Exhibit 10.4
SUBSCRIPTION AGREEMENT
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(Private Offering of (i) 1,200,000 Shares of Common Stock, and (ii) $300,000
6% Convertible Subordinated Notes of Transbotics Corporation)
This Subscription Agreement (the "Agreement") is made and
entered into as of this 23 day of September, 2003 (the "Subscription Date") by
and between Transbotics Corporation, a Delaware corporation (the "Company"), and
Xxxxxxx Xxxxxx, an individual residing in Charlotte, North Carolina
("Purchaser").
WHEREAS, the Company is offering for sale (i) 1,200,000 shares
of its Common Stock, $0.01 par value per share (the "Shares"), at a price per
share of Twenty Five Cents ($0.25) and (ii) $300,000 6% Convertible Subordinated
Notes (the "Notes") in a private offering (the "Offering") to accredited
investors;
WHEREAS, Purchaser desires to purchase from the Company, and
the Company desires to sell and issue to Purchaser, (i) 300,000 Shares and (ii)
a Note in the principal amount of Seventy-Five Thousand Dollars ($75,000.00)
(herein, the "Purchased Shares and Note"), upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, Purchaser agrees that the Company may rely on
Purchaser's representations herein in connection with the issuance of the
Purchased Shares and Note to Purchaser;
NOW, THEREFORE, in consideration of the premises, the mutual
promises, covenants and conditions herein contained and for other good and
valuable consideration, the parties hereby agree as follows:
1. Sale of Purchased Shares and Note to Purchaser. At the
Closing (as hereinafter defined), the Company shall sell and issue to Purchaser,
and Purchaser shall purchase from the Company, the Purchased Shares and Note,
upon the terms and subject to the conditions set forth in this Agreement.
2. Purchase Price for Purchased Shares. In consideration for
the sale and issuance of the Shares pursuant to Section 1 of this Agreement,
Purchaser shall pay to the Company the sum of Twenty Five Cents ($0.25) per
share for the total sum of Seventy-Five Thousand Dollars ($75,000.00) for the
Shares (the "Share Purchase Price").
3. Purchase Price for the Note. In consideration for the sale
and issuance of the Note, pursuant to Section 1 of this Agreement, Purchaser
shall pay to the Company the sum of Seventy-Five Thousand Dollars ($75,000.00)
(the "Note Purchase Price") (the Share Purchase Price and Note Purchase Price
are referred to together as the "Total Purchase Price").
4. Payment of Total Purchase Price. The Total Purchase Price
shall be payable by (i) wire transfer of the Total Purchase Price to such
account of the Company as designated by the Company, (ii) delivery to the
Company of a cashier's check for the Total Purchase Price payable to the order
of the Company, or (iii) such other means of payment of the Total Purchase Price
as approved by the Company.
5. Delivery of the Purchased Shares and Note. On or promptly
after the Closing Date (as hereinafter defined) (i) a certificate evidencing the
Purchased Shares registered in the name of Purchaser shall be executed, issued
and delivered to Purchaser by the Company, and (ii) a promissory note in the
form attached hereto as Exhibit A shall be executed, issued and delivered to the
Purchaser by the Company.
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6. Representations, Warranties and Acknowledgements of
Purchaser. Purchaser hereby represents warrants and acknowledges to the Company
as of the Subscription Date and the Closing Date, and the Company may rely on
the same in consummating the Offering and the other transactions herein
contemplated, as follows:
6.01 Validity. When accepted by the Company, this Agreement
will constitute the legally valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
6.02 Disclosure by the Company. Purchaser acknowledges that
the Company is subject to the periodic reporting requirements of the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, and, accordingly, that information about the Company
is available to Purchaser under the Electronic Data Gathering, Analysis
and Retrieval system of the Securities and Exchange Commission (the
"XXXXX System"). Purchaser further acknowledges that Purchaser has
access to the XXXXX System and has had the opportunity to review
filings of the Company that are available thereon.
6.03 Other Information. In addition to the information
contained on the XXXXX System, Purchaser has had access to all
documents, records and books pertaining to the Company and the Offering
as requested by Purchaser and has had the opportunity to ask questions
of and receive answers from the officers of the Company concerning the
terms and conditions of the Offering and operations of the Company.
6.04 No Review. Purchaser is aware that no federal or state
agency has made any finding or determination as to the fairness for
public or private investment, nor any recommendation or endorsement of
the Shares or the Note as an investment.
