unpaid balance of the purchase price of any property or interest therein,
if and to the extent such indebtedness would appear as a liability upon a
balance sheet of such person prepared on a
3
34
consolidated basis in accordance with GAAP, (ii) all Capitalized Lease
Obligations of such person, (iii) all obligations of such person in respect of
letters of credit, bankers' acceptances, letter of credit reimbursement or
similar agreement (whether or not such items would appear on the balance sheet
of such person), (iv) all net Obligations of such person in respect of interest
rate protection and foreign currency hedging arrangements, (v) all judgment
debts and (vi) all Guarantees by such person of items that would constitute
Indebtedness under this definition (whether or not such items would appear on
such balance sheet). The amount of Indebtedness of any person at any date
shall be, without duplication, the principal amount that would be shown on a
balance sheet of such person prepared as of such date in accordance with GAAP
and the maximum net liability of any contingent Obligations referred to in
clauses (i) through (v) above at such date. Interest rate swap, cap, collar or
other hedging agreements shall not be deemed to be Indebtedness for purposes of
this Security Agreement to the extent that they are entered into for the
purpose of reducing interest rate on currency exposure on any Indebtedness
permitted to be outstanding by the terms of this Security Agreement.
"Issuance Date" means the date of original issue of the Securities.
"Lien" means any lien, security interest, mortgage, deed of trust, charge
or encumbrance of any king (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to give any security interest).
"Loan Documents" means the Purchase Agreement and this Security Agreement
and all documents and instruments executed and delivered in connection with the
foregoing.
"Obligations" means any principal, interest, penalties, fees,
indemnification's, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers" means the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, Controller, Secretary, and Assistant Secretary or any Vice President
of the Company, the Guarantors or any other Subsidiary, as the case may be.
"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the principal executive officer, principal financial officer or
principal accounting officer of the Company.
"Opinion of Counsel" means an opinion from legal counsel. Such counsel
may be a director, officer or employee of or counsel to the Company, any
Guarantor, or Subsidiary.
4
35
"Permitted Liens" means the Liens described in Section 7(f) of this
Security Agreement.
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, association, organization or any government or any agency or
political subdivision thereof.
"Preferred Stock" means any Equity Interest, whether or not designated as
"preferred stock" with preferential rights of payment of dividends or upon
redemption or retirement, or upon liquidation, winding-up or dissolution or
termination of the issuer thereof.
"Principal" means any director or executive officer of the Company or any
of its Subsidiaries, and their respective Affiliates and Related Persons.
"Quarterly Reports" is defined in Section 7(b).
"Related Person" with respect to any Principal means (i) any controlling
shareholder, 80% or more owned Subsidiary, or spouse or immediate family member
(in the case of an individual) of such Principal, or (ii) a trust, corporation,
partnership or other entity, the beneficiaries, shareholders, partner, owners
or person beneficially holding an 80% or more controlling interest of which
consists of such Principal or such other persons referred to in the foregoing
clause (i).
"SEC" means the Securities and Exchange Commission.
"S&P" means Standard & Poor's Corporation and its successors.
"Securities" means the Notes and Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Subsidiary" of any person means a Subsidiary of such
person, the articles of incorporation or other governing instruments of which
restrict such Subsidiary to the business of purchasing mortgage loans from the
Company and its Affiliates and reselling such mortgage loans or selling
mortgage-backed securities.
"Securityholder" or "Holder" means a registered holder of one or more
Securities.
"Subordinated Notes" means the Company's Subordinated Convertible Notes
originally due June 30, 2004 in an original principal amount of $5,550,000.
5
36
"Subsidiary" of any specified person means a corporation or such other
entity, a majority of whose Capital stock with voting power, under ordinary
circumstances, to elect the board of directors or other governing body is at
the time, directly or indirectly, owned by such person or by such person and a
Subsidiary or Subsidiaries of such person or by a Subsidiary or Subsidiaries of
such person.
"Subsidiary Guarantee" means, individually and collectively, the
Guarantees now or hereafter given by the Guarantors pursuant to the Purchase
Agreement, including with respect to the persons that are Guarantors as of the
date hereof a notation on the Securities substantially in the form attached as
Exhibit B to the Purchase Agreement.
"Subsidiary Guarantor" means (i) each of the Company's Subsidiaries in
existence on the Issuance Date, (ii) each of the Subsidiaries that becomes a
Guarantor of the Securities in compliance with the provisions hereof, and (iii)
each of the Subsidiaries executing a supplemental agreement in which such
Subsidiary agrees to be bound by the terms of this Agreement.
"Warehouse Lines of Credit" means any agreement, individually or
collectively, providing for up to $50 million of revolving credit borrowings,
and any other warehouse line of credit together with any other replacements or
other revolving credit or loan repurchase agreement and any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection with any thereof or otherwise created for any Subsidiary or
Securitization Subsidiary of the Company, and in each case as amended,
increased, supplemented, extended, modified, renewed, refunded, replaced or
refinanced from time to time, and in addition any repurchase agreement entered
into by the Company or any of its Subsidiaries for the purpose of receiving
cash to fund mortgage lending operations pending the sale or securitization of
loans.
"Wholly Owned Subsidiary" of any person means a Subsidiary of such person
all of the outstanding Capital Stock or other ownership interest of which
(other than directors' qualifying shares required by statute) shall at the time
be owned by such person or by one or more Wholly Owned Subsidiaries of such
person or by such person and one or more Wholly Owned Subsidiaries of such
person.
1. COLLATERAL
The term "Collateral" for purposes of this Security Agreement shall
include all of Debtor's right, title and interest in and to all interest income
due to the Company generated from loans sold from March 1996 to November 1996
to Access Financial Lending Corp. under to the sales agreement dated March 26,
1996, pursuant to which the Debtor is entitled to payment of a portion of the
interest income from the loans sold during this period, specifically known as
commitment numbers 207, 214, and 252, copies of which are attached hereto.
6
37
2. SECURITY INTERESTS
(a) To secure the payment and performance of the Obligations of the Debtor
under the Loan Documents (the "Obligations"), the Debtor hereby grants to
Secured Party for the ratable benefit of the Holders of the Notes, a continuing
security interest in the Collateral.
(b) Upon request by Secured Party, the Debtor shall execute and deliver to
the Secured Party at any time any document that Secured Party may reasonably
request, and the Debtor shall take any and all other steps reasonably requested
by Secured Party in order to perfect and maintain the security interest granted
herein by the Debtor to Secured Party.
(c) To the extent permitted by law, the Obligations shall not be affected
or impaired by any of the following: (i) any exchange, release, surrender,
sale, compromise, settlement, waiver, modification, with or without
consideration, of any Collateral or any part thereof, or any other obligation
of any other person or entity with respect to the Obligations or any part
thereof, any or all of which to the extent within the control of Secured Party,
may, to the extent permitted by law, be done or omitted by Secured Party in its
sole discretion without notice and irrespective of whether the Obligations of
the Debtor to the Secured Party shall be increased or decreased thereby (ii)
any permitted change in ownership of the Debtor or the insolvency, bankruptcy
or any other change in the legal status of the Debtor; (iii) any change in or
imposition of any law, decree, regulation or other governmental act which might
in any way affect the validity or enforceability of the payment or enforcement
of the Obligations; (iv) the failure of the Debtor to maintain in full force
and effect, or to obtain or renew when required, all governmental and other
approvals, licenses or covenants required in connection with the Obligations or
this Security Agreement; (v) the existence of any claim, defense, setoff or
other right which the Debtor may have at any time against Secured Party in
connection herewith or any unrelated transaction; or (vi) any other
circumstances which might otherwise constitute a defense available to, or
discharge of, the Debtor or others.
