SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 21, 1999
INITIO, INC.
(Exact name of registrant as specified in charter)
Nevada 0-9848 22-1906744
(State or other juris- (Commission (IRS Employer
diction of Incorporation) File number) Identification No.)
2500 Arrowhead Drive, Carson City, Nevada 89706
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (775) 883-2711
(Former Name or Former Address, if Changed Since Last Report)
Item 2.Disposition of Assets.
On May 21, 1999, Initio, Inc. (the "Company") completed
the sale of certain operating assets pertaining to the direct
mail and e-commerce business (the "Mail Order Business") of its
subsidiary Deerskin Trading Post, Inc. ("Deerskin"), to Advanced
Medical Sciences, Inc. ("AMDS"). The assets sold included:
(i) all inventory related to the Mail Order Business
as of the close of business on April 30, 1999 (the "Effective
Date");
(ii) pre-paid advertising;
(iii) other prepaid expenses;
(iv) all of Deerskin's fixed assets as of the
Effective Date located in Carson City, Nevada, Teterboro, New
Jersey and Danvers, Massachusetts, excluding certain assets set
forth in the Asset Purchase Agreement dated April 21, 1999
between Deerskin and AMDS;
(v) certain accounts receivable;
(vi) all security deposits as of the Effective Date
held by the lessors in connection with the leases of the
Teterboro, New Jersey and Danvers, Massachusetts facilities as
well as all utility deposits maintained by Deerskin;
(vii) all agreements material to operating the Mail
Order Business;
(viii) customer lists;
(ix) separations, photographs and other material
relating to the preparation or printing of artwork used in the
Mail Order Business and Deerskin's e-commerce business;
(x) Deerskin's proprietary mail order computer
software systems;
(xi) all right, title and interest of Deerskin in
trademarks, copyrights, service marks, trade names, domain names
using the words "Deerskin", "Joan Cook" and variations thereof,
and other intellectual property rights, together, in each case,
with all registrations, applications, recordings, reissuances,
extensions, renewals, licenses and rights, if any, and all claims
against third parties for violation or infringement of any
thereof, together with the goodwill of the Mail Order Business;
(xii) all unshipped orders from customers as of the
Effective Date and credit card numbers (and the right to collect
monies pursuant thereto) which customers have tendered in payment
for such Unfilled Orders;
(xiii) Deerskin's books of account and records,
licenses, permits, sales and manufacturing data, software
programs, computer printouts, data bases and related items, and
other records, documents and instruments relating to the acquired
assets and all copies thereof.
The purchase price received for the assets was
approximately $6 million (the "Purchase Price"). The Purchase
Price was paid as follows:
(a) $2 million of the Company's convertible
subordinated debenture held by Pioneer Ventures Associates
Limited Partnership ("Pioneer") was cancelled and all obligations
of the Company to Pioneer for such indebtedness was assumed by
AMDS;
(b)AMDS issued to Deerskin a Convertible Debenture
due June 1, 2004 in the principal amount of $3.4 million. The
Convertible Debenture bears interest at a rate of 8% per annum,
payable on the last day of each July, October, January and April
until June 1, 2004, when the Convertible Debenture is to be
redeemed by AMDS. The Debenture is convertible into shares of
AMDS common stock; and
(c) approximately $550,000 cash.
The foregoing summary of the transaction is qualified
in its entirety by reference to the full text of the exhibits
filed with this Report.
Item 7.Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
Number
10.1Asset Purchase Agreement between
Deerskin and AMDS, dated April 21, 1999.
10.2Convertible Debenture due June 1, 2004.
10.3Security Agreement between Deerskin and
AMDS, dated May 21, 1999.
10.4Lease between Deerskin and AMDS, dated
May 21, 1999, for Carson City, Nevada
facility.
10.5Consulting Agreement between Deerskin
and AMDS, dated May 21, 1999.
10.6Assignment and Assumption Agreement
between Deerskin and AMDS, dated May 21,
1999, relating to lease for Teterboro,
New Jersey facility.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
INITIO, INC.
By /s/ Martin Fox
Martin Fox, President
Dated: May 28, 1999
EXHIBIT INDEX
ExhibitDescription
10.1Asset Purchase Agreement between Deerskin and
AMDS, dated April 21, 1999.
10.2$3.4 million Convertible Debenture due June 1,
2004.
10.3Security Agreement between Deerskin and AMDS,
dated May 21, 1999.
10.4Lease between Deerskin and AMDS, dated May 21,
1999, for Carson City, Nevada facility.
10.5Consulting Agreement between Deerskin and AMDS,
dated May 21, 1999.
10.6Assignment and Assumption Agreement between
Deerskin and AMDS, dated May 21, 1999, relating to
lease for Teterboro, New Jersey facility.
I:\INIT\80039WYC.020
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
AGREEMENT made the 21st day of April, 1999 by and
between ADVANCED MEDICAL SCIENCES, INC. ("Buyer") a Virginia
corporation having an office at 382 Rte. 59, #310, Monsey, New
York 10952 and DEERSKIN TRADING POST, INC. (the "Seller" or
"Deerskin"), a Nevada corporation having an office at 2500
Arrowhead Drive, Carson City, Nevada 89706.
W I T N E S S E T H:
WHEREAS, Seller owns certain assets used in connection
with its mail order business for the sale of leather apparel,
other leather merchandise, housewares and related items (the
"Mail Order Business");
WHEREAS, Deerskin is a wholly-owned subsidiary of
Initio, Inc., a Nevada corporation ("Initio");
WHEREAS, Seller desires to sell and Buyer desires to
purchase certain specific, but not all, of the assets used in the
Mail Order Business, and to assume certain specific; but not all,
liabilities, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the respective
agreements hereinafter set forth, the parties agree as follows:
ARTICLE I. Sale of Assets, Consideration, Payment and
Related Matters. On the basis of the representations and warran-
ties contained in and subject to the terms and conditions of this
Agreement:
A. Sale.
(a)Seller shall at the Closing (as hereinafter
defined) sell, assign, transfer, convey and deliver to Buyer, and
Buyer shall purchase, certain of the assets, rights and
entitlements (the "Acquired Assets") used by Seller in the Mail
Order Business, free and clear of all liens, claims, charges,
equities, encumbrances and restrictions of every kind, including
without limitation:
(i) all inventory related to the Mail Order
Business located at Seller's facilities in Carson City, Nevada,
Teterboro, New Jersey and Danvers, Massachusetts (including
inventory in transit, for which Seller has made payment), as of
the close of business on April 30, 1999 ("Inventory"). The close
of business on April 30, 1999 is sometimes hereinafter referred
to as the "Effective Date".
(ii) pre-paid advertising, including an accrual
for the advertising attributable to Unfilled Orders (as that term
is hereinafter defined) as of the Effective Date ("Pre-paid
Advertising").
(iii) other prepaid expenses as of the Effective
Date ("Other Pre-paid Expenses").
(iv) all of Seller's fixed assets as of the
Effective Date ("Fixed Assets") including, but not limited to,
computer and telephone systems (including the right to use the
related telephone and fax numbers), materials handling equipment,
all furniture and fixtures and other fixed assets (other than
leasehold improvements in Carson City, Nevada) located in Carson
City, Nevada, Teterboro, New Jersey and Danvers, Massachusetts,
excluding the assets set forth in Exhibit A attached hereto (the
"Excluded Assets").
(v) accounts receivable with respect to list
rentals and loans made to employees engaged in the Mail Order
Business (including accrued interest, if any) as of the Effective
Date (the "Accounts Receivable"). Schedule 1.01 sets forth the
amount and interest rate of loans currently outstanding to
employees engaged in the Mail Order Business, which are included
within the Acquired Assets. Such loans accelerate if the
employee's employment terminates.
(vi) all security deposits as of the Effective
Date held by the lessors in connection with the leases of the
Teterboro, New Jersey and Danvers, Massachusetts facilities as
well as all utility deposits maintained by Seller (the "Security
Deposits"). Schedule 1.01 sets forth with respect to the
Security Deposits the amount of each such Security Deposit and
the holder thereof.
(vii) all agreements material to operating the
Mail Order Business including, without limitation, Seller's
agreements with Globix Corporation, LinkShare Corporation,
Seller's pending agreement with Hanover Direct, Inc. for Internet
related services all open purchase orders as of the Effective
Date all service contracts with respect to the Fixed Assets,
contracts for discount rates for the telephone services and T-1
lines and a contract for printing services with RR Donnelly &
Company (the "Material Agreements"). Buyer agrees that Seller
may enter into agreements with LinkShare Corporation and/or
Hanover Direct, Inc. for Internet related services after the
Effective Date and such acts shall be deemed to have been in the
usual, regular and ordinary course of business of the Seller.
Seller will use its best efforts to assign the Material
Agreements to Buyer. Buyer understands that certain of the
Material Agreements may not be assignable without the consent of
the other party thereto. Seller agrees to work with Buyer to
obtain such consent.
(viii) customer list of the Mail Order Business
in machine-readable form as such list is presently maintained by
Cornwall Data Services (the "Customer List").
(ix) separations, photographs and other material
relating to the preparation or printing of artwork used in the
Mail Order Business and Seller's e-commerce business (the
"Artwork").
(x) the Deerskin proprietary mail order computer
software systems (the "Deerskin Software").
(xi) all right, title and interest of Seller in
trademarks, copyrights, service marks, trade names, domain names
using the words "Deerskin", "Joan Cook" and variations thereof,
and other intellectual property rights, together, in each case,
with all registrations, applications, recordings, reissuances,
extensions, renewals, licenses and rights, if any, and all claims
against third parties for violation or infringement of any
thereof (the foregoing and the Deerskin Software are hereinafter
called the "Intellectual Property"), together with the goodwill
of the Mail Order Business (the "Goodwill", and together with the
Customer List, the Artwork, the Deerskin Software and the
Intellectual Property, the "Intangibles").
(xii) all unshipped orders from customers as of
the Effective Date (the "Unfilled Orders") and credit card
numbers (and the right to collect monies pursuant thereto) which
customers have tendered in payment for such Unfilled Orders.
(xiii) Subject to the provisions of Section 1.06
below, all of Seller's books of account and records, licenses,
permits, sales and manufacturing data, software programs,
computer printouts, data bases and related items, and other
records, documents and instruments relating to the Acquired
Assets (or the employees to be employed by Buyer pursuant to
Section 7.01) and all copies thereof (collectively "Records").
(b)Concurrently with the execution and delivery of
this Agreement, Seller is delivering to Buyer Schedule 1.01,
which is a summary of the Acquired Assets as at January 31, 1999.
The Unaudited Schedules (as that term is hereinafter defined)
will be prepared in a manner consistent with and will use
substantially the same format as such Schedule 1.01.
1.02 Purchase Price. In addition to Buyer assuming
the Assumed Liabilities (as that term is hereinafter defined),
the purchase price (the "Purchase Price") for the Acquired Assets
shall be an amount equal to the net book value of the Acquired
Assets at the Effective Date plus $3,500,000, subject to
adjustment as hereinafter set forth. For purposes of this
Agreement the "net book value" of an Acquired Asset shall mean
the net book value as shown on the books and records of Seller
maintained in accordance with generally accepted accounting
principles applied consistently with Seller's past practices,
provided however, that for purposes of this Section the net book
value of the Intangibles and the Material Agreements shall be
deemed to be zero.
1.03 Payment. The Purchase Price shall be paid as
follows:
(a)$2,000,000 shall be paid to Seller by the
assumption by Buyer of an equal amount of Initio's indebtedness
to Pioneer Ventures Associates Limited Partnership ("Pioneer")
and the concurrent release by Pioneer of all obligations of
Initio pursuant to the indebtedness so assumed (as contemplated
by Section 6.02(c)) (the "Initio-Pioneer Agreement").
(b)Not more than $3,500,000, subject to adjustment as
hereinafter set forth, shall be paid by Buyer delivering a
convertible debenture, substantially in the form of Exhibit B
attached hereto (the "Convertible Debenture") which Convertible
Debenture shall be secured as set forth in the security agreement
attached hereto as Exhibit C (the "Security Agreement").
(c)In the event the net book value of the Acquired
Assets as at the Effective Date less the Assumed Liabilities (as
that term is hereinafter defined) as at the Effective Date shall
be more than $2,000,000, Buyer shall pay to Seller at the Closing
the difference by certified or bank check or wire transfer of
immediately available funds. In the event the net book value of
the Acquired Assets as at the Effective Date less the Assumed
Liabilities as at the Effective Date shall be less than
$2,000,000, then the difference shall be deducted from the
Convertible Debenture (which Convertible Debenture shall be
rounded down to the next $100,000) issued by Buyer to Seller at
the Closing and the balance, if any, shall be paid by Buyer to
Seller at the Closing by certified or bank check or wire transfer
of immediately available funds.
1.04 Allocation of Purchase Price. It is hereby
agreed that the Purchase Price with respect to the Acquired
Assets shall be allocated in accordance with the net book value
of the items thereof as reflected on the books of the Seller as
at the Effective Date and the balance shall be allocated to the
Intangibles and the Material Agreements. Buyer and Seller will
consult with each other in the preparation of their respective
tax returns so that such tax returns are consistent with the
provisions of this Section.
1.05 Assumption of Liabilities.
(a)Buyer shall assume and be liable to pay and
discharge and hold Seller harmless from all of the following
(collectively, the "Assumed Liabilities").
(i) all merchandise trade balances associated
with the Mail Order Business as at the Effective Date.
(ii) all letters of credit with respect to
Inventory issued by Seller outstanding at the Effective Date.
(iii) accrued expenses, including, but not
limited to, customer refunds and exchanges, in connection with
the Mail Order Business as at the Effective Date.
(iv) all customer deposits relating to the Mail
Order Business as at the Effective Date.
(b)Concurrently with the execution and delivery of
this Agreement, Seller is delivering to Buyer Schedule 1.05,
which is a summary of the Assumed Liabilities as at January 31,
1999. The Unaudited Schedules (as that term is hereinafter
defined) will be prepared in a manner consistent with and will
use substantially the same format as such Schedule 1.05.
1.06 Determination of Inventory. On April 30, 1999,
or shortly thereafter (but no later than May 30, 1999), Seller
shall conduct an inventory count of all merchandise located at
Carson City, Nevada, Teterboro, New Jersey and Danvers,
Massachusetts to establish the net book value of the Inventory as
of the Effective Date. Buyer shall have a representative and
Seller shall have its accountant ("Seller's Accountant") present
during the inventory count.
1.07 Seller's Records.
(a)Anything in Section 1.01 to the contrary
notwithstanding, the Acquired Assets shall not include (i)
Seller's corporate books, stock books and records and similar
corporate documents (collectively, "Corporate Records") and (ii)
Seller's accounting books of original entry, general ledgers and
such other books and records, accounting and other, as are
required by law to be retained by Seller (collectively, "Other
Records"). Notwithstanding the foregoing, however, true, correct
and complete copies of the Other Records, or such of them as
Buyer may reasonably designate, shall be delivered by Seller to
Buyer from time to time promptly upon request therefor at and
following the time of the Closing.
(b)For a period of seven (7) years following the
Closing or such other period as the parties may agree, (i) Seller
shall retain, and Buyer shall have access at all reasonable times
for proper purposes to, and shall be entitled to make copies of,
both the Corporate Records and the Other Records insofar as they
relate to any period through the date of Closing, provided,
however, that Seller may at any time deliver the same, or any
part thereof, to Buyer, and (ii) Buyer shall retain, and Seller
shall have access at all reasonable time for proper purposes to,
and shall be entitled to make copies of, all books, records and
documents transferred or delivered by Seller to Buyer pursuant to
this Agreement (including any such delivered pursuant to the
proviso to the preceding clause (i)). Subsequent to the
expiration of such seven-year (or other) period, Seller and
Buyer, as applicable, upon not less than 30-days' prior notice to
the other, may destroy any or all of the books and records so
retained or held unless within such 30-day period the other party
requests the delivery to it of any of the books and records which
are proposed to be so destroyed, in which event the same shall be
delivered to such other party at its expense.
1.08 Unaudited Schedules; Audited Balance Sheet;
Adjustment Procedure.
(a)As soon as practicable, Seller shall deliver to
Buyer, on an unaudited basis, Schedules 1.01 and 1.05 as at the
Effective Date (the "Unaudited Schedules"). The Unaudited
Schedules shall be prepared in accordance with generally accepted
accounting principles consistently applied with Seller's past
practices. On or before August 15, 1999, Initio shall deliver to
Buyer its audited balance sheet as at the Effective Date (the
"Audited Balance Sheet"), together with a certificate of its
chief executive officer or chief financial officer, certifying
final Schedules 1.01 and 1.05 (the "Final Schedules") based on
and consistent with the audited financial statements of Initio
filed with the Securities and Exchange Commission as part of
Initio's annual report on Form 10-KSB (the "Initio Financial
Statement"). The Initio Financial Statement shall be prepared in
accordance with generally accepted accounting principles applied
consistently with Initio's past practices.
(b)Seller agrees that its books and records,
including, without limitation, the work papers of Seller's
Accountant with respect to the Initio Financial Statements,
shall be available for inspection and copying by Buyer's
accountant ("Buyer's Accountant") during normal business hours
after it delivers the Final Schedules. Buyer shall have the
right to notify Seller in writing within 30 days of its receipt
of the Final Schedules that Buyer disagrees with the Final
Schedules. In the event Buyer shall so notify Seller of one or
more objections within such period, the parties' respective
accountants shall attempt to resolve such objection within a
period of 30 days after the receipt of such notice by Seller. In
the event that such objection cannot be resolved within such 60-
day period, the Buyer's Accountant and the Seller's Accountant
shall appoint a third firm of public accountants (the "Third
Firm") which shall resolve such objections based solely on
discussions with the Buyer's Accountant and the Seller's
Accountant and a review of their respective work papers. The
determination of the Third Firm shall be final and binding upon
Buyer and Seller. The expense of engaging the Third Firm shall
be borne equally by Buyer and Seller unless the purchase price
shall increase by more than $25,000 as a result of the forgoing
procedure, in which event the expense of engaging the Third Firm
shall be borne by the Seller or the Purchase Price shall decrease
by more than $25,000, in which event the expense of engaging the
Third Firm shall be borne by Buyer.
(c)In the event that the Final Schedules shall
require an increase or decrease in the Purchase Price of less
than $25,000, no adjustment to the Purchase Price shall be made.
In the event that the Final Schedules shall require an increase
in the Purchase Price of more than $25,000, Buyer shall pay the
amount of such increase within ten days after the final
determination of such amount. In the event that the Final
Schedules shall require a decrease in the Purchase Price of more
than $25,000, then Seller shall, at its option, within ten days
after the final determination of such amount, either pay the
amount of such decrease to Buyer in cash, or deliver the
Convertible Debenture to Buyer in exchange for a new Convertible
Debenture having a principal amount rounded down to the next
lowest $100,000, together with any difference payable in cash by
Buyer.
1.09 Bulk Transfer. The parties have agreed to waive
compliance with the procedures set forth in all applicable bulk
transfer, bulk sales and similar laws and requirements of all
jurisdictions in connection with the transactions provided for in
this Agreement.
1.10 Sales Taxes. All sales taxes applicable to the
transfer of Acquired Assets to Buyer pursuant to this Agreement
shall be paid by Buyer. A check(s) in payment of such sales
taxes to the order of the appropriate taxing authorities will be
delivered by Buyer to Seller at Closing.
ARTICLE II. Closing and Related Matters.
2.01 Closing. Consummation of the transactions
provided for in this Agreement ("Closing") shall be made at the
offices of Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsyl-
vania Plaza, New York, New York 10119, on that date which is not
more than five days after the delivery by Seller to Buyer of the
Unaudited Schedules, or at such other place or date as the
parties hereto shall agree in writing, provided, however, that
this Agreement shall terminate and be of no further force or
effect if the Closing does not take place on or before June 15,
1999.
2.02 Liquidated Damages;Break-Up Fee. The parties
hereto agree that in the event either party breaches this
Agreement and fails to consummate the transactions contemplated
herein without good cause, the damage or injury to the other
party would be irreparable, the exact amount of which would be
difficult to ascertain and that for such reason the party in
breach shall pay to the other party as liquidated damages or a
break-up fee the amount of $100,000.00, payable within five days
after demand by the party which is not in breach. It is agreed
that the failure of either party to consummate the transactions
contemplated herein because of the failure or refusal of Pioneer
to (i) consummate the transactions contemplated either by the
Letter Proposal (as that term is here and after defined) or (ii)
release Seller as contemplated by Sections 1.03 and 6.02(c) shall
not be deemed a breach of this Agreement for purposes of this
Section.
2.03 Documents and Actions. At the Closing, each of
the parties shall appropriately execute and deliver all such
bills of sale, instruments of transfer, assignment and
assumption, certificates and other instruments and documents and
take all such other actions as are, or as may be necessary or
required to consummate and give full effect to the transactions,
provided for in this Agreement. Promptly following the Closing,
Seller shall take all such steps as may be necessary or required
to put Buyer in actual possession and operating control of the
Acquired Assets.
ARTICLE III. Representations and Warranties of Seller.
Seller represents and warrants to and agree with Buyer as set
forth in Exhibit 3 to this Agreement.
ARTICLE IV. Representations and Warranties of Buyer.
Buyer represents and warrants to and agrees with Seller as set
forth in Exhibit 4 to this Agreement.
ARTICLE V. Pre-Closing Matters.
5.01 Information as to Operations of Buyer. Until the
Closing:
(a)Seller shall afford to Buyer, its attorneys,
accountants and other representatives, upon reasonable request,
full and free access during normal business hours to all
properties, books, records and other documents of Seller,
including the right to make extracts therefrom or copies thereof,
and shall furnish Buyer with, or with copies of, all such
agreements, documents and records, financial and operating data
and other information concerning Seller as Buyer may reasonably
request. Buyer shall hold in strict confidence and shall not use
or otherwise publicly disclose, and shall cause its officers,
attorneys, accountants and other representatives to hold in
strict confidence and not to use or publicly disclose, all
information so furnished or made available by Seller which Seller
indicates in advance is confidential, other than information
which is or becomes publicly available or otherwise in the public
domain. Should this Agreement be terminated or the transactions
contemplated hereby not be consummated for any reason, Buyer
shall, upon request, return to Seller all written information so
furnished and all copies thereof and extracts therefrom.
(b)Seller shall refrain from taking or omitting to
take any action or entering into any transaction which, had such
action been taken or omitted or such transaction entered into
immediately prior to execution of this Agreement, would have
caused any of the representations, warranties or agreements of
Seller in this Agreement to be untrue, incorrect or inaccurate in
any material respect as of the time of execution of this
Agreement or would cause any such representations, warranties or
agreements to be untrue, incorrect or inaccurate in any material
respect as of the time immediately following such action,
omission or transaction or as of the date of Closing. Without
limiting the generality of the foregoing, except as otherwise set
forth or provided in this Agreement, Seller shall (i) conduct its
business only in the usual, regular and ordinary course in the
same manner as heretofore, (ii) use its best efforts to preserve
its business, properties and assets, maintain its business
organization intact, keep available the services of its present
officers and employees and preserve its goodwill and existing
relationships with customers, suppliers and others having
dealings with it, (iii) maintain its properties in customary
repair, order and condition, reasonable use and wear and tear
excepted, (iv) maintain insurance on its properties and with
respect to the conduct of its business in amounts not less than
and of such kinds as are comparable to the insurance in effect on
the date of this Agreement, (v) maintain its books, accounts and
records in the usual, regular and ordinary manner, (vi) refrain
from entering into any employment agreement with any employee
which cannot be terminated on less than 30 days notice to such
employee, (vii) refrain from granting any salary increases or
bonuses without the prior written consent of Buyer, (viii)
refrain from forgiving in whole or in part any of the Accounts
Receivable, without Buyer's prior written consent, and (ix)
refrain from making any additional loans to employees engaged in
the Mail Order Business, without Buyer's prior written consent.
