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FIBERCHEM, INC.
12% SENIOR CONVERTIBLE NOTE
1. PROMISE TO PAY.
FiberChem, Inc., a Delaware corporation (hereinafter, the "Issuer,"
which term includes any successor corporation permitted hereunder), for value
received, hereby promises to pay RemoteData Partners or its successors or
assignees ("Lender") upon presentation and surrender of this 12% Senior
Convertible Note the principal sum of Six Hundred and Fifty Thousand United
States Dollars (U.S. $650,000) (the "Principal Amount") on July 26, 2002, and,
to pay interest hereon from the date hereof, semi-annually in arrears on
December 1 and June 1 in each year, commencing December 1, 2000, at the rate of
12% per annum. Except as is expressly provided for herein, the Company shall not
have the right to prepay the indebtedness represented by this Note.
2. STATUS
This Note is a direct, unconditional and unsecured obligation of the
Company and ranks and will rank junior to certain Secured Senior Indebtedness,
and PARI PASSU, with any Designated Indebtedness. This Note will rank senior to
all other future Indebtedness of the Company, except to the extent of Permitted
Liens securing Indebtedness. Lender will not be secured by any assets or
properties of the Company. "Designated Senior Indebtedness", "Permitted
Subsidiary Indebtedness", "Permitted Liens" and "Secured Senior Indebtedness"
are defined in Section 14 below.
3. INTEREST
The indebtedness reflected by this Note will bear interest from (and
including) the Issue Date, at the rate of 12% per annum, payable in cash
semi-annually in arrears on December 1 and June 1, in each year (each an
"Interest Payment Date"), the first such payment to be made on December 1, 2000,
in respect of the period from (and including) the Issue Date to (but excluding)
December 1, 2000. Interest shall accrue on amounts in default at the Default
Rate.
This Note will cease to bear interest when paid in full, or where the
Conversion Right shall have been exercised by the Lender or the Company elects
to cause a Mandatory Conversion, from the Conversion Date, unless as to any of
the foregoing upon due presentation, payment of the principal and interest in
respect of the Note is improperly withheld or refused, the Conversion Shares are
not timely issued or unless Default is otherwise made in respect of such
payment, in which event interest shall continue to accrue at the Default Rate.
When interest is required to be calculated in respect of a period of
less than a full year, it shall be calculated on the basis of a 360 day year
consisting of twelve (12) months of thirty (30) days each and, in the case of an
incomplete month, the number of days elapsed.
4. PAYMENTS
Time is of the essence in this Note. All payments of principal and
interest shall be made in U.S. dollars. Issuer shall make each payment under
this Note not later than noon (New York time) on the day when due to the Lender
in immediately available funds. All payments by Issuer hereunder shall be made
without any offset, abatement, withholding, or reduction. All payments due to
the Lender shall be wired to such accounts as may be designated from time to
time by the Lender.
5. CONVERSION
5.1 CONVERSION PERIOD, CONVERSION RATIO AND PRICE
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5.1.1 Lender shall have the right, subject as provided herein and to
any applicable laws and regulations, to require the Company to convert this Note
at its principal amount into shares (the "Conversion Shares") of common stock of
the Company, U.S. $.0001 par value per share ("Common Stock") at any time during
the Conversion Period referred to below. Upon conversion, the right of Lender to
repayment of the principal amount of the Note shall be extinguished and
released, and in consideration and in exchange therefor the Company shall allot
and issue Conversion Shares credited as paid up in full as provided in this
Section 5. Subject to and upon compliance with the provisions of this Note, the
Conversion Right may be exercised, at any time after the Issue Date up to the
close of business on the day two Business Days prior to the Maturity Date (but
in no event thereafter)(the "Conversion Period").
The number of Conversion Shares to be issued on conversion of this Note
will be determined by dividing the principal amount of the Note by the
Conversion Price (as defined below) in effect on the Conversion Date, with the
result being rounded down to the nearest whole number. In addition, upon the
conversion of this Note, Lender will also be entitled to receive an additional
number of Conversion Shares calculated in accordance with Section 5.7. Fractions
of Conversion Shares will not be issued on conversion and no cash adjustments
will be made in respect thereof.
5.1.2 The price at which Conversion Shares will be issued upon
conversion (the "Conversion Price") will initially be the lesser of (i) the
Maximum Conversion Price or (ii) the Adjusted Market Price, but such Conversion
Price will be subject to adjustment in the manner provided in Sections 5.3 and
5.6. The "Adjusted Market Price" shall equal 92% of the average of the Market
Price of the Common Stock for the 20 consecutive Stock Exchange Business Days
ending two Stock Exchange Business Days prior to the Conversion Date. "Market
Price" shall be the closing bid price on the OTC for the Common Stock on the
relevant Stock Exchange Business Day; provided, however, if the Common Stock is
traded on an Alternative Stock Exchange then the "Market Price" shall be the
closing bid price of the Common Stock on such Alternative Stock Exchange on any
Stock Exchange Business Day. Notice of any adjustment of the Conversion Price
shall be given in accordance with Section 13.4 within ten (10) Business Days of
such adjustment.