3. PRIORITY OF SECURITY INTERESTS
The Debtor warrants, represents and covenants that the security interest
granted to Secured Party hereunder, when properly perfected by filing duly
executed financing statements with the appropriate filing offices in all
applicable jurisdictions, as set forth on Schedule I hereto, shall constitute,
at all times, a first priority, valid and perfected security interest in the
Collateral, subject to no other liens or encumbrances (except Permitted Liens,
which at all times during the term of this Agreement will remain junior to the
Security Interest granted to the Secured Parties hereunder). The Debtor shall
not grant (without the prior written approval of Secured Party) a security
interest in, or permit a lien or encumbrance upon, any of the Collateral in
favor of anyone other than Secured Party, except for Permitted Liens.
7
38
4. LOCATION OF THE COLLATERAL
The Debtor represents, warrants and covenants that its principal place of
business is located at 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxx Xxxxxx, Xxxxxxx
00000 and that all original books and records relating to the Collateral are
kept at such location. Secured Party shall, at all reasonable times, have full
access to and the right to examine and inspect the Debtor's books and records,
to confirm and verify the existence and location of the Collateral and to take
such other action as Secured Party reasonably deems necessary to protect its
interest. The Debtor will not move any of the Collateral to any location if
such change would cause the security interest of the Secured Party in the
Collateral to lapse or cease to be perfected.
5. REPRESENTATIONS AND WARRANTIES OF THE DEBTOR
In order to induce Secured Party to enter into this Security Agreement,
the Debtor hereby represents, warrants and covenants to the Secured Party as
follows:
(a) the Debtor is the sole owner of the Collateral, free and clear of all
liens, encumbrances and security interests, except for the security interest of
Secured Party and Permitted Liens, which Permitted Liens at all times during
the term of this Agreement, will remain junior to the Security Interest granted
to the Secured Parties hereunder except to the extent set forth in Section 7(f)
hereof.
(b) the execution, delivery and performance of this Security Agreement by
the Debtor: (i) does not and will not violate: (1) any provision of law, any
order of any court or other agency of government applicable to Debtor; or (2)
any indenture, agreement or other instrument to which the Debtor is a party or
by which the Debtor is bound, or be in conflict with, result in a breach of, or
constitute (with notice or lapse of time or both) a default under, any such
indenture, agreement or other instrument; and (ii) except as contemplated
herein, result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any of the properties or assets of the Debtor.
(c) there is no action, suit, proceeding or investigation at law or in
equity or by or before any governmental instrumentality or agency or
arbitration body now pending or, to the best knowledge of the Debtor,
threatened against or affecting Debtor or any of the properties or rights of
the Debtor.
(d) the Debtor is not in default with respect of any judgment, order,
decree, injunction, rule, award or regulation of any court or other
governmental instrumentality or agency or of any arbitrator or arbitration
panel.
8
39
(e) this Agreement, when duly executed and delivered, will be the legal,
valid and binding obligation of the Debtor, enforceable against the Debtor in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
(f) the book value of the Collateral, determined in accordance with GAAP,
as of June 30, 1997 is $2,272,727, and, as of the date hereof, is substantially
the same amount.
(g) the Company is not in violation of or default under, nor will the
execution and delivery of this Agreement or any of the Loan Documents or
consummation of the transactions contemplated herein or therein result in a
violation of or constitute a default in the performance or observance of any
obligation under the Purchase and Sale Agreement between Access Financing
Lending Corp. and the Company, dated March 26, 1996.
(h) the letter agreement dated April 16, 1996 (the "Letter Agreement"),
executed in connection with the sale by the Company of certain Convertible
Mortgage Participations in March 1996 (the "Participations") and certain 9%
Cumulative Convertible Preferred Stock in October 1995 (the "Preferred Stock"),
and the Loan Agreement dated as of June 16, 1996 (the "Loan Agreement")
governing certain 10% Secured Convertible Notes due 2001 (the "Notes") issued
in June 1996, have been duly amended to exclude the issuance the Notes and
Warrants offered hereby and the Common Stock issuable on conversion or exercise
thereof from anti-dilution adjustments set forth in Section 6 of the Letter
Agreement and in Section 10.07(e) of the Loan Agreement, and Section 4.07 of
the Loan Agreement has been duly amended to provide that the security interests
provided for in this Agreement constitute Permitted Liens under the Loan
Agreement and are senior to the security interests provided for under the Loan
Agreement (the documents evidencing such amendments collectively constituting
the "Amendments") and such Amendments have been duly authorized by the Company
and are enforceable in accordance with their terms.
6. COVENANTS
(a) Payment of Securities
The Company shall pay the principal of, premium, if any, and interest on
the Securities on the date and in the manner provided in the Securities.
Holders of Securities must surrender the Notes to Thieme Consulting, Inc., 0000
Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Paying Agent") upon
payment in full of all outstanding principal, interest and collection costs, if
any, in respect thereof.
9
40
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
18% per annum, or the maximum amount permitted by law, whichever is less.
(b) Reports
The Company shall deliver to the Securityholders, copies of the annual
reports and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and designations
prescribe) that the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. If the Company is not subject to the
requirements of such Section 13 or 15(d) of the Exchange Act, the Company shall
continue to deliver to the Securityholders, such reports, information and other
documents as it would be required to file if it were subject to the
requirements of Section 13 or 15(d) of the Exchange Act and shall furnish all
such reports, information and other documents to the Securityholders.
Whether or not required by the rules and regulations of the Commission, so
long as any Securities are outstanding, the Company will furnish to the Holders
of the Securities, upon request, all financial and other information that would
be required to be contained in filings with the Commission, including, without
limitation, those on Commission Forms 10-Q ("Quarterly Reports"), 10-K ("Annual
Reports") and 8-K as if the Company were required to file such forms, including
a "Management's Discussion and Analysis of Financial Condition and Results of
Operations" quarterly and annually within 15 days after the date on which
quarterly and annual reports are required to be filed with the Commission
(after giving effect to any permitted extensions). The financial statements as
of and for each fiscal year shall contain a report thereon by the Company's
independent auditors. In the event the Company is not at any time otherwise
required to file such reports with the Commission pursuant to the Exchange Act,
the Company shall furnish reports containing substantially the same information
as such reports (the "Equivalent Reports") to the Holders of the Securities at
such times as the Company would have been required to furnish same hereunder if
the Company were so required to file with the Commission.
(c) Stay, Extension and Usury Laws
The Company and the Guarantors covenant (to the extent that they may
lawfully do so) that they shall not at any time insist upon, plead or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law whenever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Agreement.
