EXHIBIT 4.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ("THE ACT")
AND IS A "RESTRICTED SECURITY" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE
ACT. THE NOTE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
X.X. XXXX GROUP, INC.
10% SENIOR SUBORDINATED PARTICIPATING PROMISSORY NOTE
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$15,000 July 02 1999
X.X. XXXX GROUP, INC. (herein sometimes called the "Company" or
"Borrower"), a corporation duly organized and validly existing under the laws of
the State of Delaware, for value received, hereby, absolutely and
unconditionally promises to pay to the order of (herein sometimes called
"Lender" or "Holder" or "Owner"), the principal sum of FIFTEEN THOUSAND DOLLARS
AND NO/100 ($15,000), and to pay interest on said principal sum, at the rate of
ten percent (10%) per annum, with interest only payable annually, commencing
March 31, 2000, and on the 31st day of each March thereafter until paid in full
(the "Interest Payment Date"). All principal and accrued and unpaid interest
shall be due and payable in full on March 31 2004. Both the principal of and the
interest on this Note shall be payable in lawful money of the United States of
America at the principal office of the Holder hereof, or such other place as the
Holder hereof may, from time to time, designate. This Note is one of a series of
identical notes (except as to principal amount) aggregating a minimum of
$2,500,000 and a maximum of $5,000,000 in principal amount (collectively, the
"Notes").
Additional provisions are set forth below and incorporated herein by this
reference.
IN WITNESS WHEREOF, this Note has been duly executed and delivered as of
the day and year first above written.
X.X. XXXX GROUP, INC.
___________________________________
By: Xxxx X. Xxxx, President
ATTEST:
_______________________
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Xxxx Xxxxxxx, Secretary
ADDITIONAL PROVISIONS OF 10% SENIOR SUBORDINATED
PARTICIPATING PROMISSORY NOTES
1. Additional Interest. In addition to the stated rate of interest, the
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Company shall pay to the Holder of this Note on the Interest Payment Date
additional interest in an amount equal to 10% of the Company's consolidated pre-
tax net profit, if any, for the preceding fiscal year, not to exceed an
aggregate return, including interest at the stated rate, to holders on the Notes
of 15% for any year (prorated from the date of issuance of the Notes for 1994)
("Additional Interest"). Pre-tax net profit shall be determined in accordance
with generally accepted accounting principles consistently applied as stated in
the Company's annual audited consolidated financial statements. However, if the
annual audited financial statements are not available on the Interest Payment
Date, then the Additional Interest shall be based upon the Company's unaudited
consolidated financial statements subject to adjustment when the audited
financial statements are available. Any overpayment of Additional Interest will
be applied against interest due on the next Interest Payment Date. Any other
payment of Additional Interest will be due and payable in full within ten days
after receipt by the Company of the annual audited consolidated financial
statements.
2. Redemption.
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(a) Optional Redemption. The Notes are redeemable, in whole or in part, at
any time and from time to time after the date of issuance and prior to maturity
at the option of the Company at the following redemption prices (expressed as
percentages of the principal amount redeemed), if redeemed at any time during
the indicated year, but prior to the stated maturity date.
If Redeemed But no later than Premium
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0 years after issuance 2 years after issuance 105%
2 years after issuance 4 years after issuance 104%
4 years after issuance 6 years after issuance 103%
6 years after issuance 8 years after issuance 102%
8 years after issuance 10 years after issuance 101%
together with accrued interest to the Redemption Date (the "Redemption Price").
Notice of redemption shall be given to all Holders at their address of record
not more than 60 nor less than 30 days prior to the Redemption Date.
(b) Extraordinary Redemption. In the event (i) the Company voluntarily or
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involuntarily sells, assigns, transfers or conveys all of the capital stock or
all or substantially all of the assets of its wholly-owned subsidiary, to X.X.
