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EXHIBIT 10.65
Convertible Loan Agreement
BY AND BETWEEN
INTEGRATED SECURITY SYSTEMS, INC.
AS BORROWER
ALONG WITH BORROWER'S WHOLLY OWNED SUBSIDIARIES:
B&B ELECTROMATIC, INC.
ISSI ACQUISITION CORP. II
DBA TRI-COASTAL SYSTEMS
INNOVATIVE SECURITY TECHNOLOGIES, INC.
AS GUARANTORS
AND
RENAISSANCE CAPITAL GROWTH & INCOME FUND III, INC.
AND
RENAISSANCE US GROWTH & INCOME TRUST PLC
AS LENDERS
This Convertible Loan Agreement (the "Agreement") is entered into as of
DECEMBER 31, 1996, by and between INTEGRATED SECURITY SYSTEMS, INC. (a Delaware
corporation) as borrower (hereinafter referred to as "BORROWER") together with
its wholly owned subsidiaries B&B ELECTROMATIC, INC. (a Louisiana corporation),
ISSI ACQUISITION CORP. II (a Delaware corporation) and INNOVATIVE SECURITY
TECHNOLOGIES, INC. (a Texas corporation) as guarantors (hereinafter
collectively referred to as "Guarantor") from RENAISSANCE CAPITAL GROWTH &
INCOME FUND III, INC. (a Texas corporation) and RENAISSANCE US GROWTH & INCOME
TRUST PLC (a public limited company registered in England and Wales)
(individually referred to as Renaissance III and Renaissance PLC, respectively,
together with any assignees or successors in interest individually and
collectively referred to as "LENDER").
WITNESSETH:
WHEREAS, Borrower seeks to obtain up to FOUR MILLION SIX HUNDRED THOUSAND
DOLLARS ($4,600,000) in financing through issuance of Convertible Debentures in
the amount of FOUR MILLION SIX HUNDRED THOUSAND DOLLARS ($4, 600,000), such
funds to be used for the purpose of acquisition of all of
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Agreement (continued)
the stock ownership of Xxxxxxx Company, Inc., (a Texas corporation) and the
payment of expenses incurred in regard to such purposes; and
WHEREAS, Borrower has requested that Lender provide such as herein provided,
and Lender is willing to furnish such to Borrower upon the terms and subject to
the conditions and for the considerations hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises herein contained and
for other valuable consideration, receipt and sufficiency of which is
acknowledged, the parties hereto agree as follows:
ARTICLE I - DEFINITION OF TERMS
SECTION 1.01. DEFINITIONS.
(a) For the purposes of this Agreement, unless the context otherwise
requires, the following terms shall have the respective meanings assigned to
them in this Article I or in the section or recital referred to below:
"Affiliate" with respect to any Person shall mean (i) any person directly or
indirectly owning, controlling or holding power to vote 10% or more of the
outstanding voting securities of any Person; (ii) any person, 10% or more of
whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by any Person; (iii) any person
directly or indirectly controlling, controlled by or under common control
with any Person; (iv) any officer, director or partner of any Person; and
(v) if a Person is an officer, director or partner, any company for which
any Person acts in such capacity. For purposes of this Agreement, any
partnership of which any Person is a general partner, or any joint venture
in which any Person is a joint venturer, is an Affiliate of each Person.
"Capital Expenditure" shall mean an expenditure for assets that will be used in
years subsequent to the year in which the purchase is made and which asset
is properly classifiable in financial statements as equipment, real property
or improvements, or similar type of capitalized asset.
"Capital Lease" shall mean any lease of property, real or personal, which is in
substance a financing lease and which would be capitalized on a balance
sheet of the lessee, including without limitation, any lease under which (i)
such lessee will have an obligation to purchase the property for a fixed
sum, (ii) an option to purchase the property at an amount less than a
reasonable estimate of the fair market value of such property as of the date
such lease is executed, or (iii) the term of the lease approximates or
exceeds the expected useful life of the property leased thereunder.
"Consolidated Subsidiaries" shall mean those corporations of which 50% or more
of the voting stock is owned by Borrower and their financial statements are
consolidated with those of the Borrower.
"Conversion " or "Conversion Rights" shall mean exchange of, or the rights to
exchange, the Principal Amount of the loan, or any part thereof, for
Borrower's fully paid and non assessable common stock on the terms and
conditions as provided in the Debenture.
"Common Stock" shall mean Integrated Security Systems, Inc. common stock, $0.01
par value.
"Debentures" shall mean the Debentures executed by Borrower and delivered
pursuant to the terms of this Agreement, together with any renewals,
extensions or modifications thereof.
"Debtor Laws" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization or similar laws from time to time in effect affecting the
rights of creditors generally.
"Default" shall mean any of the events specified in Article VIII.
"Dividends", in respect of any corporation, shall mean (i) cash distributions
or any other distributions on, or in respect of, any class of capital stock
of such corporation, except for distributions made solely
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Agreement (continued)
in shares of stock of the same class, and (ii) any and all funds, cash and
other payments made in respect of the redemption, repurchase or acquisition
of such stock, unless such stock shall be redeemed or acquired through the
exchange of such stock with stock of the same class.
"ERISA" shall mean the Employee Retirement Income Security Act, as amended,
together with all regulations issued pursuant thereto.
"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, or their
successors, which are applicable in the circumstances as of the date in
question. The requisite that such principles be applied on a consistent
basis shall mean that the accounting principles observed in a current period
are comparable in all material respects to those applied in a preceding
period.
"Governmental Authority" shall mean any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or a Subsidiary or
any of its or their businesses, operations or properties.
"Guaranty" of any Person shall mean any contract, agreement or understanding of
such Person pursuant to which such Person in effect guarantees the payment
of any Indebtedness of any other Person (the "Primary Obligor") in any
manner, whether directly or indirectly, including without limitation
agreements: (i) to purchase such Indebtedness or any property constituting
security therefor; (ii) to advance or supply funds primarily for the purpose
of assuring the holder of such Indebtedness of the ability of the Primary
Obligor to make payment; or (iii) otherwise to assure the holder of the
Indebtedness of the Primary Obligor against loss in respect thereof, except
that "Guaranty" shall not include the endorsement by Borrower or a
Subsidiary in the ordinary course of business of negotiable instruments or
documents for deposit or collection.
"Holder" shall mean the owner of Registrable Securities.
"Indebtedness" shall mean, with respect to any Person, the following
indebtedness, obligations and liabilities of such Person: (i) all
"liabilities" that would be reflected on a balance sheet of such Person;
(ii) all obligations of such Person in respect of any Guaranty; (iii) all
obligations of such Person in respect of any Capital Lease, (iv) all
obligations, indebtedness and liabilities secured by any lien or any
security interest on any property or assets of such Person; and (v) all
preferred stock of such Person which is subject to a mandatory redemption
requirement, valued at the greater of its involuntary redemption price or
liquidation preference plus accrued and unpaid dividends.
"Investment" in any Person shall mean any investment, whether by means of share
purchase, loan, advance, extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person; provided however, that "Investment" shall not
include (i) any demand deposits in a duly chartered state or national bank
or other cash equivalent investments (ii) any loans permitted by Section
6.12, or (iii) any acquisitions of equity in any other Person.
"IRS Code" shall mean the Internal Revenue Code of 1986, as amended, together
with all regulations issued thereunder.
"Lien" shall mean any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness,
whether arising by agreement or under any statute or law, or otherwise.
"Loan" shall mean the money lent to Borrower pursuant to this Agreement, along
with any accrued interest thereon.
"Loan Closing" or "Loan Closing Date" shall mean the initial disbursement of
Loan funds which shall occur on a date 30 days from the date hereof or such
earlier date on which Borrower requests, and
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Agreement (continued)
Lender approves, as the date at which the initial advance of the Loan funds
shall be consummated, provided that such date may be mutually extended
beyond 30 days, but only by written agreement of the parties hereto.
"Loan Documents" shall mean this Agreement, the Debentures (including any
renewals, extensions and refundings thereof), and any other agreements or
documents (and with respect to this Agreement, and such other agreements and
documents, any amendments or supplements thereto or modifications thereof)
executed or delivered pursuant to the terms of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" shall mean any change,
factor or event that shall (i) have a material adverse effect upon the
validity, performance or enforceability of any Loan Documents, (ii) have a
material adverse effect upon the financial condition or business operations
of Borrower or any Subsidiaries, (iii) have a material adverse effect upon
the ability of the Borrower to fulfill its obligations under the Loan
Documents, or (iv) any event that causes an Event of Default or which, with
notice or lapse of time or both, could become an Event of Default.
"Material Indebtedness" shall mean any debt incurred by Borrower that shall (i)
have a material adverse effect upon the ability of Borrower to fulfill its
obligations under the Loan Documents, (ii) have a material adverse effect
upon the financial conditions or business operations of Borrower or any
Subsidiary, or (iii) cause an Event of Default or which, with notice or
lapse of time or both, could become an Event of Default.
"Obligation" shall mean: (i) all present and future indebtedness, obligations
and liabilities of Borrower to Lender arising pursuant to this Agreement,
regardless of whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, joint, several, or joint and several;
(ii) all present and future indebtedness, obligations and liabilities of
Borrower to Lender arising pursuant to or represented by the Debentures and
all interest accruing thereon, and reasonable attorneys' fees incurred in
the enforcement or collection thereof; (iii) all present and future
indebtedness, obligations and liabilities of Borrower and any Subsidiary
evidenced by or arising pursuant to any of the Loan Documents; (iv) all
costs incurred by Lender, including but not limited to reasonable attorneys'
fees and legal expenses related to this transaction; and (v) all renewals,
extensions and modifications of the indebtedness referred to in the
foregoing clauses, or any part thereof.
Permitted Liens" shall mean: (i) Liens (if any) granted Agent for the benefit
of the Lenders to secure the Obligation; (ii) pledges or deposits made to
secure payment of worker's compensation insurance (or to participate in any
fund in connection with worker's compensation insurance), unemployment
insurance, pensions or social security programs; (iii) Liens imposed by
mandatory provisions of law such as for landlord's, materialmen's,
mechanics', warehousemen's and other like Liens arising in the ordinary
course of business, securing Indebtedness whose payment is not yet due; (iv)
Liens for taxes, assessments and governmental charges or levies imposed upon
a Person or upon such Person's income or profits or property, if the same
are not yet due and payable or if the same are being contested in good faith
and as to which adequate cash reserves have been provided or if an extension
is obtained with respect thereto; (v) Liens arising from good faith deposits
in connection with tenders, leases, real estate bids or contracts (other
than contracts involving the borrowing of money), pledges or deposits to
secure public or statutory obligations and deposits to secure (or in lieu
of) surety, stay, appeal or customs bonds and deposits to secure the payment
of taxes, assessments, customs duties or other similar charges; (vi)
encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended, and
none of which is violated by existing or proposed structures or land use;
(vii) mortgages, financing statements, equipment leases or other
encumbrances incurred in connection with the acquisition of property or
equipment or the replacement of existing property or equipment, provided
that such liens shall be limited to the property or equipment then
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Agreement (continued)
being acquired; and (viii) Liens the Senior Lenders pursuant to the Senior
Documents to secure Senior Obligations.
"Permitted Indebtedness" shall mean (i) Senior Obligations (ii) current
liabilities, and (iii) indebtedness incurred in the purchase of capital
equipment not to exceed $400,000 per year, and (iv) debt associated with
Permitted Liens.
"Person" shall include an individual, a corporation, a joint venture, a general
or limited partnership, a trust, an unincorporated organization or a
government or any agency or political subdivision thereof.
"Plan" shall mean an employee benefit plan or other plan maintained by Borrower
for employees of Borrower and/or any Subsidiaries and covered by Title IV of
ERISA, or subject to the minimum funding standards under Section 412 of the
Internal Revenue Code of 1986, as amended.
"Principal Amount" shall mean, as of any time, the then aggregate outstanding
face amount of the Debentures after any conversions or redemptions and after
giving effect to any installment payments received by Lender.
"Registrable Securities" shall mean (i) the Common Stock issued upon Conversion
of the Debentures, or (ii) any Common Stock issued upon Conversion of the
Debentures or exercise of any warrant, right or other security which is
issued with respect to the Common Stock referred to in clause (i) and (ii)
above by way of stock dividend; any other distribution with respect to or in
exchange for, or in replacement of Common Stock; stock split; or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization; excluding in all cases, however, any
Registrable Security that is not a Restricted Security and any Registrable
Securities sold or transferred by a person in a transaction in which the
rights under this Agreement are not assigned.
"Registrable Securities Then Outstanding" shall mean an amount equal to the
number of Registrable Securities outstanding which have been issued pursuant
to the Conversion of the Debentures.
"Rentals" of any Person shall mean, as of any date, the aggregate amount of the
obligations and liabilities (including future obligations and liabilities
not yet due and payable) of such Person to make payments under all leases,
subleases and similar arrangements for the use of real, personal or mixed
property, other than leases which are Capital Leases.
"Restricted Security" shall mean a security that has not been (i) registered
under the 1933 Act or (ii) distributed to the public pursuant to Rule 144
(or any similar provisions that are in force) under the 0000 Xxx.
"SEC" shall mean the Securities and Exchange Commission.
"1933 Act" shall refer to the Securities Act of 1933, as amended.
"1934 Act" shall refer to the Securities Exchange Act of 1934, as amended.
Senior Documents" means the loan documents and related security agreement
evidencing the Senior Lenders loans and all amendments thereto, together
with all other documents, instruments, agreements executed in connection
therewith, as each may be amended, modified, supplemented, renewed, extended
or replaced from time to time.
"Senior Lenders" means Bank of Xxxxxxx, Union Planters Bank, Xxxx Xxxxxxx and
the asset based lender selected to finance Xxxxxxx Company and their
successors and assigns.
"Senior Obligations" means collectively (a) revolving and term loans in the
aggregate maximum amount outstanding of $900.000 from Bank of Xxxxxxx, (b)
revolving and term loans in the aggregate maximum amount outstanding of
$1,400,000 from Union Planters Bank, (c) revolving and term loans in the
aggregate maximum amount outstanding of $1,500,000 from the asset based
lender selected to finance the Xxxxxxx Company, and (d) seller financing
provided by Xxxx Xxxxxxx related to the acquisition of Xxxxxxx Company of
not more than $1,500,000.
