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EXHIBIT 10(cc)
NOTE PURCHASE AGREEMENT
October __, 1999
Dear Sirs:
The undersigned, AIM Group, Inc., a Delaware corporation (the "Company"), hereby
agrees with you as follows:
Section 1. Authorization of issue. The Company will authorize the issue of
up to $750,000 in aggregate principal amount of its 15% Convertible Subordinated
Notes (the "Convertible Notes"). The Convertible Notes shall, with appropriate
insertions, be substantially in the form attached as Exhibit A hereto, and shall
mature on October __, 2000.
Section 2. Issuance of convertible notes. (a) Acquisition of convertible
notes. The Company agrees to sell to you, and subject to the terms and
conditions herein set forth, you agree to purchase from the Company, Convertible
Notes in the aggregate principal amount of $______. The date on which such
purchase and delivery is to be made is herein called the "Closing Date." on the
Closing Date, the Company will deliver to you the Convertible Notes in
accordance with paragraph (b) of this Section at the offices of ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at 1:00 p.m., New York City
time (or at any other place and time agreed upon by you and Company), against
payment of the purchase price therefor by a check payable to the order of the
Company in New York Clearing House funds. The purchase price shall be an amount
equal to 100 percent of the aggregate principal amount of the Convertible Notes
to be purchased by you on such Closing Date.
(b) Delivery of convertible notes; closing date. On the Closing
Date, the Company shall deliver to you Convertible Notes in the aggregate
principal amount of $____ dated the Closing Date and registered in your name or
to the order of your nominee.
(c) Securities Act. The Company represents and warrants that it has
not, either directly or through any agent, offered any of the Convertible Notes
or substantially similar securities for sale to, or solicited any offers to buy
any thereof from, or otherwise approached or negotiated in respect thereof with,
any person or persons other than you and certin other accredited investors. The
Company agrees that it will not, either directly or through any agent, sell or
offer any of the Convertible Notes or substantially similar securities to, or
solicit any offers to buy any thereof from, or otherwise approach or negotiate
in respect thereof with, such number or character of persons, or in such manner,
as would result in making the issuance or sale of the Convertible Notes a
violation of the provisions of the Securities Act of 1933, as amended (the
"Securities Act").
(d) Purchase for investment. You represent to the Company, and in
issuing the Convertible Notes to you on the Closing Date it is specifically
understood between you and the Company, that you are acquiring the Convertible
Notes for your own account, for the purpose of investment, and not with a view
to the distribution or resale of any thereof.
Section 3. Conditions. Your obligation to purchase and pay for the
Convertible Notes to
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be purchased by you on the Closing Date is subject to the accuracy and
correctness of the Company's representations and warranties contained in this
Agreement, and shall be subject to the satisfaction, on or before the
appropriate Closing Date, of the following further conditions:
(a) Opinion of counsel for company. At the Closing Date, you shall
have received the opinion of Messrs. Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel
for the Company, dated the Closing Date, addressed to you and in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware
and is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which it owns or leases substantial properties or
where the conduct of the business requires qualification, except that
the Company may not be qualified in certain jurisdictions where the
failure to so qualify has no material adverse effect on the financial
condition or operations of the Company and its subsidiaries, as a
whole;
(ii) The Company owns the capital stock of each of its subsidiaries,
and all such shares of stock owned by the Company are validly issued
and outstanding, fully paid nonassessable, and are so owned free and
clear of all liens, encumbrances or other restrictions;
(iii) The Company owns the 1,100 shares of Netsurfer, Inc. Preferred
Stock to serve as security for the Company's obligations to repay the
Convertible Notes purchased hereunder free and clear of all liens
encumbrances or other restrictions excep that they are subject to a
Shareholders' Agreement dated November 30, 1998, as amended through
October __, 1999;
(iv) Each of the subsidiaries has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business as a
foreign corporation in each jurisdiction in which it owns or leases
substantial properties or where the conduct of the business requires
qualification, except that the subsidiaries may not be qualified in
certain jurisdictions where the failure to so qualify has no material
adverse effect on the financial condition or operations of the Company
and its subsidiaries, as a whole;
(v) The Company has authorized capital stock of 1,000,000 shares of
Preferred Stock, $1 par value, of which 150,000 shares were outstanding
on June 30, 1999 and 12,000,000 shares of Common Stock, par value $0.01
per share, of which 3,043,237 shares of Common Stock were outstanding
on October 20,, 1999; all of the Company's outstanding shares of Common
Stock have been duly and validly authorized and issued and are fully
paid and nonassessable;
(vi) The certificates evidencing shares of the Company's Common
Stock are in due and proper form, and the issuance and sale of the
shares of Common Stock initially reserved for issuance upon conversion
of the Convertible Notes pursuant to this Agreement or the exercise of
the Warrants have been duly and validly authorized for issuance, and
are sufficient in number for conversion of all of the Convertible Notes
at the initial conversion price, and the exercise of the Warrants at
the exercise
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price, and such shares, when so issued upon such conversion in
accordance with the terms and provisions of the Convertible Notes and
this Agreement or upon such exercise in accordance with the terms of
the Warrants will be duly and validly issued, fully paid and
nonassessable;
(vii) This Agreement and the Escrow Agreement has been duly and
validly authorized, executed and delivered by the Company, and
constitutes the Company's valid and binding obligation enforceable in
accordance with its terms, except as enforceability of the
indemnification provisions may be limited under federal securities laws
and except as enforcement thereof may be limited by bankruptcy,
insolvency or other laws affecting creditors' rights;
(viii) The Convertible Notes and Warrants have been duly and validly
authorized and have been duly issued and sold to you, and constitute
the Company's legal, valid and binding obligations enforceable in
accordance with their terms (except as enforcement thereof may be
limited by bankruptcy, insolvency or other laws affecting enforcement
of creditors' rights) and are entitled to the benefits provided by this
Agreement and the Convertible Notes are convertible into the Company's
Common Stock in accordance with the terms of this Agreement;
(vivi) To the best of their knowledge and information, no material
legal or governmental proceedings are pending or threatened against the
Company or any of its subsidiaries;
(x) The issue and sale of the Convertible Notes and Warrants
hereunder and the Company's compliance with all the provisions of the
Convertible Notes, this Agreement and the Escrow Agreement will not
conflict with, result in a breach of any term or provision of,
constitute a default under, or result in the creation or imposition of,
any lien, charge, or encumbrance upon any of the Company's or its
subsidiaries' property or assets pursuant to the terms of, any
agreement or instrument known to such counsel to which the Company or
any of its subsidiaries is a party, by which any of them may be bound,
or to which any of their property or assets is subject, nor will such
action result in any violation of the Company's Articles of
Incorporation, as amended, or Bylaws, or to the best of their
knowledge, of any applicable federal, state, or local statute, order,
rule, or regulation; and
(xi) No authorization, qualification, approval or consent of any
governmental authority or agency is necessary in connection with the
issue and sale of the Convertible Notes or Warrants to you.
(b) Officers' certificate. The representations and warranties
contained in Sections 2(c), 4, and 9 shall (except to the extent of changes
caused by transactions contemplated in or expressly permitted by this Agreement)
be true in all material respects on and as of the Closing Date with the same
effect as though such representations and warranties were originally made on and
as of such date; there shall exist on such Closing Date no condition, event or
act which constitutes an event of default specified in this Agreement and no
condition, event or act which, with notice or lapse of time or both, would
constitute such an event of default; all covenants and agreements to be
performed by the Company hereunder on or before such Closing Date shall
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have been duly performed; and the Company shall have delivered to you a
certificate, signed by its President or a Vice President and its Secretary or an
Assistant Secretary, dated such Closing Date to each such effect.
(c) Proceedings and documents. All corporate and other proceedings
taken in connection with the transactions contemplated by this Agreement, and
all documents incident thereto, shall be satisfactory in form and substance to
you, and you shall have received copies of all documents and records which you
or your special counsel may reasonably request.
(d) Concurrent purchases of convertible notes. ON the Closing Date
the Company shall have entered into purchase agreements with not more than __
other purchasers substantially identical to this Agreement for the purchase of
the remainder of the up to $750,000 of authorized Convertible Notes.
(e). Concurrent pledge of Netsurfer Preferred Stock. On the Closing
Date, the Company shall have delivered 1,100 shares of Netsurfer Preferred Stock
to the Escrow Agent to serve as collateral for the Convertible Notes to secure
the obligations of the Company under the Convertible Notes. The collateral shall
also include all dividends or other property received in connection with the
Preferred Stock. The Company agrees that it will not vote to change the
Netsurfer Shareholders' Agreement or the terms of the Preferred Stock without
the consent of the Noteholders so long as the Preferred Stock is held as
security for these Convertible Notes.
Section 4. Representations and warranties. The Company hereby represents
and warrants that:
(a) Financial statements. The financial statements of the Company
and its subsidiaries for the fiscal years ended December 31, 1997 and 1998 and
the six months ended June 30, 1999, and which the Company has previously
furnished to you are true and correct and have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods involved. The consolidated balance sheets and the related notes fairly
present the financial position of the Company and its consolidated subsidiaries
as of the respective dates thereof, and the consolidated statements of income
and retained earnings and the related notes fairly present the results of the
operations of the Company and such subsidiaries for the respective periods
indicated. There has been no material adverse change in the condition, financial
or otherwise, of the Company and its subsidiaries taken as a whole since
December 31, 1998.