Xxxx & Company, Inc. (the "Broker"), a Delaware corporation and a securities
broker-dealer registered with the Securities and Exchange Commission ("SEC") and
a member of the National Association of Securities Dealers, Inc. ("NASD"), or
(ii) the registration of the Broker with the SEC or the membership of the Broker
with the NASD shall terminate or shall be suspended for more than 30 days, then
the Company shall redeem all of the Notes at a Redemption Price equal to the
principal amount redeemed together with accrued and unpaid interest to the
Redemption Date. Notice of redemption shall be given to all Holders at their
address of record not less than 30 days after the date of any such transaction
or occurrence and the Redemption Date shall not be less than 60 days after the
date of any such transaction or occurrence.
(c) Form of Notice. The notice of redemption shall state the Redemption
Date, the Redemption Price; an identification of the Note or Notes to be
redeemed and the principal amount to be redeemed if less than the entire
principal amount; that interest will cease to accrue on the principal amount to
be redeemed on and after the Redemption Date; and the place where the Notes are
to be surrendered for payment of the Redemption Price. In the event of
redemption of this Note in part only, a new Note for the unredeemed portion
hereof will be issued in the name of the Holder upon cancellation hereof.
(d) Deposit of the Redemption Price. At least one business date prior to
the Redemption Date the Company shall deposit with a paying agent (which shall
be a bank or trust company having trust powers conferred under federal or state
law) or, if the Company is acting as its own paying agent, segregate and hold in
trust an amount of money sufficient to pay the Redemption Price, together with
an officer's certificate to the effect that such redemption is not prohibited by
the terms of any outstanding Senior Indebtedness. The Notes to be redeemed
shall become due and payable on the Redemption Date and shall cease to bear
interest as of such date; provided, however, if the Notes to be redeemed are not
paid upon surrender, they shall continue to bear interest at the interest rate
provided herein until paid.
(e) Partial Redemption. If the Notes are to be redeemed in part and not in
whole, then the Notes to be redeemed shall be determined by lot or by another
fair and equitable manner by an independent third party selected by the Company.
3. Subordination. Anything in this Note to the contrary notwithstanding,
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the indebtedness evidenced by this Note shall be subordinate and junior in right
of payment, to the extent and in the manner hereinafter set forth, to all
indebtedness of the Company constituting Senior Indebtedness after the date of
this Note:
(a) Occurrences Precluding Payment on Notes. No payment on account of
principal, premium, if any, or interest on this Note shall be made unless full
payment of amounts then due for principal, premium, if any, and interest on all
Senior Indebtedness has been made or duly provided for in money or money's
worth. No payment on account of principal, premium, if any,
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or interest on this Note shall be made if, at the time of such payment or
immediately after giving effect thereto, there shall have occurred an event of
default with respect to any Senior Indebtedness, as defined in any instrument
evidencing such Senior Indebtedness or in the instrument under which the same is
outstanding, permitting any holder thereof to accelerate the maturity thereof
and such event of default shall not have been cured or waived and shall not have
ceased to exist.
(b) Prior Payment of Senior Indebtedness. Upon (i) any acceleration of the
principal amount due on this Note or (ii) any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership, or other proceedings, or upon any
assignment for the benefit of creditors of the Company or any other marshalling
of the assets and liabilities of the Company, all principal, premium, if any,
and interest due or to become due upon the Senior Indebtedness shall be first
paid in full or payment thereof provided for in money or money's worth before
any payment is made on account of the principal of or interest on the
indebtedness evidenced by this Note; and upon any such dissolution or winding
up, or liquidation or reorganization, or any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or securities
(other than securities of the Company as reorganized or readjusted, or
securities of the Company or any other corporation provided for by a plan or
reorganization or readjustment, the payment of which is subordinate to the
payment of all Senior Indebtedness at the time outstanding), to which the Holder
of this Note would be entitled except for the provisions hereof, shall be paid
by the Company or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other person making such payment or distribution, or by the Holder of
this Note, if received by him, directly to the holders of Senior Indebtedness
(pro rata to each such holder on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives, to the extent
necessary to pay all Senior Indebtedness in full in money or money's worth after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness before any payment or distribution is made to the Holders of
the indebtedness evidenced by this Note.