5.1.3 If the Company shall default in making payment in full in
respect of this Note which shall have been called for redemption prior to the
Maturity Date, then from the Redemption Date, interest shall continue to accrue
this Note at the Default Rate and the Conversion Right will continue to be
exercisable up to, and including the close of business (at the place where the
Note is deposited in connection with the exercise of the Conversion Right) on
the date upon which the full amount of the monies payable in respect of Note has
been duly received by the Lender.
5.2 PROCEDURE FOR CONVERSION
5.2.1 To exercise the Conversion Right attaching to this Note,
Lender must complete, execute and deliver at his own expense to the Company, a
notice of conversion (a "Conversion Notice") in the form attached hereto as
Exhibit A, together with any amount, if any, to be paid by the Lender pursuant
to this Section 5.2.1. The Conversion Date must fall at a time when the
Conversion Right is expressed to be exercisable and will be deemed to be the
date of the delivery of such Conversion Notice and, if applicable, any payment
to be made or indemnity given under this Note in connection with the exercise of
such Conversion Right. A Conversion Notice once delivered shall be irrevocable.
Upon the conversion of this Note into Conversion Shares, the Company
shall pay any taxes and capital, stamp, issue and registration duties arising on
conversion and duties payable in the U.S. or, if applicable, in the place of any
Alternative Stock Exchange, as the case may be, and the Lender must pay any
taxes and capital, stamp, issue and registration duties arising on conversion
and duties payable to an entity located outside the U.S. or in the place of any
Alternative Stock Exchange outside the U.S. The foregoing shall not apply to
taxes in connection with any transfer of ownership of this Note.
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5.2.2 As soon as practicable, and in any event not later than three
(3) Stock Exchange Business Days after either the Company's receipt of a
completed Conversion Notice or, if conversion is occurring as a result of a
mandatory conversion, the Conversion Date, the Company will cause the person or
persons designated for that purpose in the Conversion Notice or otherwise to be
registered as holder(s) of the relevant number of Conversion Shares, which will
include any Conversion Shares issued in accordance with Section 5.7, and will
make a certificate or certificates for the relevant Conversion Shares available
for collection at the Company's principal office which is currently in Las
Vegas, Nevada or at the Company's transfer agent in Denver, Colorado, or, if so
requested in the relevant Conversion Notice, will deliver such certificate or
certificates by courier to the person at the place specified in the Conversion
Notice, at the risk of Lender, together with any other securities, property or
cash required to be delivered upon conversion and such assignments and other
documents (if any) as may be required by law to effect the transfer thereof. If
the Company fails to timely satisfy its obligations as provided in this Section
5.2.2, then within two Stock Exchange Business Days after the expiration of such
3 day period, the Company shall pay to Lender a cash payment equal to 1% of the
principal amount of this Note. An additional 1% cash payment will be paid for
each additional three (3) day period commencing after the expiration of the
relevant 3 day period during which the Company has not complied with its
obligations as provided in this Section 5.2.2.
5.2.3 The person or persons specified for that purpose will be
deemed for all purposes to be the holder of record of the number of Conversion
Shares issuable upon conversion with effect from the Conversion Date. The
Conversion Shares issued upon conversion of this Note will in all respects rank
PARI PASSU with the issued and outstanding shares of Common Stock issued on the
relevant Conversion Date except for any right excluded by mandatory provisions
of applicable law. A holder of Conversion Shares issued on conversion of this
Note shall not be entitled to any shareholder rights for any record date which
precedes the relevant Conversion Date.
5.2.4 Subject to Section 3, all accrued and unpaid interest due upon
the conversion of this Note (whether as a result of an election by Lender, or
the Company pursuant to its right to cause Mandatory Conversion) shall be paid
to or on behalf of Lender by the Company not later than three (3) calendar days
after the relevant Conversion Date by a U.S. dollar cheque, or by transfer to a
U.S. dollar account maintained by the payee in accordance with instructions
given by Lender.
5.2.5 The Conversion Shares shall be traded on the OTC.
5.3 ADJUSTMENTS IN CONVERSION PRICE
As provided in Section 10 below, the Conversion Price is subject to
adjustment upon the occurrence of certain events, including: (i) stock dividends
and certain other distributions; (ii) the subdivision, combination or
reclassification of outstanding shares of Common Stock; (iii) the issuance to
all stockholders of the Company of rights or warrants to acquire shares of
Common Stock at a price less than the Market Price for the Common Stock; (iv)
the issuance of Common Stock at a price less than the Market Price, other than
any issuances pursuant to the conversion of issued and outstanding preferred
stock (including conversions related to FiberChem's outstanding preferred stock
even if the conversion ratio of such stock is increased from 10 to 1 to 75 to
1), and the conversion or exercise of all other currently outstanding options,
warrants, or outstanding indebtedness of the Company, or any warrants issued
pursuant to the Offering or in connection with any plan adopted by the Company
for the purchase of stock in connection with any employee compensation or
benefit plan of the Company or any of its Subsidiaries, whether now in effect or
hereafter created or amended; and (v) the distribution to all holders of Common
Stock or debt securities of the Company or of assets or rights or warrants to
purchase securities of the Company (excluding those rights and warrants referred
to above and cash dividends or distributions from current or retained earnings).