(d) Limitation on Restricted Payments
10
41
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any common stock dividend or make
any Distribution on account of the Company's or any of its Subsidiaries' Equity
Interests (other than dividends payable from any Subsidiary to the Company or
to a Wholly Owned subsidiary of the Company or dividends or Distributions
payable to the Company or, in the case of a Subsidiary, from such Subsidiary to
any Wholly Owned Subsidiary of the Company that is a Guarantor and dividends
and Distributions payable in capital stock of the Company); or (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any Subsidiary or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Subsidiary of
the Company that is a Guarantor);
(e) Limitation on Dividend Restrictions Affecting Subsidiaries
The Company will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective
any restriction on the ability of any such Subsidiary to (i) pay dividends or
make any other Distributions on its Equity Interests or with respect to any
other interest or participation in, or measured by, its sales, revenues or
profits, or pay any Indebtedness owed to the Company or a Subsidiary of the
Company, or (ii) make loans or advances to the Company or a Subsidiary of the
Company, except for such restrictions existing under or by reason of (A)
applicable law, (B) this Agreement, (C) any instrument governing indebtedness
existing on the Issuance date or any exchange, refinancing or refunding thereof
permitted under this Agreement; provided, that the terms of the new
Indebtedness to be incurred shall not impose any greater encumbrance or
restriction than those existing pursuant to the terms of the Indebtedness
proposed to be so exchanged, refinanced or refunded, (D) customary assignment
provisions of any agreement or obligation, including a lease governing a
leasehold interest, of the Company or a Subsidiary of the Company, (E) any
instruments governing or evidencing the Warehouse Lines of Credit or any other
Indebtedness permitted by this Agreement (including any liens or guarantees
created thereunder), (F) any instrument governing or evidencing Indebtedness of
a person acquired by the Company or any Subsidiary of the Company at the time
of such acquisition, which encumbrance or restriction is not applicable to any
person, or the properties or assets of any person, other than the person, or
the property or assets of the person, so acquired; provided, that such
Indebtedness is not incurred in connection with or in contemplation of such
acquisition, or (G) any instrument governing or evidencing Indebtedness of a
Securitization Subsidiary, provided, that such restrictions relate solely to
such Securitization Subsidiary.
(f) Limitation on Liens
Neither the Company, nor any of its Subsidiaries, may create, incur or
assume or suffer to exist any lien upon any of its property, assets, income or
profits, whether now
11
42
owned or hereafter acquired, except for the following, which, at all times,
will be subordinate and junior to the liens created by this Security Agreement,
except to the extent that any senior liens that may arise in the future shall
not be granted by the Company or any Subsidiary and have priority, as a matter
of law, over liens perfected by filing under the UCC:
(i) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP;
(ii) carriers', warehousemen's, mechanics', landlords', materialmen's ,
repairmen's or other like Liens arising by operation of law in the ordinary
course of business if (1) the underlying obligations are not overdue for a
period of more than 60 days or (2) such Liens are being contested in good faith
and by appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company or such Subsidiary, as the case may be,
in accordance with GAAP;
(iii) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(iv) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(v) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount, and which do
not any case materially detract from the value of the property subject thereto
or interfere with the ordinary conduct of the business of the Company or its
Subsidiaries;
(vi) Liens on assets which are subject to leases which are capitalized on
the books of the Company and its Subsidiaries;
(vii) Liens arising by operation of law in connection with judgments;
(viii) Liens created by this Security Agreement;
(ix) Liens on mortgage loans originated or purchased by the Company using
the proceeds from Indebtedness incurred for the purpose of providing funds to
originate or purchase mortgage loans and any proceeds from the sale of any such
mortgage loans;
12
43
(x) Liens on mortgage loans originated by the Company and the proceeds
therefrom securing up to $50,000,000 of Indebtedness under a warehouse facility
or facilities with banks or institutions regularly engaged in the business of
making commercial loans;
(xi) Liens securing up to $700,000 of outstanding mortgage
participations, which are characterized as "other indebtedness" on the
Company's balance sheet or which are issued in connection with the proposed
offering of mortgage participation;
(xii) Liens securing up to $2,530,000 of Indebtedness under a Secured
Warehouse Facility to be issued in exchanged for up to $2,530,000 of
Subordinated Notes;
(xiii) Liens to secure indebtedness or other obligations of the Company
provided that at the time of the creation of such Lien the book value of the
remaining Collateral not subject to such Lien shall be not less than 200% of
the aggregate outstanding principal balance of the Securities;
(xiv) Liens created pursuant to the Security Agreement dated June 12,
1996.
(g) Corporate Existence
Subject to Section 8 hereof, each of the Company and each of its
Subsidiaries shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, and the corporate,
partnership or other existence of each Subsidiary, in accordance with the
respective organizational documents (as the same may be amended from time to
time) of the Company and each Subsidiary and the rights (charter and
statutory), licenses and franchises of the Company or its Subsidiaries, as the
case may be; provided, that neither the Company nor its Subsidiaries shall be
required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any Subsidiary (other than the Company), if
the Board of Directors of the Company or its Subsidiaries, as the case may be,
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company or its Subsidiaries, as the case may be,
and that the loss thereof is not adverse in any material respect to the
Securityholders.
On the date of this Agreement, Credit Depot Corporation of North Carolina,
Credit Depot Corporation of Ohio, Credit Depot Corporation of South Carolina,
Credit Depot Corporation of Tennessee, Credit Depot Corporation of Florida,
Credit Depot Corporation of Indiana, Credit Depot Corporation of Georgia,
Credit Depot Corporation of Illinois, Credit Depot Corporation of Missouri,
Credit Depot Corporation of Michigan, Credit Depot Corporation of Maryland,
Credit Depot Corporation of Virginia and Cash Back Mortgage
13
44
Corporation constitute all of the Subsidiaries of the Company. Credit Depot
Corporation of Maryland is inactive.
(h) Line of Business
For so long as any Securities are outstanding, the Company and its
Subsidiaries will engage primarily in the origination, servicing and sale of
residential first mortgage loans.
(i) Additional Subsidiary Investments and Guarantees
The Company will not, and will not permit any of its Subsidiaries,
including without limitation, any of the Guarantors, to make any Investment in
any Subsidiary that is not a Wholly Owned Subsidiary or a Securitization
Subsidiary, unless each such Subsidiary the majority of the capital stock of
which is owned by the Company or by another Subsidiary (a) guarantees payment
of the Securities by executing a Subsidiary Guarantee having the same terms and
conditions as those set forth, herein; (b) executes and delivers a Subsidiary
Security Agreement and also delivers to the Securityholders, upon request, an
Opinion of Counsel, in form that such Subsidiary Guarantee is a valid, binding
and enforceable obligation of such Subsidiary, subject to such customary
exceptions for bankruptcy and equitable principles; and (c) agrees in writing
to be bound by the terms of this Security Agreement.
(j) Transactions with Affiliates
The Company will not, and will not permit any of its Subsidiaries to
enter into any transaction (or series of transactions) between the Company or
any Subsidiary of the Company and an Affiliate or Related Person involving
payments by the Company or any Subsidiary of the Company, including, without
limitation, any sale, purchase, lease or loan or any other disposition of
assets, property or services (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or such Subsidiary, as the case may be, than
those that would be available in a comparable arms-length transaction with an
unrelated person and (ii) the Company first delivers to the Securityholders (1)
with respect to any Affiliate Transaction involving aggregate payments in
excess of $100,000, an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and such Affiliate Transaction has
been approved by a majority of the disinterested members of the Board of
Directors of the Company and (2) with respect to any Affiliate Transaction
involving aggregate payments in excess of $1 million, a favorable opinion as to
the fairness to the Company or such Subsidiary from a financial point of view
issued by an investment banking, accounting or financial advisory firm of
national standing.
14
45
(k) Asset Sales
The Company will not and will not permit any of its
Subsidiaries to sell, lease, convey or otherwise dispose of any assets (other
than (x) inventory in the ordinary course of business (including for purposes of
this Section, loans originated by the Company), (y) to a Wholly Owned Subsidiary
that is a Guarantor or (z) sales of accounts receivable, mortgage loans and
property acquired upon foreclosure of mortgage loans and all proceeds related
thereto, in each case under clauses (y) and (z) above, whether or not in the
ordinary course of business), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $1.0 million
or (b) for net proceeds in excess of $1.0 million (each of the foregoing, an
"Asset Sale"), unless, in each case, (1) the Company (or the Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value (as determined in good faith by, and evidenced by
a resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Holders of the Securities) of the assets sold or otherwise
disposed of.
