EXHIBIT 10.26
EXHIBIT A
This Note, and the securities issuable upon the conversion of this Note,
have not been registered under the Securities Act of 1933, as amended (the
"Act") or applicable state law and may not be sold, transferred or otherwise
disposed of unless registered under the Act and any applicable state act or
unless the Company receives an opinion from counsel to the holder and is
satisfied that this Note and the underlying securities may be transferred
without registration under the Act.
CONVERTIBLE NOTE
As of September __, 1998
Palm Beach, Florida
$500,000
FOR VALUE RECEIVED, ENVIRONMENTAL REMEDIATION HOLDING CORPORATION, a
Colorado corporation (the "Company"), hereby promises to pay to the order of
TALISMAN CAPITAL OPPORTUNITY FUND LTD., any subsequent holder of this Note (the
"Payee"), at16101 XxXxxxxx Xxxxx Xxxxx 000, Xxxxxx Xxxx, XX 00000, or at such
other place as may be designated by the Payee from time to time by notice to the
Company, the principal sum of Five Hundred Thousand Dollars ($500,000), together
with simple interest from the date hereof (the "Issuance Date") on the unpaid
principal amount at an annual rate equal to twenty percent (20.0%) per annum.
Such principal and interest shall be paid in accordance with the terms of
Section 1 below, in cash, or by wire transfer to such account as the Payee shall
direct, in immediately available funds and in lawful currency of the United
States of America.
1. PAYMENTS.
(a) Unless previously fully converted into Common Stock of the Company as
herein provided, the unpaid principal amount of this Note shall be payable to
the Payee in cash on September __, 2000 (collectively the "Maturity Date").
(b) Interest on the unpaid principal balance of this Note at the rate of
twenty percent (20.0%) per annum shall accrue from the date hereof and shall be
payable to the Payee in cash as set forth in Section 1(c) hereof in arrears and
such interest may, at the election of the Payee, be payable in shares of Common
Stock of the Company, the number of which shall be equal to the product of such
interest payment divided by the Conversion Price, as defined herein, with the
overage, if any, payable in cash.
(c) Commencing of the first anniversary of the issuance date, the remaining
principal amount of this Note plus all accrued and unpaid interest and fees, if
any, shall automatically and without further action on the part of the holder,
be payable in twelve (12) monthly installments commencing with a first payment
on November __, 1999 with the final payment due on the Maturity Date.
(d) In the event that any payment of principal and/or interest hereunder
becomes due and payable on a Saturday, Sunday or other day on which commercial
banks in the State of New York are authorized or required by law to close, then
the maturity thereof shall be extended to the next succeeding "Business Day"
(defined as any days on which national banks in the United States are open for
business); and during any such extension, interest on principal amounts payable
shall accrue and be payable at the applicable rate.
2. RANKING OF NOTE.
Subject at all time to the subordination provisions set forth in Section 9
hereof, this Note shall constitute senior securities of the Company and shall
rank pari passu with all other indebtedness for money borrowed by the Company
and senior to any other indebtedness for money borrowed by the Company which, by
its terms shall be made expressly subject and subordinated to this Note.
3. PREPAYMENT OF NOTE.
(a) At any time prior to the first anniversary of this Note, the Company,
at its option, may prepay all or any portion of the remaining principal plus an
amount equal to twenty percent (20%) of the portion so paid.
4. CONVERSION.
Subject at all times to the Company's right to prepay the Notes as provided in
Section 3 hereof, the holder of the Note shall have the following conversion
rights (the "Conversion Rights"):
(a) Voluntary Conversion. Commencing on the first anniversary of the
issuance date, the holder of this Note may elect to convert up to one hundred
(100%) percent of the original principal amount of this Note and any accrued but
unpaid interest, into shares of Common Stock of the Company, by written notice
given to the Company in accordance with the provisions of Section 4(g) hereof
(the "Conversion Notice"). In no event may the holder of this Note effect a
conversion of less than $10,000 principal amount of this Note. Such right of
Voluntary Conversion shall be effected by the surrender of this Note to the
Company for conversion at any time during normal business hours at the office of
the Company, accompanied (i) by the Conversion Notice, (ii) if so required by
the Company, by instruments of transfer, in a form satisfactory to the Company,
duly executed by the registered holder or by his duly authorized attorney and
(iii) transfer tax stamps or funds therefore, if required pursuant to Section
4(f) herein.
