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X.X. XXXXXXXX, INC.
Subordinated Note
due March 15, 2000
$2,500,000.00 CUSIP PPN No: 749573 AA 9
San Francisco, California
X.X. Xxxxxxx, Inc., a California corporation (the "Company"), for value
received, hereby promises to pay to Xxxx Xxxxxxx Life Insurance Company
or registered assigns, the principal sum of TWO MILLION FIVE HUNDRED
THOUSAND DOLLARS ($2,500,000.00) as specified herein; and to pay interest
on the unpaid principal balance hereof until this Note shall become due
and payable in accordance with the terms hereof and of that certain
Securities Exchange Agreement dated as of March 15, 2000 (the
"Securities Exchange Agreement") between the Company and Xxxx
Xxxxxxx Life Insurance Company at the rate of 14% per annum.
If any installment of principal, premium or interest is not paid
as and within the date when such payment is due or following
acceleration or maturity, the provisions of Section 7 of the
Securities Exchange Agreement shall apply.
1. Interest and Principal Payments. If the Company shall have paid
or agreed to pay any interest or premium on this Note in excess of that
permitted by law, then it is the express intent of the Company and the
holder hereof that all excess amounts previously paid or to be paid by
the Company be applied to reduce the principal balance of this Note,
and the provisions hereof immediately be deemed reformed and the amounts
thereafter collectable hereunder reduced, without the necessity of the
execution of any new document, so as to comply with the then applicable
law, but also so as to permit the recovery of the fullest amount
otherwise called for hereunder.
Interest shall be due and payable on each March 15 and September 15
beginning September 15, 2000 and ending when all outstanding amounts
hereunder have been paid. Principal in the amount of $833,333 shall
be due and payable on each of March 15, 2004 and March 15, 2005 and
in the amount of $833,334 shall be due and payable on March 15, 2006.
Notwithstanding anything to the contrary contained herein or in the
Securities Exchange Agreement, however, the final payment due hereunder
(whether at maturity, by acceleration or otherwise) shall be in an amount
sufficient to pay in full all outstanding principal, together with all
accrued interest and premiums due hereon.
The interest rate payable on this Note shall increase by one percent
upon any failure of the Company to make payments when due hereunder.
Interest on this Note shall be computed on the basis of a 360-day year
of twelve 30-day months.
2. Series. This Note is one of a series of Unsecured Subordinated
Notes issued pursuant to the Securities Exchange Agreement and is
entitled to the benefits thereof. All capitalized terms not otherwise
defined herein shall have the meanings set forth therein in the
Securities Exchange Agreement. The Company agrees to perform and
observe duly
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and punctually each of the covenants and agreements set
forth in the Securities Exchange Agreement. All such covenants and
agreements are incorporated by reference in this Note, and this Note
shall be interpreted and construed as if all such covenants and
agreements were set forth in full in this Note at this place.
3. Prepayment. As and to the extent provided in the Securities
Exchange Agreement, this Note is subject to prepayment, in whole or
in part, with premium. The Company agrees to make required prepayments
on account of this Note in accordance with the provisions of the
Securities Exchange Agreement. Under certain circumstances, as
specified in the Securities Exchange Agreement, the principal of
and accrued interest on this Note may be declared due and payable
in the manner and with the effect provided in the Securities Exchange
Agreement.
4. Restrictions on Transfer. This Note has not been registered
under the Securities Act of 1933, as amended, or the laws of any
state and may be transferred in whole or in part only pursuant to
an effective registration statement under such Act and applicable
state laws or under an exemption from such registration available
under such Act and applicable state law. Subject to the foregoing,
transfers of this Note shall be registered upon registration books
maintained for such purpose by or on behalf of the Company as provided
in the Securities Exchange Agreement.
5. Method of Payment. Payment of principal, premium, if any, and
interest shall be made to the registered holder hereof by direct
wire transfer of immediately available funds pursuant to the
instructions provided by the registered holder or shall otherwise
be made by such other method as directed by the registered holder
hereof in accordance with the Securities Exchange Agreement. Prior
to presentation of this Note for registration of transfer, the
Company shall treat the registered holder hereof as the owner and
holder of this Note for the purpose of receiving all payments of
principal and interest hereon and for all other purposes whatsoever,
whether or not this Note shall be overdue, and the Company shall
not be affected by notice to the contrary.
6. Subordination. Anything in this instrument to the contrary
notwithstanding, the indebtedness evidenced by this instrument
shall be subordinated and junior in right of payment, to the
extent and in the manner hereinafter set forth, to all Senior
Debt of the Company and its Subsidiaries. The term "Senior Debt"
shall mean the principal of, premium, if any, and interest on any
present or future Indebtedness of the Company that is not, by the
express terms of the instrument that evidences the Indebtedness or
any related agreement, subordinated in right of payment to any
other Indebtedness of the Company.
6.1. Payments on Subordinated Notes. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, make
or agree to make, and neither the holder nor any assignee or successor
holder of any Notes will demand, accept or receive, (a) any payment
(by set-off or otherwise), direct or indirect, of or on account of
any principal, premium, if any, or interest in respect of any Notes,
or (b) any payment for the purpose of any redemption, purchase or
other acquisition, direct or indirect, of any Notes, and no such
payment shall be due, if, at the time of making any such payment a
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default (a "Payment Default") in the payment when due (whether
at the stated maturity thereof, by acceleration or otherwise) of
all or any portion of any of the Senior Debt shall have occurred
and be continuing.
