EXHIBIT 4.5
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE HEREUNDER HAVE BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR SUCH SHARES MAY BE SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON (1) SUCH
REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF THIS NOTE OR SUCH SHARES OF AN
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF THIS NOTE OR
SUCH SHARES OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE
EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN
VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS PROMULGATED
THEREUNDER.
THE PAYMENT OF THE PRINCIPAL OF, AND INTEREST ON, AND ALL OTHER AMOUNTS OWING IN
RESPECT OF THE INDEBTEDNESS EVIDENCED BY, THIS NOTE, IS AND SHALL BE EXPRESSLY
SUBORDINATED, TO THE EXTENT AND IN THE MANNER SET FORTH IN THAT CERTAIN
SUBORDINATION AGREEMENT DATED JUNE ___, 1997, AMONG THE COMPANY, THE PAYEE, THE
CHASE MANHATTAN BANK, TEXAS COMMERCE BANK NATIONAL ASSOCIATION (COLLECTIVELY,
"LENDERS"), AND THE CHASE MANHATTAN BANK ("AGENT"), AS AGENT FOR LENDERS.
ISSUE DATE: JUNE 12, 1997
THE SAFE SEAL COMPANY, INC.
5.0% CONVERTIBLE SUBORDINATED NOTE
NO. 1 HOUSTON, TEXAS $3,027,982.60
THE SAFE SEAL COMPANY, INC., a Texas corporation with offices at
00000 Xxxxxxx Xxxxx, Xxxxx X000, Xxxxxxx, Xxxxx 00000 (hereinafter referred to
as the "Company"), for value received, hereby promises to pay to the order of
XXXXX X. XXXXXX (the "Payee"), at 0000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx 00000
the sum of THREE MILLION, TWENTYSEVEN THOUSAND, NINE HUNDRED EIGHTY-TWO AND
60/100 DOLLARS ($3,027,982.60), together with interest on the unpaid principal
balance hereof from the date hereof until payment in full, in lawful money of
the United States of America which shall be legal tender for the payment of
debts from time to time, at a per annum rate of Five Percent (5.0%) prior to
maturity. All past due principal on this Note shall bear interest from and after
maturity until paid at a per annum rate equal to the lesser of (i) nine percent
(9.0%), or (ii) the maximum nonusurious rate allowable under applicable law.
1
This 5.0% Convertible Subordinated Note (hereinafter referred to
as the "Note") is being issued by the Company pursuant to the terms of a Stock
and Real Estate Purchase Agreement (the "Agreement"), executed by and among the
Company, the Payee, Plant Specialties, Inc. ("PSI"), and all of the shareholders
of PSI other than Payee (the shareholders of PSI, other than the Payee, being
collectively sometimes herein referred to as the "Other Shareholders"), as
partial consideration for the shares of capital stock of PSI acquired by the
Company from the Payee. This Note is one of five (5) 5.0% Convertible
Subordinated Notes in an aggregate principal amount of Three Million Two Hundred
Ninety Five Thousand One Hundred Twenty Five and No/100 Dollars ($3,295,125.00)
(collectively, the "Notes") issued by the Company on the date hereof to Payee
and the Other Shareholders. The Notes have terms and provisions identical to one
another, other than the principal amounts and the respective payees thereof.
1. INTEREST AND PRINCIPAL PAYMENTS. Interest only is payable
quarterly on the last day of each calendar quarter, beginning June 30, 1997, and
continuing regularly and quarterly on the last day of every September, December,
March and June thereafter until March 31, 2002, on which date the entire unpaid
principal balance hereof, together with all accrued but unpaid interest, shall
mature and become due and payable. All payments received hereon by Xxxxx shall
be applied first to accrued but unpaid interest, and the balance, if any, shall
be returned to Maker, except in those instances in which prepayment is permitted
hereunder, in which event such balance shall be applied to the principal
remaining unpaid hereon.