6.05 Speculative Nature. Purchaser recognizes the speculative
nature of an investment in the Purchased Shares and the Note.
6.06 Holding of Purchased Shares and Note. Purchaser must bear
the economic risk of his investment in the Purchased Shares and Note
for an indefinite period of time because the Purchased Shares and Note
have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"), in reliance upon an exemption from such registration
requirements set forth in Rule 506 of Regulation D promulgated under
the 1933 Act ("Regulation D") and, therefore, cannot be sold unless
they are subsequently registered under the 1933 Act or an exemption
from such registration is available. Purchaser acknowledges that the
Company will make a notation in its transfer records and on the
certificate representing the Purchased Shares and Note regarding said
restrictions on transfer of the Purchased Shares and Note and that the
Purchased Shares and Note may not be sold without registration under
the 1933 Act or exemption therefrom.
6.07 Financial Knowledge and Experience. Purchaser has
knowledge and experience in financial and business matters so as to be
capable of evaluating the merits and risks of an investment in the
Purchased Shares and Note, is not utilizing any other person to be his
"Purchaser Representative" (as defined in Regulation D) in connection
with evaluating such merits and risks, and offers as evidence of his
knowledge and experience in these matters the representations and
information set forth in this Agreement.
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6.08 Economic Risk. Purchaser is willing and able to bear the
economic risk of an investment in the Purchased Shares and Note (in
making this representation, consideration has been given to whether
Purchaser can afford to hold the Purchased Shares and Note for an
indefinite period of time and whether, at this time, Purchaser can
afford a complete loss of his investment).
6.09 Accredited Investor. Purchaser is an "accredited
investor" as defined in Rule 501 of Regulation D (an "Accredited
Investor"). In addition to certain institutional investors and
fiduciaries, an Accredited Investor in the Company includes any person
or entity that falls within any one of the following categories:
(a) any natural person whose individual net worth, or
joint net worth with such person's spouse, exceeds $1,000,000;
(b) any natural person who had an individual income
in excess of $200,000 in each of the two most recent tax years
or joint income with such person's spouse in excess of
$300,000 in each of those years and who reasonably expects to
reach the same income level in the current year;
(c) any corporation, business trust or partnership
not formed for the specific purpose of acquiring the Shares,
with total assets in excess of $5,000,000;
(d) any entity in which all of the equity owners are
"Accredited Investors";
(e) any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the Shares, whose purchase is directed by a "Sophisticated
Person" (as described in Rule 506 of Regulation D);
(f) any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons who are Accredited
Investors; or
(g) any director or executive officer of the Company.
6.10 Commitments. Purchaser's overall commitment to
investments that are not readily marketable is not disproportionate to
his net worth.
6.11 Liquidity. Purchaser has adequate means of providing
for his current needs and personal contingencies and has no need for
liquidity in his investment in the Purchased Shares and Note.
6.12 Objective. The objectives of the Company are
compatible with Purchaser's investment goals.
6.13 Investment Intent. Purchaser is purchasing the
Purchased Shares and Note for the Purchaser's own account, as
principal, for investment and not with a view to the resale or
distribution of all or any part of the Purchased Shares and Note.
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6.14 Information About Purchaser. The information about
Purchaser on Schedule I attached hereto shall be completed by Purchaser
prior to the execution by Purchaser of this Agreement and such
information is true, correct and complete in all respects.
6.15 Advisors. Purchaser understands that he should consult
his own legal counsel, accountant or business advisor as to the legal,
tax and other matters concerning the Offering, his purchase of the
Purchased Shares and his execution of this Agreement.
6.16 Public Trading in Company Common Stock. Purchaser
acknowledges that the Common Stock of the Company is not currently
traded on any stock exchange or listed by NASDAQ as a National Market
or Small-Cap Issue.
6.17 Additional Offerings of Capital Shares. If the Board of
Directors of the Company decides that the Company requires additional
capital and seeks to raise the funds necessary to meet immediate and
reasonable future needs of the Company by offering for sale additional
capital shares and/or notes or other securities of the Company
("Securities"), the Board of Directors of the Company may in its
absolute discretion determine the price and terms at which the
Securities may be sold without offering the Securities to Purchaser.
7. Representations, Warranties and Acknowledgements of the
Company. The Company hereby represents, warrants and acknowledges to Purchaser
as of the Subscription Date and the Closing Date, and Purchaser may rely on the
same in consummating the Offering, as follows:
7.01 Due Incorporation. The Company is a corporation duly
organized and validly existing under the Delaware General Corporation
Law.