Following an acceleration of the maturity of any Senior Debt, and as
long as such acceleration shall continue unrescinded and unannulled,
such Senior Debt shall first be paid in full in cash, securities or
other property before any payment is made on account of or applied
on the Notes.
6.2. Insolvency, etc. In the event of (a) any insolvency,
bankruptcy, receivership, liquidation, reorganization, readjustment,
composition or other similar proceeding relating to the Company,
its Subsidiaries or its property, (b) any proceeding for the
liquidation, dissolution or other winding-up of the Company, voluntary
or involuntary, and whether or not involving insolvency or bankruptcy
proceedings, (c) any assignment for the benefit of creditors, or (d)
any distribution, division, marshalling or application of any of the
properties or assets of the Company or the proceeds thereof to
creditors, voluntary or involuntary, and whether or not involving
legal proceedings, then and in any such event:
(i) all Senior Debt shall first be paid in full (including all
principal, premium, if any, and interest, including interest accruing
after the commencement of any such proceeding) before any payment or
distribution of any character, whether in cash, securities or other
property shall be made in respect of any Notes;
(ii) all principal or premium, if any, and interest on the Notes
shall forthwith become due and payable, and any payment or distribution
of any character, whether in cash, securities or other property,
which would otherwise (but for the terms hereof) be payable or
deliverable in respect of any Notes, shall be paid or delivered
directly to the holders of the Senior Debt, for application to the
payment of the Senior Debt, until all Senior Debt shall have been
paid in full, and the holders of the Notes at the time outstanding
irrevocably authorize, empower and direct all receivers, trustees,
liquidators, conservators, fiscal agents and other having authority
in the premises to effect all such payments and deliveries;
(iii) each holder of the Notes at the time outstanding irrevocably
authorizes and empowers each holder of the Senior Debt and such holder's
representatives (without imposing any obligation on any holder of the
Senior Debt or such holder's representative) to demand, sue for, collect
and receive such holder's ratable share of all such payments and
distributions and to receipt therefor, and to file and prove all
claims therefor and take all such other action (including the right
to vote the Notes) in the name of such holder or otherwise, as such
holder of the Senior Debt or such holder's representative may
determine to be necessary or appropriate for the enforcement of
this 6.2; and
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(iv) the holders of the Notes shall execute and deliver to each
holder of the Senior Debt or such holder's representative all such
further instruments confirming the above authorization, and all
such powers of attorney, proofs of claim, assignments of claim and
other instruments, and shall take all such other action as may be
reasonably requested by such holder of the Senior Debt or such
holder's representative to enforce all claims upon or in respect
of the Notes.
For all purposes of this instrument, Senior Debt shall not be deemed
to have been paid in full unless the holders thereof shall have
received cash, securities or other property equal to the amount
of principal, premium, if any, and interest in respect of all
Senior Debt at the time outstanding, and in case there are two
or more holders of the Senior Debt any payment or distribution
required to be paid or delivered to the holders of the Senior
Debt shall be paid or delivered to such holders ratably according
to the respective aggregate amounts remaining unpaid on the Senior
Debt held by such holders.
6.3. Payments and Distributions Received. If any payment or
distribution of any character, whether in cash, securities or
other property, shall be received by any holder of any of the
Notes, or such holder's representative, in contravention of any
of the terms of this instrument, such payment or distribution or
security shall be held in trust for the benefit of, and shall be
paid over or delivered and transferred to, the holders of the
Senior Debt or such holders' representative or representatives
for application to the payment of all Senior Debt remaining unpaid,
to the extent necessary to pay all such Senior Debt in full.
In the event of the failure of any holder of any of the Notes
to endorse or assign any such payment or distribution, any holder
of the Senior Debt or such holder's representative is hereby
irrevocably authorized to endorse or assign the same.
6.4. Subrogation. In case cash, securities or other property
otherwise payable or deliverable to the holders of the Notes shall
have been applied pursuant to 6.2 or 6.3 hereof to the payment
of Senior Debt in full, then and in each such case, the holders
of the Notes shall be subrogated to any rights of any holders of
Senior Debt to receive any further payments or distributions in
respect of or applicable to the Senior Debt.
6.5. Security. So long as any of the Senior Debt shall not have
been paid in full, the Company shall not, and shall not permit any
of its Subsidiaries to, give, and the holders of the Notes shall
not demand, accept or receive, any security, direct or indirect,
for any Notes.
6.6. Limitation on Exercise of Remedies. Each holder of all or
any part of the Notes shall not exercise any right or remedy available
to it on account of any Default or Event of Default unless (a)
payment on any Senior Debt shall have been accelerated or (b)
at least six months have elapsed from the date the holder of
such Notes otherwise would have had the right to exercise any
such right or remedy. If the acceleration of any Senior Debt
is subsequently rescinded, then each holder of Notes shall also
rescind its exercise of any right or remedy available to it only
if the Default or Event of Default giving rise to such right is
cured within six months of the occurrence of such Default or Event
of Default.
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6.7. Right to Current Payments on Notes. Nothing in this Section
6 shall limit the right of any Note holder to receive payments and
prepayments on the Notes when no payment default has occurred with
respect to the Senior Debt or when any acceleration of the payment
of any Senior Debt has been rescinded as provided in 6.6.
6.8. Governing Law. This Note shall be governed by and construed
in accordance with the law of the State of California without
reference to conflicts of law rules.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.
X.X. XXXXXXXX, INC.,
a California corporation
By:
Name:
Title:
