Registration of Securities (General Form) — Form 10
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-12G General Form for Registration of Securities 76 435K
2: EX-2.1 Agreement and Plan of Merger 39 192K
3: EX-3.1 Certificate of Incorporation 2 14K
4: EX-3.2 By-Laws 11 50K
5: EX-4.1 Convertible Debenture Note 15 71K
6: EX-4.2 Convertible Debenture Note 15 72K
7: EX-4.3 Securities Purchase Agreement 23 110K
8: EX-4.4 Agreement 13 52K
9: EX-4.5 Hollinger Pledge and Security Agreement 5 18K
10: EX-4.6 Certificate of Designation 16 72K
11: EX-9.1 Voting Trust and Stockholders' Agreement 7 31K
12: EX-9.2 Voting and Shareholders Agreement 7 32K
13: EX-9.3 Shareholders Agreement 6 24K
14: EX-10.1 Employment Agreement 16 50K
20: EX-10.10 Warrant 13 61K
21: EX-10.11 Warrant Certificate No. Pv-1 12 50K
22: EX-10.12 Warrant Certificate No. Pv-2 12 51K
15: EX-10.2 Separation Agreement 9 42K
16: EX-10.3 Employment Agreement 15 44K
17: EX-10.4 1999 Stock Incentive Plan 10 48K
18: EX-10.5 Investment Agreement 47 208K
19: EX-10.9 Common Stock Purchase Option 14 68K
23: EX-16.1 Letter Re: Change of Certifying Accountant 1 10K
24: EX-27 Financial Data Schedule 1 12K
EX-4.2 — Convertible Debenture Note
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THIS CONVERTIBLE DEBENTURE NOTE AND THE SHARES ISSUABLE UPON CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"ACT") OR ANY STATE SECURITIES LAWS AND NEITHER THIS DEBENTURE NOTE, SUCH
SHARES, NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE OR SUCH
SHARES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY,
THAT THIS NOTE OR SUCH SHARES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
AMERICAN INTERACTIVE MEDIA, INC.
Floating Rate Convertible Secured Debenture Note
$3,000,000.00 February 3, 1998
New York, New York
AMERICAN INTERACTIVE MEDIA, INC., a Nevada corporation, (the "Company") for
value received, hereby promises to pay to HOLLINGER DIGITAL, INC. or its
designee, with an address at 270 Lafayette Street, New York, New York 10012 or
registered assigns (the "Holder"), the principal amount of Three Million and
00/100 ($3,000,000.00) Dollars on the Maturity Date (as defined below), together
with all interest on the unpaid principal balance hereof at the rate equal to
three and one-half (3.5%) percent per annum in excess of the prime rate as
published in the Wall Street Journal from time to time during the term hereof.
Interest shall be compounded and shall accrue on the first day of each June and
December and on the Maturity Date, each such date being an AInterest Accrual
Date" (calculated on the basis of a 360-day year consisting of twelve 30-day
months), all as hereafter further provided. This Floating Rate Convertible
Secured Debenture Note shall be referred to hereafter as the ANote."
If, after December 31, 1999, the Company establishes, to the reasonable
satisfaction of Holder, the Company's ability to borrow $6,000,000 from an
institutional lender on substantially the terms and conditions of this Note but
at a lower interest rate than herein set forth, the Company and the Holder shall
renegotiate the herein interest rate, on a prospective basis, to a mutually
agreeable rate which shall be reflective of the Company's then borrowing
ability.
In no event shall any interest to be paid hereunder exceed the maximum rate
permitted by law. In any such event, this Note shall automatically be deemed
amended to permit interest charges at an amount equal to, but no greater than,
the maximum rate permitted by law.
This Note is being issued by the Company pursuant to that Securities
Purchase Agreement of even date herewith between the Company and Hollinger
Digital, Inc. or its designee (the "Securities Purchase Agreement").
1. Payments.
(a) Subject to the mandatory conversion provisions of Section 3 (or
earlier exercise of the Conversion Right), principal of, and all accrued
and unpaid interest on, this Note shall be due and payable in full on the
Maturity Date. The "Maturity Date" shall be the date which is the earliest
of (i) February 3, 2003 and (ii) the date upon which a Conversion Event is
consummated. As used herein, a Conversion Event shall mean an initial
public offering of securities of the Company pursuant to a registration
statement filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(b) Interest on this Note shall accrue on each Interest Accrual Date
and be payable on the Maturity Date.