(l) Default Certificate
The Company shall, so long as any of the Securities
are outstanding, deliver to the Securityholders, forthwith upon any Officer's
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
(m) Real Property Acquisitions
The Company and the Subsidiaries shall not, without
the prior written consent of the Holders of a majority in outstanding principal
amount of the Securities, acquire, on a consolidated basis during any calendar
year, any real property or interest therein in excess of $200,000, other than
real property acquired the Company or any Subsidiary upon foreclosure or by deed
in lieu of foreclosure.
(n) Rights of Inspection
The Debtor will permit the Secured Party or any of
its representative, at reasonable times and reasonable intervals upon one
business day's notice, to visit any of its offices and inspect the Collateral.
7. SUCCESSORS
(a) Merger, Consolidation or Sale of Assets
15
46
The Company may not consolidate or merge with or into another person,
or sell, assign, transfer, lease, convey or otherwise dispose of (or permit any
of its Subsidiaries to sell, assign, transfer, lease, convey, or otherwise
dispose of) all or substantially all of its and its Subsidiaries' assets
(determined on a consolidated basis for the Company and its Subsidiaries taken
as a whole) to another person unless (i) the Company is the surviving entity or
the person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, one of the states thereof or
the District of Columbia, (ii) the resulting, surviving or transferee
corporation assumes by supplemental agreement in a form reasonably satisfactory
to a majority of the Securityholders all of the obligations under the
Securities and this Agreement, (iii) immediately before and after giving effect
to such transaction, no Default or Event of Default (and no event that with
notice or lapse of time, or both, would become an Event of Default) shall have
occurred or be continuing or would occur or result upon the effective date of
such transaction, and (iv) the Company shall have delivered to the
Securityholders, upon request, a Officers' Certificate and an Opinion of
Counsel that all conditions precedent relating to such transaction have been
satisfied. The Securityholders shall be entitled to conclusively rely upon
such Officers' Certificate and Opinion of Counsel.
(b) Successor Corporation Substituted
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 8(a) hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such
sale, lease, conveyance or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of the Company under
this Agreement with the same effect as if such successor person had been named
as the Company herein; provided, that the Company shall not be released or
discharged from the obligation to pay the principal of and interest on the
Securities.
8. DEFAULTS AND REMEDIES
(a) Events of Default
An "Event of Default" occurs if:
(i) the failure by the Company to pay interest on any of the
Securities when the same becomes due and payable.
(ii) the failure to pay principal on the Securities when the same
becomes due and payable, whether at maturity, acceleration, conversion or
otherwise;
16
47
(iii) failure to perform, or breach of, any material covenant in any
Loan Document by the Company or the Subsidiaries which materially adversely
impacts the practical realization of the benefits to the Holders of the
Securities, and if such failure or breach is publicly disclosed by the Company,
continuance of such failure for 5 days after written notice is given to the
Company or the Subsidiaries by the holders of more than 50% in principal amount
of the Securities of the security interests granted to the Holders of the
Securities;
(iv) The Company or any Subsidiary shall
(1) become insolvent or generally fail or be unable to pay, or
admit in writing its inability to pay, debts as they become due;
(2) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower or any
Subsidiary or any property of any thereof, or make a general assignment for the
benefit of creditors;
(3) in the absence of such application, consent or acquiescence
in, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or any Subsidiary or for any
part of the property of any thereof, and such trustee, receiver, sequestrator
or other custodian shall not be discharged within 10 days;
(4) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any Subsidiary, and, if such case or
proceeding is not commenced by the Borrower or any Subsidiary or converted to a
voluntary case, such case or proceeding shall be consented to or acquiesced in
by the Borrower or such Subsidiary or shall result in the entry of an order for
relief or shall remain for 5 days undismissed; or
(5) take any corporate action authorizing, or in furtherance of,
any of the foregoing;
(v) Failure by the Company or any of its Subsidiaries to pay final
judgments entered by a court of competent jurisdiction against the Company
and/or its Subsidiaries (other than any judgment as to which an insurance
company of recognized standing has accepted full liability) aggregating $10,000
or more which remain undischarged or unstayed for a period of sixty (10) days;
(vi) Except as permitted by this Agreement, any Subsidiary Guarantee
is determined in any judicial proceeding to be unenforceable or invalid or
ceases for any reason to be in full force and effect or any Guarantor or any
person acting on behalf of any Guarantor denies or
17
48
disaffirms its obligations under its Subsidiary Guarantee; provided that no
Event of Default shall exist under this clause (vi) by reason of any of the
foregoing events unless the occurrence of such event makes the remedies
provided for in the Subsidiary Guarantees (taken as a whole) inadequate for the
practical realization of the benefits intended to be afforded thereby; or
(vii) Any Indebtedness of the Company or any Subsidiary under a
warehouse facility or facilities with one or more banks or institutions
regularly engaged in the business of making commercial loans shall be duly
declared to be or shall become due and payable prior to the stated maturity
thereof.
If a Default or Event of Default occurs and is continuing, the Company
shall mail to each holder of the Securities a Notice of Default or Event of
Default ("Notice of Default") within 2 days after the occurrence of such
Default or Event of Default, as the case may be, unless such Default or Event
of Default has been cured.
(b) Acceleration
The holders of not less than 50% in aggregate principal amount of
Securities then-outstanding will be authorized, upon the happening of any Event
of any Default (other than an Event of Default specified in clause (iv) of
Section 9(a) hereof that relates to the Company), to declare (a "Declaration")
all the Securities due and payable immediately (the "Default Amount"). Upon
any such Declaration, the Default Amount shall become immediately due and
payable.
Notwithstanding the foregoing, if an Event of Default described in the
foregoing clause (iv) occurs with respect to the Company and is continuing,
then the principal of the Securities, together with accrued and unpaid interest
to the date the Securities become due and payable, shall automatically become
and be immediately due and payable without any declaration or other act on the
part of any Holder.
(c) Other Remedies
If an Event of Default occurs and is continuing, the Securityholders may
pursue any and all available remedies (under this Agreement or otherwise) to
collect the payment of principal, premium, if any, or interest on the
Securities or to enforce the performance of any provision of the Securities,
this Agreement or the other Loan Documents.
(d) Waiver of past Defaults
The Holders of not less than a majority in aggregate principal amount of
Securities outstanding are authorized to waive any Default and rescind any
Declaration if the Default or Event of Default is cured, except an uncured
Default in the payment of principal of or
18
49
interest on any Security ("Payment Default"), or a Default with respect to a
covenant or provision that cannot be modified or amended without the consent of
the Holder of each outstanding Security affected; a Payment Default may not be
waived by the Holders' Agent (as defined below). Upon any such waiver, such
Default shall cease to exist, and any Event of Default arising therefrom shall
be deemed to have been cured for every purpose of this Agreement; but no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
(e) Control by Majority
Subject to all provisions of this Agreement and applicable law, the
Holders of a majority in aggregate principal amount of the Securities then
outstanding shall have the right to appoint an agent to act on their behalf and
until the Company receives written notice delivered in accordance with Section
15(j) hereof and executed by the Holders of a majority in outstanding principal
amount of the Securities of the appointment of a successor agent, the Agent for
the Holders of the Securities shall be Thieme Consulting, Inc., 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (such agent and its successors, the
"Holders' Agent") and the Company shall be entitled to deal with the Holders'
Agent as the agent of the Holders of the Securities for all purposes of this
Agreement and the other Loan Documents.
(f) Rights of Securityholders to Receive Payment
Notwithstanding any other provision of this Agreement, the right of any
Securityholder to receive payment of principal and interest on the Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of the Securityholder.