7.02 Validity. Each of the Agreement and the Note constitutes
the legally valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
7.03 Fully Paid and Nonassessable Shares. Upon receipt by the
Company of the proceeds from the Purchased Shares and the delivery of
the certificate(s) for the Purchased Shares to Purchaser, the Purchased
Shares will be validly issued, fully paid and nonassessable.
8. Registration Rights Agreement. Purchaser and the Company
are in agreement that Purchaser shall have the registration rights set forth in
the form of Registration Rights Agreement attached hereto as Exhibit B. The
parties acknowledge that the Company and Purchaser shall enter into such
Registration Rights Agreement simultaneously with the execution hereof.
9. Closing. The closing of the issue and sale of the Purchased
Shares and Note by the Company to Purchaser pursuant to this Agreement (the
"Closing") shall occur promptly after the later of (i) receipt by the Company of
binding subscription agreements for the purchase of all of the Shares and Notes
in the Offering, (ii) the Company's execution of this Agreement to indicate its
acceptance hereof, and (iii) the delivery of the Total Purchase Price to the
Company.
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10. Further Action. The parties agree that they will, at any
time and from time to time, after the date hereof, upon request of the other
party hereto, do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, all such further acts, assignments,
transfers, agreements, assurances and powers of attorney as may be reasonably
required to carry out the transaction herein contemplated.
11. Notices. Unless otherwise required by law, all notices,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given (except as may otherwise be specifically
provided herein to the contrary) if delivered by hand to the party to whom said
notice or other communications shall have been directed, or mailed by certified
or registered mail with postage prepaid, or shipped and receipted by express
courier service with charges prepaid by shipper and addressed as follows (or to
such other address as may be designated by notice given pursuant hereto): (i) if
to the Company, to Xxxxxx Xxxxxxx, President, at 0000 Xxxxxxx Xxxxx, Xxxxxxxxx,
Xxxxx Xxxxxxxx 00000, and (ii) if to Purchaser, to Purchaser at his address
indicated on Schedule I attached hereto.
12. Binding Effect. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their respective heirs,
personal representatives, successors and permitted assigns.
13. Amendments. No amendments or variations of the terms and
conditions of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto.
14. Governing Law. This Agreement shall be construed and
enforced pursuant to the laws of the State of Delaware.
15. Entire Agreement. This instrument contains the entire
agreement between the parties hereto with respect to the transactions
contemplated in this Agreement.
16. Assignment. Neither of the parties hereto may assign,
transfer or otherwise dispose of any of their rights or obligations under this
Agreement except with the prior written consent of the other party hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Purchaser and the Company have
executed this Agreement as of the dates indicated below, to be effective as of
the date of the Company's acceptance hereof or such other date indicated in the
preamble hereof as the Subscription Date.
Number of Purchased Shares: 300,000 Share Purchase Price at
$0.25 per share: $75,000.00
Amount of 6% Convertible Subordinated Note: $75,000.00
Purchaser's Signature: /s/ Xxxxxxx Xxxxxx
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Print Name: Xxxxxxx Xxxxxx
Dated: 9/23/03
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SUBSCRIPTION ACCEPTED AND AGREED TO
TRANSBOTICS CORPORATION
By: /s/ Xxxxxx Xxxxxxx
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Its: President
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Dated: 9/22/03
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Schedule I
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1. Name of Purchaser (Please print name in exactly the form desired for
issuance of the Shares): Xxxxxxx Xxxxxx
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2. Primary residence address of Purchaser if Purchaser is an individual:
0000 Xxxxxxxx xx., Xxxxxxxxx XX 00000
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3. Mailing address of Purchaser (this will be the record address for the
Shares): Same
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4. Social security or federal identification number of Purchaser:
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5. Purchaser is an Accredited Investor for the reasons set forth in
Section 6.09(__A____) of the Subscription Agreement (fill in
-
appropriate subsection).
6. Type of entity if Purchaser is not an individual (please check
appropriate box):
a. corporation
b. partnership
c. limited liability company
d. trust
e. bank or savings and loan
association
f. broker dealer
g. insurance company
h. investment company registered under
the Investment Company Act of 1940 or a business
development company as defined in that act
i. private business development
company as defined in the Investment Advisors Act of
1940
j. small business investment company
licensed by the U.S. Small Business Administration
k. plan established and maintained by
a state, its political subdivisions, or any agency
or instrumentality of a state or its political
subdivisions, for the benefit of its employees
("Government Employee Plan")
l. organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended
("Charitable Organization")
m. employee pension benefit plan subject to ERISA
("ERISA Plan")
n. other (please describe):
7. If Purchaser is a corporation, partnership, limited liability company,
trust or Charitable Organization, please answer the following
questions:
a. Was such entity formed for the purpose of purchasing the Shares?