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Agreement (continued)
"Solvent" shall mean, with respect to any Person on a particular date, that on
such date: (i) the fair value of the property of such Person is greater than
the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person; (ii) the present fair salable value, in the
ordinary course of business, of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (iii) such Person
is able to realize upon its assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal
course of business; (iv) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature; and (v) such Person is
not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Subordinated Debt" shall mean any indebtedness of the Borrower or any
Subsidiaries, now existing or hereafter incurred, which indebtedness is, by
its terms, junior in right of repayment to the payment of the Debentures.
"Subsidiary" shall mean any corporation whether now existing or hereafter
acquired of which fifty percent (50%) or more of the Voting Shares are
owned, directly or indirectly, by Borrower.
"Voting Shares" of any corporation shall mean shares of any class or classes
(however designated) having ordinary voting power for the election of at
least a majority of the members of the Board of Directors (or other
governing bodies) of such corporation, other than shares having such power
only by reason of the happening of a contingency.
SECTION 1.02. OTHER DEFINITION PROVISIONS.
(a) All terms defined in this Agreement shall have the above-defined
meanings when used in the Debentures or any other Loan Documents, certificate,
report or other document made or delivered pursuant to this Agreement, unless
the context therein shall otherwise require.
(b) Defined terms used herein in the singular shall import the plural and
vice versa.
(c) The words "hereof," "herein," "hereunder" and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(d) References to financial statements and reports shall be deemed to be a
reference to such statements and reports prepared in accordance with GAAP
recognized as such by the American Institute of Certified Public Accountants
acting through its Accounting Principles Board or by the Financial Accounting
Standards Board which principles are consistently applied, on the basis used by
Borrower in prior years, for all periods after the date hereof so as to
properly reflect the financial condition, and the results of operations and
statement of cash flows, of Borrower and its Consolidated Subsidiaries, if any.
(e) Accounting terms not specifically defined above, or not defined in this
Agreement, shall be construed in accordance with GAAP as recognized as of this
date by the American Institute of Certified Public Accountants.
ARTICLE II - LOAN PROVISIONS
SECTION 2.01. LOAN CLOSING.
(a) Subject to the terms and conditions of this Agreement, and the
compliance with such terms and conditions by all parties, Lender agrees to lend
to Borrower, and Borrower agrees to borrow from
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Agreement (continued)
Lender, the aggregate sum of up to FOUR MILLION SIX HUNDRED THOUSAND DOLLARS
($4,600,000) which shall be disbursed at the Loan Closing as follows:
Renaissance Capital Growth & Income III, Inc.: $2,300,000
Renaissance US Growth & Income Trust PLC: $2,300,000
(b) Each such disbursement is to be at such time and subject to the
conditions as provided hereunder and such borrowing shall be evidenced by
Borrower's duly executed Debenture (in one or more counterparts in the
aggregate sum of the Principal Amount advanced substantially in the form of
Exhibit 2.01(b) attached hereto and made a part hereof, with appropriate
insertion of names, dates and amounts. In the event of any differences in
terms between this Agreement and the Debenture, the Debenture will be
controlling; provided, however, that the holder of the Debenture shall be
entitled to all the rights and benefits of the Lender provided in this
Agreement.
(c) Unless otherwise mutually agreed, the Loan Closing shall be at the
offices of Renaissance Capital Group, Inc. in Dallas, Texas.
(d) If, within 30 days of the date of this Agreement (i) Borrower has
failed to comply with the conditions precedent to the Loan Closing as specified
in Article III hereof (unless compliance with such conditions in whole or in
part has been waived or modified by Lender in its sole discretion) or (ii) the
Loan Closing has not occurred (unless the date of such Loan Closing has been
mutually extended) then, in either such case, the obligations of Lender under
this Agreement shall terminate, provided however that Borrower shall be
obligated for payment of the commitment fees and Lender expenses as provided in
Section 2.07 due and payable as of such date of termination.
SECTION 2.02. USE OF PROCEEDS.
(a) Borrower intends to use the money advanced hereunder, along with
funding from other sources, substantially for the following purposes:
Purchase of Common Stock of Xxxxxxx Company $5,400,000
Fees and Working Capital $400,000
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Total $5,800,000
(b) Borrower hereby acknowledges that the proceeds from the Loan shall be
of benefit to the company for the growth of its business by providing capital
for acquisition of the Xxxxxxx Company, Inc. which will provide added financial
and marketing opportunities.
SECTION 2.03. INTEREST RATE AND INTEREST PAYMENTS.
(a) Interest on the Principal Amount outstanding from time to time shall
accrue at the rate of 9.00% per annum, with the first installment payable on
FEBRUARY 1, 1997 and subsequent payments at the first day of each month
thereafter. Overdue principal and interest on the Debentures shall bear
interest, to the extent permitted by applicable law, at a rate of 9.00% per
annum. Interest on the Principal Amount of each Debenture shall be calculated,
from time to time, on the basis of the actual days elapsed in a year consisting
of 365 days.
SECTION 2.04. MATURITY.
(a) If not sooner redeemed or converted, the Debentures shall mature on
DECEMBER 1, 2003, at which time all the remaining unpaid principal, interest
and any other charges then due under this Agreement shall be due and payable in
full.
SECTION 2.05. MANDATORY PRINCIPAL REDEMPTION INSTALLMENTS.
(a) Mandatory principal redemption installments on each Debenture shall be
as provided for in the Debentures.
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Agreement (continued)
SECTION 2.06. OPTIONAL REDEMPTION.
(a) Optional principal redemption on each Debenture shall be as provided
for in the Debentures.
SECTION 2.07 CLOSING FEES AND LOAN CLOSING COSTS.
(a) Borrower agrees to pay to Lender, or Lender's designee, a Loan
Commitment fee of 1% of the loan amount available under this Agreement such to
be due and payable at Loan Closing or upon termination of this Agreement.
(b) Borrower agrees to pay to Lender, or Lender's designee, a Loan Closing
Fee of 1% of the amount of Loan funds disbursed at each Loan Closing, such to
be due and payable at Loan Closing.
(c) In addition, at the Loan Closing Borrower agrees to pay Lender's
reasonable costs and expenses (including, without limitation, the reasonable
fees and expenses of Lender's legal counsel) in connection with the
negotiation, preparation, execution and delivery of this Agreement, the
Debentures, the other Loan Documents and the Loan Closing or Subsequent Loan
Closings, provided that such costs and expenses shall not, in the aggregate,
exceed 0.5% of the loan amount available under this Agreement.
(d) Lender acknowledges the receipt of the payment by the Borrower of
$10,000 to cover Due Diligence expenses, with a remaining balance of $10,000
due upon closing..
(e) Borrower and Lender agree to a similar fee arrangement on any
additional funds provided under this Agreement or similar agreement between
Lender and Borrower.
SECTION 2.08. PLACEMENT FEE.
The Borrower shall be responsible for payment of any placement fees and
commissions, brokerage fees or finder's fees in connection with the Loan. All
such placement fee obligations are as listed in Exhibit 2.08 attached hereto.
The Lender has incurred no placement fee on this transaction.
SECTION 2.09. TAXES.
(a) Each Debenture shall be exchangeable for shares of Borrower's common
stock provided by Borrower and on such terms stated hereunder. Such exchange
for shares shall be made without deduction for any present or future taxes,
duties, charges or withholdings, (excluding, in the case of the Lender, any
foreign taxes, any federal, state or local income taxes and any franchise taxes
or taxes imposed upon it by the jurisdiction, or any political subdivision
thereof, under which the Lender is organized or is qualified to do business),
and all liabilities with respect thereto (herein "Taxes") shall be paid by
Borrower. If Borrower shall be required by law to deduct any Taxes for which
Borrower is responsible under the preceding sentence from any sum payable
hereunder to any Lender: (i) the sum payable shall be increased so that after
making all required deductions, such Lender receives an amount equal to the sum
it would have received had no such deductions been made; (ii) Borrower shall
make such deductions; and (iii) Borrower shall pay the full amount deducted to
the relevant taxing authority or other authority in accordance with applicable
law.
(b) Except as otherwise set forth in this Agreement or the other Loan
Documents, Borrower shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Loan Documents or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as "Other
Taxes").
(c) Borrower shall indemnify Lender for the full amount of Taxes and Other
Taxes reasonably paid by Lender or any liability (including any penalties or
interest assessed because of Borrower's defaults) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within thirty (30) days
from the date Lender makes written demand therefor. Lender shall subrogate any
and all rights and claims relating to such Taxes and Other Taxes to Borrower
upon payment of said indemnification.
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Agreement (continued)
(d) Without prejudice to the survival of any other agreement of Borrower
hereunder, the agreements and obligations of Borrower in this Section 2.09
shall survive the payment in full of the Obligation.
SECTION 2.10 STOCK CONVERSION RIGHTS.
(a) Each Debenture shall be exchangeable for shares of Borrower's common
stock on such terms and in such amounts as shall be stated in the Debenture.
The holders of the stock issued upon exercise of the right of conversion as
provided in said Debenture shall be entitled to all the rights of the Lender as
stated in this Agreement or the other Loan Documents to the extent such rights
are specifically stated to survive the surrender of the Debenture for
conversion as therein provided.
SECTION 2.11 REGISTRATION RIGHTS AGREEMENT.
(a) The holder of shares of common stock of Borrower issued upon conversion
of the Debentures shall be entitled to the rights as provided in Article IX of
this Agreement.
ARTICLE III - CONDITIONS PRECEDENT
SECTION 3.01. DOCUMENT REQUIREMENTS.
(a) The obligation of Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent that, on or before the date of
such advance, Lender shall have received the following in form and substance
satisfactory to Lender:
(i) One or more duly executed Debentures aggregating the Principal Amount of
Loan funds then advanced, each in amounts as requested by Lender, which shall
be styled "River Oaks Trust Company, FBO, Renaissance Capital Growth and Income
Fund III, Inc.," and "Renaissance U.S. Growth and Income Trust, PLC.", and in
the form of Exhibit 2.01(a)(1) with appropriate insertions of date, amount and
conversion features.
(ii) An agreement from Guarantor guaranteeing the Borrower's payment of all
interest, principal and other ancillary costs of the entire debt.
(iii) Stock pledge agreements from Borrower pledging as security, for all
payments of interest, principal and other ancillary costs of the entire debt,
all outstanding shares of each of the Borrower's wholly owned subsidiaries,
including but not limited to, B&B Electromatic, Inc., ISSI Acquisition Corp. II
dba Tri-Coastal Systems and Innovative Security Technologies, Inc., and
further, all outstanding shares of Xxxxxxx Company, Inc., upon acquisition
thereof from use of the loan proceeds.
(iv) An agreement from the Borrower pledging as security, for all payments
of interest, principal and other ancillary costs of the entire debt (a) all
trademarks, copyrights and software technology relating to the Borrower's
Intelli-site product, and (b) all machinery and equipment.
(v) An opinion of legal counsel for Borrower dated as of the Loan Closing
Date, satisfactory in form and substance to Lender, as to due execution by the
Borrower of this Agreement, the Debenture and other Loan Documents and the
legal enforceability thereof.
(vi) A true and correct certificate signed by a duly authorized officer of
the Borrower and dated as of the Loan Closing Date stating that, to the best
knowledge and belief of such officer, after reasonable and due investigation
and review of matters pertinent to the subject matter of such certificate: (A)
all of the representations and warranties contained in Article IV hereof and
the other Loan Documents are true and correct as of the Loan Closing Date and
(B) no event has occurred and is continuing, or would result from the Loan,
which constitutes a Default or an Event of Default.
(vii) Copies of resolutions, as adopted by the Borrower's Board of
Directors, approving the execution, delivery and performance of this Agreement,
the Debentures, and the other Loan Documents, including the transactions
contemplated herein and accompanied by a certificate of the Secretary or
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Agreement (continued)
Assistant Secretary of Borrower stating that such resolutions have been duly
adopted, are true and correct, have not been altered or repealed and are in
full force and effect.
(viii) A signed certificate of the Secretary or Assistant Secretary of the
Borrower which shall certify the names of the officers of Borrower authorized
to sign each of the Loan Documents to be executed by such officer, together
with the true signatures of each of such officers. It is herewith stipulated
and agreed that Lender may thereafter rely conclusively on the validity of this
certificate as a representation of the officers of Borrower duly authorized to
act with respect to the Loan Documents until such time as Lender shall receive
a further certificate of the Secretary or Assistant Secretary of Borrower
canceling or amending the prior certificate and submitting the signatures of
the officers thereupon authorized in such further certificate.
(ix) Certificates of good standing (or other similar instrument) for the
Borrower issued by the Secretary of State of the state of incorporation of
Borrower, and certificates of qualification and good standing for Borrower
issued by the Secretary of State of each of the states wherein such Borrower
has operating facilities of such nature so as to be required to be qualified to
do business as a foreign corporation, dated within ten (10) days of Loan
Closing.
(x) A copy of the Articles of Incorporation of the Borrower and all
amendments thereto, certified by the Secretary of State of the state of
incorporation and dated within ten (10) days of the date of Loan Closing and a
copy of the bylaws of Borrower and all amendments thereto, certified by the
Secretary or Assistant Secretary of Borrower, as being true, correct and
complete as of the date of such certification.
(xi) Copies of the following financial statements for Borrower: (A) An
audited balance sheet and income statement for Borrower as of December 31, 1995
and (B) unaudited balance sheet and income statement for Borrower as of March
31, 1996, June 30, 1996 and September 30, 1996.
(xii) Such other information and documents as may reasonably be required by
Lender and Lender's counsel to substantiate Borrower's compliance with the
requirements of this Agreement.
SECTION 3.02. STOCK PURCHASE AGREEMENT AND AVAILABILITY OF OTHER FUNDING
(a) The obligation of Lender to advance funds at the Loan Closing Date
hereof is subject to the condition precedent Borrowers shall have obtained, on
or before the loan closing:
(i) an executed contract, in form satisfactory to Lenders, for the
purchase of all of the outstanding stock of the Xxxxxxx Company, Inc. Such
contract will be substantially in the form of Exhibit 3.02(a)(i) attached
hereto and shall provide for a purchase price for such stock in an amount not
in excess of $6,000,000 of which not more than $4,000,000 shall be in cash,
$1,500,000 shall be in a secured promissory note, and $500,000 shall be paid
pursuant to a non-compete agreement.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan hereunder, Borrower represents and warrants
to Lender that:
SECTION 4.01. ORGANIZATION AND GOOD STANDING.
(a) Borrower is duly organized and existing in good standing under the laws
of the state of its incorporation, is duly qualified as a foreign corporation
and in good standing in all states in which failure to qualify would have a
Material Adverse Effect, and has the corporate power and authority to own its
properties and assets and to transact the business in which it is engaged and
is or will be qualified in those states wherein it proposes to transact
material business operations in the future.