2. LIMITATIONS ON PREPAYMENTS. This Note may not be prepaid, in
whole or in part, prior to March 31, 1999, without the written consent of the
Payee. At any time on or after March 31, 1999, the Company may, upon thirty (30)
days prior written notice (the period commencing on the date on which such
notice is sent and expiring at the close of business on the thirtieth day
thereafter being hereinafter referred to as the "Prepayment Notice Period")
prepay all, but not less than all, of the unpaid balance hereof, provided that
the holder hereof shall maintain its right to convert the outstanding principal
amount hereof into fully paid and non-assessable shares of common stock (the
"Common Stock") of the Issuer (as defined below) through the expiration of the
Prepayment Notice Period. The Company, Innovative Valve Technologies, Inc., a
Delaware corporation ("Invatec") which is an affiliate of the Company that is
expected to become the parent of the Company prior to the closing of the IPO (as
defined below) or any other successor to or parent company of the Company or
Invatec that first conducts an IPO of its Common Stock is hereinafter sometimes
referred to as the "Issuer". Notwithstanding the foregoing or any provision
hereof to the contrary, however, no prepayment of this Note shall be attempted
or permitted if such prepayment would be or would be deemed to be, with notice
or lapse of time or both, or if there has then occurred and is then continuing,
a default or an event of default with respect to any Senior Indebtedness, as
hereinafter defined, under the terms of the instrument under which such Senior
Indebtedness is outstanding.
3. SUBORDINATION AND STANDSTILL PROVISIONS. The Company covenants
and agrees, and the Payee, on behalf of Xxxxx and each subsequent holder of this
Note, by acceptance hereof likewise covenants and agrees, that notwithstanding
any provision of this Note to the
2
contrary, the payment of all indebtedness evidenced by this Note is, to the
extent and in the manner hereinafter set forth, subordinated in right of payment
to all Senior Indebtedness (as hereinafter defined) of the Company, unless by
the terms of the instrument creating or evidencing such Senior Indebtedness it
is expressly and specifically provided that such Senior Indebtedness is
subordinate or on parity in right of payment to the indebtedness evidenced by
this Note. Except as permitted in the immediately following sentence, or unless
and until all Senior Indebtedness has been paid in full and no commitment is in
existence to advance or create the Senior Indebtedness, no payment shall be made
by the Company, directly or indirectly, in respect of the principal of, interest
on, premium on, or otherwise owing in respect of, the indebtedness evidenced
hereby, and the Payee shall not ask, demand, sue for, take any action to
enforce, take or receive, directly or indirectly, in cash or other property, by
sale, setoff or in any other manner whatsoever, any amounts owing in respect of
the indebtedness evidenced hereby. Notwithstanding any provision of the
preceding sentence to the contrary, (i) so long as there shall exist no default
or event of default of which the Payee shall have been given notice (or if
notice of a default or event of default shall have been given to the Payee and
the Company shall have cured the event without the holder of any Senior
Indebtedness accelerating the maturity of such Senior Indebtedness), the Company
may make, and the Payee may receive and retain for Payee's account, regularly
scheduled accrued interest payments, as and when such interest payments are due
on the indebtedness evidenced hereby, and (ii) this Note shall always be and
remain convertible into Common Stock in accordance with the provisions of
Section 6 hereof, notwithstanding any default or event of default with respect
to any Senior Indebtedness. For purposes of this Note, the term "Senior
Indebtedness" shall mean and include (i) indebtedness of the Company for money
heretofore, now or hereafter borrowed by the Company, or by any subsidiary of
the Company and guaranteed by the Company, from any bank or banks, savings and
loan association or associations, insurance company or companies, or other
institutional lender or lenders, including any modifications, renewals,
extensions, rearrangements, increases or refinancings of indebtedness of the
kind described in this clause (i), and (ii) such other indebtedness of the
Company as to which the Payee (or other holder hereof) consents in writing. The
term "Senior Indebtedness" expressly includes all indebtedness, obligations and
liabilities of (i) the Company under that certain Credit Agreement dated January
31, 1997, among the Company, the direct and indirect subsidiaries of the
Company, and the Agent, as agent for Lenders, or any other document or
instrument evidencing, securing, guaranteeing, or in any way pertaining to
Loans, as such term is defined in such Credit Agreement, and all other
indebtedness, obligations, and liabilities owing by the Company to the Lenders
howsoever evidenced, whether now or hereafter existing for principal or interest
(including without limitation interest accruing after the commencement of any
proceeding referred to in Section 3 of the Credit Agreement), or for fees,
expenses or otherwise, and (ii) the Company under that certain Credit agreement
dated effective March 6, 1997, between the Company and Texas Commerce Bank
National Association, or any other document or instrument evidencing, securing,
guaranteeing, or in any way pertaining to the Loans, as such term is defined in
such Credit Agreement, and expressly including all obligations, of such term as
defined in such Credit Agreement. Each holder of this Note agrees, solely for
the benefit of holders of Senior Indebtedness, that no consent of any holder of
this Note shall be required for any modification, renewal, extension,
rearrangement, increase or refinancing of any Senior Indebtedness, or waiver of
any guaranty therefor, or release of any collateral
3
securing payment thereof, or any other alteration of the relationship between
the Company and any holder of Senior Indebtedness.
(a) SUBORDINATION UPON DISTRIBUTION OF ASSETS. Upon any
distribution of the assets of the Company in connection with any
dissolution, winding up, liquidation or reorganization of the Company
(whether in bankruptcy, insolvency or receivership proceedings, or upon
an assignment for the benefit of creditors, or any other marshaling of
the assets and liabilities of the Company or otherwise), the holders of
all Senior Indebtedness shall first be entitled to receive payment in
full, in accordance with the terms of such Senior Indebtedness, of the
principal thereof (and premium, if any) and the interest accrued but
unpaid thereon, if any, before any holder of this Note is entitled to
receive any payment upon the principal or accrued but unpaid interest
evidenced by this Note; and, upon any such dissolution, winding up,
liquidation or reorganization, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or
securities (other than shares of stock of the Company as reorganized or
adjusted or readjusted, the payment or distribution of which is
subordinate to the payment of all Senior Indebtedness which may at the
time be outstanding and which are provided for by a plan of
reorganization or readjustment, or securities of the Company or any
other corporation provided for by plan of reorganization or readjustment
which does not alter the rights of the holders of Senior Indebtedness at
the time outstanding and under which such other corporation, if any,
assumes all Senior Indebtedness at the time outstanding), to which the
holder of this Note would be entitled except for the provisions of this
paragraph (a), shall be made by the liquidating trustee or agent or
other persons making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to
the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which such instruments evidencing any of such Senior Indebtedness may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the principal of (and premium, if any) and accrued
but unpaid interest on the Senior Indebtedness held or represented by
each, to the extent necessary to pay in full all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Senior Indebtedness. In the event
that, notwithstanding the foregoing, upon any such dissolution, winding
up, liquidation or reorganization, any payment or distribution of assets
of the Company of any kind or character, whether in cash, property or
securities (other than shares of stock of the Company as reorganized or
readjusted or securities of the Company or any other corporation
provided for by plan of reorganization or readjustment, the payment or
distribution of which is subordinate to the payment of all Senior
Indebtedness which may at the time be outstanding and which are provided
for by a plan of reorganization or readjustment which does not alter the
rights of the holder of Senior Indebtedness at the time outstanding and
under which such other
4
corporation, if any, assumes all Senior Indebtedness at the time
outstanding), shall be received by a holder of this Note before all
Senior Indebtedness is paid in full, such payment or distribution shall
be paid over to the holders of such Senior Indebtedness or their
representative or representatives or to the trustee under any indenture
under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably as aforesaid, for application to the
payment of all Senior Indebtedness remaining unpaid until all of such
Senior Indebtedness shall have been paid in full, after giving effect to
any concurrent payment or distribution to the holders of any such Senior
Indebtedness.
(b) MATURITY OF OTHER INDEBTEDNESS. Upon the maturity of any
Senior Indebtedness by lapse of time, acceleration or otherwise, all
outstanding principal of and accrued but unpaid interest on all such
matured Senior Indebtedness shall first be paid in full before any
payment on account of principal of or interest on this Note is made.
(c) DEFAULT ON SENIOR INDEBTEDNESS. Upon a default in the payment
of principal or interest with respect to any Senior Indebtedness, or
upon the happening of any default or event of default with respect to
any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the holder or holders thereof to
accelerate the maturity thereof, and during the continuance of any such
default or event of default, no amount shall be paid by the Company, and
the holder of this Note shall not be entitled to receive any amount, in
respect of the principal of or interest on this Note, unless and until
such default shall have been remedied or waived.
(d) STANDSTILL. Notwithstanding the provisions of Section 5
hereof, for so long as any Senior Indebtedness, principal or interest,
remains outstanding and unpaid, upon the occurrence of any Event of
Default (as defined in Section 4 hereof) other than an Event of Default
described under Section 4(c) hereof, the holder of this Note shall have
no right to declare the indebtedness evidenced by this Note due and
payable, or to exercise any remedies to enforce the collection of
obligations evidenced hereby, without obtaining the prior written
consent of the holders of at least 50% of the principal indebtedness
outstanding under the Notes. Once such written consent has been
obtained, the holder of this Note may declare that the indebtedness
evidenced hereby shall become due and payable, and this Note shall then
become due and payable, upon the expiration of two hundred seventy (270)
days after the date on which written notice of such declaration is sent
by the holder hereof to the Company. Upon the occurrence of an Event of
Default described under Section 4(c) hereof, the holder of this Note may
exercise such holder's remedies hereunder, including the right to
accelerate payment hereof pursuant to Section 5, but the holder of this
Note shall remain subordinate in right
5
of payment in all respects to the holders of Senior Indebtedness as set
forth in this Section 3.
(e) SUBROGATION. Subject to the payment in full of all Senior
Indebtedness, the holder of this Note shall be subrogated to the rights
of the holders of all Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior
Indebtedness until this Note shall be paid in full. None of the payments
or distributions to holders of the Senior Indebtedness to which the
holder of this Note would be entitled but for the provisions of the
foregoing paragraphs (a) through (d) of this Section 3 shall, as between
the Company, its creditors, and the holder of this Note, be deemed to be
a payment by the Company to or on account of Senior Indebtedness of the
Company; it being understood that the subordination provisions of this
Note are and are intended solely for the purpose of defining the
relative rights of the holder of this Note, on the one hand, and the
holders of the Senior Indebtedness on the other hand. Nothing contained
in this Note is intended to or shall impair, as between the Company, its
creditors, and the holders of this Note, the obligation of the Company
to pay to the holder of this Note the principal of and interest on this
Note as and when the same shall become due and payable in accordance
with its terms, or to affect the relative rights of the holder of this
Note and the creditors of the Company other than holders of Senior
Indebtedness.
(f) RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS. Each holder of
this Note acknowledges and agrees that each holder of Senior
Indebtedness, whether outstanding at the date of this Note or incurred
hereafter, shall have extended credit to the Company, or shall have
purchased or accepted or will purchase or accept such Senior
Indebtedness, in reliance upon the subordination and standstill
provisions contained in this Note.
(g) EFFECT. If the Company fails because of this Section 3 to
make a payment, principal or interest, otherwise due under this Note,
such failure shall nonetheless become an Event of Default as set forth
in Section 4.
4. EVENTS OF DEFAULT. The occurrence and continuation of any one
of the following events or conditions shall constitute an "Event of Default":
(a) The Company fails to make any payment, principal or interest,
within ten (10) business days after the date such payment is due under
any of the Notes;
(b) An event of default occurs under any arrangement with any
holder of Senior Indebtedness and the Senior Indebtedness is accelerated
and not reinstated; or
6
(c) The Company makes an assignment for the benefit of creditors
or becomes insolvent or unable to pay its debts generally as they become
due, or applies to any tribunal for the appointment of a trustee or
receiver for a substantial part of the assets of the Company, or
commences any proceedings relating to the Company under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debts,
dissolution or other liquidation law of any jurisdiction; or any such
application is filed, or any such proceedings are commenced against the
Company and the Company indicates its consent to such proceedings, or an
order is entered appointing such trustee or receiver, or approving the
petition in any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or other liquidation proceedings, and
such order remains in effect for one hundred twenty (120) days.
5. REMEDIES. Subject to the provisions of Section 3(d) hereof,
upon the occurrence of an Event of Default other than as described in Section
4(c) hereof, the Payee or other holder of this Note may declare the entire
unpaid principal of this Note, and all accrued but unpaid interest thereon, at
once due and payable, and upon the occurrence of an Event of Default under
Section 4(c) hereof, the entire unpaid principal of this Note and all accrued
but unpaid interest thereon shall automatically be declared at once due and
payable, and upon any such declaration the principal of this Note and such
accrued but unpaid interest shall become and be immediately due and payable, and
the Payee or any other holder of this Note may, subject to the provisions of
Section 3(d) hereof, thereupon proceed to protect and enforce its rights, either
by suit in equity or by action at law or by other appropriate proceedings,
whether for specific performance (to the extent permitted by law) of any
covenant or agreement contained herein or in aid of the exercise of any power
granted herein, or proceed to enforce the payment of this Note or to enforce any
other legal or equitable right of the Payee or such other holder. The foregoing
shall not affect the relative rights and obligations as between any holder of
Senior Indebtedness and the Payee or other holder hereof; as between such
parties, Section 3 shall control the exercise of remedies.
6. CONVERSION RIGHTS.
(a) AT THE OPTION OF HOLDER. From the date of the closing of the
initial public offering and sale (the "IPO") of shares of the Common
Stock of the Issuer for the account of the Issuer, which offering
results in net proceeds to the Issuer of not less than Ten Million
Dollars ($10,000,000) through the earlier of the maturity date or the
expiration of the Prepayment Notice Period (as such term is defined in
Section 2 hereof), the holder of this Note shall have the right to
convert all, but not less than all, of the outstanding principal amount
of this Note into shares of Common Stock at a price equal to 130% of the
IPO Price, as hereinafter defined (the "Initial Conversion Price") (the
Initial Conversion Price, as same may hereinafter be adjusted from time
to time pursuant to the provisions hereof being referred to herein as
the "Conversion Price"), and otherwise on and subject to the
7
terms and conditions set forth in paragraphs 6(c) through 6(i). As used
herein, the term "IPO Price" shall mean the initial issuance price per
share of the Common Stock issued in the IPO, without giving effect to
any underwriting discounts or commissions. The holder of this Note may
exercise such holder's right to convert all, but not less than all, of
the outstanding principal amount of this Note into shares of Common
Stock by (i) giving written notice to the Issuer that such holder elects
to convert the outstanding principal amount into Common Stock, (ii)
stating in such written notice the denominations in which such holder
wishes the certificate or certificates for Common Stock to be issued,
and (iii) surrendering this Note to the Issuer.
(b) AT THE OPTION OF THE ISSUER. If the average closing price per
share of Common Stock (as reported by the principal securities exchange
or trading market, as the case may be, on which the Common Stock is then
traded) during a period of 20 consecutive trading days occurring after
March 31, 1999 (such 20-day average being refereed to herein as the
"Average Price") equals or exceeds 150% of the IPO Price (a "Special
Conversion Event"), the Issuer may, at its option exercisable in its
sole discretion at any time following such Special Conversion Event,
convert all (but not less than all) of the outstanding principal balance
of this Note into fully paid and non-assessable shares of Common Stock
at the Conversion Price then in effect. If the Issuer elects pursuant to
this Section 6(b) to convert this Note into Common Stock, the Issuer
shall send notice (the "Issuer Conversion Notice") to the holder hereof
at the address specified above (or such other address as may have been
designated in writing by the holder). Such conversion shall be deemed to
have been effected immediately upon the mailing of the Issuer Conversion
Notice, whereupon the person or persons entitled to receive the Common
Stock deliverable upon such conversion shall be treated for all purposes
as the record holder or holders of such Common Stock, and this Note
shall be deemed to represent only the right to receive certificates
representing the number of shares of Common Stock, plus cash in lieu of
fractional shares in accordance with this Section 6, into which this
Note has been so converted. The Issuer Conversion Notice shall specify
(i) the date the conversion was effected, (ii) the Conversion Price,
(iii) the number or amount of any securities and property as hereinafter
provided into which the Note has been converted, (iv) the place or
places that this Note is to be surrendered upon conversion, and (v) that
on or after the effective date of the conversion, interest will cease to
accrue on this Note.
(c) ACCRUED INTEREST; FRACTIONAL SHARES; CONVERSION DATE. In the
event of any conversion, the Issuer will, as soon as practicable after
surrender of this Note and compliance by the holder hereof with any
other conditions herein contained, cause to be issued and delivered to
the surrendering holder certificates for the number of full shares of
Common Stock to which such holder shall be entitled as aforesaid,
together with any unpaid interest on the principal amount converted
accrued through the Conversion Date, as hereinafter defined. The Issuer
8
shall not issue fractional shares of Common Stock upon conversion or
script in lieu thereof, but the number of shares of Common Stock to be
received by any holder upon conversion shall be rounded down to the next
whole number and the holder shall be entitled to payment for the
fractional share in cash at the then applicable Conversion Price. Such
conversion shall be deemed to have been made as of the close of business
on the date the notice of conversion is sent by or delivered to the
Issuer, as applicable, in accordance with the notice provisions
hereinafter set forth (the close of business on such date being herein
sometimes called the "Conversion Date"), so that the persons entitled to
receive the shares of Common Stock upon conversion of the principal
amount hereof shall be treated for all purposes as having been the
record holder or holders of such shares of Common Stock at such time.
(d) SUBDIVISIONS, COMBINATIONS, DIVIDENDS OR DISTRIBUTIONS OF
STOCK. In the event that, while this Note shall remain outstanding and
after the IPO shall have occurred, the Issuer shall at any time
subdivide or combine the outstanding shares of Common Stock, or issue
additional shares of Common Stock as a dividend or other distribution on
the Common Stock, the Conversion Price shall be proportionately adjusted
so that, with respect to each such subdivision of shares or stock
dividend or stock distribution, the number of shares of Common Stock
deliverable upon conversion of this Note shall be increased in
proportion to the increase in the number of then outstanding shares of
Common Stock resulting from such subdivision of shares or stock dividend
or stock distribution, and, with respect to each such combination of
shares, the number of shares of Common Stock deliverable upon conversion
of this Note shall be decreased in proportion to the decrease in the
number of then outstanding shares of Common Stock resulting from such
combination of shares. Any such adjustment in the Conversion Price shall
become effective, in the case of any subdivision or combination of
shares, at the close of business on the effective date thereof, and, in
the case of any such stock dividend or stock distribution, at the close
of business on the record date fixed for the determination of
stockholders entitled thereto, or on the first business day during which
the stock transfer books of the Issuer shall be closed for the purpose
of such determination. No adjustment shall be made by reason of the
issuance of shares of Common Stock or of any securities convertible into
shares of Common Stock in exchange for cash, property or services, or in
any event other than those specifically set forth in this Section 6.
(e) OTHER NONCASH DIVIDENDS. In the event that, while this Note
shall be outstanding, the Issuer shall distribute to the holders of its
Common Stock as a class any assets (other than stock dividends or
distributions) or evidences of indebtedness, the Issuer shall,
concurrently therewith reduce the Conversion Price by the amount of the
value per share of such distribution, but in no event shall the
Conversion Price be or become less than the par value per share of
Common
9
Stock. The provisions of this paragraph (e) shall similarly apply to
successive distributions to holders of Common Stock.
(f) LIQUIDATION, DISSOLUTION, CONSOLIDATION, MERGER, SALE,
RECLASSIFICATION. In the event, while this Note shall remain
outstanding, there shall be any liquidation or dissolution of the
Issuer, consolidation or merger of the Issuer with another corporation,
a sale to another corporation of all or substantially all of the assets
of the Issuer, or a reclassification of the Common Stock of the Issuer
into securities including other than Common Stock, then the holder of
this Note shall thereafter have the right to convert the outstanding
principal amount of this Note (or such other stock or securities) into
the kind and amount of shares of stock and other securities and property
receivable upon such liquidation, dissolution, consolidation, merger,
sale of assets or reclassification by a holder of the number of shares
of Common Stock into which the outstanding principal amount of this Note
could have been converted immediately prior to such liquidation,
dissolution, consolidation, merger, sale or reclassification. The
instruments effecting such liquidation, dissolution, consolidation,
merger, sale or reclassification, and, where appropriate, the
certificate of incorporation of the surviving or resulting or purchasing
corporation shall provide for such conversion rights, and the provisions
of this paragraph (f) shall similarly apply to successive liquidations,
dissolutions, consolidations, mergers, sales or reclassifications. In
case securities or property other than Common Stock shall be issuable or
deliverable upon conversion as aforesaid, then all references to Common
Stock in this Section 6 shall be deemed to apply, so far as appropriate
and as nearly as may be, to such other securities or property.
(g) RESERVATION OF ADEQUATE SHARES. The Issuer shall at all times
reserve and keep available out of its authorized Common Stock, for
issuance upon conversion of this Note as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of
all of the Notes. All shares of Common Stock which shall be so issuable
shall, when so issued upon any such conversion, be duly and validly
issued and fully paid and nonassessable.
(h) DELIVERY OF CERTIFICATES. If the outstanding principal amount
of this Note shall be converted within any period during which the
transfer books for the the Issuer's Common Stock are closed for any
purpose, the Issuer shall not be required to make delivery of
certificates for Common Stock until the date of the reopening of such
transfer books.
(i) NO SHAREHOLDER RIGHTS. This Note shall not entitle the holder
hereof to any voting rights or other rights as a stockholder of the
Company or the Issuer, or to any other rights whatsoever except the
rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Note or the
10
interest represented hereby or the Common Stock purchasable hereunder
until or unless, and except to the extent that, the outstanding
principal amount hereof shall be converted.
7. IMMUNITY. This Note and the indebtedness and obligations
evidenced hereby are solely corporate indebtedness and obligations, and no
personal liability whatsoever shall attach to or be incurred by any past,
present or future officer, director, shareholder, agent, attorney or employee of
the Company, Invatec or any successor, under or by reason of any of the
obligations, covenants or agreements contained in or implied by this Note or the
Agreement.
8. NOTICES. All notices, requests, consents, and other
communications required or permitted under this Note shall be in writing and
shall be deemed, unless otherwise provided, to have been delivered on the date
mailed, postage prepaid, by certified mail, return receipt requested, or on the
date personally delivered:
(i) If to the Payee, to the address of the Payee set forth on
the first page of this Note;
(ii) If to the Company, Invatec or any successor, to the address
of the Company set forth on the first page of this Note, Attention:
President, with a copy of such notice to Xx. Xxxx X. Xxxxx, Xx., Xxxxx,
Xxxxx & Xxxxxx Incorporated, Nine Greenway Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000;
(iii) If to any holder other than the Payee, to such address as
may have been designated by notice given the Company by such holder; and
(iv) If to any holder of Senior Indebtedness, to such address as
may have been designated by notice given the Company by such holder,
which the Company will provide to the holder of this Note upon request.
The Company, Invatec, the Payee or any other holder hereof may designate a
different address by notice given in accordance with the foregoing.
9. USURY. It is expressly provided and stipulated that
notwithstanding any provision of this Note or any other instrument evidencing or
securing the indebtedness evidenced hereby, in no event shall the aggregate of
all interest paid by the Company to the Payee hereunder ever exceed the Maximum
Nonusurious Rate of interest which may lawfully be charged the Company under the
laws of the State of Texas or the United States Federal Government, as
applicable, on the principal balance of this Note remaining unpaid. If under any
circumstances the aggregate amounts paid on the indebtedness evidenced by this
Note prior to and incident to the final payment hereof include amounts which by
law are deemed interest and which would exceed the Maximum Nonusurious Rate of
interest which could lawfully have been charged or collected on this Note, the
Company stipulates that (a) any non-principal payment shall be
11
characterized as an expense, fee, or premium rather than as interest, and any
excess shall be credited hereon by the holder hereof (or, if this Note shall
have been paid in full, refunded to the Company); (b) determination of the rate
of interest for determining whether the indebtedness evidenced hereby is
usurious shall be made by amortizing, prorating, allocating, and spreading, in
equal parts during the full stated term of such indebtedness, all interest at
any time contracted for, charged, or received from the Company in connection
with such indebtedness, and any excess shall be canceled, credited or refunded
as set forth in (a) herein.
In connection with Article 5069-1.04, Xxxxxx's Annotated Civil
Statutes, as amended, the Company hereby agrees that the "Maximum Nonusurious
Rate of interest" which may be charged as herein contemplated shall be the
indicated rate ceiling from time to time in effect as defined by said article,
as amended, provided that Xxxxx may also rely on any alternative Maximum
Nonusurious Rate of interest provided by other applicable laws if such other
rates are higher than that allowed by said Article, as amended.
THIS NOTE, THE AGREEMENT AND ALL DOCUMENTS, INSTRUMENTS AND
AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH, REPRESENT THE FINAL
AGREEMENT BETWEEN THE COMPANY AND PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE COMPANY AND THE
PAYEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE COMPANY AND PAYEE.
THIS NOTE IS SUBJECT TO FINAL ACCEPTANCE IN, AND ALL TERMS, OBLIGATIONS, AND
PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF, THE STATE OF TEXAS.
10. EXECUTION BY INVATEC. Invatec has executed this Note solely
to evidence its agreement to the potential obligations of Invatec with respect
to conversion of the Note into Invatec Common Stock, as set forth in Section 6
of this Agreement, in the event that Invatec becomes the Issuer. To the extent
any successor to the Company or Invatec becomes the Issuer, the Company and
Invatec agree to cause such successor to assume the obligations of the Company
or Invatec under Section G.
IN WITNESS WHEREOF, the Company and Invatec have authorized this
Note to be executed in its corporate name by its duly authorized officer as of
the date first above written.
12
Invatec has executed this Note solely to evidence its agreement to the
potential obligations of Invatec with respect to conversion of the Note into
Invatec Common Stock, as set forth in Section 6 of this Agreement, in the event
that Invatec becomes the Issuer.
THE SAFE SEAL COMPANY, INC.
By:_____________________________
XXXXXXX X. XXXXXX
President & CEO
INNOVATIVE VALVE TECHNOLOGIES,
INC.
By:
XXXXXXX X. XXXXXX
President & CEO
13