The Company shall cause written notice of any adjustment to the Conversion Price
pursuant to this Section 5.3 or Section 10 to be given to the Lender in
accordance with Section 13.4.
No adjustment will be made pursuant to this Section 5.3 or Section 10
where such adjustment would be less than five percent (5%) of the Conversion
Price then in effect. Any adjustment not so made
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will be carried forward and taken into account in any subsequent adjustment. On
any adjustment, the resultant Conversion Price, if not an integral multiple of
one cent shall be rounded up to the nearest one cent.
The Conversion Price may not be reduced so that, on conversion of this
Note, Conversion Shares would be issued for an amount less than their current
par value.
Where more than one event which gives or may give rise to an adjustment
to the Conversion Price occurs within such a short period of time that in the
reasonable opinion of the Company's Board of Directors the foregoing provisions
would need to be operated subject to some modification in order to give the
intended result, such modification shall be made to the operation of the
foregoing provisions as may be advised by the Board of Directors to be in their
reasonable opinion appropriate in order to give such intended result.
5.4 CONSOLIDATION, AMALGAMATION OR MERGER
In the case of any consolidation, amalgamation or merger of the Company
with any other Person (other than a consolidation, amalgamation or merger in
which the Company is the continuing Person), or in the case of any sale or
transfer of all, or substantially all, of the assets of the Company, the Company
will forthwith notify Lender of such event in accordance with Section 13.4 and
(so far as legally possible) cause the Person resulting from such consolidation,
amalgamation or merger or the Person which shall have acquired such assets, as
the case may be, to execute an express assumption of the obligations set out in
this Note to ensure that Lender will have the right (during the period in which
this Note shall be convertible) to convert this Note into the class and amount
of shares of Common Stock and other securities and property receivable upon such
consolidation, amalgamation, merger, sale or transfer by a Holder of the number
of shares of Common Stock which would have become liable to be issued upon
conversion of this Note immediately prior to such consolidation, amalgamation,
merger, sale or transfer. Such assumption agreement will provide for adjustments
which will be as nearly equivalent as may be practicable to the adjustments
provided for in the foregoing provisions of this Section 5. The above provisions
of this Section 5.4 will apply in the same way to any subsequent consolidations,
amalgamations, mergers, sales or transfers.
5.5 MANDATORY CONVERSION
Lender acknowledges and agrees that the Company may, at its own cost,
elect to exercise the Conversion Right at the Conversion Price applicable as of
the date fixed by the Company for such conversion (the "Mandatory Conversion
Date"), provided that (i) the Company has caused a Registration Statement to
have been declared effective by the Commission in satisfaction of its
obligations under the Registration Rights Agreement and such Registration
Statement is currently in effect and remains effective as of the Mandatory
Conversion Date and (ii)the average Market Price of the Shares during any 20
consecutive Stock Exchange Business Days falling on or after the date the
Company has satisfied its obligations in clause (i) above and on the date the
notice is sent, is equal to or greater than $0.42. The Company's election to
exercise its conversion rights as set out herein shall not modify the Company's
obligations under the Registration Rights Agreement. The Company is required to
give notice to Lender that the criteria for Mandatory Conversion under this
Section 5.5 has been met within 20 days of having met such criteria.
The Company may give written notice of its election to convert the Note
within 30 days of having satisfied the criteria set out in clauses (i) and (ii)
in the preceding paragraph provided such criteria are also satisfied on the date
such notice is sent. The Company shall cause such written notice of the
Mandatory Conversion Date to be given to Lender not less than 20 calendar days
prior to the Mandatory Conversion Date, which notice shall be irrevocable and
given to Lender. Following such notice the Company shall comply with the
procedures for Conversion as set out in this Section 5 and Lender will be
required on or before the Mandatory Conversion Date to deliver or procure
delivery of the Note together with a duly completed Conversion Notice to the
Company.
