Exhibit 10.1
Receivable Factoring Agreement
FACE AMOUNT $695,000
INTEREST RATE 3.5% per month
ISSUANCE DATE May 17, 2006
MATURITY DATE July 17, 2006
FOR VALUE RECEIVED, Xtreme Companies, Inc., a Nevada corporation (the
"Company"), (OTC BB: NWKI) hereby promises to pay DUTCHESS PRIVATE EQUITIES
FUND, II, L.P. (the "Holder") by July 17, 2006 (the "Maturity Date"), or
earlier, the Face Amount of Six Hundred Ninety-Five Thousand dollars ($695,000)
U.S., plus accrued interest, in such amounts, at such times and on such terms
and conditions as are specified herein.
Article 1 Method of Payment/Interest
The Company shall pay three and one-half percent (3.5%) monthly
coupon, compounded daily, on the unpaid Face Amount, pro rata for partial
periods. The Company shall pay a minimum of one month's interest on the funds
("Minimum Interest") to the Holder.
Section 1.2 Prepayment
The Company shall make mandatory payments to the Holder as the funds become
available from the boats listed below in Exhibit A ("Collateral Receivables")
(attached hereto and incorporated by reference). The Company shall make
immediate payment to the Holder within one (1) day, via wire transfer, to the
Holder's account for the Face Amount plus accrued interest and penalties, if
any.
The Company may make additional payments ("Prepayment") without any penalties
provided the Minimum Interest is paid.
Article 2 Collateral
The Company will deliver the assigned receivables, attached hereto as
Exhibit A and incorporated by reference, due to the Company and its wholly owned
subsidiary Marine Holdings d/b/a Challenger Offshore. The Company shall
immediately make payment to the Holder on ANY funds received from the vendors
listed on Exhibit A.
Article 3 Unpaid Amounts
In the event that on the Maturity Date, there is an outstanding balance on
the Face Amount, the Holder can exercise its right to increase the Face Amount
by ten percent (10%) per month for each month that the Agreement remains unpaid,
compounded daily, pro rata for partial periods. The Company shall also continue
to pay the interest rate outlined in this Agreement. If the aforementioned
occurs, the Company will be in Default and remedies as described in Article 4
may be taken at the Holder's discretion.
Article 4 Defaults and Remedies
Section 4.1 Events of Default. An "Event of Default" occurs if any of
the following occur:
(a) the Company does not make the Payment on the Face Amount of this
Agreement within two (2) business days of the Maturity Date, as applicable, upon
receipt of Collateral or otherwise; or
(b) the Company, pursuant to or within the meaning of any Bankruptcy Law (as
hereinafter defined): (i) commences a voluntary case; (ii) consents to the
entry of an order for relief against it in an involuntary case; (iii) consents
to the appointment of a Custodian (as hereinafter defined) of it or for all or
substantially all of its property; (iv) makes a general assignment for the
benefit of its creditors; or (v) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that: (A) is for relief against the
Company in an involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property; or (C) orders the liquidation of the
Company, and the order or decree remains unstayed and in effect for sixty (60)
calendar days; or
(c) the Company's $0.001 par value common stock (the "Common Stock") is
suspended or is no longer listed on any recognized exchange, including an
electronic over-the-counter bulletin board, for in excess of two (2) consecutive
trading days; or
(d) any of the Company's representations or warranties contained in this
Agreement were false when made and such failure continues for a period of five
(5) business days; or,
(e) the Company breaches any covenant or condition of this Agreement, and
such breach, if subject to cure, continues for a period of five (5) business
days.
As used in this Section 4.1, the term "Bankruptcy Law" means Title 11 of
the United States Code or any similar federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
Section 4.2 Remedies. In the Event of Default, the Holder may elect to
secure a portion of the Company's assets not to exceed 200% of the Face Amount
of the Agreement, including, but not limited to: accounts receivable, cash,
marketable securities, equipment, building, land or inventory. The Holder may
also elect to garnishee Revenue from the Company in an amount that will repay
the Holder on the schedules outlined in this Agreement.
