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EXHIBIT 2
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
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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 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, by contract or
otherwise.
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(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 materially adverse to the business, operations,
properties, assets, financial condition or
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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
agreements relating to voting or disposition of any shares of the
Company's capital stock
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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
Preferred Stock acquired upon conversion of this Note ("Conversion
Shares") and shares
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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 that the Company may rely upon the
representations made by it in this Section 5(b) in
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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 fide
written
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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.
SECTION 12. EXTENSION OF MATURITY.
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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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