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5.6 REGISTRATION RIGHTS
5.6.1 Pursuant to the Registration Rights Agreement (the
"Registration Rights Agreement") dated as of July 28, 2000, by the Company
for the benefit of Lender, the Company has agreed to file a registration
statement with the U.S. Securities and Exchange Commission (the "Commission")
in respect of the resale of the Conversion Shares. In accordance with the
terms and conditions of the Registration Rights Agreement, the Company will
(i) use its best efforts to cause the Commission to declare effective the
registration statement contemplated in the foregoing sentence within three
months of the Issue Date and (ii) use its best efforts to maintain the
effectiveness of such registration statement until all Conversion Shares that
may be issued have been issued. In the event that the Commission does not
declare such registration statement effective within four months of the Issue
Date, Lender will be entitled to convert this Note at a discount (the
"Registration Default Discount") of 2% from the then applicable Conversion
Price and thereafter, commencing on the fifth month from the Issue Date, an
additional 5% discount for each month or portion thereof that the
registration statement is not declared effective. The Registration Default
Discount shall be permanent and shall not be affected by the subsequent
effectiveness of the registration statement. All discounts under this Section
5.6 will be in addition to, and not in lieu of, any other discounts or
adjustments applicable to the Conversion Price under the terms of this Note.
5.6.2 In addition, if prior to the date the Company satisfies its
obligations under the Registration Rights Agreement and for a period of 60 days
after it satisfies such obligations, the Company issues any Common Stock or
Common Stock Equivalents at a price or having a conversion price less than the
then applicable Conversion Price, the applicable Conversion Price shall be
adjusted downward only to equal 95% of the price or conversion price
attributable to the Common Stock or Common Stock Equivalents. To the extent any
issuance of securities causes an adjustment under this Section 5.6.2 and could
also provide for an adjustment under Section 5.3, the only adjustment resulting
from such issuance shall occur solely under this Section 5.6.2.
5.7 ADDITIONAL SHARES.
Upon the conversion of this Note, either upon the election of Lender or
the Company, Lender will be entitled to receive, at no additional cost, an
additional number of Conversion Shares equal to the product of (i) the number of
Conversion Shares being issued to Lender multiplied by (ii) 0.26. The additional
shares issued in accordance with this Section 5.7 will be part of the total
number of Conversion Shares to be issued and will be included in the certificate
delivered in accordance with Section 5.2.2 above.
5.8 CALCULATION OF CONVERSION PRICE.
As provided in this Note, the Conversion Price is subject to reduction
in a number of different circumstances. The Conversion Price to be used in
connection with the conversion of this Note will be calculated on the applicable
date as follows. The initial Conversion Price will first be calculated using the
formula set out in Section 5.1.2. Thereafter, the Conversion Price shall be
adjusted downward to give effect to any reductions as provided for in Section
5.3 and Section 5.6, with each such reduction given full effect before the next
adjustment is applied. At the request of Lender, the Company shall promptly
provide Lender with a calculation of the current applicable Conversion Price.
Such calculation shall be sent by means of a certificate signed by the Company's
Chief Financial Officer setting forth the adjusted Conversion Price and showing
in reasonable detail the facts upon which such adjustment is based.
6. COVENANTS
6.1 PAYMENT OF PRINCIPAL AND INTEREST. The Company covenants and agrees
for the benefit of Lender that it will duly and punctually pay the principal of
and interest on the Note in accordance with the terms of the Note.
6.2 CORPORATE EXISTENCE. Provided that nothing contained in this
Section 6.2 shall prohibit any transaction permitted by Section 9, the Company
will at all times maintain, preserve and keep in full force
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and effect its corporate existence, rights (charter and statutory) and
franchises and the Company will carry on and conduct or will cause to be carried
on and conducted its business and the business of its Subsidiaries in a proper
and efficient manner and will keep or cause to be kept proper books of account
and make or cause to be made therein true and accurate entries of all its
dealings and transactions in relation to its business and the business of its
Subsidiaries, as the case may be, all in accordance with GAAP, and at all
reasonable times it will furnish or cause to be furnished to Lender or its duly
authorized agent or attorney such information relating to its business and that
of its Subsidiaries as Lender may reasonably require and such books of account
shall at all reasonable times be open for inspection by Lender or such agent or
attorney.
6.3 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (a) all
taxes, assessments and governmental charges levied or imposed upon the Company
or any Subsidiary or upon the income, profits or property of the Company or any
Subsidiary and (b) all lawful claims for labour, materials and supplies which,
if unpaid, might by law become a Lien upon the property of the Company or any
Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
6.4 MAINTENANCE OF PROPERTIES. The Company will cause all properties owned
by the Company or any Subsidiary or used or held for use in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order (ordinary wear and tear excepted) and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 6.4 shall prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to Lender.
6.5 INSURANCE. The Company will at all times keep all of the Company's and
its Subsidiaries' properties which are of an insurable nature insured with
insurers, believed by the Company to be responsible, against loss or damage to
the extent that property of similar character is usually so insured by
Corporations similarly situated and owning like properties in similar geographic
areas in which the Company or such Subsidiary operates; PROVIDED that such
insurance is generally available at commercially reasonable rates, and PROVIDED
FURTHER that the Company or such Subsidiary may self-insure directly or through
captive insurers or insurance cooperatives, to the extent that the Company
determines that such practice is consistent with prudent business practices.