(g) Undertaking for Costs
In any suit for the enforcement of any right or remedy under this
Agreement, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
19
50
(h) Confession of Judgment
Debtor shall deliver to the Holders' Agent at the closing, separate
affidavits of confession of judgment for the full amount of each Note (the
"Confessions of Judgment"). Upon the occurrence of (1) an Event of Default
under Section 9(a)(i), 9(a)(ii) or (iv) of this Agreement or (2) the
acceleration of the indebtedness evidenced by the Notes in accordance with the
terms of this Agreement, any or all of the Holders shall have the right, in
addition to other available remedies, to enter judgment on their respective
Confessions of Judgment for the full amount of each Holder's respective Note,
less credit to Debtor for sums actually received by the Paying Agent hereunder
with respect to such respective Note, and to execute on the judgment for the
full amount set forth in the Confessions of Judgment. Failure to exercise such
option or any other rights which the Holders may be entitled to upon the
occurrence of an Event of Default shall not constitute a waiver of the right to
exercise such option or any other rights in the event of any subsequent Event
of Default, whether of the same or different nature.
9. CONVERSION
(a) Conversion Rights of Holder
The Holder shall have conversion rights as follows:
(i) The Securities shall be convertible, in whole or in part, at any
time from the date of issuance until 11:59 p.m. on the earlier of any Event of
Default resulting in acceleration of the Securities, or October 31, 1997, into
shares of Common Stock at the conversion price per share (such price, as
adjusted pursuant to this section, the "Conversion Price") equal to $.40,
subject to adjustment as described below.
(ii) In the event the Holder elects to convert, conversion of the
Securities shall be effected by written notice advising the Company of the
desire to convert the securities and enclosing the Securities to be converted.
Such notice shall specify the principal amount to be converted, the address to
which the certificate representing the Common Stock issuable upon conversion,
and a new Security or Securities in the principal amount equal to the
unconverted portion of such Securities, if any, shall be delivered and shall
include reasonable instructions for delivery thereof. Not later than five (5)
days following such conversion, the Company shall deliver such certificate
representing the Common Stock in accordance with such instructions accompanied
by the new Security or Securities, if any. Interest accrued through the date
of conversion of a Security shall be paid to the Person in whose name such
Security is registered at the close of business on the date of conversion.
20
51
(iii) A Holder may convert a portion of the outstanding principal
balance only in integral multiples of $1,000, unless the conversion is for the
full outstanding principal balance of the Note.
(b) Fractional Shares
The Company will not issue a fractional share of Common Stock upon
conversion of a Security. Instead the Company will deliver its check for the
current market value of the fractional share. The current market value of a
fraction of a share is determined by multiplying the current market price of a
full share of Common Stock by the fraction, rounded to the nearest cent.
The current market price of a share of Common Stock is the last sale
price of the Common Stock as reported on the National Association of Securities
Dealers Automated Quotations System ("NASDAQ") on the last trading day prior to
the conversion date. In the absence of such a quotation, the Company shall
determine the current market price of the basis of such quotations as it
considers appropriate.
(c) Taxes on Conversion
If a Holder of a Security converts it, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of Common
Stock upon the conversion. However, the Holder shall pay any such tax which is
due because the shares are issued in a name other than the Holder's name.
(d) Reservation of Shares
The Company shall at all times reserve and keep available out of its
authorized Common Stock the full number of shares of Common Stock deliverable
in the event of conversion solely for the purpose of effecting the conversion
of the Securities.
(e) Adjustment for Certain Events
The number and kind of securities purchasable upon the conversion of
the Securities shall be subject to adjustment from time to time upon the
happening of certain events as follows:
(i) In case the Company shall (A) declare a dividend or make a
distribution on the outstanding shares of its Common Stock that is payable in
shares of its Common stock, (B) subdivide, split or reclassify the outstanding
shares of its Common Stock into a greater number of shares, or (C) combine or
reclassify the outstanding shares of its Common Stock into a
21
52
smaller number of shares, the Conversion Price in effect immediately after the
record date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Conversion Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately before such dividend,
distribution, split, subdivision, combination or reclassification and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such dividend, distribution, split, subdivision, combination
or reclassification. Any shares of Common Stock issuable in payment of a
dividend shall be deemed to have been issued immediately prior to the record
date for such dividends for purposes of calculating the number of outstanding
shares of common stock of the Company under this Section. Such adjustment
shall be made successively upon the occurrence of each event specified above.
(ii) In case the Company fixes a record date for the issuance to holders
of its Common Stock of rights, options, warrants or convertible or exchangeable
securities generally entitling such holders to subscribe for or purchase shares
of Common Stock at a price per share less than the then effective Conversion
Price per share of Common Stock on such record date, the Conversion Price shall
be adjusted immediately thereafter so that it shall equal the price determined
by multiplying the Conversion Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of share of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered would purchase at the then effective Conversion Price per share, and of
which the denominator shall be the number of shares of common stock
outstanding on such record date plus the number of additional shares of Common
Stock offered for subscription or purchase. Such adjustment shall be made
successively on each date whenever a record date is fixed. To the extent that
any such rights, options, warrants or convertible or exchangeable securities
are not so issued or expire unexercised, the Conversion Price then in effect
shall be readjusted to the Conversion Price which would then be in effect if
such unissued or unexercised rights, options, warrants or convertible or
exchangeable securities had not been issuable.
(iii) In case the Company fixes a record date for the making of a
distribution to all holders of shares of its Common Stock (A) of shares of any
class of capital stock other than its common stock or (B) of evidences of its
indebtedness or (C) of assets (excluding cash dividends or distributions (other
than extraordinary cash dividends or distributions), and dividends or
distributions referred to in subsection 10(e)(ii) or (D) of rights, options,
warrant or convertible or exchangeable securities (excluding those rights,
options, warrants or convertible or exchangeable securities referred to in
subsection 10(e)(ii), then in each such case the Conversion Price in effect
immediately thereafter shall be determined by multiplying the Conversion Price
in effect immediately prior thereto by a fraction, of which the numerator
shall be the total number of shares of Common Stock outstanding on such record
date multiplied by the Current Market Price (as such term is defined in
subsection 10(g) below per share on such record date, less the aggregate fair
22
53
market value as determined in good faith by the Board of Directors of the
Company of said shares or evidences of indebtedness or assets or rights,
options, warrants or convertible or exchangeable securities so distributed, and
of which the denominator shall be the total number of shares of Common Stock
outstanding on such record date multiplied by such Current Market Price per
share. Such adjustment shall be made successively each time such a record
date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted to the Conversion Price
which would then be in effect if such record date had not been fixed.
(f) Adjustment for Certain Issuances of Common Stock
(i) The conversion price of the Securities shall be adjusted to a
price equal to the price or prices of any shares of Common Stock issued by the
Company (the "Adjusted Conversion Price") on or after the date hereof; provided
that there shall be no adjustment for any Common Stock issued on or after the
earlier of October 31, 1997 or an Event of Default resulting in an acceleration
of the Notes. The provisions of this subsection shall not apply retroactively
to any Security which has been converted prior to the date of the adjustment.
(ii) In no event shall the provisions of this Agreement cause the
conversion price, or the Adjusted Conversion Price, of any of the Securities to
be increased.