5.02 Adverse Circumstances.
(a)Seller shall promptly notify Buyer, as soon as it
obtains knowledge, of any facts, circumstances or occurrences
which have adversely affected or might reasonably be expected to
adversely affect its business, properties, assets, financial
condition or prospects or which could or reasonably might be
expected to cause any of the representations, warranties or
agreements in this Agreement to be untrue, incorrect or
inaccurate in any material respect.
(b)Should Buyer elect to consummate the Closing after
receipt of any notice pursuant to subsection 5.02(a), then,
anything elsewhere in this Agreement to the contrary notwith-
standing, Buyer shall be deemed to have waived any rights or
claims which it might possess under this Agreement, or otherwise,
against Seller with respect to the matters referred to in such
notice.
5.03 Operations between the Effective Date and
Closing.
(a)Seller and Buyer agree that for the period from
the Effective Date through Closing, Seller shall conduct the Mail
Order Business for the benefit and account of Buyer as follows:
(i) all sales of the Mail Order Business shall
be credited to Buyer;
(ii) all costs incurred during this period of
the Mail Order Business shall be charged to Buyer;
(iii) all costs of payroll and benefits for
employees at Carson City, Nevada, Teterboro, New Jersey and
Danvers, Massachusetts, except for Martin Fox, Daniel DeStefano
and one secretary based in Teterboro, New Jersey and one driver
based in Teterboro, New Jersey, shall be charged to Buyer;
(iv) all expenses of occupancy of Carson City,
Nevada, Teterboro, New Jersey and Danvers, Massachusetts shall be
charged to Buyer.
(b)It is anticipated that the Mail Order Business
will require more cash than will be received during the period
from May 1, 1999 through the date of Closing. Buyer agrees to
deposit with Seller on or before April 28, 1999, the amount of
$34,000, representing the approximate rents due for the month of
May 1999 for the Carson City, Nevada, Teterboro, New Jersey and
Danvers, Massachusetts facilities. In addition, Buyer shall
transfer to Seller the sum of $10,000 every seventh day after
such date by wire transfer of immediately available funds, which
the parties agree is the estimated short fall of the Mail Order
Business' cash flow prior to Closing. In addition, prior to
Closing, Buyer shall pay to Seller such additional funds as
Seller shall deem necessary to provide sufficient cash flow for
the ordinary operations of the Mail Order Business, which shall
be consistent with the Seller's past practices. Preliminary
adjustment for all of the above shall be made at Closing. A
final adjustment for the above shall be made concurrently with
any adjustment required by reason of the delivery of the Final
Schedule. Such adjustments shall also include adjustments for
miscellaneous accrued expenses and prepaid expenses incurred in
the ordinary course of the Mail Order Business, including,
without limitation, with respect to utilities and insurance.
(c)As promptly as practicable after the Effective
Date, Seller will send to Buyer by telecopier or such other means
as Buyer shall reasonably request such information concerning the
operations of the Mail Order Business as Buyer shall request,
including without limitation, daily check runs, daily sales
reports and daily deposits.
(d)In the event this Agreement terminates in
accordance with Section 2.01, Seller shall within five business
days after such termination pay to Buyer an amount equal to the
amounts transferred pursuant to Subsection (b) above unless
Seller shall be entitled to liquidated damages pursuant to
Section 2.02 in which event Buyer shall be entitled to a credit
for the amounts so transferred. In the event Seller shall be
entitled to liquidated damages pursuant to Section 2.02 and the
amount transferred pursuant to Subsection (b) above shall exceed
the amount specified in Section 2.02, Seller shall pay within
five business days after the termination of this Agreement the
excess to Buyer.
ARTICLE VI. Conditions Precedent.
6.01 Conditions Precedent to Obligation of Buyer. The
obligation of Buyer to consummate the transactions provided for
in this Agreement shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions (any or all of
which may be waived, in whole or in part, by Buyer in its
discretion):
(a)Each of the representations and warranties of
Seller in, or in any instrument delivered in connection with or
pursuant to, this Agreement shall, except as otherwise
contemplated or permitted by this Agreement, be true and correct
in all material respects on and as of the date of Closing.
Seller shall have duly performed and complied in all material
respects with all agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior to
or at the Closing. Buyer shall have received Seller's
certificate, dated the date of Closing, to the foregoing effect.
(b)A lease of the property owned by Seller located in
Carson City, Nevada shall have been entered into in substantially
the form of Exhibit D attached hereto.
(c)A Consulting Agreement shall have been entered
into by Seller in substantially the form of Exhibit E attached
hereto.
(d)Martin Fox and Daniel DeStefano (the "Principal
Shareholders") and Initio shall execute and deliver to Buyer an
agreement pursuant to which each agrees to be bound by the terms
of Section 7.08.
(e)Buyer shall receive at the Closing an opinion of
Milberg Weiss Bershad Hynes & Lerach LLP in the form of Exhibit F
attached hereto.
6.02 Conditions Precedent to Obligation of Seller.
The obligation of Seller to consummate the transactions provided
for in this Agreement shall be subject to the fulfillment at or
prior to the Closing of each of the following conditions (any or
all of which may be waived, in whole or in part, by Seller in its
discretion):
(a)Each of the representations and warranties of
Buyer in, or in any instrument delivered in connection with or
pursuant to, this Agreement shall, except as otherwise contem-
plated or permitted by this Agreement, be true and correct in all
material respects on and as of the date of Closing. Buyer shall
have duly performed and complied in all material respects with
all agreements, covenants, and conditions required by this
Agreement to be performed or complied with by it prior to or at
the Closing. Seller shall have received Buyer's certificate,
dated the date of Closing, to the foregoing effect.
(b)Buyer shall have consummated its transactions with
Pioneer and its acquisition of Remarkable Products and Creadis
Promotions, Inc. as contemplated by the Letter Proposal between
Buyer and Pioneer, dated March 12, 1999.
(c)Initio shall have been released from $2,000,000 of
its convertible subordinated debenture by Pioneer and Initio
shall have issued a replacement convertible subordinated
debenture in the amount of $1,000,000 for the balance of such
convertible subordinated debenture. Such replacement convertible
subordinated debenture shall have the same terms and conditions
as currently exist, provided however, that the conversion price
thereunder shall be adjusted to be the greater of $2.50 or the
book value per share of Initio after taking into account the
consummation of the transactions contemplated by this Agreement
and the tax benefit attributable to the then net operating loss
carry forward of Initio, but in no event shall the conversion
price be more than $3.00 per share.
(d)Buyer shall have completed its reverse stock split
so that, at the Closing, Buyer shall have outstanding no more
than 3,000,000 common shares.
(e)Buyer shall have completed its reincorporation in
the State of Nevada (under the name America's Shopping Mall,
Inc.).
(f)Buyer shall have assumed the lease of Seller's
property located in Teterboro, New Jersey pursuant to an
Agreement executed by Initio in substantially the form of
Exhibit G attached hereto.
(g)Seller shall receive at the Closing an opinion of
Caro & Associates, P.C., in the form of Exhibit H attached
hereto.
6.03 Compliance with Conditions. All of the
conditions to the respective obligations of the parties set forth
in Sections 6.01 and 6.02 are and shall be deemed covenants by
the other, Seller on the one hand and Buyer on the other, to
comply with and satisfy as promptly as practicable each such
condition as requires action by it (to the extent within its
power) and to use its commercially reasonable efforts to obtain
compliance with and satisfaction of each such condition as
requires action by any other party or persons, including any
person not a party.
ARTICLE VII. Additional Agreements of the Parties.
7.01 Employees. All employees of Deerskin except for
those named in Schedule 7.01 attached hereto, shall become
employees of Buyer and Buyer shall assume responsibility for all
salaries and benefits for such employees accrued after the
Effective Date. The foregoing shall not be deemed to require
Buyer to assume Seller's medical plan or to retain any of
Seller's employees for any specified period of time, provided,
however, that Seller shall assign to Buyer and Buyer shall assume
the Seller's cafeteria plan as of the Effective Date. The net
balance of such cafeteria plan shall be either added to or
subtracted from the Purchase Price, as appropriate, and shall be
payable at the Closing in cash.
7.02 Real Estate Matters. Seller and Buyer have
agreed that Seller shall remain the lessee at Seller's facility
in Danvers, Massachusetts, which lease expires May 31, 2000. All
costs incurred pursuant to Seller's lease of the Danvers facility
and all costs of utilities and ordinary maintenance incurred in
connection with such facility after the Effective Date shall be
paid by Buyer within three (3) days of receipt of Seller's
request for such payment. Seller's request for payment shall
include copies of bills or invoices requiring payment.
7.03 Refunds. Seller shall reimburse Buyer for
amounts of refunds less the value of merchandise determined in
accordance with Seller's practices and procedures (applied prior
to the Effective Date on a consistent basis) made to customers of
the Mail Order Business, for items Seller shipped on or before
April 30, 1999, provided, however, that Seller shall not be
required to reimburse Buyer for any refund made after July 31,
1999. All returned merchandise which is the subject of a refund
shall be Buyer's property.
7.04 Material Agreements; Purchase Orders. All
Material Agreements, including all open purchase orders, as of
the Effective Date, which remain open at the date of Closing,
relating to the Mail Order Business shall be assumed by Buyer.
7.05 Pre-paid Advertising Adjustment. Book value of
Pre-paid Advertising is calculated based upon the percent
complete for such advertising event and an adjustment will be
made such that if such percent complete is too high, Buyer shall
remit to Seller, and, if too low, Seller shall remit to Buyer the
appropriate amount provided, however, if such amount is less than
$5,000 no payment shall be made by either party. If such amount
is greater than $5,000, the entire amount due under this section
shall be paid within ten days of the date used to make the
calculation. The first adjustment under this section shall be
made as of July 31, 1999 and the final adjustment under this
section shall be made as of January 31, 2000. It is agreed that
an advertising event shall be deemed 100% complete by the end of
13 months after issuance.
7.06 Letters of Credit. With respect to Letters of
Credit relating to purchases of inventory written by Seller prior
to the Effective Date, which remain outstanding as of the Closing
Date, Buyer at the Closing will deposit with the issuing bank
such funds as shall be required to obtain the issuing bank's
release of Seller's liability for such Letters of Credit. With
respect to Letters of Credit relating to purchase of inventory
which will be written by Seller after the Effective Date but
prior to the Closing Date, Buyer will provide a letter of credit
facility, provided, however, in the event this Agreement is
terminated, title to the merchandise subject to such Letter of
Credit shall pass to Seller and Seller shall remit Buyer's actual
cost within three (3) days of the receipt of merchandise.
7.07 Change of Corporate Name. At the Closing, Seller
shall take all such corporate actions, and shall execute and
promptly following the Closing file all such appropriate
certificates and documents, as are necessary to change its
corporate name to a name which does not contain the words
"Deerskin", "Trading Post", "Joan Cook" or any variation thereof.
7.08 Covenant Not to Compete. In order to induce
Buyer to enter into and consummate the transactions provided for
in this Agreement, Seller covenants and agrees on behalf of
itself, Initio and the Principal Shareholders that (i) during the
period of three (3) years following the date of Closing neither
Seller, nor Initio nor the Principal Shareholders, will directly
or indirectly, whether for itself or himself or for any other
person, firm, corporation or entity, engage in, or have any
interest in any business or other entity which engages in, the
business of selling by mail order leather apparel or other
leather merchandise of the type currently sold by Seller anywhere
in the continental United States or goods of the type included in
the Deerskin Holiday 1998 catalog or (ii) at any time after the
Closing, unless such employee's employment with Buyer had
previously been terminated without being solicited by Seller,
Initio or the Principal Shareholder, hire any of Buyer's
employees, provided, however, that the foregoing shall not
prohibit Initio or the Principal Shareholder, at any time from
owning in the aggregate not more than 10% of the stock or other
equity interest of any publicly-traded entity.
7.09 Payment of Liabilities. Seller will pay or, in
the event of a dispute, adequately reserve against, all of its
liabilities arising prior to the Effective Date which are not
included within the Assumed Liabilities and shall hold Buyer
harmless therefrom.
7.10 Further Assurances. From and after the date of
this Agreement and the date of Closing, the parties hereto shall
from time to time, at the request of any other party and without
further consideration, do, execute and deliver, or cause to be
done, executed and delivered, all such further acts, things and
instruments as may be reasonably requested or required more
effectively to evidence and give effect to the transactions
provided for in this Agreement.
ARTICLE VIII. Survival and Indemnification.
8.01 Survival. All of the provisions of, and all of
the representations, warranties, covenants and agreements of the
parties in, or in any document or other instrument executed or
delivered pursuant to or in connection with, this Agreement
shall, unless waived, survive and continue in full force and
effect from and after the date of Closing.
8.02 Indemnification. Buyer and Seller:
(a)Shall each indemnify and hold the other free and
harmless from and against and shall reimburse the other for any
and all claims, liabilities, damages, losses, judgments, costs
and expenses including reasonable counsel fees and other
reasonable out-of-pocket expenses (the foregoing being herein-
after collectively referred to as "damages") arising out of or
resulting from any inaccuracy or inadequacy in or breach or
default of any of its representations, warranties, covenants or
agreements in, or in any document or other instrument executed or
delivered pursuant to or in connection with, this Agreement,
provided, however, that notwithstanding the foregoing Seller
shall not be liable to Buyer hereunder for damages in excess of
the Purchase Price.
(b)Shall give the other written notice of any claim,
demand, action, suit or proceeding raised, brought, threatened,
made or commenced against it relating to any matter to which the
indemnification provisions of this Section 8.02 apply, and the
party receiving such notice shall have the right, at its expense,
to control the settlement and defense thereof using counsel of
its own choice. Nothing herein shall limit the right of any
party to settle any claim, demand, action, suit or proceeding
brought or threatened against it, provided, however, that in any
such event any other party shall not be bound by the amount or
terms of any such settlement not consented to by it.
(c)The provisions of this Section 8.02 shall not be
construed as a waiver by any party of any other rights or
remedies which it may possess, whether under this Agreement, at
law or in equity, arising out of or resulting from any breach or
default of or inaccuracy or inadequacy in any other party's
representations, warranties, covenants or agreements. All of
such other rights and remedies shall be cumulative with the
rights and remedies set forth herein.
8.03Survival of Representations. The representations
and warranties of Buyer and Seller shall survive the Closing and
remain in full force and effect for a period of one year after
the final calculation of the Purchase Price pursuant to Section
1.08.
8.04Products Liability Insurance. To the extent that
Seller's product liability insurance is a "claims made" policy,
Seller hereby agrees that it will maintain such product liability
insurance in full force and effect at current policy levels for
at least one year after the date of the Closing.
ARTICLE IX. Miscellaneous.
9.01 Brokers. Seller and Buyer each represents and
warrants to the other that it has had no dealings with and has
not employed any broker, agent, finder or other person and that
no such person brought about or is entitled to any commission,
brokerage or finder's fee or similar payment in connection with,
or with the transactions provided for in, this Agreement.
9.02 Expenses. Each party shall bear and pay all
legal, accounting and other fees and expenses incurred by it in
connection with, and with the transactions provided for in, this
Agreement and the performance of all its obligations and agree-
ments hereunder.
9.03 Notices. All notices, requests, demands and
other communications required or permitted under this Agreement
shall be in writing and shall be deemed to have been duly given
if personally delivered or if mailed by first class registered or
certified mail return receipt requested, or by first class mail
if received, addressed to the parties at their respective
addresses set forth or referred to on the first page and signa-
ture page of this Agreement, with copies to their respective
counsel, Milberg Weiss Bershad Hynes & Lerach LLP, Att: Arnold N.
Bressler, Esq., One Pennsylvania Plaza, New York, New York 10119,
in the case of Seller, and Caro & Associates, P.C., Attention:
Chase A. Caro, Esq., 60 East 42nd Street, Suite 2001, New York,
New York 10165, in the case of Buyer or to such other person or
address as may be designated by like notice hereunder.
9.04 Parties in Interest. This Agreement shall be
binding upon, and shall inure to the benefit of and be enforce-
able by, the parties hereto and their respective legal represen-
tatives, successors and assigns, but no other person shall
acquire or have any rights under this Agreement.
9.05 Entire Agreement; Modification; Waiver. This
Agreement (as below defined) contains the entire agreement and
understanding among the parties hereto with respect to the
subject matter hereof and supersedes all prior negotiations and
understandings, if any, and there are no agreements, representa-
tions or warranties other than those set forth, provided for or
referred to herein. All exhibits and schedules to this Agreement
are expressly made a part of this Agreement as fully as though
completely set forth herein, and all references to this Agreement
herein, in any of such writings or elsewhere shall be deemed to
refer to and include all such writings. Neither this Agreement
nor any provisions hereof may be modified, amended, waived,
discharged or terminated, in whole or in part, except in writing
signed by the party to be charged. Any party may extend the time
for or waive performance of any obligation of any other party or
waive any inaccuracies in the representations or warranties of
any other party or compliance by any other party with any of the
provisions of this Agreement. No waiver of any such provisions
or of any breach of or default under this Agreement shall be
deemed or shall constitute a waiver of any other provisions,
breach or default, nor shall any such waiver constitute a con-
tinuing waiver.
9.06 Interpretation.
(a)This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of New York
applicable to contracts made and to be performed exclusively in
that State without giving effect to the principles of conflict of
laws.
(b)All pronouns and words used in this Agreement
shall be read in the appropriate number and gender, the mascu-
line, feminine and neuter shall be interpreted interchangeably
and the singular shall include the plural and vice versa, as the
circumstances may require.
9.07 Headings; Counterparts. The article and section
headings in this Agreement are for reference purposes only and
shall not define, limit or affect the meaning or interpretation
of this Agreement. This Agreement is being executed in two or
more counterparts, each of which shall be deemed an original but
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
ADVANCED MEDICAL SCIENCES, INC.
By /s/ Irwin Schneidmill
Irwin Schneidmill, President
DEERSKIN TRADING POST INC.
By /s/ Martin Fox
Martin Fox, Chairman
EXHIBIT 3
to
ASSET PURCHASE AGREEMENT
ARTICLE III. Representations and Warranties of Seller.
Seller represents and warrants to Buyer that except as otherwise
set forth or referred to in this Agreement and a separate letter
or schedule dated and executed contemporaneously herewith from
the Seller to (and received by) Buyer (hereinafter referred to as
the "Seller's Schedule"):
3.01 Corporate Organization, Good Standing and
Corporate Power. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada and has all requisite corporate power and authority to
conduct its business and own, lease and operate its properties as
and in the places where such business is now conducted and such
properties are now owned, leased or operated. Seller is duly
qualified to do business in the states where it is required to be
so qualified and is not required to be qualified or licensed as a
foreign corporation in any other jurisdiction. Seller has no
subsidiaries. The execution delivery and performance by Seller
of this Agreement are within Seller's corporate powers and have
been duly authorized by all corporate action.
3.02 No Violations. No provision of Seller's
Certificate of Incorporation or By-laws, or of any agreement,
instrument or understanding, or of any law, regulation, rule,
order, judgment, decree, of any court or governmental authority,
to which Seller is a party or by which it is bound or subject,
has been or will be violated by the execution by Seller of, or
the performance or satisfaction of any agreement or condition
upon its part to be performed or satisfied under, this Agreement,
3.03 Books and Records. The books and records of the
Seller have been prepared in conformity with generally accepted
accounting principles and practices consistently applied through
the periods covered and fairly present in all material respects
the financial condition and results of operations of the Seller
as at the dates thereof and for the periods covered thereby. The
books of account and other financial records of Seller are in all
material respects complete and correct. Seller does not maintain
a separate financial statement for itself.
3.04 Reports. Seller has delivered to Buyer the
annual report on Form 10-KSB of Initio for fiscal 1998 and the
quarterly reports on Form 10-QSB of Initio for fiscal 1999, which
reports are accurate and complete.
3.05 Property; Leases.
(a)Other than the Excluded Assets the Acquired Assets
are substantially all the material assets used by Seller in
operating the Mail Order Business as it is currently being
operated. For purposes of the foregoing only, it is agreed that
an asset having a value of less than $30,000 shall not be
considered material.
(b)Seller has good and marketable title to all of its
assets, personal, tangible and intangible, which are the subject
of this Agreement, including without limitation, the Acquired
Assets, in each case free and clear of all liens, security
interests, claims, charges and encumbrances except as expressly
set forth in the Seller's Schedule.
(c)All machinery, fixtures, equipment and similar
assets, which are material to operating the Mail Order Business
as it is currently being operated, are in good operating
condition and repair, reasonable wear and tear excepted. Buyer
recognizes that from time to time such equipment will not be
functioning and will require repair or replacement and Buyer is
acquiring such equipment "as is."
(d)All leases to which Seller is a party are in good
standing, and are valid, binding and enforceable in accordance
with the respective provisions thereof.
3.06 Default. Neither Seller nor, to the best of
Seller's knowledge, any other party thereto is in material
violation of or default under, and no event (including, without
limitation, execution of and consummation of the transactions
provided for in this Agreement) has occurred which with the
passage of time or notice from or action by any party thereto or
otherwise could result in a material breach of or default under,
or give any other person the right to terminate, as the case may
be, any material indenture, mortgage, security, loan, lease or
other agreement (including, without limitation, those listed or
referred to in the Seller's Schedule) to which Seller is a party
or by which it is bound or to which any of its assets are subject
or result in the creation, imposition or acceleration of any
material lien, encumbrance, charge, equity or restriction of any
nature in favor of any other person upon any of the assets of
Seller.
3.07 Permits; Compliance with Laws. Seller possesses
all necessary valid licenses, permits, franchises, consents,
authorizations and approvals of or from governmental departments,
agencies and instrumentalities for the business and operations of
Seller as presently conducted and is not in material default with
respect to nor in violation of, and has not received notice of
any violation of or of any proceedings for the termination or
revocation (other than by reason of normal expiration according
to their terms) of, any such license, permit, franchise, consent,
authorization or approval or, to the best of its knowledge, any
applicable Federal, state, local or foreign law, statute,
ordinance, regulation, order or requirement relating to its
business, operations or assets, or the use thereof, which default
or violation could have a materially adverse affect upon its
business, operations or assets. The Seller's Schedule includes a
list (including expiration dates) of all material licenses,
permits, consents, authorizations and approvals of or from
governmental departments, agencies and instrumentalities held by
Deerskin in the conduct of the Mail Order Business.
3.08 Intellectual Property. Seller owns and has good
and marketable title to the Intellectual Property, free and clear
of any and all liens, security interests, claims, charges and
encumbrances. The use of the Intellectual Property by Seller
does not conflict in any material respect with any rights,
including, without limitation, copyrights or trademark rights, of
others. No litigation or other proceedings have been instituted
or are pending or threatened which challenge the ownership or use
of the Intellectual Property. Seller has not entered into any
license or other agreement granting to anyone the right to use
any of the Intellectual Property and, to the best of Seller's
knowledge, none of the Intellectual Property is being used or
infringed in any material respect by any other person. The
Intellectual Property includes all material intangible and
similar rights presently owned or used by Seller. The only
Intellectual Property which Seller has registered with the U.S.
Patent and Trademark Office are set forth in the Seller's
Schedule. Other than standard licenses in connection with its
computer systems, Seller's Mail Order Business is not dependant
on any intellectual property licensed from another person, firm
or entity.
3.09 Customer List. Seller hereby represents and
warrants to Buyer that, prior to the date hereof, it has not
disclosed the Customer List of the Mail Order Business to any
person, other than to Seller's employees and agents and other
than in the ordinary course of Seller's list rental business.
Seller agrees to maintain the confidentiality of such Customer
List after the date hereof and after the Closing.
3.10 Litigation. Except as set forth in Seller's
Schedule, there are no actions, suits, claims, arbitrations,
administrative or other proceedings or governmental
investigations pending or, to the best of Seller's knowledge,
threatened against, relating to or affecting Seller or the
business, operations or assets of Seller, whether or not fully
covered by insurance, or which question or seek to prevent
consummation of the transactions provided for in this Agreement,
whether at law or in equity, or before or by any Federal, state,
local, foreign or other governmental department, agency or
instrumentality nor to the best of Seller's knowledge is there
any basis therefor. Seller is not bound or adversely affected by
or in default with respect to any judgment, order, writ, injunc-
tion or decree of any court or of any governmental department,
agency or instrumentality.