(c) Subrogation. Subject to the payment in full of all Senior
Indebtedness, the Holder of this note shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of assets of
the Company made on the Senior Indebtedness until the principal of and premium,
if any, and interest on this Note shall be paid in full; and for the purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holder of this
Note would be entitled except for the provisions hereof and no payment over
pursuant to the provisions hereof to the holders of Senior Indebtedness by the
Holder of this Note shall, as between the Company, its creditors, other than the
holders of Senior Indebtedness, and the Holder of this Note be deemed to be a
payment by the Company to or on account of Senior Indebtedness, it being
understood that the foregoing provisions hereof are and are intended solely for
the purpose of defining the relative rights of the Holder of this Note, on the
one hand, and the holders of Senior Indebtedness, on the
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other hand.
(d) No Impairment of Obligation to Pay Notes. Nothing herein contained is
intended to or shall impair, as between the Company, its creditors, other than
the holders of Senior Indebtedness, and the Holder of this Note, the obligation
of the Company which is absolute and unconditional to pay to the Holder of this
Note the principal of and premium, if any, and interest on this Note as and when
the same shall become due and payable strictly in accordance with its terms or
to affect the relative rights of the Holder of this Note and creditors of the
Company, other than the holders of Senior Indebtedness, nor shall anything
herein or therein prevent the Holder of this Note from exercising all remedies
otherwise permitted by applicable law upon default under this note, subject to
the rights, if any, under this section of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
(e) Definition. As used herein, "Senior Indebtedness" shall mean all
indebtedness of the Company, whether outstanding on the date of issuance of this
Note or hereafter created, for (i) short-term and long-term borrowings
(including interest and collection costs) from financial institutions, including
banks, savings and loan associations, insurance companies and the like, incurred
in connection with the acquisition of any asset by the Company (other than this
or any other Note) or by the Broker or to provide capital to the Broker; and
(ii) purchase money indebtedness (including interest and collection costs),
incurred in connection with the acquisition of any asset by the Company (other
than this or any other Note) or by the Broker and any deferrals, renewals or
extensions of any such Senior Indebtedness.
4. Seniority. Anything in this Note to the contrary notwithstanding, the
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indebtedness evidenced by this Note shall be senior and prior in right of
payment, to the extent and in the manner hereinafter set forth, to all
indebtedness of the Company (which, for purposes of this Section 4 shall include
any subsidiary of the Company) for money borrowed constituting Subordinated Debt
after the date of this Note:
(a) Occurrences Precluding Payment on Subordinated Debt. No payment on
account of principal, premium, if any, or interest on Subordinated Debt shall be
made unless full payment of amount then due for principal, premium, if any, and
interest on all Notes has been made or duly provided for in money or money's
worth. No payment on account of principal, premium, if any, or interest on
Subordinated Debt shall be made if, at the time of such payment or immediately
after giving effect thereto, there shall have occurred an event of default with
respect to the Notes or if interest on this Note shall not have been paid for a
period of one year or more.
(b) Priority in Payment of Notes. Upon (i) any acceleration of the
principal amount due on this Note or (ii) any payment or distribution of assets
of the Company of any kind or
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character, whether in cash, property or securities, to creditors upon any
dissolution or winding up or total or partial liquidation or reorganization of
the Company, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership, or other proceedings, or upon any assignment for the benefit of
creditors of the Company or any other marshalling of the assets and liabilities
of the Company, all principal, premium, if any, and interest due or to become
due upon this Note shall be first be paid in full or payment thereof provided
for in money or money's worth before any payment is made on account of the
principal of or interest on the indebtedness evidenced by any Subordinated Debt;
and upon any such dissolution or winding up, or liquidation or reorganization,
or any payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinate to the payment of all Notes at the time
outstanding), to which the holders of Subordinated Debt would be entitled except
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by the holders of Subordinated Debt, if received by
them, directly to the Holders of the Notes (pro rata to each such Holder on the
basis of respective amounts of Notes held by such Holders) or their
representatives, to the extent necessary to pay all Notes in full in money or
money's worth after giving effect to any concurrent payment or distribution to
or for the holders of the Notes before any payment or distribution is made to
the holders of the Subordinated Debt.