(iii) In the event that on or after the date hereof the Company issues
any securities convertible into or exercisable for Common Stock (the "Additional
Securities"), the shares of Common Stock underlying the Additional Securities
shall be deemed to have been sold by the Company at the respective conversion
or exercise prices thereof; provided that if the conversion or exercise price
of the underlying Common Stock is not then determinable or is based on future
events, such shares of Common Stock shall not be deemed to be issued until the
price is determinable or such event has occurred and the conversion or exercise
price shall be subject to adjustment pursuant to subsection (a) above as a
result of any such issuance occurring prior to April 16, 1998 at the time of
such determination or the occurrence of such event even if the price is
determined or such event occurs after such date.
23
54
(g) Current Market Price
For the purpose of any computation under subsection 10(e) above hereof,
the "Current Market Price" per share at any date (the "Computation Date") shall
be deemed to be the average of the reported daily closing bid prices of the
common stock on the principal market on which such securities are then traded
for twenty (20) consecutive trading days ending the trading day before such
date; provided, however, that in the event that during such twenty-day period
there shall occur one or more days on which there is no daily closing bid price
of the common stock reported on the principal market on which such securities
are then traded, then the "Current Market Price" per share at any such
Computation Date shall equal the book value per share of such common stock as
of the last day of the most recent fiscal quarter of the Company, computed in
accordance with GAAP; provided, further, however, upon the occurrence, prior to
the Computation Date, of any event described in subsection 10(e) above which
shall have become effective with respect to market transactions at any time
(the "Market-Effect Date") on or after the beginning of such 20-day period, the
Closing Price for each trading day preceding the Market-Effect Date shall be
adjusted, for purposes of calculating such average, by multiplying such Closing
Price by a fraction the numerator of which is the Conversion Price as in effect
immediately after the Market-Effect Date and the denominator of which is the
Conversion Price immediately prior to the Market-Effect Date, it being
understood that the purpose of this proviso is to ensure that the effect of
such event on the market price of the common stock shall, as nearly as
possible, be eliminated in order that the distortion in the calculation of the
Current Market Price may be minimized.
(h) Calculation
(i) All monetary calculations under this Section 10 shall be made to
the nearest cent.
(ii) Upon each adjustment of the Conversion Price pursuant to
subsections 10(e) and 10(f) above and each of the Securities shall thereupon
evidence the right to be converted into that number of shares of Common Stock
(calculated to the nearest one-hundred thousandth of a share) obtained by
multiplying the number of shares of Common Stock issuable upon conversion of
such Security immediately prior to such adjustment by the Conversion Price in
effect immediately prior to such adjustment and dividing the product so
obtained by the Conversion Price in effect immediately after such adjustment.
24
55
(i) Independent Accountant's Review
The Company shall select a firm of independent public accountants,
which may be the Company's independent auditors, and which selection may be
changed from time to time, to verify the computations made in accordance with
this Section. The certificate, report or other written statement of any such
firm shall be conclusive evidence of the correctness of any computation made
under this Section. Promptly upon its receipt of such certificate, report or
statement from such firm of independent public accountants, the Company shall
deliver a copy thereof to the Holders of each of the Securities.
(j) Certificate as to Adjustment
Whenever the Conversion Price shall be adjusted as required by the
provisions of this subsection 10(j), the Company shall forthwith file in the
custody of its Secretary or an Assistant Secretary at its principal office and
with its stock transfer agent, if any, an officer's certificate showing the
adjusted Conversion Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment, including a statement of
the number of additional shares of Common Stock, if any, and such other fact as
shall be necessary to show the reason for and the manner of computing such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by any such Holder or representative thereof
and the Company shall, forthwith after each such adjustment, mail a copy by
certified mail of such certificate to each such Holder.
25
56
SUBSIDIARY GUARANTEES
(a) Subsidiary Guarantees
Each of the Guarantors hereby, jointly and severally, absolutely,
unconditionally and fully guarantees to each Holder of a Security all
Obligations of the Company under the Securities and under this Agreement and,
that: (a) the principal of and interest on the Securities will be promptly
paid in full when due, whether at maturity, by acceleration, redemption,
conversion or otherwise, and interest on the overdue principal of and interest
on the Securities, if any, and all other obligations of the Company to the
Securityholders under the Securities and under this Agreement will be promptly
paid in full or performed, all in accordance with the terms of the Securities
and this Agreement; and (b) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors will be jointly and severally
obligated to pay the same immediately. The Guarantors hereby agree that their
obligations hereunder shall be absolute and unconditional, and joint and
several irrespective of the validity, regularity or enforceability of the
Securities or this Agreement, the absence of any action to enforce the same,
any waiver, consent, modification or indulgence granted by any Securityholder
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
that might otherwise constitute a legal or equitable discharge or defense of a
Guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that this Subsidiary
Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities and this Agreement and the payment in
full of the principal thereof and all accrued interest thereon. If any
Securityholder is required by any court or otherwise to return to the Company
or the Guarantors, or any Custodian, liquidator or other similar official
acting in relation to either the Company or the Guarantors, any amount paid by
either to such Securityholder, this Subsidiary Guarantee, to the extent
therefore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees that it shall not be entitled to any right of subrogation in
relation to the Securityholders in respect of any Obligations guaranteed hereby
until payment in full of obligations guaranteed hereby, including, without
limitation, the principal of and interest on all of the Securities. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Securityholders on the other hand, (x) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Section 9 hereof for the
purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such Obligations as provided in Section 9 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Subsidiary Guarantee.
26
57
(b) Execution and Delivery of Subsidiary Guarantee
To evidence its Subsidiary Guarantee set forth in subsection 11(a)
hereof, each Guarantor as of the date of this Agreement hereby agrees that a
notation of such Subsidiary Guarantee substantially in the form of Exhibit B to
this Agreement shall be endorsed by two Officers of such Guarantor on each
Security and that this Agreement shall be executed on behalf of such Guarantor
by its President or one of its Vice Presidents.
The delivery of any Security shall constitute due delivery of the
Subsidiary Guarantee set forth in this Agreement on behalf of each of the
Guarantors. Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in subsection 11(a) hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Subsidiary Guarantee.
If an Officer whose signature is on this Agreement or on a Subsidiary
Guarantee no longer holds that office on which the Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(c) Guarantors May Consolidate, Etc., on Certain Terms
Except as set forth in Sections 7 and 8 hereof, nothing contained in
this Agreement or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to the Company or another Guarantor.
Except as set forth in Sections 7 and 8 hereof, nothing contained in
this Agreement or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into a corporation or corporations other than the
Company (whether or not affiliated with the Guarantor), or successive
consolidations or mergers in which a Guarantor or its successor or successors
shall be a party or parties, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety, to a
corporation other than the Company (whether or not affiliated with the
Guarantor) authorized to acquire and operate the same; provided, that each
Guarantor hereby covenants and agrees that, upon any such consolidation,
merger, sale or conveyance, the Subsidiary Guarantee endorsed on the
Securities, and the due and punctual performance and observance of all of the
covenants and conditions of this Agreement to be performed by such Guarantor,
shall be expressly assumed (in the event that the Guarantor is not the
surviving corporation in the merger), by supplemental agreement together with
an Opinion of Counsel stating that the transaction and the supplemental
agreement comply with this Agreement, executed and delivered to the Holders of
the Securities by the corporation formed by such consolidation, or into which
the Guarantor shall have been merged, or by the corporation which shall have
acquired such property. In case of any such consolidation, merger, sale or
conveyance
27
58
and upon such assumption by the successor corporation or the purchasing
corporation, as the case may be, by supplemental agreement, executed and
delivered to the Securityholder, of the Subsidiary Guarantee endorsed upon the
Securities and the due and punctual performance of all of the covenants and
conditions of this Agreement to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. Notwithstanding the
foregoing, a Subsidiary Guarantor may be released from its Subsidiary Guarantee
and its related obligations under this Agreement if 80% or more of the capital
stock of such Guarantor is sold to another Person or if such Guarantor
consolidates with, merges into or sells all or substantially all of its assets
to, another Person, in accordance and compliance with the requirements of this
Agreement.