(c) If any Interest Accrual Date or the Maturity Date would fall on a
day that is not a Business Day (as defined below), the payment due or to be
accrued on such Interest Accrual Date or Maturity Date will be made on the
next succeeding Business Day with the same force and effect as if made on
the Interest Accrual Date or the Maturity Date, as the case may be.
ABusiness Day" means any day which is not a Saturday or Sunday and is not a
day on which banking institutions are generally authorized or obligated to
close in the City of New York, New York.
(d) The Company shall not have the right to prepay all or any part of
the principal or interest of this Note without the prior written consent of
Holder in its discretion. All payments on this Note shall be applied first
to accrued interest hereon and the balance to the payment of principal
hereof. However, in the event that Holder does not exercise in full the
Common Stock Purchase Option (as defined in the Securities Purchase
Agreement) on or prior to the expiration date thereof, the Company shall
have the right to prepay the full amount of outstanding principal and
accrued interest of this Note upon thirty (30) days' notice not later than
one hundred-eighty (180) days from expiration of the unexercised Common
Stock Purchase Option, and Holder shall lose its Conversion Right with
respect to the full amount prepaid.
(e) Subject to the mandatory conversion provisions of Section 3 (or
earlier exercise of the Conversion Right), payments of principal and
interest on this Note shall be made by check sent to the Holder's address
set forth above or to such other address as the Holder may designate for
such purpose from time to time by written notice to the Company, in such
coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts.
(f) Subject to the mandatory conversion provisions of Section 3 (or
earlier exercise of the Conversion Right), the obligations to make the
payments provided for in this Note are absolute and unconditional and not
subject to any defense, set-off, counterclaim,
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rescission, recoupment or adjustment whatsoever. The Company hereby
expressly waives demand and presentment for payment, notice of non-payment,
notice of dishonor, protest, notice of protest, bringing of suit and
diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of and without any notice,
diligence, act or omission with respect to the collection of any amount
called for hereunder.
2. Ranking of Note.
(a) The Company covenants and agrees that the indebtedness represented
by this Note, together with the indebtedness represented by the Note dated
December 4, 1997 also issued by the Company to the Holder (the AFirst
Note") and the payment of principal and interest on this Note and the First
Note when due shall be expressly senior to any and all indebtedness of the
Company and any subsidiary except for indebtedness of the Company relating
to the purchase of equipment and machinery pursuant to a written business
plan approved in advance by the Holder (the ABusiness Plan"). The term
Aindebtedness" shall mean (A) any liability of the Company (x) for borrowed
money, (y) evidenced by a note, debenture, bond or other instrument of
indebtedness (including, without limitation, a purchase money obligation),
including any given in connection with the acquisition of property, assets
or service, or (z) for the payment of rent or other amounts relating to
capitalized lease obligations; (B) any liability of others which the
Company has guaranteed or which is otherwise its legal liability; and (C)
any modification, renewal, extension, replacement or refunding of any such
liability; provided, that indebtedness does not include unsecured trade
credit.
(b) Nothing contained in this Note is intended to or shall impair, as
between the Company, its creditors, and the holder of this Note, the
obligation of the Company, which is absolute and unconditional, to pay to
the Holder the principal of and interest on this Note as and when the same
shall become due and payable in accordance with its terms, or affect the
relative rights of the Holder and the creditors of the Company, nor shall
anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Note.
(c) Upon any payment or distribution of assets of the Company referred
to in this Note, the Holder shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which any such
dissolution, winding up, liquidation or reorganization proceeding affecting
the affairs of the Company is pending, or upon a certificate of the
liquidating trustee or agent or other person making any payment or
distribution to the Holder for the purpose of ascertaining the persons
entitled to participate in such payment or distribution, the holder of any
other indebtedness of the Company, the amount thereof or payable thereon,
the amount paid or distributed thereon and all other facts pertinent
thereto or to this Note.
3. Conversion.
(a) Conversion Right. The Holder shall have the right (the "Conversion
Right"), at any time after December 3, 1999 and prior to the Maturity Date,
on the terms set forth in this Section 3, to convert the outstanding
principal balance, and all accrued
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interest at the time of conversion, of this Note into a number of shares of
the Company's common stock, par value $.001 per share, (the "Common Stock")
determined by dividing the principal amount and accrued interest so
converted (the "Conversion Amount") by $2.85 (as adjusted in accordance
herewith, the AConversion Price"). The Conversion Price and the number of
shares of Common Stock issuable upon conversion of this Note are subject to
adjustment as hereafter provided.