3.11 Authorization, Validity. This Agreement and each of
the other instruments executed or to be executed by Seller
pursuant to this Agreement has been duly authorized and consti-
tutes the valid and legally binding obligation of Seller in
accordance with its terms except as enforcement may be limited by
applicable bankruptcy, insolvency and other laws relating to or
affecting creditors' rights generally and subject also to general
principles of equity affecting the right to specific performance
and injunctive relief.
3.12 Authorizations; Approvals. No authorization or
approval of, or filing with, or compliance with any applicable
order, judgment, decree, statute, rule or regulation of, any
court or governmental authority, or approval, consent, release or
action of any third party, is required in connection with the
execution and delivery by Seller of, or the performance or
satisfaction of any agreement of Seller contained in or contem-
plated by, this Agreement.
3.13 Employees. Except as set forth in Seller's Schedule,
Seller has no employment agreement with any employee nor does
Seller maintain any pension plans. Prior to the date hereof,
Seller has not been notified by any employee earning in excess of
$50,000 per annum of an intention to terminate his or her
employment.
3.14 Payment of Taxes. Seller has paid or adequately
reserved against all taxes, assessments and governmental charges
and levies imposed upon it including, without limitation all
sales taxes.
3.15 Disclosure. Neither this Agreement nor the schedules
and exhibits to this Agreement nor any other written certificate,
statement or document furnished or to be furnished by Seller in
connection with the transactions provided for in this Agreement
contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary in
order to make the statements contained herein or therein, in
light of the circumstances under which made, not misleading, and
to the best of Seller's knowledge and belief, all such material
books, records, agreements, documents, financial and operating
data and other information of or relating to Seller as Buyer has
requested or may request has heretofore been or will be made
available to Buyer. Without limiting the generality of the
foregoing, to the best of Seller's knowledge, there has not
occurred and does not exist in any event, circumstance or
development not disclosed to Buyer relating to Seller (as
contrasted with general industry, economic or business
conditions) which has materially adversely affected or in the
future reasonably may, so far as Seller can now foresee,
materially adversely affect the business, operations or assets of
Seller.
EXHIBIT 4
to
ASSET PURCHASE AGREEMENT
ARTICLE IV. Representations and Warranties of Buyer.
Buyer represents and warrants to and agrees with Seller that:
4.01 Corporate Organization; Good Standing and
Corporate Power. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Virginia. The execution delivery and performance by Buyer of
this Agreement are within Buyer's corporate powers and have been
duly authorized by all corporate action.
4.02 No Violations; Validity. No provision of Buyer's
Certificate of Incorporation or By-laws, or of any agreement,
instrument or understanding, or of any law, regulation, rule,
order, judgment, decree of any court or governmental authority,
to which Buyer is a party or by which it is bound or subject, has
been or will be violated by the execution by Buyer of, or the
performance or satisfaction of any agreement or condition upon
its part to be performed or satisfied under, this Agreement.
4.03 Letter Proposal. The Letter Proposal between
Pioneer and America's Shopping Mall, Inc., dated March 12, 1999
(the "Letter Proposal") is in full force and effect and was
entered into on behalf of Buyer using the trade name "America's
Shopping Mall, Inc."
4.04 Permits; Compliance with Laws. Buyer possesses
all necessary valid licenses, permits, franchises, consents,
authorizations and approvals of or from governmental departments,
agencies and instrumentalities for the business and operations of
Buyer as presently conducted and is not in material default with
respect to nor in violation of, and has not received notice of
any violation of or of any proceedings for the termination or
revocation (other than by reason of normal expiration according
to their terms) of, any such license, permit, franchise, consent,
authorization or approval or, to the best of its knowledge, any
applicable Federal, state, local or foreign law, statute,
ordinance, regulation, order or requirement relating to its
business, operations or assets, or the use thereof, which default
or violation could have a materially adverse affect upon its
business, operations or assets.
4.05 Litigation. There are no actions, suits, claims,
arbitrations, administrative or other proceedings or governmental
investigations pending or, to the best of Buyer's knowledge,
threatened against, relating to or affecting Buyer or the
business, operations or assets of Buyer, whether or not fully
covered by insurance, or which question or seek to prevent
consummation of the transactions provided for in this Agreement,
whether at law or in equity, or before or by any Federal, state,
local, foreign or other governmental department, agency or
instrumentality nor to the best of Buyer's knowledge is there any
basis therefor. Buyer is not bound or adversely affected by or
in default with respect to any judgment, order, writ, injunction
or decree of any court or of any governmental department, agency
or instrumentality.
4.06 Authorization, Validity. This Agreement and each
of the other instruments executed or to be executed by Seller
pursuant to this Agreement has been duly authorized and consti-
tutes the valid and legally binding obligation of Buyer in
accordance with its terms except as enforcement may be limited by
applicable bankruptcy, insolvency and other laws relating to or
affecting creditors' rights generally and subject also to general
principles of equity affecting the right to specific performance
and injunctive relief.
4.07 Authorizations; Approvals. No authorization or
approval of, or filing with, or compliance with any applicable
order, judgment, decree, statute, rule or regulation of, any
court or governmental authority, or approval, consent, release or
action of any third party, is required in connection with the
execution and delivery by Buyer of, or the performance or satis-
faction of any agreement of Buyer contained in or contemplated
by, this Agreement.
4.08 Disclosure. Neither this Agreement nor the
schedules and exhibits to this Agreement nor any other written
certificate, statement or document furnished or to be furnished
by Buyer in connection with the transactions provided for in this
Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact
necessary in order to make the statements contained herein or
therein, in light of the circumstances under which made, not
misleading, and to the best of Buyer's knowledge and belief, all
such material books, records, agreements, documents, financial
and operating data and other information of or relating to Buyer
as Seller has requested or may request has heretofore been or
will be made available to Seller. Without limiting the
generality of the foregoing, to the best of Buyer's knowledge,
there has not occurred and does not exist in any event, circum-
stance or development not disclosed to Seller relating to Buyer
(as contrasted with general industry, economic or business
conditions) which has materially adversely affected or in the
future reasonably may, so far as Buyer can now foresee,
materially adversely affect the business, operations or assets of
Buyer.
SCHEDULE 7.01
Excluded Employees
Martin Fox
Daniel DeStefano
Oscar Atkinson
EXHIBIT A
Excluded Assets
1.Cash and Marketable Securities
2.Real property located in Carson City, Nevada.
3.Real property located in Peabody, Massachusetts.
4.1990 Limousine
5.1995 Limousine
6.Chrysler Automobile
7.Daniel DeStefano's Office Furniture
Martin Fox's Office Furniture
8.1 Fax Machine located in Teterboro, New Jersey
9.1 Copy Machine located in Teterboro, New Jersey
10.1990 Mazda Automobile
11.Loan Receivable with respect to loan made to Michael
Divardi
EXHIBIT 10.2
THIS CONVERTIBLE DEBENTURE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, ASSIGNED OR
OTHERWISE TRANSFERRED WITHOUT REGISTRATION
THEREUNDER EXCEPT IN ACCORDANCE WITH AN
APPLICABLE EXEMPTION FROM THE REGISTRATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS
AMENDED.
$3,400,000
ADVANCED MEDICAL SCIENCES, INC.
CONVERTIBLE DEBENTURE DUE JUNE 1, 2004
FOR VALUE RECEIVED, the undersigned, ADVANCED MEDICAL
SCIENCES, INC., a corporation duly organized and existing under
the laws of the State of Virginia (the "Payor"), with its
principal business address at 382 Rte. 59 #310, Monsey, New York
10952 hereby promises to pay to the order of DEERSKIN TRADING
POST, INC. (the "Payee"), with its principal business address at
2500 Arrowhead Drive, Carson City, Nevada 89701, the principal
amount of Three Million Four Hundred Thousand Dollars
($3,400,000) on June 1, 2004 (the "Maturity Date"), plus interest
at the rate of 8% per annum on the unpaid principal balance, such
interest to be paid on the last day of each July, October,
January and April prior to the Maturity Date and on the Maturity
Date together with the repayment of the principal balance and
with all charges, amounts, sums and interest which have accrued
and have not been paid. All payments to be made pursuant to this
Debenture shall be made in such coin or currency of the United
States of America which, at the time of payment, is legal tender
for the payment of public and private debts. All such payments
shall be made by electronic funds wire transfer in accordance
with the wire transfer instructions submitted by Payee as the
first payment method option; however, Payee may designate that
payments may be made by bank or certified check, at the offices
of the Payee set forth above or such other place as the Payee
shall designate in writing to the Payor. In the event that any
installment of principal or interest on this Debenture is not
paid when due, such overdue principal or interest shall bear
interest from thirty days after the due date until paid (to the
extent permitted by law) at the rate of 15% per annum. In
addition, in the event such overdue principal or interest is not
paid for a period of ten days after the date due, the Payor shall
promptly pay the Payee a late payment fee equal to 5% of such
overdue principal or interest. In the event the rate of interest
hereunder shall exceed the maximum rate permitted by applicable
law, such rate of interest shall automatically and without
further action on the part of any person be reduced to the
maximum rate permitted by applicable law.
1. Optional Redemption. This Debenture may not be redeemed,
called or prepaid without Payee's prior written consent prior to
June 1, 2001. Thereafter, this Convertible Debenture will be
subject to redemption at any time at the option of the Payor, in
whole or in part, on not less than 30 nor more than 60 days'
prior notice in amounts of $100,000 or an integral multiple
thereof at the following redemption prices (expressed as
percentages of the principal amount), if redeemed during the 12-
month period beginning on June 1 of each of the years indicated
below:
YearRedemption Prices
2001105%
2002104%
2003103%
and thereafter at 100% of the principal amount, in each case,
together with accrued and unpaid interest if any, to the
redemption date.
2. Security Interest. Concurrently with the issuance of this
Debenture, Payor is executing and delivering to Payee a Security
Agreement dated as of the date hereof (the "Security Agreement")
pursuant to which the Payor has granted a security interest in
certain collateral to secure the payment of this Debenture.
3. Conversion.
3.1 Right to Convert. The Payee shall have the right, one or
more times at its option, at any time and from time to time, to
convert the principal amount of this Debenture, or any portion of
such principal which is at least Two Hundred Thousand Dollars
($200,000), into that number of fully-paid and nonassessable
shares of Common Stock of the Payor, obtained by dividing the
principal amount of the Debenture or portion thereof surrendered
for conversion by the conversion price equal to the lesser of
(i) the current market price per share of Payor's Common Stock on
that date which is five days after the date hereof (or if such
day shall not be a business day, then the following business
day), computed in accordance with Section 3.4(c) hereof and (ii)
the current market price per share of Payor's Common Stock on
June 1, 2000, computed in accordance with Section 3.4(c) hereof,
provided however, that no adjustment in the conversion price
shall be required unless such adjustment would require a decrease
of at least 5% in such price.
3.2 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order
to exercise the conversion privilege, the Payee shall surrender
this Debenture to the Payor and shall give written notice of
conversion in the form provided herein to the Payor that the
Payee elects to convert this Debenture or the portion thereof
specified in said notice.
As promptly as practicable (but not more than 10 days)
after the surrender of this Debenture and the receipt of such
notice as aforesaid, the Payor shall issue and shall deliver to
the Payee a certificate or certificates for the number of full
shares issuable upon the conversion of this Debenture or portion
thereof in accordance with the provisions of this Debenture and a
check or cash in respect of any fractional interest in respect of
a share of Common Stock arising upon such conversion as provided
in Section 3.3 of this Debenture. In each case this Debenture
shall be surrendered for partial conversion, the Payor shall also
promptly execute and deliver to the Payee a new Debenture or
Debentures in an aggregate principal amount equal to the
unconverted portions of the surrendered Debenture.
Each conversion shall be deemed to have been effected
on the date on which this Debenture shall have been surrendered
and such notice shall have been received by the Payor, as
aforesaid, and the Payee shall be deemed to have become on said
date the holder of record of the shares issuable upon such
conversion; provided, however, that any such surrender on any
date when the stock transfer books of the Payor shall be closed
shall constitute the Payee as the record holder thereof for all
purposes on the next succeeding day on which such stock transfer
books are open.
No adjustment of the number of shares to be issued upon
conversion shall be made for interest accrued on this Debenture
prior to the date it is surrendered or for cash dividends on any
shares issued upon the conversion of this Debenture prior to the
date it is surrendered. However, all accrued interest shall be
payable by wire transfer, or in cash or cash equivalents.
3.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon conversion of Debentures. If any fractional
shares of stock would be issuable upon the conversion of this
Debenture, the Payor shall make a payout therefor in cash at the
current market value thereof. The current market value of a
share of Common Stock shall be the closing price of the day
(which is not a legal holiday) immediately preceding the day on
which this Debenture (or specified portions thereof) is deemed to
have been converted and such closing price shall be determined as
provided in subsection (c) of Section 3.4.
3.4 Adjustment of Conversion Price. The conversion price shall
be adjusted from time to time as follows:
(a) Dividends. In case the Payor shall on any
one or more occasions after the date of this Debenture
(i) pay a dividend or make a distribution in shares of
its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide its
outstanding Common Stock, or (iii) combine its
outstanding Common Stock into a smaller number of
shares, the conversion price in effect immediately
prior thereto shall be adjusted so that the holder of
any Debenture thereafter surrendered for conversion
shall be entitled to receive the number of shares of
capital stock of the Payor which it would have owned or
have been entitled to receive after the happening of
any of the events described above had this Debenture
been converted immediately prior to the happening of
such event. An adjustment made pursuant to this
subsection (a) shall become effective immediately after
the record date.
(b) Other Distributions. The purpose of this
subsection is to provide a means to reduce the Payee's
conversion price in the event the assets of the Payor
are materially diluted through distributions to the
Payor's common stockholders and/or any other security
holder of the Payor. In case the Payor shall
distribute to all holders of its Common Stock evidence
of its indebtedness or assets (excluding cash dividends
or distributions paid from retained earnings of the
Payor) or subscription rights or warrants, then in each
such case the conversion price shall be adjusted so
that the same shall equal the price determined by
multiplying the conversion price in effect immediately
prior to the date of such distribution by a fraction of
which the numerator shall be the current market price
per share (as defined in subsection (c) of this Section
3.4) of the Common Stock on the record date as set
forth below less the then fair market value (as
determined by the Board of Directors, whose
determination shall be conclusive) of the portion of
the assets or evidences of indebtedness so distributed
or of such rights or warrants applicable to one (1)
share of Common Stock, and the denominator shall be the
current market price per share (as defined in
subsection (c) below) of the Common Stock. In the
event that securities of a subsidiary of the Payor
shall be distributed to the Payor's common stockholders
and/or any other security holder of the Payor, such
subsidiary shall, no later than the date of such
distribution, jointly assume the obligation of repaying
this Debenture and this Debenture shall become
convertible at, the Payee's option, into Common Stock
of such subsidiary, initially at a conversion price
equal to the reduction in the conversion price with
respect to the Payor's Common Stock as provided herein.
Such adjustments shall become effective immediately
after the record date for the determination of
stockholders entitled to receive such distribution.
(c) Conversion Price Adjustment. For the purpose
of any computation under this Section 3.4, the current
market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing
prices (disregarding the three highest closing prices
and the three lowest closing prices) for the twenty six
consecutive trading days commencing thirty-one trading
days before the day in question. The closing price for
each day shall be (i) the last sale price of the Common
Stock on the National Association of Securities
Dealers, Inc., Automated Quotation System or any other
automated quotation system or, if no sale occurred on
such date, the closing bid price of the Common Stock on
such quotation system on such date or (ii) if the
Common Stock shall be listed or admitted for trading on
the New York or American Stock Exchange or any
successor exchange, the last sale price, or if no sale
occurred on such date, the closing bid price of the
Common Stock on such exchange, or (iii) if the Common
Stock shall not be included in any automated quotation
system or listed on any such exchange, the closing bid
quotation for Common Stock as reported by the National
Quotation Bureau Incorporated if at least two
securities dealers have inserted both bid and asked
quotations for Common Stock on at least five of the ten
preceding days. If none of the conditions set forth
above is met, the closing price of Common Stock on any
day or the average of such closing prices for any
period shall be the fair market value of Common Stock
as determined by a member firm of the New York Stock
Exchange, Inc. selected by the Board of Directors,
provided such firm shall be reasonably acceptable to
Payee.
(d) No Nominal Adjustments. No adjustment in the
conversion price shall be required unless such
adjustment would require an increase or decrease of at
least two percent (2%) in such price; provided,
however, that any adjustments which by reason of this
subsection (d) are not required to be made shall be
carried forward and taken into account in any
subsequent adjustment. All calculations under this
Section shall be made to the nearest cent or to the
nearest one-hundredth (1/100th) of a share, as the case
may be.
(e) Conversion Price Adjustment Notice. Whenever
the conversion price is adjusted, as herein provided,
the Payor shall prepare a notice of such adjustment of
the conversion price setting forth the adjusted
conversion price and the date on which such adjustment
becomes effective and shall mail such notice of such
adjustment of the conversion price to the Payee.
3.5 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any
reclassification or change of outstanding shares of Common Stock
issuable upon conversion of this Debenture (other than a change
in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which the Payor
is a party other than a consolidation or merger in which the
Payor is the continuing corporation and which does not result in
any reclassification of, or change (other than a change in par
value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination) in,
outstanding shares of Common Stock, or (iii) any sale or
conveyance of the properties and assets of the Payor as, or
substantially as, an entirety to any other corporation; then this
Debenture shall be convertible into the kind and amount of shares
of stock and other securities or property receivable upon such
reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock
issuable upon conversion of this Debenture immediately prior to
such reclassification, change, consolidation, merger, sale or
conveyance. The above provisions of this Section shall similarly
apply to successive reclassifications, consolidations, mergers
and sales.
3.6 Reservation of Shares; Shares to be Fully Paid. As of the
date hereof, the Payor has reserved, free from preemptive rights,
out of its authorized but unissued shares, or out of shares held
in its treasury, sufficient shares to provide for the conversion
of this Debenture. Before taking any action which would cause an
adjustment reducing the conversion price below the then par
value, if any, of the shares of Common Stock issuable upon
conversion of this Debenture, the Payor shall promptly take all
corporate action which may be necessary in order that the Payor
may validly and legally issue shares of such Common Stock at such
adjusted conversion price. The Payor covenants that all shares
of Common Stock which may be issued upon conversion of Debentures
will upon issue be fully paid and nonassessable.
3.7 Notice to Payee Prior to Certain Actions. In case:
(a)the Payor shall declare a dividend (or any
other distribution) on its Common Stock (other than in
cash out of retained earnings); or
(b)the Payor shall authorize the granting to the
holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any
other rights or warrants; or
(c)of any reclassification of the Common Stock
of the Payor (other than a subdivision or combination
of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no
par value to par value) or, of any consolidation or
merger to which the Payor is a party and for which
approval of any shareholders of the Payor is required,
or of the sale or transfer of all or substantially all
of the assets of the Payor; or
(d)of the voluntary or involuntary dissolution,
liquidation or winding up of the Payor;
the Payor shall give notice to the Payee in accordance with this
Debenture as promptly as possible but, in any event, at least
thirty days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants,
or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property deliverable
upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to
give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up; without limiting the
definition of a breach of this Debenture, such failure shall
constitute a breach hereunder.
4. Registration Rights.
4.1 Grant of Piggyback Right. So long as there shall be
outstanding any principal or interest under this Debenture or the
Payee shall hold any shares of Common Stock issuable to the Payee
pursuant to this Debenture ("Conversion Shares"), the Payor shall
send written notice to the Payee in accordance with this
Agreement at least one month prior to the filing by the Payor of
any registration statement filed by the Payor on Form S-1,
Form S-2, Form S-3 or Form SB-2, or any successor form, covering
the sale of common stock, and shall give to the Payee the right
to have included in any such registration statement any
Conversion Shares. In order to have the Conversion Shares
included in such registration statement, the Payee must give
written notice to the Payor within 15 days after the date of the
Payee's receipt of written notice from the Payor indicating the
number of Conversion Shares requested to be included for sale in
such registration statement. Upon receipt of such notice from
the Payee, the Payor shall use its best efforts to cause all of
the Common Stock specified in such notice to be registered under
the Securities Act of 1933, as amended (the "Securities Act").
The registration expenses in connection with such registration
statement shall be paid by the Payor (exclusive of underwriter's
spread and commissions with respect to stock sold by the Payee or
fees and disbursements of the Payee's counsel). If the
registration statement to be filed by the Payor pertains to an
underwritten public offering of shares of common stock to be sold
solely for the account of the Payor and, if in the judgment of
the prospective managing or lead underwriter for the Payor as set
forth in a letter to the Payor, the registration of the
Conversion Shares would materially adversely affect the proposed
public offering by the Payor, the Payor shall not be obligated to
register such number of Conversion Shares in such registration
statement for inclusion in such public offering as such
underwriter shall have identified as having, in its judgment,
such material adverse effect.
4.2 Demand Registration Right. If at any time after six months
from the date hereof while there shall be outstanding any
principal or interest under this Debenture or while the Payee
shall hold Conversion Shares, the Payee shall give notice to the
Payor to the effect that the Payee desires to register under the
Securities Act any Conversion Shares, under such circumstances
that a public distribution (within the meaning of the Securities
Act)of any such Conversion Shares will be involved, then the
Payor will as promptly as practicable after receipt of such
notice, but not later than ninety (90) days after receipt of such
notice, at the Payee's option, file a registration statement
pursuant to the Securities Act (the "Demand Registration") to the
end that the Conversion Shares may be publicly sold under the
Securities Act as promptly as practicable thereafter and the
Payor will use its best efforts to cause such registration to
become and remain effective as provided herein (including the
taking of such steps as are reasonably necessary to obtain the
removal of any stop order); provided, that the Payee shall
furnish the Payor with appropriate information in connection
therewith as the Payor may reasonably request; and provided that
the Payor shall not be required to file such a registration
statement pursuant to this Section on more than one occasion; and
provided, further, that the registration rights of the Payee
under this Section shall be subject to the "piggyback"
registration rights of other holders of securities of the Payor
to include such securities in any registration statement filed
pursuant to this Section; however, all costs and expenses of the
Demand Registration shall then be shared proportionately with any
other parties desiring to piggyback onto the Payee's Demand
Registration. The exercise by the Payee of its demand
registration right under this Section shall be deemed to be an
irrevocable election to convert this Debenture to the extent of
the Conversion Shares which the Payee has elected to have
registered (but no more) no later than the effective date of the
registration statement required hereunder. The Payee shall bear
the entire cost and expense of any registration of Conversion
Shares initiated by it under this Section, provided, however,
that if the Payor registers any securities within six months of
the effective date of the Demand Registration, then the Payor
shall reimburse the Payee its actual costs incurred in
registering its securities pursuant to the Section. The Payor
shall only be required to grant a Demand Registration as
contemplated by this Section on one occasion. The Payor shall
not be required to grant a Demand Registration as contemplated by
this Section in the event that (i) the Payee shall be able to
sell Conversion Shares pursuant to Rule 144 under the Securities
Act, but only to the extent that Rule 144 is available for the
sale of Conversion Shares during the three month period
immediately following demand, (ii) such demand shall relate to
less than the conversion of $1 million of principal amount under
this Debenture unless the entire unpaid principal amount of this
Debenture shall be less than $1 million and (iii) if "piggy back"
rights pursuant to Section 4.1 hereof had been extended to the
Payee within six months prior to its making such demand.
4.3 Undertaking to File Documents. The Payee shall execute,
deliver and/or file with or supply to the Payor, the Securities
and Exchange Commission and/or any state or other regulatory
authority such information, documents, representations,
undertakings and/or agreements necessary to carry out the
provisions of the registration covenants contained herein and/or
to effect the registration or qualification of the Conversion
Shares under the Securities Act and/or any of the laws and
regulations of any state or governmental instrumentality.