(c) Subrogation. Subject to the payment in full of all Notes, the holder
of Subordinated Debt shall be subrogated to the rights of the Holders of the
Notes to receive payments or distributions of assets of the Company made on the
Notes until the principal of and premium, if any, and interest on the
Subordinated Debt shall be paid in full; and for the purposes of such
subrogation, no payments or distributions to the holders of the Notes of any
cash, property or securities to which the holder of the Subordinated Debt would
be entitled except for the provisions hereof and no payment over pursuant to the
provisions hereof to the Holder of this Note by the holders of the Subordinated
Debt shall, as between the Company, its creditors, other than the holders of
Subordinated Debt, and the Holder of this Note be deemed to be a payment by the
Company to or on account of this Note, it being understood that the foregoing
provisions hereof are and are intended solely for the purpose of defining the
relative rights of the Holder of this Note, on the one hand, and the holders of
Subordinated Debt, on the other hand.
(d) No Impairment. Nothing herein contained is intended to or shall
impair, as between the Company, its creditors, other than the holders of
Subordinated Debt, and the Holder of this Note, the obligation of the Company
which is absolute and unconditional to pay to the holder of the Subordinated
Debt the principal of and premium, if any, and interest on the Subordinated Debt
as and when the same shall become due and payable strictly in accordance with
its terms or to affect the relative rights of the holders of the Subordinated
Debt and creditors of the Company, other than the Holder of this Note, nor shall
anything herein or therein prevent the holders of the Subordinated Debt from
exercising all remedies otherwise permitted by applicable law upon default under
the Subordinated Debt, subject to the rights, if any, under this
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section of the Holder of this Note in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
(e) Definition. As used herein, "Subordinated Debt"shall mean short-term
and long-term borrowings (including interest and collection costs) from any
person whatsoever, excluding (i) Senior Indebtedness; (ii) accounts payable
arising in the ordinary course of business; (iii) wage and other compensation
claims of employees and registered representatives who are associated with the
Company as independent contractors; and (iv) any indebtedness which has a
priority in payment as a matter of law.
(f) Acknowledgment of Subordination. To the extent practicable, any
promissory note or other evidence of indebtedness representing Subordinated Debt
shall contain provisions substantially similar to the foregoing and effectuating
the intention of this Section 4 that the Subordinated Debt be subordinated in
payment to this Note as provided herein.
5. Covenants of the Company.
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(a) Mergers and Sales of Assets by the Company. If the Company is
recapitalized, consolidated with or merged into any other corporation, or sells
or conveys to any other corporation all or substantially all of its property as
an entity, then the obligation to pay the principal of (and premium, if any) and
interest on the Notes and the performance of the other covenants of the Company
under the Notes shall remain in full force and effect.
(b) Stock of Broker. The Company agrees not to sell, transfer, convey,
distribute, pledge, hypothecate or otherwise dispose of all or any portion of
the capital stock of the Broker owned by the Company or any interest therein,
nor to cause or allow the Broker to issue, sell, transfer, convey, pledge,
hypothecate or otherwise dispose of any of its capital stock or any interest
therein to any person other than the Company. Notwithstanding the foregoing but
subject to Section 2(b) herein, the Company may dispose of all of the Broker's
capital stock owned by the Company in a single transaction.
(c) Assets of Broker. Subject to Section 2(b) herein, the Company agrees
not to cause or allow the Broker to sell, transfer, convey, distribute, pledge,
hypothecate or otherwise dispose of all or substantially all of its assets.
