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EXHIBIT 10.63
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT. IN ADDITION, THE TRANSFERABILITY OF THE
SECURITIES REPRESENTED HEREBY IS RESTRICTED AS SET FORTH IN SECTION 2 HEREOF.
THE XXXXXX ENTERTAINMENT COMPANY
7% Non-Negotiable Note Due 2000
$2,048,750 June 30, 1999
SECTION 1. GENERAL.
(a) THE XXXXXX ENTERTAINMENT COMPANY, a California corporation
(the "Company"), for value received, hereby promises to pay Xx. Xxxx Xxxx
("Investor") (or such Persons' permitted transferees), the aggregate principal
amount of Two Million Forty-Eight Thousand Seven Hundred and Fifty Dollars
($2,048,750) (the "Principal Amount"), together with accrued and unpaid interest
on the Principal Amount, on May 20, 2000 (the "Payment Date"), in such coin or
currency of the United States of America as at the time of payment shall be
legal tender therein for the payment of public and private debts.
(b) This Note shall accrue interest at a rate per annum of 7%
with respect to the unpaid Principal Amount plus any accrued but unpaid interest
thereon (the "Interest"), such Interest to be paid in four equal quarterly
payments on the last day of each March, June, September and December, commencing
June 30, 1999. The Company agrees to pay additional interest at the rate of 3%
per annum on any overdue principal and (to the full extent permitted by
applicable law) on any overdue Interest, from the due date thereof until the
obligation of the Company with respect to the payment thereof shall be
discharged. Interest shall be calculated on the basis of a 365 (or 366, as
applicable)-day year and the actual number of days elapsed.
SECTION 2. NON-NEGOTIABILITY; NON-TRANSFERABILITY.
(a) This Note or any interest herein shall not be negotiable,
assignable or transferable other than pursuant to (i) an effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act")
and any applicable state securities laws, or (ii) an exemption from the
requirements of the Securities Act and any applicable state securities laws and,
in addition, (A) in the case of a holder who is an individual, pursuant to
gifts, applicable laws of descent and distribution or by will among the Family
Group (as such term is defined below) of the individual holder to whom this Note
(provided that if this Note is a replacement Note, such reference shall be to
the original Note from which this Note was derived) was
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originally issued, (B) in the case of a holder which is a trust, pursuant to
gifts, applicable laws of descent and distribution or by will among the Family
Group of the direct beneficiaries of the trust to whom this Note (provided that
if this Note is a replacement Note, such reference shall be to the original Note
from which this Note was derived) was originally issued (to the extent such
beneficiaries were beneficiaries of the trust to which this Note (provided that
if this Note is a replacement Note, such reference shall be to the original Note
from which this Note was derived) was issued at the time of the issuance of such
Note), (C) in the case of any holder which is a corporation, partnership or
limited liability company, to any member of the Group (as such term is defined
below) of the holder to whom this Note is originally issued (or of the holder
which has acquired this Note in a transaction described in either clause (A)(3)
or (B)(2) of the definition of "Group", or (D) in the case of any holder, to any
other holder of a Note at the time of such negotiation, transfer or assignment;
provided that, any such transferee shall be bound by the provisions of this
Section 2 with respect to future transfers.
(b) For purposes of this Note, the following terms shall have the
following meanings:
(i) "Family Group" means, with respect to any natural Person,
(A) such Person, (B) the spouse, former spouse and issue (whether
natural or adopted) of such Person, (C) the parents or step-parents of
such Person (whether natural or adopted), (D) the siblings of such
Person (whether natural or adopted), (E) assuming such Person is
deceased, the heirs or descendants of such Person (whether natural or
adopted), and (F) any one or more trusts solely for the benefit of any
one or more of the Persons described in clause (A) through clause (E)
above;
(ii) "Group" means:
(1) In the case of any holder which is a partnership or
limited liability company, (1) such partnership and any of its
limited or general partners, (2) such limited liability company
and any of its members, (3) any corporation or other business
organization to which such partnership or limited liability
company shall sell all or substantially all of its assets or
with which it shall be merged and (4) any Affiliate of such
partnership or limited liability company; and
(2) In the case of any holder which is a corporation, (1)
such corporation, (2) such corporation or other business
organization to which such corporation shall sell or transfer
all or substantially all of its assets or with which it shall be
merged and (3) any Affiliate of such corporation.