(b) Conversion Price. Subject to adjustment from time to time as provided
in Section 4(c) below, the term AConversion Price" shall mean mean the lower of
(i) 90% of the Market Price (as defined herein); or
(ii) $1.00.
For purposes of this Note, Market Price shall mean the average of the
closing bid price according to Bloomberg L.P. ("Bloomberg") over the five (5)
trading day period immediately preceding the date of the Conversion Notice.
(c) Adjustments of Conversion Price. The Conversion Price in effect from
time to time shall be, subject to adjustment in accordance with the provisions
of this Section 4(c).
(i) Adjustments for Stock Splits and Combinations. If the Company shall at
any time or from time to time after the Issuance Date, effect a stock split of
the outstanding Common Stock, the Conversion Price in effect immediately prior
to the stock split shall be proportionately decreased. If the Company shall at
any time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the Conversion Price in effect immediately prior to the
combination shall be proportionately increased. Any adjustments under this
Section 4(c)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(ii) Adjustments for Certain Dividends and Distributions. If the Company
shall at any time or from time after the Issuance Date, make or issue or set a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution payable in shares of Common Stock, then, and in
each event, the Conversion Price in effect immediately prior to such event shall
be decreased as of the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record date, by
multiplying the Conversion Price then in effect by a fraction;
(A) the numerator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date; and
(B) the denominator of which shall be the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution.
(iii) Adjustments for Other Dividends and Distributions. If the Company
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the Conversion Price
shall be made and provision shall be made (by adjustments of the Conversion
Price or otherwise) so that the holder of this Note shall receive upon
conversions thereof, in addition to the number of shares of Common Stock
receivable thereon, the number of securities of the Company which they would
have received had this Note been converted into Common Stock on the date of such
event and had thereafter, during the period from the date of such event to and
including the Conversion Date, retained such securities (together with any
distributions payable thereon during such period), giving application to all
adjustments called for during such period under this Section 4(c)(iii) with
respect to the rights of the holders of the Note.
(iv) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon conversion of this Note at any time or from time to
time after the Issuance Date shall be changed into the same or a different
number of shares of any class or classes of stock, whether by reclassification,
exchange, substitution or otherwise (other than by way of a stock split or
combination of shares or stock dividends provided for in Sections 4(c)(i), (ii)
and (iii), or a reorganization, merger, consolidation, or sale of assets
provided for in Section 4(c)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall by made and provisions shall be made (by
adjustments of the Conversion Price of otherwise) so that the holder of this
Note shall have the right thereafter to convert such Note into the kind and
amount of shares of stock and other securities receivable upon such
reclassification, exchange, substitution or other change, by holders of the
number of shares of Common Stock into which such Note might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(v) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Issuance Date there shall
be a capital reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for in
Section 4(c)(i), (ii) and (iii), or a reclassification, exchange or substitution
of shares provided for in Section 4(c)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person, then as a part of
such reorganization, merger, consolidation, or sale, an appropriate revision to
the Conversion Price shall be made and provision shall be made (by adjustments
of the Conversion Price or otherwise) so that the holder of this Note shall have
the right thereafter to convert this Note into the kind and amount of shares of
stock and other securities or property of the Company or any successor
corporation resulting from such reorganization, merger, consolidation, or sale,
to which a holder of Common Stock deliverable upon conversion of such shares
would have been entitled upon such reorganization, merger, consolidation, or
sale. In any such case, appropriate adjustment shall be made in the application
of the provisions of this Section 4(c)(v) with respect to the rights of the
holders of this Note after the reorganization, merger, consolidation, or sale to
the end that the provisions of this Section 4(c)(v) (including any adjustment in
the Conversion Price then in effect and the number of shares of stock or other
securities deliverable upon conversion of this Note) shall be applied after that
event in as nearly an equivalent manner as may be practicable.