Notwithstanding the foregoing and subject to Section 2(b) herein, the Company
may cause or allow the Broker's to dispose of all or substantially all of its
assets in a single transaction for such consideration as the board of directors
of the Broker shall determine, in good faith, to be fair and reasonable.
6. Tender upon Warrant Exercise. Notwithstanding anything herein
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contained to the contrary, the Holder may apply all or a portion of the
principal amount of this Note in payment of all or a portion of the exercise
price of those certain Stock Purchase Warrants of even date herewith for the
purchase of shares of the Company's common stock, par value $.10 per
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share, at an exercise price of $1.50 per share, subject to adjustment as
provided therein. Accrued and unpaid interest on the principal amount of this
Note so applied shall be paid to the Holder within 30 days following the date of
tender of this Note to the Company for that purpose.
7. Demand Registration Rights.
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(a) Company Registration. If at any time after December 31, 1994, to and
including December 31, 1995, the Company shall receive from the Holders of not
less than a majority in principal amount of the Notes then outstanding a notice
requesting registration of their Notes under the Act for public sale, the
Company shall promptly give each other Holder written notice of such request.
The Company shall, one time only, use its best efforts to cause to be registered
under the Act all of the Notes that the Holders have requested to be registered,
including Holders who made written request therefor within twenty (2) days after
mailing of such notice to them by the Company.
(b) Obligations of the Company. Whenever required to use its best efforts
to effect the registration of the Notes, the Company shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission ("SEC") a
registration statement with respect to such Notes and use its best efforts to
cause such registration statement to become and remain effective; provided,
however, that in connection with any proposed registration intended to permit an
offering of any securities from time to time (i.e., a so-called "shelf
registration"), the Company shall in no event be obligated to cause any such
registration to remain effective for more than 180 days.
(ii) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(iii) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Notes owned by them.
(iv) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or blue-sky laws of
such jurisdictions as shall be reasonably appropriate for the distribution of
the securities covered by the registration statement, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions, and further provide that (anything in this Section
7(b)(iv) to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the
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qualification of the securities in that jurisdiction be borne by selling
shareholders pro rata, to the extent required by such jurisdiction.
(c) Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action that the Holders shall furnish to
the Company such information regarding them, the Notes held by them, and the
intended method of disposition of such securities as the Company shall
reasonably request and as shall be required in connection with the action to be
taken by the Company.
(d) Company Registration Expenses. The Company shall bear all registration
and qualification fees and expenses (excluding underwriters' discounts,
commissions and expenses), and any additional costs and disbursements of counsel
for the Company in connection with such registration; provided, however, that if
any such cost or expense is attributable solely to one selling Holder and does
not constitute a normal cost or expense of such a registration, such cost or
expense shall be paid by that selling Holder. In addition, each selling Holder
shall bear the fees and costs of its own counsel.
(e) Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 7.
(f) Indemnification.
(i) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Act) for it, and each
such person, if any, who controls such Holder or underwriter within the meaning
of the Act, against any losses, claims, damages, or liabilities, joint or
several, to which they may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements 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 not misleading; and will reimburse
each such Holder, such underwriter, or controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 7(f) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon an untrue statement or
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alleged untrue statement or omission or alleged omission made in connection with
such registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, underwriter, or controlling person.
(ii) To the extent permitted by law, each Holder requesting or joining in
a registration will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, and each
agent and any underwriter for the Company (within the meaning of the Act)
against any losses, claims, damages, or liabilities to which the Company or any
such director, officer, controlling person, agent, or underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements 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 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 made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 7(f)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld).
(iii) Promptly after receipt by an indemnified party under this Section
7(f) of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party under
this paragraph, notify the indemnifying party in writing of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties. The failure to notify an indemnifying
party promptly of the commencement of any such action, if prejudicial to his
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this paragraph, but the omission to so
notify the indemnifying party will not relieve him of any liability that he may
have to any indemnified party otherwise than under this paragraph.