Yes No
b. If question 7(a) above is answered "Yes," please list below the
names and addresses of the holders of all beneficial interests in
such entity and indicate whether or not such holders are
accredited investors:
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8. If the undersigned is a corporation, partnership, limited
liability company, trust, Government Employee Plan, ERISA Plan
or Charitable Organization, does such entity possess total
assets in excess of $5,000,000?
Yes No
9. If the undersigned is an ERISA Plan, please answer the following questions:
a. Has the decision to purchase the Purchased Shares been made by
a plan fiduciary which is either a bank, savings and loan
association, insurance company, or a registered investment
advisor?
Yes No
b. If the ERISA Plan is a "self-directed" plan, are investment
decisions made solely by accredited investors?
Yes No
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10. State of organization of entity if Purchaser is not an individual:
____________________________
11. Date of organization of entity if Purchaser is not an individual:
_____________________________
/s/ Xxxxxxx Xxxxxx
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Purchaser
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EXHIBIT A
FORM OF 6% CONVERTIBLE SUBORDINATED NOTE
THE NOTE REPRESENTED HEREBY, AND ALL SHARES OF CAPITAL STOCK ISSUABLE HEREUNDER
UPON CONVERSION, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF NORTH CAROLINA. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS REMITTED UNDER THE ACT AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
TRANSBOTICS CORPORATION
6% CONVERTIBLE SUBORDINATED NOTE
$75,000.00 Charlotte, North Carolina
September 23, 2003
FOR VALUE RECEIVED, the undersigned, Transbotics Corporation, a
Delaware corporation (the "Company"), promises to pay to the order of Xxxxxxx
Xxxxxx, a resident of the State of North Carolina (the "Holder"), the principal
sum of Seventy-Five Thousand and No/100 U.S. Dollars ($75,000.00) at the
principal address of Holder in Charlotte, North Carolina, or at such other
location as is specified by written notice from Holder to the Company, together
with interest on the unpaid amount of said principal sum from time to time
outstanding at the rate per annum equal to six percent (6%), with quarterly
payments of interest commencing November 30, 2003. Principal and any accrued and
unpaid interest shall be due and payable on September 30, 2013.
If any payment of principal or interest under this note shall be due on
a Saturday, Sunday or any day on which banks in Charlotte, North Carolina are
legally closed to business, such payment shall be made on the next succeeding
business day and interest shall continue to accrue on the unpaid balance of the
principal sum of this note until the date payment is received by Holder.
This note is subject to redemption in whole or in part, by the Company
at any time after September 30, 2006 by the Company providing thirty (30) days
prior written notice and its payment of the principal of and accrued interest on
this note.
For as long as this note is outstanding, this note may be converted in
whole, but not in part, at the option of the Holder into shares of common stock
of the Company at a conversion price of $0.40 per share by providing the Company
with this note duly endorsed by Holder and the conversion notice in the form set
forth on Annex A attached hereto.
Notwithstanding any provision to the contrary contained herein, this
Note and the obligations hereunder are expressly subordinate in accordance with
the terms of Annex B hereto to the Company's obligations to its Lender referred
to in Annex B. By acceptance of this Note, the Holder hereby acknowledges and
agrees that rights under this Note are subordinate to the rights of the Lender
in accordance with the terms of Annex B hereto. The foregoing subordination
shall not impair or otherwise affect the validity, as between the Company and
the Holder, of this Note.
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This note is being delivered in the State of North Carolina and all
sums payable under this note are payable in the State of North Carolina. This
note shall be governed, construed and enforced in accordance with the
substantive laws of the United States and the State of North Carolina, without
regard to rules governing conflict of laws. The provisions of this note are
severable, and the invalidity or unenforceability of one or more of the
provisions of this note shall not affect or impair the validity or
enforceability of the remaining terms hereof.
IN WITNESS WHEREOF, the duly authorized officer of the Company has
executed this note on the date first above written.