SECTION 4.02. AUTHORIZATION AND POWER.
(a) Borrower has the corporate power and requisite authority to execute,
deliver and perform the Loan Documents to be executed by Borrower. The
Borrower is duly authorized to, and has taken all
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11
Agreement (continued)
corporate action necessary to authorize, execute, deliver and perform the Loan
Documents executed by Borrower. The Borrower is and will continue to be duly
authorized to perform the Loan Documents executed by Borrower.
SECTION 4.03. NO CONFLICTS OR CONSENTS.
(a) Except as disclosed to Lender pursuant to Exhibit 4.03 - Schedule of
Conflicts or Consents, neither the execution and delivery of the Loan
Documents, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any judgment, license, order or permit
applicable to Borrower, or any indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument to which Borrower is a party or by
which Borrower is or becomes bound, or to which Borrower is or becomes subject,
or violate any provision of the charter or bylaws of Borrower. No consent,
approval, authorization or order of any court or governmental authority or
third party is required in connection with the execution and delivery by
Borrower of the Loan Documents or to consummate the transactions contemplated
hereby or thereby except those that have been obtained.
SECTION 4.04. ENFORCEABLE OBLIGATIONS.
(a) The Loan Documents have been duly executed and delivered by the
Borrower and are the legal and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as limited by any applicable
bankruptcy, insolvency or similar laws now or hereafter in effect affecting
creditors rights and debtor's obligations.
SECTION 4.05. NO LIENS.
(a) Except for Permitted Liens, all of the properties and assets owned by
the Borrower are free and clear of all Liens and other adverse claims of any
nature, and Borrower has good and marketable title to such properties and
assets. A true and complete list of all liens for borrowed money is disclosed
to Lender pursuant to Exhibit 4.05.
SECTION 4.06. FINANCIAL CONDITION.
(a) Borrower has delivered to Lender copies of the balance sheet of
Borrower as of December 31, 1995, and the related statements of income,
stockholders' equity and statement of cash flow for the year ended, audited by
its independent Certified Public Accountant. Borrower has also delivered to
Lender copies of the balance sheet of Borrower as of September 30, 1996, and
the related statements of income, stockholders' equity and statement of cash
flow for the period ended such date, which financial statements have not been
certified by its independent Certified Public Accountant. Such financial
statements are true and correct in all material respects, fairly represent the
financial condition of Borrower as of such dates and have been prepared in
accordance with GAAP (except unaudited financial statements omit certain
footnotes); and as of the date hereof, there are no obligations, liabilities or
Indebtedness (including contingent and indirect liabilities and obligations) of
Borrower which are (separately or in the aggregate) material and are not
reflected in such financial statements or otherwise disclosed herein. Since
the date of the above referenced year end financial statements and quarterly
financial statements, there have not been, except as disclosed in Exhibit 4.06:
(i) any Material Adverse Change in the financial condition, results of
operations, business, prospects, assets or liabilities (contingent or
otherwise, whether due or to become due, known or unknown), of the Borrower;
(ii) any dividend declared or paid or distribution made on the capital stock of
the Borrower or any capital stock thereof redeemed or repurchased; (iii) any
incurrence of long-term debt by the Borrower; (iv) any salary, bonus or
compensation increases to any officers, key employees or agents of the Borrower
or; (v) any other transaction entered into by the Borrower except in the
ordinary course of business and consistent with past practice.
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Agreement (continued)
SECTION 4.07. FULL DISCLOSURE.
(a) To the best of Borrower's knowledge and belief after current
investigation, there is no material fact that Borrower has not disclosed to
Lender which could reasonably be expected to have a Material Adverse Effect on
the properties, business, prospects or condition (financial or otherwise) of
Borrower. Neither the financial statements referenced in Section 4.06 hereof,
nor any business plan, offering memorandum or prospectus, certificate or
statement delivered herewith or heretofore by Borrower to Lender in connection
with the negotiations of this Agreement, contained any untrue statement of a
material fact or omitted to state any material fact necessary to keep the
statements contained herein or therein from being misleading.
SECTION 4.08. NO DEFAULT.
(a) No event has occurred and is continuing which constitutes a Default or
an Event of Default under this Agreement.
SECTION 4.09. MATERIAL AGREEMENTS.
(a) The Borrower is not in default in any material respect under any
contract, lease, loan agreement, indenture, mortgage, security agreement or
other material agreement or obligation to which it is a party or by which any
of its properties is bound.
SECTION 4.10. NO LITIGATION.
(a) Except as disclosed to Lender pursuant to Exhibit 4.10 - Schedule of
Litigation attached hereto, there are no actions, suits, investigations,
arbitrations or administrative proceedings pending, or to the knowledge of
Borrower threatened, against Borrower, and there has been no change in the
status of any of the actions, suits, investigations, litigation or proceedings
disclosed to Lender which could have a Material Adverse Effect on Borrower or
on any transactions contemplated by any Loan Document.
SECTION 4.11. BURDENSOME CONTRACTS.
(a) To the best knowledge of the Borrower, it is not a party to, or bound
by, any contract or agreement, the faithful performance of which is so onerous
so as to create or to likely create a Material Adverse Effect on the business,
operations or financial condition of the Borrower.
SECTION 4.12. TAXES.
(a) All tax returns required to be filed by Borrower in any jurisdiction
have been filed and all taxes (including mortgage recording taxes),
assessments, fees and other governmental charges upon Borrower or upon any of
its properties, income or franchises have been paid. To the best knowledge of
Borrower, there is no proposed tax assessment against Borrower and there is no
basis for such assessment.
SECTION 4.13 PRINCIPAL OFFICE, ETC.
(a) The principal office and principal place of business of the Borrower
and each of its Subsidiaries is as follows:
Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx,
Xxxxx 000
Xxxxxx, Xxxxx 00000
B&B Electromatic, Inc.
00000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
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13
Agreement (continued)
ISSI Acquisition Corp. II dba Tri-Coastal Systems, Inc.
0000 Xxxxxxxxxx Xxxxx,
Xxxxx 000
Xxxxxx, Xxxxx 00000
Innovative Security Technologies, Inc.
0000 Xxxxxxxxxx Xxxxx,
Xxxxx 000
Xxxxxx, Xxxxx 00000
SECTION 4.14. USE OF PROCEEDS.
(a) The Borrower hereby acknowledges that it intends to use proceeds from
the Loan as disclosed in Section 2.02 hereof.
SECTION 4.15. EMPLOYEE BENEFIT AND INCENTIVE PLANS; ERISA.
(a) Borrower is not obligated under any Plans.
(b) Borrower is not a party to any collective bargaining agreement and is
not aware of any activities of any labor union that is currently seeking to
represent or organize its employees. Borrower has not experienced any labor
problems, including work stoppages, disputes or slowdowns with respect to its
employees.
SECTION 4.16. COMPLIANCE WITH LAW.
(a) To the best knowledge of Borrower, Borrower is in compliance with all
laws, rules, regulations, orders and decrees which are applicable to Borrower
or its properties by reason of any Governmental Authority which are material to
the conduct of the business of Borrower or any of its properties.
SECTION 4.17. COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS.
(a) To the best knowledge of Borrower, all properties of Borrower are in
compliance with all federal, state or local environmental protection laws,
statutes and regulations which are material to the conduct of the business of
Borrower, or its properties, and the Borrower is currently in compliance with
all material reporting requirements, rules, and regulations which are
applicable to Borrower or its properties by reason of such governmental
environmental protective agencies.
SECTION 4.18. SCHEDULE OF CAPITAL STOCK AND SEC REQUIREMENTS.
(a) Set forth on Exhibit 4.18 - Schedule of Capital Stock is a true and
correct schedule of all classes of authorized, issued, and outstanding Capital
Stock of the Borrower, all stock options, warrants, conversion rights,
subscription rights and other rights or agreements to acquire securities of
Borrower and any shares held in treasury or reserved for issue upon exercise of
such stock options, warrants or conversion rights, subscription rights and
other rights or agreements to acquire securities including date of termination
of such right and the consideration therefor.
(b) Except as provided in Exhibit 4.18 - Schedule of Capital Stock, to the
best of the Borrower's knowledge, all securities of Borrower have been issued
in compliance with the requirements of the 1933 Act, and the rules and
regulation promulgated thereunder, or pursuant to an exemption therefrom.
Lender acknowledges receipt from Borrower Registration 333-5023 and certain
comment letters from the SEC and responses thereto.
(c) The shares of common stock of the Borrower when issued to Lender upon
conversion of the Debentures will be duly and validly issued, fully paid and
nonassessable and in compliance with all applicable securities laws. Such
issuance will not give rise to preemptive rights or similar rights by any other
security holder of Borrower, except for anti-dilution provisions found in
certain securities
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Agreement (continued)
previously issued by the Borrower. Borrower shall at all times reserve and
keep available sufficient authorized and unissued shares of common stock to
effectuate the conversion of the Debentures.
SECTION 4.19. INSIDER.
(a) Neither the Borrower, nor any Person having "control" (as that term is
defined in the Investment Company Act of 1940, as amended, or in regulations
promulgated pursuant thereto (herein the "1940 Act")) of the Borrower is, an
"executive officer," "director," or "principal shareholder" (as those terms are
defined in the 0000 Xxx) of Lender.
(b) Except as set forth in the Borrower's Form 10-K dated for the period
ending December 31, 1995, there are no transactions between the Borrower and
any affiliates of Borrower.
(c) All agreements between the Borrower and any of its officers, directors,
and principal shareholders, including employment agreements, are listed on
Exhibit 4.19 - Schedule of Affiliate Transactions.
SECTION 4.20. SUBSIDIARIES.
(a) As of the date hereof, the Borrower has the following Subsidiaries: B&B
Electromatic, Inc., ISSI Acquisition Corp. II dba Tri-Coastal Systems, Inc.,
and Innovative Security Technologies, Inc.
(b) Except as disclosed in the Financial Statements and except for
Subsidiaries, the Borrower does not own any equity or debt interest or any form
of proprietary interest in any entity, or any right or option to acquire any
such interest in any such entity.
SECTION 4.21. CASUALTIES.
(a) Neither the business nor the properties of Borrower is currently
affected by any environmental hazard, fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty (whether or not covered by insurance), which could
have a Material Adverse Effect.
SECTION 4.22 INVESTMENT COMPANY ACT.
(a) Borrower is not an "investment company" as defined in Section 3 of the
1940 Act nor a company that would be an investment company except for the
exclusions from the definition of an investment company in Section 3(C) of the
1940 Act, and Borrower is not controlled by such a company.
SECTION 4.23. SUFFICIENCY OF CAPITAL.
(a) Borrower is, and after consummation of this Agreement and giving effect
to all Indebtedness incurred and transactions contemplated in connection
herewith will be, Solvent.
SECTION 4.24. CORPORATE NAMES.
(a) The Borrower has not, during the preceding five (5) years, been known
as or used any other corporate, fictitious or Tradenames.
SECTION 4.25 MARGIN REGULATION.
(a) As of the Loan Closing Date, the Borrower does not have class of
securities with respect to which a member of a national securities exchange,
broker, or dealer may extend or maintain credit to or for a customer pursuant
to rules or regulation adopted by the Board of Governors of the Federal Reserve
System under Section 7 of the 1934 Act.
SECTION 4.26 INSURANCE.
(a) All of the insurable properties of the Borrower are insured for its
benefit under valid and enforceable policies, issued by insurers of recognized
responsibility in amounts and against such risks and losses as is customary in
such industry. Such policies are listed in Exhibit 4.26 - Schedule of
Insurance.
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15
Agreement (continued)
SECTION 4.27 PATENTS, TRADEMARKS AND COPYRIGHTS.
(a) To the best of Borrower's knowledge and belief after current
investigation, Borrower owns all patents, trademarks and copyrights, if any,
necessary to conduct its business or possesses licenses or other rights, if
any, therefor. All such intangible property rights are listed in Exhibit 4.27 -
Schedule of Patents, Trademarks and Copyrights. Borrower has the right to use
such proprietary rights without infringing or violating the rights of any third
parties. No claim has been asserted by any person to the ownership of or right
to use any such proprietary right or challenging or questioning the validity or
effectiveness of any such license or agreement. Each of the proprietary rights
is valid and subsisting, and has not been canceled, abandoned or otherwise
terminated.
SECTION 4.28. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) All representations and warranties by Borrower herein shall survive the
Loan Closing and any subsequent Loan Closings and the delivery of the
Debentures, and any investigation at any time made by or on behalf of Lender
shall not diminish Lender's right to rely on Borrower's' representations and
warranties as herein set forth.
ARTICLE V - AFFIRMATIVE COVENANTS
So long as any part of the Debentures remains unpaid or has not been
redeemed or converted hereunder, and until such payment, redemption or
conversion in full, unless the Lender shall otherwise consent in writing, which
consent shall not be unreasonably withheld, Borrower agrees that:
SECTION 5.01. FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS.
(a) The Borrower shall accurately and fairly maintain its books of account
in accordance with GAAP, employ a firm of independent certified public
accountants, which firm is one of the six largest national accounting firms or
which is approved by the Lender, to make annual audits of its accounts in
accordance with generally accepted auditing standards; permit the Lender and
its representatives to have access to and to examine its properties, books and
records (and to copy and make extracts therefrom) at such reasonable times and
intervals as the Lender may request; and to discuss its affairs, finances and
accounts with its officers and auditors, all to such reasonable extent and at
such reasonable times and intervals as the Lender may request.
(b) The Borrower shall provide the following reports and information to the
Lender and/or the Lender's designee:
(i) As soon as available, and in any event within forty-five (45) days
after the close of each quarter, the Company's report on Form 10-Q with
exhibits for said period. In addition, the Lender may at its sole discretion
request internal monthly reports for specific periods.
(ii) As soon as available, and in any event within ninety (90) days
after the close of each year, the Company's report on Form 10-K with exhibits
for said period.
(iii) Each quarter, concurrent with the periodic report required above,
a certificate executed by the Chief Financial Officer or Chief Executive
Officer of the Borrower, (A) stating that a review of the activities of the
Borrower during such fiscal period has been made under his supervision and that
the Borrower has observed, performed and fulfilled each and every obligation
and covenant contained herein and is not in default under any of the same or,
if any such default shall have occurred, specifying the nature and status
thereof, and (B) setting forth a computation in reasonable detail as of the end
of the period covered by such statements, of compliance with the Agreed Minimum
Financial Standards in Exhibit 7.01 as provided therein.