(vi) Additional Adjustments. If at any time or from time to time after the
Issuance Date, the Company shall issue or sell any share of Common Stock, other
that shares issued or sold pursuant to a employee or consultant stock option
plan or shares issued or sold pursuant to conversion or exercise rights granted
prior to the Issuance Date, to any party for a price per share which shall be
less than seventy five percent (75%) of the average closing bid price per share
of Common Stock as reported on Bloomberg for the five (5) consecutive trading
days immediately prior to the time of the issue or sale (the "Trigger Price"),
then forthwith upon such issue or sale, the number of shares of Common Stock
issuable upon conversion of the Note in effect immediately prior to such issue
or sale shall be adjusted by multiplying the number of shares of Common Stock
issuable upon conversion of the Note in effect immediately prior to the time of
such issue or sale by a fraction:
(A) the number of which shall be (i) the total number of
shares of Common Stock issued and outstanding
immediately after such issue or sale, multiplied by
(ii) the Trigger Price; and
(B) the denominator of which shall be the sum of (i) the
number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by
the Trigger Price, plus (ii) the consideration
received by the Company upon such issue or sale.
(d) No Impediment. The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the Note
set forth in this Section 4 against impairment.
(e) Certificate as to Adjustments. Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of the Note pursuant to this Section 4, the Company at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish notice to the holder of this Note,
a certificate setting forth such adjustment and readjustment, showing in detail
the facts upon which such adjustment or readjustment is based.
The Company shall, upon written request of the holder of this Note, at any time,
furnish or cause to be furnished to such holder a like certificate setting forth
such adjustments and readjustments, the applicable Conversion Price in effect at
the time and the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon the
conversion of such Note. Notwithstanding the foregoing, the Company shall not be
obligated to deliver a certificate unless such certificate would reflect an
increase or decrease of at least one percent (1%) of such adjusted amount.
(f) Issue Taxes. The Company shall pay any and all issue and other taxes,
excluding federal, state or local income taxes, that may be payable in respect
of any issue or delivery of shares of Common Stock on conversion of this Note
pursuant hereto; provided, however, that the Company shall not be obligated to
pay any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(g) Notices and Delivery of Shares. All notices and other communications
hereunder shall be in writing and shall be deemed given (i) on the same date, if
delivered personally or by facsimile by not later than 7:00 p.m. New York time
(provided, that a copy of such facsimile shall be simultaneously sent to Xxxxxx
X. Xxxxxxxx, Esq. at (000)000-0000, or (ii) three business days following being
mailed by certified or registered mail, postage prepaid, return-receipt
requested, addressed to the party in accordance with Section 7 hereof. Not later
than five (5) Business Days following receipt of notice of conversion as
provided herein (the "Delivery Date"), the Company shall deliver to the holders
of this Note, against delivery of this Note surrendered for conversion,
certificates evidencing all shares of Common Stock into which this Note shall be
converted. In the event the certificates are not delivered within such five (5)
Business Days, the Company shall pay to the holder of the Note Liquidated
Damages as listed below for each day until the date such certificates are
delivered to the holder. Such Liquidated Damages shall be paid within ten (10)
Business Days of delivery of the shares or within ten (10) Business Days of the
end of each thirty (30) day period.
Liquidated Damages for each
$10,000 of Note Principal
No. of Business Days Date Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1000
>10 $1000 + $200 for each
Business Day late beyond
10 days
(h) Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of the Note. In lieu of any fractional shares to which the
holder would otherwise be entitled, the Company shall pay cash equal to the
product of such fraction multiplied by the Conversion Price of one share of the
Company's Common Stock on the applicable Conversion Date.