For EACH Event of Default, as outlined in this Agreement, the Holder can
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exercise its right to increase the Face Amount ten percent (10%) as an initial
penalty. In addition, the Holder may elect to increase the Face Amount by three
percent (3%) per month paid as a penalty for Liquidated Damages. The Liquated
Damages will be compounded daily. It is the intention and acknowledgement of
both parties that the Liquidated Damages not be deemed as interest.
In the event of a Default hereunder, the Holder shall have the right, but
not the obligation, to 1) switch the Residual Amount to a three-year
("Convertible Maturity Date"), fifteen percent (15%) interest bearing
convertible debenture at the terms described in Section 4.2 (the "Convertible
Debenture"). At such time of Default, the Convertible Debenture shall be
considered closed ("Convertible Closing Date"). If the Holder chooses to
convert the Residual Amount to a Convertible Debenture, the Company shall have
twenty (20) business days after notice of the same (the "Notice of Convertible
Debenture") to file a registration statement covering an amount of shares equal
to three hundred percent (300%) of the Residual Amount. Such registration
statement shall be declared effective under the Securities Act of 1933, as
amended (the "Securities Act"), by the Securities and Exchange Commission (the
"Commission") within forty (40) business days of the date the Company files such
Registration Statement. In the event the Company does not file such
registration statement within twenty (20) business days of the Holder's
request, or such registration statement is not declared by the Commission to be
effective under the Securities Act within the time period described above , the
Residual Amount shall increase by five thousand dollars ($5,000) per day. In
the event the Company is given the option for accelerated effectiveness of the
registration statement, it agrees that it shall cause such registration
statement to be declared effective as soon as reasonably practicable. In the
event that the Company is given the option for accelerated effectiveness of the
registration statement, but chooses not to cause such registration statement to
be declared effective on such accelerated basis, the Residual Amount shall
increase by five thousand dollars ($5,000) per day commencing on the earliest
date as of which such registration statement would have been declared to be
effective if subject to accelerated effectiveness.
Section 4.3 Conversion Privilege
(a) The Holder shall have the right to convert the Convertible
Debenture into shares of Common Stock at any time following the Convertible
Closing Date and which is before the close of business on the Convertible
Maturity Date. The number of shares of Common Stock issuable upon the
conversion of the Convertible Debenture shall be determined pursuant to Section
4.3, but the number of shares issuable shall be rounded up or down, as the case
may be, to the nearest whole share.
(b) The Convertible Debenture may be converted, whether in whole or in
part, at any time and from time to time.
(c) In the event all or any portion of the Convertible Debenture
remains outstanding on the Convertible Maturity Date (the "Debenture Residual
Amount"), the unconverted portion of such Convertible Debenture will
automatically be converted into shares of Common Stock on such date in the
manner set forth in Section 4.3.
Section 4.4 Conversion Procedure
(a) The Residual Amount may be converted, in whole or in part any time
and from time to time, following the Convertible Closing Date. Such conversion
shall be effectuated by surrendering to the Company, or its attorney, the
Convertible Debenture to be converted together with a facsimile or original of
the signed notice of conversion (the "Notice of Conversion"). The date on
which the Notice of Conversion is effective ("Conversion Date") shall be deemed
to be the date on which the Holder has delivered to the Company a facsimile or
original of the signed Notice of Conversion, as long as the original Convertible
Debenture(s) to be converted are received by the Company within five (5)
business days thereafter. At such time that the original Convertible Debenture
has been received by the Company, the Holder can elect to whether a reissuance
of the Convertible Debenture is warranted, or whether the Company can retain the
Convertible Debenture as to a continual conversion by the Holder.
Notwithstanding the above, any Notice of Conversion received by 4:00 P.M. EST
shall be deemed to have been received the following business day (receipt being
via a confirmation of the time such facsimile to the Company is received).
(b) Common Stock to be Issued. Upon the conversion of any
Convertible Debentures and upon receipt by the Company or its attorney of a
facsimile or original of the Holder's signed Notice of Conversion, the Company
shall instruct its transfer agent to issue stock certificates without
restrictive legends or stop transfer instructions, if at that time the
aforementioned registration statement described in Section 4.1 has been declared
effective (or with proper restrictive legends if the registration statement has
not as yet been declared effective), in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. In the event that the Debenture is aged one year
and deemed sellable under Rule 144, the Company shall, upon a Notice of
Conversion, instruct the transfer agent to issue free trading certificates
without restrictive legends, subject to other applicable securities laws. The
Company is responsible to provide all costs associated with the issuance of the
shares, including but not limited to the opinion letter, FedEx of the
certificates and any other costs that arise. The Company shall act as registrar
and shall maintain an appropriate ledger containing the necessary information
with respect to each Convertible Debenture. The Company warrants that no
instructions, other than these instructions, have been given or will be given to
the transfer agent and that the Common Stock shall otherwise be freely resold,
except as may be set forth herein or subject to applicable law.
(c) Conversion Rate. Holder is entitled to convert the Debenture
Residual Amount , plus accrued interest, anytime following the Convertible
Maturity Date, at the lesser of (i) fifty percent (50%) of the lowest closing
bid price during the fifteen (15) trading immediately preceding the Convertible
Maturity Date or (ii) 100% of the lowest bid price for the twenty (20) trading
days immediately preceding the Convertible Maturity Date ("Fixed Conversion
Price"). No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded up
or down, as the case may be, to the nearest whole share.
(d) Nothing contained in the Convertible Debenture shall be deemed to
establish or require the payment of interest to the Holder at a rate in excess
of the maximum rate permitted by governing law. In the event that the rate of
interest required to be paid exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess
shall be returned with reasonable promptness by the Holder to the Company.
(e) It shall be the Company's responsibility to take all necessary
actions and to bear all such costs to issue the Common Stock as provided herein,
including the responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. Holder shall be treated as a shareholder of
record on the date Common Stock is issued to the Holder. If the Holder shall
designate another person as the entity in the name of which the stock
certificates issuable upon conversion of the Convertible Debenture are to be
issued prior to the issuance of such certificates, the Holder shall provide to
the Company evidence that either no tax shall be due and payable as a result of
such transfer or that the applicable tax has been paid by the Holder or such
person. Upon surrender of any Convertible Debentures that are to be converted in
part, the Company shall issue to the Holder a new Convertible Debenture equal to
the unconverted amount, if so requested in writing by the Holder.
(f) Within five (5) business days after receipt of the documentation
referred to above in Section 4.2, the Company shall deliver a certificate, for
the number of shares of Common Stock issuable upon the conversion. In the event
the Company does not make delivery of the Common Stock as instructed by Holder
within five (5) business days after the Conversion Date, then in such event the
Company shall pay to the Holder one percent (1%) in cash of the dollar value of
the Debenture Residual Amount remaining after said conversion, compounded daily,
per each day after the fifth (5th) business day following the Conversion Date
that the Common Stock is not delivered to the Purchaser.
(g) The Company acknowledges that its failure to deliver the Common
Stock within five (5) business days after the Conversion Date will cause the
Holder to suffer damages in an amount that will be difficult to ascertain.
Accordingly, the parties agree that it is appropriate to include in this
Agreement a provision for liquidated damages The parties acknowledge and agree
that the liquidated damages provision set forth in this section represents the
parties' good faith effort to quantify such damages and, as such, agree that the
form and amount of such liquidated damages are reasonable and will not
constitute a penalty. The payment of liquidated damages shall not relieve the
Company from its obligations to deliver the Common Stock pursuant to the terms
of this Convertible Debenture.
(h) The Company shall at all times reserve (or make alternative written
arrangements for reservation or contribution of shares) and have available all
Common Stock necessary to meet conversion of the Convertible Debentures by the
Holder of the entire amount of Convertible Debentures then outstanding. If, at
any time the Holder submits a Notice of Conversion and the Company does not have
sufficient authorized but unissued shares of Common Stock (or alternative shares
of Common Stock as may be contributed by stockholders of the Company) available
to effect, in full, a conversion of the Convertible Debentures (a "Conversion
Default," the date of such default being referred to herein as the "Conversion
Default Date"), the Company shall issue to the Holder all of the shares of
Common Stock which are available, and the Notice of Conversion as to any
Convertible Debentures requested to be converted but not converted (the
"Unconverted Convertible Debentures"), may be deemed null and void upon written
notice sent by the Holder to the Company. The Company shall provide notice of
such Conversion Default ("Notice of Conversion Default") to the Holder, by
facsimile within three (3) business days of such default (with the original
delivered by overnight mail or two day courier), and the Holder shall give
notice to the Company by facsimile within five (5) business days of receipt of
the original Notice of Conversion Default (with the original delivered by
overnight mail or two day courier) of its election to either nullify or confirm
the Notice of Conversion.
(i) The Company agrees to pay the Holder payments for a Conversion
Default ("Conversion Default Payments") in the amount of (N/365) multiplied by
..24 multiplied by the initial issuance price of the outstanding or tendered but
not converted Convertible Debentures held by the Holder where N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Company authorizes a sufficient number of shares of Common Stock to
effect conversion of all remaining Convertible Debentures. The Company shall
send notice ("Authorization Notice") to the Holder that additional shares of
Common Stock have been authorized, the Authorization Date, and the amount of
▇▇▇▇▇▇'s accrued Conversion Default Payments. The accrued Conversion Default
shall be paid in cash or shall be convertible into Common Stock at the
conversion rate set forth in the first sentence of this paragraph, upon written
notice sent by the Holder to the Company, which Conversion Default shall be
payable as follows: (i) in the event the Holder elects to take such payment in
cash, cash payments shall be made to the Holder by the fifth (5th) day of the
following calendar month, or (ii) in the event Holder elects to take such
payment in stock, the Holder may convert such payment amount into Common Stock
at the conversion rate set forth in the first sentence of this paragraph at any
time after the fifth (5th) day of the calendar month following the month in
which the Authorization Notice was received, until the expiration of the
mandatory three (3) year conversion period.
(j) The Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to effect in full a
conversion of the Convertible Debentures will cause the Holder to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties
agree that it is appropriate to include in this Agreement a provision for
liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties' good faith
effort to quantify such damages and, as such, agree that the form and amount of
such liquidated damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from its obligations
to deliver the Common Stock pursuant to the terms of this Convertible Debenture.
(k) If, by the third (3rd) business day after the Conversion Date of
any portion of the Convertible Debentures to be converted (the "Delivery Date"),
the transfer agent fails for any reason to deliver the Common Stock upon
conversion by the Holder and after such Delivery Date, the Holder purchases, in
an open market transaction or otherwise, shares of Common Stock (the "Covering
Shares") solely in order to make delivery in satisfaction of a sale of Common
Stock by the Holder (the "Sold Shares"), which delivery such Holder anticipated
to make using the Common Stock issuable upon conversion (a "Buy-In"), the
Company shall pay to the Holder, in addition to any other amounts due to Holder
pursuant to this Convertible Debenture, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Holder's total purchase price
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds (after brokerage commissions, if any) received by the Holder from
the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
to the Holder in immediately available funds within five (5) business days of
written demand by the Holder. By way of illustration and not in limitation of
the foregoing, if the Holder purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which the Company will be required to pay to the Holder
will be $1,000.
(l) The Company shall defend, protect, indemnify and hold harmless the
Holder and all of its shareholders, officers, directors, employees, counsel,
and direct or indirect investors and any of the foregoing person's agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "Section 4.3(h) Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Section 4.3(h) Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "Section 4.3(h) Indemnified Liabilities"), incurred by any Section 4.3(h)
Indemnitee as a result of, or arising out of, or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement, or obligation of the Company contained in the Transaction Documents
or any other certificate, instrument, or document contemplated hereby or
thereby, (iii) any cause of action, suit, or claim brought or made against such
Section 4.3(h) Indemnitee by a third party and arising out of or resulting from
the execution, delivery, performance, or enforcement of the Transaction
Documents or any other certificate, instrument, or document contemplated hereby
or thereby, (iv) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Common Stock
underlying the Convertible Debenture ("Securities"), or (v) the status of the
Holder or holder of the Securities as an investor in the Company, except insofar
as any such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission, or alleged omission is made in reliance upon and in
conformity with written information furnished to the Company by the Holder or
the Investor which is specifically intended by the Holder or the Investor to be
relied upon by the Company, including for use in the preparation of any such
registration statement, preliminary prospectus, or prospectus, or is based on
illegal trading of the Common Stock by the Holder or the Investor. To the extent
that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. The indemnity provisions contained herein shall be in addition
to any cause of action or similar rights the Holder may have, and any
liabilities the Holder may be subject to.