(iv) So long as any Debenture remains outstanding, promptly (but in any
event within five (5) business days) upon learning of the occurrence of a
Default or an Event of Default deliver a certificate
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Agreement (continued)
signed by the Chief Executive Officer or Chief Financial Officer of the
Borrower describing such Default, Event of Default and stating what steps are
being taken to remedy or cure the same.
(v) Promptly (but in any event within five (5) business days) upon the
receipt thereof by the Borrower or the Board of Directors of the Borrower,
copies of all reports, all management letters and other detailed information
submitted to the Borrower or the Board by independent accountants in connection
with each annual or interim audit or review of the accounts or affairs of the
Borrower made by such accountants.
(vi) With reasonable promptness, such other information relating to the
finances, properties, business and affairs of the Borrower and each Subsidiary,
as Lender may reasonably request from time to time.
(vii) Promptly upon its becoming available, one copy of each financial
statement, report, press release, notice or proxy statement sent by Borrower to
stockholders generally, and of each regular or periodic report, registration
statement or prospectus filed by Borrower with any securities exchange or the
SEC or any successor agency, and of any order issued by any Governmental
Authority in any proceeding to which the Borrower is a party.
SECTION 5.02. PREPARATION OF A BUDGET.
(a) Prior to the beginning of Borrower's fiscal year Borrower agrees to
prepare and submit to the Board and furnish to the Lender a copy of, an annual
plan for such year which shall include, without limitation, plans for
expansion, if any, plans for incurrences of Indebtedness and projections
regarding other sources of funds, quarterly projected capital and operating
expense budgets, cash flow statements, profit and loss statements and balance
sheet projections, itemized in such detail as the Board and/or the Lender may
request.
(b) Borrower shall furnish to Lenders monthly financial reports, including
budgets (as currently used by management in the conduct of business) within 30
days of the end of each month.
SECTION 5.03. OPERATION REVIEW.
(a) Borrower agrees that it will review its operations with Lender. Such
operations reviews will be in such depth and detail as Lender shall reasonably
request. Operations reviews, which usually will require a day or less to
complete, will be held as reasonably necessary, generally once a fiscal
quarter.
SECTION 5.04. PAYMENT OF TAXES AND OTHER INDEBTEDNESS.
(a) Borrower shall, and shall cause its Subsidiaries (if any) to, pay and
discharge (i) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any property belonging to it,
before delinquent, (ii) all lawful claims (including claims for labor,
materials and supplies), which, if unpaid, might give rise to a Lien upon any
of its property, and (iii) all of its other Indebtedness, except as prohibited
hereunder; provided, however, that Borrower and its Subsidiaries, if any, shall
not be required to pay any such tax, assessment, charge or levy if and so long
as the amount, applicability or validity thereof shall currently be contested
in good faith by appropriate proceedings and appropriate accruals and reserves
therefor have been established in accordance with GAAP.
SECTION 5.05. MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS.
(a) Borrower shall, and shall cause its Subsidiaries (if any) to, preserve
and maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business, and
conduct its business in an orderly and efficient manner consistent with good
business practices and in accordance with all valid regulations and orders of
any Governmental Authority. Borrower shall keep its principal place of business
within the United States.
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17
Agreement (continued)
SECTION 5.06. SEC FILING AND MAINTENANCE OF SEC REPORTING REQUIREMENTS.
(a) So long as Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, Borrower shall duly file, when due, all reports and
statements required of a company whose securities are registered for public
trading under and pursuant to the 1934 Act, as amended, and any rules and
regulations issued thereunder, and to preserve and maintain its registration
thereunder and all of the rights of its security holders normally associated
with a publicly traded stock company.
SECTION 5.07. NOTICE OF DEFAULT.
(a) Borrower shall furnish to Lender, immediately upon becoming aware of
the existence of any condition or event which constitutes a Default or would
with the passage of time become a Default or an Event of Default, written
notice specifying the nature and period of existence thereof and the action
which Borrower is taking or proposes to take with respect thereto.
SECTION 5.08. OTHER NOTICES.
(a) Borrower shall promptly notify Lender of (i) any Material Adverse
Change in its financial condition or its business, (ii) any default under any
material agreement, contract or other instrument to which it is a party or by
which any of its properties are bound, or any acceleration of the maturity of
any Indebtedness owing by Borrower or its Subsidiaries, if any, (iii) any
material adverse claim against or affecting Borrower or its Subsidiaries, if
any, or any of its properties, and (iv) the commencement of, and any material
determination in, any litigation with any third party or any proceeding before
any Governmental Authority, the negative result of which has a Material Adverse
Effect on Borrower and its Subsidiaries, taken as a whole.
SECTION 5.09. COMPLIANCE WITH LOAN DOCUMENTS.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
promptly comply with any and all covenants and provisions of the Loan
Documents.
SECTION 5.10. COMPLIANCE WITH MATERIAL AGREEMENTS.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
comply in all material respects with all material agreements, indentures,
mortgages or documents binding on it or affecting its properties or business.
SECTION 5.11. OPERATIONS AND PROPERTIES.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
act prudently and in accordance with customary industry standards in managing
or operating its assets, properties, business and investments. Borrower shall,
and shall cause each of its Subsidiaries (if any) to, keep in good working
order and condition, ordinary wear and tear excepted, all of its assets and
properties which are necessary to the conduct of its business.
SECTION 5.12. BOOKS AND RECORDS; ACCESS.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
maintain complete and accurate books and records of its transactions in
accordance with good accounting practices. Borrower shall give each duly
authorized representative of Lender access during all normal business hours to,
and shall permit such representative to examine, copy or make excerpts from,
any and all books, records and documents in the possession of Borrower and its
Subsidiaries and relating to its affairs, and to inspect any of the properties
of Borrower and its Subsidiaries, if any. Borrower shall make a copy of this
Agreement, along with any waivers, consents, modifications or amendments,
available for review at its principal office by Lender or Lender's
representatives.
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18
Agreement (continued)
SECTION 5.13. COMPLIANCE WITH LAW.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
comply with all applicable laws, rules, regulations, and all orders of any
Governmental Authority applicable to it or any of its property, business
operations or transactions, a breach of which could reasonably be expected to
have a Material Adverse Effect.
SECTION 5.14. INSURANCE.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
maintain such worker's compensation insurance, liability insurance and
insurance on its properties, assets and business, now owned or hereafter
acquired, against such casualties, risks and contingencies, and in such types
and amounts, as are consistent with customary practices and standards of
companies engaged in similar businesses.
SECTION 5.15. AUTHORIZATIONS AND APPROVALS.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
promptly obtain, from time to time at its own expense, all such governmental
licenses, authorizations, consents, permits and approvals as may be required to
enable it to comply with its obligations hereunder and under the other Loan
Documents.
SECTION 5.16. ERISA COMPLIANCE.
(a) Borrower shall (i), at all times, make prompt payment of all
contributions required under all Plans, if any, and shall meet the minimum
funding standards set forth in ERISA with respect to its Plans subject to
ERISA, if any, (ii) notify Lender immediately of any fact in connection with
any of its Plans, which might constitute grounds for termination thereof or for
the appointment by the appropriate United States District Court of a trustee to
administer such Plan, together with a statement, if requested by Lender as to
the reason therefor and the action, if any, proposed to be taken with respect
thereto, and (iii) furnish to Lender upon its request such additional
information concerning any of its Plans as may be reasonably requested.
SECTION 5.17. FURTHER ASSURANCES.
(a) Borrower shall, and shall cause each of its Subsidiaries (if any) to,
make, execute or endorse, and acknowledge and deliver or file or cause the same
to be done, all such notices, certifications and additional agreements,
undertakings, transfers, assignments, or other assurances, and take any and all
such other action, as Lender may, from time to time, deem reasonably necessary
or proper in connection with any of the Loan Documents, or the obligations of
Borrower or its Subsidiaries, if any, thereunder, which Lender may request from
time to time.
SECTION 5.18. INDEMNITY BY BORROWER.
(a) Borrower shall indemnify, save, and hold harmless, Lender and its
directors, officers, agents, attorneys, and employees (singularly or
collectively, the "Indemnitee") from and against (i) any and all claims,
demands, actions or causes of action that are asserted against any Indemnitee
if the claim, demand, action or cause of action directly or indirectly relates
to this Agreement and the other Loan Documents issued pursuant thereto, the use
of proceeds of the Loans, or the relationship of Borrower and Lender under this
Agreement or any transaction contemplated pursuant to this Agreement, (ii) any
administrative or investigative proceeding by any Governmental Authority
directly or indirectly related to a claim, demand, action or cause of action
described in clause (i) above, and (iii) any and all liabilities, losses,
costs, or expenses (including reasonable attorneys' fees and disbursements)
that any Indemnitee suffers or incurs as a result of any of the foregoing;
provided, however, that Borrower shall have no obligation under this Section
5.18 to Lender with respect to any of the foregoing arising out of the
negligence or willful misconduct of Lender or its assignees or the breach by
the Lender or its assignees
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Agreement (continued)
of this Agreement or any other Loan Document or other document executed in
connection with any of the aforesaid, the breach by Lender or its assignees of
any agreement or commitment with other parties, the violation or alleged
violation of any law, rule or regulation by Lender or its assignees, or from
the transfer or disposition by Lender of any Debenture or the Common Stock
issued upon conversion of the Debenture. If any claim, demand, action or cause
of action is asserted against any Indemnitee, such Indemnitee shall promptly
notify Borrower, but the failure to so promptly notify Borrower shall not
affect Borrower's obligations under this Section unless such failure materially
prejudices Borrower's right to participate in the contest of such claim,
demand, action or cause of action, as hereinafter provided. In the event that
such indemnitee's failure to properly notify the Borrower materially prejudices
Borrower's right to participate in the contest of such claim, demand, action,
or cause of action, then said Indemnitee shall have no right to receive, and
Borrower shall have no obligation to pay, any indemnification amounts
hereunder. Borrower may elect to defend any such claim, demand, action or
cause of action (at its own expense) asserted against said Indemnitee and, if
requested by Borrower in writing and so long as no Default or Event of Default
shall have occurred and be continuing, such Indemnitee (at Borrower's expense)
shall in good faith contest the validity, applicability and amount of such
claim, demand, action or cause of action and shall permit Borrower to
participate in such contest. Any Indemnitee that proposes to settle or
compromise any claim or proceeding for which Borrower may be liable for payment
to or on behalf of an Indemnitee hereunder shall give Borrower written notice
of the terms of such proposed settlement or compromise reasonably in advance of
settling or compromising such claim or proceeding and shall obtain Borrower's
written concurrence thereto. In the event that said Indemnitee fails to obtain
Borrower's prior written consent to any such settlement or compromise, said
Indemnitee shall have no right to receive and Borrower shall have no obligation
to pay any indemnification amounts hereunder. Each Indemnitee may employ
counsel in enforcing its rights hereunder and in defending against any claim,
demand, action, or cause of action covered by this Section 5.18; provided,
however, that each Indemnitee shall endeavor, but shall not be obligated, in
connection with any matter covered by this Section which also involves any
other Indemnitee, to use reasonable efforts to avoid unnecessary duplication of
effort by counsel for all Indemnitees, including by allowing Borrower to select
one lawyer for all parties, such selection to be subject to the approval of
such parties, which approval shall not be unreasonably withheld. Any
obligation or liability of Borrower to any Indemnitee under this Section 5.18
shall survive the expiration or termination of this Agreement and the repayment
of the Debentures.
5.19 Payment of Management Fee/Monitoring Fee
(a) Borrower shall pay each of Renaissance III and Renaissance PLC a
monitoring and financial advisory fee of $500 per month and shall reimburse
them for the reasonable travel and out-of-pocket expenses incurred by them or
their agents in monitoring Borrowers compliance with this Agreement.
ARTICLE VI - NEGATIVE COVENANTS
So long as any part of the Debentures have not been redeemed or converted
hereunder, and until such redemption or conversion in full, unless the Lender
shall otherwise consent in writing, which consent shall not be unreasonably
withheld, Borrower agrees that, unless permitted otherwise:
SECTION 6.01. LIMITATION ON INDEBTEDNESS.
(a) Borrower and its Subsidiaries shall not incur, create, contract, waive,
assume, have outstanding, guarantee or otherwise be or become, directly or
indirectly, liable in respect of any Indebtedness, except:
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Agreement (continued)
(i) Indebtedness arising out of this Agreement or otherwise
contemplated herein;
(i) Permitted Indebtedness; and
(i) on Exhibit 4.05.
SECTION 6.02. NEGATIVE PLEDGE.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to,
create, incur, permit or suffer to exist any Lien upon any of its property or
assets other than Permitted Liens, or payments upon any Subordinated Debt other
than regularly scheduled installments of principal and interest and shall not
directly or indirectly make any payment of any Subordinated Debt which would
violate the terms of this Agreement or of such Subordinated Debt or any
subordination agreement applicable to such Subordinated Debt.
SECTION 6.03. LIMITATION ON INVESTMENTS.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to,
make or have outstanding any Investments in any Person, except for Borrower's
(and any Subsidiary's) ownership of stock of Subsidiaries, the acquisition of
Xxxxxxx Company as contemplated herein, loans and other transactions between
the Borrower and any Subsidiaries, short term bank deposits or money market
investments, and such other "cash equivalent" investments as Lender may from
time to time approve.
SECTION 6.04. ALTERATION OF MATERIAL AGREEMENTS.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to,
consent to or permit any alteration, amendment, modification, release, waiver
or termination of any material agreement to which it is a party other than in
the ordinary course of business.
SECTION 6.05. CERTAIN TRANSACTIONS.
(a) Except as permitted by Section 6.12, Borrower shall not, and shall not
permit its Subsidiaries (if any) to, enter into any transaction with, or pay
any management fees to, any Affiliate; provided, however, that Borrower and any
Subsidiary may enter into transactions with Affiliates upon terms not less
favorable to Borrower and any Subsidiary than would be obtainable at the time
in comparable transactions of Borrower and any Subsidiaries in arms-length
dealings with Persons other than Affiliates.
SECTION 6.06. LIMITATIONS ON ACQUISITION OF NON-RELATED BUSINESS.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to,
engage in any line of business or acquire any new product lines or business or
acquire any companies unless such new product line or business of the company
acquired is primarily involved in the Borrower's current lines of business.
SECTION 6.07. LIMITATION ON SALE OF PROPERTIES.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to
(i) sell, assign, convey, exchange, lease or otherwise dispose of any of its
properties, rights, assets or business, whether now owned or hereafter
acquired, except in the ordinary course of its business and for a fair
consideration, or (ii) sell, assign or discount any accounts receivable except
in the ordinary course of business or to secure bank or commercial working
capital loans in the ordinary course of business.