(d) Limitation of Guarantor's Liability
Each Guarantor hereby confirms that it is its intention that its
Subsidiary Guarantee is not and shall not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, each of the Guarantors
hereby irrevocably agrees that the Obligations under the Subsidiary Guarantee
shall be limited to the maximum amount as will, after giving effect to such
maximum amount and all other (contingent or otherwise) liabilities of each of
the Guarantors that are relevant under such laws, and after giving effect to
any rights to contribution pursuant to any agreement providing for an equitable
contribution among each of the Guarantors and other Affiliates of the Company
of payments made by guarantees by such parties, result in the Obligations of
each of the Guarantors in respect of such maximum amount not constituting a
fraudulent transfer or conveyance.
28
59
(e) Additional Subsidiary Guarantees
In the event any Subsidiary is required to become a Guarantor by the
provisions of Section of this Agreement or in the event such Subsidiary's
assets, liabilities, earnings or equity become more than "immaterial" or
"inconsequential" to the Company and its Subsidiaries on a consolidated basis
and the Company determines not to make such separate reporting of such
Subsidiary activities as required by Commission interpretations under the
Exchange Act and Regulation S-X, or if any Subsidiary is hereafter required to
guarantee any Senior Debt or debt that ranks pari passu with the obligations of
the Company and the Subsidiaries hereunder, then such Subsidiary shall
guarantee payment of the Securities and the Obligations of the Company
hereunder by executing a Subsidiary Guarantee having the same terms and
conditions as those set forth in this Section. Such new Subsidiary Guarantee
shall be evidenced by the Subsidiary executing and delivering to the
Securityholders a supplemental agreement and Subsidiary Guarantee which
subjects such Subsidiary to the provisions of this Agreement, joint and
severally, absolutely and unconditionally and fully as a Guarantor, and also
delivers an opinion of counsel that such Subsidiary Guarantee is valid, binding
and enforceable obligation of such Subsidiary, subject to such customary
exceptions for bankruptcy and applicable principles.
11. AMENDMENTS
(a) Supplement or Waiver with Consent of Securityholders
The terms of the Secured Notes may be amended or supplemented, and any
past default, excluding Payment Default, or compliance with any provisions may
be waived, with the consent of the holders of at least a majority in principal
amount of the Securities then outstanding.
(b) Without Consent of Securityholders
Without the consent of each holder of an outstanding Securities, no
amendment may (i) reduce the amount of Securities whose holders must consent to
an amendment, (ii) reduce to rate of or extend the time for payment of interest
on any Securities, (iii) reduce the principal of or extend the stated maturity
of any Securities, (iv) reduce to premium payable upon redemption of any
Securities or change the time at which any Securities may or shall be redeemed,
(v) make any Securities payable in money other than that stated in the
Securities, or (vi) impair the right of any holder to institute suit for the
enforcement of any payment on or with respect to any Securities, (vii) increase
the conversion price or (viii) amend the provisions of this Section 12.
12. TAXES AND INSURANCE
29
60
(a) The Debtor shall pay promptly, when due, all sales, use, excise,
personal property, income, withholding, and other taxes, assessments and
governmental charges upon and in relation to the ownership or use of any of its
assets, income or gross receipts for which the Debtor is or may be liable,
except to the extent any such liabilities are being contested in good faith by
appropriate proceedings and adequate reserves therefor have been posted on the
books of Debtor in accordance with generally accepted accounting principles.
(b) In the event the Debtor shall fail to pay any tax, assessment, levy or
government charge or to discharge any lien (other than Permitted Liens) or
contest the same in good faith, then Secured Party, without waiving or
releasing any obligation or default of the Debtor hereunder, may at any time or
times thereafter make such payment, settlement, compromise or release or cause
to be released any such lien, or take any other action with respect thereto
which the Secured Party deems advisable. All sums paid by Secured Party in
satisfaction of, or on account of, any tax, levy assessment or governmental
charge, or to discharge or release any lien, and any expenses, including
attorneys' fees, court costs and other charges related thereto, shall become a
part of the Obligations secured by the Collateral, payable on demand. Nothing
herein shall be deemed to require or obligate Secured Party to make such
payment, settlement, compromise or release.
(c) The Debtor shall keep all insurable Collateral insured, at no expense
to Secured Party, against loss or damage by fire, theft, explosion and such
other risks, as are ordinarily insured against by other owners or users of
similar property in similar businesses, for the full insurable value thereof,
by policies of insurance in such form and with such companies as are reasonably
satisfactory to Secured Party. The Secured Party shall be named as a loss
payee on each such policy of insurance.
(d) Copies of all insurance policies covering the Collateral, or, at the
option of Secured Party, certificates evidencing insurance coverage, listing
the risks covered thereby shall be delivered to Secured Party, upon its written
request. The Debtor hereby grants to Secured Party a continuing security
interest in and to all said policies and the proceeds thereof to secure the
repayment of all Obligations, and the Debtor agrees that Secured Party shall
have the right, upon the occurrence of an Event of Default, as defined in this
Agreement, in the Debtor's name, or in the name of Secured Party, to file
claims under any insurance policies covering the Collateral, to receive any
payments that may be made thereunder, and to execute any and all documents that
may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
(e) If the Debtor shall at any time or times hereafter fail to obtain and
maintain any of the policies of insurance required above, or fail to pay any
premium in whole or in part relating to any such policies, Secured Party may,
but shall not be obligated to, obtain or cause to be obtained any or all of
such policies and pay any part or all of the premiums due thereunder, without
30
61
thereby waiving any default by the Debtors, and any sum so disbursed by Secured
Party shall become a part of the Obligations secured by the Collateral, payable
on demand.
13. REMEDIES UPON AN EVENT OF DEFAULT WITH RESPECT TO COLLATERAL
(a) Upon the occurrence of an Event of Default, Secured Party shall have,
in addition to any other rights and remedies contained in this Agreement, all
the rights and remedies of a secured party under the Uniform Commercial Code of
New York, or any other applicable state, all of which shall be cumulative to
the extent permitted by law.
(b) In addition to all other rights and remedies, upon the occurrence of
an Event of Default, Secured Party may sell, lease or make any other
disposition of the Collateral, free from any right of redemption after such
sale, which right of redemption the Debtor hereby waives, for cash, credit or
any other accommodation thereof, and Secured Party may purchase all or any part
of the Collateral at a public or, to the extent permitted by law, private sale
after giving the Debtor ten (10) days' notice, which notice is hereby agreed to
be reasonable. The notice of such sale shall (i) in the case of a public sale,
state the time and place fixed for such sale and (ii) in the case of a private
sale, state the date after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business hours and at
such place or places as the Secured Party may fix in the notice of such sale.
Secured Party may, if it deems it reasonable, postpone or adjourn any sale of
the Collateral from time to time by an announcement at the time and place of
such postponed or adjourned sale, without being required to give a new notice
of sale and such sale may be made at any time or place to which the same may be
so adjourned. The proceeds of any sale or other disposition of any part of the
Collateral shall be applied by Secured Party to the then outstanding balance of
the Obligations (including any costs or sums advanced by Secured Party
hereunder or incurred by Secured Party hereunder) in such order of application
as Secured Party in its sole discretion may elect. The Debtor shall be liable
to Secured Party for any deficiency.
(c) Secured Party shall have the right to apply all proceeds from the sale
of Collateral to any of the Obligations in such order as Secured Party shall
determine.