(b) Mandatory Conversion. So long as an Event of Default has not
occurred, the Holder shall be required to exercise the Conversion Right
upon the Maturity Date for the full amount of shares of Common Stock then
subject to the Conversion Right.
(c) To exercise the Conversion Right, the Holder, on or before the
Maturity Date, shall deliver to the Company, at its office at 611 Broadway,
Suite 308, New York, New York 10012, or at such other place as is
designated in writing by the Company, a notice (the "Conversion Notice")
stating that the Holder is exercising the Conversion Right, the intended
Conversion Amount and the name or names in which the Holder wishes the
certificates for shares of Common Stock to be issued. The Conversion
Notice, once given, shall be irrevocable; provided, however, that a
Conversion Notice given after notice of a proposed Conversion Event may be
made expressly conditional upon the consummation of such Conversion Event,
in which event the Conversion Right shall be deemed to have been exercised
if and only if such Conversion Event is actually consummated. The
Conversion Amount, unless equal to the maximum amount eligible for
conversion, shall be an integral multiple of $1,000 and, if the Conversion
Notice (i) shall specify a desired Conversion Amount other than an amount
permitted by the foregoing, the Conversion Amount shall be equal to the
greatest amount so permitted which does not exceed the amount stated in the
Conversion Notice, or (ii) does not specify a desired Conversion Amount,
the Conversion Amount shall be equal to the maximum permitted Conversion
Amount.
(d) Upon exercise of the Conversion Right (or in the case of the
exercise of a Conversion Right made expressly conditional upon the
occurrence of a Conversion Event, the consummation of such Conversion
Event), the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise (the "Conversion Shares"),
notwithstanding that the transfer books of the Company shall then be closed
or certificates representing such Conversion Shares shall not then have
been actually delivered to the Holder. As soon as practicable after
exercise of the Conversion Right, the Company shall issue and deliver to
the Holder a certificate or certificates for the Conversion Shares issuable
upon such exercise registered in the name of the Holder or its designee;
provided, that the Company, by notice given to the Holder promptly after
receipt of the Conversion Notice, may require the Holder, as a condition to
the delivery of such certificate or certificates, to present this Note to
the Company for the placement hereon of a legend indicating that the
Conversion Right has been exercised and of the Conversion Amount, and this
Note (unless thereby paid in full) shall be immediately returned to the
Holder. In the event the Conversion Right is not exercised with respect to
the entire outstanding principal balance of this Note, interest shall
accrue thereafter only on the remaining outstanding principal balance under
this Note.
(e) The issuance of any shares or other securities upon the exercise
of the Conversion Right, and the delivery of certificates or other
instruments representing such
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shares or other securities, shall be made without charge to the Holder for
any tax (other than income taxes, if any) or other charge in respect of
such issuance. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of any certificate in a name other than that of the Holder and the
Company shall not be required to issue or deliver any such certificate
unless and until the person or persons requesting the issue thereof shall
have paid to the Company the amount of such tax or shall have established
to the satisfaction of the Company that such tax has been paid.
(f) The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the Conversion Right, such number of shares
of Common Stock as shall, from time to time, be sufficient for the exercise
of the Conversion Right in full. The Company covenants that all shares of
Common Stock issuable upon exercise of the Conversion Right shall be
validly issued, fully paid, nonassessable, and free of preemptive rights.
4. Adjustments to Conversion Rate.
(a) In case the Company shall at any time after the date this Note is
first issued (i) declare a dividend on the outstanding Common Stock payable
in shares of its capital stock, (ii) subdivide the outstanding Common
stock, (iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock by reclassification
of the Common Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing
corporation), then, in each case, the Conversion Price, and the number and
kind of shares issuable upon conversion of this Note, in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination, or reclassification, shall be proportionately
adjusted so that the Holder after such time shall be entitled to receive
the aggregate number and kind of shares which, if the Conversion Right had
been exercised immediately prior to such time, it would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination, or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or fix a record date for the
issuance to all holders of Common Stock of rights, options, or warrants to
subscribe for or purchase Common Stock (or securities convertible into or
exchangeable for Common Stock) at a price per share (or having a conversion
or exchange price per share, if a security convertible into or exchangeable
for Common Stock) less than the Current Market Price (as hereinafter
defined) per share of Common Stock on such record date, then, in each case,
the number of shares of Common Stock into which this Note shall be
convertible after such record date shall be determined by multiplying the
number of shares of Common Stock into which this Note was theretofore
convertible by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock to be offered for subscription or
purchase (or into which the convertible or exchangeable securities so to be
offered are initially convertible or exchangeable) and the denominator of
which shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares of Common Stock which the aggregate
offering price of the
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total number of shares of Common Stock so to be offered (or the aggregate
initial conversion or exchange price of the convertible or exchangeable
securities so to be offered) would purchase at such Current Market Price.