SECTION 6.08. FISCAL YEAR AND ACCOUNTING METHOD.
(a) Borrower shall not, and shall not permit its Subsidiaries, if any, to,
change its method of accounting except as permitted by GAAP.
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Agreement (continued)
SECTION 6.09. LIQUIDATION AND DISPOSITIONS OF SUBSTANTIAL ASSETS.
(a) Borrower shall not permit its Subsidiaries to (i) dissolve or
liquidate, (ii) sell, transfer, lease or otherwise dispose of all or any
substantial part of its property or assets or business, or (iii) enter into any
other transaction that has a similar effect.
SECTION 6.10. NO AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS.
(a) Borrower shall not, and shall not permit its Subsidiaries (if any) to,
materially amend its Articles of Incorporation or bylaws except as is necessary
to fulfill the conditions of this Agreement.
SECTION 6.11. LIMITATION ON INCREASED EXECUTIVE COMPENSATION AND BONUS, PROFIT
SHARING OR OTHER INCENTIVE PAYMENTS.
(a) Borrower will not increase the salary, bonus, or other compensation
programs (whether in cash, securities, or other property, and whether payment
is deferred or current) of its top five executive officers unless such
compensation increase is approved by a majority of the Board or a Compensation
Committee of the Board of Directors, a majority of whom shall non-employee
Directors.
(b) Borrower shall not pay any Bonus, Profit Sharing or Other Incentive
Payments until such plans are formally adopted by the majority of the Board or
a Compensation Committee of the Board of Directors, a majority of which shall
be non-employee Directors.
SECTION 6.12. RESTRICTED PAYMENTS.
(a) So long as any Debentures are outstanding, Borrower shall not (i)
declare or pay any dividend (other than stock dividends) on any Common Stock,
or (ii) purchase, redeem, decrease, or otherwise acquire any shares of Common
Stock, or any Preferred Stock.
ARTICLE VII - COVENANTS OF MAINTENANCE OF FINANCIAL STANDARDS
SECTION 7.01. FINANCIAL RATIOS.
(a) So long as any part of the Debentures has not been redeemed or
converted hereunder, and until such redemption or conversion in full, or unless
the Lender (or if any portion of the Debentures has been assigned, the holders
of a majority in amount of the outstanding Principal Amount) shall otherwise
consent in writing, the Borrower will at all times maintain the agreed minimum
financial ratios or standards as provided and set forth in Exhibit 7.01 -
Agreed Minimum Financial Standards as attached hereto and made a part hereof.
Borrower shall deliver to Lender a compliance certificate covering these ratios
as required in Section 5.01(b)(iii).
ARTICLE VIII - EVENTS OF DEFAULT
SECTION 8.01. EVENTS OF DEFAULT.
(a) An "Event of Default" shall exist if any one or more of the following
events (herein collectively called "Events of Default") shall occur and be
continuing:
(i) Borrower shall fail to pay (or shall state in writing an intention not
to pay or its inability to pay), not later than ten (10) days after the due
date, any installment of interest on or principal of, any Debenture or any fee,
expense or other payment required hereunder;
(ii) Any representation or warranty made under this Agreement, or any of the
other Loan Documents, or in any certificate or statement furnished or made to
Lender pursuant hereto or in connection herewith or with the Loans hereunder,
shall prove to be untrue or inaccurate in any material respect as of the date
on which such representation or warranty was made;
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Agreement (continued)
(iii) Default shall occur in the performance of any of the covenants or
agreements of Borrower or of its Subsidiaries (if any) contained herein, or in
any of the other Loan Documents, which is not remedied within thirty (30) days
after written notice thereof to Borrower from Lender;
(iv) Default shall occur in the payment of any material indebtedness (other
than the Obligation) of the Borrower or its Subsidiaries (if any), or default
shall occur in respect of any note, loan agreement or credit agreement relating
to any such indebtedness and such default shall continue for more than the
period of grace, if any, specified therein and any such indebtedness shall
become due before its stated maturity by acceleration of the maturity thereof
or shall become due by its terms and shall not be promptly paid or extended;
(v) Any of the Loan Documents shall cease to be legal, valid and binding
agreements enforceable against the Borrower in accordance with the respective
terms thereof, or shall in any way be terminated or become or be declared
ineffective or inoperative, or shall in any way whatsoever cease to give or
provide the respective rights, titles, interests, remedies, powers or
privileges intended to be created thereby;
(vi) Borrower or its Subsidiaries (if any) shall (A) apply for or consent to
the appointment of a receiver, trustee, custodian, intervenor or liquidator of
itself, or of all or substantially all of such Person's assets, (B) file a
voluntary petition in bankruptcy, admit in writing that such Person is unable
to pay such Person's debts as they become due or generally not pay such
Person's debts as they become due, (C) make a general assignment for the
benefit of creditors, (D) file a petition or answer seeking reorganization or
an arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, (E) file an answer admitting the material allegations of, or
consent to, or default in answering, a petition filed against such Person in
any bankruptcy, reorganization or insolvency proceeding, or (F) take corporate
action for the purpose of effecting any of the foregoing;
(vii) An involuntary petition or complaint shall be filed against Borrower
or any of its Subsidiaries (if any) seeking bankruptcy or reorganization of
such Person or the appointment of a receiver, custodian, trustee, intervenor or
liquidator of such Person, or all or substantially all of such Person's assets,
and such petition or complaint shall not have been dismissed within sixty (60)
days of the filing thereof or an order, order for relief, judgment or decree
shall be entered by any court of competent jurisdiction or other competent
authority approving a petition or complaint seeking reorganization of Borrower
or its subsidiary (if any) or appointing a receiver, custodian, trustee,
intervenor or liquidator of such Person, or of all or substantially all of such
Person's assets;
(viii) Any final judgment(s) for the payment of money in excess of the sum
of $250,000 in the aggregate shall be rendered against Borrower or any
subsidiary and such judgment or judgments shall not be satisfied or discharged
at least ten (10) days prior to the date on which any of its assets could be
lawfully sold to satisfy such judgment;
(ix) The Borrower shall fail to issue and deliver shares of Common Stock as
provided herein upon conversion of the Debenture; or
(x) The Borrower shall fail to submit Lender's nominee, if any, for election
to the Board of Directors of the Borrower or shall remove Lender's nominee from
the Board of Directors of Borrower other than for cause.
SECTION 8.02. REMEDIES UPON EVENT OF DEFAULT.
(a) If an Event of Default shall have occurred and be continuing for a
period of thirty (30) days, then Lender may exercise any one or more of the
following rights and remedies, and any other remedies provided in any of the
Loan Documents, as Lender in its sole discretion may deem necessary or
appropriate:
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Agreement (continued)
(i) declare the unpaid Principal Amount (after application of any payments
or installments received by Lender) of, and all interest then accrued but
unpaid on, the Debentures and any other liabilities hereunder to be forthwith
due and payable, whereupon the same shall forthwith become due and payable
without presentment, demand, protest, notice of default, notice of acceleration
or of intention to accelerate or other notice of any kind, all of which
Borrower hereby expressly waives, anything contained herein or in the
Debentures to the contrary notwithstanding;
(ii) reduce any claim to judgment; and
(iii) without notice of default or demand, pursue and enforce any of
Lender's rights and remedies under the Loan Documents, or otherwise provided
under or pursuant to any applicable law or agreement, all of which rights may
be specifically enforced.
SECTION 8.03. PERFORMANCE BY LENDER.
(a) Should Borrower fail to perform any covenant, duty or agreement
contained herein or in any of the other Loan Documents, Lender may perform or
attempt to perform such covenant, duty or agreement on behalf of Borrower. In
such event, Borrower shall, at the request of Lender, promptly pay any amount
reasonably expended by Lender in such performance or attempted performance to
Lender at its principal office in Dallas, Texas, together with interest
thereon, at the interest rate specified in the Debenture, from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that Lender assumes no liability or responsibility for the
performance of any duties of Borrower hereunder or under any of the other Loan
Documents.
SECTION 8.04. PAYMENT OF EXPENSES INCURRED BY LENDER.
(a) Upon the occurrence of a Default or an Event of Default, which
occurrence is not cured within the notice provisions, if any, provided herein,
Borrower agrees to pay and shall pay all costs and expenses (including Lender's
attorney's fees and expenses) reasonably incurred by Lender in connection with
the preservation and enforcement of Lender's rights under this Agreement, the
Debentures, or any other Loan Document.
ARTICLE IX - REGISTRATION RIGHTS
SECTION 9.01. DEMAND FOR REGISTRATION.
(a) Subject to the Holder's rights to convert all or part of the
Debentures, the Borrower hereby agrees to register, subject to the terms and
conditions set forth herein, all or any portion of the Registrable Securities
at any time it shall receive a written request from the Holders of at least
fifty percent (50%) of the Registrable Securities Then Outstanding (or a lesser
percent if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $1,000,000) that the Borrower file a
registration statement under the 1933 Act covering the registration of at least
a majority of the Registrable Securities Then Outstanding. The Borrower shall,
within 20 days of its receipt thereof, give written notice of such request to
all Holders of record of Registrable Securities. The Holders of said
Registrable Securities shall then have 15 days from the date of mailing of such
notice by the Borrower to request that all or a portion of their respective
Registrable Securities be included in said registration. The Borrower hereby
agrees, subject to the limitations hereof, to use its best lawful efforts to
effect as soon as reasonably possible, and in any event (if legally possible,
and as allowed by the SEC, and if no factor outside the Borrower's reasonable
control prevents it) within 150 days of the receipt of the initial written
registration request, to effect the registration under the 1933 Act of all
Registrable Securities which the Holders thereof (the "Initiating Holders")
have requested.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Borrower as a part of their request made pursuant
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Agreement (continued)
to this Agreement, and the Borrower shall include such information in the
written notice to the other Holders of Registrable Securities referred to in
Section 9.01(a). In such event, the right of any Holder to include his/her
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
the Borrower, the underwriter, a majority in interest of the Initiating Holders
and such Holder) is limited to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Borrower as provided in Section 9.03(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by mutual agreement of the Borrower and a
majority in interest of the Initiating Holders, which agreement shall not be
unreasonably withheld. Notwithstanding any other provision of this Section
9.01, if the underwriter advises the Initiating Holders and the Borrower in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Initiating Holder(s) shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated on a pro rata basis among all Holders that have
requested to participate in such registration.
(c) Borrower shall utilize Rule 144 if said exemption, in the Borrower's
sole determination, meets its distribution requirements.
(d) Notwithstanding the foregoing, if the Borrower shall furnish to the
Initiating Holders a certificate signed by the President of the Borrower
stating that in the good faith judgment of the Board of Directors of the
Borrower, it would be materially detrimental to the Borrower and its
shareholders for such registration statement to be filed at that time, and it
is therefore essential to defer the filing of such registration statement, the
Borrower shall have the right to defer the commencement of such a filing for a
period of not more than 180 days after receipt of the request of the Initiating
Holders; provided, however, that at least 12 months must elapse between any two
such deferrals.
SECTION 9.02. "PIGGY-BACK" REGISTRATION.
If, but without any obligation to do so, the Borrower proposes to register
any of its capital stock under the 1933 Act in connection with the public
offering of such securities for its own account or for the account of its
security holders, other than Holders of Registrable Securities pursuant hereto
(a "Piggy-Back Registration Statement"), (except for (i) a registration
relating solely to the sale of securities to participants in the Borrower's
stock plans or employee benefit plans or (ii) a registration relating solely to
an SEC Rule 145 transaction or any rule adopted by the SEC in substitution
thereof or in amendment thereto), then:
(a) The Borrower shall give written notice of such determination to each
Holder of Registrable Securities, and each such Holder shall have the right to
request, by written notice given to the Borrower within 15 days of the date
that such written notice was mailed by the Borrower to such Holder, that a
specific number of Registrable Securities held by such Holder be included in
the Piggy-Back Registration Statement (and related underwritten offering, if
any);
(b) If the Piggy-Back Registration Statement relates to an underwritten
offering, the notice given to each Holder shall specify the name or names of
the managing underwriter or underwriters for such offering. In addition such
notice shall also specify the number of securities to be registered for the
account of the Borrower and for the account of its shareholders (other than the
Holders of Registrable Securities), if any;
(c) If the Piggy-Back Registration Statement relates to an underwritten
offering, each Holder of Registrable Securities to be included therein must
agree (i) to sell such Holder's Registrable Securities on the same basis as
provided in the underwriting arrangement approved by the Borrower, and (ii) to
timely complete and execute all questionnaires, powers of attorney,
indemnities, hold-back agreements,
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Agreement (continued)
underwriting agreements and other documents required under the terms of such
underwriting arrangements or by the SEC or by any state securities regulatory
body;
(d) If the managing underwriter or underwriters for the underwritten
offering under the Piggy-Back Registration Statement determines that inclusion
of all or any portion of the Registrable Securities in such offering would
adversely affect the ability of the underwriters for such offering to sell all
of the securities requested to be included for sale in such offering at the
best price obtainable therefor, the aggregate number of Registrable Securities
that may be sold by the Holders shall be limited to such number of Registrable
Securities, if any, that the managing underwriter or underwriters determine
may be included therein without such adverse effect as provided below. If the
number of securities proposed to be sold in such underwritten offering exceeds
the number of securities that may be sold in such offering, there shall be
included in the offering, first, up to the maximum number of securities to be
sold by the Borrower for its own account and for the account of other
stockholders (other than Holders of Registrable Securities), as they may agree
among themselves, and second, as to the balance, if any, Registrable Securities
requested to be included therein by the Holders thereof (pro rata as between
such Holders based upon the number of Registrable Securities initially
proposed to be registered by each), or in such other proportions as the
managing underwriter or underwriters for the offering may require; provided,
however, that in the event that the number of securities proposed to be sold in
such underwritten offering exceeds the number of securities that may be sold in
such offering pursuant to the terms and conditions set forth above and the
Piggy-Back Registration Statement is a result of public offering by the
Borrower of its securities for its own account, there shall be included in the
offering, first, up to the maximum number of securities to be sold by the
Borrower for its own account and second, as to the balance, if any, securities
to be sold for the account of the Borrower's stockholders (both the Holders of
Registrable Securities requested and such other stockholders of the Borrower
requested to be included therein) on a pro rata basis; and
(e) Holders of Registrable Securities shall have the right to withdraw
their Registrable Securities from the Piggy- Back Registration Statement, but
if the same relates to an underwritten offering, they may only do so during the
time period and on the terms agreed upon among the underwriters for such
underwritten offering and the Holders of Registrable Securities.