4.4 Commitment to Keep Effective. The Payor will be obligated
to keep any registration statement filed by it hereunder and any
registration or qualification pursuant to Section 4.5 below
effective under the Securities Act for a period of six months
after the actual effective date of such registration statement
and to prepare and file such supplements and amendments which may
be necessary to maintain an effective registration statement for
such period. The Payor will furnish to the Payee such number of
prospectuses and other appropriate documents as the Payee may
from time to time reasonably request.
4.5 Blue Sky Registration. The Payor will use its best efforts
to register or qualify the shares of Common Stock covered by any
registration statement under the Securities Act which includes
Conversion Shares to be sold on behalf of the Payee pursuant
hereto under such securities or blue sky laws in such
jurisdictions within the United States as the Payee may
reasonably request; provided, however, that the Payor reserves
the right, in its sole discretion, not to register or qualify
such shares of Common Stock in any jurisdiction in which such
shares of Common Stock do not satisfy the requirements of such
jurisdiction or in which the Payor would be required to qualify
as a foreign corporation to do business in such jurisdiction and
is not so qualified therein or is required to file any general
consent to service of process.
4.6 Deregistration. In the event the Payee has not sold all of
the Conversion Shares included in the registration statement or
prior to the expiration of the six-month period specified above,
the Payee hereby agrees that the Payor may deregister by post-
effective amendment any Conversion Shares of the Payee covered by
the registration statement but not sold on or prior to such date.
The Payor agrees that it will notify the Payee of the filing and
effective date of each such post-effective amendment.
4.7 Right to Delay. The Payor shall have the right at any time
after it shall have received written notice pursuant to
Section 4.1 to elect not to file or to delay any such proposed
registration statement, or to withdraw the same after the filing
but prior to the effective date thereof. In addition, the Payor
may delay the filing of any registration statement requested
pursuant to Section 4.2 hereof by not more than 120 days if the
Payor, prior to the time it would otherwise have been required to
file such registration statement, determines in good faith that
the filing of the registration statement would require the
disclosure of non-public material information that, in its
judgment, would be detrimental to the Payor if so disclosed or
would otherwise adversely affect a financing, acquisition,
disposition, merger or other material transaction.
4.8 Selection of Underwriters. If a registration pursuant to
Section 4.1 hereof involves an underwritten offering, the Payor
shall have the right to select the investment banker or
investment bankers and manager or managers that will serve as
underwriter with respect to the underwritten offering. The Payee
may not participate in any underwritten offering under this
Debenture unless the Payee completes and executes all question-
naires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwritten
offering, in each case, in the form and upon terms reasonably
acceptable to the Payor and the underwriters. The requested
registration pursuant to Section 4.2 hereof shall not involve an
underwritten offering unless the Payor shall first give its
written approval of each underwriter that participates in the
offering, such approval not to be unreasonably withheld.
4.9 Principal Shareholders. The Payor will not file a
registration statement on behalf of any person who beneficially
owns more than 10% if the Payor's issued and outstanding common
stock (other than Pioneer Venture Associates Limited
Partnership), as a selling shareholder, without the prior written
approval of the Payee, which approval shall not be unreasonably
withheld.
5. Acceleration. In the event that (i) the Payor shall default
in the due and punctual payment of any installment of interest on
this Debenture when and as the same shall become due and payable
and such default shall continue for fifteen days after written
notice from the Payee to the Payor or (ii) the Payor shall be in
default under the Security Agreement, after the passage of any
applicable grace period; or (iii) the Payor shall commence a
voluntary case concerning itself under Title 11 of the United
States Code entitled "Bankruptcy" as now or hereafter in effect,
or any successor thereto (the "Bankruptcy Code"); or (iv) in the
event of the appointment of a custodian (as defined in the
Bankruptcy Code) for all or substantially all of the property of
the Payor; or (v) in the event the Payor shall commence any other
proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction, whether now or hereafter in
effect, relating to the Payor or in the event of the commencement
against the Payor of any such proceeding which remains
undismissed for a period of 90 days; or (vi) if the Payor is
adjudicated insolvent or bankrupt; or (vii) if any order of
relief or other order approving any such case or proceeding is
entered; or (viii) if the Payor shall allow any appointment of
any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 90
days; or (ix) if the Payor shall make a general assignment for
the benefit of creditors; or (x) if the Payor shall cease doing
business as a going concern; or (xi) if the Payor shall take
action for the purpose of effecting any of the foregoing; (the
foregoing being hereinafter collectively referred to as "Events
of Default") then, in any such Event of Default and at any time
thereafter while such Event of Default is continuing, the Payee
may, in addition to any other rights and remedies, the Payee may
have hereunder or otherwise, including, without limitation, the
right to an increased rate of interest and to late payment fees
as set forth on the first page of this Debenture, declare this
Debenture to be due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby
expressly waived.
6. Waivers; Modifications.
6.1 In General. No forbearance, indulgence, delay or failure to
exercise any right or remedy with respect to this Debenture shall
operate as a waiver nor as an acquiescence in any default. No
single or partial exercise of any right or remedy shall preclude
any other or further exercise thereof or any exercise of any
other right or remedy.
6.2 Presentment, Etc.; Jury Trial Waived. The Payor hereby
waives presentment, demand, notice of dishonor, protest and
notice of protest. The Payor hereby waives all rights to a trial
by jury in any litigation arising out of or in connection with
this Debenture.
6.3 Modifications. This Debenture may not be modified or
discharged orally, but only in writing duly executed by the Payee
and the Payor.
7. Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Debenture made by the Payor shall
bind its successors and assigns, whether so expressed or not, and
inure to the benefit of the Payee and its successors and assigns.
8. Miscellaneous.
8.1 Headings. The headings of the various paragraphs of this
Debenture are for convenience of reference only and shall in no
way modify any of the terms or provisions of this Debenture.
8.2 Governing Law. This Debenture and the obligations of the
Payor and the rights of the Payee shall be governed by and
construed in accordance with the laws of the State of New York
applicable to instruments made and to be performed entirely
within such State.
8.3 Collection Costs. The Payor shall pay all costs and
expenses incurred by the Payee to enforce its rights under this
Debenture, including reasonable counsel fees and other reasonable
out-of-pocket expenses, provided, however, that the foregoing
shall not relate to the issuance of routine notices sent no more
frequently than once in any twelve-month period.
8.4 Notices. All notices, requests, demands and other
communications required or permitted under this Debenture shall
be in writing and shall be deemed to have been duly given if
personally delivered or if mailed by first class registered or
certified mail return receipt requested, or by first class mail
if received, addressed to the parties at their respective
addresses set forth or referred to on the first page and signa-
ture page of this Agreement, with copies to their respective
counsel, Milberg Weiss Bershad Hynes & Lerach LLP, Att: Arnold N.
Bressler, Esq., One Pennsylvania Plaza, New York, New York 10119,
in the case of the Payee, and Caro & Associates, P.C., Attention:
Chase A. Caro, Esq., 60 East 42nd Street, Suite 2001, New York,
New York 10165, in the case of Payor or to such other person or
address as may be designated by like notice hereunder.
IN WITNESS WHEREOF, the Payor has caused this Debenture to be
signed in its corporate name by a duly authorized officer and to
be dated as of the day and year written below.
Dated: May 21, 1999
ADVANCED MEDICAL SCIENCES, INC.
By /s/ Irwin Schneidmill, President
(Title)
FORM OF CONVERSION NOTICE
TO: Advanced Medical Sciences, Inc.
The undersigned owner of this Debenture hereby
irrevocably exercises the option to convert this Debenture, or
portion hereof (which is at least $200,000) below designated,
into shares of Common Stock of America's Shopping Mall, Inc. in
accordance with the terms of this Debenture and directs that the
shares issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any
Debentures representing any unconverted principal amount hereof,
be issued and delivered to the registered holder hereof.
Dated:
Name of Owner:
Signature:
Title:
Address:
Taxpayer Identification
No.:
Amount to be Converted:
EXHIBIT 10.3
SECURITY AGREEMENT
AGREEMENT, dated as of May 21, 1999 between ADVANCED
MEDICAL SCIENCES, INC., a Nevada corporation, having an address
at 382 Rte. 59, #310, Monsey, New York 10952 ("Debtor"), and
DEERSKIN TRADING POST, INC., a Nevada corporation, having an
address at 2500 Arrowhead Drive, Carson City, Nevada 89706
("Secured Party").
W I T N E S S E T H:
WHEREAS, Debtor and Secured Party are parties to an
Asset Purchase Agreement, dated April 21, 1999 (the "Asset
Purchase Agreement");
WHEREAS, concurrently herewith Debtor is issuing to
Secured Party that certain Convertible Debenture in the original
principal amount of $3,400,000, dated the date hereof (the
"Convertible Debenture"); and
NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, parties hereto agree
as follows:
1. Definitions. The following terms as used in this Agreement
shall have the meanings set forth below:
(a)"Collateral" shall mean:
i)the Customer List (as that term is defined in the
Asset Purchase Agreement);
ii)The Artwork (as that term is defined in the
Asset Purchase Agreement);
iii)The Deerskin Software (as that term is
defined in the Asset Purchase Agreement);
iv)The other Intellectual Property (as that term
is defined in the Asset Purchase Agreement);
v)and all substitutions, replacements and accessions
to the foregoing.
(b)"Obligations" shall mean all principal and
interest and other obligations and indebtedness
due or to become due under the Convertible
Debenture.
2. Creation of the Security Interest. Debtor hereby grants to
Secured Party a security interest in all of the right, title and
interest of Debtor in, to and under the Collateral to secure the
full and prompt payment and performance of all of the
Obligations.
3. Representations and Warranties. In order to induce the
Secured Party to enter into this Agreement and the Asset Purchase
Agreement, Debtor hereby represents, warrants and agrees that:
3.1Outstanding Stock. Debtor has no securities
outstanding other than 41,392,200 shares of Common Stock $.001
par value. The names of each holder of more than five percent of
Debtor's Common Stock is set forth in Exhibit 3.1 attached
hereto.
3.2Organization; Power; Qualification.
The Debtor is (a) a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, (b)
has the full power and authority to own and operate its
properties and assets and to carry on the business now conducted
by it, and (c) is qualified or authorized to do business and in
good standing in all jurisdictions listed in Exhibit 3.2 attached
hereto (except as set forth therein) which represent all
jurisdictions in which the character of the property owned or the
nature of the business conducted by it makes such qualification
or authorization necessary.
3.3 Authorization of Agreement. Debtor has the full power and
authority to execute, deliver and perform any action which may be
necessary or advisable to carry out the terms of this Agreement
and this Agreement has been duly executed and is the legal, valid
and binding obligation of Debtor enforceable in accordance with
its terms, subject only to: (a) the effect of bankruptcy,
insolvency or other laws affecting creditors' rights generally
and (b) the Secured Party's remedy of specific performance and
insurance relief may not be available in all cases.
3.4 No Legal Bar. The execution, delivery and performance of
this Agreement will not (a) violate any provision of any existing
law, statute, rule, regulation or ordinance which violation may
have a material adverse effect upon the business, financial
condition or result of operations of the Debtor, (b) conflict
with, result in a breach of or constitute a default under (i) the
certificate of incorporation or by-laws of the Debtor or (ii) any
order, judgment, award or decree of any court, governmental
authority, bureau or agency to which the Debtor is a party, or
(iii) any mortgage, lease, contract or other agreement or
undertaking to which the Debtor is a party or by which any of its
properties or assets may be bound, and (c) result in the creation
or imposition of any lien upon or with respect to any property or
asset now or hereafter acquired by the Debtor other than the lien
created by this Agreement.
3.5 Consent. No consent, license, permit, approval or
authorization of, exemption by, notice to, report to, or reg-
istration, filing or declaration with any person is required to
be obtained, reported or filed by the Debtor in connection with
the execution, delivery, performance or validity of this
Agreement.
3.6 Compliance With Law. The Debtor is not in violation of any
applicable law, rule, regulation, statute, ordinance, or any
order, judgment, award or decree of any court, governmental
authority, bureau of agency, the violation of which might have a
materially adverse effect on the business, assets, liabilities,
financial condition, results of operation or business prospects
of the Debtor.
3.7 Title to Properties and Assets.Debtor has
good, marketable and legal title to, or a valid leasehold
interest in, the properties and assets as reflected on the
balance sheets delivered to the Secured Party pursuant to Section
3.10, except such properties or assets as have been disposed of
by the Debtor subsequent to the date thereof in the ordinary
course of business.
3.8 No Default. The Debtor is not in default in the
payment or performance of any of its material obligations or in
the performance of any mortgage, indenture, lease, contract or
other material agreement or undertaking to which it is a party or
by which it or any of its properties or assets may be bound and
no default or event of default under any such mortgage, inden-
ture, lease, contract or other material agreement or undertaking
has occurred and is continuing. The Debtor is not in default
under any order, award or decree of any court, arbitrator, or
governmental authority binding upon or affecting it or by which
any of its properties or assets may be bound or affected, and no
such order, award or decree, if any, materially adversely affects
the ability of the Debtor to carry on its business as presently
conducted or to pay the Obligations.
3.9 No Litigation. No litigation, investigation or
proceeding of or before any court, arbitrator or governmental
authority is currently pending, nor, to the knowledge of the
Debtor, threatened, against the Debtor or any of its properties
and revenues, which, if adversely, determined, would materially
adversely affect its business, operations, financial condition or
results of operations.
3.10 Financial Statements. The Borrower has furnished
to the Secured Party copies of the financial statements which it
has previously delivered to Pioneer Ventures Associates Limited
Partnership in connection with the transactions closing
concurrently with the closing of the Asset Purchase Agreement.
Such financial statements fairly present the financial position
and results of operations of the entities indicated therein on
the dates and for the periods then ended, in accordance with
generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved (subject, in the case of
the unaudited financial statements, to normal year-end adjust-
ments) and show all known direct liabilities and, as to the
audited financial statements, all known contingent liabilities of
a material nature of such entities in accordance with GAAP.
3.12 ERISA.
(a) The Debtor is in compliance in all material
respects with the applicable provisions of the Employee Retire-
ment Income Security Act of 1974, as amended ("ERISA") and all
regulations issued thereunder; and
(b) No "employee benefit plan", as defined in Section
3 or ERISA, maintained and administered by the Debtor as from
time to time in effect (the "Plans"), nor any trusts created
thereunder, nor any trustee or administrator thereof, has engaged
in a "prohibited transaction, as defined, which could subject the
Debtor, any Plan or any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any
such trust to the tax or penalty on prohibited transactions
imposed by said Section 4975. Neither any of the Plans nor any
such trusts have been terminated, nor has there been any "report-
able event, n as defined in Section 4043 of ERISA, or
"accumulated funding deficiency." The Debtor has not incurred
any liability to the Pension Benefit Guaranty Corporation.
3.13 Collateral.
(a) The Debtor is the sole owner of each item of Col-
lateral and has good and marketable title thereto, free and clear
of any and all liens, except any impediment thereto created by
Secured Party.
(b) No security agreement, financing statement, mort-
gage, deed of trust, or lien instrument covering all or any part
of the Collateral is on file or of record in any public office.
(c) This Agreement (together with the filing of
financing statements in the appropriate offices) constitutes a
valid and continuing first lien on and first perfected security
interest in the Collateral in favor of the Secured Party, prior
to all other liens, encumbrances, security interests and rights
of others, and is enforceable as such against creditors of and
purchasers from the Debtor. All action necessary or desirable to
protect and perfect such security interest in each item of
Collateral has been duly taken.
(d) The first page of this Agreement sets forth the
location of the Debtor's principal place of business which is the
place where its records concerning the Collateral are kept.
3.14 Accuracy and Completeness of Information. All
written information, reports and other papers and data furnished
to the Secured Party were, at the time the same were so
furnished, complete and correct in all material respects. No
document furnished or statement made to the Secured Party in
connection with the negotiation, preparation or execution of this
Agreement contains or will contain any untrue statement of fact
or omits or will omit to state a material fact necessary in order
to make the statements contained therein not misleading. No fact
is known to the Debtor which has had or may in the future have
(so far as the Debtor can reasonably foresee) a materially
adverse effect upon the Debtor's business, assets, liabilities,
condition, financial or otherwise, or results of operation that
has not been set forth in the financial statements furnished to
the Secured Party or other reports or other papers or data
otherwise disclosed in writing to the Secured Party.
4. Covenants.
The Debtor covenants and agrees that until all the
Obligations have been satisfied and paid in full, the Debtor will
comply with the following covenants:
4.1 Preservation of Existence. The Debtor will do or
cause to be done all things necessary to preserve and maintain in
full force and effect its corporate existence and all contracts,
rights, licenses, permits, franchises and trade names which in
its judgment are necessary or useful to the proper conduct of its
business and shall qualify and remain qualified as a foreign
corporation and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its
business requires such qualification or authorization.
4.2 Nature of Business. The Debtor will continue to
be primarily engaged in the business of a mail order and e-
commerce retailer.
4.3 Compliance with Laws. The Debtor will comply with
all laws, ordinances, governmental rules and regulations to which
it or its property or assets are, or might become subject (unless
the same shall be contested by the Debtor in good faith and by
appropriate proceedings and such contest shall operate to stay
any such non-compliance), the non-compliance with which might
materially interfere with the payment of the Obligations or with
the proper conduct of its business.
4.4 Maintenance of Properties. The Debtor will
maintain or cause to be maintained in working order and condi-
tion, ordinary wear and tear excepted, all of its assets and
properties which are material to the conduct of its business, and
from time to time, make or cause to be made all necessary
repairs, replacements, additions, betterments and improvements
thereto, so that the business carried on in connection therewith
may be conducted in a manner consistent with the present opera-
tion thereof.
4.5 Accounting Methods. The Debtor will maintain a
system of accounting established and administered in accordance
with GAAP, keep adequate records and books of account in which
complete entries will be made in accordance with GAAP, make pro-
vision in its accounts in accordance with GAAP for reserves for
depreciation, obsolescence and amortization and all other proper
reserves and accruals which in accordance with GAAP should be
established.
4.6 Payment of Taxes and Claims. The Debtor will pay
and discharge promptly (a) all taxes, assessments and govern-
mental charges or levies imposed upon it or upon its income or
profits or upon any of its property or assets before the same
shall become delinquent, (b) all lawful claims of materialmen,
mechanics, carriers, warehousemen, landlords, and other similar
persons for labor, materials, supplies and rentals which, if
unpaid, might by law become a lien or charge upon its property
and (c) all of its indebtedness and other obligations of whatever
nature when due (subject, where applicable, to grace periods,
normal credit terms and to other forbearance in the ordinary
course of business); provided, however, that none of the forego-
ing need be paid while being contested in good faith and by
appropriate proceedings, so long as adequate book reserves have
been established in accordance with GAAP with respect thereto and
the Debtor's title to, and right to use, their properties are not
materially adversely affected thereby.
4.7 Information Covenants. The Debtor will furnish
the following information to the Secured Party:
(a) Quarterly Financial Statements. As soon as
practicable and, in any case, within 45 days after the close of
each of the quarterly accounting periods in each fiscal year of
the Debtor, an unaudited consolidated balance sheet of the Debtor
as at the end of such quarterly period and the related unaudited
statements of income, expenses and retained earnings for such
period and for the elapsed portion of the fiscal year ended with
the last day of such quarterly period, setting forth in
comparative form the figures for the corresponding periods of the
previous fiscal year, which shall be certified by the chief
financial officer of the Debtor in his opinion, as presenting
fairly in accordance with GAAP consistently applied throughout
the period involved, the consolidated financial condition of the
Debtor as at the end of such period and the results of operations
and changes in cash flow for such period and for the elapsed
portion of the fiscal year ended with the last day of such
period, subject only to normal year-end adjustments.
(b) Annual Financial Statements. As soon as
practicable, and, in any case, within 90 days after the end of
each fiscal year of the Debtor, a consolidated balance sheet of
the Debtor as at the end of such fiscal year and the related
statement of income, expenses and retained earnings and changes
in financial position for such fiscal year, setting forth in com-
parative form the figures as at the end of and for the previous
fiscal year, certified by independent certified public accoun-
tants reasonably satisfactory to the Secured Party, whose
certificate shall not contain any qualification and shall state
that such consolidated financial statements have been prepared in
accordance with GAAP consistently applied and that the
examination of such accountants in connection with such financial
statements has been made in accordance with generally accepted
auditing standards and, accordingly, included such test of the
accounting records and such other auditing procedures as were
considered necessary in the circumstances and who shall have
authorized the Debtor to deliver such financial statements and
certifications thereof to the Secured Party pursuant to this
Agreement.
(c) Certificate. At the time the financial statements
are furnished pursuant to subsections (a) and (b) above, the
Debtor shall also furnish a certificate of the chief executive
officer and chief financial officer of the Debtor stating that no
event has occurred which constitutes a default under the
Convertible Debenture or if such an event has occurred,
disclosing each such event or failure and its nature, when it
occurred, whether it is continuing and the steps being taken by
the Debtor with respect to such event or failure.
(d) Notice of Litigation and Other Matters. Prompt
notice of:
(i) The commencement of any proceeding or
investigation by or before any governmental body and any action
or proceeding in any court or before any arbitrator against or in
any other way relating adversely to the Debtor or any of its
property, assets or business, which, if adversely determined,
would singly or when aggregated with all other proceedings,
investigations or actions, materially and adversely affect the
business, results of operations or financial condition of the
Debtor;
(ii) Any notice received from any administrative
official or agency relating to any order, ruling, statute or
other law or information which would materially and adversely
affect the operations of the Debtor;
(iii) Any amendment of the certificate of
incorporation or by-laws of the Debtor; and
(iv) Any default hereunder or under the
Convertible Debentures or any default under any other material
agreement to which the Debtor is a party or by which any of its
property may be bound.
(e) ERISA.
(1) As soon as possible, and in any event within
30 days after any executive officer the Debtor knows or has
reason to know that any reportable event (as defined in Section
4043 of ERISA) with respect to any Plan has occurred, a statement
of the chief financial officer setting forth details as to such
reportable event and the action that the Debtor proposes to take
with respect thereto, together with a copy of the notice of such
reportable event given to the Pension Benefit Guaranty
Corporation.
(2) Promptly after receipt thereof, a copy of any
notice the Debtor may receive from the Pension Benefit Guaranty
Corporation relating to the intention of said Corporation to
terminate any Plan or to appoint a trustee to administer any
Plan.
4.8 Accuracy and Completeness of Information.The
Debtor covenants that all written information, reports, state-
ments, and other papers and data furnished to the Secured Party
pursuant to any provision or term of this Agreement shall be, at
the time the same is so furnished, true, complete and correct in
all material respects.
4.9 Liens. The Debtor will not create, assume or
incur or cause to be created, assumed or incurred, or permit to
exist, any liens on the Collateral, and will defend the right,
title and interest of the Secured Party in and to the Debtor's
rights to the Collateral.
4.10 Sale of Assets: Merger. The Debtor shall not (a)
sell, transfer, assign, lease or otherwise dispose of (whether in
one transaction or a series of transactions) all or substantially
all of its assets (whether now owned or hereafter acquired) or
(b) consolidate with or merge into any other corporation or
permit any corporation to merge into it, unless (i) the Debtor is
the surviving entity of such merger or consolidation, (ii) the
Secured Party receives pro forma financial statements from an
independent certified public accountant satisfactory to the
Secured Party to reflect such merger or consolidation, and such
pro forma statements set forth a net worth of the Debtor which
equals or exceeds the net worth of the Debtor prior to such
event, (iii) no Event of Default (as that term is hereinafter
defined) shall occur as a result of and after giving effect to
such event and (iv) the security interest of the Secured Party in
the Collateral (and the priority position of the Secured Party
with respect thereto) shall not be affected, diminished or
impaired in any way.
4.11 Collateral.
(a) The Debtor will not sell, transfer, lease or
otherwise dispose of any or all of the Collateral, or attempt or
offer to contract to do so, without the express prior written
consent of the Secured Party.
(b) The Debtor will not change its name, identify
or corporate structure in any manner which might make any
financing or continuation statement filed hereunder misleading,
nor will the Debtor change its principal place of business,
record-keeping location or remove any of its books and records to
any location other than as set forth on the first page hereof
unless, in each case, the Debtor shall have given the Secured
Party at least 30 days' prior written notice thereof or shall
have delivered to the Secured Party acknowledgment copies of
financing statements recording such change duly executed and duly
filed in each jurisdiction in which financing statements on Form
UCC-l are required to be filed in order to perfect the security
interest granted by this Agreement in the Collateral and shall
have taken all action necessary or reasonably requested by the
Secured Party to amend such financing statement or continuation
statement so that it is not seriously misleading.
(c) The Debtor will, (i) continue to use each
trademark which constitutes a part of the Intellectual Property
(as that term is defined in the Asset Purchase Agreement) (the
"Trademarks") on each and every trademark class of goods
applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain each
Trademark in full force free from any claim of abandonment for
non-use, (ii) maintain as in the past the quality of products and
services offered under each Trademark, (iii) employ each
Trademark with the appropriate notice of registration, (iv) not
adopt or use any mark which is confusingly similar or a colorable
imitation of any Trademark, and (v) not (and shall use its
reasonable best efforts to prohibit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby
any Trademark may be invalidated.
(d) The Debtor shall notify the Secured Party
immediately if it knows, or has reason to know, that any
application or registration relating to any Trademark may become
abandoned or dedicated, or of any material adverse determination
or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or
tribunal in any country) regarding the Debtor's ownership of any
Trademark, its right to register the same, or to keep and main-
tain the same.
(e) The Debtor will take all necessary steps to
maintain each registration of the Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use
and affidavits of incontestability.
(f) In the event that any of the Trademarks
included in the Collateral is materially infringed,
misappropriated or diluted by a third party, the Debtor shall
promptly notify the Secured Party after it learns thereof and
shall promptly sue for infringement, misappropriation or
dilution, seek injunctive relief where appropriate, and to
recover any and all damages of such infringement,
misappropriation or dilution, or to take such other actions as
the Debtor shall reasonably deem appropriate under the circum-
stances to protect such Trademark.
4.12 Issuance of Stock. The Debtor shall not issue to
any person any shares of its capital stock (whether common or
preferred) nor any options, subscriptions, warrants, rights, con-
tracts, commitments, understandings or agreements to purchase or
otherwise acquire any such shares (including any right of conver-
sion or exchange) without the prior written consent of a
committee composed of three members, one designated by the
Debtor, one designated by the Secured Party and one designated by
Pioneer Venture Associates Limited Partnership, provided however
that the Debtor may issue shares (i) pursuant to stock options
granted to employees pursuant to a stock option plan so long as
the aggregate amount authorized to be issued pursuant to such
stock option plan does not exceed 20% of the number of common
shares outstanding on the date hereof. It is understood and
agreed that the initial members of the committee referred to in
this Section shall be Irwin Schneidmill, on behalf of the Debtor,
Martin Fox, on behalf of the Secured Party and John Ferraro, on
behalf of Pioneer Venture Associates Limited Partnership.
4.13 Further Documentation. At any time and from time
to time upon the Secured Party's written request and at the
Debtor's sole expense, the Debtor will promptly and duly execute
and deliver such further documents and instruments and do such
further acts and things as the Secured Party may reasonably
request in order to obtain the full benefits of this Agreement
including the filing of any financing or continuation statements
and amendments thereto under the Uniform Commercial Code in
effect in any jurisdiction and any and all other recording
documents with respect to the security interest granted to the
Secured Party pursuant to this Agreement.
4.14 Payment of Dividends: Purchase of Stock. The
Debtor shall not purchase, redeem, retire or make any other
distribution by reduction of capital or otherwise in respect of
any of its shares of capital stock.
4.15Limitation on Compensation. The Debtor shall not
pay aggregate compensation, including without limitation salaries
and bonuses, to Irwin Schneidmill in excess of $250,000 in any
fiscal year, provided however, that the Debtor may grant Irwin
Schneidmill a bonus not to exceed 7.5% of the Debtor's net income
for that fiscal year as shown in its annual report filed with the
Securities and Exchange Commission.
4.16 Transaction with Affiliates. The Debtor shall not
enter into any transaction with any affiliate on terms which
are less favorable than if such transaction were an arms-length
transaction between unaffiliated parties.
5. Debtor's Obligations to Pay. Debtor shall pay and
perform all of the Obligations of Debtor to Secured Party as the
same may become due according to their terms. Debtor shall be
liable for, and shall reimburse to Secured Party, all expenses,
including reasonable attorneys' fees, incurred or paid in
connection with maintaining, protecting or enforcing any of
Secured Party's rights and remedies hereunder. Any amounts
collected hereunder by Secured Party which are in excess of those
applied to pay in full the aforesaid liabilities and indebtedness
at the time due shall be promptly paid to Debtor.
6. Default. The occurrence of any one or more of the
following events, and the Debtor's failure to cure upon 10 days
written notice (hereinafter referred to as "Events of Default")
shall constitute a default hereunder, whether such occurrence is
voluntary or involuntary or comes about or is effected by
operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental authority:
(a) If Debtor shall fail to pay, perform or
observe any material covenant, agreement, term or
provision of the Convertible Debenture; or
(b) If any representation, warranty or other
statement of fact herein or in any writing, certifi-
cate, written report or written statement at any time
furnished to Secured Party pursuant to or in connection
with this Agreement or the Convertible Debenture shall
be false or misleading in any material respect; or
(c) If Debtor shall: admit in writing its
inability to pay its debts generally as they become
due; file a petition for relief under the bankruptcy
laws or a petition to take advantage of any insolvency
act; make an assignment for the benefit of creditors;
commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself
or the whole or any substantial part of its property;
file a petition or answer seeking reorganization or
arrangement or similar relief under the Federal
Bankruptcy Laws or any other applicable law or statute
of the United States or any State; or if Debtor shall
be adjudged a bankrupt or insolvent, or a court of
competent jurisdiction shall enter any order, judgment
or decree appointing a receiver, trustee, liquidator or
conservator of Debtor or of the whole or any substan-
tial part of the property of Debtor or approves a
petition filed against Debtor seeking reorganization or
similar relief under the Federal Bankruptcy Laws or any
other applicable law or statute of the United States or
any State; or if, under the provisions of any other law
for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of Debtor
or the whole or any substantial part of its property;
or if there is commenced against Debtor any proceeding
for any of the foregoing relief and said proceeding is
not dismissed within 90 days; or if Debtor by any act
indicates its consent to, approval of, or acquiescence
in any such proceeding; or
(d) If all or any part of the Collateral shall be
made subject to any lien or security interest, without
the prior written consent of Secured Party.
Upon the occurrence of such an Event of Default, Secured
Party shall, without further notice or judicial process
immediately become entitled to exercise all of the Secured
Party's rights hereunder.
7. Rights and Remedies. Upon the occurrence of an
Event of Default, the Obligations shall immediately become due
and payable in full without further notice or demand. Secured
Party shall have all rights and remedies provided by the Uniform
Commercial Code in effect in the State of New York on the date
hereof. In addition to, or in conjunction with, or substitution
for such rights and remedies, Secured Party may at any time and
from and after the occurrence of an Event of Default hereunder:
(a) with or without notice to Debtor, foreclose
the security interest created herein by any available
judicial procedure, or take possession of the
Collateral and the income generated therefrom, or any
portion thereof, with or without judicial process, and
enter any premises where the Collateral may be located
for the purpose of taking possession of or removing the
same, or disposing of the Collateral on such premises,
and Debtor agrees not to resist or interfere therewith;
(b) require Debtor to prepare, assemble or
collect the Collateral, at Debtor's own expense, and
make the same available to Secured Party at such place
as Secured Party may designate, whether at Debtor's
premises or elsewhere;
(c) sell, lease or otherwise dispose of all or
any part of the Collateral, in Debtor's name or in its
own name, or in the name of such party as Secured Party
may designate, either at public or private sale (at
which Secured Party shall have the right to purchase),
in lots or in bulk, for cash or for credit, with or
without representations or warranties, and upon such
other terms as Secured Party, in its sole discretion,
may deem advisable; and ten days' written notice of
such public sale date or dates after which private sale
may occur, or such lesser period of time in the case of
an emergency, shall constitute reasonable notice
hereunder;
(d) execute and deliver documents of title,
certificates of origin, or other evidence of payment,
shipment or storage of any Collateral or proceeds on
behalf of and in the name of Debtor;
(e) remedy any default by Debtor hereunder,
without waiving such default, and any monies expended
in so doing shall be chargeable with interest to Debtor
and added to the Obligations secured hereby; and
(f) apply for an injunction to restrain a breach
or threatened breach of this Agreement by Debtor.
If, after an Event of Default, Secured Party shall
foreclose upon the security interest in the Collateral, Debtor
shall pay to Secured Party, as compensation the reasonable
attorneys' fees of Secured Party.
8. Power of Attorney. Debtor hereby appoints Secured Party the
true and lawful attorney of Debtor with full power of
substitution and with power for it and in its name, place and
stead, to demand, collect receipt and give complete acquittances
for any and all rents and other amounts which may be or become
due under the Collateral, and at its discretion to file any claim
or take any other action or proceeding and make any settlement of
any claims, either in its own name or in the name of Debtor or
otherwise, which Secured Party may deem necessary or desirable in
order to collect and enforce the payment of any and all rents and
other amounts which may be or become due under the Collateral.
Lessees of the leased equipment described in the Collateral are
hereby expressly authorized and directed to pay all rents and
other amounts herein assigned to Secured Party or such nominee as
Secured Party may designate in writing delivered to and received
by such lessees who are expressly relieved of any and all duty,
liability or obligation to Debtor in respect of all payments so
made. The powers granted to Secured Party under this Section
shall not be exercised unless and until the occurrence of an
Event of Default under Section 6 above.
9. Cumulative Rights. All rights, remedies and powers granted
to Secured Party herein, or in any instrument or document related
hereto, or provided or implied by law or in equity shall be
cumulative and may be exercised singly or concurrently on any one
or more occasions.
10. Termination. Upon payment in full of the obligations
secured hereby, this Agreement shall be and become null and void.
Upon such termination, Secured Party will promptly execute and
provide to Debtor the appropriate UCC-3 Termination Statements
and shall perform such acts and shall execute such documents as
Debtor shall deem are necessary to effectuate such termination.
11. Notice. All notices, requests, demands or other
communications provided for herein shall be in writing and shall
be deemed to have been properly given if sent by registered or
certified mail, return receipt requested, addressed to the
parties at their respective addresses hereinabove set forth, or
at such other addresses as the parties may designate in writing.
12. Modification and Waiver. No modification or waiver of any
provision of this Agreement shall be effective unless such
modification or waiver shall be in writing and signed by the
parties hereto and the same shall then be effective only for the
period and on the conditions and for the specific instances and
purposes specified in such writing. No course of dealing between
Debtor and Secured Party in exercising any rights or remedies
hereunder shall operate as a waiver or preclude the exercise of
any other rights or remedies hereunder.
13. Applicable Law. This Agreement shall be construed in
accordance with and shall be governed by the laws of the State of
New York. The parties hereto consent to the jurisdiction of the
State of New York and agree that the venue of any action or
proceeding arising from this Agreement may be venued in the State
of New York.
14. Benefit. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first above written.
DEBTOR:
ADVANCED MEDICAL SCIENCES, INC.
By /s/ Irwin Schneidmill, President
(Title)
SECURED PARTY:
DEERSKIN TRADING POST, INC.
By /s/ Martin Fox, Chairman
(Title)
EXHIBIT 10.4
L E A S E
THIS INDENTURE OF LEASE (hereinafter called "Lease") dated
this 21st day of May, 1999 between DEERSKIN TRADING POST, INC.,
having offices at 10 Henry Street, Teterboro, New Jersey 07068
(hereinafter called "Landlord"), and AMERICA'S SHOPPING MALL,
INC., (formerly Advanced Medical Sciences, Inc.) 382 Rte. 59
#310, Monsey, New York 10952 (hereinafter referred to as
"Tenant").
W I T N E S S E T H:
ARTICLE 1
DEMISED PREMISES - TITLE - TERM OF LEASE
Section 1.01 - Demised Premises. In consideration of the
rents, covenants and agreements hereinafter reserved and
contained on the part of the Tenant to be observed and performed,
Landlord does hereby lease and demise to the Tenant and the
Tenant does hereby hire, lease and take from Landlord, for the
term subject to and upon the covenants and conditions hereinafter
set forth, the entire building and parking lot ("Demised
Premises" or "Premises") located at 2500 Arrowhead Drive, Carson
City, Nevada 89701 (hereinafter referred to as "Building").
Section 1.2 - Title. At the commencement of the term of the
Lease ("Term"), Landlord shall own the fee title to the Demised
Premises, subject to restrictions and encumbrances of record, if
any, zoning regulations affecting such Premises and any state of
facts shown on an accurate survey or as a visual inspection of
the Premises would disclose.
Section 1.3 - Term of Lease. To have and to hold unto the
Tenant, its successors and permitted assigns, for the term which
shall commence currently with the Closing, as that term is
defined in the Asset Purchase Agreement between Landlord and
Tenant, dated April 21, 1999 (the "Asset Purchase Agreement"),
("Commencement Date") and terminate on April 30, 2000. The
aforesaid period shall be referred to as the "Term" or "Lease
Term".)
ARTICLE 2
USE OF PREMISES
The Tenant shall use and occupy the Premises only for a mail
order retail business consistent with Landlord's prior use of the
Premises. Tenant shall not permit gambling to be conducted at
the Premises. Tenant shall not store or sell gasoline or fuel at
the Premises. The Premises shall not be used as a drug
treatment/rehabilitation center, methadone clinic, or alcohol
treatment/rehabilitation center. The Premises will not be used
for residential purposes. The Tenant will not permit the
Premises to be used for any obscene or pornographic purposes and
will not permit any obscene or pornographic material to be
brought on the Premises. Any of the aforementioned uses shall be
deemed to be a breach of a substantial obligation of the Lease.
The Tenant shall not use or occupy or permit the leased property
to be used or occupied, nor do or permit anything to be done in
or on the leased property, in a manner which will in any way
violate any Certificate of Occupancy affecting the leased
property, or make void or voidable any insurance then in force
with respect thereto, or which will make it impossible to obtain
fire or other insurance, or which will cause or be likely to
cause structural damage to the Building or any part thereof, or
which will constitute a public or private nuisance, or which
would adversely affect the then value thereof, and shall not use
or occupy or permit the leased property to be used or occupied in
any manner which will violate any present or future laws or
regulations of any governmental authority. Other than as set
forth above, nothing herein contained shall be deemed or
construed to constitute a representation or guaranty by the
Landlord that any specific business may be conducted in the
Premises or any particular use is lawful under the Certificate of
Occupancy.
ARTICLE 3
RENT AND OTHER CHARGES
Section 3.1 - Rent.
A.During the Term the Annual Basic Rent to be paid
by Tenant to Landlord shall be $336,000.
B.Said rent, additional rent and all other payments
due under this Lease shall be paid to the Landlord at the address
hereinabove first specified, or as the Landlord may otherwise
direct in writing. Rent shall be payable in monthly installments
due and payable on the first day of each and every month in
advance. Failure to pay rent by the fifth day of the month shall
be deemed to be a breach of a substantial obligation of the
Lease. Additionally, if Tenant fails to pay the annual basic
rent or additional rent on or before the 7th day of the month,
(in addition to all other remedies Landlord may have hereunder)
Tenant shall pay one hundred fifty ($150.00) dollars as a late
fee. Said fee shall be deemed to be additional rent. Interest
shall accrue on any unpaid rent or additional rent at twenty-four
(24%) percent per annum or at the highest legal rate allowable
pursuant to law, whichever amount shall be less.
C.If Tenant shall submit any check to Landlord for
payment of any obligation hereunder and said check is returned
unpaid ("bounced" check), Tenant shall pay one hundred fifty
($150.00) dollars to Landlord for the bookkeeping charge
incurred. In the event Tenant submits more than one "bounced"
check during the Term, Tenant shall be obligated to make all
payments to Landlord by certified check or bank check. In such
event, if Tenant fails to submit a certified check or bank check
to Landlord, said failure shall be deemed to be a substantial
breach of the terms of this Lease. The one hundred fifty ($150)
dollar bookkeeping charge is in addition to any other remedies
Landlord may have pursuant to the terms of this Lease.
Section 3.2 - Additional Rent. All payments Tenant is
required to make pursuant to this Lease, other than annual basic
rent payments (including but not limited to refurnishing of
security or payment of additional security), shall constitute
additional rent and, if Tenant defaults in any such payment so as
to create an Event of Default (as hereinafter defined), Landlord
shall have (in addition to any rights and remedies granted
hereby) all rights and remedies provided by law for nonpayment of
rent.
Section 3.3 - Persistent Late Payment of Rent. If Tenant
shall default in the payment of the rent reserved herein, or any
item of additional rent herein mentioned, or any part of either,
during any two (2) months, whether or not consecutive, during the
Term and (i) such default continues for more than ten business
(10) days after written notice of such default by Landlord to
Tenant, and (ii) Landlord, after the expiration of such ten
business (10) day period, commences a proceeding or action to
dispossess Tenant in each such instance, then, notwithstanding
that such defaults may have been cured prior to the entry of a
judgment against Tenant, any further default in the payment of
any money due Landlord hereunder which shall continue for more
than ten business (10) days after Landlord shall give a written
notice of such default shall be deemed to be deliberate and
Landlord may thereafter serve a written three (3) day notice of
cancellation of this Lease and the term hereunder shall end and
expire as fully and completely as if the expiration of such three
(3) day period were the day herein definitely fixed for the end
and expiration of this Lease and the term thereof, and Tenant
shall then quit and surrender the Premises to Landlord, but
Tenant shall remain liable as elsewhere provided in this Lease.
Section 3.4 - Last Month's Rent. Concurrently with the
execution hereof, Tenant is paying to Landlord the last month's
portion of the Annual basic rent in the amount of twenty-eight
thousand dollars ($28,000).
ARTICLE 4
REAL ESTATE TAXES,
INSURANCE, AND BUILDING MAINTENANCE
Section 4.1 - Net Lease. It is hereby mutually agreed and
it is the intention of the parties hereto that this lease shall
be deemed a "net lease" with respect to the Premises. Tenant
shall make all repairs structural and non-structural to the
premises. Other than as specifically set forth herein, Landlord
shall not be expected or required to make any payments of any
kind or be under any liability or have any obligation with
respect to the Premises. Tenant agrees to pay, or cause to be
paid all costs necessary to maintain the Premises including, but
not limited to, real estate taxes, taxes assessed against the
Premises (including building, land and vault if any), taxes
assessed against the rent, or taxes assessed against use of the
Premises, insurance costs, and maintenance costs.
Section 4.2 - Real Estate Taxes. Presentment of a xeroxed
copy of the real estate tax bill by the Landlord shall be deemed
conclusive as to the amount of additional rent for Real Estate
Taxes to be paid by the Tenant. The additional rent for Real
Estate Taxes shall be due ten (10) days after Tenant is presented
with a copy of the tax bill. Tenant shall pay as additional rent
the entire amount of taxes as assessed against use of the
Premises, insurance costs and maintenance costs.
Section 4.3 - Late Payment. In the event Tenant's late
payment of the additional rent for real estate taxes causes a
penalty and/or interest to be incurred, said penalty and/or
interest, shall be deemed to be additional rent and shall be paid
by Tenant to the Landlord.
Section 4.4 - Certiorari Proceedings. Either party may
commence a proceeding to challenge the tax assessment
(hereinafter "Certiorari Proceeding"). In the event landlord
maintains a Certiorari Proceeding during the Term, the cost of
said proceeding shall be borne by the Tenant. Said cost shall be
deemed additional rent. In the event Tenant commences a
Certiorari Proceeding in any year of the term Landlord shall
cooperate with the Tenant in the filing of such proceeding. The
cost and expense of the Certiorari Proceeding shall be borne
exclusively by the Tenant.
ARTICLE 5
UTILITY EXPENSE
Section 5.1 - Utility Expense. A. The Tenant agrees to
pay, or cause to be paid, all charges for gas, sewage,
electricity, water, light, air-conditioning, heat, power, or
service used, rendered or supplied upon or in connection with the
Premises throughout the term of this Lease and any renewal
thereof, and to indemnify the Landlord and save it harmless
against any liability or damages on such account. The Tenant
shall also, at its sole cost and expense, procure any and all
necessary permits, licenses and other authorizations required for
the lawful and proper installation and maintenance upon the
Premises of Tenant's own wires, pipes, conduits, tubes and other
equipment and appliances for use in supplying any such service to
and upon the Premises. Water for the standby sprinkler and sewer
charges, if any, shall be an obligation of the Tenant. Tenant
shall at its own cost and expense install any and all utility
meters which may be required by law or which are necessary to
provide utility service to the Premises.
Section 5.2 - Telephone Services. Tenant shall procure and
pay for its own telephone and communication services.
ARTICLE 6
SECURITY
Section 6.1 - Security. Tenant will deposit the sum of
Twenty-Eight Thousand dollars ($28,000.00) with the Landlord,
payable upon execution hereof. Landlord may use, apply or retain
the whole or any part of the security to the extent required to
cure any default of Tenant's and reimburse Landlord for any
damages or expenses (including, without limitation, counsel fees)
incurred by reason of such default, including, but not limited
to, any damages, deficiency or expenses in reletting of the
Premises, whether accrued before or after summary proceedings or
other re-entry by Landlord. If Tenant complies with all its
obligations hereunder, the security shall be returned to it
thirty (30) days after the end of the Term and delivery of
possession of the Premises to Landlord. In the event the
Landlord shall sell or assign the Premises, then upon transfer,
Landlord agrees to transfer this security to such transferee and
Landlord shall thereupon be released from all liability with
respect to such security. Tenant shall not assign or encumber
the security and neither Landlord nor its successors or assigns
shall be bound by any such assignment or encumbrance. Provided
Tenant has furnished Landlord with its Federal tax identification
number in the space provided below, Landlord agrees to deposit
the security in an FDIC insured account. The interest or
dividends that accrue on such security shall be deemed part of
the security and credited to Tenant if it is not in default of
the terms of this Lease, less an amount equal to 1% of the
security deposit hereunder which amount shall be retained by the
Landlord as an annual administration fee.
Section 6.2 - Tax ID Number. Tenant's Federal tax
identification number is _____________.
ARTICLE 7
REPAIRS
Section 7.1 - Structural Repairs. Tenant shall be required
to make or cause to be made all interior and exterior repairs
whether structural or non-structural to the Premises. Any repair
or alteration requiring expenditure of ten thousand ($10,000.00)
dollars or more shall require the consent of the Landlord, which
consent shall not be unreasonably withheld. In the event of a
break-in, Tenant shall repair (and/or replace) the damage caused
to the Premises. Tenant is responsible for all damages to
Premises incurred as a result of a break-in.
Section 7.2 - Violations. Tenant shall do whatever is
necessary to remove any violations issued by any Federal, State
or local governmental or quasi-governmental agencies or units,
within a reasonable period of time. The aforesaid shall only
apply to violations issued or which accrue prior to the date
Tenant vacates or the Term expires, whichever date shall be
later. Tenant's obligation to make said repairs and correct
violations shall survive the termination of this Lease so long as
the obligations accrued prior to the date of termination.
Section 7.3 - HVAC and Roof. At the date of termination of
this Lease, the electrical, plumbing heating ventilation and air
conditioning system (HVAC), shall be in good and working order
and the Premises shall be in good repair. The roof shall be free
of leaks and the parking lot shall be paved and lined at the
termination of the Lease. These obligations shall survive
termination of the Lease.