(iii) "Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, another
Person. For the purposes of this Note, the term "control" including,
with correlative meaning, the terms "controlling," "controlled by" and
"under common control with" as used with respect to any Person means the
possession directly or indirectly of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities,
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by contract or otherwise.
(iv) "Person" shall be construed broadly and shall include,
without limitation, an individual, a partnership, an investment fund, a
limited liability company, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
government entity or any department, agency or political subdivision
thereof.
SECTION 3. PREPAYMENTS.
If the conditions for conversion of this Note set forth in
subsections 6(a), (b), (c) and (d) hereof are not fulfilled at the Company's
meeting of shareholders next held following the date of this Note (the "Annual
Meeting"), then (A) the Company may, at its sole discretion, at any time
following the completion of the Annual Meeting prepay this Note without penalty
or premium, in whole or in part, together with all accrued and unpaid interest
on the principal amount so prepaid to the date of such prepayment (the
"Prepayment Date") and (B) the Investor may at any time following the completion
of the Annual Meeting accelerate the repayment of this Note, in whole or in
part, and if this Note is so accelerated, the Company shall prepay this Note and
all accrued and unpaid interest hereon through the date of such repayment.
SECTION 4. SUBORDINATION.
Intentionally Omitted.
SECTION 5. COMPANY REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to the Investor as
follows:
(i) Organization and Qualification; Subsidiaries. The Company
and each of its Subsidiaries (as hereinafter defined) is a corporation
duly incorporated, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so incorporated, existing or
in good standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, have a Company
Material Adverse Effect (as defined below). The Company is and each of
its Subsidiaries is duly qualified or licensed as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing necessary,
except for such failure to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a
Company Material Adverse Effect. The term "Company Material Adverse
Effect" means any change, effect or circumstance that individually or
when taken together with all other such changes, effects or
circumstances that have occurred prior to the date of determination of
the occurrence of the Company Material Adverse Effect, (x) will be
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materially adverse to the business, operations, properties, assets,
financial condition or results of operations of the Company and all of
its Subsidiaries taken as a whole, or (y) will impair in any material
respect the Company's ability to perform any of its obligations or
agreements hereunder, provided that none of the following shall
constitute a Company Material Adverse Effect: (i) general changes in the
economy or changes affecting the entertainment industry in general, (ii)
the filing, initiation and subsequent prosecution, or results of
litigation that challenges or otherwise seeks damages with respect to
the issuance of this Note, or (iii) changes arising directly or
indirectly from the execution or issuance of this Note. For purposes of
this Agreement, the term "Subsidiary" shall includes the following:
Xxxxxx Comics, Inc., a New York corporation, and Xxxx Xxxx Productions,
Inc., a California corporation. The Company owns directly or indirectly
all of the issued and outstanding shares of capital stock of each of its
Subsidiaries.
(ii) Articles of Incorporation and Bylaws. The Company has
heretofore furnished to the Investor a complete and correct copy of the
Articles of Incorporation and bylaws of the Company and each of its
subsidiaries as most recently restated and subsequently amended to date.
The Articles of Incorporation and bylaws of the Company and each of the
Subsidiaries are in full force and effect. As of the date of this Note,
neither the Company nor any of its subsidiaries is in violation of any
of the provisions of its respective Articles of Incorporation or bylaws.
(iii) Capitalization. The authorized capital stock of the
Company consists of (i) 10,000,000 shares of Common Stock, (ii) 299,600
shares of Class B Common Stock (the "Class B Common Stock"), (iii)
2,830,000 shares of Series Preferred Stock (the "Series Preferred
Stock") and (iv) 170,000 shares of Series A Preferred Stock ("Series A
Preferred Stock"). As of June 15, 1999, (i) approximately 4,186,941
shares of Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable, (ii) no shares of Common
Stock were held in the treasury or by its subsidiaries and (iii)
approximately 3,169,560 shares of Common Stock were reserved for future
issuance upon exercise of outstanding options and warrants. As of June
15, 1999, (i) no shares of Class B Common Stock were issued and
outstanding or held in treasury or by the subsidiaries and (ii) no
shares of Class B Common Stock were reserved for future issuance. As of
June 15, 1999, 170,000 shares of Series A Preferred Stock were issued
and outstanding. As of June 15, 1999, (i) no shares of Series Preferred
Stock were issued and outstanding or held in treasury or by its
Subsidiaries other than the 170,000 shares of Series A Preferred Stock
mentioned in the previous sentence and (ii) no shares of Preferred Stock
were reserved for future issuance. Except as described above and except
as described in the attached disclosure schedule or contemplated hereby,
there are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell
any shares of capital stock of, or other equity interests in, the
Company. All shares of the Company's capital stock subject to issuance,
upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, will be duly authorized, validly
issued, fully paid and nonassessable. To the best of the Company's
knowledge, there are no shareholder agreements, voting trusts or other
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agreements relating to voting or disposition of any shares of the
Company's capital stock or, except as set forth in that certain Stock
Purchase Agreement dated as of April 26, 1999 by and among the Company,
Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxxx, Xxx Xxxxxxx and The Xxxxxxx-Xxxxx
Company, a copy of which has been provided to the Investor prior to the
date hereof, granting to any person or group of persons the right to
elect, or to designate or nominate for election, a director to the
Company's board of directors.
(iv) Authority Relative to the Transaction Agreements. The
Company has all necessary corporate power and authority to execute and
deliver this Note, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and
delivery of this Note and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on
the part of the Company are necessary to authorize this Note or to
consummate the transactions contemplated hereby. This Note has been duly
and validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company, enforceable against
the Company in accordance with its respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally and to general
principles of equity.
(v) No Conflicts. This Note and the transactions contemplated by
this Note will not result in a default (either by passage of time or
otherwise) of any material contract to which the Company is a party.
(vi) Litigation. As of the date of this Note, except as set
forth in the attached disclosure schedule, there is no suit, claim,
action, proceeding or investigation pending, or, to the Company's best
knowledge, threatened against the Company or any of its Subsidiaries
that could reasonably be expected to have a Company Material Adverse
Effect or prevent or materially delay the consummation of the
transactions contemplated hereby.
(vii) Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Company.
(viii) Shares Fully Paid, Etc. The shares of Series A Preferred
Stock, when issued and paid for pursuant to the terms of this Note, and
any additional shares of Series A Preferred Stock issued as dividends
pursuant to the terms and conditions of the Company's certificate of
determination for the Series A Preferred Stock as it is proposed to be
amended in accordance with the terms of this Note (and assuming it is so
amended) (the "Amended Certificate of Determination"), will be duly
authorized, validly issued and outstanding, fully paid, nonassessable
shares and shall have all rights, privileges and preferences specified
in the Amended Certificate of Determination and shall be free and clear
of all pledges, liens, encumbrances and restrictions. Subject to
receiving the approval of holders of Common Stock and Series A Preferred
Stock, the Company will reserve for issuance the shares of Common Stock
issuable upon conversion of Series A
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Preferred Stock acquired upon conversion of this Note ("Conversion
Shares") and shares of Common Stock issuable upon exercise of the
warrants issuable upon conversion of this Note (the "Warrant Shares"),
and when issued upon conversion or exercise, as the case may be, such
shares will be duly authorized, validly issued and outstanding, fully
paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions.
(ix) Shares of Common Stock. The outstanding shares of Common
Stock of the Company are duly authorized, validly issued, fully paid and
non-assessable, and have been issued in full compliance with the
Securities Act and applicable blue sky laws.
(x) No Preemptive Rights. The issuance, sale and delivery of
this Note and, assuming the conditions in Section 6 hereof have been
met, of the Series A Preferred Stock, Warrants, Conversion Shares and
Warrant Shares are not subject to any preemptive right of shareholders
of the Company arising under law or the Articles of Incorporation or
Bylaws or to any contractual right of first refusal or other contractual
right in favor of any Person.
(b) The Investor hereby represents and warrants to the Company
that:
(i) This Note being acquired by the Investor is being acquired
and, when acquired, the shares of Series A Preferred Stock and the
Warrants issuable upon conversion of this Note, and the Conversion
Shares and Warrant Shares, will be acquired for investment for such
Investor's own account and not with the view to, or for resale in
connection with, any distribution or public offering thereof. Such
Investor understands that this Note, the shares of Series A Preferred
Stock, the Conversion Shares, the Warrants and the Warrant Shares have
not been registered under the Securities Act or any state securities
laws by reason of their contemplated issuance in transactions exempt
from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof and applicable state securities laws, and that the
reliance of the Company and others upon these exemptions is predicated
in part upon this representation by the Investor. The Investor further
understands that this Note, the shares of Series A Preferred Stock, the
Conversion Shares, the Warrants and the Warrant Shares may not be
transferred or resold without (i) registration under the Securities Act
and any applicable state securities laws, or (ii) an exemption from the
requirements of the Securities Act and applicable state securities laws.