Such insurance shall be in such amount, on such terms, in such forms and for
such periods as are customary for similarly situated Persons in the Company's
industry or in insurance markets available to the Company.
6.6 STATEMENT BY OFFICERS AS TO DEFAULT. The Company will deliver to
Lender, within 120 days after the end of each fiscal year (which on the date
hereof is September 30), a brief Officers' Certificate including a statement by
the officer executing such certificate that in the course of performing his or
her duties as an officer of the Company such officer would normally obtain
knowledge of (i) whether or not any Default or Event of Default exists in the
performance and observation of any terms, provisions and conditions of the Note
and (ii) whether or not the Company has otherwise kept, observed, performed and
fulfilled its obligations under the Note in all material respects. Such
Officers' Certificate shall further state, as to the officer signing such
certificate, to the knowledge of such officer, as of the date of such Officers'
Certificate, (i) whether or not any Default or Event of Default exists, (ii)
whether or not the Company during the preceding fiscal year kept, observed,
performed and fulfilled in all material respects each and every covenant and
obligation of the Company under the Note and (c) whether or not there was any
Default or Event of Default in the performance and observance of any of the
terms, provisions or conditions of the Note during such preceding fiscal year.
If the officer signing the Officers' Certificate knows of such a Default or
Event of Default, whether then existing or occurring during such preceding
fiscal year, the Officers' Certificate shall describe such Default or Event of
Default and its status with
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particularity. The First Officer's Certificate delivered pursuant to this
Section 6.6 must be delivered no later than 120 days after the first anniversary
of the Closing. The Company shall also promptly notify Lender if the Company's
fiscal year is changed so that the end thereof is on any date other than the
then current fiscal year end date. For purposes of this Section 6.6, such
compliance shall be determined without regard to any period of grace granted by
Lender or requirement of Notice under the Note. The Company will deliver to
Lender, forthwith upon becoming aware of any default in the performance or
observance of any covenant, agreement or condition contained in the Note, or any
Event of Default, an Officers' Certificate specifying with particularity such
Default or Event of Default and further stating what action the Company has
taken or is taking or proposes to take with respect thereto. In connection with
the delivery of the Company's annual report, the Company will deliver to Lender
a properly completed Certificate substantially in the form of the Certificate
attached hereto as Exhibit B.
6.7 PROVISION OF FINANCIAL STATEMENTS. Whether or not the Company is
subject to Section 13(a) or 15(d) of the Exchange Act, the Company will, to the
extent permitted under the Exchange Act, file with Lender the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Sections 13(a) or 15(d) if the
Company were so subject, such documents to be delivered to Lender within 15 days
of the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
file with Lender copies of the annual reports, quarterly reports and other
documents which the Company has filed with the Commission or would have been
required to file with the Commission pursuant to Section 13(a) or 15(d) of the
Exchange Act if the Company were subject to such Sections and (y) if filing such
documents by the Company with the Commission is not permitted under the Exchange
Act, the Company will promptly upon written request, supply copies of such
documents to any prospective assignee of the Note at the Company's cost.
6.8 LIMITATION ON OTHER INDEBTEDNESS. The Company will not create, incur,
assume, guarantee or in any other manner become directly or indirectly liable
for the payment of any Indebtedness that will rank (i) except for Secured Senior
Indebtedness, senior in right of payment to the Note or (ii) except for
Designated Indebtedness, PARI PASSU with the Note, except to the extent of
Permitted Liens securing Indebtedness. The Company will not permit any of its
Subsidiaries to create, incur, assume, guarantee or in any other manner become
directly or indirectly liable for the payment of any Indebtedness other than
Permitted Subsidiary Indebtedness.
6.9 LIMITATION ON LIENS. Except for Liens securing Designated Senior
Indebtedness and Permitted Liens , the Company will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist, any Lien of
any kind upon any properties of the Company or any of its Subsidiaries securing
any Indebtedness (whether by agreement, by operation of law, or structurally by
virtue of the identity of the obligor).
6.10 CHARTER AMENDMENTS. On or before December 1, 2000 , the Company shall
increase the authorised capital stock of the Company to provide for a total of
500,000,000 Shares. Except as to the foregoing, the Company will not amend its
Certificate of Incorporation or Bylaws except as required by law or except to
the extent that such amendment would not have a material adverse effect on (a)
the ability of the Company to perform its obligations under the Note or (b) the
rights of Lender, except that neither (i) increases in the number of Shares and
issuance thereof with related securities, nor (ii) designations of Preferred
Stock of the Company, modifications of the terms of such designations and
issuance thereof with related securities, nor (iii) modification or expansion of
the indemnity provisions provided by the Company to its directors and officers,
nor (iv) change of the Company's registered agent shall be deemed an amendment
hereunder.