Article 5 Additional Financing and Registration Statements
Section 5.1 The Company will not enter into any additional financing
agreements, debt or equity, without prior expressed written consent from the
Holder, which shall not be unreasonably withheld. Failure to do so will result
in an Event of Default and the Holder may elect to take the action outlined in
Article 4.
Section 5.2 The Company agrees that it shall not file any registration
statement which includes any of its Common Stock, including those on Form S-8,
until such time as the Face Amount is paid off in full ("Lock-Up Period") or
without the prior written consent of the Holder.
Section 5.3 The Holder shall also reserve the right to switch to the
terms of the new financing If at any time while the Face Amount is outstanding,
if the Company issues or agree to issue any common stock or securities
convertible into or exercisable for shares of commons stock (or modify any of
the foregoing which may be outstanding) to any person or entity. Additionally,
if the Company shall, issue or agree to issue any of the aforementioned services
to any person, firm or corporation at terms deemed by the Holder to be more
favorable to the other investor than the terms or conditions of this Agreement,
then the Holder is granted the right to modify any such term or condition of the
Agreement to be the same as any such term or condition of any subsequent
offering. The rights of the Holder in this Section 5 are in addition to any
other right the Holder has pursuant to this Agreement and the Security Agreement
of even date between the Holder and the Company.
Section 5.4 The Company agrees that any and all its officers, insiders,
affiliates or other related parties shall refrain from selling any Stock, during
the Lock-Up Period.
Article 6 Notice.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided a confirmation
of transmission is mechanically or electronically generated and kept on file by
the sending party); or (iii) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Xtreme Companies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Holder:
Dutchess Capital Management
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Each party shall provide five (5) business days prior notice to the other
party of any change in address, phone number or facsimile number.
Article 7 Time
Where this Agreement authorizes or requires the payment of money or the
performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specified hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Agreement. A "business day"
shall mean a day on which the banks in New York are not required or allowed to
be closed.
Article 8 No Assignment
This Agreement and the terms and conditions herein, shall not be
assignable.
Article 9 Rules of Construction.
In this Agreement, unless the context otherwise requires, words in the
singular number include the plural, and in the plural include the singular, and
words of the masculine gender include the feminine and the neuter, and when the
sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in the Agreement are inserted for
convenience of reference only, and they neither form a part of this Agreement
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Agreement, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Agreement.
Article 10 Governing Law
The validity, terms, performance and enforcement of this Agreement shall be
governed and construed by the provisions hereof and in accordance with the laws
of the Commonwealth of Massachusetts applicable to agreements that are
negotiated, executed, delivered and performed solely in the State of
Massachusetts.
Article 11 Litigation
The parties to this agreement will submit all disputes arising under this
agreement to arbitration in Boston, Massachusetts before a single arbitrator of
the American Arbitration Association ("AAA"). The arbitrator shall be selected
by application of the rules of the AAA, or by mutual agreement of the parties,
except that such arbitrator shall be an attorney admitted to practice law in the
Commonwealth of Massachusetts. No party to this agreement will challenge the
jurisdiction or venue provisions as provided in this section. Nothing in this
section shall limit the Holder's right to obtain an injunction for a breach of
this Agreement from a court of law.
Article 12 Conditions to Closing
The Company shall have delivered the proper Collateral to the Holder before
Closing.
Article 13 Structuring and Administration Expense
The Company agrees to pay for related expenses associated with the proposed
transaction of $20,000. This amount shall cover, but is not limited to, the
following: due diligence expenses, document creation expenses, closing costs,
and transaction administration expenses. This shall be deducted from the first
closing.
Article 16 Indemnification
In consideration of the Holder's execution and delivery of this Agreement
and the acquisition and funding by the Holder hereunder and in addition to all
of the Company's other obligations under the documents contemplated hereby, the
Company shall defend, protect, indemnify and hold harmless the Holder and all of
their shareholders, officers, directors, employees, counsel, and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES'),
incurred by any Indemnitee as a result of, or arising out of, or relating to (i)
any misrepresentation or breach of any representation or warranty made by the
Company in the Agreement, or any other certificate, instrument or document
contemplated hereby or thereby (ii) any breach of any covenant, agreement or
obligation of the Company contained in the Agreement or any other certificate,
instrument or document contemplated hereby or thereby, except insofar as any
such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon and in
conformity with written information furnished to the Company by, or on behalf
of, the Holder or based on illegal or alleged illegal trading of the Shares by
the Holder. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions contained herein
shall be in addition to any cause of action or similar rights the Holder may
have, and any liabilities the Holder may be subject to.