Such adjustment shall become effective at the close of business on such
record date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible into or exchangeable for shares of Common
Stock) are not delivered, the number of shares of Common Stock issuable
upon conversion of this Note shall be readjusted after the expiration of
such rights, options, or warrants (but only with respect to any portion of
this Note converted after such expiration), to the number of shares which
would have been issuable upon conversion of this Note had the adjustments
made upon the issuance of such rights, options, or warrants been made upon
the basis of delivery of only the number of shares of Common Stock (or
securities convertible into or exchangeable for shares of Common Stock)
actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the
board of directors of the Company, whose determination shall be conclusive
absent manifest error. Shares of Common Stock owned by or held for the
account of the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(c) In case the Company shall distribute to all holders of Common
Stock (including any such distribution made to the stockholders of the
Company in connection with a consolidation or merger in which the Company
is the continuing corporation) evidences of its indebtedness or assets
(other than cash dividends or distributions and dividends payable in shares
of Common Stock), or rights, options, or warrants to subscribe for or
purchase Common Stock, or securities convertible into or exchangeable for
shares of Common Stock (excluding those with respect to the issuance of
which an adjustment is provided for pursuant to Section 4(b) of this Note),
then, in each case, the number of shares of Common Stock into which this
Note shall be convertible shall be determined by multiplying the number of
shares of Common Stock into which this Note was convertible immediately
prior to the record date for the determination of stockholders entitled to
receive such distribution by a fraction, the numerator of which shall be
the Current Market Price per share of Common Stock on such record date, and
the denominator of which shall be such Current Market Price per share of
Common Stock less the fair market value (as reasonably determined in good
faith by the board of directors of the Company) of the portion of the
evidences of indebtedness or assets so to be distributed, or of such
rights, options, or warrants or convertible or exchangeable securities,
applicable to one share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of such
distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(d) In case the Company shall issue shares of Common Stock or rights,
options, or warrants to subscribe for or purchase Common Stock, or
securities convertible into or exchangeable for Common Stock (excluding
shares, rights, options, warrants, or convertible or exchangeable
securities issued or issuable (i) in a private placement of shares or
convertible securities of up to $6,000,000 provided that the Company shall
consult with Holder with respect to such issuance or in private placements
of shares or convertible securities over the $6,000,000 amount if Holder
has approved such transaction, (ii) in any of the transactions with respect
to which an adjustment is provided for pursuant to Sections 4(a), (b) or
(c) of this Note, or (iii) upon
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conversion of this Note or the First Note or exercise of the Common Stock
Purchase Option and Warrant issued pursuant to the Securities Purchase
Agreement or exercise or conversion of any other options, warrants or
securities outstanding on the date hereof) at a price per share
(determined, in the case of such rights, options, warrants, or convertible
or exchangeable securities, by dividing (x) the total amount received or
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants, or convertible or exchangeable securities, plus
the minimum aggregate consideration payable to the Company upon exercise,
conversion, or exchange thereof, by (y) the maximum number of shares
covered by such rights, options, warrants, or convertible or exchangeable
securities) lower than the Current Market Price per share of Common Stock
in effect immediately prior to such issuance, then the number of shares of
Common Stock into which this Note shall be convertible shall be determined
by multiplying the number of shares of Common Stock into which this Note
was convertible immediately prior to such issuance by a fraction, the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately after such issuance and the denominator of which
shall be an amount equal to the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such issuance, plus (B) the quotient
obtained by dividing the consideration received by the Company upon such
issuance by such Current Market Price. For the purposes of such
adjustments, the maximum number of shares which the holders of any such
rights, options, warrants, or convertible or exchangeable securities shall
be entitled to initially subscribe for or purchase or convert or exchange
such securities into shall be deemed to be issued and outstanding as of the
date of such issuance, and the consideration received by the Company
therefor shall be deemed to be the consideration received by the Company
for such rights, options, warrants, or convertible or exchangeable
securities, plus the minimum aggregate consideration or premiums stated in