(i) Reservation of Common Stock. The Company shall at all times reserve and
keep available, out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, the full number
of shares deliverable upon conversion of all the Note from time to time
outstanding. The Company shall, from time to time in accordance with the
Colorado General Corporations Law, as amended, increase the authorized number of
shares of Common Stock if at any time the unissued number of authorized shares
shall not be sufficient to permit the conversion of all of the Note at the time
outstanding. In such connection, the Company shall hold a special meeting of
stockholders not later than 90 days after any date in which the Company shall
have insufficient shares of Common Stock so reserved for the purpose of
authorizing additional shares of Common Stock.
(j) Retirement of Note. Conversion of this Note shall be deemed to have
been effected on the applicable Conversion Date. The converting holder shall be
deemed to have become a stockholder of record of the Common Stock on the
applicable Conversion Date. Upon conversion of only a portion of this Note, the
Company shall issue and deliver to such holder, at the expense of the Company,
against receipt of the original Note delivered for partial cancellation, a new
Note representing the unconverted portion of this Note so surrendered and Common
Stock equal to the portion converted.
(k) Regulatory Compliance.
(i) The Company shall file, as soon as practicable, with the United States
Securities and Exchange Commission ("SEC") and use its best efforts to cause it
to be declared effective within one (1) year of the Issuance Date and remain
effective until the earlier of the date on which all of the Note is sold or for
the life of the Note (the "Effective Period"), a Form S-1 Registration Statement
or other appropriate form of registration in order to register for resale and
distribution under the Securities Act of 1933, as amended (the "Securities
Act"), all shares of Common Stock of the Company issuable upon voluntary or
mandatory conversion of the Note (the "Conversion Shares"). Such registration
shall initially cover at least 150% of the shares issuable upon conversion of
the Note into Common Stock and shall cover, to the extent allowed by applicable
law, such additional indeterminate number of shares of Common Stock as are
required to effect conversion of the Notes due to fluctuations in the price of
the Company's Common Stock, in accordance with Rule 416 of the Securities Act.
The Company shall prepare and file with the SEC such amendments and supplements
necessary to keep such registration statement effective throughout the Effective
Period and to comply with the provisions of the Securities Act with respect to
the sale or other disposition of the shares covered by such registration
statement whenever the holder shall desire to sell or otherwise dispose of same.
(ii) If any shares of Common Stock to be reserved for the purpose of
conversion of this Note require registration or listing with or approval of any
government authority, stock exchange or other regulatory body under any federal
or state law or regulation or otherwise before such shares may be validly issued
or delivered upon conversion, the Company shall, at its sole cost and expense,
in good faith and as expeditiously as possible, endeavor to secure such
registration, listing or approval, as the case may be.
(iii) The shares of Common Stock issuable upon the election to convert
shall be Rule 144 restricted shares (the "Restricted Securities"). After
issuance, the Company agrees to use its best efforts to assist holder in
registering the Restricted Securities or to register the Restricted Securities
under the Act subject to the rules, regulations, and other provisions of said
Act.
(iii) In the event the holder elects to convert into ownership of shares of
the Company's Common Stock, at the time of such conversation, the holder of such
shares shall have the following piggyback rights:
(A) At any time that the Company proposes to file a Company registration
statement on Form S-1, including the pending Form S-1 registration filed on
January 8, 1998, under the Act (the "Registrations Statement"), of any amendment
to be filed thereof, the Company shall cause to be included in such registration
statement any securities issued or subject to issuance in this transaction;
provided, however, that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
Company Registration Statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay registration
of holder's Restricted Securities, the Company may, at its election, give
written notice of such determination to holder and, thereupon:
(1) in the case of a determination not to register such other securities,
shall be relieved of its obligation to register holder's Restricted Securities
in connection with such registration (but not from its obligation to pay the
registration expenses in connection therewith), and
(2) in the case of a delay in registering, shall be permitted to delay
registering holder's Restricted Securities for the same period as the delay in
registering such other securities.
(B) The Company's obligation to include Restricted Securities in a
Company's Registration Statement pursuant to Section 4(k)(iii)(A) shall be
subject to the following limitations:
(1) The Company may elect, at its sole option and for any reason, not to
register holder's Restricted Shares, provided however, that this right is
limited to one (1) time and relative to one (1) particular Company Registration
Statement.