Article 17 Waiver
The Holder's delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants shall
not waiver, affect, or diminish any right of the Holder under this Agreement to
demand strict compliance and performance herewith. Any waiver by the Holder of
any Event of Default shall not waive or affect any other Event of Default,
whether such Event of Default is prior or subsequent thereto and whether of the
same or a different type. None of the undertakings, agreements and covenants of
the Company contained in this Agreement, and no Event of Default, shall be
deemed to have been waived by the Holder, nor may this Agreement be amended,
changed or modified, unless such waiver, amendment, change or modification is
evidenced by an instrument in writing specifying such waiver, amendment, change
or modification and signed by the Holder.
Article 18 Senior Obligation
The Company shall cause this Agreement ("Holder's Debt") to be senior in
right of payment to all other Indebtedness of the Company for the Collateral.
Article 19 Transactions With Affiliates
The Company shall not, and shall cause each of its Subsidiaries not to,
enter into, amend, modify or supplement, or permit any Subsidiary to enter into,
amend, modify or supplement, any agreement, transaction, commitment or
arrangement with any of its or any Subsidiary's officers, directors, persons who
were officers or directors at any time during the previous two years,
shareholders who beneficially own five percent (5%) or more of the Common Stock,
or affiliates or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or individual
owns a five percent (5%) or more beneficial interest (each a "Related Party")
during the Lock Up Period
Article 20 Security
The Holder shall have full right to funds due to the Company from the boats
listed on Exhibit A. In the Event of Default the Holder shall have the right to
attach any other assets as outlined in Article 4.
Article 21 Miscellaneous
a. All pronouns and any variations thereof used herein shall be deemed to
refer to the masculine, feminine, impersonal, singular or plural, as the
identity of the person or persons may require.
b. Neither this Agreement nor any provision hereof shall be waived,
modified, changed, discharged, terminated, revoked or canceled, except by an
instrument in writing signed by the party effecting the same against whom any
change, discharge or termination is sought.
c. Notices required or permitted to be given hereunder shall be in writing
and shall be deemed to be sufficiently given when personally delivered or sent
by facsimile transmission: (i) if to the Company, at its executive offices or
(ii) if to the Holder, at the address for correspondence set forth in the
Article 6, or at such other address as may have been specified by written notice
given in accordance with this paragraph.
d. This Agreement may be executed in two or more counterparts, all of which
taken together shall constitute one instrument. Execution and delivery of this
Agreement by exchange of facsimile copies bearing the facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
e. This Written Agreement represent the FINAL AGREEEMENT between the Company
and the Holders and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties, there are no
unwritten oral agreements among the parties.
f. The execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Articles of Incorporation, any
Certificate of Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws or (ii) conflict with, or
constitute a material default (or an event which with notice or lapse of time or
both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
contract, indenture mortgage, indebtedness or instrument to which the Company or
any of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree, including United States federal and state
securities laws and regulations and the rules and regulations of the principal
securities exchange or trading market on which the Common Stock is traded or
listed (the "Principal Market"), applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of, or in default under, the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of any outstanding
series of preferred stock of the Company or the By-laws or their organizational
charter or by-laws, respectively, or any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except for
possible conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the aggregate
have a Material Adverse Effect. The business of the Company and its Subsidiaries
is not being conducted, and shall not be conducted, in violation of any law,
statute, ordinance, rule, order or regulation of any governmental authority or
agency, regulatory or self-regulatory agency, or court, except for possible
violations the sanctions for which either individually or in the aggregate would
not have a Material Adverse Effect. The Company is not required to obtain any
consent, authorization, permit or order of, or make any filing or registration
(except the filing of a registration statement) with, any court, governmental
authority or agency, regulatory or self-regulatory agency or other third party
in order for it to execute, deliver or perform any of its obligations under, or
contemplated by, this Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, permits, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and are in full force and
effect as of the date hereof. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.