(ii) This Note, the shares of Series A Preferred Stock,
Conversion Shares, Warrants and Warrant Shares are only transferrable
pursuant to (a) a public offering registered under the Securities Act,
(b) an exemption from the registration requirements of the Securities
Act and applicable state securities or blue sky laws, (c) a transfer not
involving a change in beneficial ownership or (d) in the case of a
partnership, distribution of such securities to its partners or a
partner's estate.
(iii) Each certificate representing shares of Series A Preferred
Stock, Conversion Shares, Warrants and Warrant Shares shall be endorsed
with the following legend:
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THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR WITH THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THOSE SECURITIES LAWS (IF REQUESTED BY THE COMPANY, UPON PROVISION OF
AN OPINION OF COUNSEL IN FORM SATISFACTORY TO THE COMPANY).
(iv) Location of Principal Office, Qualification, etc. The state
in which the Investor's domicile is located is the state set forth in
the Investor's address in Section 14 of this Note. The Investor
acknowledges that the Company has made available to the Investor at a
reasonable time prior to the execution of this Note the opportunity to
ask questions and receive answers concerning the terms and conditions of
the sale of securities contemplated by this Note and to obtain any
additional information (which the Company possesses or can acquire
without unreasonable effort or expense) as may be necessary to verify
the accuracy of information furnished to the Investor. The Investor (a)
is able to bear the loss of its entire investment in the shares of
Series A Stock without any material adverse effect on its business,
operations or prospects, and (b) has such knowledge and experience in
financial and business matters that it is capable of evaluating the
merits and risks of the investment to be made by it pursuant to this
Agreement.
(v) Acts and Proceedings. This Note has been duly authorized by
all necessary action on the part of the Investor, has been duly executed
and delivered by the Investor, and is a valid and binding agreement of
the Investor.
(vi) No Brokers or Finders. No person, firm or corporation has
or will have, as a result of any act or omission by the Investor, any
right, interest or valid claim against the Company for any commission,
fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Note.
The Investor will indemnify and hold the Company harmless against any
and all liability with respect to any such commission, fee or other
compensation which may be payable or determined to be payable as a
result of the actions of the Investor in connection with the
transactions contemplated by this Note.
(vii) Accredited Investor. The Investor is an "accredited
investor" within the meaning of Rule 501 promulgated under the
Securities Act.
(viii) Reliance by the Company. The Investor acknowledges and
agrees
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that the Company may rely upon the representations made by it in this
Section 5(b) in connection with its issuance to the Investor of the
Series A Preferred Stock and the Warrants upon the conversion of this
Note.
(ix) Note. The Investor has read and understands fully the terms
of this Note, including the exhibits hereto.
SECTION 6. CONVERSION INTO SHARES OF SERIES A PREFERRED STOCK; WARRANTS.
(a) Upon the satisfaction of the conditions specified below, this
Note shall automatically be converted into 20,488 shares of the Company's Series
A Preferred Stock and 144,618 warrants ("Warrants") to purchase the Company's
common stock, no par value ("Common Stock") and all accrued and unpaid interest
shall be paid in cash:
(i) the approval of a majority of the holders of the Series A
Preferred Stock and Common Stock voting together as a single class to
authorize additional shares of Common Stock sufficient to cover the
additional shares of Common Stock issuable upon the conversion of Series
A Preferred Stock and exercise of Warrants issuable upon conversion of
this Note;
(ii) the approval of a majority of the holders of the Series A
Preferred Stock to authorize additional shares of Series A Preferred
Stock and the issuance and sale of such shares;
(iii) the approval of a majority of the holders of the Series A
Preferred Stock and Common Stock, voting together as a single class to
authorize additional shares of Series A Preferred Stock and the issuance
and sale of such shares.
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(iv) the approval of the holders of the Series A Preferred Stock
and Common Stock voting together as a single class to convert this Note
into shares of Series A Preferred Stock and Warrants; and
(v) the filing with the Secretary of State of California and
effectiveness thereof, of the Amended Certificate of Determination for
Series A Preferred Stock authorizing the issuance and sale of additional
shares of Series A Preferred Stock.
(b) The Warrants shall have the terms and conditions set forth in
the Form of Warrant Agreement attached hereto as Exhibit A.
SECTION 7. COVENANTS.
(a) The Company hereby agrees that:
(i) In connection with the Annual Meeting, the Company will (A)
prepare a proxy statement as required by the regulations of the
Securities Exchange Act of 1934, as amended, and will include therein as
part of the proposals to be voted upon by the Company's shareholders at
such Annual Meeting, the matters set forth in Section 6 hereof (the
"Proposals") and (B) make a good faith effort to solicit proxies in
favor of the Proposals.
(ii) The Company will hold the Annual Meeting as soon as
practicable, and in any event not later than September 30, 1999.
(iii) Upon approval by the requisite shareholders of the matters
set forth in Section 6 hereof at the Annual Meeting, the Company will
(A) promptly prepare and file with the Secretary of State of California
the Amended Certificate of Determination in substantially the form
attached hereto as Exhibit B and (B) reserve for issuance that number of
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of Warrants issuable upon conversion of
this Note.
(iv) In connection with the execution and delivery of this Note,
the Company will deliver the opinion of Xxxx, Scholer, Fierman, Xxxx &
Handler, LLP in the form previously provided to the Investor.
(b) Covenant of the Investor.
(i) In the event (and on each occasion) that prior to the
conversion of the Series A Preferred Stock, the Investor shall seek to
sell its shares of Series A Preferred Stock to any person or entity
(other than (i) an affiliate of the Investor or another "Investor" (as
defined in that certain Stock Purchase Agreement made and entered into
as of April 7, 1999 among the Company, The Xxxxxxx-Xxxxx Company,
Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxxx and Xxx Xxxxxxx) (each an "Other
Investor") or an affiliate of any Other Investor, or (ii) any family
member of the Investor or any Other Investor or in connection with
estate planning matters), the Investor shall obtain a bona
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fide written offer from such person or entity and give the Company
written notice (a "Sale Notice") describing the material terms of such
offer, including the identity of such person or entity and the proposed
closing date. The Company shall have ten (10) business days from the
date on which the Investor shall give the written Sale Notice to agree
to purchase all or any portion of such shares of Series A Preferred
Stock, upon the terms (other than the proposed closing date) specified
in the Sale Notice, by giving written notice (the "Purchase Notice") to
the Investor. If the Company agrees to purchase all or any portion of
such shares in accordance with the foregoing, the closing of such
purchase shall occur on a date chosen by the Company which is no later
than the later of (x) the closing date specified in the Sale Notice and
(y) ten (10) Business Days (defined below) from the date of the Purchase
Notice. If the Company does not agree to purchase such shares, the
Investor may sell such shares to such person or entity on or prior to
the closing date set forth in the Sale Notice on terms and conditions no
less favorable to the Investor than those set forth in the Sale Notice.
If the Investor fails to timely provide the Company with a Sale Notice
prior to selling shares of Series A Preferred Stock, the Company may, in
its sole discretion, refuse to permit the transfer of such shares of
Series A Preferred Stock on its stock transfer ledger. The provisions of
this Section 7(b) shall terminate with respect to any shares of Series A
Preferred Stock which are converted into shares of Common Stock (or
other securities or assets) pursuant to the terms of the Amended
Certificate of Determination.
SECTION 8. REGISTRATION RIGHTS; WARRANTS.
In connection with the issuance and sale of the Series A
Preferred Stock and the Warrants to the Investor upon the satisfaction of the
conditions set forth in Section 6 hereof, the Company shall execute and deliver
to the Investor the Registration Rights Agreement, in substantially the form
attached hereto as Exhibit C and the Warrant Agreement, in substantially the
form attached hereto as Exhibit A.
SECTION 9. REPLACEMENT OF NOTE.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Note and, in case of loss, theft
or destruction, of indemnity reasonably satisfactory to it, or, in the case of
mutilation or at the request of the Investor, upon surrender and cancellation of
this Note, and in all cases upon reimbursement to the Company of all reasonable
expenses incidental thereto, the Company will make and deliver a new Note of
like tenor in lieu of this Note. A holder, through the Investor, may also
request that this Note be exchanged for one or more Notes of like tenor in the
same aggregate principal amount as such Note being exchanged, subject to the
provisions of Section 2 hereof, and appropriate notation on any newly issued
Note to indicate which holders have an interest therein.