(2) The Company shall not be obligated to include any Restricted Securities
in a registration statement filed on Form X-0, Xxxx X-0 or such other similar
successor forms then in effect under the Securities Act.
(3) If a Company Registration Statement involves an underwritten offering
and the managing underwriter advises the Company in writing that in its opinion,
the number of securities requested to be included in such Company Registration
Statement exceeds the number which can be sold in such offering without
adversely affecting the offering, the Company shall include in such Company
Registration Statement the number of such securities which the Company is so
advised can be sold in such offering without adversely affecting the offering,
determined as follows:
(i) first, the securities proposed by the Company to be sold for it own
account, and
(ii) second, any Restricted Securities requested to be included in such
registration and any other securities of the Company in accordance with the
priorities, if and then existing among the holders of such securities pro rata
among the holders thereof requesting such registration on the basis of the
number of shares of such securities requested to be included by such holders.
(4) The Company shall not be obligated to include Restricted Securities in
more than one (1) Company Registration Statement.
(C) To the extent holder's Restricted Securities are intended to be
included in a Company Registration Statement, holder may include any of its
Restricted Securities in such Company Registration Statement pursuant to this
Agreement only if holder furnishes to the Company in writing, within ten (10)
business days after receipt of a written request therefor, such information
specified in Item 507 of Regulation S-K under the Act or such other information
as the Company may reasonably request for use in connection with the Company
Registration Statement or Prospectus or preliminary Prospectus included therein
and in any application to the NASD. Holder as to which the Company Registration
Statement is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make all information previously
furnished to the Company by holder not materially misleading.
(l) Limitations on Amount of Conversion. Notwithstanding anything contained
in this Note to the contrary, in no event shall any holder of Note be entitled
or required to convert this Note in excess of that number of shares of Common
Stock which, upon giving effect to such conversion, would cause the aggregate
number of shares of Common Stock beneficially owned by the holder and its
affiliates to exceed 4.9% of the total outstanding shares of the Company's
Common Stock immediately following such conversion. For purposes of the
foregoing proviso, the aggregate number of shares of Common Stock beneficially
owned by the holder and its affiliates shall include the number of shares of
Common Stock issuable upon conversion of this Note with respect to which the
determination of such proviso is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) conversion of the
remaining, unconverted portion of the Note beneficially owned by such holder and
its affiliates, and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Company (including without
limitation any warrants) which are beneficially owned by the holder and its
affiliates and which are subject to a limitation on conversion or exercise
analogous to the limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended. Any holder of Note may waive the foregoing limitations set
forth in this paragraph by providing the Company upon not less than 30 days with
prior written notice (with such waiver taking effect only upon the expiration of
such 30-day notice period).
5. EVENTS OF DEFAULT.
The occurrence and continuance of any one or more of the following events
is herein referred to as an Event of Default:
(a) If the Company shall default in converting the applicable principal amount
of this Note into Common Stock and delivering stock certificates in respect of
such conversion within ten (10) Business Days from the Company's receipt of the
applicable notice of conversion pursuant to the provisions hereof, whether on
the Maturity Date or otherwise; or
(b) If the Company shall default in the payment of any installment of interest
on this Note when payable in accordance with the terms thereof for more than ten
(10) calendar days after the same shall become due if the Payee has not elected
to take such interest in Common Stock; and if the Payee has elected to take such
interest in Common Stock, if the Company shall default in delivering stock
certificates in respect of such election within ten (10) Business Days from the
Company's receipt of the notice of such election; or
(c) If the Company shall not, at the time of receipt of a Conversion Notice
hereunder, have a sufficient number of authorized and unissued shares of its
Common Stock available for issuance to the holder of this Note upon conversion
of all or any portion of this Note in accordance with the terms hereof, and such
default shall not have been remedied within sixty (60) calendar days from the
date of such Conversion Notice; or
(d) If the Company shall default in the performance of or compliance with any of
its material covenants or agreements contained herein or any covenant contained
in a certain warrant agreement between the Payee and the Company of even date
and such default shall not have been remedied within thirty (30) calendar days
after written notice thereof shall have been delivered to the Company by the
holder of this Note in accordance with the notice provisions herein; or
(e) If any representation or warranty made in writing by or on behalf of the
Company in connection with the transactions contemplated hereby shall prove to
have been false or incorrect in any material respect on the date as of which
made; or
(f) If the Company or any of its "Significant Subsidiaries" (as defined herein)
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts as they become due, or shall file a voluntary
petition in bankruptcy or shall have an order for relief under the Bankruptcy
Act granted against it or them, or shall be adjudicated a bankrupt or insolvent,
or shall file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, or shall file any
answer admitting or not contesting the material allegations of a petition filed
against the Company or any of its Significant Subsidiaries in any such
proceeding, or shall seek or consent to or acquiesce in the appointment of any
trustee, custodian, receiver or liquidator of the Company or of all or any
substantial part of the properties of the Company or any of its Significant
Subsidiaries, or the Company or its directors shall take any action looking to
the dissolution or liquidation of the Company or any of its Significant
Subsidiaries. For purposes of this Section 5(f), the term Significant Subsidiary
shall mean and include Bass American Petroleum Corp. and any other person, firm
or corporation (i) more than 50% of the common stock or equity interests of
which are owned of record by the Company or any Subsidiary of the Company, and
(ii) the net income before taxes or total assets of which represent more than
15% of the consolidated net income before taxes or consolidated assets of the
Company and all of its Subsidiaries; or
(g) If, within sixty (60) days after the commencement of any proceeding against
the Company or any Significant Subsidiary seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such proceeding
shall not have been dismissed, or if, within sixty (60) days after the
appointment, without the consent or acquiescence of the Company or any
Significant Subsidiary, of any trustee, receiver or liquidator of the Company or
any Significant Subsidiary or of all or any substantial part of the properties
of the Company or any Significant Subsidiary, such appointment shall not have
been vacated.
6. REMEDIES ON DEFAULT; ACCELERATION.
Upon the occurrence and during the continuance of an Event of Default, the
entire unpaid balance of principal and accrued interest on this Note may be
accelerated and declared to be immediately due and payable by the holder. Unless
waived by the written consent of the holder, such holder may proceed to protect
and enforce its rights by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein, or for an injunction against a violation of any of the terms hereof, or
in aid of the exercise of any power granted hereby or by law. Upon the
occurrence of an Event of Default, the Company agrees to pay to the holder of
this Note such further amount as shall be sufficient to cover the cost and
expense of collection, including, without limitation, reasonable attorneys' fees
and expenses. No course of dealing and no delay on the part of the holder of
this Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers and remedies. No
right, power or remedy conferred hereby upon the holder hereof shall be
exclusive of any other right, power or remedy referred to herein nor now or
hereafter available at law, in equity, by statute or otherwise.
7. NOTICES.
All notices, requests, demands or other communications hereunder shall be in
writing and personally addressed or sent by telecopier or by registered or
certified mail, return receipt requested, postage pre-paid, addressed or
telecopied as follows or to such other address or telecopier number of which
notice has been given pursuant hereto:
If to the Company: Environmental Remediation Holding Corp.
0000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx, President
Telephone (000) 000-0000
Fax (000) 000-0000000-0000; and
Environmental Remediation Holding Corp.
Attn: Xxxxxx Xxxxxx, Vice President and
Chief Financial Officer
Telephone (000) 000-0000
Fax (000) 000-0000
with copy to: Mintmire & Associates
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone (000) 000-0000
Fax (000) 000-0000
If to the Holder: to such Holder at
the address set forth on the records
of the Company. In addition, copies
of all such notices or other
communications shall be concurrently
delivered by the person giving the
same to each person who has been
identified to the Company by such
Holder as a person who is to receive
copies of such notices.
8. GOVERNING LAW.
This Note shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York, without giving effect to conflict of
law principles.