ARTICLE 8
AFFIRMATIVE OBLIGATIONS AND COVENANTS OF TENANT
Section 8.1 - Affirmative Obligations. Tenant covenants and
agrees, at its own cost and expense, at all times during the
Term, except as stated in Article 8 hereof to:
A.Repairs. Keep, maintain in good order, condition
and repair the Premises and each and every part thereof
including, without limitation, air conditioning systems, interior
plumbing units and systems; sprinkler systems; electrical
systems; equipment; alarm systems; parking lot; sidewalks,
facilities and fixtures which are at the Premises and the
aforesaid obligation of Tenant shall also include the replacement
of any of the aforesaid items and the replacement of any glass
which may be damaged or broken. The aforesaid items shall be in
good and working order at the expiration of the Lease. This
obligation shall survive the termination of the Lease.
B.Keep Premises Clean and Attractive. Keep and
maintain the Premises in a neat and clean condition, including
maintenance of any steps and sidewalk adjacent to the Premises.
C.Comply with Laws. Promptly comply with all laws,
ordinances, rules and regulations of governmental authorities
(including, but not limited to, zoning ordinances and building
codes) affecting the Premises.
D.Garbage. Handle and dispose of all rubbish,
garbage and waste from Tenant's operation in accordance with, all
laws and ordinances, and reasonable regulations established by
Landlord. Tenant shall not permit the accumulation (unless in
concealed enclosed containers), or burning of any rubbish or
garbage in, on or about any part of the Premises. Tenant shall
sort its garbage in accordance with all applicable laws and
regulations. All waste shall be removed from the Premises at
least five times a week and disposed of with a licensed carter.
ARTICLE 9
COVENANT AGAINST LIENS
Section 9.1 - No Liens. Tenant shall neither create nor
permit to be created any lien or encumbrance affecting the
Premises and shall discharge, promptly upon notice, any lien or
encumbrance arising out of any act or omission of Tenant. Notice
is hereby given that Landlord shall not be liable for any work
performed or to be performed at the Premises for Tenant, or for
any materials furnished or to be furnished at the Premises for
Tenant, and that no mechanic's or other lien for such work or
materials shall attach to or affect the interest of Landlord in
and to the Premises. Any contractors or subcontractors who shall
do work at the building on behalf of Tenant shall be licensed and
insured in an amount of not less than two million ($2,000,000.00)
dollars. Moreover, such workers shall be properly bonded and
licensed. At least thirty (30) days prior to commencement of any
work at the Premises, Tenant shall submit proposed plans to the
Landlord. Moreover, Tenant shall, upon submission of the plans,
submit the name and address of the contractor, a copy of the
contract, and an insurance certificate naming the Landlord as an
additional insured. Failure to submit this documentation shall
be deemed to be a breach of a substantial obligation of this
Lease. Landlord will not unreasonably withhold its consent to
any proposed work, so long as the aforesaid documentation is
submitted in a timely manner.
ARTICLE 10
EASEMENT
Tenant shall permit Landlord or its assignees to show
the Premises to any person that Landlord deems appropriate. Such
showings, visits or repairs shall be done upon reasonable notice
to Tenant, and so far as practicable, in such manner as to avoid
unreasonably interfering with or adversely affecting Tenant's use
of the Premises. It is hereby agreed that the aforesaid easement
does not grant Landlord dominion and control over the Premises
therefore such easement shall not relieve Tenant of indemnifying
Landlord from any and all liability for any injury which may be
sustained by any person on the Premises.
ARTICLE 11
ADDITIONAL NEGATIVE OBLIGATIONS AND COVENANTS OF TENANT
Section 11.1 - Additional Covenants. Tenant covenants and
agrees that at all times during the Term it shall not at any time
without first obtaining Landlord's prior written consent:
A.Alterations. Make any alterations, improvements,
and/or additions to the Premises or any part thereof in excess of
ten thousand ($10,000.00) dollars without the prior written
consent of the Landlord, which consent will not be unreasonably
withheld.
B.Not Change Exterior Architecture. Change (whether
by alteration, replacement, rebuilding or otherwise) the exterior
color and/or architectural treatment of the Premises without the
prior written consent of the Landlord, which consent will not be
unreasonably withheld.
C.Not Misuse Plumbing Facilities. Use the plumbing
facilities for any purpose other than that for which they were
constructed, or dispose of any garbage or other foreign substance
therein.
D.No Liens. Subject any fixtures, furnishing or
equipment in or on the Premises which are affixed to the realty,
to any mortgages, liens, conditional sales agreements, security
interest or encumbrances.
E.Not Damage the Premises. Perform any act or carry
on any practice which may damage, mar or deface the Premises.
F.Not Exceed Floor Loads. Place a load on any floor
in the Premises, which is in excess of the floor load per square
foot as established by standard engineering principles; or
install, operate or maintain therein any heavy item or equipment
except in such manner as to achieve a proper distribution of the
weight.
G.Not Exceed Electrical Load. Install, operate or
maintain in the Premises, any electrical equipment which does not
bear underwriters' approval, and would overload the electrical
system therein, or any part thereof, beyond its reasonable
capacity for proper and safe operation.
H.Not Permit Odors, etc. Suffer, allow or permit
any offensive or obnoxious vibration, noise, odor or other
undesirable effect to emanate from the Premises, or any machine
or other installation therein, or otherwise suffer, allow or
permit the same to constitute a nuisance or otherwise
unreasonably interfere therefore with the safety, comfort or
convenience of the area surrounding the Premises; upon notice by
Landlord to Tenant that any of the aforesaid is occurring, Tenant
shall forthwith (but in all events within five (5) days) remove
or control the same.
I.Not Interfere with Insurance; Compliance; Improper
Use. Use or occupy the Premises or do not permit anything to be
done thereon in any manner which shall prevent Landlord from
obtaining at standard rates any insurance required or desired, or
which would invalidate or increase the cost of Landlord of any
existing insurance, or which might cause structural injury to the
building, or which would constitute a public or private nuisance
or which would violate any present or future laws, regulations,
ordinances or requirements (ordinary or extraordinary, foreseen
or unforeseen) of the federal, state or municipal governments, or
of any department, subdivisions, bureaus or offices thereof, or
of any other governmental public or quasi-public authorities now
existing or hereafter created having jurisdiction of the
Premises.
J.Utilization of the Premises in Conformity with the
Certificate of Occupancy. Not utilize the Premises in violation
of the use clause set forth in this Lease or use the Premises in
a manner which is not in conformance with the Certificate of
Occupancy.
K.Permits. Not do any work at the Premises without
complying with all laws, regulations, ordinances, affecting such
work and obtaining all necessary and proper permits. Tenant
shall not submit any applications to any governmental agency
which have not been signed by the Landlord. Tenant shall, if
required, or if requested by Landlord use union labor for all
alteration or repair work performed at the Premises.
ARTICLE 12
INSURANCE CASUALTY, CONDEMNATION
Section 12.1 - Required Insurance. a. Tenant shall, at its
own cost and expense, maintain comprehensive public liability
insurance (containing the so-called "occurrence clause") against
claims for personal injury, death and property damage occurring
in or about the Premises, such insurance shall afford minimum
protection (including umbrella policies) of Eleven Million
($11,000,000) dollars with respect to the personal injury or
death of any one person; Eleven Million ($11,000,000) dollars
with respect to personal injury or death occurring or resulting
from one occurrence.
b. Tenant shall at its own cost and expense
maintain casualty insurance (including coverage for fire, natural
disasters and water damage) in the amount of Three Million
($3,000,000) dollars. Landlord shall be named as additional
named insured and primary loss payee on said policy. Tenant
shall also maintain rental insurance in an amount so that the
annual basic rent and additional rent are paid in the event the
Premises are partially or wholly destroyed. Said rental
insurance shall be payable not more than 30 days after the date
of the casualty.
Section 12.2 - Required Provisions. All insurance
maintained pursuant to Article 12 shall:
A.Be provided by policies which may not be canceled
or modified with respect to the Premises without at least thirty
(30) days prior written notice by the insurer to Landlord;
B.Provide that no act or omission of Landlord or
Tenant shall affect the coverage afforded thereunder;
C.Name Landlord as an additional insured party and,
if obtainable, (even if at additional cost to the Tenant) provide
that the insurer waives all right of subrogation against Landlord
for losses insured thereunder.
D.Be provided by an insurer with at least an "A"
rating.
Section 12.3 - Landlord's Non-Liability, Tenant's Own
Insurance.
A.Tenant hereby waives all right of recovery which
it might have against Landlord, Landlord's agents and employees,
for loss or damage to Tenant's furniture, inventory, furnishings,
fixtures, equipment, chattels and articles of personal property
located on the Premises, notwithstanding that such loss or damage
may result from the passive negligence or fault of Landlord.
Tenant shall obtain insurance policies covering its furnishings,
inventory, fixtures, equipment and articles of personal property
(collectively, "Personal Property") in the Premises, and Tenant
shall cause Landlord to be named as an additional insured party
under such policies (without entitling Landlord to receive any
loss proceeds thereof) and obtain the insurer's waiver of all
rights of subrogation against Landlord with respect to losses
insured under such policies. All policies obtained by the Tenant
(including any liability or casualty policies) shall provide that
the insurer waives all rights of subrogation against the Landlord
for losses insured thereunder.
B.Tenant shall advise Landlord promptly of the
applicable provisions of such insurance policies and notify
Landlord promptly of any cancellation or change therein. Tenant
shall provide copies of original insurance policies to Landlord
evidencing the insurance coverage required by this Article.
Section 12.4 - Exculpation of Landlord. As a consideration
for the making of this Lease, the Landlord shall not be liable
for any failure of water supply or electric current, nor for
injury or damage which may be sustained to any person or property
by the Tenant or any other person caused by or resulting from
steam, electricity, gas, water, rain, ice, or snow which may leak
or flow from or into any part of said Building or the Premises or
from the breakage, leakage, obstruction or other defect of the
pipes, wiring, appliances, plumbing or lighting fixtures of the
same, the condition of said Premises or any part thereof, or from
the street or subsurface, or from any other source or cause
whatsoever, unless such damage or injury shall be caused by or be
due to the gross negligence of the Landlord, the Landlord's
agents, servants or employees. Tenant acknowledges that it will
obtain appropriate insurance to cover any of the contingencies
set forth above
Section 12.5 - Safety Compliance. Tenant agrees, at its own
cost and expense, to comply with all of the rules and regulations
of the Fire Insurance Rating Organization having jurisdiction and
any similar body. If Tenant installs any electrical equipment
that overloads the lines of the Building, Tenant shall, at its
own cost and expense, promptly make whatever changes are
necessary to remedy such condition and to comply with all
requirements of the Landlord and the Board of Fire Insurance
Underwriters and any similar body and any governmental authority
having jurisdiction thereof.
Section 12.6 - Fire or Other Casualty.
A.Rent and additional rent shall not be apportioned
for any month hereunder, in which the Premises are substantially
damaged. In the event the Premises shall be damaged or destroyed
Tenant shall be obligated to rebuild the Premises. Landlord
shall tender any proceeds received from Tenant's casualty
insurance to contractors involved with the rebuilding of the
Premises.
B.Notwithstanding anything to the contrary contained
in the preceding Paragraph A of this Section or elsewhere in this
Lease, Tenant, or Landlord at its option, may terminate this
Lease on twenty-five (25) days notice to the other party, given
within sixty (60) days after the Premises shall be damaged or
destroyed, if the cost to repair the same shall amount to fifty
(50%) percent or more of the cost of replacement thereof; the
term "cost of replacement" shall be determined by the company or
companies selected by Landlord insuring Landlord against the
casualty in question. Landlord shall be entitled to retain all
proceeds of any payment made under the casualty insurance policy
obtained by Tenant pursuant to this Article.
Section 12.7 - Condemnation.
A.Total or Substantial Partial Condemnation. If the
whole of the Premises shall be taken for any public or any
quasi-public use under any statute or by right of eminent domain,
or by private purchase in lieu thereof, then this Lease shall
automatically terminate as of the date that title shall be taken.
If a substantial part of the Premises shall be taken so as to
substantially interfere with the operation of Tenant's business,
then Landlord and Tenant shall each have the right to terminate
this Lease on thirty (30) days' notice to the other given within
ninety (90) days after the date of such taking. In the event
that this Lease shall terminate or be terminated, the rent shall,
if and as necessary, be equitably adjusted.
B. Disposition of Proceeds. All compensation awarded
or paid upon such a total or partial taking of the Premises shall
belong to and be the property of Landlord without any
participation by Tenant. Nothing herein shall preclude Tenant
from asserting any claim against the municipality enforcing the
condemnation.
ARTICLE 13
TENANT'S INDEMNIFICATION OF LANDLORD AGAINST LIABILITY
Tenant shall indemnify Landlord against all liability
and expense (including reasonable architects' and attorneys'
fees) incurred by Landlord (unless caused by the gross negligence
of the Landlord) by reason of:
A.Any action commenced by Tenant (or by Landlord to
cure an event of default as hereinafter defined) on or about the
Premises;
B.Any use, non-use or maintenance of the Premises or
adjacent area;
C.Any negligence of Tenant;
D.Any injury or damage to any person or property
occurring on or about the Premises (including the commencement of
an action as a result of such damage or injury) or adjacent area
and it is admitted by Tenant that Landlord has no liability for
any such injury since Tenant has control of the Premises; or
E.Any failure by Tenant to perform its obligations
under the Lease.
ARTICLE 14
LANDLORD'S REMEDIES IN EVENT OF TENANT'S DEFAULT OR BANKRUPTCY
Section 14.1 - Events of Default. Tenant shall be in
default of this Lease if any one or more of the following events
(referred to herein as "events of default") occurs:
A.Tenant shall default in payment of any
installments of rent, additional rent or other sums required to
be paid by Tenant under this Lease, which default shall continue
for five (5) days after written notice thereof by Landlord to
Tenant or in the observance or performance of any other covenant
or provision of this Lease and such default continues for ten
(10) days after notice of such default from Landlord.
B.Tenant shall make an assignment for the benefit of
creditors or shall assign or sublet;
C.A voluntary petition is filed by Tenant under any
laws for the purpose of adjudication of Tenant as a bankrupt or
the extension of the time of payment, composition, arrangement,
adjustment, modification, settlement or satisfaction of the
liabilities of Tenant, or the reorganization of Tenant under the
Bankruptcy Act of the United States or any future laws of the
United States having the same general purpose, or receivers
appointed for Tenant by reason of insolvency or alleged
insolvency of Tenant; an involuntary petition shall be filed
against Tenant for such relief and shall not be dismissed within
ninety (90) days.
Section 14.2 - Termination of Lease. Landlord,
notwithstanding any other right or remedy it may have under the
Lease, at law or in equity, may, in the event of Tenant's
material breach of this Lease and its failure to cure as set
forth above, terminate the Lease, by written notice to Tenant
setting forth the basis therefor and effective not less than five
(5) days thereafter, whereupon, upon such effective date, the
Lease shall terminate (with the same effect as if such date were
the date fixed herein for the natural expiration of the Term),
Tenant shall surrender the Premises to Landlord and Tenant shall
have no further rights hereunder, but Tenant, shall remain liable
as hereinafter provided. In such event, Landlord may, without
further notice, enter the Premises, repossess the same and
dispossess Tenant and all other persons and property therefrom.
Section 14.3 - Landlord's Damages.
A.If Landlord so terminates the Lease, Tenant shall
pay Landlord, as damages:
i.A sum which represents any excess of (i) the
aggregate of the rent, impositions and additional rent for the
balance of the Term if the Lease were not so terminated, over
(ii) the net rental value of the Premises at the effective date
of such termination, both discounted at the rate of 1% per month;
or, at Landlord's option,
ii.Sums equal to the rent, impositions and
additional rent, when the same would have been payable if not for
such termination, less any net rents received by Landlord from
any reletting, after deducting all costs incurred in connection
with such termination and reletting (but Tenant shall not receive
any excess of such net rents over such sums). Brokerage fees and
reasonable legal fees incurred by the Landlord in re-letting the
Premises and the costs of repairing or doing construction
necessary to subdivide for any new tenant or tenants shall be
deemed to be costs incurred in re-letting.
Section 14.4 - Discovery of Damages. Landlord may commence
actions or proceedings to recover such damages or installments
thereof at any lawful time. No provisions hereof shall be
construed to preclude Landlord's recovery from Tenant of any
other damages to which Landlord is lawfully entitled. Landlord
shall be entitled to payment of its reasonable legal fees in any
action commenced against Tenant by reason of Tenant's breach of
any term of this Lease.
Section 14.5 - Nonexclusivity. No right or remedy herein
conferred upon Landlord is intended to be exclusive of any other
right or remedy herein or by law provided, but each shall be
cumulative and subject to the grace and notice provisions of
Section 14.1 hereof, in addition to every other right or remedy
given herein or now or hereafter existing at law or in equity or
by statute.
Section 14.6 - Landlord's Right to Perform Tenant's
Covenants. If Tenant shall fail to maintain the Premises or
shall fail to make any other payment or perform any other act
which Tenant is obligated to make or perform under this Lease,
and Tenant has not proceeded to diligently cure such failure to
pay or perform after written notice by Landlord to Tenant stating
such nonperformance, then Landlord, after ten (10) day written
notice to Tenant, may perform for the account of Tenant any
covenant in the performance of which Tenant is in default.
Tenant shall pay to the Landlord as additional rent, upon demand,
any amount paid by Landlord in the performance of such covenant
in any amount which Landlord shall have paid by reason of failure
of Tenant to comply with any covenant or provision of this Lease,
including reasonable accounts of fees incurred in connection with
the prosecution or defense of any proceedings instituted by
reason of default of Tenant, together with interest at the rate
of twenty-four (24%) percent per annum or the highest rate
allowed by law whichever amount shall be less. Interest shall
accrue from the date any outstanding amount is due.
Section 14.7 - No Waiver. The failure of the Landlord to
seek redress for violation of, or to insist upon the strict
performance of any covenant or condition of this Lease shall not
prevent a subsequent act which would have originally constituted
a violation from having all the force and effect of an original
violation. The receipt by Landlord of rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver
of such breach and no provision of this Lease shall be deemed to
have been waived by Landlord unless such waiver be in writing
signed by Landlord. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rent herein stipulated shall
be deemed to be other than on account of the earliest stipulated
rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or
payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy provided in this
Lease. No act or thing done by Landlord or Landlord's agents
during the Term shall be deemed an acceptance of a surrender of
said Premises, and no agreement to accept such surrender shall be
valid unless in writing signed by Landlord. No employee of
Landlord or Landlord's agent shall have any power to accept the
keys of the Premises prior to the termination of the Lease and
the delivery of keys to any such agent or employee shall not
operate as a termination of the Lease or a surrender of the
Premises.
Section 14.8 - Right of Re-Entry. Tenant waives any and all
right to a trial by jury in the event that summary proceedings
shall be instituted by Landlord. The terms "enter", "re-enter",
"entry" or "re-entry", as used in this Lease are not restricted
to their technical legal meaning.
ARTICLE 15
NO ASSIGNMENT AND SUBLETTING
Tenant shall not have the right to assign this Lease, or
sublet all or any part of the Demised Premises at any time during
the Term.
ARTICLE 16
SUBORDINATION OF LEASE TO MORTGAGES ON THE PREMISES
Section 16.1 - Subordination. The Lease shall be subject
and subordinate to any mortgage on the Premises ("Mortgage") and
any renewal, replacement, extension or consolidation thereof.
Section 16.2 - Attornment Agreement. This Article shall be
self-operative but Tenant shall promptly, upon Landlord's
request, execute and deliver proper instruments subordinating the
Lease to the Mortgage, agreeing to attorn to the Mortgagee (at
the Mortgagee's request) in the event the Mortgagee, by
foreclosure or otherwise, terminates Landlord's interest in the
Premises and agreeing further to notify the Mortgagee of any
default by Landlord hereunder and afford the Mortgagee reasonable
opportunity to remedy such default should it wish to do so.
ARTICLE 17
ACCESS TO PREMISES
The Landlord is hereby given the right during usual business
hours to enter the Premises and to exhibit the same for the
purposes of sale or hire of all or a part of the Premises
provided at least twenty-four (24) hours written notice is given
to Tenant. Landlord shall during the final six (6) months of the
Term be entitled to display, on the Premises in such manner as
not unreasonably to interfere with the Tenant's business, the
usual "For Sale" or "To Let" signs or such other signage
indicating Landlord's proposed development plans for the
Premises, and the Tenant agrees that such signs may remain
unmolested upon the Premises.
ARTICLE 18
NOTICES
All notices, demands and requests which may or are required
to be given by either party to the other shall be in writing.
All notices, demands and requests by the Tenant to the Landlord
shall be sent by United States Certified Mail (return receipt
requested), postage prepaid, addressed to the Landlord at the
address shown on the first page of this Lease or at such other
place as the Landlord may from time to time designate in a
written notice to the Tenant. A copy of any notice to Landlord
shall be sent to Milberg Weiss Bershad Hynes & Lerach LLP, One
Pennsylvania Plaza, New York, New York 10119, attn: Arnold N.
Bressler. All notices, demands and requests by the Landlord to
the Tenant shall be sent by United States Certified Mail, postage
prepaid, Return Receipt Requested, addressed to the Tenant at the
address shown on the first page of this Lease or at such other
place as the Tenant may from time to time designate in a written
notice to the Landlord. A copy of any notice to Tenant shall be
sent to Caro & Associates, P.C. 60 East 42nd Street, Suite 2001,
New York, New York 10165, attn: Chase A. Caro. Notices, demands
and requests which shall be served upon the Landlord or the
Tenant in the manner aforesaid shall be deemed sufficiently
served or given for all purposes hereunder two (2) days after
such notice, demand or request shall be mailed. Tenant hereby
appoints any person employed at the Premises as his agent
authorized to accept service of any papers or service of process.
ARTICLE 19
ACCEPTANCE
Neither the Landlord nor its agents have made any
representations with respect to the Building, the land upon which
it is erected except as expressly set forth herein and no rights,
easements, or licenses are acquired by the Tenant by this Lease.
The taking of possession of the leased property by the Tenant
shall be conclusive evidence that the Tenant will have accepted
the same "as is" at the time of the commencement of the term
hereof. In no event shall the Landlord be liable for any defect,
latent or otherwise, in such property or for any limitation on
its use.
ARTICLE 20
QUIET ENJOYMENT - CONVEYANCE BY LANDLORD
Section 20.1 - Quiet Enjoyment. Tenant, upon paying the
rent and all additional rent and other charges herein provided
for and performing all covenants and conditions of this Lease, on
its part to be performed, shall quietly have and enjoy the
Premises during the term, without hindrance or molestation by
Landlord or any other person claiming through Landlord.
Section 20.2 - Conveyance by Landlord. If Landlord shall
convey the Premises, all liabilities and obligations on the part
of Landlord under this Lease accruing subsequent to such transfer
shall terminate upon such conveyance and thereafter all such
liabilities and obligations shall be the liabilities and
obligations of such transferee and shall be binding upon such
transferee of the Premises.
ARTICLE 21
ESTOPPEL CERTIFICATE
Within ten (10) days after the request therefrom by
Landlord, or if on a sale, assignment of hypothecation by
Landlord of its interest in the Premises, or any part thereof, an
estoppel certificate shall be required from Tenant and Tenant
shall deliver, in recordable form, a certificate to any proposed
mortgagee or purchaser, or to Landlord, certifying if such be the
case that this Lease is in full force and effect, the date of
Tenant's most recent payment of rent, and that there are no
defenses or offsets outstanding, or stating those claimed by
Tenant. Tenant's failure to deliver said statement shall be
conclusive upon Tenant that (l) this Lease is in full force and
effect without modification except as may be represented by
Landlord, (2) there are no uncured defaults in Landlord's
performance and Tenant has no right of offset, counter claim or
deduction, and (3) that no more than one (l) month's rent has
been paid in advance.