SECTION 9.03. OBLIGATIONS OF THE BORROWER.
Whenever required to effect the registration of any Registrable Securities
pursuant to this Agreement, the Borrower shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use its best lawful efforts to cause such
registration statement to become effective, and keep such registration
statement effective until the sooner of all such Registrable Securities having
been distributed, or until 120 days have elapsed since such registration
statement became effective (subject to extension of this period as provided
below);
(b) 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
1933 Act with respect to the disposition of all securities covered by such
registration statement, or 120 days have elapsed since such registration
statement became effective (subject to the extension of this period as provided
below);
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them;
(d) Use its best lawful 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 requested by the Holders,
provided that the Borrower shall not be required in connection therewith or as
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Agreement (continued)
a condition thereto to qualify as a broker-dealer in any states or
jurisdictions or to do business or to file a general consent to service of
process in any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement with the managing
underwriter of such offering, in usual and customary form reasonably
satisfactory to the Borrower and the Holders of a majority of the Registrable
Securities to be included in such offering. Each Holder participating in such
underwriting shall also enter into and perform its obligations under such an
agreement;
(f) Notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto and
covered by such registration statement is required to be delivered under the
1933 Act, of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing; and
(g) In the event of the notification provided for in Section 9.03(f) above,
the Borrower shall use its best efforts to prepare and file with the SEC (and
to provide copies thereof to the Holders) as soon as reasonably possible an
amended prospectus complying with the 1933 Act, and the period during which the
prospectus referred to in the notice provided for in Section 9.03(f) above
cannot be used and the time period prior to the use of the amended prospectus
referred to in this Section 9.03(g) shall not be counted in the 120 day period
of this Section 9.03.
SECTION 9.04. FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the Borrower to
take any action pursuant to this Article IX that the selling Holders shall
furnish to the Borrower any and all information reasonably requested by the
Borrower, its officers, directors, employees, counsel, agents or
representatives, the underwriter or underwriters, if any, and the SEC or any
other Governmental Authority, including but not limited to: (i) such
information regarding themselves, the Registrable Securities held by them, and
the intended method of disposition of such securities, as shall be required to
effect the registration of their Registrable Securities, and (ii) the identity
of and compensation to be paid to any proposed underwriter or broker-dealer to
be employed in connection therewith.
(b) In connection with the preparation and filing of each registration
statement registering Registrable Securities under the 1933 Act, the Borrower
shall give the Holders of Registrable Securities on whose behalf such
Registrable Securities are to be registered and their underwriters, if any, and
their respective counsel and accountants, at such Holders' sole cost and
expense (except as otherwise set forth herein), such access to copies of the
Borrower's records and documents and such opportunities to discuss the business
of the Borrower with its officers and the independent public accountants who
have certified its financial statements as shall be reasonably necessary in the
opinion of such Holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the 1933 Act.
SECTION 9.05. EXPENSES OF DEMAND REGISTRATION.
Except as set forth below, all expenses, other than underwriting discounts
and commissions incurred in connection with not more than two demand
registrations pursuant to Section 9.01 above, including, without limitation,
all registration, filing and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Borrower, and the reasonable fees and
disbursements of one counsel for the selling Holders, shall be borne by the
Borrower; provided, however, that the Borrower shall not be required to pay for
any expenses of any registration proceeding which was commenced prior to July
12, 1998, pursuant to Section 9.01, or if the registration request is
subsequently withdrawn at the written request of the Holders of the majority of
the Registrable Securities subject to such registration.
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Agreement (continued)
SECTION 9.06. EXPENSES OF PIGGY-BACK REGISTRATION.
(a) Each Holder shall bear and pay all commissions and discounts
attributable to the inclusion of such Holder's Registrable Securities in any
registration, filing or qualification of Registrable Securities pursuant to
Section 9.02 and the reasonable fees and disbursements of the counsel for the
selling Holders
SECTION 9.07. INDEMNIFICATION REGARDING REGISTRATION RIGHTS.
If any Registrable Securities are included in a registration statement under
this Article IX:
(a) To the extent permitted by law, the Borrower will indemnify and hold
harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the 0000 Xxx) for such Holder and each person, if
any, who controls such Holder or underwriter within the meaning of the 1933 Act
or the 1934 Act, against any losses, claims, damages, liabilities (joint or
several) or any legal or other costs and expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action to which they may become subject under the 1933 Act, the
1934 Act or other federal or state law, insofar as such losses, claims,
damages, costs, expenses or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact with respect to the Borrower or its
securities contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements therein; (ii) the omission or alleged omission to state therein a
material fact with respect to the Borrower or its securities required to be
stated therein or necessary to make the statements therein not misleading; or
(iii) any violation or alleged violation by the Borrower of the 1933 Act, the
1934 Act, any federal or state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law.
Notwithstanding the foregoing, the indemnity agreement contained in this
Section 9.07(a) shall not apply and the Borrower shall not be liable (i) in any
such case for any such loss, claim, damage, costs, expenses, liability or
action to the extent that it arises out of or is based upon a Violation which
occurs 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, or (ii) for amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the prior written consent of the Borrower, which consent shall
not be unreasonably withheld.
(b) To the extent permitted by law, each Holder who participates in a
registration pursuant to the terms and conditions of this Agreement shall
indemnify and hold harmless the Borrower, each of its directors and officers
who have signed the registration statement, each Person, if any, who controls
the Borrower within the meaning of the 1933 Act or the 1934 Act, each of the
Borrower's employees, agents, counsel and representatives, any underwriter and
any other Holder selling securities in such registration statement, or any of
its directors or officers, or any person who controls such Holder, against any
losses, claims, damages, costs, expenses, liabilities (joint or several) to
which the Borrower or any such director, officer, controlling person, employee,
agent, representative, underwriter, or other such Holder, or director, officer
or controlling person thereof, may become subject, under the 1933 Act, the 1934
Act or other federal or state law, only insofar as such losses, claims,
damages, costs, expenses or liabilities or actions in respect thereto arise out
of or are based upon any Violation, in each case to the extent and only to the
extent that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such. Each such Holder will indemnify any legal or other expenses
reasonably incurred by the Borrower or any such director, officer, employee,
agent representative, controlling person, underwriter or other Holder, or
officer, director or of any controlling person thereof, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section
9.07(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, costs, expenses,
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Agreement (continued)
liability or action if such settlement is effected without the prior written
consent of the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section 9.07
of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 9.07, deliver to the
indemnifying party a written notice 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; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonable fees and expenses
of such counsel to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve the indemnifying party of its obligations under this Section 9.07,
except to the extent that the failure results in a failure of actual notice to
the indemnifying party and such indemnifying party is materially prejudiced in
its ability to defend such action solely as a result of the failure to give
such notice.
(d) If the indemnification provided for in this Section 9.07 is unavailable
to an indemnified party under this Section in respect of any losses, claims,
damages, costs, expenses, liabilities or actions referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, costs, expenses, liabilities or actions in
such proportion as is appropriate to reflect the relative fault of the
Borrower, on the one hand and of the Holder, on the other, in connection with
the Violation that resulted in such losses, claims, damages, costs, expenses,
liabilities or actions. The relative fault of the Borrower, on the one hand,
and of the Holder, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of the material
fact or the omission to state a material fact relates to information supplied
by the Borrower or by the Holder, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Borrower, on the one hand, and the Holders, on the other hand,
agree that it would not be just and equitable if contribution pursuant to this
Section 9.07 were determined by a pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of losses, claims, damages, costs, expenses,
liabilities and actions referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses incurred by such indemnified party in
connection with defending any such action or claim. Notwithstanding the
provisions of this Section 9.07, neither the Borrower nor the Holders shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities were offered to the public exceeds the amount of
any damages which the Borrower or each such Holder has otherwise been required
to pay by reason of such Violation. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the 0000 Xxx) shall
be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
SECTION 9.08. REPORTS UNDER THE 1934 ACT.
So long as the Borrower has a class of securities registered pursuant to
Section 12 of the 1934 Act, with a view to making available to the Holders the
benefits of Rule 144 promulgated under the 1933 Act ("Rule 144") and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
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29
Agreement (continued)
securities of the Borrower to the public without registration or pursuant to a
registration on Form S-3, if applicable, the Borrower agrees to use its best
lawful efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times;
(b) File with the SEC in a timely manner all reports and other documents
required of the Borrower under the 1933 Act and the 1934 Act;
(c) Use its best efforts to include all Common Stock covered by such
registration statement on NASDAQ if the Common Stock is then quoted on NASDAQ;
or list all Common Stock covered by such registration statement on such
securities exchange on which any of the Common Stock is then listed; or, if the
Common Stock is not then quoted on NASDAQ or listed on any national securities
exchange, use its best efforts to have such Common Stock covered by such
registration statement quoted on NASDAQ or, at the option of the Borrower,
listed on a national securities exchange; and
(d) Furnish to any Holder, so long as the Holder owns any Registrable
Securities, (i) forthwith upon request a copy of the most recent annual or
quarterly report of the Borrower and such other SEC reports and documents so
filed by the Borrower, and (ii) such other information (but not any opinion of
counsel) as may be reasonably requested by any Holder seeking to avail himself
of any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
SECTION 9.09. ASSIGNMENT OF REGISTRATION RIGHTS.
(a) Subject to the terms and conditions of this Agreement, and the
Debentures, the right to cause the Borrower to register Registrable Securities
pursuant to this Agreement may be assigned by Holder to any transferee or
assignee of such securities; provided that said transferee or assignee is a
transferee or assignee of at least ten percent (10%) of the Registrable
Securities and provided that the Borrower is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act; it being the intention that so long as Holder
holds any Registrable Securities hereunder, either Holder or its transferee or
assignee of at least ten percent may exercise the demand right to registration
and piggy-back registration rights hereunder. Other than as set forth above,
the parties hereto hereby agree that the registration rights hereunder shall
not be transferable or assigned and any contemplated transfer or assignment in
contravention of this Agreement shall be deemed null and void and of no effect
whatsoever.
SECTION 9.10. OTHER MATTERS.
(a) Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, with respect to each offering of the
Registrable Securities, whether each Holder is offering such Registrable
Securities in an underwritten or non-underwritten offering, such Holder will
comply with Rules 10b-2, 10b-6 and 10b-7 of the 1934 Act and such other or
additional anti-manipulation rules then in effect until such offering has been
completed, and in respect of any non-underwritten offering, in writing will
inform the Borrower, any other Holders who are selling shareholders, and any
national securities exchange upon which the securities of the Borrower are
listed, that the Registrable Securities have been sold and will, upon the
Borrower's request, furnish the distribution list of the Registrable
Securities. In addition, upon the request of the Borrower, each Holder will
supply the Borrower with such documents and information as the Borrower may
reasonably request with respect to the subject matter set forth and described
in this Section 9.10.
(b) Each Holder of Registrable Securities hereby agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Borrower
of the happening of any event which makes
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Agreement (continued)
any statement made in the registration statement, the prospectus or any
document incorporated therein by reference, untrue in any material respect or
which requires the making of any changes in the registration statement, the
prospectus or any document incorporated therein by reference, in order to make
the statements therein not misleading in any material respect, such Holder will
forthwith discontinue disposition of Registrable Securities under the
prospectus related to the applicable registration statement until such Holder's
receipt of the copies of the supplemented or amended prospectus, or until it is
advised in writing by the Borrower that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the prospectus.
(c) The Borrower hereby agrees not to effect any public sale or other
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such equity securities, during the period
commencing on the 7th day prior to, and ending on the 120th day (subject to
extension as provided in Section 9.03 hereof) following the effective date of
any underwritten demand registration, other than pursuant to Form S-8.
SECTION 9.11 TERMINATION OF RIGHTS.
(a) The Holders' right to demand registration and to participate in a
Piggy-Back Registration, as granted to Holders under this Article IX, shall
terminate on June 30, 2006, or after the Holder has exercised two demand
registration rights at the expense of the Borrower as provided in Article IX of
this Agreement, whichever is first to occur.
ARTICLE X - DIRECTORS AND BOARD MEETING ATTENDANCE
SECTION 10.01. BOARD REPRESENTATION OR ATTENDANCE BY LENDER DESIGNEE.
(a) Borrower herewith agrees that Lender shall have the right from time to
time, at Lender's option and so long as there is $1,000,000 face value of
Debentures that have not been fully converted or redeemed, to designate a
nominee to the Board of Directors of the Borrower, which designee is subject to
THE written approval of Borrower which approval shall not be unreasonably
withheld. Borrower will, at all times, use its reasonable best efforts to
secure the election of such designee as a Director of the Borrower, provided
that such designee may, at his or her option, elect to serve only as an
"Advisory Director" with all the rights of the Directors in regards to notice
and attendance at meetings of the Board of Directors, or committees thereof,
but without voting rights. All reasonable costs and expenses incurred by such
Designee as a Director or Advisory Director, or by Lender on behalf of such
Designee, shall be reimbursed by Borrower, consistent with payment policies
accorded to other independent directors.
(b) Further, though Lender may waive, from time to time, its right to
require a Board Designee, in such event it shall be entitled, at its own
expense, to have a representative of the Lender attend meetings of the Board of
Directors of the Borrower or of its Subsidiaries and such representative may
serve as an observer but without voice in matters under discussion except as
requested.
(c) Any such Designee or representative of the Lender shall, if requested
to do so, absent himself or herself from the meeting in the event of, and so
long as, the Directors are considering and acting on matters pertaining to any
rights or obligations of the Borrower or the Lender under this Agreement, the
Debenture, or the other Loan Documents. Borrower will provide Lender's
designated representative with the same notice of Board meetings and
information as the Borrower shall provide to its duly elected Directors.
SECTION 10.02. BORROWER'S RIGHT TO REQUEST LENDER TO PROVIDE AN ADVISOR AND A
DIRECTOR NOMINEE.
(a) Lender herewith agrees that, so long as no Default or Event of Default
exists under this Agreement and so long as the Debentures have not been fully
converted or redeemed, Lender will, at the written request of Borrower, use its
reasonable best efforts to provide, from time to time, a person or
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Agreement (continued)
persons, reasonably believed knowledgeable in investor relations, such person
or persons to be available to consult with, and serve as advisor to, the
Borrower about its communications with its shareholders and with the general
investment public. Further, if requested by Borrower, at least one such person
will be available to serve as a nominee to the Board of Directors of the
Borrower provided that such nominee may, at his or her option, elect to serve
only as an "Advisory Director" with all the rights of the Directors in regards
to notice and attendance at meetings of the Board of Directors, or committees
thereof, but without voting rights. All reasonable costs and expenses incurred
by such person or persons, or by Lender on behalf of such persons, shall be
reimbursed by Borrower, consistent with payment policies accorded to other
independent directors.