TRANSBOTICS CORPORATION
By: /s/ Xxxxxx Xxxxxxx
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Its: President
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ANNEX A
FORM OF CONVERSION NOTICE
TRANSBOTICS CORPORATION
The undersigned owner of the 6% Convertible Subordinated Note attached hereto
irrevocably exercises the option to convert this 6% Convertible Subordinated
Note into 187,500 shares of Common Stock of Transbotics Corporation. (such
conversion being at a conversion price of $0.40 per share), and directs that the
shares issuable and deliverable upon the conversion, be issued and delivered to
the registered Holder thereof as soon as practicable hereafter. If shares are to
be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto. Any amount required to
be paid by the undersigned on account of interest and taxes accompanies this 6%
Convertible Subordinated Note.
Dated:________________ Signature: ____________________________________
Name of Holder Printed:_____________________
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(Street Address)
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(City, State and zip code)
Social Security or other Taxpayer Identification Number:_______________________
Signature Guarantee:___________________________________________________________
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ANNEX B
TO
6% CONVERTIBLE SUBORDINATED NOTE OF
TRANSBOTICS CORPORATION
1.01 Definitions. In addition to the terms defined above in this 6%
Convertible Subordinated Note, the following terms shall have the following
meanings:
"Senior Credit Agreement" means the Credit Agreement dated as of
_______, 2003, by and between the Company and the Lender referred to therein, as
amended, restated, supplemented or otherwise modified from time to time and any
and all credit agreements relating to any refinancings respecting the Senior
Indebtedness.
"Senior Default" means any Default or Event of Default under the Senior
Credit Agreement or any document referred to therein.
"Senior Indebtedness" means the obligations of the Company as described
in the Senior Credit Agreement, and in each case any amendment, restatement,
extension, renewal, or other modification thereof, and any indebtedness for
borrowed money refinancing, in whole or in part, such obligation, provided that
the principal amount of such indebtedness to which the Subordinated Note is
subordinated shall not exceed $500,000.
"Subordinated Note" means the $75,000.00 6% Convertible Subordinated
Note payable by Transbotics Corporation to the order of Xxxxxxx Xxxxxx to which
this Annex B is annexed.
1.02 Subordination Upon Distribution of Assets. Upon any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or winding-up or total
or partial liquidation or reorganization of the Company whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other proceedings or
pursuant to any assignment for the benefit of creditors or any other marshalling
of assets and liabilities of the Company (any such event is referred to herein
as a "Bankruptcy"), all Senior Indebtedness shall first be paid in full in cash
before any payment is made on account of this Subordinated Note, or to acquire
this Subordinated Note for cash or property and any such payment or distribution
which otherwise would be payable or deliverable upon or with respect to this
Subordinated Note shall be paid or delivered directly to the holder of the
Senior Indebtedness for application to the payment or prepayment of the Senior
Indebtedness until the Senior Indebtedness shall have been paid in full in cash.
1.03 Limitations on Payment. Upon the occurrence of any Senior Default
and unless and until such Senior Default shall have been cured in a manner
satisfactory to the holder of the Senior Indebtedness or effectively waived in
writing by such holder, no direct or indirect payment (in cash, property,
securities or by set-off or otherwise) shall be made of or on account of this
Subordinated Note or in respect of any redemption, retirement, purchase or other
acquisition of this Subordinated Note. Upon any such cure or waiver of such
Senior Default, the Company may pay to the Holder all sums then due and payable
under this Subordinated Note.
1.04 Payments and Distributions Received. If the Holder shall have
received any payment from or distribution of assets of the Company or proceeds
of any collateral, in respect of this Subordinated Note in contravention of the
terms of this Annex B, then and in such event such payment, distribution or
proceeds shall be received and held in trust for and shall be paid over or
delivered to the holder of Senior Indebtedness, to the extent necessary to pay
all such Senior Indebtedness in full in cash.
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1.05 Proofs of Claim. If, while any Senior Indebtedness is outstanding,
the Company shall commence or be subject to any Bankruptcy, the Holder shall
duly and promptly take such action as the holder of Senior Indebtedness may
reasonable request to collect any payment with respect to this Subordinated Note
for the account of the holder of the Senior Indebtedness and to file appropriate
claims or proofs of claim in respect of this Subordinated Note. Upon the failure
of the Holder to take any such action, the holder of Senior Indebtedness is
hereby irrevocably authorized and empowered (in its own name or otherwise), but
shall have no obligation, to demand, xxx for, collect and receive every payment
or distribution referred to in respect of this Subordinated Note and to file
claims and proofs of claim with respect of this Subordinated Note and the Holder
hereby appoints the holder of Senior Indebtedness or its representative as
attorney-in-fact for such Holder to take any and all actions permitted by this
paragraph to be taken by such Holder.