6.11 MAINTENANCE OF LISTINGS FOR SHARES. During the term of the Note, the
Company will maintain a quotation for all the issued Shares on OTC, it being
understood that if the Company is unable to obtain or maintain such listing of
Shares, it shall obtain and maintain a listing of all Shares issued on the
exercise of the Conversion Rights on such Alternative Stock Exchange as the
Company may from time to time (with the written consent of the Lender) determine
and will forthwith give notice to Lender in accordance with
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Section 13.4 herein of the listing, de-listing or quotation or lack of quotation
of the Shares (as a class) by any such Alternative Stock Exchange.
6.12 REGISTRATION OF CONVERSION SHARES. The Company shall timely comply with
the terms of the Registration Rights Agreement.
6.13 ADDITIONAL COVENANTS. In addition to the foregoing, while any
Conversion Right remains exercisable, the Company will, save with the consent of
Lender:
6.13.1 at all times keep available for issuance free from any
pre-emptive rights out of its authorised but unissued capital such number of
Conversion Shares as would enable the Conversion Rights, the rights for
additional shares as set forth in Section 5.7, and all other rights of
subscription and exchange for and conversion into Conversion Shares to be
satisfied in full;
6.13.2 maintain a quotation for all the issued Conversion Shares on
OTC, it being understood that if the Company is unable to obtain or maintain
such quotation of Conversion Shares, to obtain and maintain a listing or
quotation for all the Conversion Shares issued on the exercise of the Conversion
Rights on such Alternative Stock Exchange as the Company may from time to time
with the written consent Lender determine and will forthwith give notice to the
Lender in accordance with Section 13.4 of the listing, de-listing or quotation
or lack of quotation of the Conversion Shares (as a class) by any such
Alternative Stock Exchange; and
6.13.3 not adopt any amendment to its Certificate of Incorporation
that would modify the rights attaching to the Common Stock.
7. EVENTS OF DEFAULT AND REMEDIES
7.1 EVENTS OF DEFAULT. "Event of Default," wherever used herein, means any
one of the following events (whatever the reason for such Event of Default and
whether it shall be occasioned by the provisions of this Section 7 or be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body) which shall have occurred and is
continuing:
7.1.1 if the Company defaults in the payment of the principal of (or
premium, if any, on) this Note as and when it shall become due and payable at
its Maturity, upon redemption, by declaration or otherwise, and continuance of
such default for a period of 5 days; or
7.1.2 if the Company defaults in the payment of any interest upon
this Note when such interest becomes due and payable, and continuance of such
default for a period of 5 days; or
7.1.3 if the Company fails to perform or observe any of its other
obligations, covenants, conditions or provisions under this Note and such
failure continues for the period of thirty (30) calendar days next following the
service by Lender on the Company of notice requiring the same to be remedied; or
7.1.4 if (i) any other Indebtedness of the Company or any Subsidiary
becomes due and payable prior to its Stated Maturity by reason of an event of
default (howsoever described) or (ii) any such Indebtedness of the Company or
any Subsidiary is not paid when due or, as the case may be, within any
applicable grace period or (iii) the Company or any Subsidiary fails to pay when
due (or, as the case may be, within any applicable grace period) any amount
payable by it under any present or future guarantee for, or indemnity in respect
of, any Indebtedness of any Person or (iv) any security given by the Company or
any Subsidiary for any Indebtedness of any Person or any Guaranty or indemnity
of Indebtedness of any Person by the Company or any Subsidiary becomes
enforceable by reason of default in relation thereto and steps are taken to
enforce such security save in any such case where there is a bona fide dispute
as to whether the relevant Indebtedness or any such Guaranty or indemnity as
aforesaid shall be due and payable (following any applicable grace period),
provided that in each such case the Indebtedness exceeds in the aggregate U.S.