SECTION 10.03. LIMITATION OF AUTHORITY OF PERSONS DESIGNATED AS A DIRECTOR
NOMINEE.
(a) It is provided and agreed that the actions and advice of any person
while serving pursuant to Section 10.01 or 10.02 as an advisor to the Borrower
or as a member of Borrower's Board of Directors, or while serving solely as a
representative of Lender in attendance at meetings of the Board of Directors,
shall be construed to be the actions and advice of that person alone and not be
construed as actions of the Lender as to any notice of requirements or rights
of Lender under this Agreement, the Debenture or the other Loan Documents; nor
as actions of the Lender to approve modifications, consents, amendments or
waivers thereof; and all such actions or notices shall be deemed actions or
notices of the Lender only when duly provided in writing and given in
accordance with the provisions of this Agreement.
SECTION 10.04. NONLIABILITY OF LENDER.
(a) The provisions of Section 10.01 and 10.02 notwithstanding, the
relationship between Borrower and Lender is, and shall at all times remain,
solely that of borrower and lender, and except for the agreement to use its
best efforts to provide a knowledgeable advisor (whose actions and advice shall
be deemed to be solely advised by such person in an individual capacity and not
advice by Lender), Lender neither undertakes nor assumes any responsibility or
duty to the Borrower to review, inspect, supervise, pass judgment upon, or
inform Borrower of any matter in connection with any phase of Borrower's
business, operations, or condition, financial or otherwise. Borrower shall
rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment, or information supplied
to Borrower by Lender, or any representative or agent of Lender, in connection
with any such matter is for the protection of Lender, and neither Borrower nor
any third party is entitled to rely thereon.
ARTICLE XI - Agency and Inter-Lender Provisions
SECTION 11.01. LENDERS' REPRESENTATIONS AND WARRANTIES TO OTHER LENDERS
Each Lender represents and warrant to the other Lender and the Agent:
(a) It is legal for it to make its portion of the Loan, and the making of
such portion of the Loan complies with laws applicable to it;
(b) It has made, without reliance upon any other Lender, its own
independent review (including any desired investigations and inspections) of,
and it accepts and approves, the Loan, this Agreement and the associated
documents and all other matters and information which it deems pertinent. It
acknowledges that the Loan Documents are a complete statement of all
understandings and respective rights and obligations between and among Lenders
and Borrowers regarding the Loan.
(c) No Lender has made any express or implied representation or warranty to
any other Lender with respect to this transaction.
(d) It will, independently and without reliance upon any other Lender, and
based upon such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and will make
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Agreement (continued)
such investigation as it deems necessary to inform itself as to the Loan, the
Loan Document, the Borrower and any collateral; provided, however, nothing
contained in this Section shall limit Agent's obligation to provide the other
Lenders with the information and documents Agent is expressly required to
deliver under this Agreement.
(e) The relationship of Lender is, and shall at all times remain, solely
that of a lender of its respective Loan portion. Lenders are not partners or
joint venturer in connection with the Loan
SECTION 11.02. WAIVER OF LOAN PROVISIONS OR INTEREST OR PRINCIPAL PAYMENTS
(a) So long as Renaissance III and Renaissance PLC each have not sold or
assigned any of the debentures issued to such Lender pursuant to this
Agreement, consent of both Renaissance III and Renaissance PLC will be required
for the waiver of principal or interest payment and any alterations thereto.
(b) If either Renaissance III and Renaissance PLC disposes of any part of
their Debentures, a waiver of an interest or principal payment and any
alterations thereto will require the consent of the holders of a majority by
dollar amount of the then outstanding Debentures issued pursuant to this
Agreement.
SECTION 11.03. AGENCY
(a) Renaissance III and Renaissance PLC each hereby designates and appoints
Renaissance Capital Group, Inc. ("Renaissance Group") as its Agent under this
Agreement and authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonable incidental thereto. In performing its functions and duties under
this Agreement, the Agent shall act solely as agent of the Lenders and does not
assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any of the Borrowers. The Agent
may perform any of its duties under this Agreement, or under the other Loan
Documents, by or through its agents or employees.
(b) The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement or in the other Loan Documents. Except
as expressly provided herein, the duties of the Agent shall be mechanical and
administrative in nature. The Agent shall have and may use its sole discretion
with respect to exercising or refraining from taking any actions which the
Agent is expressly entitled to take or assert under this Agreement and the
other Loan Documents. The Agent shall not have by reason of this Agreement a
fiduciary relationship with respect to any Lender. Nothing in this Agreement
or any of the other Loan Documents, express or implied, is intended to or shall
be construed to impose upon the Agent any obligations in respect of this
Agreement or any of the other Loan Documents except as expressly set forth
herein or therein. If the Agent seeks the consent or approval of the Majority
in Interest to the taking or refraining from taking any action hereunder, the
Agent shall send notice thereof to each Lender. The Agent shall promptly
notify each Lender any time that the Majority in Interest have instructed the
Agent to act or refrain from acting pursuant hereto. The Agent may employ
agents, co-agents and attorneys-in-fact and shall not be responsible to the
Lenders or the Borrower, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
(c) Neither the Agent nor any of its officers, directors, employees or
agents shall be liable to any Lender for any action taken or omitted by it or
any of them under this Agreement or under any of the other Loan Documents, or
in connection herewith or therewith, except that no Person shall be relieved of
any liability imposed by law, intentional tort or gross negligence. The Agent
shall not be not be responsible to any Lender for any recitals, statements,
representations or warranties contained in this Agreement or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the other Loan Documents or any of the
transactions contemplated thereby, or for the financial condition of any of the
Borrowers. The Agent shall not be
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Agreement (continued)
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any of the
other Loan Documents or the financial condition of any of the Borrowers, or the
existence or possible existence of any Default or Event of Default. Agent
shall give Lender notice of any Default or Event of Default of which Agent has
actual notice. The Agent may at any time request instructions from the Lenders
with respect to any actions or approvals which by the terms of this Agreement
or of any of the other Loan Documents the Agent is permitted or required to
take or to grant, and if such instructions are promptly requested, the Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Loan
Documents until it shall have received such instructions from the Majority in
Interest. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting under this Agreement or any of the other Loan Documents
in accordance with the instructions of the Majority in Interest.
(d) The Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents or any telephone message
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person, and with respect to all matters pertaining
to this Agreement or any of the other Loan Documents and its duties hereunder
or thereunder, upon advice of counsel selected by it.
(e) To the extent that the Agent is not reimbursed and indemnified by the
Borrowers, the Lenders will reimburse and indemnify the Agent for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, advances or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of this Agreement or any of the
other Loan Documents or any action taken or omitted by the Agent under this
Agreement or any of the other Loan Documents, in proportion to each Lender's
pro rata share. The obligations of the Lenders under this indemnification
provision shall survive the payment in full of the Loans and the termination of
this Agreement.
(f) (i) The Agent is hereby authorized by each of the Borrowers and the
Lenders, from time to time, before or after the occurrence of an Event of
Default, to make such disbursements and advances ("Agent Advances") pursuant to
this Agreement and the other Loan Documents which the Agent, in its sole
discretion, deems necessary or desirable to preserve or protect the collateral,
or any portion thereof, in order to enhance the likelihood of, or maximize the
amount of, repayment by the Borrowers, or any guarantor or other Person, of the
Loans and other Obligations or to pay any other amount chargeable to any of the
Borrowers pursuant to the terms of this Agreement, including, without
limitation, costs, fees and expenses. The Agent Advances shall be repayable on
demand and be secured by the collateral.
(ii) If and so long as the Loan is secured or the Lender is a
beneficiary of any security agreement or pledge, the Lenders hereby irrevocably
authorize the Agent, at its option and in its discretion, to release any Lien
granted to or held by the Agent for the benefit of the secured creditors upon
any collateral (A) upon termination of the commitments and payments and
satisfaction of all Loans, (whether or not due) and all other Obligations which
have matured and which the Agent has been notified in writing are then due and
payable, (B) constituting property being sold or disposed of if the applicable
Borrower certifies to the Agent that the sale or disposition is made in
compliance with this Agreement (and the Agent may rely conclusively on any such
certificate, without further inquiry); (C) constituting property in which none
of the Borrowers owned any interest at the time the Lien was granted or at any
time thereafter; (D) constituting property leased to any of the Borrowers under
a lease which has expired or been terminated in a transaction permitted under
this Agreement or which will expire imminently and which has not been, and is
not intended by such Borrower to be, renewed or extended; or (E) if approved,
authorized or ratified in writing by the Majority in Interest. Upon request by
the Agent or each of the Borrowers at any time, the Lenders will confirm in
writing the Agent's authority to release any Lien
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Agreement (continued)
granted to or held by the Agent, for the benefit of the secured creditors, upon
particular types or items of collateral pursuant to this section.
(iii) So long as no Event of Default has occurred and is then
continuing, upon receipt by the Agent of confirmation from the Majority in
Interest of its authority to release any Lien granted to or held by the Agent,
for the benefit of the secured creditors, upon particular types or items of
collateral, and upon at least five (5) business days prior written request by
each of the Borrowers, the Agent shall (and is hereby irrevocable authorized by
the Lenders to) execute such documents as may be necessary to evidence the
release of the Liens granted to the Agent, for the benefit of the secured
creditors, herein or pursuant hereto upon such collateral; provided, however,
that the Agent (i) shall not be required to execute any such document on terms
which, in the Agent's opinion, would expose the Agent to liability or create
any obligation or entail any consequence other than the release and (ii) shall
not in any manner discharge, affect or impair the Obligations or any Liens
(other than those expressly being released) upon (or obligations of any of the
Borrowers in respect of) all interests retained by any Borrower, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute part of the collateral.
(iv) The Agent shall have no obligation whatsoever to any Lender to
assure that the collateral exists or is owned by any Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted to the
Agent, for the benefit of the secured creditors, herein or pursuant hereto have
been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or
in any particular manner or under any duty or care, disclosure or fidelity, or
to continue exercising, any of the rights, authorities and powers granted or
available to the pursuant to this section or pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the collateral, or
any act, omission or event related thereto, the Agent may act in any manner it
may deem appropriate, in its sole discretion, given the Agent's own interest in
the collateral in its capacity as one of the Lenders and that the Agent shall
have no duty or liability whatsoever to any Lender as to any of the foregoing.
ARTICLE XII - MISCELLANEOUS
SECTION 12.01. STRICT COMPLIANCE.
(a) Any waiver by Lender of any breach or any term or condition of this
Agreement or the other Loan Documents shall not be deemed a waiver of any other
breach, nor shall any failure to enforce any provision of this Agreement or the
other Loan Documents operate as a waiver of such provision or of any other
provision, nor constitute nor be deemed a waiver or release of the Borrower for
anything arising out of, connected with or based upon this Agreement or the
other Loan Documents.
SECTION 12.02. WAIVERS AND MODIFICATIONS.
(a) All modifications, consents, amendments or waivers (herein "Waivers")
of any provision of this Agreement, the Debentures or any other Loan Documents,
and any consent to departure therefrom, shall be effective only if the same
shall be in writing by Lender and then shall be effective only in the specific
instance and for the purpose for which given. No notice or demand given in any
case shall constitute a waiver of the right to take other action in the same,
similar or other instances without such notice or demand. No failure to
exercise, and no delay in exercising, on the part of Lender, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right. The rights of Lender hereunder and under the other Loan
Documents shall be in addition to all other rights provided by law.
SECTION 12.03. LENDER LIABILITY.
(a) The duties, warranties, covenants and promises arising from the Loan
Documents of each Lender to Borrower shall be several and not joint, and the
Borrower shall have no legal or equitable
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Agreement (continued)
cause of action against one Lender (or its successors or assigns) for any
liability of the other Lender (or its successors or assigns)
SECTION 12.03. NOTICES.
(a) Any notices or other communications required or permitted to be given
by this Agreement or any other documents and instruments referred to herein
must be (i) given in writing and personally delivered, mailed by prepaid
certified, registered mail or sent by overnight service such as Federal
Express, or (ii) made by telex or facsimile transmission delivered or
transmitted to the party to whom such notice or communication is directed, with
confirmation thereupon given in writing and personally delivered or mailed by
prepaid certified or registered mail.
(b) Any notice to be mailed, sent or personally delivered shall be mailed
or delivered to the principal offices of the party to whom such notice is
addressed, as that address is specified herein on the signature page hereof.
Any such notice or other communication shall be deemed to have been given
(whether actually received or not) on the day it is mailed, postage prepaid, or
sent by overnight service or personally delivered or, if transmitted by telex
or facsimile transmission, on the day that such notice is transmitted;
provided, however, that any notice by telex or facsimile transmission, received
by any Borrower or Lender after 4:00 p.m., Standard Time at the recipient's
address, on any day, shall be deemed to have been given on the next succeeding
day. Any party may change its address for purposes of this Agreement by giving
notice of such change to the other parties pursuant to this Section 12.03.
SECTION 12.04. CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
(a) Any suit, action or proceeding against the Borrower with respect to
this Agreement, the Debentures or any judgment entered by any court in respect
thereof, may be brought in the courts of the State of Texas, County of Dallas,
or in the United States courts located in the State of Texas as Lender in its
sole discretion may elect, and Borrower hereby submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action or
proceeding. Borrower hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of Texas
may be brought upon, and Borrower hereby irrevocably appoints, the CT
Corporation, Dallas, Texas, as its true and lawful attorney-in-fact in the
name, place and stead of Borrower to accept such service of any and all such
writs, process and summonses. Borrower hereby irrevocably waives any
objections which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Agreement or any
Debenture brought in the courts located in the State of Texas, County of
Dallas, and hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in any
inconvenient forum.