1.06 Subrogation. After all amounts payable under or in respect of
Senior Indebtedness are paid in full in cash or in a manner satisfactory to the
holders thereof, the Holder shall be subrogated to the rights of the holder of
Senior Indebtedness to receive payments or distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the Holder
have been applied to the payment of Senior Indebtedness. A distribution made
under this Annex B to a holder of Senior Indebtedness which otherwise would have
been made to the Holder is not, as between the Company and the Holder, a payment
by the Company on Senior Indebtedness.
1.07 Subordination May Not Be Impaired by the Maker. No right of any
holder of any Senior Indebtedness to enforce the subordination of this
Subordinated Note shall be impaired by any failure to act by the Company or such
holder of Senior Indebtedness or by the failure of the Company or such holder to
comply with this Subordinated Note. The provisions of this Annex B shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Senior Indebtedness is rescinded or must otherwise be
returned by any holder of Senior Indebtedness as a result of the insolvency,
bankruptcy or reorganization of the Company or otherwise, all as though such
payment had not been made.
1.08 Subordination Not Impaired: Benefit of Subordination. The Holder
agrees and consents that without notice to or assent by such Holder, and without
affecting the liabilities and obligations of the Company and any Holder and the
rights and benefits of the holders of the Senior Indebtedness set forth in this
Annex B:
(a) The obligations and liabilities of the Company and any other party
or parties for or upon the Senior Indebtedness may, from time to time, be
amended, restated, renewed, refinanced, extended, compromised, supplemented,
terminated, waived or released or otherwise modified (but shall not be increased
to a principal amount exceeding $500,000);
(b) The holder of Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may exercise or refrain from
exercising any right, remedy or power granted by or in connection with any
agreements relating to the Senior Indebtedness; and
(c) Any balance or balances of funds with the holder of Senior
Indebtedness at any time outstanding to the credit of the Company may, from time
to time, in whole or in part, be surrendered or released;
all as the holder of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
this Subordinated Note to the Senior Indebtedness provided for herein.
1.9 Amendments. The provisions of this Annex B are for the benefit of
the holders from time to time of Senior Indebtedness and, so long as any Senior
Indebtedness remains outstanding, may not be modified, rescinded or canceled in
whole or in part without the prior written consent thereto of the holder of
Senior Indebtedness.
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1.10 Covenants of Holders. Until all of the Senior Indebtedness
has been paid in full in cash.
(a) The Holder shall not sell, assign, transfer or pledge this
Subordinated Note unless expressly subject to the terms of this Annex B or take
any security or collateral to secure this Subordinated Note;
(b) The Holder shall not release, exchange, extend the time of payment
of, compromise, set off or otherwise discharge any part of this Subordinated
Note or modify or amend this Subordinated Note in such manner as to have an
adverse effect upon the rights of the holder of Senior Indebtedness without such
holder's prior written consent;
(c) The Holder hereby undertakes and agrees for the benefit of the
holder of Senior Indebtedness that, upon the occurrence and during the
continuance of a Senior Default, it shall take any actions reasonably requested
by the holder of Senior Indebtedness to effectuate the full benefit of the
subordination contained herein; and
(d) The Holder hereby undertakes and agrees for the benefit of the
holder of Senior Indebtedness that he will not vote his claim or claims with
respect to this Subordinated Note in a manner inconsistent with the terms of
this Annex B.
1.11 Miscellaneous. (a) To the extent permitted by applicable law, the
Holder of this Subordinated Note and the Company hereby waive (i) notice of
acceptance hereof by the holder of the Senior Indebtedness and (ii) all
diligence in the collection or protection of or realization upon the Senior
Indebtedness.
(b) The Company and the Holder hereby expressly agree that the holder
of Senior Indebtedness may enforce any and all rights derived herein by suit,
either in equity or law, for specific performance of any agreement contained in
this Annex B or for judgment at law and any other relief whatsoever appropriate
to such action or procedure.
(c) The Holder acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, and inducement and a consideration to
the holder of Senior Indebtedness, whether such Senior Indebtedness was created
or acquired before or after the issuance of this Agreement, and the holder of
Senior Indebtedness shall be deemed conclusively to have relied upon such
subordination provisions in acquiring and continuing to hold such Senior
Indebtedness.
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