(b) Organization, standing, and qualification of company. The
Company is a corporation duly organized and existing and in good standing under
the laws of the State of Delaware, and has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted. The Company is qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which such
qualification is necessary under applicable provisions of law.
(c) Organization, standing, and qualification of subsidiaries.
Exhibit B annexed hereto correctly sets forth the names of all the subsidiaries
of the Company. Each subsidiary has been duly incorporated and is existing in
good standing under the laws of its jurisdiction of incorporation, has the
corporate power to own its properties and to carry on its business as now
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being conducted and as proposed to be conducted, and is qualified to do business
as a foreign corporation and is in good standing in every jurisdiction in which
such qualification is necessary under applicable provisions of law. All of the
outstanding shares of the capital stock of each class of each subsidiary have
been validly issued, are fully paid and nonassessable, and are wholly owned by
the Company free and clear of all liens, charges, security interests or
encumbrances with the exception of any directors' qualifying shares required by
law.
(d) Litigation. There are no actions, suits or proceedings pending
or, to the Company's knowledge, threatened against or affecting the Company or
any of its subsidiaries which may result in any material adverse change in their
business, properties or condition.
(e) Title and liens. The real property and all the other property
and assets of the Company as shown on the consolidated balance sheet of the
Company and its subsidiaries as at December 31, 1998 are free from all liens,
charges, security interests, and encumbrances, except for liens, charges,
security interests, and encumbrances described in Schedule II hereto; and,
except as aforesaid, the Company and its subsidiaries, respectively, have good
record and marketable title in fee simple absolute to all the real property, and
good and marketable title to all other property and assets, included in their
most recent consolidated balance sheet furnished to you or subsequently acquired
by the Company or any of its subsidiaries, except property and assets
subsequently sold or otherwise disposed of in the ordinary course of business.
(f) Leases. The Company and its subsidiaries enjoy peaceful and
undisturbed possession under all of the leases to which any of them is a party
or under which any of them is operating. All of such leases are valid and
subsisting and none of them is in default.
(g) Conflicting agreements and charter provisions. Neither the
execution and delivery of this Agreement, the Convertible Notes nor the Warrants
or any other documents to be delivered by the Corporation hereunder, the
consummation of the transactions herein or therein contemplated, the fulfillment
of the terms hereof or thereof, nor compliance with the terms and provisions
hereof or thereof, will conflict with or result in a breach of any of the terms,
conditions, or provisions of any corporate restriction or of any agreement or
instrument to which the Company or any of its subsidiaries is now a party or by
which any of them is bound, or constitute a default thereunder, or results in
the creation or imposition of any lien, charge, security interest, or
encumbrance of any nature whatsoever upon any of the property or assets of the
Company or any of its subsidiaries pursuant to the terms of any such agreement
or instrument.
(h) Income tax returns. The Company and its subsidiaries have filed
all required federal, state, and local tax returns, and have paid or provided
for payment of, all taxes as shown on said returns or pursuant to any assessment
received by the Company, or its subsidiaries, and do not know of any proposed
assessment of additional taxes or any basis therefor. There has been no audit of
the Company's tax returns.
(i) Issuance of convertible notes. Upon receipt by the Company of
payment for the Convertible Notes and Warrants as provided herein, the
Convertible Notes, the Warrants and the shares issuable upon the conversion of
the Convertible Notes and the exercise of the Warrants, will have been duly
authorized, executed, and issued and will constitute the Company's valid and
legally binding obligations enforceable in accordance with their terms and will
be entitled to the
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benefits provided by this Agreement.
(j) Authorized and outstanding capital stock. The Company's
authorized and outstanding capital stock consists of (i) 1,000,000 shares of
Preferred Stock, $1 par value, of which 150,000 shares were outstanding on June
30, 1999, and (ii) 12,000,000 shares of Common Stock, par value $0.01 per share,
of which 3,043,237 shares of Common Stock were outstanding on October 20, 1999.
All of the Company's outstanding Common Stock has been duly and validly
authorized and issued and is full paid and nonassessable. The shares of Common
Stock initially to be reserved for issuance and to be issued upon conversion of
the Convertible Notes pursuant to this Agreement have been duly and validly
authorized and are sufficient in number for the conversion of all the
Convertible Notes at the initial conversion price.
The Company has granted or issued, or agreed to grant or issue no options
or warrants or similar rights to others to acquire or receive any of its
authorized but unissued shares of either Preferred or Common Stock, or
securities convertible into its Common Stock other than (i) the Convertible
Notes and Warrants to be issued pursuant to this Agreement, (ii) options
pursuant to the Company's Qualified Stock Option Plan to purchase 560,573 shares
of the Company's Common Stock. The Company holds 3,150 shares of its Common
Stock in its Treasury as of June 30, 1999. An additional 108,667 shares are
scheduled to be granted to certain key employees during the current calendar
quarter.
(k) Securities Exchange Act Registration. The Company's Common Stock
has been duly registered with the Securities and Exchange Commission in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Said Common Stock is the Company's only "equity security" (required to be
registered under the Exchange Act).
(l) The Company is not in default, and there are no circumstances
with the passage of time that will result in a default under any agreements to
which the Company is a party or any Senior Debt of the Company
(m) The Company is current in all filings required of it under the
Securities Exchange Act and such filings do not contain any material
misrepresentation or omissions.
(n) The Company owns the 1,180 shares of Netsurfer, Inc. Preferred
Stock to serve as security for the Company's obligation to repay the Convertible
Notes free and clear of all liens except that they are subject to a
Shareholders' Agreement, dated November 30, 1998, as amended through October __,
1999.
Section 5. Interest payments and redemptions. (a) Interest payments on
convertible notes. The Convertible Notes shall be dated the Closing Date and
shall bear interest at the rate of is percent per annum from the Closing Date.
Interest shall be computed on the basis of a 360-day year, 30-day month. On
April __ 2000, and on October __, 2000, the Company shall pay accrued interest
on the Convertible Notes to such payment dates.
(b) Optional redemption of Convertible Notes. The Convertible Notes
shall be subject to redemption for cash, at the Company's option, at any time,
in whole or in part, prior to maturity with no penalty.
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In the case of each redemption at the Company's option under this Section
5(b), the Company will give written notice thereof to each holder of a
Convertible Note to be redeemed not less than 5 nor more than 10 days prior to
the date fixed for such redemption (the "Redemption Date"), in each case
specifying such date and the aggregate principal amount of the Convertible Notes
to be redeemed on such date, and the principal amount of Convertible Notes held
by such holder to be redeemed on such date.
Section 6. Mandatory Conversion of Convertible Notes. The Convertible
notes will automatically convert in the event that the closing "bid" price of
the Company's Common Stock is above $6.25 for any twenty (20) consecutive
trading days after the closing of this purchase.
Section 7. Optional Conversion of Convertible Notes. (a) Right to convert;
conversion price. Subject to and upon compliance with the provisions hereof, the
holder of any Convertible Note shall have the right, at any time (except that if
the Company has given notice of redemption thereof pursuant to Section 5(b) such
holder shall give written notice of intention to convert the principal amount of
such Convertible Note not less than one day prior to the Redemption Date) until
such Convertible Note has been paid in full, to convert all or any portion of
the unpaid amount of such Convertible Note into Common Stock of the Company at a
price of $3.75 per share, or in case an adjustment of such initial conversion
prices has taken place pursuant to the further provisions of this Section 7,
then at the price as last adjusted and in effect at the date such Convertible
Note or portion thereof is surrendered for conversion (the initial conversion
price or such price as last adjusted, as the case may be, being referred to
herein as the "Conversion Price"); provided, however, that in no event shall the
Conversion Price be reduced below the then applicable par value of the Company's
Common Stock. The number of shares of the Company's Common Stock into which any
Convertible Note is convertible shall be subject to adjustment pursuant to the
further provisions of this Section 7. The number of such shares into which a
portion of any Convertible Note is convertible shall be that proportion of the
total number of such shares, as adjusted, into which such Convertible Note is
then convertible which the principal amount of such portion to be so converted
bears to the then unpaid principal amount of such Convertible Note. In order to
convert any Convertible Note, the holder thereof shall surrender the Note to the
Company at its office in Atlanta (or any other office or agency of the Company
that it designates by notice in writing to the holders of the Convertible
Notes), accompanied by a written statement designating the principal amount of
such Convertible Note, or portion thereof, to be so converted. In the case of
any Convertible Note which is converted in part only, the Company shall, upon
such conversion, execute and deliver to the holder thereof, at the Company's
expense, a new Convertible Note or Convertible Notes of authorized denominations
in principal amount equal to the unconverted portion of such Convertible Note.
(b) Issue of common stock; continuing obligation. Within a
reasonable time, not exceeding five days after the receipt of the written
statement referred to in subsection (a) and surrender of such Convertible Note
as aforesaid, the Company shall issue and deliver to the holder thereof
(hereinafter in this subsection, the term "holder" shall include the nominee of
any such holder), registered in the holder's name, a certificate or certificates
for the number of full shares of Common Stock issuable upon the conversion of
such Convertible Note (or specified portion thereof), bearing the restrictive
legend required by subsection (h). To the extent permitted by law, such
conversion shall be deemed to have been effected and the conversion price and
the number of shares of Common Stock issuable in connection with such conversion
shall be determined as of the close of business on the date on which such
written statement shall have
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been received by the Company and such Convertible Note shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
Convertible Note (or specified portion thereof) as such holder shall cease, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby.