(g) Termination of the Company's Obligations. The Company shall have no
obligations pursuant to this Section 7 after December 31, 1995.
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(h) Lockup Agreement. In consideration for the Company agreeing to its
obligations under this Section 7, each Holder agrees in connection with any
registration of the Company's securities, upon the request of the Company or the
underwriters managing any underwritten offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Notes (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days from the effective
date of such registration) as the Company or the underwriters may specify.
8. Default Interest. In the event of an uncured event of default under
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this Note, the interest on the principal amount of this Note shall be computed
at the default rate of 15% per annum, and no Additional Interest shall accrue
thereafter as long as the default rate of interest remains effective.
9. Default Provisions. All principal and accrued and unpaid interest on
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this Note shall become and be due and payable immediately upon demand of the
Holder if any one or more of the following "events of default" shall occur:
(a) Payment Default. Default in the payment of any principal or interest
on this Note when and as the same becomes due and payable and the continuance
thereof for sixty (60) days after receipt of written notice by the Borrower from
the Holder hereof;
(b) Other Default. Default in the due observance or performance of any of
the other agreements, covenants, warranties, representations, terms or
conditions contained in this Note and the continuance thereof for sixty (60)
days after written notice from the Holder hereof; provided, however, that the
cure period shall be extended for a reasonable period (but in no event for a
period longer than 180 days from the date of the initial default notice) if:
(i) such event of default cannot be cured within the applicable cure period
despite the Company's diligent and good faith effort; (ii) the Company
commences all actions necessary to cure such default immediately upon receipt of
Holder's written notice and provides Holder with its written plan to cure; and
(iii) so long as the Company diligently pursues such cure to its completion;
(c) Dissolution or Insolvency. The dissolution, liquidation, termination
of existence, or admission in writing of insolvency (defined as the Company
generally not paying its debts as they become due, excluding its 45%
subordinated notes due October 1, 19--, and its 1989-A Series Preferred Stock,
par value $1.00 per share, redeemable on October 1, 19--) of, or the making of
an assignment for the benefit of creditors, by the Company or the Broker;
(d) Voluntary Bankruptcy. The institution of bankruptcy proceedings or
proceedings for a reorganization, liquidation, composition, receivership or
other similar debtor relief under any other law or regulation, federal or state,
by the Company or the Broker; or
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(e) Involuntary Bankruptcy. The institution of bankruptcy proceedings or
proceedings for a reorganization, liquidation, composition, receivership or
other similar debtor relief under any other law or regulation, federal or state,
instituted against the Company or the Broker and such proceeding shall continue
unstayed and in effect for any period of sixty (60) consecutive days; or
(f) Default on Senior Indebtedness. There shall have occurred an event of
default under any instrument evidencing Senior Indebtedness or in the instrument
under which the same is outstanding permitting any holder thereof to accelerate
the maturity thereof until such time as such event of default shall have been
cured or waived and shall have ceased to exist, provided that the 1989 Preferred
Stock shall not be deemed to be Senior Indebtedness.
The Company shall, within 90 days after the occurrence of any Event of
Default known to it, give to the Holder of this Note notice of such default.
10. Transfer. Subject to the appropriate provisions of the Act, and the
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provisions of applicable state blue-sky laws, this Note or any portion of the
principal amount hereof equal to $1,000 or integral multiples thereof is
transferable on the records of the Company upon presentation of this Note,
properly endorsed, at its principal executive offices. Upon such presentation
and transfer a new Note or Notes will be issued. For the purposes of payment
and all other purposes, the Company shall deem and treat the person in whose
name this Note is registered as the absolute owner hereof and the Company shall
not be affected by any notice to the contrary.
11. No Waiver. Except as provided in Section 12 below, no failure to
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exercise, and no delay in exercising any right, power or remedy hereunder shall
impair any right, power or remedy which the Holder may have, nor shall any such
delay be construed to be a waiver of any of such rights, powers or remedies, or
an acquiescence in any breach or default under this Note, nor shall any waiver,
which, except as provided in Section 12 below, must be in writing signed by the
Holder, of any breach or default hereunder be deemed a waiver of any default or
breach subsequently occurring. The rights and remedies herein specified are
cumulative and not exclusive of any rights or remedies which the Holder would
otherwise have.