(d) Should the Debtor fail to perform or observe any covenant or comply
with any condition contained in any agreement or instrument to which Debtor is
a party relating to the Collateral, then Secured Party, without obligation to
do so and without notice to or demand upon the Debtor, and without releasing
the Debtor from its obligations to Secured Party, may perform such covenant or
satisfy such condition. If Secured Party shall incur any costs or expenses of
litigation in connection with the enforcement of its rights hereunder, all such
costs, expenses, and payments shall become part of the Obligations secured
hereby, and shall be immediately due and payable upon demand.
31
62
(e) Upon the occurrence of an Event of Default and without written notice
thereof, Secured Party shall have the right to enter and remain upon the
property of Debtor, without cost or charge to Secured Party, and to effectuate
any or all of the remedies herein, for liquidating or collecting the
Collateral, or for conducting and preparing for the sale of the Collateral,
whether by foreclosure, auction or otherwise. In addition, Secured Party may
remove from such premises the Collateral and any records with respect thereto,
and take the same to the premises of Secured Party at such times as the Secured
Party may desire, in order to effectively collect or liquidate the Collateral.
In addition, upon an Event of Default, the Debtor, at its own cost, shall
assemble all the Collateral and make it available to Secured Party, in its sole
discretion, by written notice to the Debtor, which notice shall specify the
place of assembly and the time when the Collateral must be made available to
the Secured Party.
(f) Secured Party's failure, at any time or times hereafter, to require
strict performance by the Debtor of any of the provisions, warranties, terms
and conditions contained in this Security Agreement shall not waive, affect or
diminish any right of Secured Party at any time or times hereafter to demand
strict performance thereof and any waiver of any Event of Default shall not
waive or affect any other Event of Default, whether prior or subsequent thereto
and whether of the same or different type.
(g) The Debtor hereby constitutes Secured Party or its designee as the
Debtor's attorney-in-fact, effective upon the occurrence of an Event of
Default, to endorse the Debtor's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment, and to do all other acts or
things necessary to carry out this Security Agreement. The Debtor hereby
waives notice of presentment, protest and dishonor of any instrument so
endorsed by Secured Party. All acts of said attorney-in-fact or designee are
hereby authorized or ratified and said attorney-in-fact or designee shall not
be liable for any acts of omission or commission, nor for any error of judgment
or mistake of fact or loss except to the extent caused by the gross negligence
or willful misconduct of the Secured Party or such designee. This power is
coupled with an interest and is irrevocable while the Obligations remain
unpaid. The granting of the power of attorney herein shall be in addition to
any other power of attorney granted to Secured Party and shall in no way limit
any other powers granted herein.
(h) Upon the occurrence of an Event of Default, Secured Party shall have
the right to exercise any and all of the foregoing remedies, without regard to
the adequacy of the security for the Obligations, and with or without the
commencement of any legal or equitable action or the appointment of any
receiver or trustee. The Secured Party shall exercise any and all rights and
remedies hereunder only upon the instructions of the holders of not less than
50% in principal amount of the Notes.
(i) After the earlier of (i) termination of this Agreement and the payment
in full of the Obligations and (ii) conversion of all of the Notes pursuant to
this Agreement, any proceeds
32
63
of the Collateral received or held by the Secured Party shall be turned over to
the Debtor and the Collateral shall be reassigned to the Debtor by the Secured
Party without recourse to the Secured Party and without any representations,
warranties or agreements of any kind.
14. MISCELLANEOUS
(a) Notwithstanding the place where this Agreement may be executed by any
of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the
laws of the State of New York. The parties hereby agree that any dispute which
may arise between them arising out of or in connection with this Agreement
shall be adjudicated before a court located in New York County and they hereby
submit to the exclusive jurisdiction of the courts of the State of New York and
of the federal courts in New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this Agreement or any acts or
omissions relating to the sale of the securities hereunder, and consent to the
service of process in any such action or legal proceeding by means of
registered or certified mail, return receipt requested, in care of the address
set forth below or such other address as the undersigned shall furnish in
writing to the other.
(b) Whenever reference is made to any of the parties in this Security
Agreement, such reference shall be deemed to include the successors and assigns
of such party, and all covenants, provisions and agreements by or on behalf of
the Debtor in this Agreement shall inure to the benefit of the successors and
assigns of the Secured Party.
(c) This Agreement may be executed in one or more counterparts each of
which shall be deemed an original, but all of which together shall constitute
one and the same Agreement.
(d) Any invalidity or limitation on the enforceability of any provision of
this Agreement shall not affect or impair the validity, legality or
enforceability of any other provision hereof and the remaining provisions of
this Agreement shall continue and remain in full force and effect.
(e) The captions of the various sections and paragraphs of this Agreement
have been included only for the purposes of convenience and are not a part of
this Agreement and shall not be deemed in any manner to modify, explain,
enlarge or restrict any of the provisions of this Agreement.
33
64
(f) No waiver of any breach of any covenant, agreement or undertaking
contained herein shall operate as a waiver of any subsequent breach of the same
covenant, agreement or undertaking or as a waiver of any breach of any other
covenant, agreement or undertaking. In the case of a breach by any party of
any covenant, agreement or undertaking, the nonbreaching party may nevertheless
accept from the other any payment or performance without waiving its right to
exercise any right or remedy provided herein or otherwise with respect to any
such breach which was in existence at the time such payment or performance was
accepted by it. No failure of any party to exercise any power given herein or
to insist upon strict compliance with any covenant, agreement or undertaking
contained herein, and no custom or practice which varies from the terms hereof,
shall constitute a waiver of such party's right to demand exact compliance with
the terms hereof. The waiver by any party of a breach of any covenant,
agreement or undertaking contained herein shall be made only by a written
waiver in each case, and no such waiver shall operate or be construed as a
waiver of any prior or subsequent breach.
(g) This Agreement and the Loan Documents embody the entire understanding
and agreement among the parties pertaining to the subject matter hereof, and
all prior agreements and understandings of the parties, whether written or
oral, are terminated and superseded by this Agreement and shall be deemed
merged herein.
(h) Except as otherwise expressly provided herein, all rights, powers and
privileges conferred hereunder upon any party shall be cumulative and not
restrictive of those given by law. No remedy herein conferred is exclusive of
any other available remedy, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given by agreement or now or
hereafter existing at law or in equity or by statute.
(i) If the Obligations shall be collected through an attorney at law, the
Debtor shall be responsible for the costs of collection, including, but not
limited to, court costs and reasonable attorneys' fees.
(j) Any notice, payment, demand, instruction or communication required or
permitted to be given by this Agreement shall be in writing and shall be given
by hand delivery, overnight messenger or certified mail, return receipt
requested, addressed to the appropriate party at the address stated below:
If to the Debtor:
Credit Depot Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
Attn:Xxxxxx X. Xxxxxxxx, President and Chief Executive Officer
If to the Holders' Agent:
35
65
Thieme Consulting, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(k) The parties hereto agree that time is of the essence in the execution
and performance of this Agreement.
Any notice sent by Federal Express or other nationally recognized overnight
courier service or hand delivery shall be deemed made on the date received and
any notice sent by certified mail shall be deemed made three (3) days after
mailing.
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Agreement the day and year first above written.
SECURED PARTY:
_________________________________
By:___________________________ (Seal)
Its: ___________________
DEBTOR:
CREDIT DEPOT CORPORATION
By: __________________________ (Seal)
XXXXXX X. XXXXXXXX
Its: President and Chief Executive Officer
34
66
Schedule I
FILING JURISDICTIONS
Clerk of the Superior Court, Hall County, Georgia
36