such rights, options, warrants, or convertible or exchangeable securities
to be paid for the shares covered thereby. No further adjustment shall be
made as a result of the actual issuance of shares of Common Stock on
exercise of such rights, options, or warrants or on conversion or exchange
of such convertible or exchangeable securities. On the expiration or the
termination of such rights, options, or warrants, or the termination of
such right to convert or exchange, the number of shares of Common Stock
issuable upon conversion of this Note shall be readjusted to such number of
shares as would have been issuable had the adjustments made upon the
issuance of such rights, options, warrants, or convertible or exchangeable
securities been made upon the basis of the delivery of only the number of
shares of Common Stock actually delivered upon the exercise of such rights,
options, or warrants or upon the conversion or exchange of any such
securities; and on any change of the number of shares of Common Stock
deliverable upon the exercise of any such rights, options, or warrants or
conversion or exchange of such convertible or exchangeable securities or
any change in the consideration to be received by the Company upon such
exercise, conversion, or exchange, including, but not limited to, a change
resulting from the antidilution provisions thereof, the number of shares of
Common Stock issuable upon conversion of this Note, as then in effect,
shall forthwith be readjusted to such number of shares as would have been
issuable had an adjustment been made upon the issuance of such rights,
options, or warrants not exercised prior to such change, or securities not
converted or exchanged prior to such change, on the basis of such change.
In case the Company shall issue shares of Common Stock or any such rights,
options, warrants, or convertible or exchangeable securities for a
consideration consisting, in whole or in part, of property other than cash
or its equivalent, then the "price per share" and the
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"consideration received by the Company" for purposes of the first sentence
of this Section 4(d) shall be as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error. Shares of Common Stock owned by or held for the account of
the Company or any majority-owned subsidiary shall not be deemed
outstanding for the purpose of any such computation.
(e) For the purpose of any computation under this Section 4, the
Current Market Price per share of Common Stock on any date shall be deemed
to be the average of the daily closing prices for the 30 consecutive
trading days immediately preceding the date in question. The closing price
for each day shall be the last reported sales price regular way or, in case
no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange
(including, for purposes hereof, the NASDAQ National Market System) on
which the Common Stock is listed or admitted to trading or, if the Common
Stock is not listed or admitted to trading on any national securities
exchange, the highest reported bid price for the Common Stock as furnished
by the National Association of Securities Dealers, Inc. through NASDAQ or a
similar organization if NASDAQ is no longer reporting such information or
if the Common Stock is not reported on NASDAQ, as quoted on the OTC
Bulletin Board. If on any such date the Common Stock is not listed or
admitted to trading on any national securities exchange and is not quoted
by NASDAQ or any similar organization, the fair value of a share of Common
Stock on such date, as reasonably determined in good faith by the board of
directors of the Company shall be used. The foregoing provisions shall also
be applied to determine the Current Market Price of any shares of capital
stock of the Company issued by the Company by reclassification of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving corporation).
(f) No adjustment in the number of shares of Common Stock into which
this Note is convertible shall be required unless such adjustment would
require an increase or decrease of at least 1/20th of a share in the number
of shares of Common Stock into which this Note is convertible; provided,
however, that any adjustments which by reason of this Section 4(f) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(g) Upon each adjustment to the number of shares of Common Stock
issuable upon conversion of this Note as a result of the calculations made
in Sections 4(b), (c) and (d) hereof, the Conversion Price shall
simultaneously be adjusted to the price obtained by multiplying the
Conversion Price in effect immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of shares of Common
Stock into which this Note was convertible immediately prior to such
adjustment and the denominator of which shall be the number of shares of
Common Stock into which this Note is convertible immediately after such
adjustment.
(h) Whenever there shall be an adjustment as provided in this Section
4, the Company shall promptly cause written notice thereof to be sent to
the Holder, which notice shall be accompanied by an officer's certificate
setting forth the number of Conversion Shares issuable upon the exercise of
the Conversion Right and the Conversion Price after such
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adjustment and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall
be conclusive evidence of the correctness of any such adjustment absent
manifest error.