SECTION 10. AMENDMENTS AND WAIVERS.
No covenant, agreement or condition contained in this Note may be
amended or waived (either generally or in a particular instance and either
retroactively or prospectively) without the prior written consent of the
Investor (in its sole discretion) and the Company;
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provided, however, that the provisions of Section 1, Section 3, Section 4 hereof
and this Section 10 may not be amended or modified without the prior written
consent of the holders of the Designated Senior Debt. Any such amendment or
waiver shall be binding upon each of the Investor, each future holder of this
Note and the Company. Upon the request of the Company, the Investor or any
holder of this Note shall submit this Note to the Company so that this Note may
be marked to indicate such amendment or waiver, and any Note issued thereafter
shall bear a similar notation referring to any such amendment or continuing
waiver.
SECTION 11. EVENT OF DEFAULT.
(a) In case of the occurrence of any of the following events (an
"Event of Default"):
(i) default shall be made in the payment of the principal of or
interest on this Note, when and as the same shall become due and
payable, whether at the due date thereof or by acceleration thereof or
otherwise and such default, (A) in the case of interest due, shall
continue unremedied for five (5) Business Days after written notice from
the holder of this Note to the Company of such default and (B) in the
case of principal due, shall continue unremedied for two (2) Business
Days after written notice from the holder of this Note to the Company of
such default (for the purpose of this Note "Business Day" shall mean any
day other than a Saturday, Sunday or other day or in which commercial
banks in the State of California are authorized or required to be
closed);
(ii) the Company shall (A) apply for or consent to the
appointment of a receiver, trustee or liquidator for itself or all or a
substantial part of its property, (B) admit in writing its inability to
pay its debts as they mature, (C) make a general assignment for the
benefit of creditors, (D) be adjudicated a bankrupt or insolvent, (E)
file a voluntary petition in bankruptcy or petition or answer seeking a
reorganization or an arrangement with its creditors, (F) take advantage
of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute or file an answer admitting
the material allegations of a petition filed against it in any
proceeding under any such law or (G) take any corporate action for the
purpose of effecting any of the foregoing;
(iii) an order, judgment or decree shall be entered, without the
application, approval or consent of the Company, by any court of
competent jurisdiction, approving a petition seeking reorganization of
the Company or all or a substantial part of the assets of the Company,
or appointing a receiver, trustee or liquidator of the Company, and such
order, judgment or decree shall continue unstayed and in effect for any
period of 90 days;
(iv) any material breach by the Company of: (A) any provision of
this Note (other than those described in subpart (i) of this Section
11(a) and Section 7(a) hereof) and the failure to cure such breach
within ten (10) days after written notice from the Investor to the
Company of such default and (B) any provision of Subsection 7(a)(ii) of
this Note and the failure to cure such breach within twenty (20) days
after written
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notice from the Investor to the Company, in each case provided that such
breach is subject to cure; or
(v) a default occurs under the Primary Bank Facility (as defined
below), provided that, as a result of such default, the maturity of any
Senior Debt under the Primary Bank Facility (as defined below) has been
accelerated prior to its expressed maturity;
then the Investor may declare this Note to be forthwith due and payable,
whereupon this Note shall become forthwith due and payable, both as to principal
and interest, without presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived. The term "Senior Debt" means (i) all
indebtedness (including any debt securities) of the Company and/or its
subsidiaries whether outstanding on the date hereof or hereafter created
(including all principal, interest, fees and expenses) owed to any person(s) or
entity for (A) money borrowed by, or purchase money obligations of, the Company
and/or its subsidiaries or (B) guarantees by the Company and/or its subsidiaries
of money borrowed or purchase money obligations, and (ii) all deferrals,
renewals, extensions, refinancings and refundings of, and amendments,
modifications and supplements to any such indebtedness, unless, by the terms of
the instrument creating or evidencing any such indebtedness, it is expressly
provided that such indebtedness is not superior in right of payment to this
Note. "Senior Debt" includes interest that accrues on any such indebtedness
after the commencement of any case or proceeding relating to the bankruptcy or
insolvency of the Company and/or its affiliates (whether or not such interest is
allowed or allowable as a claim in such case or proceeding. The term "Primary
Bank Facility" means all indebtedness under the Company's primary bank credit
facility existing from time to time, including as amended or restated from time
to time).