ARTICLE 22
NO ABATEMENT OF RENT
Section 22.1 - No Abatement of Rent. Except as otherwise
specifically provided in this Lease, there shall be no abatement,
diminution or deduction of rent charges or other compensation due
to the Landlord by the Tenant or any person claiming under it,
under any circumstances including but not limited to the complete
or partial destruction of the Building or any inconveniences,
discomfort, interruption of business or otherwise caused by a
taking or destruction of the Premises except as otherwise
specifically provided herein.
Section 22.2 - Declaratory Judgment. Tenant waives its
rights to bring a declaratory judgment action with respect to any
provision of this Lease, or with respect to any notice sent
pursuant to the provisions of this Lease, and expressly agrees
not to seek injunctive relief which would stay, extend or
otherwise toll any of the time limitations or provisions of this
Lease, or any notice sent pursuant thereto. Any breach of this
paragraph shall constitute a breach of substantial obligations of
the tenancy, and shall be grounds for the immediate termination
of this Lease. It is further agreed that in the event injunctive
relief is sought, such relief shall be denied, and the Landlord
shall be entitled to recover the costs of opposing such an
application or action, including its attorneys' fees actually
incurred.
ARTICLE 23
SURRENDER
Section 23.1 - Required Conditions. On the last day or
sooner termination of the Lease, Tenant shall quit and surrender
the Premises broom clean, in good condition and repair, exclusive
of all alterations, additions and improvements which may have
been made in, on, or to the Premises (including, but not limited
to, replacement of any walls which were removed and removal of
any partitions or walls installed), movable furniture or
unattached movable trade fixtures normal wear and tear excepted.
If the Premises are not surrendered as and when aforesaid,
Tenant shall indemnify Landlord against loss or liability
resulting from the delay by Tenant in so surrendering the
Premises including, without limitation, any claims made by any
succeeding occupant founded on such delay. Tenant's obligations
under this section shall survive the expiration or sooner
termination of the term. In the event Tenant remains in
possession of the Premises after the expiration of the term
created hereunder, and without the execution of a new lease,
Tenant, shall be deemed to be occupying the Premises as a Tenant
from month-to-month, at a monthly rental equal to three (3) times
the annual rent payable for the last month of the term or any
renewal thereof.
Section 23.2 - Abandoned Property. Any property left at the
Premises by the Tenant at the expiration of the Term or, when
Tenant abandons the Premises, shall be deemed abandoned.
Landlord may sell or dispose of said property in any manner it
deems appropriate. Any costs of disposal incurred by Landlord
shall be paid by Tenant. This obligation shall survive
termination of the Lease.
ARTICLE 24
MISCELLANEOUS
Section 24.1 - Governing Law. This Lease shall be governed
by and construed in accordance with the laws of the State of
Nevada.
Section 24.2 - No Broker. Landlord and Tenant each
represents and warrants to the other that it has not employed any
realtor, broker or agent in connection with this Lease and the
renting of the Premises hereunder. Landlord and Tenant each
agrees to indemnify the other and hold it harmless from all
liabilities arising from any claim that it incurred a commission,
brokerage or finder's fee including, without limitation,
reasonable counsel fees in connection therewith.
Section 24-3 - No Examination of Deed. In any summary
proceeding commenced by Landlord against Tenant, Tenant waives
any rights it may have to examine the deed for the Premises.
Section 24.4 - No Jury Trial. Anything herein contained to
the contrary notwithstanding, the Tenant agrees and does hereby
waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any
matter whatsoever arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant and/or
Tenant's use or occupancy of the Premises.
Section 24.5 - Counterclaim, Etc. Anything herein contained
to the contrary notwithstanding, in any action or summary
proceeding brought for the collection of any of the rent or
additional rent provided for herein or for the nonpayment thereof
to the Landlord, or for any proceeding or action wherein Tenant
has violated the terms of this Lease, the Tenant hereby waives
and agrees not to introduce any noncompulsory counterclaims which
the Tenant now has or hereafter may have. The Tenant, however,
shall have the right to litigate any such claim in a separate
independent action, and such independent action shall at no time
be joined or consolidated. Moreover, Tenant shall not assert as
an affirmative defense, in any summary proceeding commenced by
the Landlord, any claim which is based on Landlord's alleged
negligence. Subject to the terms of this Lease, Tenant may
assert any negligence claims against Landlord in a plenary action
brought against Landlord.
Section 24.6. Tenant accepts the Premises "as is". Tenant
has carefully inspected the Premises and is fully familiar with
the condition of the Premises.
Section 24.7 - Legal Fees. Tenant shall pay as additional
rent all reasonable legal fees incurred by Landlord in any action
or proceeding to collect rent, additional rent or to enforce any
provision of this Lease and for which Landlord successfully
prosecutes. Such fees shall be payable to Landlord if it is
defending any action commenced by Tenant or in the defense of any
counterclaims brought by Tenant.
Section 24.8 - Sign. Tenant shall only be entitled to erect
a sign at the Premises upon receipt of written approval from the
Landlord, which shall not be unreasonably withheld. If the
Landlord approves the erection of such a sign, Tenant shall be
required to obtain all governmental approvals prior to erecting
the sign. Tenant shall be obligated to maintain the sign and
Tenant will be obligated to remove the sign when it vacates the
Premises.
Section 24.9 - Interest. Interest shall accrue on all rent
and additional rent which has accrued but which is unpaid at the
rate of twenty-four (24%) percent per annum or the highest rate
allowed by law whichever rate shall be less.
Section 24.10. Any breach of the terms of this Lease by
Tenant shall be deemed substantial.
IN WITNESS WHEREOF, the parties have duly executed this
Lease as of the date first above written.
Landlord:DEERSKIN TRADING POST, INC.
By/s/ Martin Fox, Chairman
(title)
Tenant:AMERICA'S SHOPPING MALL, INC.
By/s/ Irwin Schneidmill, Pres.
(title)
CONSULTING AGREEMENT
AGREEMENT made the 21st day of May, 1999 by and
between ADVANCED MEDICAL SCIENCES, INC. (the "Company") a
Virginia corporation having an office at 382 Rte. 59, #310,
Monsey, New York 10952 and DEERSKIN TRADING POST, INC.
("Deerskin"), a Nevada corporation having an office at 2500
Arrowhead Drive, Carson City, Nevada 89706.
W I T N E S S E T H:
WHEREAS, the Company and Deerskin are parties to an
Asset Purchase Agreement dated April 21, 1999 (the "Asset
Purchase Agreement"), pursuant to which Company is purchasing
certain assets and assuming certain liabilities of Deerskin;
WHEREAS, the Company desires to secure the consulting
services of Deerskin and Deerskin desires to provide such
services to the Company in order to facilitate the transactions
contemplated by the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
0.0.1 Term and Performance. For the period beginning
on the date of this Agreement and ending on December 31, 2000,
Deerskin hereby agrees that it will provide to the Company
services (the "Consulting Services") which shall consist of the
advice and services of Martin Fox and Daniel DeStefano (each
hereinafter referred to as a "Consultant", and collectively as
the "Consultants"), reasonably requested by the Company relating
to the transition and management of the Mail Order Business (as
that term is defined in the Asset Purchase Agreement). The
Consultants shall be generally available to the Company during
normal business hours.
0.0.2 Compensation. As compensation for the
performance of the Consulting Services, Deerskin shall receive
Four Thousand Dollars ($4,000.00) on the first day of each
calendar month (prorated with the respect to the first month of
this Agreement if the Closing under the Asset Purchase Agreement
does not take place on the first day of a month) until December
31, 1999. Thereafter, Deerskin shall be compensated at the rate
of $200.00 per hour for each hour (or part thereof) devoted by
either of the Consultants upon the request of the Company. The
Company will pay for the Consulting Services within five days
after being billed therefore by Deerskin.
0.0.3 Expenses. During the term of this Agreement the
Company shall pay or reimburse Deerskin for all reasonable travel
(including automobile), hotel and other business expenses
incurred in the performance of Deerskin's duties, consistent with
Deerskin's past practices. The Company shall make such payment
promptly after submission of appropriate vouchers and other
supporting data.
0.0.4 Offices. From the date hereof until December
31, 1999, the Company shall provide office space to the
Consultants at the Company's facility located in Teterboro, New
Jersey, together with telephone and related services, as needed,
without charge.
0.0.5 Confidential Information. Deerskin shall hold
in strict confidence and shall not use or otherwise publicly
disclose, and shall cause its officers, attorneys, accountants
and other representatives to hold in strict confidence and not to
use or publicly disclose, all information furnished or made
available by the Company which the Company indicates in advance
is confidential, other than information which is or becomes
publicly available or otherwise in the public domain. Upon the
termination of this Agreement, Deerskin shall, upon request,
return to the Company all written information so furnished and
all copies thereof and extracts therefrom.
0.0.6Deerskin Representations. Deerskin
represents and warrants to and agrees with the Company that
neither the execution nor performance by Deerskin of this
Agreement is prohibited by or constitutes or will constitute,
directly or indirectly, a breach or violation of, or will be
adversely affected by, any written or other agreement to which
Deerskin is or has been a party or by which it is bound.
0.0.7Miscellaneous.
(a) Notices. Except as otherwise provided
herein, all notices under this Agreement shall be in writing and
shall be deemed to have been duly given if personally delivered
against receipt or if mailed by first class registered or
certified mail, return receipt requested, addressed to the
Company or to Deerskin at their respective addresses set forth on
the first page of this Agreement, or to such other person or
address as may be designated by like notice hereunder. Any such
notice shall be deemed to have been given on the day delivered,
if personally delivered, or on the second day after the date of
mailing if mailed.
(b) Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, legal
representatives, successors and, in the case of the Company,
assigns, but no other person shall acquire or have any rights
under or by virtue of this Agreement, and the obligations of
Deerskin under this Agreement may not be assigned or delegated.
(c) Governing Law; Severability. This Agreement
shall be governed by and construed and enforced in accordance
with the laws and decisions of the State of New York applicable
to contracts made and to be performed therein without giving
effect to the principles of conflict of laws. The invalidity or
unenforceability of any other provision of this Agreement, or the
application thereof to any person or circumstance, in any
jurisdiction shall in no way impair, affect or prejudice the
balance of this Agreement, which shall remain in full force and
effect, or the application thereof to other persons and
circumstances.
(d)Entire Agreement; Modification; Waiver;
Interpretation. This Agreement contains the entire agreement and
understanding between the parties with respect to the subject
matter hereof and supersedes all prior negotiations and oral
understandings, if any. Neither this Agreement nor any of its
provisions may be modified, amended, waived, discharged or
terminated, in whole or in part, except in writing signed by the
party to be charged. No waiver of any such provision or any
breach of or default under this Agreement shall be deemed or
shall constitute a waiver of any other provision, breach or
default. All pronouns and words used in this Agreement shall be
read in the appropriate number and gender, the masculine,
feminine and neuter shall be interpreted interchangeably and the
singular shall include the plural and vice versa, as the
circumstances may require.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
ADVANCED MEDICAL SCIENCES, INC.
By /s/ Irwin Schneidmill
Irwin Schneidmill, President
DEERSKIN TRADING POST INC.
By /s/ Martin Fox
Martin Fox, Chairman
EXHIBIT 10.6
CONSULTING AGREEMENT
AGREEMENT made the 21st day of May, 1999 by and
between ADVANCED MEDICAL SCIENCES, INC. (the "Company") a
Virginia corporation having an office at 382 Rte. 59, #310,
Monsey, New York 10952 and DEERSKIN TRADING POST, INC.
("Deerskin"), a Nevada corporation having an office at 2500
Arrowhead Drive, Carson City, Nevada 89706.
W I T N E S S E T H:
WHEREAS, the Company and Deerskin are parties to an
Asset Purchase Agreement dated April 21, 1999 (the "Asset
Purchase Agreement"), pursuant to which Company is purchasing
certain assets and assuming certain liabilities of Deerskin;
WHEREAS, the Company desires to secure the consulting
services of Deerskin and Deerskin desires to provide such
services to the Company in order to facilitate the transactions
contemplated by the Asset Purchase Agreement.
NOW THEREFORE, in consideration of the mutual promises
contained herein, the parties agree as follows:
1. Term and Performance. For the period beginning on
the date of this Agreement and ending on December 31, 2000,
Deerskin hereby agrees that it will provide to the Company
services (the "Consulting Services") which shall consist of the
advice and services of Martin Fox and Daniel DeStefano (each
hereinafter referred to as a "Consultant", and collectively as
the "Consultants"), reasonably requested by the Company relating
to the transition and management of the Mail Order Business (as
that term is defined in the Asset Purchase Agreement). The
Consultants shall be generally available to the Company during
normal business hours.
2. Compensation. As compensation for the performance
of the Consulting Services, Deerskin shall receive Four Thousand
Dollars ($4,000.00) on the first day of each calendar month
(prorated with the respect to the first month of this Agreement
if the Closing under the Asset Purchase Agreement does not take
place on the first day of a month) until December 31, 1999.
Thereafter, Deerskin shall be compensated at the rate of $200.00
per hour for each hour (or part thereof) devoted by either of the
Consultants upon the request of the Company. The Company will
pay for the Consulting Services within five days after being
billed therefore by Deerskin.
3. Expenses. During the term of this Agreement the
Company shall pay or reimburse Deerskin for all reasonable travel
(including automobile), hotel and other business expenses
incurred in the performance of Deerskin's duties, consistent with
Deerskin's past practices. The Company shall make such payment
promptly after submission of appropriate vouchers and other
supporting data.
4. Offices. From the date hereof until December 31,
1999, the Company shall provide office space to the Consultants
at the Company's facility located in Teterboro, New Jersey,
together with telephone and related services, as needed, without
charge.
5. Confidential Information. Deerskin shall hold in
strict confidence and shall not use or otherwise publicly
disclose, and shall cause its officers, attorneys, accountants
and other representatives to hold in strict confidence and not to
use or publicly disclose, all information furnished or made
available by the Company which the Company indicates in advance
is confidential, other than information which is or becomes
publicly available or otherwise in the public domain. Upon the
termination of this Agreement, Deerskin shall, upon request,
return to the Company all written information so furnished and
all copies thereof and extracts therefrom.
6.Deerskin Representations. Deerskin represents and
warrants to and agrees with the Company that neither the
execution nor performance by Deerskin of this Agreement is
prohibited by or constitutes or will constitute, directly or
indirectly, a breach or violation of, or will be adversely
affected by, any written or other agreement to which Deerskin is
or has been a party or by which it is bound.
7.Miscellaneous.
(a) Notices. Except as otherwise provided
herein, all notices under this Agreement shall be in writing and
shall be deemed to have been duly given if personally delivered
against receipt or if mailed by first class registered or
certified mail, return receipt requested, addressed to the
Company or to Deerskin at their respective addresses set forth on
the first page of this Agreement, or to such other person or
address as may be designated by like notice hereunder. Any such
notice shall be deemed to have been given on the day delivered,
if personally delivered, or on the second day after the date of
mailing if mailed.
(b) Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by
the parties hereto and their respective heirs, legal
representatives, successors and, in the case of the Company,
assigns, but no other person shall acquire or have any rights
under or by virtue of this Agreement, and the obligations of
Deerskin under this Agreement may not be assigned or delegated.
(c) Governing Law; Severability. This Agreement
shall be governed by and construed and enforced in accordance
with the laws and decisions of the State of New York applicable
to contracts made and to be performed therein without giving
effect to the principles of conflict of laws. The invalidity or
unenforceability of any other provision of this Agreement, or the
application thereof to any person or circumstance, in any
jurisdiction shall in no way impair, affect or prejudice the
balance of this Agreement, which shall remain in full force and
effect, or the application thereof to other persons and
circumstances.
(d)Entire Agreement; Modification; Waiver;
Interpretation. This Agreement contains the entire agreement and
understanding between the parties with respect to the subject
matter hereof and supersedes all prior negotiations and oral
understandings, if any. Neither this Agreement nor any of its
provisions may be modified, amended, waived, discharged or
terminated, in whole or in part, except in writing signed by the
party to be charged. No waiver of any such provision or any
breach of or default under this Agreement shall be deemed or
shall constitute a waiver of any other provision, breach or
default. All pronouns and words used in this Agreement shall be
read in the appropriate number and gender, the masculine,
feminine and neuter shall be interpreted interchangeably and the
singular shall include the plural and vice versa, as the
circumstances may require.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the date first above written.
ADVANCED MEDICAL SCIENCES, INC.
By /s/ Irwin Schneidmill, Pres.
(Title)
DEERSKIN TRADING POST INC.
By /s/ Martin Fox
Martin Fox, President
EXHIBIT 10.7
THIS CONVERTIBLE SUBORDINATED DEBENTURE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION THEREUNDER EXCEPT IN ACCORDANCE
WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT
OF 1933, AS AMENDED.
$1,000,000
INITIO, INC.
CONVERTIBLE SUBORDINATED DEBENTURE DUE MAY 1, 2003
FOR VALUE RECEIVED, the undersigned, INITIO, INC., a
corporation duly organized and existing under the laws of the
State of Nevada (the "Payor"), with its principal business
address at 2500 Arrowhead Drive, Carson City, Nevada 89701,
hereby promises to pay to the order of PIONEER VENTURES
ASSOCIATES LIMITED PARTNERSHIP (the "Payee"), with its principal
business address at 651 Day Hill Road, Windsor, Connecticut
06095, the principal amount of One Million Dollars ($1,000,000)
on May 1, 2003 (the "Maturity Date"), plus interest at the rate
of 8% per annum on the unpaid principal balance, such interest to
be paid on the last day of each April, July, October and January
prior to the Maturity Date and on the Maturity Date together with
the repayment of the principal balance and with all charges,
amounts, sums and interest which have accrued and have not been
paid. All payments to be made pursuant to this Debenture shall
be made in such coin or currency of the United States of America
which, at the time of payment, is legal tender for the payment of
public and private debts. All such payments shall be made by
electronic funds wire transfer in accordance with the wire
transfer instructions submitted by Payee as the first payment
method option; however, Payor may designate that payments may be
made by bank or certified check, at the offices of the Payee set
forth above or such other place as the Payee shall designate in
writing to the Payor. In the event that any installment of
principal or interest on this Debenture is not paid when due,
such overdue principal or interest shall bear interest from
thirty days after the due date until paid (to the extent
permitted by law) at the rate of 15% per annum. In addition, in
the event such overdue principal or interest is not paid for a
period of ten days after the date due, the Payor shall promptly
pay the Payee a late payment fee equal to 5% of such overdue
principal or interest. In the event the rate of interest
hereunder shall exceed the maximum rate permitted by applicable
law, such rate of interest shall automatically and without
further action on the part of any person be reduced to the
maximum rate permitted by applicable law.
1. Redemption. This Debenture may be redeemed on any date after
the date hereof and prior to the Maturity Date, at the option of
the Payor, as a whole at any time or in part from time to time,
upon the notice referred to below, at the following redemption
prices (expressed in percentages of the principal amount thereof
to be redeemed):
If redeemed
during the
12-month periodRedemption
beginning May 1 Price
2000106%
2001104%
2002102%
and thereafter at 100% of the principal amount thereof, together,
in each case, with any and all charges then due to the Payee
hereunder and all accrued interest to the date fixed for
redemption, provided, however, that the Payor may not redeem this
Debenture in part (i) for less than $500,000 in principal amount
and (ii) more frequently than once in any 12-month period. It is
understood and agreed that any redemption shall be applied first
to any and all charges then due to the Payee hereunder, second to
any unpaid interest then due and thereafter to the principal
amount due hereunder. The notice of redemption to the Payee
shall be given not less than 45 nor more than 60 days before the
date fixed for redemption. If this Debenture is to be redeemed
only in part, the Payee shall surrender this Debenture to the
Payor's counsel, Milberg Weiss Bershad Hynes & Lerach LLP, as
escrow agent (the "Escrow Agent"), pursuant to the Escrow
Agreement between the Payor, the Payee and the Escrow Agent,
dated the date hereof (the "Escrow Agreement"), and the Payor
shall execute and deliver to the Escrow Agent in accordance with
the Escrow Agreement a new Debenture in the aggregate principal
amount equal to and in exchange for the unredeemed portion of the
principal of the Debenture so surrendered. Upon notice to Payee
from Payor that the Debenture is to be redeemed in whole or in
part, Payee shall have the right for 45 days to convert any
amount of the Debenture into common stock. Any amounts not so
converted and thereafter not so redeemed shall remain subject
hereto.
2. Subordination.
2.1 Senior Indebtedness. The indebtedness evidenced by this
Debenture shall be subordinate and subject in right of payment,
to the extent and in the manner hereinafter set forth, to the
prior payment in full of all Senior Indebtedness. "Senior
Indebtedness" shall mean (i) indebtedness of the Payor or with
respect to which the Payor is a guarantor, whether outstanding on
the date hereof or hereafter created, to banks, insurance
companies or other lending institutions regularly engaged in the
business of lending money, which is for money borrowed or the
issuance of letters of credit by the Payor or a subsidiary of the
Payor, which is secured ("Senior Institutional Indebtedness"),
and (ii) any deferrals, renewals or extensions of any such Senior
Institutional Indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for such Senior
Institutional Indebtedness, provided, however, that Payor shall
not permit any Senior Institutional Indebtedness secured by a
real property mortgage on its Carson City, Nevada property to
exceed $1,000,000 in the aggregate outstanding at any time. As
used herein, the term "subsidiary" shall mean a corporation at
least 50% of the voting securities, having ordinary voting power
not dependent on a default, of which is owned directly or
indirectly by the Payor or by one or more of its other
subsidiaries or by the Payor in conjunction with one or more of
its other subsidiaries.
2.2 Subordination to Senior Indebtedness. Upon any payment or
distribution of the assets of the Payor upon any dissolution or
winding up or total liquidation or reorganization of the Payor
(whether in bankruptcy, insolvency, reorganization or
receivership proceedings, or upon an assignment for the benefit
of creditors, or any other marshaling of the assets and
liabilities of the Payor, or otherwise):
(a) all Senior Indebtedness shall first be paid in full in cash,
or provision made for such payment, before the holder of this
Debenture shall be entitled to receive any payment or
distributions from or by the Payor on account of the principal of
or interest on the indebtedness evidenced by this Debenture;
(b) any payment or distribution of assets of the Payor of any
kind or character, whether in cash, property or securities, to
which the holder of this Debenture would be entitled except for
the provisions of this subsection shall be paid or delivered by
the Payor or by any trustee in bankruptcy, receiver, assignee for
benefit of creditors, or other liquidating agent making such
payment or distribution, directly to the holders of Senior
Indebtedness or their representative or representatives, or to
such trustee or trustees under any indenture pursuant to which
any instruments evidencing any of such Senior Indebtedness may
have been issued, ratably (or otherwise in accordance with their
relative rights) according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented
by each, to the extent necessary to pay all Senior Indebtedness
in full after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such
Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Payor of any kind or
character, whether in cash, property or securities, shall be
received by the holder of this Debenture before all Senior
Indebtedness is paid in full, or provision made for its payment,
such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders
of such Senior Indebtedness or their representative or
representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any of
such Senior Indebtedness may have been issued ratably (or
otherwise) as aforesaid, for application to the payment of all
Senior Indebtedness remaining unpaid to the extent necessary to
pay all such Senior Indebtedness after giving effect to any
concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness.
3. Subordinate Position. Subject to the payment in full of all
Senior Indebtedness, the holder of this Debenture shall be
subordinated only to the rights of the holders of Senior
Indebtedness to receive payments or distributions of assets of
the Payor made on the Senior Indebtedness until the principal of
and interest on this Debenture shall be paid in full, and for
purposes of such subordination, no such payments or distributions
to the holders of Senior Indebtedness of cash, property or
securities, which otherwise would be payable or distributable to
the holder of this Debenture, shall as between the Payor, its
creditors other than the holders of Senior Indebtedness, and the
holder of this Debenture, be deemed to be a payment by the Payor
to or on account of this Debenture, it being understood that the
provisions of this section are intended solely for the purpose of
defining the relative rights only of the holder of this
Debenture, on the one hand, and only the holders of Senior
Indebtedness, on the other hand.