(i) The Company shall not be required to issue fractions of shares of
Common Stock or other capital stock of the Company upon the exercise of the
Conversion Right. If any fraction of a share would be issuable on any
exercise of the Conversion Right (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the
same fraction of the Current Market Price of such share of Common Stock or
other capital stock on the date of exercise of the Conversion Right.
5. Registration Rights.
The Holder and any holder of Conversion Shares issuable upon conversion of
this Note shall have registration rights with respect to the Conversion Shares
as provided with respect to the Company Common Stock pursuant to the Securities
Purchase Agreement.
6. Covenants.
The Company covenants and agrees with the Holder that, so long as any
amount remains unpaid on the Note, unless the prior written consent of the
Holder in its discretion is obtained, the Company:
(a) Shall not create, incur or suffer to exist, or permit any
subsidiary to create, incur or suffer to exist, any indebtedness except (i)
the indebtedness represented by this Note (or any other Note issued
pursuant to the Securities Purchase Agreement), (ii) any other indebtedness
of the Company outstanding on the date hereof, (iii) capital lease
obligations of the Company outstanding on the date hereof and any
subsequent capital lease obligations pursuant to a Business Plan of the
Company as agreed to by the Holder, and (iv) purchase money indebtedness
incurred by the Company pursuant to the Business Plan of December, 1997
annexed hereto.
(b) Shall not create, incur or suffer to exist, or permit any
subsidiary to create, incur or suffer to exist, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind on any of its property
or assets (collectively, ALiens"), except (i) Liens for taxes not yet due
or contested in good faith with appropriate reserves maintained on the
books of the Company or a subsidiary, (ii) carriers', warehousemen's,
mechanics', and similar Liens arising in the ordinary course of business
which are not overdue for more than 90 days or are being contested in good
faith, (iii) easements, rights of way, zoning restrictions, and similar
Liens on real property, which in the aggregate are not material and do not
materially detract from the use of such property, (iv) Liens for
indebtedness permitted to be incurred or in existence under Section 6(a).
(c) Shall not pay any dividend or make any distribution on, or
purchase, redeem, or retire, any shares of its capital stock or any
warrants, options, or other rights to reacquire any such shares other than
dividends payable solely in shares of its capital stock.
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(d) Shall not change, or permit any subsidiary to change, its primary
line of business.
(e) Shall not, and shall not permit any subsidiary to, (i) enter into
any merger or consolidation (other than a merger between the Company and
any subsidiary in which the Company is the surviving corporation or a
merger pursuant to which the Company reincorporates in the State of
Delaware), (ii) liquidate, wind up its affairs or dissolve, or (iii) except
in the ordinary course of business, convey, sell, lease, transfer or
otherwise dispose of, or purchase or acquire, any business, assets, capital
stock or other property.
(f) Shall not, and shall not permit any subsidiary, directly or
indirectly, to enter into any transaction with or for the benefit of an
Affiliate (other than reasonable compensation for services as an officer,
director or employee).
(g) Shall not, and shall not permit any subsidiary to, in any manner
increase the compensation of its existing officers and directors from the
levels in effect on the date of issuance of this Note, except that this
restriction shall not apply to (1) performance bonuses which may be payable
to current executives pursuant to existing written employment agreements,
(2) compensation increases to executives earning less than $150,000 per
year or (3) compensation increases to executives earning $150,000 or more
per year if such increases are not greater than 5% in the aggregate for all
such executives in any calendar year during the term hereof.
(h) Shall not file for or conduct a public offering of any securities
pursuant to the Act.
(i) Shall deliver to the Holder the financial statements referred to
in Section 5.b of the Securities Purchase Agreement.
(j) Shall consult with the Holder as to the periodic preparation of
Business Plans for the Company and as to any funding requirements of the
Company in addition to those referred to in the Securities Purchase
Agreement.
(k) Shall not issue any shares of preferred stock.
In addition, during the term of this Note, the Company covenants and agrees
that:
(l) Without the prior consent of Holder, which shall not be
unreasonably withheld, the Company's budgeted and actual expenses for
content production shall not exceed ten percent (10%) of the Company's
operating expenses for any year during the term of this Note.
(m) Without the prior consent of Holder, which shall not be
unreasonably withheld, the Company's operating and capital expenses in each
year during the term of this Note shall not exceed the expenses set forth
in the applicable Business Plan for that year, as approved in advance by
Holder.
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(n) Without the prior consent of Holder, which shall not be
unreasonably withheld, no additional executive employees shall be hired,
retained or employed by the Company.