9. SUBORDINATION TO SENIOR DEBT.
(a) Payment of the principal of and interest on this Note is subordinated, to
the extent and in the manner provided herein, to the prior payment of all
indebtedness of the Company and/or all Subsidiaries of the Company, for money
borrowed or other obligations which is now or may hereafter be owed
(collectively, "Senior Debt") to any bank, commercial finance company, factor,
insurance company or other institution the lending activities of which are
regulated by law (individually, a "Senior Lender" and collectively, "Senior
Lenders"), which may, hereafter on any one or more occasions provide financing
to the Company or any of its Subsidiaries, secured by liens on any of the assets
and properties of the Company and/or any of its Subsidiaries (individually and
collectively, an "Institutional Borrower").
(b) Upon any payment or distribution of assets or securities of the
Institutional Borrower, as the case may be, of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or total or
partial liquidation or reorganization of the Institutional Borrower, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all amounts payable under Senior Debt shall first be paid in full
in cash, or payment provided for in cash or cash equivalents, before the holder
hereof shall be entitled to receive any payment on account of principal of or
interest on this Note. Before any payment may be made by the Institutional
Borrower of the principal of or interest on this Note upon any such dissolution
or winding up or liquidation or reorganization, any payment or distribution of
assets or securities of the Institutional Borrower of any kind of character,
whether in cash, property or securities, to which the holder hereof would be
entitled, except for the provisions of this Section 9, shall be made by the
Institutional Borrower or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
the holders of Senior Debt or their representatives to the extent necessary to
pay all such Senior Debt in full after giving effect to any concurrent payment
or distribution to the holders of such Senior Debt.
(c) Upon the happening of any default in payment of the principal of or interest
on any Senior Debt, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment in cash,
property or securities, by set-off or otherwise, shall be made or agreed to be
made by the Institutional Borrower on account of the principal of or interest on
this Note.
(d) Upon the happening of an event of default (other than under circumstances
when the terms of Section 9(c) above are applicable) with respect to any Senior
Debt pursuant to which the holder thereof is entitled under the terms of such
Senior Debt to accelerate the maturity thereof, and upon written notice thereof
given to each of the Institutional Borrower and the holder of this Note by such
holder of Senior Debt ("Payment Notice"), then, unless and until such event of
default shall have been cured or waived or shall have ceased to exist, no action
shall or may be taken for collection of any amounts under this Note, and no
direct or indirect payment in cash, property or securities, by set-off or
otherwise, shall be made or agreed to be made by the Institutional Borrower an
account of the principal of or interest on this Note until such Senior Debt has
been paid in full accordance with its terms.
(e) In the event that, notwithstanding the provisions of this Section 9,
any payment shall be made on account of the principal of or interest on this
Note in contravention of such provisions, then such payment shall be held for
the benefit of, and shall be paid over and delivered to, the holders of such
Senior Debt remaining unpaid to the extent necessary to pay in full in cash or
cash equivalents the principal of and interest on such Senior Debt in accordance
with its terms after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt.
(f) Nothing contained in this Section 9 shall
(i) impair the conversion rights of the holder hereof referred to in
Section 4 above,
(ii) impair, as between the Company and the holder of this Note, the
obligation of the Company, which is absolute and unconditional, to pay to the
holder hereof principal and interest as the same shall become due and payable,
or
(iii) prevent the holder hereof from exercising all rights, powers and
remedies otherwise provided herein or by applicable law, all subject to the
express limitations provided herein.
(g) Upon the occurrence of an Event of Default, if any Senior Debt shall then be
outstanding, no acceleration of the maturity of this Note shall be effective
until the earlier of (i) ten (10) days shall have passed following the date of
delivery to the Institutional Borrower by a Senior Lender(s) of written notice
of acceleration of any Senior Debt, or (ii) the maturity of any then outstanding
Senior Debt shall have been accelerated by reason of a default hereon. The
Company may pay the holder hereof any defaulted payment and all other amounts
due following any such acceleration of the maturity of this Note if this Section
9 would not prohibit such payment to be made at that time.