The Company will, at the time of such conversion, in whole or in part, upon
request of the holder of such Convertible Note, acknowledge in writing its
continuing obligation to such holder in respect of any rights (including,
without limitation, any right of registration of the shares of Common Stock
issued upon such conversion) to which such holder shall continue to be entitled
under this Agreement after such conversion; provided, that the failure of such
holder to make any such requests shall not affect the continuing obligation of
the Company to such holder in respect of such rights.
(c) Dividends and interests. No payment or adjustments shall be made
upon any conversion on account of any cash dividends on the Common Stock issued
upon such conversion. The Company shall pay all interest on the Convertible Note
surrendered for conversion accrued to the date upon which the above-mentioned
written statement has been received by the Company.
(d) Anti-dilution provisions. A. Adjustment of conversion price. The
Conversion Price shall be subject to adjustment from time to time only as
follows:
(1) If shares of Common Stock are issued as a dividend or other
distribution on any class of stock of the Company, the Conversion Price
which would otherwise be in effect at the opening of business on the day
following the date fixed for determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to become
effective immediately after the opening of business on the day following
the date fixed for such determination. For the purpose of this paragraph
(1), the number of shares at any time outstanding shall include shares
held by the Company if such dividend or distribution is paid or made in
respect thereof.
(2) If the Common Stock is subdivided into a greater or combined
into a lesser number of shares of Common Stock, the Conversion Price in
effect immediately prior thereto, or immediately prior to the record date
for such subdivision or combination if a record date is fixed, shall be
proportionately adjusted so that it will bear the same relation to the
Conversion Price in effect immediately prior to such subdivision or
combination, or such record date, as the total number of shares of Common
Stock outstanding immediately prior to such subdivision or combination, or
such record date shall bear to the total number of shares of Common Stock
outstanding immediately after such subdivision or combination or such
record date. For purposes of this paragraph (2), the number of shares at
any time outstanding shall include shares held by the Company if such
subdivision or combination affects such shares.
(3) In case of any capital reorganization of the Company, or of any
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reclassification of the Common Stock, or in case of the consolidation of
the Company with, or the merger of the Company into, any other corporation
or of the sale of all or substantially all of the Company's properties and
assets to any other corporation, each Convertible Note shall after such
capital reorganization, reclassification, consolidation, merger, or sale
entitle the holder to receive upon conversion the number of shares of
stock or other securities or property of the Company, or of the
corporation resulting from such consolidation or surviving such merger or
to which such sale shall be made, as the case may be, to which the holder
of securities deliverable (at the time of such capital reorganization,
reclassification, consolidation, merger, or sale) upon conversion of such
Convertible Note would have been entitled upon such capital
reorganization, reclassification, consolidation, merger or sale; and in
any such case the provisions of this Section 7(d) with respect to the
rights and interests thereafter of the holders of Convertible Notes shall
be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or any property
thereafter deliverable on the conversion of the Convertible Notes. Any
such adjustment which shall be approved by the Company's Board of
Directors shall for all purposes of this paragraph conclusively be deemed
to be an appropriate adjustment. The subdivision or combination of shares
of Common Stock deliverable upon conversion of the Convertible Notes at
any time outstanding into a greater or lesser number of shares of Common
Stock (whether with or without par value) shall not be deemed to be a
reclassification of the Common Stock for the purposes of this paragraph.
(4) If the Company issues Common Stock or rights or warrants or
securities convertible into shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock without consideration or
at a price per share less than the Current Market Value per share (as
determined pursuant to Section 7(d)(G)) on the record date for the
issuance of such shares, rights or warrants, then the Conversion Price in
effect on the date immediately prior to such record date shall immediately
be adjusted to a price (computed to the nearest cent) equal to the
quotient obtained by dividing
(a) an amount equal to the sum of (i) the number of shares of
Common Stock issued and outstanding on such record date multiplied
by the Conversion Price in effect on such record date, and (ii) the
aggregate consideration to be received by the Company if all such
rights or warrants were exercised, by
(b) an amount equal to the sum of (i) the number of shares of Common
Stock issued and outstanding on such record date and (ii) the number of shares
issuable upon exercise of such rights or warrants (in each case increased or
decreased to the extent that the number of such shares shall have been increased
by a dividend or distribution of the type contemplated by paragraph (1) of this
Section 7(d)(A) or shall have been increased or decreased by each subdivision or
combination thereof);
provided, however, that such adjustment shall be made only if the
aforesaid quotient shall be less than the Conversion Price in effect
immediately prior to the issue of such rights or warrants. Such
adjustment shall become effective retroactively immediately after
the record date for the determination of stockholders entitled to
receive such rights or warrants.
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(5) For the purposes of any adjustment of the Conversion Price
pursuant to this Section 7(d), the following provisions shall be
applicable:
(a) in case of the issuance of Common Stock for a
consideration part or all of which shall be cash (including such
issuance upon exercise of rights, warrants or options, granted
without consideration, to subscribe for or purchase such shares),
the amount of the cash consideration shall be the amount of such
cash received by the Company, provided that no deduction shall be
made for any commissions, discounts or expenses incurred by the
Company for any underwriting of the issue or otherwise in connection
therewith; and
(b) in case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the lower of the fair value
thereof as determined by the Board of Directors of the Company or
the value of the shares issued based on the Current Market Value of
the Common Stock (determined as provided in Section 7(d)(G)).
(6) For the purpose of this Section 7(d)(A), shares of Common Stock
or other securities held in the treasury of the Company shall not be
deemed to be outstanding, except as specifically provided herein, and the
sale or other disposition of any shares of Common Stock or other
securities held in the treasury of the Company shall be deemed an issuance
thereof.
(7) Anything in this Section 7(d) to the contrary notwithstanding,
no adjustment of the Conversion Price shall be required in any case in
which the amount of the adjustment would be less than 5 cents but in such
case any adjustment that would otherwise be required then to be made will
be carried forward and made at the time and together with the next
subsequent adjustment which, together with any and all such adjustments so
carried forward, shall amount to 5 cents or more per share of Common
Stock. Regardless of any subdivision or combination of shares of Common
Stock, said amount of 5 cents shall not be proportionately decreased or
increased.
(8) The certificate of the Company's independent public accountants
shall be conclusive evidence of the correctness of any computation made
under this Section 7(d)(A).
B. In any case in which this Section 7(d) requires that an adjustment
shall become effective immediately after a record date for an event, the Company
may defer until the occurrence of such event (i) issuing to the holder of a
Convertible Note converted after such record date and before the occurrence of
such event the additional shares issuable upon such conversion by reason of the
adjustment required by such event over and above the shares issuable upon such
conversion before giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share pursuant to Section
7(d)(F); provided, however, that the Company shall deliver to such holder a due
▇▇▇▇ or other appropriate instrument evidencing such holders' right to receive
such additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
C. Whenever the Conversion Price is adjusted as herein provided the
Company shall also
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adjust the Conversion Prices to be in effect for subsequent Conversion Periods,
and shall compute the adjusted Conversion Prices in accordance with Section
7(d)(A) and shall prepare a certificate signed by the Chairman of the Board, the
President or a Vice President and by a Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company setting forth the
adjusted Conversion Prices and showing in reasonable detail the facts (and
computations) upon which such adjustments are based, and such certificate, as
well as any accountants' certificate provided for in Section 7(d)(A)(8) on which
the Company has relied in making such adjustments, shall forthwith be mailed (by
first class mail postage prepaid) to each registered holder of a Convertible
Note at such holder's last address as shown on the register of the Company.
D. If at any time after the date hereof and prior to October __, 2000 and
so long as any amounts remain unpaid under the Convertible Notes:
(1) The Company authorizes the granting to the holders of its
Common Stock of rights to subscribe for or purchase any shares of stock of
any class or of any other rights; or
(2) There is any reclassification of the Company's Common Stock
(other than a subdivision or combination of its outstanding common stock); or
(3) There is any capital reorganization by the Company; or
(4) There is any consolidation or merger involving the Company or
sale, transfer or other disposition of all or substantially all of its
property, assets, or business (except a merger or other reorganization in
which the Company is the surviving corporation and except a consolidation,
merger or sale, transfer or other disposition involving a wholly owned
subsidiary); or
(5) There is a voluntary or involuntary dissolution, liquidation, or
winding up of the Company or any partial liquidation by the Company or
distribution to holders of Common Stock (other than the Company's customary
cash and stock dividend);
then in any one or more of said cases, the Company shall cause to be mailed
(by first class mail postage prepaid) to each registered holder of a
Convertible Note at such holder's last address as shown on the register of
the Company, at the earliest practicable time (and, in any event, not less
than 20 days before any record date or other date set for definitive action),
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution, or subscription rights or
such reorganization, reclassification, sale, consolidation, merger,
dissolution, liquidation, or winding up shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of
such action (to the extent such effect may be known at the date of such
notice) on the Conversion Price and the kind and amount of the shares of
stock and other securities and property deliverable upon conversion of the
Convertible Notes. Such notice shall also specify the date as of which the
holders of the shares of record shall participate in said dividend,
distribution, or subscription rights or shall be entitled to exchange their
shares for securities or other property deliverable upon such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation, or
winding up, as the case may be.
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E. The form of Convertible Note Certificate need not be changed because of
any change in the Conversion Prices and Convertible Note Certificates issued
before or after such change, and may state the same Conversion Prices as stated
in the Convertible Note Certificates theretofore issued pursuant to this
Agreement. How-ever, the Company may at any time in its sole discretion (which
shall be conclusive) make any change in the form of Convertible Note Certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Convertible Note Certificates thereafter issued may be in the form as so
changed.
F. Anything contained herein to the contrary notwithstanding, the Company
shall not be required to issue any fraction of a share in connection with the
conversion of Convertible Notes, but in any case where any holder of a
Convertible Note Certificate would, except for the provisions of this paragraph
F, be entitled under the terms of this Agreement to receive a fraction of a
share upon the conversion of Convertible Notes, the Company shall pay a sum in
cash equal to such fraction multiplied by the Current Market Value of the shares
(determined as provided in Section 7(d)(G) except that the Current Market Value
shall be deemed to be the market price for the business day next preceding the
day of conversion), unless the Board of Directors of the Company shall determine
to adjust fractional shares by the issue of scrip of the Company in respect of
such fraction or in some other manner.
G. For the purposes of any computation under this Section 7(d), the
Current Market Value of Common Stock per share or of any other security (herein
collectively referred to as a "security") at the date therein specified shall be
deemed to be the average of the daily market prices for the 20 consecutive
business days commencing 30 business days before such date. The market price for
each such business day shall be the last reported bid price on such day, as
reported by a reputable quotation source designated by the Company.
(e) Shares issuable upon conversion. The Company covenants and agrees that
all shares of Common Stock which are issued upon the conversion of all
outstanding Convertible Notes or upon exercise of the Warrants, will, upon
issuance, be duly and validly issued and fully paid and nonassessable and free
from all taxes, liens, and charges with respect to the issue thereof. The
Company further covenants and agrees that it will at all times have authorized,
and reserved and kept available solely for the purpose of issue upon the
conversion of Convertible Notes or the exercise of the Warrants as herein
provided, a sufficient number of shares of its Common Stock as are then issuable
upon the conversion of all outstanding Convertible Notes and exercise of all
outstanding Warrants.
(f) Registration, approval or listing of common stock. If any shares of
Common Stock required to be reserved for purposes of conversion of Convertible
Notes hereunder require registration with or approval of any governmental
authority under any federal (other than the Securities Act or similar federal
statute than in force) or state law, or listing on any national securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense, as expeditiously as possible exercise its best efforts to cause
such shares to be duly registered or approved or listed on the relevant national
securities exchange, as the case may be. Shares of Common Stock issued upon
conversion of the Convertible Notes shall be registered by the Company under the
Securities Act if required by subsection (h) below and subject to the conditions
stated therein.
(g) Issuance tax and expenses. The Company shall pay all expenses,
issuance taxes and
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other charges payable in connection with the preparation, execution and delivery
of certificates for Common Stock issuable upon each conversion of the
Convertible Notes, except that, if any such certificate is registered in a name
or names other than the name of the holder of such Convertible Note, funds
sufficient to pay all stock transfer taxes which are payable upon the execution
and delivery of such certificate shall be paid by such holder to the Company
when such Convertible Note is surrendered for conversion.
(h) A. Legend; restrictions on conversion and transfer. Each Convertible
Note issued pursuant to this Agreement shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Note, and any shares or other securities acquired upon the
conversion of this Note, have not been registered under the Securities Act of
1933 and may be offered and sold or transferred only if registered pursuant
to the provisions of that Act or if an exemption, supported by an opinion of
counsel, from registration is available."
Each stock certificate issued upon the conversion of any Convertible Note
(except as permitted by this Section 7) or upon exercise of any Warrant shall be
stamped or imprinted with a legend in substantially the following form:
" These securities have not been registered under the Securities Act of
1933 and may be offered and sold or transferred only if registered pursuant
to the provisions of that Act or if an exemption, supported by an opinion of
counsel, from registration is available."
The outstanding stock of the Company evidenced by a certificate or
certificates bearing such legend is herein sometimes called "Legend Stock." Any
certificate issued at any time in exchange or substitution for any certificate
bearing such legend (except a new certificate issued upon completion of a public
distribution under a registration statement of the securities represented
thereby) shall also bear such legend unless in the opinion of such holder's
counsel specified in Clause B below (addressed to such holder), the securities
represented thereby need no longer be subject to the restrictions contained in
this Section 7. The provisions of this Section 6 shall be binding upon all
subsequent holders of Legend Stock, and shall also be applicable to and inure to
the benefit of all subsequent holders of the Convertible Notes.
B. Notice of intention to convert or transfer; opinions of counsel;
registration required by holders of convertible notes. The Convertible Notes and
the Legend Stock to be issued upon such conversion thereof shall not be
transferable except upon the conditions specified in this subsection (h). Each
holder of any Convertible Note or Legend Stock, by acceptance thereof, agrees,
prior to any transfer of such Convertible Note or Legend Stock or concurrently
with any conversion of such Convertible Note, to give written notice to the
Company expressing such holder's intention to effect such transfer or conversion
and describing briefly the manner of the proposed transfer or, in the case of
such conversion, such holder's intention as to the disposition (and the intended
method thereof) or retention to be made of Common Stock issuable upon the
proposed conversion, together, if registration of such Convertible Note or
Legend Stock or Common Stock is deemed unnecessary, with a copy of the opinion
of counsel selected by such holder and reasonably satisfactory to the Company
(addressed to such holder) as to the nonnecessity for registration under the
Securities Act of such Convertible Note or Legend Stock or Common Stock in
connection with such proposed transfer or disposition or retention upon
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such proposed conversion. The following provisions shall apply:
(1) If in the opinion of such counsel, the proposed transfer of such
Convertible Note or Legend Stock, or the proposed disposition or retention of
Common Stock to be issued upon such conversion, may be effected without such
registration of such Convertible Note or of such Legend Stock or of such
Common Stock under the Securities Act, such holder shall be entitled to
transfer such Convertible Note or Legend Stock or to dispose of or retain
such Common Stock to be issued upon conversion, all in accordance with the
terms of the notice delivered by such holder to the Company. Unless in the
opinion of such counsel subsequent disposition by such holder or by others of
the Common Stock to be issued upon conversion or of the Legend Stock to be so
transferred may require such registration, the Company will promptly upon
such conversion or transfer deliver certificates for Common Stock not bearing
a legend of the character set forth in the first sentence of this subsection
(h), all as contemplated by such form of legend.
(2) If the proposed transfer of such Convertible Note or Legend Stock, or
the proposed disposition (including retention) of the Common Stock to be
issued upon such conversion, may not be effected without such registration of
such Convertible Note, Legend Stock, or such Common Stock, (i) the holder
thereof shall not be entitled to transfer such Convertible Note or such
Legend Stock until such registration is in effect, and (ii) the Company shall
promptly give written notice to all holders of outstanding Convertible Notes
and or Legend Stock of a possible registration of Legend Stock under the
Securities Act.
C. "Piggyback" registrations. If the Company at any time proposes to
register any of its securities under the Securities Act on any form upon which
may be registered securities similar to the Legend Stock, it will at each such
time give written notice to all holders of outstanding Convertible Notes and/or
Legend Stock, including shares issued upon exercise of the Warrants, of its
intention so to do. Upon the written request to the Company by any holder or
holders of outstanding Convertible Notes and/or Legend Stock, given within 30
days after receipt of any such notice, the Company will use its best efforts to
cause the Legend Stock which the Company has been requested to register by the
holders to be registered under the Securities Act, all to the extent requisite
to permit the sale or other disposition by such holders of the Legend Stock,
including shares issued upon exercise of the Warrants, so registered; provided,
however, that, if the registration is in connection with an underwritten public
offering and the managing underwriter determines that inclusion of the Legend
Stock in the registration will materially impair the marketability of the stock
being registered, the Company shall not be obligated to include such shares. If
the underwriter consents to include any shares owned by shareholders of the
Company, the holder of Legend Stock will be able to participate ratably with any
other shareholders eligible to participate.
D. Payment of registration expenses. With respect to any registration
statement filed pursuant to clause C of this Section 7(h), the Company shall
bear all the costs and expenses incidental thereto, with the exception of the
filing fees of the National Association of Security Dealers, Inc., the
registration fee payable to the Securities and Exchange Commission, the blue sky
fees and expenses, and transfer taxes attributable to the Legend Stock being
included, which fees and expenses shall be borne by the holders of such Legend
Stock.
E. Information to be furnished. Notices and requests delivered pursuant to
this Section (h)
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shall contain such information regarding the Legend Stock and the intended
method of disposition thereof as shall reasonably be required in connection with
the action to be taken.
F. Exchange of stock certificates. As expeditiously as possible after the
effectiveness of any registration pursuant to this Section 7(h), the Company
will deliver in exchange for any certificates representing shares of Legend
Stock so registered, new common stock certificates not bearing the legend set
forth above.
G. Indemnification. (1) In the event of any registration pursuant to this
Section 7(h), the Company will indemnify each holder of Legend Stock so
registered and each other person, if any, who controls such holder within the
meaning of the Securities Act and each other person (including underwriters) who
participates in the offering of such Legend Stock against any losses, claims,
damages, or liabilities, joint or several, to which such holder or controlling
person or participating person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such Legend
Stock was registered under the Securities Act, in any preliminary prospectus or
final prospectus contained therein, or in any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such holder and each such
controlling person or participating person for any legal or any other expenses
reasonably incurred by such holder or such controlling person or participating
person in connection with investigating or defending any such loss, claim,
damage, liability, or proceeding; provided, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by an
instrument with respect to such holder or person duly executed by such holder or
person specifically for use in the preparation thereof.
(2) Each holder of Legend Stock included in the Registration
Statement shall agree to indemnify and hold harmless the Company and each
person, if any (including underwriters), who participate in the offering to the
same extent as the foregoing indemnity from the Company but only with respect to
any information furnished in writing by or on behalf of and with respect to such
holder expressly for use in any Preliminary Prospectus, the Registration
Statement or any amendment or supplement thereof. In case any action shall be
brought against the Company or any underwriter or any other person so
indemnified based on any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereof or any application, and in
respect of which indemnity may be sought against the holder of Legend Stock,
such holder shall have the rights and duties given to the Company by the
provisions in the preceding paragraph.
H. Survival of obligations. The obligations of the Company contained in
this Section 7(h) shall survive payment in full of the Convertible Notes.
I. The Company will keep any registration statement filed pursuant to this
Section 7(h) current so long as the holder has Legend Stock.
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Section 8. Subordination. Anything in this Agreement or the Convertible
Notes to the contrary notwithstanding, the indebtedness evidenced by the
Convertible Notes, principal and interest, shall be subordinate and junior to
the extent set forth in the following subparagraphs of this Section 8 to all
principal and interest of all indebtedness of the Company for borrowed money
(except such indebtedness of the Company other than the Convertible Notes which
is subordinate or junior in any respect to other indebtedness of the Company),
whether outstanding at the date of this Agreement or created or incurred after
the date of this Agreement but prior to the maturity of the Convertible Notes by
lapse of time, acceleration or otherwise. Notwithstanding the foregoing, money
borrowed from affiliates shall not be senior to the Convertible Notes. Such
indebtedness of the Company to which the Convertible Notes are subordinate and
junior is sometimes hereinafter referred to as "Senior Debt."
(a) Maturity of senior debt. Upon maturity of any Senior Debt by
lapse of time, acceleration or otherwise, then all principal of, premium, if
any, and interest on, all such matured Senior Debt shall first be paid in full
before any payment on account of principal or interest is made upon the
Convertible Notes.
(b) Liquidation, etc. In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its creditors or
its property, and in. the event of any proceedings for voluntary liquidation,
dissolution, or other winding up of the Company, whether or not involving
insolvency or bankruptcy proceedings, then all principal, premium, if any, and
interest due on Senior Debt shall first be paid in full, or such payment shall
have been provided for, before any payment on account of principal or interest
is made upon the Convertible Notes. Any payment or distribution of any kind or
character, whether in cash, property, stock, or obligations, which may be
payable or deliverable in respect of the Convertible Notes in any of the
proceedings referred to in the first sentence of this Section 8(b) shall be paid
or delivered directly to the holders of Senior Debt (or to a banking institution
selected by the court or person making the payment or delivery or designated by
any holder of Senior Debt) for application in payment thereof, unless and until
all principal and interest on all Senior Debt shall have been paid in full, or
such payment shall have been provided for; provided however, that:
(i) In the event that payment or delivery of such cash,
property, stock or obligations to the holders of the Convertible Notes
is authorized by an order or decree giving effect, and stating in such
order or decree that effect is given, to the subordination of the
Convertible Notes to Senior Debt, and made by a court of competent
jurisdiction in a reorganization proceeding under any applicable
bankruptcy or reorganization law, no payment or delivery of such cash,
property, stock or obligations payable or deliverable with respect to
the Convertible Notes shall be made to the holders of Senior Debt; and
(ii) No such delivery shall be made to holders of Senior Debt
of stock or obligations which are issued pursuant to reorganization
proceedings or dissolution or liquidation proceedings, or upon any
merger, consolidation, sale, lease, transfer or other disposal not
prohibited by the provisions of this Agreement, by the Company, as
reorganized, or by the corporation succeeding to the Company or
acquiring its property and assets, if such stock or obligations are
subordinate and junior at least to the extent provided in this Section
8 to the payment of all Senior Debt then outstanding and to the payment
of any stock or obligations which are issued in exchange or
substitution for any
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Senior Debt then outstanding.
(c) Senior debt default. The Company shall not make any payment of
principal or interest on, or purchase or acquire for value, any of the
Convertible Notes during the continuance of any default in the payment of
principal of or premium or interest on any Senior Debt.
(d) Company's obligations unimpaired. The provisions of this Section 8 are
for the purpose of defining the relative rights of the holders of Senior Debt,
on the one hand, and the holders of the Convertible Notes on the other hand, and
as between the Company and the holders of the Convertible Notes nothing herein
shall impair the obligation of the Company, which is unconditional and absolute,
to pay the holders thereof the principal thereof and interest thereon in
accordance with their terms and the terms of the related agreements, nor shall
anything herein prevent the holder of any Convertible Note from exercising all
remedies otherwise permitted by applicable law upon default thereunder, subject
to the rights, under this Section 8, of holders of Senior Debt in respect of
cash, property, stock or other securities received upon the exercise of such
remedies.
(e) Subrogation. Subject to the payment in full of all Senior Debt, the
holders of the Convertible Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of assets of the
Company payable or distributable to the holders of Senior Debt until all the
Convertible Notes shall be paid in full and, as between the Company, its
creditors other than the holders of Senior Debt, and the holders of the
Convertible Notes, no payments or distributions otherwise payable or deliverable
in respect of the Convertible Notes but, by virtue of the provisions thereof,
paid or delivered to the holders of Senior Debt shall be deemed to be a payment
by the Company on account of Senior Debt and no payments or distributions paid
to the holders of the Convertible Notes, by virtue of the subrogation herein
provided for, shall be deemed to be a payment by the Company on account of the
Convertible Notes.
(f) Subordination unimpaired. No right of any present or future holder of
Senior Debt to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act in good faith by any such holder, or by
any noncompliance by the Company with the terms, provisions, and covenants of
any agreement relating to Senior Debt, regardless of any knowledge thereof any
such holder may have or be otherwise charged with.
Section 9. Security. The Company will pledge 1,100 shares of Netsurfer,
Inc. Preferred Stock as security for the repayment of the aggregate principal of
the Convertible Notes sold. Such security will be placed in escrow with
Freedman, Levy, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ pursuant to an Hypothecation and Escrow
Agreement to be entered into by the Company and the holders of the Convertible
Notes.
Section 10. Affirmative covenants of company. The Company covenants and
agrees that, so long as any of the Convertible Notes shall be outstanding:
(a) Provide financial and other material information
concerning operations of company. The Company shall furnish to each registered
holder of a Convertible Note:
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(1) As soon as practicable after they have been sent to stockholders
of the Company or filed with the Commission, a copy of each annual and
interim financial and other report or communication sent by the Company to
its stockholders or filed with the Securities and Exchange Commission;
(2) As soon as practicable a copy of every press release and every
material news item and article in respect of the corporate affairs of the
Company which is released for publication by the Company; and
(3) Such additional nonconfidential and readily available documents
and information with respect to the Company and its business affairs and
the business affairs of any Subsidiaries as you may from time to time
request in writing.
(b) Insurance. The Company will maintain or cause to be
maintained with well rated and reputable insurers, insurance with respect to its
properties and business and the properties and businesses of its subsidiaries
against such risks (including, without limitation, risks of business
interruption), casualties and contingencies and of such types and in such
amounts as is customary in the case of corporations engaged in the same or
similar business or having similar properties.
(c) Notice of event of default. If any officer of the
Company obtains knowledge of the occurrence of any event of default specified in
this Agreement which has not been cured, or if the holder of any of the
Convertible Notes demands payment of such Convertible Notes or takes any other
action permitted upon the occurrence and continuance of such an event of
default, the Company will at once give notice to every other holder of the
Convertible Notes, specifying the nature of such demand or of such event of
default or of such action, as the case may be.
(d) Notices of certain events. The Company agrees to give
notice to the holders of the Convertible Notes within ten days after it has
filed with the Securities and Exchange Commission an application to register any
of the securities of the Company pursuant to the Exchange Act, or any comparable
federal statute. The Company agrees to review its stock ledgers, stock transfer
books and other corporate records periodically (and not less often than once in
each calendar quarter) in order to determine whether you are or shall have
become, directly or indirectly, the beneficial owner of more than such
percentage of any class of its equity securities (as defined in the Exchange
Act) as shall cause you to be required to make any filings or declarations to
the Company, the Securities and Exchange Commission pursuant to any provision of
the Exchange Act or any comparable federal statute, and the Company will give
prompt notice to you whenever it shall have determined, upon the basis of the
information disclosed by any such review, that you are or have become such a
holder, which notice shall also specify the information upon which the Company
bases such determinations.
(e) Payment of taxes, etc. The Company will pay, and will
cause each of its subsidiaries to pay, before they become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed
upon it or its property, and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords
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and other like persons which, if unpaid, might result in the creation of a
lien upon its property.
Neither the Company nor any of its subsidiaries shall be required to pay any
such tax, assessment, charge, levy, claim or demand if the amount, applicability
or validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company or such subsidiary, as the case may be, shall
have set aside on its books reserves m accordance with generally accepted
accounting principles deemed by its independent public accountants to be
adequate with respect thereto.
(f) Books and records. The Company will at all times keep, and will
cause each of its subsidiaries to keep, in accordance with generally accepted
accounting principles, true and complete books and records in connection with
its assets and operations.
(g) Preservation of properties. The Company will at all times keep
its properties, and will cause each of its subsidiaries to keep their respective
properties, whether owned in fee or otherwise, or leased, in good operating
condition, and from time to time will make, and will cause each of its
subsidiaries to make, all proper repairs, renewals, replacements, additions and
improvements thereto needed to maintain such properties in good operating
condition, will at all times comply with, and will cause each of its
subsidiaries to comply with, the provisions of all material leases to which it
or any subsidiary of it is a party or under which it or any subsidiary of it
occupies property so as to prevent any loss or forfeiture thereof or thereunder,
and at all times will comply with, and will cause each of its subsidiaries to
comply with, all laws, rules, regulations, and orders applicable to the
properties or business or any part thereof of it or any subsidiary.
(h) The Company will, so long as the holder of any warrants or
shares issuable upon the conversion of the Notes or exercise of the warrants,
remain current in all Exchange Act filings and retain its Bulletin Board listing
(or such listing of greater distribution such as NASDAQ).
Section 11. Use of proceeds. The Company represents and warrants that the
net proceeds of the sale of the Convertible Notes will be added to the general
funds of the Company and be used for working capital or to complete pending
acquisitions.
Section 12. Exchange, transfer, or replacement of convertible notes. At
the request of a holder of Convertible Notes, the Company at its own expense
will issue, upon transfer and surrender, or in exchange or replacement, of
Convertible Notes or mutilated portions thereof, new Convertible Notes of the
same tenor (except, in the case of a transfer, for the payee thereof) as, and in
an aggregate principal amount not exceeding the sum of, the outstanding
Convertible Notes held by such holder and so transferred and surrendered or
exchanged or replaced; notwithstanding the foregoing the Company may condition
such transfer on the payment to it by such holder of a sum sufficient to cover
any stamp tax or other governmental charge imposed in respect of any such
transfer and may condition the replacement of any of the Convertible Notes
reported as lost, stolen, or destroyed by a holder upon the receipt from such
holder of indemnity or security reasonably satisfactory to the Company;
provided, however, that if you or your designee shall be such holder, your
agreement of indemnity shall be sufficient for all purposes of this Section.
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Section 13. Amendments and waivers. This Agreement may be amended or any
of its restrictions or provisions may be waived with the written consent of the
holders of 66 2/3 percent of the principal amount of the Convertible Notes at
the time outstanding, except that without the written consent of the holders of
all Convertible Notes at the time outstanding no amendment to this Agreement
shall extend the maturity of any of the Convertible Notes, or reduce the rate of
interest or any premium payable with respect to any Convertible Note, or affect
the amount or allocation of any interest payments required under Section 5(a),
or affect the conversion rights of the Convertible Notes or reduce the
proportion of the principal amount of the Convertible Notes required with
respect to any consent or amendment.
Section 14. Events of default and remedies. The following events shall
constitute "events of default" under this agreement:
(a) The Company defaults (i) in the payment of principal or premium
on any Convertible Note when and as it becomes due and payable, whether at
maturity, on a date fixed for an interest payment under Section 5(a) or for a
redemption or otherwise, or (ii) in the payment of interest on any Convertible
Note when and as it becomes due and payable in accordance with the provisions
hereof and of the Convertible Notes,
(b) The Company defaults with respect to any material
misrepresentation in the representations or warranties made in Sections 2(c), 4,
or 11 hereof or in any certificate provided for herein which confirms any such
representation or warranty;
(c) The Company defaults in the performance or observance of any
other covenant, condition, or agreement made by it, or its successors or
assigns, either in this Agreement or in any Convertible Note, and such default
continues for a period of 30 days;
(d) A court of competent jurisdiction enters a decree or order
adjudging the Company or any material subsidiary a bankrupt or insolvent, or
approves as properly filed a petition seeking reorganization, readjustment,
arrangement, composition, or similar relief for the Company or any subsidiary
under the federal bankruptcy laws, or any other similar applicable federal or
state law, and such decree or order continues undischarged and unstayed for a
period of 60 days; a court of competent jurisdiction enters a decree or order
for the appointment of a receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of the Company or any subsidiary or a substantial part
of the Company's or subsidiary's property, or for the winding up or liquidation
of its affairs, and such decree or order remains in force undischarged and
unstayed for a period of 60 days; or any property of the Company or a subsidiary
is sequestered or attached and is not returned to the Company's or subsidiary's
possession or released from such attachment within 60 days thereafter;
(e) The Company or any material subsidiary: institutes proceedings
to be adjudicated a voluntary bankrupt; consents to the filing of a bankruptcy
proceeding against it; files a petition, answer, or consent seeking
reorganization, readjustment, arrangement, composition, or similar relief under
the federal bankruptcy laws, or any other similar applicable federal or state
law; consents to the filing of any such petition; consents to the appointment of
a receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of it
or a substantial part of its business; makes an assignment for the benefit of
creditors; admits in writing its in-ability to pay its debts generally as they
become due; or the Company or any subsidiary takes corporate
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action in furtherance of any of the above purposes;
(f) The Company or any material subsidiary defaults in any payment
of principal or premium or interest on, or any other payment of money due under,
any other obligation for borrowed money (including any obligation secured by
purchase money mortgages) beyond any period of grace provided with respect
thereto, and such default is not cured, or in the performance of any other
agreement, term, or condition contained in any agreement under which any such
obligation is created if the effect of such default is to cause, or permit the
holder or holders of such obligation (or a trustee on behalf of the holder or
holders) to cause, such obligation to become due prior to its stated maturity,
unless such default has been cured or effectively waived before the obligation
becomes due and the Convertible Notes are declared due under this Section 12; or
(g) A court or other governmental body renders final judgment
against the Company or any of its material subsidiaries for the payment of
money, which together with other outstanding judgments against the Company or
its subsidiaries, exceeds a total of $100,000, and the Company or such
subsidiary does not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay thereof, within 60 days from the
date of entry thereof and within such 60-day period, or within any longer period
during which execution of such judgment has been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
If any one or more of the above events of default occurs, any holder of
the Convertible Notes then outstanding may declare the entire principal of all
the Convertible Notes held by such holder, and all accrued unpaid interest
thereon, and (to the extent permitted by law) the applicable premium thereon set
forth in Section 5(b) hereof to be due and payable immediately. Upon any such
declaration the principal of such Convertible Notes and said accrued unpaid
interest and said premium shall be immediately due and payable, anything in such
Convertible Notes or in this Agreement contained to the contrary
notwithstanding, and the holder of any of such Convertible Notes may thereupon
proceed to protect and enforce its rights either by suit in equity, or by action
at law, or by other appropriate proceedings whether for the specific performance
(to the extent permitted by law) of any covenant or agreement contained in this
Agreement or such Convertible Notes or in aid of the exercise of any power
granted in this Agreement, and proceed to enforce the payment of any of such
Convertible Notes held by it, and to enforce any other legal or equitable right
of such holder.
Section 15. Method of payment of principal, premium and interest.
Notwithstanding any contrary provision in the Convertible Notes or in this
Agreement, the Company will promptly and punctually pay to you at the address
set forth on the signature page hereof or to you or to your nominee at any other
address you designate to the Company in writing, all amounts payable in respect
of the principal of or premium or interest on any of the Convertible Notes, so
long as it is held by you or by such nominee, without any presentment thereof.
You or your nominee may, but need not, make any notation on any of the
Convertible Notes as to any such payment, except that prior to any sale or other
disposition of any of the Convertible Notes by you or your nominee, you or such
nominee, as the case may be, will give written notice of such sale or other
disposition of any of the Convertible Notes by you or your nominee, you or such
nominee, as the case may be, will give written notice of such sale or other
21
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disposition to the Company specifying the name and address of the transferee (if
known to you or such nominee).
Section 16. Payment by company of fees and expenses. Regardless of whether
the purchases of the Convertible Notes by you as contemplated by this Agreement
are consummated, the Company will, on demand, pay, indemnify, and hold you and
each other holder of any of the Convertible Notes harmless from and against any
and all liability and loss with respect to or resulting from all claims for or
on account of brokers' or finders' fees or commissions with respect to your
purchases of the Convertible Notes hereunder.
The obligations of the Company under this Section 16 shall survive the
payment of the Convertible Notes.
Section 17. Survival of covenants, agreements, representations and
warranties; successors and assigns. All covenants, agreements, representations,
and warranties made herein and in certificates delivered pursuant hereto shall
survive the execution and delivery of the Convertible Notes, and shall continue
in full force and effect as long as any of the Convertible Notes are outstanding
and unpaid and thereafter as provided in Section 7(h) and Section 16.
Section 18. Entire agreement; no oral change. This Agreement embodies the
entire agreement and understanding between the Company and you relating to the
subject matter hereof, and supersedes all prior agreements and understandings
relating to such subject matter. This Agreement may not be changed orally, but
only by an agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, or discharge is sought.
Section 19. Notices, etc. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be delivered, or mailed
by registered mail, postage prepaid, addressed: (a) if to you, to your address
to which this Agreement is addressed, or to any other address you have furnished
to the Company in writing, or (b) if to any other holder of the Convertible
Notes to such address or such holder as may appear on, or in the registration
of, such Convertible Notes, or to any other address such holder has furnished to
the Company in writing, or (c) if to the Company, to its address set forth below
or to any other address the Company has furnished to you in writing. Notices
shall be deemed delivered when received by the party being notified.
Section 20. Law governing. This Agreement and the Convertible Notes shall
be construed in accordance with and governed by the laws of the State of New
York and all parties hereby consent to subject themselves to the jurisdiction of
the State of New York.
Section 21. Legal expenses. The Company will pay the legal expenses of the
Noteholders incurred in connection with the purchase of the Convertible Notes
and the Warrants, up to an aggregate of $5,000, such expenses to be deducted
from the purchase price.
Upon your signing the form of acceptance on the enclosed counterpart of this
Agreement and returning such counterpart to the Company, this Agreement shall
become a binding agreement between you and the Company.
Very truly yours,
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AIM Group, Inc.
By:
---------------------------
Name:
President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The foregoing is hereby accepted
as of the date first above written.
[NAME]
By :
------------------------
-------------------------
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EXHIBIT A
15% CONVERTIBLE SUBORDINATED NOTE
Atlanta, Georgia
October __, 1999
$
------------
FOR VALUE RECEIVED, the undersigned AIM Group, Inc. (the "Company"), a
corporation organized and existing under the laws of the State of Delaware,
hereby promises to pay to the order of ___________ the principal amount of
$_________ as hereinafter provided, together with interest (computed on the
basis of a 360-day year of twelve 30-day months) on the unpaid principal amount
hereof at the rate of fifteen percent (15%) per annum from the date hereof to
maturity, whether by acceleration or otherwise, payable semiannually on April
15th and October 15th in each year commencing on April 15, 2000, and unless
prohibited by applicable law, to pay interest (computed as aforesaid) on any
overdue principal and overdue interest at the rate of eighteen percent (18%) per
annum (or, in each case at the highest rate permitted by applicable law,
whichever is less).
The principal of this Note shall be due and payable on October __, 2000.
All payments of principal and interest are to be made in lawful money of the
United States of America at _____________________.
This Note is one of the Company's 15% Convertible Subordinated Notes,
limited in aggregate original principal amount of $750,000 issued pursuant to a
Purchase Agreement dated October __, 1999 (the "Agreement"), entered into by the
Company with _____________, and others . This Note is subject to redemption at
the Company's option, at any time, in whole or in part, prior to maturity with
no penalty. This Note may be, at the option of the Company, prepaid at any time
prior to maturity, without penalty.
The maturity of this Note may be accelerated by the holder hereof
following an event of default. The following events shall constitute an "event
of default":
(a) The Company defaults (i) in the payment of principal or premium
on any Convertible Note when and as it becomes due and payable, whether at
maturity, on a date fixed for an interest payment under Section 5(a) or for a
redemption or otherwise, or (ii) in the payment of interest on any Convertible
Note when and as it becomes due and payable in accordance with the provisions
hereof and of the Convertible Notes,
(b) The Company defaults with respect to any material
misrepresentation in the representations or warranties made in Sections 2(c), 4,
or 11 of the Agreement or in any certificate provided for herein which confirms
any such representation or warranty;
(c) The Company defaults in the performance or observance of any
other covenant, condition, or agreement made by it, or its successors or
assigns, either in this Agreement or in any Convertible Note, and such default
continues for a period of 30 days;
(d) A court of competent jurisdiction enters a decree or order
adjudging the
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Company or any material subsidiary a bankrupt or insolvent, or approves as
properly filed a petition seeking reorganization, readjustment, arrangement,
composition, or similar relief for the Company or any subsidiary under the
federal bankruptcy laws, or any other similar applicable federal or state law,
and such decree or order continues undischarged and unstayed for a period of 60
days; a court of competent jurisdiction enters a decree or order for the
appointment of a receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of the Company or any subsidiary or a substantial part of the
Company's or subsidiary's property, or for the winding up or liquidation of its
affairs, and such decree or order remains in force undischarged and unstayed for
a period of 60 days; or any property of the Company or a subsidiary is
sequestered or attached and is not returned to the Company's or subsidiary's
possession or released from such attachment within 60 days thereafter;
(e) The Company or any material subsidiary: institutes proceedings
to be adjudicated a voluntary bankrupt; consents to the filing of a bankruptcy
proceeding against it; files a petition, answer, or consent seeking
reorganization, readjustment, arrangement, composition, or similar relief under
the federal bankruptcy laws, or any other similar applicable federal or state
law; consents to the filing of any such petition; consents to the appointment of
a receiver, liquidator, trustee, or assignee in bankruptcy or insolvency of it
or a substantial part of its business; makes an assignment for the benefit of
creditors; admits in writing its in-ability to pay its debts generally as they
become due; or the Company or any subsidiary takes corporate action in
furtherance of any of the above purposes;
(f) The Company or any material subsidiary defaults in any payment
of principal or premium or interest on, or any other payment of money due under,
any other obligation for borrowed money (including any obligation secured by
purchase money mortgages) beyond any period of grace provided with respect
thereto, and such default is not cured, or in the performance of any other
agreement, term, or condition contained in any agreement under which any such
obligation is created if the effect of such default is to cause, or permit the
holder or holders of such obligation (or a trustee on behalf of the holder or
holders) to cause, such obligation to become due prior to its stated maturity,
unless such default has been cured or effectively waived before the obligation
becomes due and the Convertible Notes are declared due: or
(g) A court or other governmental body renders final judgment
against the Company or any of its material subsidiaries for the payment of
money, which together with other outstanding judgments against the Company or
its subsidiaries, exceeds a total of $100,000, and the Company or such
subsidiary does not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay thereof, within 60 days from the
date of entry thereof and within such 60-day period, or within any longer period
during which execution of such judgment has been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
This Note is subordinated to certain other indebtedness of the Company, as
follows:
(a) Maturity of senior debt. Upon maturity of any Senior Debt by
lapse of time, acceleration or otherwise, then all principal of, premium, if
any, and interest on, all such matured Senior Debt shall first be paid in full
before any payment on account of principal or interest is
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26
made upon the Convertible Notes. "Senior Debt" means all principal and interest
of all indebtedness of the Company for borrowed money (except such indebtedness
of the Company other than the Convertible Notes, which is subordinate or junior
in any respect to other indebtedness of the Company), whether outstanding at the
date hereof or created or incurred after the date hereof but prior to the
maturity of this Note by lapse of time, acceleration or otherwise.
Notwithstanding the foregoing, money borrowed from affiliates shall not be
senior to this Note.
(b) Liquidation, etc. In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its creditors or
its property, and in. the event of any proceedings for voluntary liquidation,
dissolution, or other winding up of the Company, whether or not involving
insolvency or bankruptcy proceedings, then all principal, premium, if any, and
interest due on Senior Debt shall first be paid in full, or such payment shall
have been provided for, before any payment on account of principal or interest
is made upon the Convertible Notes. Any payment or distribution of any kind or
character, whether in cash, property, stock, or obligations, which may be
payable or deliverable in respect of the Convertible Notes in any of the
proceedings referred to in the first sentence of this Section (b) shall be paid
or delivered directly to the holders of Senior Debt (or to a banking institution
selected by the court or person making the payment or delivery or designated by
any holder of Senior Debt) for application in payment thereof, unless and until
all principal and interest on all Senior Debt shall have been paid in full, or
such payment shall have been provided for; provided however, that:
(i) In the event that payment or delivery of such cash,
property, stock or obligations to the holders of the Convertible Notes is
authorized by an order or decree giving effect, and stating in such order
or decree that effect is given, to the subordination of the Convertible
Notes to Senior Debt, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy or
reorganization law, no payment or delivery of such cash, property, stock
or obligations payable or deliverable with respect to the Convertible
Notes shall be made to the holders of Senior Debt; and
(ii) No such delivery shall be made to holders of Senior Debt
of stock or obligations which are issued pursuant to reorganization
proceedings or dissolution or liquidation proceedings, or upon any merger,
consolidation, sale, lease, transfer or other disposal not prohibited by
the provisions of this Agreement, by the Company, as reorganized, or by
the corporation succeeding to the Company or acquiring its property and
assets, if such stock or obligations are subordinate and junior at least
to the extent provided in this Section to the payment of all Senior Debt
then outstanding and to the payment of any stock or obligations which are
issued in exchange or substitution for any Senior Debt then outstanding.
(c) Senior debt default. The Company shall not make any payment of
principal or interest on, or purchase or acquire for value, any of the
Convertible Notes during the continuance of any default in the payment of
principal of or premium or interest on any Senior Debt.