(o) Without the prior consent of Holder, which shall not be
unreasonably withheld, the Company shall not conduct any private placement
for the sale of, or sell, any Common Stock in excess of that permitted in
Section 5.2(b) of the Securities Purchase Agreement.
7. Events of Default.
The occurrence of any of the following events shall constitute
an event of default (an AEvent of Default"):
(a) A material default in the performance, or a breach, of any of the
covenants of the Company contained in Section 6 of this Note or Section 6
of the First Note.
(b) A default in the performance, or a breach, of any other covenant
or agreement of the Company in this Note or the First Note and the
continuance of such default or breach for a period of ten (10) days after
receipt of notice from the Holder as to such breach.
(c) A default or event of default which remains uncured following any
applicable cure period shall have occurred with respect to any indebtedness
of the Company or subsidiary in an amount greater than $250,000.
(d) A final judgment or judgments for the payment of money in excess
of $250,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction
against the Company and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall
not be procured, within 60 days from the date of entry thereof and the
Company shall not, within such 60-day period, or such longer period during
which execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal.
(e) The entry of a decree or order by a court having jurisdiction
adjudging the Company or any subsidiary a bankrupt or insolvent, or
approving a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any subsidiary, under
federal bankruptcy law, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law,
and the continuance of any such decree or order unstayed and in effect for
a period of 60 days; or the commencement by the Company or any subsidiary
of a voluntary case under federal bankruptcy law, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency, or other similar law, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or the filing by it of
a petition or answer or consent seeking reorganization or relief under
federal bankruptcy law or any other applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or similar official
of the Company or any subsidiary or of any substantial part of its
property, or the
-11-
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the Company or any
subsidiary in furtherance of any such action.
(f) Peter Yunich shall no longer be employed as the chief executive
officer of the Company other than due to his death, disability or
termination at the request of Holder.
8. Remedies Upon Default.
(a) Upon the occurrence of an Event of Default referred to in Section
7, the Holder, by notice in writing given to the Company, may declare the
entire principal amount then outstanding of, and the accrued interest on,
this Note to be due and payable immediately, and upon any such declaration
the same shall become and be due and payable immediately, without
presentation, demand, protest or other formalities of any kind, all of
which are expressly waived by the Company.
(b) The Holder may institute such actions or proceedings in law or
equity as it shall deem expedient for the protection of its rights and may
prosecute and enforce its claims against all assets of the Company, and in
connection with any such action or proceeding shall be entitled to receive
from the Company payment of the principal amount of this Note plus accrued
interest to the date of payment plus reasonable expenses of collection,
including, without limitation, attorneys' fees and expenses or the Holder
may proceed to enforce the provisions of the Security Agreement described
in Section 9 either simultaneously or in such order as the Holder shall
elect.
9. Security.
This Note is secured by that certain Pledge and Security Agreement of even
date herewith made by the Company to the Holder (the ASecurity Agreement"),
pursuant to which the Company has granted to the Holder a first priority lien
upon and security interest in certain property more particularly described in
the Security Agreement. All of the covenants, conditions, provisions and
agreements contained in the Security Agreement are by this reference
incorporated herein and made a part hereof.
10. Transfer.
(a) Any Notes issued upon the transfer of this Note shall be numbered
and shall be registered in a Note Register as they are issued. The Company
shall be entitled to treat the registered holder of any Note on the Note
Register as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Note
on the part of any other person, and shall not be liable for any
registration or transfer of Notes which are registered or to be registered
in the name of a fiduciary or the nominee of a fiduciary unless made with
the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration or transfer, or with the knowledge of
such facts that its participation therein amounts to bad faith. This Note
shall be transferable only on
-12-
the books of the Company upon delivery thereof duly endorsed by the Holder
or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment, or authority to transfer. In all
cases of transfer by an attorney, executor, administrator, guardian, or
other legal representative, duly authenticated evidence of his or its
authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Note or Notes to the person entitled thereto. This Note
may be exchanged, at the option of the Holder thereof, for another Note, or
other Notes of different denominations, of like tenor and representing in
the aggregate a like principal amount, upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall
have no obligation to cause Notes to be transferred on its books to any
person if, in the opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act and the rules and regulations
thereunder.