(h) Upon payment in full of all Senior Debt, the Payee of this Note shall be
subrogated to the rights of the holder or holders of Senior Debt to receive all
payments or distributions applicable on such Senior Debt to the extent of the
prior application thereto of moneys or other assets which would have been
received in respect of this Note, but for these subordination provisions, until
the principal of, and interest on, this Note shall have been paid in full.
(i) The Payee, by accepting this Note
(i) shall be bound by all of the foregoing subordination provisions;
(ii) agrees expressly for the benefit of the present and future holders of
Senior Debt that this Note is subject to the foregoing subordination provisions;
(iii) authorizes such persons as shall be designated by all holders of
Senior Debt at any given time, on his or its benefit to execute and deliver such
agreements, assignments, proofs of claim and other documents appropriate to
effectuate the foregoing subordination provisions; and
(iv) hereby appoints the person so designated his or its attorney-in-fact
for such purpose.
(j) The foregoing subordination provisions shall be for the benefit of all
holders of Senior Debt from time to time outstanding, and each of such holders
may proceed to enforce such provisions either directly against the holder hereof
or in any other manner provided by law.
10. WAIVER OF STAY, EXTENSION OF USURY LAWS.
The Company covenants that it will not at any time insist upon, plead, or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension of law or any usury laws or other law that would prohibit or forgive
the Company from paying all or any portion of the principal of or interest on
the Note as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this
Agreement; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the holder, but will permit execution of every such power as though no such law
had been enacted.
11. CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined herein), the Company
shall make an offer to purchase the outstanding principal amount of the Note at
a purchase price equal to the greater of : (i) 150% of the outstanding principal
amount of the Note plus accrued but unpaid interest to the date of the purchase;
or (ii) the Intrinsic Value of the Note (as defined herein) on the date the
Change of Control occurs. For purposes of this Note, Change of Control shall
mean (i) the purchase of a majority of the Company's Common Stock; (ii) a merger
of the Company with another entity which results in the shareholders of the
Company owning less that 50.01% of the restructured company; (iii) the removal
of Xxxxx Xxxxxxxxx as President and Chief Executive Officer or Xxxxxx Xxxxxx as
the Chief Financial Officer; or (iv) the sale of the Company to another entity.
For purposes of this Note, Intrinsic Value shall mean the result of the
following formula: (applicable Market Price less the maximum Conversion Price)
multiplied by ((principal amount of the Note outstanding plus any and all
accrued but unpaid interest plus fees, if any) divided by the maximum Conversion
Price).
12. PERMITTED PAYMENTS.
Notwithstanding the provisions of Section 9 of this Note, and provided that
no default or event of default (or event which, with the passage of time or
giving of notice or both) has occurred, will occur as a result of the "Permitted
Payment" (herein defined), or will occur with the passage of time or giving of
notice or both, under any document or instrument evidencing such Senior Debt,
the Company may pay to the Payee, and the Payee may accept from the Company, the
principal payments of, and/or interest payments on, the outstanding principal
amount of this Note when due on an unaccelerated basis (herein, "Permitted
Payments"); it being understood and agreed by the Payee by accepting this Note
that neither:
(a) the payment terms set forth in Section l of this Note;
(b) the subordination provisions contained in Section 9 of this Note, nor
(c) the provisions of this Section 12 of this Note,
may be modified or amended without the prior written consent of each and every
holder of Senior Debt.
13. SUCCESSORS AND ASSIGNS.
This Note shall be binding upon and inure to the benefit of the Company and the
holder hereof and their respective successors and permitted assigns; provided,
however, that the Company may not transfer or assign any of its rights or
obligations hereunder without the prior written consent of the holder hereof;
and provided, further, that transfer or assignment by the holder is in
accordance with the rules governing Restricted Securities.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly
authorized officers as of the date first set forth above.
ENVIRONMENTAL REMEDIATION HOLDING CORP.
By: ______________________________________
Xxxxxx X. Xxxxxx , Vice President and
Chief Financial Officer
Attest: ___________________________________