12. Amendments and Waivers.
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(a) Amendment by the Company. The Company may amend or supplement the
Notes without notice to or the consent of the holders of the Notes (i) to cure
any ambiguity, omission, defect or inconsistency and (ii) to make any other
change that does not adversely affect the rights of the holders of the Notes.
The Company may similarly waive compliance with any provision of the Notes which
waiver does not adversely affect the rights of the Note holders.
(b) Amendments to Comply with the Trust Indenture Act of 1940. In
connection with registration of the Notes for public sale or if it should ever
be determined that the Notes were or
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are subject to provisions of the Trust Indenture Act of 1940, the Company may
find it necessary or desirable to cause the Notes to be covered by a trust
indenture administered by an independent trustee. Accordingly, the Holders agree
that the Company shall have the right and power to enter into a trust indenture
meeting the applicable requirements of the Trust Indenture Act of 1940, to
appoint an independent trustee thereunder and, subject to Section 12(c) herein,
to make such modifications and amendments to the Notes as the Board of Directors
of the Company, in the exercise of its discretion, shall deem necessary or
desirable without any requirement for approval by the holders of the Notes.
(c) Amendments Requiring Holder Approval. The Company may otherwise amend
the Notes only with the written consent of the holders of at least a majority of
the principal amount of the Notes then outstanding; provided, however, that
without the consent of the holder of each Note affected, however, no such
amendment may (i) reduce the rate or extend the time for payment of interest on
the Notes, (ii) reduce the principal of or extend the maturity of the Notes,
(iii) decrease the redemption premium to be paid by the Company or (iv) reduce
the required percentage for waiver or modification of the Notes.
(d) Waivers. Except as otherwise provided in Section 12(c) above, the
observance of any term or provision of this Note may be waived (either generally
or in a particular instance and either retroactively or prospectively) and any
default or event of default may be waived with the written consent of the
Borrower and the Holders of at least a majority in principal amount of Notes
then outstanding.
(e) Amendments and Waivers Binding on all Holders. Except as otherwise
provided in Section 12(c) above, any amendment or waiver effected in accordance
with this Section 12 shall be binding upon each Holder of any Notes at the time
outstanding, each future holder of all such Notes and the Company. Each Holder
acknowledges and agrees that by operation of this Section, the Holders of a
majority in principal amount of Notes then outstanding will have the right and
power to diminish or eliminate certain material rights of the Holder hereunder.
13. Notices. All notices, requests, consents and demands hereunder shall
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be effective upon the earlier of personal delivery (including telex, telecopier,
telegram, overnight courier or other acknowledged receipt) or three business
days after deposit in the United States mails, registered or certified mail,
postage fully prepaid, return receipt requested, addressed to the Holder or the
Company at the address set forth below:
Company: X.X. Xxxx Group, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: President
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Holder:
Any address may be changed by notice, in writing, given in accordance with this
Section.
14. Severability of Provisions. In case any one or more of the provisions
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contained in this Note should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
15. Successors and Assigns. This Note shall be binding upon, enforceable
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by and against, and inure to the benefit of the Holder and the Company, and
their respective heirs, personal representatives, successors and assigns.
16. Choice of Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Colorado.
17. Amendment and Priority. No provision of this Note may be amended,
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except with the written consent of the Holder or as provided in Section 12
above. No such amendment shall extend to or affect any obligation, covenant,
agreement, event of default or any provision of this Note not expressly amended
nor impair any right consequent thereon.
18. Collection Costs. In the event this Note is placed in the hands of an
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attorney for collection following the occurrence of an event of default, the
Company agrees to pay all costs of collection incurred by the Holder including
reasonable attorneys' fees.
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