(b) The Holder acknowledges that it has been advised by the Company
that neither this Note nor the Conversion Shares have been registered under
the Act, that the Note is being or has been issued and the Conversion
Shares may be issued on the basis of the statutory exemption provided by
Section 4(2) of the Act or Regulation D promulgated thereunder, or both,
relating to transactions by an issuer not involving any public offering,
and that the Company's reliance thereon is based in part upon the
representations made by the original Holder in the Securities Purchase
Agreement. The Holder acknowledges that it has been informed by the Company
of, or is otherwise familiar with, the nature of the limitations imposed by
the Act and the rules and regulations thereunder on the transfer of
securities. In particular, the Holder agrees that no sale, assignment or
transfer of the Note or Conversion Shares shall be valid or effective, and
the Company shall not be required to give any effect to any such sale,
assignment or transfer, unless (i) the sale, assignment or transfer of the
Note or Conversion Shares is registered under the Act, or (ii) the Note or
Conversion Shares are sold, assigned or transferred in accordance with all
the requirements and limitations of Rule 144 under the Act, it being
understood that Rule 144 is not available at the time of the original
issuance of this Note for the sale of the Note or the Conversion Shares and
that there can be no assurance that Rule 144 sales will be available at any
subsequent time, or (iii) such sale, assignment, or transfer is otherwise
exempt from registration under the Act.
(c) Unless registered pursuant to the provisions of Section 5 hereof,
or otherwise, the Conversion Shares issued upon exercise of the Conversion
Right shall be subject to a stop transfer order and the certificate or
certificates evidencing such Conversion Shares shall bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE AACT")
OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO
IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
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HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED,
SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS."
11. Miscellaneous.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by
telecopy, telex or similar telecommunications equipment) against receipt to
the party to whom it is to be given, (i) if to the Company, at its address
at 611 Broadway, Suite 308, New York, New York 10012, Attention: James S.
Hatch, Secretary, (ii) if to the Holder, at its address set forth on the
first page hereof; or (iii) in either case, to such other address as the
party shall have furnished in writing in accordance with the provisions of
this Section 11(a). Any notice or other communication given by certified
mail shall be deemed given at the time of certification thereof, except for
a notice changing a party's address which shall be deemed given at the time
of receipt thereof. Any notice given by other means permitted by this
Section 11(a) shall be deemed given at the time of receipt thereof.
(b) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Note (and upon surrender of this
Note, if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder a
new Note of like date, tenor and denomination. In the case of a lost or
stolen Note, the Company may require the Holder to execute an indemnity
agreement.
(c) No course of dealing and no delay or omission on the part of the
Holder in exercising any right or remedy shall operate as a waiver thereof
or otherwise prejudice the Holder's rights, powers or remedies. No right,
power or remedy conferred by this Note upon the Holder shall be exclusive
of any other right, power or remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise, and all such remedies
may be exercised singly or concurrently.
(d) This Note may be amended only by a written instrument executed by
the Company and the Holder hereof. Any amendment shall be endorsed upon
this Note, and all future Holders shall be bound thereby.
(e) This Note has been negotiated and consummated in the State of New
York and shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles governing
conflicts of law.
(f) The Company irrevocably consents to the jurisdiction of the courts
of the State of New York and of any federal court located in such State in
connection with any
-14-
action or proceeding arising out of or relating to this Note, any
document or instrument delivered pursuant to, in connection with or
simultaneously with this Note, or a breach of this Note or any such
document or instrument. In any such action or proceeding, the Company
waives personal service of any summons, complaint or other process and
agrees that service thereof may be made in accordance with Section
11(a). Within 30 days after such service, or such other time as may be
mutually agreed upon in writing by the attorneys for the parties to
such action or proceeding, the Company shall appear or answer for the
parties to such action or proceeding, the Company shall appear or
answer such summons, complaint, or other process. Should the Company
so served fail to appear or answer within such 30-day period or such
extended period, as the case may be, the Company shall be deemed in
default and judgment may be entered against the Company for the amount
as demanded in any summons, complaint or other process so served.
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
dated the day and year first above written.
AMERICAN INTERACTIVE MEDIA, INC.
By: _______________________________
Name:
Title:
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Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘10-12G’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 2/3/03 | | 2 | | | | | None on these Dates |
| | 12/31/99 | | 1 |
| | 12/3/99 | | 3 |
| Filed on: | | 5/14/99 |
| | 2/3/98 | | 1 |
| | 12/4/97 | | 3 |
| List all Filings |
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