SECTION 12.05. ARBITRATION
(a) Upon the demand of the Lender or Borrower (collectively the "parties"),
made before the institution of any judicial proceeding or not more than 60 days
after service of a complaint, third party complaint, cross-claim or
counterclaim or any answer thereto or any amendment to any of the above, any
Dispute (as defined below) shall be resolved by binding arbitration in
accordance with the terms of this arbitration clause. A "Dispute" shall
include any action, dispute, claim, or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now existing
or hereafter occurring between the parties arising out of, pertaining to or in
connection with this Agreement, any document evidencing, creating, governing,
or securing any indebtedness guaranteed pursuant to the terms hereof, or any
related agreements, documents, or instruments (the "Documents"). The parties
understand that by this Agreement they have decided that the Disputes may be
submitted to arbitration rather that being decided through litigation in court
before a judge or jury and that once decided by an arbitrator the claims
involved cannot later be brought, filed, or pursued in court. IF BORROWER
SHALL FAIL TO PAY (OR SHALL STATE IN WRITING AN INTENTION NOT TO PAY OR ITS
INABILITY TO PAY), NOT LATER THAN TEN (10) DAYS AFTER THE DUE DATE, ANY
INSTALLMENT OF INTEREST ON OR PRINCIPAL OF, ANY DEBENTURE OR ANY
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Agreement (continued)
FEE, EXPENSE OR OTHER PAYMENT REQUIRED HEREUNDER, LENDER MAY, AT ITS SOLE
OPTION, ENFORCE ITS RIGHTS OUTSIDE THE ARBITRATION PROVISION FOUND IN THIS
SECTION 12.05 OR ANY DEBENTURE.
(b) Arbitrations conducted pursuant to this Agreement, including selection
of arbitrators, shall be administered by the American Arbitration Association
("Administrator") pursuant to the Commercial Arbitration rules of the
Administrator. Arbitrations conducted pursuant to the terms hereof shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of the
United States Code), and to the extent the foregoing are inapplicable,
unenforceable or invalid, the laws of the State of Texas. Judgment upon any
award rendered hereunder may be entered in any court having jurisdiction;
provided, however, that nothing contained herein shall be deemed to be a waiver
by any party that is a bank of the protections afforded to it under 12 U.S.C.
91 or similar governing state law. Any party who fails to submit to binding
arbitration following a lawful demand by the opposing party shall bear all
costs and expenses, including reasonable attorney's fees, incurred by the
opposing party in compelling arbitration of any Dispute.
(c) No provision of, nor the exercise of any rights under, this arbitration
clause shall limit the right of any party to (i) foreclose against any real or
personal property collateral or other security, (ii) exercise self-help
remedies (including repossession and setoff rights) or (iii) obtain provisional
or ancillary remedies such as injunctive relief, sequestration, attachment,
replevin, garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the extent
such action is contrary to a final award or decision in any arbitration
proceeding. The institution and maintenance of an action as described above
shall not constitute a waiver of the right of any party, including the
plaintiff, to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other exercise of rights under this
section shall be a Dispute hereunder.
(d) Arbitrator(s) shall resolve all Disputes in accordance with the
applicable substantive law of the State of Texas. Arbitrator(s) may make an
award of attorneys' fees and expenses if permitted by law or the agreement of
the parties. All statutes of limitation applicable to any Dispute shall apply
to any proceeding in accordance with this arbitration clause. Any arbitrator
selected to act as the only arbitrator in a Dispute shall be required to be a
practicing attorney with not less than 5 years practice in commercial law in
the State of Texas. With respect to a Dispute in which the claims or amounts
in controversy do not exceed five hundred thousand dollars ($500,000), a single
arbitrator shall be chosen and shall resolve the Dispute. In such case the
arbitrator shall have authority to render an award up to but not to exceed five
hundred thousand dollars ($500,000) including all damages of any kind
whatsoever, costs, fees and expenses. Submission to a single arbitrator shall
be a waiver of all parties' claims to recover more than five hundred thousand
dollars ($500,000). A Dispute involving claims or amounts in controversy
exceeding five hundred thousand dollars ($500,000) shall be decided by a
majority vote of a panel of three arbitrators ("Arbitration Panel"), one of
whom must possess the qualifications to sit as a single arbitrator in a Dispute
decided by one arbitrator. If the arbitration is consolidated with one
conducted pursuant to the terms of an agreement between the Lender and the
Borrower related to the indebtedness guaranteed, then the Arbitration Panel
shall be one which meets the criteria set forth between the Lender and
Borrower. Arbitrator(s) may, in the exercise of their discretion, at the
written request of a party, (i) consolidate in a single proceeding any multiple
party claims that are substantially identical and all claims arising out of a
single loan or series of loans including claims by or against borrower(s),
guarantors, sureties and/or owners of collateral if different from the
Borrower, and (ii) administer multiple arbitration claims as class actions in
accordance with Rule 23 of the Federal Rules of Civil Procedure. The
arbitrator(s) shall be empowered to resolve any dispute regarding the terms of
this Agreement or the arbitrability of any Dispute or any claim that all or any
part (including this provision) is void or voidable but shall have no power to
change or alter the terms of this Agreement.
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Agreement (continued)
The award of the arbitrator(s) shall be in writing and shall specify the
factual and legal basis for the award.
(e) To the maximum extent practicable, the Administrator, the arbitrator(s)
and the parties shall take any action necessary to require that an arbitration
proceeding hereunder be concluded within 180 days of the filing of the Dispute
with the Administrator. The arbitrator(s) shall be empowered to impose
sanctions for any party's failure to proceed within the times established
herein. Arbitration proceedings hereunder shall be conducted in Texas at a
location determined by the Administrator. In any such proceeding a party shall
state as a counterclaim any claim which arises out of the transaction or
occurrence or is in any way related to the Documents which does not require the
presence of a third party which could not be joined as a party in the
proceeding, The provisions of this arbitration clause shall survive any
termination, amendment, or expiration of the Documents and repayment in full of
sums owed to Lender by Borrower unless the parties otherwise expressly agree in
writing. Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business of the parties or as required by applicable law or
regulation.
SECTION 12.06. INVALID PROVISIONS.
(a) If any provision of any Loan Document is held to be illegal, invalid or
unenforceable under present or future laws during the term of this Agreement,
such provision shall be fully severable; such Loan Document shall be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part of such Loan Document; and the remaining provisions of such
Loan Document shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from
such Loan Document. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision shall be added as part of such Loan Document a
provision mutually agreeable to Borrower and Lender as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable. In the event Borrower and Lender are unable to agree
upon a provision to be added to the Loan Document within a period of ten (10)
business days after a provision of the Loan Document is held to be illegal,
invalid or unenforceable, then a provision acceptable to independent
arbitrators, such to be selected in accordance with the provisions of the
American Arbitration Association, as similar in terms to the illegal, invalid
or unenforceable provision as is possible and be legal, valid and enforceable
shall be added automatically to such Loan Document. In either case, the
effective date of the added provision shall be the date upon which the prior
provision was held to be illegal, invalid or unenforceable.
SECTION 12.07. MAXIMUM INTEREST RATE.
(a) Regardless of any provision contained in any of the Loan Documents,
Lender shall never be entitled to receive, collect or apply as interest on the
Debentures any amount in excess of interest calculated at the Maximum Rate,
and, in the event that any Lender ever receives, collects or applies as
interest any such excess, the amount which would be excessive interest shall be
deemed to be a partial prepayment of principal and treated hereunder as such;
and, if the principal amount of the Obligation is paid in full, any remaining
excess shall forthwith be paid to Borrower. In determining whether or not the
interest paid or payable under any specific contingency exceeds interest
calculated at the Maximum Rate, Borrower and Lender shall, to the maximum
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest; (ii) exclude
voluntary prepayments and the effects thereof, and (iii) amortize, pro rate,
allocate and spread, in equal parts, the total amount of interest throughout
the entire contemplated term of the Debentures; provided that, if the
Debentures are paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period
of existence thereof exceeds interest calculated at the Maximum Rate, Lender
shall refund to Borrower the amount of such excess or credit the amount of such
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Agreement (continued)
excess against the principal amount of the Debentures and, in such event,
Lender shall not be subject to any penalties provided by any laws for
contracting for, charging, taking, reserving or receiving interest in excess of
interest calculated at the Maximum Rate.
(b) "Maximum Rate" shall mean, on any day, the highest nonusurious rate of
interest (if any) permitted by applicable law on such day that at any time, or
from time to time, may be contracted for, taken, reserved, charged or received
on the Indebtedness evidenced by the Debentures under the laws which are
presently in effect of the United States of America and the State of Texas or
by the laws of any other jurisdiction which are or may be applicable to the
holders of the Debentures and such Indebtedness or, to the extent permitted by
law, under such applicable laws of the United States of America and the State
of Texas or by the laws of any other jurisdiction which are or may be
applicable to the holder of the Debentures and which may hereafter be in effect
and which allow a higher maximum nonusurious interest rate than applicable laws
now allow.
SECTION 12.08. PARTICIPATIONS AND ASSIGNMENTS OF THE DEBENTURES.
(a) The Lender shall have the right to enter into a participation agreement
with any other party with respect to the Debentures, or to sell all or any part
of the Debentures, but any participation or sale shall not affect the rights
and duties of such Lender hereunder vis-a-vis Borrower. In the event that all
or any portion of the Loan shall be, at any time, assigned, transferred or
conveyed to other parties, any action, consent or waiver (except for compromise
or extension of maturity), to be given or taken by Lender hereunder (herein
"Action"), shall be such action as taken by the holders of a majority in amount
of the Principal Amount of the Debentures then outstanding, as such holders are
recorded on the books of the Borrower and represented by Lender's Agent as
described in subsection (b) below.
(b) Assignment or sale of the Debentures shall be effective, on the books
of the Borrower only upon (i) endorsement of the Debenture, or part thereof, to
the proposed new holder, along with a current notation of the amount of
payments or installments received and net Principal Amount yet unfunded or
unpaid, and presentment of such Debenture to the Borrower for issue of a
replacement Debenture, or Debentures, in the name of the new holder; (ii) a
designation by the holders of a single Lender's Agent for Notice, such agent to
be the sole party to whom Borrower shall be required to provide notice when
notice to Lender is required hereunder and who shall be the sole party
authorized to represent Lender in regard to modification or waivers under the
Debenture, this Agreement, or other Loan Documents; and (iii) delivery of an
opinion of counsel, reasonably satisfactory to Borrower, that transfer shall
not require registration or qualification under applicable state or federal
securities laws.
(c) So long as the Borrower is not in default hereunder, the Lender shall
not sell or assign an interest in the Debentures or rights under this Agreement
to any Person that the Borrower reasonably identifies to Lender as being
engaged as a competitor.
SECTION 12.09 CONFIDENTIALITY.
(a) All financial reports or information which are furnished to Lender, or
its director designee or other representatives, pursuant to this Agreement or
pursuant to the Debentures or other Loan Documents shall be treated as
confidential unless and to the extent that such information has been otherwise
disclosed by the Borrower, but nothing herein contained shall limit or impair
Lender's right to disclose such reports to any appropriate Governmental
Authority, or to use such information to the extent pertinent to an evaluation
of the Obligation, or to enforce compliance with the terms and conditions of
this Agreement, or to take any lawful action which Lender deems necessary to
protect its interests under this Agreement.
(b) Lender, its director designees, and agents shall use their reasonable
best efforts to protect and preserve the confidentiality of such information
except for such disclosure as shall be required for compliance by Lender or its
director designees with SEC reporting requirements or otherwise as a matter of
law. The provisions of Section 5.01 notwithstanding, Borrower may refuse to
provide information as
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Agreement (continued)
required pursuant thereto to an assignee or successor in interest to the Lender
unless and until such assignee or successor shall have executed an agreement to
maintain the confidentiality of the information as provided herein.
SECTION 12.10. BINDING EFFECT.
(a) The Loan Documents shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors, assigns and legal
representatives; provided, however, that Borrower may not, without the prior
written consent of Lender, assign any rights, powers, duties or obligations
thereunder.
SECTION 12.11. NO THIRD PARTY BENEFICIARY.
(a) The parties do not intend the benefits of this Agreement to inure to
any third party, nor shall this Agreement be construed to make or render Lender
liable to any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, or for debts or claims accruing to
any such persons against Borrower. Notwithstanding anything contained herein
or in the Debentures, or in any other Loan Document, no conduct by any or all
of the parties hereto, before or after signing this Agreement nor any other
Loan Document, shall be construed as creating any right, claim or cause of
action against Lender, or any of its officers, directors, agents or employees,
in favor of any materialman, supplier, contractor, subcontractor, purchaser or
lessee of any property owned by Borrower, nor to any other person or entity
other than Borrower.
SECTION 12.12. ENTIRETY.
(a) This Agreement and the Debentures and the other Loan Documents issued
pursuant thereto contain the entire agreement between the parties and supersede
all prior agreements and understandings, if any, relating to the subject matter
hereof and thereof.
SECTION 12.13. HEADINGS.
(a) Section headings are for convenience of reference only and, except as a
means of identification of reference, shall in no way affect the interpretation
of this Agreement.
SECTION 12.14. SURVIVAL.
(a) All representations and warranties made by Borrower herein shall
survive delivery of the Debentures and the making of the Loans.
SECTION 12.15. MULTIPLE COUNTERPARTS.
(a) This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same agreement, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
SECTION 12.16. GOVERNING LAW.
(a) THIS LOAN AGREEMENT HAS BEEN PREPARED, IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND THE SUBSTANTIVE LAWS
OF SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND INTERPRETATION OF THIS
LOAN AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS.
Section 12.17. REFERENCE TO BORROWER.
(a) The term Borrower shall mean Integrated Security Systems, Inc where the
context of the agreement makes such other reference appropriate.
(signature page follows)
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Agreement (continued)
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
executed, sealed, and delivered, as of the day and year first above written.
Address for Notice: BORROWER
------------------- --------
0000 Xxxxxxxxxx Xxxxx,
Xxxxx 000 INTEGRATED SECURITY SYSTEMS, INC.
Xxxxxx, Xxxxx 00000
By:
-----------------------------------------------
Xxxxxx X. Xxxxxxx, President
Attest by:
--------------------------------
Xxxxx Xxxxx, Secretary
LENDER
Address for Notice: Renaissance US Growth & Income Trust PLC
-------------------
8080 North Central Expressway, By:
Suite 210/LB59 -----------------------------------------------
Xxxxxx, Xxxxx 00000 Xxxxx X. Xxxxxx, Vice President
(000) 000 0000
Fax: (000) 000-0000 Attest by:
--------------------------------
Title: Secretary
LENDER
Address for Notice: ------
-------------------
8080 North Central Expressway, Renaissance Capital Growth & Income Fund III, Inc.
Xxxxx 000/XX00
Xxxxxx, Xxxxx 00000 By:
(000) 000 0000 -----------------------------------------------
Fax: (000) 000-0000 Xxxxx X. Xxxxxx, Vice President
Attest by:
--------------------------------
Title: Secretary
40