(d) Company's obligations unimpaired. The provisions of this Section
are for the purpose of defining the relative rights of the holders of Senior
Debt, on the one hand, and the holders of the Convertible Notes on the other
hand, and as between the Company and the holders of the Convertible Notes
nothing herein shall impair the obligation of the Company, which is
3
27
unconditional and absolute, to pay the holders thereof the principal thereof and
interest thereon in accordance with their terms and the terms of the related
agreements, nor shall anything herein prevent the holder of any Convertible Note
from exercising all remedies otherwise permitted by applicable law upon default
thereunder, subject to the rights, under this Section, of holders of Senior Debt
in respect of cash, property, stock or other securities received upon the
exercise of such remedies.
(e) Subrogation. Subject to the payment in full of all Senior Debt,
the holders of the Convertible Notes shall be subrogated to the rights of the
holders of Senior Debt to receive payments or distributions of assets of the
Company payable or distributable to the holders of Senior Debt until all the
Convertible Notes shall be paid in full and, as between the Company, its
creditors other than the holders of Senior Debt, and the holders of the
Convertible Notes, no payments or distributions otherwise payable or deliverable
in respect of the Convertible Notes but, by virtue of the provisions thereof,
paid or delivered to the holders of Senior Debt shall be deemed to be a payment
by the Company on account of Senior Debt and no payments or distributions paid
to the holders of the Convertible Notes, by virtue of the subrogation herein
provided for, shall be deemed to be a payment by the Company on account of the
Convertible Notes.
(f) Subordination unimpaired. No right of any present or future
holder of Senior Debt to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Company or by any act or failure to act in good faith by any such
holder, or by any noncompliance by the Company with the terms, provisions, and
covenants of any agreement relating to Senior Debt, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
This Note is convertible into common stock of the Company in the manner,
and upon the terms and conditions, provided in the Agreement.
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28
If the indebtedness represented by this Note or any part thereof is placed
in the hands of attorneys for collection after an event of default, as defined
in the Agreement, the Company agrees to pay the principal, premium if any, and
interest due and payable hereon, and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
This Note shall be governed by the laws of New York and any dispute shall
be subject to the jurisdiction of New York.
The parties hereto waive presentment, notice of dishonor, notice of
protest, presentment and demand in connection with the delivery, acceptance,
performance or default of this Note.
AIM Group, Inc.
By:
---------------------------
Name:
[Corporate Seal] President
By:
---------------------------
Name:
Secretary
-------------------------
(Address)
5
29
AIM GROUP, INC.
Warrant
THIS AGREEMENT is made as of October __, 1999, by and between AIM GROUP,
INC., a Delaware corporation (the "Company"), and ___________ (the "Warrant
Holder").
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Warrant Holder a warrant to
purchase shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), in partial consideration for the Warrant Holder's purchase of
the Company's 15% Convertible Subordinated Notes.
NOW, THEREFORE, the parties hereto, intending to be legally bound, do
agree as follows:
1. Issuance of Warrant. Subject to the terms and conditions of this
Agreement, the Company hereby issues to Warrant Holder the right to purchase
from the Company that number of shares of Common Stock as determined in
accordance with the following formula:
a) 0.5 times the number of shares into which the Warrant Holder's
Notes are convertible, if the Notes are repaid or converted within
30 days of the issuance of the Notes and Warrants;
b) 1.0 times the number of shares into which the Warrant Holders Notes
are convertible, if the Notes are repaid or converted up to 90 days
of the issuance of the Notes and warrants; or
c) 1.5 times the number of shares into which the Warrant Holders Notes
are convertible, if the Notes are repaid or converted after 90 days
of issuance of the Notes and Warrants.
2. Warrant Price and Time of Exercise. The per-share purchase price at
which the shares subject to this Warrant may be purchased by Warrant Holder
pursuant to his exercise of this warrant shall be $4.00. The Warrant may be
exercised for a three (3) year period commencing at the earlier of (i) the
repayment or the conversion of the Convertible Notes or (ii) ninety (90) days
after the closing of the purchase of the Convertible Notes ("Exercise Period").
3. Method of Exercise and Payment for Shares. This warrant shall be
exercised by written notice delivered to the Company at its principal office,
specifying the number of shares to be acquired upon such exercise, and
accompanied by cash payment of the exercise price.
4. Non-transferability. This warrant is not transferable by Warrant Holder
except as
30
otherwise provided in Paragraph 10 below.
5. Exercise After Death. In the event Warrant Holder dies before the
expiration of this warrant, Warrant Holder's estate, or the person or persons to
whom his rights under this warrant shall pass by will or the laws of descent and
distribution, may exercise this warrant, to the extent exercisable at the date
of death, at any time within six months following Warrant Holder's death (but in
any event before the expiration of the Exercise Period).
6. Adjustments.
(a) Adjustments by Stock Split, Stock Dividend, Etc. If the Company
shall at any time increase or decrease the number of its outstanding shares of
Common Stock, or change in any way the rights and privileges of such shares, by
means of the payment of a Common Stock dividend or the making of any other
distribution upon such shares payable in Common Stock, or through a Common Stock
split or subdivision of shares, or a consolidation or combination of shares, or
through a reclassification or recapitalization involving the Common Stock, or
the conversion price of the Company's 15% Convertible Subordinated Notes is
adjusted, or any Common Stock of the Company is issued for a price below that of
the exercise price of this Warrant, then the numbers, rights and privileges of
the shares of Common Stock underlying the warrant granted hereunder shall be
increased, decreased or changed in like manner as if they had been issued and
outstanding, fully paid and non-assessable at the time of such occurrence.
(b) Dividend Payable in Stock of Another Corporation, Etc. If the
Company shall at any time pay or make any dividend or other distribution upon
the Common Stock payable in securities or other property (except money or Common
Stock), a proportionate part of such securities or other property shall be set
aside and delivered to the Warrant Holder upon exercise hereof.
(c) Apportionment of Price. Upon any occurrence described in the
preceding subsections (a) and (b) of this Section 6, the total warrant price
hereunder shall remain unchanged but shall be apportioned ratably over the
increased or decreased number or changed kinds of securities or other property
subject to this warrant.
(d) Rights to Subscribe. If the Company shall at any time grant to the
holders of its Common Stock rights to subscribe pro rata for additional shares
thereof or for any other securities of the Company or of any other corporation,
there shall be added to the number of shares underlying this warrant, the Common
Stock or other securities which the Warrant Holder would have been entitled to
subscribe for if immediately prior to such grant the Warrant Holder had
exercised his entire warrant, and the warrant price shall be increased by the
amount which would have been payable by the Warrant Holder for such Common Stock
or other securities.
(e) Determination by the Company. Adjustments under this Section 6
shall be made by the Company, whose determinations with regard thereto shall be
final and binding. No fractional shares of Common Stock shall be issued on
account of any such adjustment.
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7. Merger, Consolidation, Etc.
(a) Effect of Transaction. Upon the occurrence of any of the
following events, if the notice required by Section 7(b) hereof shall have first
been given, the warrant granted hereunder shall automatically terminate and be
of no further force and effect whatsoever, without the necessity for any
additional notice or other action by the Company: (i) the merger, consolidation
or liquidation of the Company or the acquisition of its assets or stock pursuant
to a nontaxable reorganization, unless the surviving or acquiring corporation,
as the case may be, shall assume all outstanding warrants of the Company or
substitute new warrants for them; (ii) the dissolution or liquidation of the
Company; (iii) the appointment of a receiver for all or substantially all of the
Company's assets or business; (iv) the appointment of a trustee for the Company
after a petition has been filed for the Company's reorganization under
applicable statutes; or (v) the sale, lease or exchange of all or substantially
all of the Company's assets and business.
(b) Notice of Such Occurrences. At least 30 days' prior written
notice of any event described in Section 7(a) hereof, except the transactions
described in subsections 7(a)(iii) and (iv) as to which no notice shall be
required, shall be given by the Company to the Warrant Holder. If the Warrant
Holder is so notified, he may exercise all or a portion of the entire
unexercised portion of this warrant at any time before the occurrence of the
event requiring the giving of notice. Such notice shall be deemed to have been
given when delivered personally to the Warrant Holder or when mailed to the
Warrant Holder by registered or certified mail, postage prepaid, at the Warrant
Holder's last address known to the Company.
8. Binding Effect, Entire Agreement. Subject to the limitations stated
above, this Agreement shall be binding upon and inure to the benefit of the
personal representatives of Warrant Holder and the successors of the Company.
This Agreement constitutes the entire agreement between the parties and cannot
be altered, modified, or changed in any way unless made in writing and signed by
the party against whom such alteration, modification, or change is asserted.
9. Registration. This warrant is subject to the registration rights set
forth in a Note Purchase Agreement of this same date and such provisions are
incorporated herein by reference.
10. Assignability. This warrant may be assigned by the Warrant Holder
so long as such assignee agrees to be bound by the terms of this Warrant and the
Note Purchase Agreement.
11. Governing Law. This Warrant shall be governed by the laws of New
York and the parties agree that any dispute hereunder shall be subject to the
jurisdiction of New York.
------------------------
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
signed by its President and the Warrant Holder has signed this Agreement.
AIM GROUP, INC.
By:
-----------------------------------
▇▇▇▇ ▇. Arena
President
WARRANT HOLDER:
-----------------------------------
Name:
4