(b) In case any one or more of the Events of Default shall have
occurred and be continuing, the holder of this Note may proceed to protect and
enforce its rights either by suit in equity and/or by action at law, whether for
the specific performance of any covenant or agreement contained in this Note or
in aid of the exercise of any power granted in this Note, or proceed to enforce
the payment of this Note or to enforce any other legal or equitable right of a
holder of this Note.
(c) No remedy conferred hereunder is intended to be exclusive of
any other remedy and each and every such remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or hereafter existing at law
or in equity or by statute or otherwise. No course of dealing between the
Company and the holder of this Note or any delay on the part of the holder of
this Note in exercising its rights hereunder shall operate as a waiver of any
rights of such holder.
(d) The Company hereby waives notice of protest, dishonor, intent
to accelerate, acceleration and all other notices of any type or character,
demand, presentment for payment, protest, diligence in collecting or bringing
suit and notice, other than required service, with respect to the filing of suit
for the purpose of fixing liability.
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SECTION 12. EXTENSION OF MATURITY.
Should the principal of and interest on this Note become due and
payable on other than a Business Day, the maturity hereof shall be extended to
the next succeeding Business Day, and principal and interest shall be payable
thereon at the rate per annum herein specified during such extension.
SECTION 13. SUCCESSORS AND ASSIGNS.
The provisions of this Note shall be binding upon and inure to
the benefit of the Company and its successors and permitted assigns, and to the
holder and its successors and permitted assigns and their respective heirs,
executors, administrators and duly appointed legal representatives who shall
succeed to the holder's rights and obligations in, to and under this Note
pursuant to Section 2 hereof.
SECTION 14. NOTICES.
All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(i) if to the holder to:
Xxxx Xxxx
c/o Azteca Productions
0000 X. Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxx
Telecopier: 000-000-0000
(ii) with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
Seventeenth Floor
000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopier: 000-000-0000
(iii) if to the Company:
The Xxxxxx Entertainment Company Inc.
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
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Attention: Xxxxxx X. Xxxxxx
Chief Financial Officer
Telecopier: 000-000-0000
with a copy to:
Xxxx, Scholer, Fierman, Xxxx & Handler, LLP
0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: 310-788-1200.
All such notices and other communications shall be deemed to have been given and
received (A) in the case of personal delivery, on the date of such delivery, (B)
in the case of delivery by telecopy, on the date of such delivery, (C) in the
case of delivery by nationally-recognized, overnight courier, on the Business
Day following dispatch, and (D) in the case of mailing, on the third Business
Day following such mailing.
Either party may change its address from time to time for
purposes of notice or other communication hereunder by giving notice to the
other party in accordance with this section.
SECTION 15. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF CALIFORNIA OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF CALIFORNIA.
SECTION 16. EXPENSES.
Each of the parties shall pay its own expenses incurred in
connection with the preparation, negotiation, execution and delivery of this
Note, including all Exhibits hereto. The Company agrees to pay or reimburse the
Investor for its reasonable costs and expenses (including reasonable legal fees
and costs) incurred by the Investor in connection with the enforcement of its
rights under this Note.
SECTION 17. INTEREST DEFICIT.
If the provisions of this Note would at any time require payment
by the Company to the holder of any amount of interest in excess of the maximum
amount then permitted by applicable law, the interest payments to the holder
shall be reduced but only to the extent necessary so that such holder shall not
receive interest in excess of such maximum amount. If, as a result of the
foregoing, a holder shall receive interest payments under the Note in an amount
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less than the amount otherwise provided hereunder, such deficit (hereinafter
called the "Interest Deficit") will, to the fullest extent permitted by
applicable law, cumulate and will be carried forward (without interest) until
the payment in full of this Note or such earlier time as it may be paid.
Interest otherwise payable to the holder under the Note for any subsequent
period shall be increased by the maximum amount of the Interest Deficit that may
be so added without causing such holder to receive interest in excess of the
maximum amount then permitted by the law applicable thereto.