g. The Company and its "Subsidiaries" (which for purposes of this Agreement
means any entity in which the Company, directly or indirectly, owns capital
stock or holds an equity or similar interest) are corporations duly organized
and validly existing in good standing under the laws of the respective
jurisdictions of their incorporation, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted. Both the Company and its Subsidiaries are duly qualified to do
business and are in good standing in every jurisdiction in which their ownership
of property or the nature of the business conducted by them makes such
qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its Subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith, or on the
authority or ability of the Company to perform its obligations under the
Agreement.
h. Authorization; Enforcement; Compliance with Other Instruments. (i) The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, and to issue the Agreement in accordance with the terms
hereof and thereof, (ii) the execution and delivery of the Agreement by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors, or its shareholders, (iii) the Agreement has been duly
and validly executed and delivered by the Company, and (iv) the Agreement
constitutes the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
I. The execution and delivery of this Agreement shall not alter any prior
written agreements between the Company and the Holder.
j. There are no disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the accountants,
auditors and lawyers formerly or presently employed by the Company, including
but not limited to disputes or conflicts over payment owed to such accountants,
auditors or lawyers.
k. All representations made by or relating to the Company of a historical
nature and all undertaking described herein shall relate and refer to the
Company, its predecessors, and the Subsidiaries.
l. The only officer, director, employee and consultant stock option or stock
incentive plan currently in effect or contemplated by the Company has been
submitted to the Holder or is described with Reports. No other plan will be
adopted nor may any options.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as of the
date first written above.
XTREME COMPANIES
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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/s/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
DUTCHESS PRIVATE EQUITIES FUND, II, L.P.
BY ITS GENERAL PARTNER DUTCHESS
CAPITAL MANAGEMENT, LLC
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: A Managing Member
EXHIBIT A
CHALLENGER OFFSHORE BOATS
ATTACHED TO FACTORING AGREEMENT
APPROX INVOICE/ $ AVAILABLE TO APPLY
BOAT # PYMT FROM CUSTOMER APPROX. LOAN PAYMENT DUE TO FACTOR BALANCE COMMENT
109 $ 138,000 $ 102,000 $ 36,000 Remaining $after WIP loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
110 $ 82,000 $ 62,000 $ 20,000 Remaining $after WIP loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
115 $ 120,000 $ 78,000 $ 42,000 Remaining $after WIP loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
119 $ 45,000 N/A $ 45,000
------ ------------------ ------------------------- -------------------- ------------------------------------
120 $ 75,000 $ 30,000 $ 45,000 Remaining $after Happy Apple loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
125 $ 130,000 N/A $ 130,000
------ ------------------ ------------------------- -------------------- ------------------------------------
126 $ 120,000 N/A $ 120,000
------ ------------------ ------------------------- -------------------- ------------------------------------
129 $ 140,000 $ 55,000 $ 85,000 Remaining $after WIP loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
Philly
Fire $ 60,000 $ 28,000 $ 32,000 Remaining $after WIP loan is paidoff
------ ------------------ ------------------------- -------------------- ------------------------------------
CT Fire $ 36,750 N/A $ 36,750
------ ------------------ ------------------------- -------------------- ------------------------------------
Cpt
▇▇▇▇▇▇ $ 100,000 N/A $ 100,000
------ ------------------ ------------------------- -------------------- ------------------------------------
TOTAL $ 966,750 $ 293,000 $ 673,750
------ ------------------ ------------------------- -------------------- ------------------------------------
All amounts are approximate. Any monies received from customers for above
listed boats must first be applied to outstanding WIP loans at Sun Security
or applied against the Happy Apple loan, where noted. Xtreme agrees to forward
all remaining monies to Dutchess.
We, the Company, do hereby agree to assign the above Receivables as Collateral
as defined in Section 2 of the Receivable Factoring Agreement above, and do
hereby, agree to make such payments to Holder from these Receivables as outlined
in the Agreement. We, the Company, realize that failure to make payments from
the above Receivables to the Holder as outlined in the Agreement will result in
an Event of Default as outlined in Article 4 and the Holder may take actions
against the Company.
/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CEO