4. Non-Impairment.
4.1 Other Creditors. Nothing contained in this Debenture is
intended to or shall impair the obligation of the Payor, which is
absolute and unconditional, to pay to the holder of this
Debenture the principal of and interest on this Debenture, as and
when the same shall become due and payable in accordance with its
terms. Nor shall anything herein or therein prevent the holder
of this Debenture from exercising all remedies otherwise
permitted by applicable law upon the occurrence of an Event of
Default (as that term is hereinafter defined).
4.2 Notice to Senior Institutional Indebtedness. So long as
Senior Indebtedness remains outstanding, the Payee shall not
commence litigation against Payor to enforce its remedies without
first providing to the holder of the Senior Indebtedness written
notice; such notice shall be effected by forwarding such notice
to the holder of the Senior Indebtedness in care of the Payor at
least 45 days prior to such commencement of litigation.
5. Conversion.
5.1 Right to Convert. The Payee shall have the right, one or
more times at its option, at any time and from time to time, to
convert the principal amount of this Debenture, or any portion of
such principal which is at least Two Hundred Thousand Dollars
($200,000), into that number of fully-paid and nonassessable
shares of Common Stock of the Payor, obtained by dividing the
principal amount of the Debenture or portion thereof surrendered
for conversion by the conversion price equal to the greater of
(i) $2.50 per share or (ii) the book value per share of the
Payor's Common Stock as determined by its certified public
accountants after giving effect to the transactions contemplated
by the Asset Purchase Agreement dated April 21, 1999 between the
Payor and Advanced Medical Sciences, Inc. ("AMDS") (the "Asset
Agreement"); provided, however, that in no event shall the
Conversion Price exceed $3.00 per share. The Conversion Price
shall be subject to adjustment as hereinafter provided and
conversions shall be effected by surrender of this Debenture in
the manner provided in Section 5.2.
5.2 Exercise of Conversion Privilege; Issuance of Common Stock
on Conversion; No Adjustment for Interest or Dividends. In order
to exercise the conversion privilege, the Payee shall surrender
this Debenture to the Escrow Agent in accordance with the Escrow
Agreement and shall give written notice of conversion in the form
provided herein to the Payor that the Payee elects to convert
this Debenture or the portion thereof specified in said notice.
As promptly as practicable (but not more than 10 days) after the
surrender of this Debenture and the receipt of such notice as
aforesaid, the Payor shall issue and shall deliver to the Escrow
Agent in accordance with the Escrow Agreement a certificate or
certificates for the number of full shares issuable upon the
conversion of such Debenture or portion thereof in accordance
with the provisions of this Debenture and a check or cash in
respect of any fractional interest in respect of a share of
Common Stock arising upon such conversion as provided in Section
5.3 of this Debenture. In each case this Debenture shall be
surrendered for partial conversion, the Payor shall also promptly
execute and deliver to the Escrow Agent in accordance with the
Escrow Agreement a new Debenture or Debentures in an aggregate
principal amount equal to the unconverted portions of the
surrendered Debenture.
Each conversion shall be deemed to have been effected on the date
on which this Debenture shall have been surrendered and such
notice shall have been received by the Payor, as aforesaid, and
the Payee shall be deemed to have become on said date the holder
of record of the shares issuable upon such conversion; provided,
however, that any such surrender on any date when the stock
transfer books of the Payor shall be closed shall constitute the
Payee as the record holder thereof for all purposes on the next
succeeding day on which such stock transfer books are open.
No adjustment of the number of shares to be issued upon
conversion shall be made for interest accrued on this Debenture
prior to the date it is surrendered or for dividends on any
shares issued upon the conversion of this Debenture prior to the
date it is surrendered. However, all accrued interest shall be
payable by wire transfer, or in cash or cash equivalents.
5.3 Cash Payments in Lieu of Fractional Shares. No fractional
shares of Common Stock or scrip representing fractional shares
shall be issued upon conversion of Debentures. If any fractional
shares of stock would be issuable upon the conversion of this
Debenture, the Payor shall make a payout therefor in cash at the
current market value thereof. The current market value of a
share of Common Stock shall be the closing price of the day
(which is not a legal holiday) immediately preceding the day on
which this Debenture (or specified portions thereof) is deemed to
have been converted and such closing price shall be determined as
provided in subsection (c) of Section 5.4.
5.4 Adjustment of Conversion Price. The conversion price shall
be adjusted from time to time as follows:
(a) Dividends. In case the Payor shall on any
one or more occasions after the date of this Debenture
(i) pay a dividend or make a distribution in shares of
its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide its
outstanding Common Stock, or (iii) combine its
outstanding Common Stock into a smaller number of
shares, the conversion price in effect immediately
prior thereto shall be adjusted so that the holder of
any Debenture thereafter surrendered for conversion
shall be entitled to receive the number of shares of
capital stock of the Payor which he would have owned or
have been entitled to receive after the happening of
any of the events described above had this Debenture
been converted immediately prior to the happening of
such event. An adjustment made pursuant to this
subsection (a) shall become effective immediately after
the record date.
(b) Other Distributions. The purpose of this
subsection is to provide a means to reduce the Payee's
conversion price in the event the assets of the Payor
are materially diluted through distributions to the
Common Stockholders and/or any other security holder of
Payor. In case the Payor shall distribute to all
holders of its Common Stock evidence of its
indebtedness or assets (excluding cash dividends or
distributions paid from retained earnings of the Payor)
or subscription rights or warrants, then in each such
case the conversion price shall be adjusted so that the
same shall equal the price determined by multiplying
the conversion price in effect immediately prior to the
date of such distribution by a fraction of which the
numerator shall be the current market price per share
(as defined in subsection (c) of this Section 5.4) of
the Common Stock on the record date as set forth below
less the then fair market value (as determined by the
Board of Directors, whose determination shall be
conclusive) of the portion of the assets or evidences
of indebtedness so distributed or of such rights or
warrants applicable to one (1) share of Common Stock,
and the denominator shall be the current market price
per share (as defined in subsection (c) below) of the
Common Stock. Such adjustment shall become effective
immediately after the record date for the determination
of stockholders entitled to receive such distribution.
(c) Conversion Price Adjustment. For the purpose
of any computation under this Section 5.4, the current
market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing
prices for the thirty consecutive trading days
commencing thirty-five trading days before the day in
question. The closing price for each day shall be (i)
the last sale price of the Common Stock on the National
Association of Securities Dealers, Inc., Automated
Quotation System or any other automated quotation
system or, if no sale occurred on such date, the
closing bid price of the Common Stock on such quotation
system on such date or (ii) if the Common Stock shall
be listed or admitted for trading on the New York or
American Stock Exchange or any successor exchange, the
last sale price, or if no sale occurred on such date,
the closing bid price of the Common Stock on such
exchange, or (iii) if the Common Stock shall not be
included in any automated quotation system or listed on
any such exchange, the closing bid quotation for Common
Stock as reported by the National Quotation Bureau
Incorporated if at least two securities dealers have
inserted both bid and asked quotations for Common Stock
on at least five of the ten preceding days. If none of
the conditions set forth above is met, the closing
price of Common Stock on any day or the average of such
closing prices for any period shall be the fair market
value of Common Stock as determined by a member firm of
the New York Stock Exchange, Inc. selected by the Board
of Directors, provided such firm shall be reasonably
acceptable to Payee.
(d) No Nominal Adjustments. No adjustment in the
conversion price shall be required unless such
adjustment would require an increase or decrease of at
least two percent (2%) in such price; provided,
however, that any adjustments which by reason of this
subsection (d) are not required to be made shall be
carried forward and taken into account in any
subsequent adjustment. All calculations under this
Section shall be made to the nearest cent or to the
nearest one-hundredth (1/100th) of a share, as the case
may be.
(e) Conversion Price Adjustment Notice. Whenever
the conversion price is adjusted, as herein provided,
the Payor shall prepare a notice of such adjustment of
the conversion price setting forth the adjusted
conversion price and the date on which such adjustment
becomes effective and shall mail such notice of such
adjustment of the conversion price to the Payee.
5.5 Effect of Reclassification, Consolidation, Merger or Sale.
If any of the following events occur, namely (i) any
reclassification or change of outstanding shares of Common Stock
issuable upon conversion of this Debenture (other than a change
in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or
combination), (ii) any consolidation or merger to which the Payor
is a party other than a consolidation or merger in which the
Payor is the continuing corporation and which does not result in
any reclassification of, or change (other than a change in par
value, or from par value to no par value, or from no par value to
par value or as a result of a subdivision or combination) in,
outstanding shares of Common Stock, or (iii) any sale or
conveyance of the properties and assets of the Payor as, or
substantially as, an entirety to any other corporation; then this
Debenture shall be convertible into the kind and amount of shares
of stock and other securities or property receivable upon such
reclassification, change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock
issuable upon conversion of this Debenture immediately prior to
such reclassification, change, consolidation, merger, sale or
conveyance. The sale of certain assets of Payor to AMDS pursuant
to the Asset Agreement shall not be deemed a sale governed by
this Section 5.5. The above provisions of this Section shall
similarly apply to successive reclassifications, consolidations,
mergers and sales.
5.6 Reservation of Shares; Shares to be Fully Paid. As of the
date hereof, the Payor has reserved, free from preemptive rights,
out of its authorized but unissued shares, or out of shares held
in its treasury, sufficient shares to provide for the conversion
of this Debenture. Before taking any action which would cause an
adjustment reducing the conversion price below the then par
value, if any, of the shares of Common Stock issuable upon
conversion of this Debenture, the Payor shall promptly take all
corporate action which may be necessary in order that the Payor
may validly and legally issue shares of such Common Stock at such
adjusted conversion price. The Payor covenants that all shares
of Common Stock which may be issued upon conversion of Debentures
will upon issue be fully paid and nonassessable.
5.7 Notice to Payee Prior to Certain Actions. In case:
(a)the Payor shall declare a dividend (or any
other distribution) on its Common Stock (other than in
cash out of retained earnings); or
(b)the Payor shall authorize the granting to the
holders of its Common Stock of rights or warrants to
subscribe for or purchase any share of any class or any
other rights or warrants; or
(c)of any reclassification of the Common Stock
of the Payor (other than a subdivision or combination
of its outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no
par value to par value) or, of any consolidation or
merger to which the Payor is a party and for which
approval of any shareholders of the Payor is required,
or of the sale or transfer of all or substantially all
of the assets of the Payor; or
(d)of the voluntary or involuntary dissolution,
liquidation or winding up of the Payor;
the Payor shall give notice to the Payee in accordance with
Section 10.4 hereof, as promptly as possible but in any event at
least thirty days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to
be taken for the purpose of such dividend, distribution or rights
or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, or
(y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
to exchange their Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding up. Failure
to give such notice, or any defect therein, shall not affect the
legality or validity of such dividend, distribution,
reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up; without limiting the
definition of a breach of this Debenture, such failure shall
constitute a breach hereunder.
6. Registration Rights.
6.1 Grant of Piggyback Right. So long as there shall be
outstanding any principal or interest under this Debenture or
Payee shall hold any shares of Common Stock issuable to Payee
pursuant to this Debenture ("Conversion Shares"), Payor shall
send written notice to Payee in accordance with Section 10.4
hereof at least one month prior to the filing by Payor of any
registration statement filed by Payor on Form S-1, Form S-2,
Form S-3 or Form SB-2, or any successor form, covering the sale
of common stock, and shall give to Payee the right to have
included in any such registration statement any Conversion
Shares. In order to have the Conversion Shares included in such
registration statement, Payee must give written notice to Payor
within 15 days after the date of Payee's receipt of written
notice from Payor indicating the number of Conversion Shares
requested to be included for sale in such registration statement.
Upon receipt of such notice from Payee, Payor shall use its best
efforts to cause all of the Common Stock specified in such notice
to be registered under the Securities Act of 1933, as amended
(the "Securities Act"). The registration expenses in connection
with such registration statement shall be paid by Payor
(exclusive of underwriter's spread and commissions with respect
to stock sold by Payee or fees and disbursements of Payee's
counsel). If the registration statement to be filed by Payor
pertains to an underwritten public offering of shares of common
stock to be sold solely for the account of Payor and, if in the
judgment of the prospective managing or lead underwriter for
Payor as set forth in a letter to Payor, the registration of the
Conversion Shares would materially adversely affect the proposed
public offering by Payor, Payor shall not be obligated to
register such number of Conversion Shares in such registration
statement for inclusion in such public offering as such
underwriter shall have identified as having, in its judgment,
such material adverse effect.
6.2 Demand Registration Right. If at any time while there shall
be outstanding any principal or interest under this Debenture or
if at any time while Payee shall hold Conversion Shares, the
Payee shall give notice to the Payor to the effect that the Payee
desires to register under the Securities Act any Conversion
Shares, under such circumstances that a public distribution
(within the meaning of the Securities Act)of any such Conversion
Shares will be involved, then the Payor will as promptly as
practicable after receipt of such notice, but not later than
ninety (90) days after receipt of such notice, at the Payee's
option, file a registration statement pursuant to the Securities
Act to the end that the Conversion Shares may be publicly sold
under the Securities Act as promptly as practicable thereafter
and the Payor will use its best efforts to cause such
registration to become and remain effective as provided herein
(including the taking of such steps as are reasonably necessary
to obtain the removal of any stop order); provided, that the
Payee shall furnish the Payor with appropriate information in
connection therewith as the Payor may reasonably request; and
provided that the Payor shall not be required to file such a
registration statement pursuant to this Section 6.2 on more than
one occasion; and provided, further, that the registration rights
of the Payee under this Section 6.2 shall be subject to the
"piggyback" registration rights of other holders of securities of
the Payor to include such securities in any registration
statement filed pursuant to this Section 6.2; however, all costs
and expenses of this Demand Registration shall then be shared
proportionately with any other parties desiring to piggyback onto
Payee's Demand Registration. The exercise by the Payee of its
demand registration right under this Section 6.2 shall be deemed
to be an irrevocable election to convert this Debenture to the
extent of the Conversion Shares which the Payee has elected to
have registered (but no more) no later than the effective date of
the registration statement required hereunder. The Payee shall
bear the entire cost and expense of any registration of
Conversion Shares initiated by it under this Section 6.2,
provided, however, that if the Payor registers any securities
within six months of the effective date of the Demand
Registration, then Payor shall reimburse Payee its actual costs
incurred in registering its securities pursuant to this Demand
Registration Right. The Payor shall only be required to grant a
demand registration as contemplated by this Section 6.2 on one
occasion, it being understood and agreed that such demand
registration may apply to this Debenture or this Debenture and
the Second Subordinated Debenture (as that term is defined in the
Debenture Commitment Agreement, between Payor and Payee, dated
the date hereof (the "Debenture Commitment Agreement")) or only
the Second Subordinated Debenture but in no event shall the Payor
be required to undertake such demand registration more than once.
6.3 Undertaking to File Documents. Payee shall execute, deliver
and/or file with or supply to Payor, the Securities and Exchange
Commission and/or any state or other regulatory authority such
information, documents, representations, undertakings and/or
agreements necessary to carry out the provisions of the
registration covenants contained herein and/or to effect the
registration or qualification of the Conversion Shares under the
Securities Act and/or any of the laws and regulations of any
state or governmental instrumentality.
6.4 Commitment to Keep Effective. Payor will be obligated to
keep any registration statement filed by it hereunder and any
registration or qualification pursuant to Section 6.5 below
effective under the Securities Act for a period of six months
after the actual effective date of such registration statement
and to prepare and file such supplements and amendments which may
be necessary to maintain an effective registration statement for
such period. Payor will furnish to Payee such number of
prospectuses and other appropriate documents as each Payee may
from time to time reasonably request.
6.5 Blue Sky Registration. Payor will use its best efforts to
register or qualify the shares of Common Stock covered by any
registration statement under the Securities Act which includes
Conversion Shares to be sold on behalf of Payee pursuant hereto
under such securities or blue sky laws in such jurisdictions
within the United States as Payee may reasonably request;
provided, however, that Payor reserves the right, in its sole
discretion, not to register or qualify such shares of Common
Stock in any jurisdiction in which such shares of Common Stock do
not satisfy the requirements of such jurisdiction or in which
Payor would be required to qualify as a foreign corporation to do
business in such jurisdiction and is not so qualified therein or
is required to file any general consent to service of process.
6.6 Deregistration. In the event Payor has not sold all of the
Conversion Shares included in the registration statement or prior
to the expiration of the six-month period specified above, Payee
hereby agrees that Payor may deregister by post-effective
amendment any Conversion Shares of Payee covered by the
registration statement but not sold on or prior to such date.
Payor agrees that it will notify Payee of the filing and
effective date of each such post-effective amendment.
6.7 Right to Delay. The Payor shall have the right at any time
after it shall have received written notice pursuant to
Section 6.1 to elect not to file or to delay any such proposed
registration statement, or to withdraw the same after the filing
but prior to the effective date thereof. In addition, the Payor
may delay the filing of any registration statement requested
pursuant to Section 6.2 hereof by not more than 120 days if the
Payor, prior to the time it would otherwise have been required to
file such registration statement, determines in good faith that
the filing of the registration statement would require the
disclosure of non-public material information that, in its
judgment, would be detrimental to the Payor if so disclosed or
would otherwise adversely affect a financing, acquisition,
disposition, merger or other material transaction.
6.8 Selection of Underwriters. If a registration pursuant to
Section 6.1 hereof involves an underwritten offering, the Payor
shall have the right to select the investment banker or
investment bankers and manager or managers that will serve as
underwriter with respect to the underwritten offering. The Payee
may not participate in any underwritten offering under this
Debenture unless the Payee completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwritten offering, in each case, in the form and upon terms
reasonably acceptable to the Payor and the underwriters. The
requested registration pursuant to Section 6.2 hereof shall not
involve an underwritten offering unless the Payor shall first
give its written approval of each underwriter that participates
in the offering, such approval not to be unreasonably withheld.
6.9 Principal Shareholders. The Payor will not file a
registration statement on behalf of any Principal Shareholder (as
that term is defined in the Voting Agreement between the Payee
and certain shareholders of the Payor, dated the date hereof) as
selling shareholders without the prior written approval of the
Payee, which approval shall not be unreasonably withheld.
7. Acceleration. In the event that (i) the Payor shall default
in the due and punctual payment of any installment of interest on
this Debenture when and as the same shall become due and payable
and such default shall continue for fifteen days after written
notice from the Payee to the Payor or (ii) the Payor shall fail
to pay any principal or interest on any of the Senior
Indebtedness when due, so that the holder of such Senior
Indebtedness declares such Senior Indebtedness due prior to its
stated maturity because of the Payor's default thereunder, which
default shall continue for a period of thirty days, provided,
however, that the Payor's failure to make such payment shall not
be deemed a default hereunder if same is being contested in good
faith with a valid defense, and so long as the Payor is
vigorously defending or prosecuting a litigation commenced within
such thirty-day period; or (iii) the ratio of Senior Indebtedness
to Total Stockholders' Equity as set forth in any of the Payor's
annual reports on Form 10-KSB or quarterly reports on Form 10-QSB
shall be greater than 2:1 at the end of any fiscal quarter and
shall remain so for a period of thirty days; or (iv) the Payor
shall commence a voluntary case concerning itself under Title 11
of the United States Code entitled "Bankruptcy" as now or
hereafter in effect, or any successor thereto (the "Bankruptcy
Code"); or (v) in the event of the appointment of a custodian (as
defined in the Bankruptcy Code) for all or substantially all of
the property of the Payor; or (vi) in the event the Payor shall
commence any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction,
whether now or hereafter in effect, relating to the Payor or in
the event of the commencement against the Payor of any such
proceeding which remains undismissed for a period of 90 days; or
(vii) if the Payor is adjudicated insolvent or bankrupt; or
(viii) if any order of relief or other order approving any such
case or proceeding is entered; or (ix) if the Payor shall allow
any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or
unstayed for a period of 90 days; or (x) if the Payor shall make
a general assignment for the benefit of creditors; or (xi) if the
Payor shall cease doing business as a going concern; or (xii) if
there shall be any default or breach of the Debenture Commitment
Agreement on the part of the Payor, the Escrow Agreement on the
part of the Payor, this Debenture, or the Voting Agreement
between the Payee and the Principal Shareholders (as that term is
therein defined), dated the date hereof; or (xiii) if the Payor
shall take action for the purpose of effecting any of the
foregoing; (the foregoing being hereinafter collectively referred
to as "Events of Default") then, in any such Event of Default and
at any time thereafter while such Event of Default is continuing,
the Payee may, in addition to any other rights and remedies, the
Payee may have hereunder or otherwise, including, without
limitation, the right to an increased rate of interest and to
late payment fees as set forth on the first page of this
Debenture, declare this Debenture to be due and payable without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived.
8. Waivers.
8.1 In General. No forbearance, indulgence, delay or failure to
exercise any right or remedy with respect to this Debenture shall
operate as a waiver nor as an acquiescence in any default. No
single or partial exercise of any right or remedy shall preclude
any other or further exercise thereof or any exercise of any
other right or remedy.
8.2 Presentment, Etc.; Jury Trial Waived. The Payor hereby
waives presentment, demand, notice of dishonor, protest and
notice of protest. The Payor hereby waives all rights to a trial
by jury in any litigation arising out of or in connection with
this Debenture.
8.3 Modifications. This Debenture may not be modified or
discharged orally, but only in writing duly executed by the Payee
and the Payor.
9. Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Debenture made by the Payor shall
bind its successors and assigns, whether so expressed or not.
10. Miscellaneous.
10.1 Headings. The headings of the various paragraphs of this
Debenture are for convenience of reference only and shall in no
way modify any of the terms or provisions of this Debenture.
10.2 Governing Law. This Debenture and the obligations of the
Payor and the rights of the Payee shall be governed by and
construed in accordance with the laws of the State of Nevada
applicable to instruments made and to be performed entirely
within such State.
10.3 Collection Costs. The Payor shall pay all costs and
expenses incurred by the Payee to enforce its rights under this
Debenture, including reasonable counsel fees and other reasonable
out-of-pocket expenses, provided, however, that the foregoing
shall not relate to the issuance of routine notices sent no more
frequently than once in any twelve-month period.
10.4 Notices. All notices, requests, demands and other
communications required or permitted under this Debenture shall
be in writing and shall be deemed to have been duly given by the
Payor to the Payee if delivered by overnight delivery service and
telecopier, addressed to the Payee at its address set forth or
referred to on the first page of this Debenture, with a copy to
Kenneth Lerman, Esq., 651 Day Hill Road, Windsor, Connecticut
06095 (telecopier no. (860) 285 - 0139), or to such other person
or address as may be designated by the Payee. The current
telecopier number of the Payee is (860) 285 - 0139.
IN WITNESS WHEREOF, INITIO, INC. has caused this Debenture to be
signed in its corporate name by a duly authorized officer and to
be dated as of the day and year written below.
Dated: May 1, 1999
INITIO, INC.
By /s/ Martin Fox, President
(Title)
I:\INIT\80039HOM.001
FORM OF CONVERSION NOTICE
TO: INITIO, INC.
The undersigned owner of this Debenture hereby
irrevocably exercises the option to convert this Debenture, or
portion hereof (which is at least $200,000) below designated,
into shares of Common Stock of Initio, Inc. in accordance with
the terms of this Debenture and directs that the shares issuable
and deliverable upon the conversion, together with any check in
payment for fractional shares and any Debentures representing any
unconverted principal amount hereof, be issued and delivered to
the registered holder hereof.
Dated:
PIONEER VENTURES ASSOCIATES
LIMITED PARTNERSHIP
By: Ventures Management Partners,
LLC, Its General Partner
By: Pioneer Ventures Corp.,
Its Managing Member
By
(Title)
Address:
Taxpayer Identification
No.:
Amount to be Converted:
- - 32 -
- - 8 -
- - 4 -
- - 1 -
- - 2 -
- - 15 -
- - 15 -
- - 21 -
- - 5 -
- - 5 -
- - 17 -