The amount of any Interest Deficit relating to a particular Note
(if any) shall be treated as a prepayment penalty and shall, to the fullest
extent permitted by applicable law, be paid in full at the time of any optional
prepayment by the Company to the holder of the Note. The amount of any Interest
Deficit relating to a particular Note at the time of any complete payment of the
Note (if any) (other than an optional prepayment thereof) shall, except to the
full extent then permitted to be paid under applicable law, be canceled and not
paid. The parties agree that if this Note did not have the conversion features
set forth herein, the interest rate would only be 1% more than the rate stated
on the face hereof.
IN WITNESS WHEREOF, each of the parties hereto has duly executed
and delivered this Note as of the date first written above.
THE XXXXXX ENTERTAINMENT COMPANY
By:
-------------------------------
Name:
Title:
Xxxx Xxxx
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DISCLOSURE SCHEDULE TO
NOTE
DATED AS OF JUNE 30, 1999
Introduction
------------
This Disclosure Schedule of The Xxxxxx Entertainment Company, a
California corporation (the "Company"), has been prepared in connection with the
Note, dated June 30, 1999, in the amount of $2,048,750 made by the Company in
favor of Xxxx Xxxx (the "Investor").
The disclosure of any matter in this disclosure schedule should not be
construed as indicating that such matter is necessarily required to be disclosed
in order for any representation or warranty in the Note to be true and correct
in all material respects.
Any description of any document included in this disclosure schedule is
qualified in all respects by reference to such documents. Except as set forth in
the Note, by accepting this disclosure schedule, the Investor acknowledges that
the Company makes no representations or warranties, express or implied, to the
Investor, and the Investor shall not be entitled to rely upon any other matters
with respect to the transactions contemplated in the Note. Headings in this
disclosure schedule are for convenience only and shall not affect in any way
the meaning of this disclosure schedule.
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Company Option Securities
-------------------------
The Xxxxxx Entertainment Company Options and Warrants
Number of Options
-----------------
Xxxx Xxxx - 5/94 5,000
Xxxx Xxxx - 5/95 2,500
Xxxx Xxxx - 5/96 2,500
Xxxx Xxxx - 3/96 7,500
Xxxx Xxxx - 5/97 10,000
Xxxx Xxxx - 6/97 20,000
Xxxx Xxxx - 4/98 50,000
Xxxx Xxxx - 5/98 10,000
Xxxx Xxxx - 5/99 10,000
Xxxxxxx Xxxxxxx - 5/98 10,000
Xxxxxxx Xxxxxxx - 5/99 10,000
Xxxxxxx X. Xxxxx - 5/99 10,000
Xxxxxx Xxxxxxx - 5/99 5,000
Xxxxx Xxxxx - 5/99 5,000
Xxxxx Xxxxxxx - 5/95 2,500
Xxxxx Xxxxxxx - 3/96 7,500
Xxxxx Xxxxxxx - 5/96 2,500
Xxxxx Xxxxxxx - 5/97 10,000
Xxxxx Xxxxxxx - 6/97 20,000
Xxxxx Xxxxxxx - 5/98 10,000
Xxxxxxx Xxxxxx Warrants - 3/98 155,200
Xxxxxxx Xxxxxx - 4/98 38,800
Xxxxxxx Xxxxxx - 7/98 77,600
Xxxxxxx Xxxx Warrants - 3/98 38,800
Xxxxxxx Xxxx - 4/98 9,700
Xxxxxxx Xxxx - 7/98 19,400
Xxxxxxx Xxxxxx Warrants - 3/98 6,000
Xxxxxxx Xxxxxx - 4/98 1,500
Xxxxxxx Xxxxxx - 7/98 3,000
Xxxxxxx Xxx - 10/96 11,500
Xxxxxxx Xxx - 12/97 5,000
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Number of Options
-----------------
Other Employees 93 & 95 10,650
Other Employees - 5/97 20,500
Xxxxxxx Xxxxxxx Warrants - 1/97 25,000
Xxxxxxx Xxxxxxx Warrants - 3/98 25,000
Xxxxxxx & S. Bleichroeder Warrants - 1/97 25,000
Xxxxxxx & X. Xxxxxxxxxxxx Warrants - 3/98 25,000
Xxxxx Xxxxxxx - 5/98 10,000
Investors and Management 4/99 2,400,000
Cruttenden & Co. 52,000
Total 3,169,650
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Litigation
----------
Realty Trust Advisors, Inc. v. The Xxxxxx Entertainment Company, Inc. (Los
Angeles Superior Court Case No. SC 050660).
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