$250,000 and in each case such event continues unremedied for a period of thirty
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(30) calendar days; or
7.1.5 if the Company or any Subsidiary shall generally fail to pay
its debts as such debts become due (except debts which the Company or such
Subsidiary, as the case may be, may contest in good faith generally) or shall be
declared or adjudicated by a competent court to be insolvent or bankrupt,
consents to the entry of an order of relief against it in an involuntary
bankruptcy case, shall enter into any assignment or other similar arrangement
for the benefit of its creditors or consents to the appointment of a custodian
(including, without limitation, a receiver, liquidator or trustee); or
7.1.6 if a receiver, administrative receiver, administrator or other
similar official shall be appointed in relation to the Company or any Subsidiary
or in relation to the whole or a substantial part of the undertaking or assets
of any of them or a distress, execution or other process shall be levied or
enforced upon or sued out against, or an encumbrancer shall take possession of,
the whole or a substantial part of the assets of any of them and in any of the
foregoing cases is not paid out or discharged within ninety (90) calendar days;
or
7.1.7 if the Company or any Subsidiary institutes proceedings to be
adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent seeking
reorganisation under the laws of the Federal Bankruptcy Code or any similar
applicable U.S. Federal, State or foreign law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver or
liquidator or trustee or assignee (or other similar official) in bankruptcy or
insolvency of it or its property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they come due; or
7.1.8 if a decree or order by a court having jurisdiction in the
premises shall have been entered adjudging the Company or any Subsidiary a
bankrupt or insolvent, or approving as properly filed a petition seeking the
reorganisation of the Company or any Subsidiary under the Federal Bankruptcy
Code or any other similar applicable U.S. Federal State or foreign law, and such
decree or order shall have continued undischarged or unstayed for a period of
ninety (90) calendar days; or a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver or liquidator or trustee or
assignee (or other similar official) in bankruptcy or insolvency of the Company
or any Subsidiary or of all or substantially all of its property, or for the
winding up or liquidation of its affairs, shall have been entered, and such
decree or order shall have continued undischarged and unstayed for a period of
ninety (90) calendar days; or
7.1.9 if a warranty, representation or other statement made by or on
behalf of the Company contained in this Note or any certificate or other
agreement furnished in compliance with such documents is false in any material
respect when made and such falsity continues for a period of thirty (30)
calendar days next following the service by the Lender on the Company of Notice
requiring the same to be remedied; or
7.1.10 if there is any final judgment or judgments for the payment of
money exceeding in the aggregate U.S. $250,000 outstanding against the Company
or any Subsidiary which has been outstanding for more than sixty (60) calendar
days from the date of its entry and shall not have otherwise been discharged in
full or stayed by appeal, bond or otherwise.
7.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 7.1.6 or 7.1.7) occurs and is continuing, then and in every such case
the Lender may declare the principal amount of this Note to be due and payable
immediately, by a notice in writing to the Company and upon any such declaration
such principal amount together with accrued interest (as provided herein) shall
become immediately due and payable.
If an Event of Default specified in Section 7.1.6 or 7.1.7 occurs and
is continuing, then the principal amount of this Note shall IPSO FACTO become
and be immediately due and payable without any declaration or other act on the
part of the Lender.
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If the Company fails to pay such amounts forthwith upon such demand,
Lender may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon this Note and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon this Note,
wherever situated. If an Event of Default occurs and is continuing, Lender may
proceed to protect and enforce its rights by such appropriate judicial
proceedings it shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in this Note
or in aid of the exercise of any power granted herein, or to enforce any other
proper remedy.
7.3 APPLICATION OF MONEY COLLECTED.
Any money collected by the Lender pursuant to this Section 7 shall be
applied in the following order:
FIRST: To the payment of the amounts then due and unpaid for
principal of and interest on this Note in respect of which or for the
benefit of which such money has been collected, according to the
amounts due and payable on this Note for principal and interest,
respectively; and
SECOND: To the payment of all costs and expenses incurred by
Lender in enforcing its rights under this Note; and
THIRD: The balance, if any, to the Person or Persons entitled
thereto.
7.4 RESTORATION OF RIGHTS AND REMEDIES.
If the Lender has instituted any proceeding to enforce any right or
remedy under this Note and such proceeding has been discontinued or abandoned
for any reason, or has been determined adversely to the Lender, then and in
every such case, subject to any determination in such proceeding, the Company
and the Lender shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Lender
shall continue as though no such proceeding had been instituted.
7.5 RIGHTS AND REMEDIES CUMULATIVE.
No right or remedy herein conferred upon or reserved to the Lender
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition
to every other right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
7.6 DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Lender to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Section 7 or by law to Lender may be
exercised from time to time, and as often as may be deemed expedient, by Lender.
7.7 WAIVER OF STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Note; and the Company (to the extent that it may lawfully do
so) hereby expressly waives all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the
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execution of any power herein granted to Lender, but will suffer and permit the
execution of every such power as though no such law had been enacted.
8. REPORTS BY COMPANY
8.1 REPORTS BY COMPANY. The Company shall:
8.1.1 deliver to Lender, within 15 days after the Company is
required to file the same with the Commission, copies of the annual reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with the
Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if
the Company is not required to file information, documents or reports pursuant
to either of said Sections, then, on the 120th day following the issuance of the
Note and annually thereafter, it shall deliver to the Lender, in accordance with
rules and regulations prescribed from time to time by the Commission, such of
the supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations; and
8.1.2 deliver to Lender, in accordance with rules and regulations
prescribed from time to time by the Commission, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants of the Note as may be required from time to time by
such rules and regulations.
9. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER, OR LEASE
9.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company will not merge or consolidate with or sell, convey,
transfer or lease or otherwise dispose of all or substantially all of its
properties or assets substantially as an entirety to any Person, unless:
9.1.1 either (i) the Company shall be the surviving Person or (ii)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety (1) shall be a Person organized and validly
existing under the laws of the United States of America, any state thereof or
the District of Colombia and (2) shall expressly assume, in form satisfactory to
the Lender, the Company's obligation for the due and punctual payment of the
principal of and interest on the Note and the performance and observance of
every covenant of the Note on the part of the Company to be performed or
observed;
9.1.2 immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Company in
connection with or as a result of such transaction as having been incurred at
the time of such transaction), no Default or Event of Default shall have
occurred and be continuing; and
9.1.3 the Company or such Person shall have delivered to the Lender
an Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease complies with all
provisions contained in this Note and that all conditions precedent therein and
herein provided for relating to such transaction have been complied with.
9.2 SUCCESSOR SUBSTITUTED. Upon any consolidation of the Company with or
merger of the Company with or into any other Person or any conveyance, transfer
or lease of the properties and assets of the Company substantially as an
entirety to any Person in accordance with Section 5.4, the successor Person
formed by such consolidation or into which the Company is merged or to which
such conveyance, transfer
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or lease is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Note with the same effect as if
such successor Person had been named as the Company therein, and in the event of
any such conveyance or transfer, the Company (which term shall for this purpose
mean the Person named as the "Company" in the first paragraph of the Note or any
successor Person which shall theretofore become such in the manner described in
Section 5.4), except in the case of a lease, shall be discharged of all
obligations and covenants under the Note and may be dissolved and liquidated.
10. ADDITIONAL PROVISIONS RELATING TO CONVERSION.
10.1 ADJUSTMENT OF MAXIMUM CONVERSION PRICE. In addition to the adjustments
to the Conversion Price as provided for in Section 5.3, the Maximum Conversion
Price shall be subject to further adjustments as follows:
10.1.1 In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the Maximum
Conversion Price in effect at the opening of business on the day next following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Maximum
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day next following the date fixed for such determination. For
the purposes of this Section 10.1.1, the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company.
10.1.2 In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall otherwise
issue to all holders of its Common Stock, rights, warrants or options entitling
the holders thereof to subscribe for or purchase shares of Common Stock at a
price per share less than the Market Price per share (determined as provided in
Section 10.1.5) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, warrants or options, the Maximum
Conversion Price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such Maximum
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Market Price and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, outstanding at
the close of business on the date fixed for such reduction to become effective
immediately after the opening of business on the day following the date fixed
for such determination. For the purposes of this Section 10.1.2, the number of
shares of Common Stock at any time outstanding shall not include shares held in
the treasury of the Company. The Company shall not issue any rights, warrants or
options in respect of shares of Common Stock held in the treasury of the
Company.
10.1.3 In case the Company shall, by dividend or otherwise, make a
distribution to all holders of its Common Stock exclusively in cash in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution and
in respect of which no Conversion Price adjustment pursuant to this Section
10.1.3 has been made and (ii) the aggregate of any cash plus the fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Company's Board of Directors), as of the expiration of the tender or exchange
offer referred to below, of consideration payable in respect of any tender or
exchange offer by the Company or a Subsidiary for all or any portion of the
Common Stock concluded within the 12
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months preceding the date of payment of such distribution and in respect of
which no Conversion Price adjustment pursuant to Section 10.1. 6 has been made,
exceeds five percent (5%) of the product of the Market Price per share
(determined as provided in Section 10.1.7) of the Common Stock on the date fixed
for stockholders entitled to receive such distribution times the number of
shares of Common Stock outstanding on such date, the Maximum Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Maximum Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this Section
10.1.3 by a fraction of which the numerator shall be the Market Price per share
(determined as provided Section 10.1.7) of the Common Stock on the date of such
effectiveness less the amount of cash so distributed applicable to one share of
Common Stock and the denominator shall be such Market Price per share of the
Common Stock, such reduction to become effective immediately prior to the
opening of business on the day following the date fixed for the payment of such
distribution.
10.1.4 Subject to the last sentence of this Section 10.1.4, in case
the Company shall, by dividend or otherwise, distribute to all holders of its
Common Stock evidences of its indebtedness, shares of any class of capital
stock, securities, cash or property (excluding any rights, warrants or options
referred to in Section 10.1.2, any dividend or distribution paid exclusively in
cash and any dividend or distribution referred to in Section 10.1.1), the
Maximum Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Maximum Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction contemplated by
this Section 10.1.4 by a fraction of which the numerator shall be the Market
Price per share (determined as provided in Section 10.1.7) of the Common Stock
on the date of such effectiveness less the fair market value (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Company's Board of Directors and shall, in
the case of securities being distributed for which prior thereto there is an
actual or when issued trading market, be no less than the value determined by
reference to the average of the Market Price over the period specified in the
succeeding sentence), on the date of such effectiveness, of the portion of the
evidences of indebtedness, shares of capital stock, securities, cash and
property so distributed applicable to one share of Common Stock and the
denominator shall be such Market Price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of business on
the day next following the date fixed for the payment of such distribution (such
date to being referred to as the "Reference Date"). If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 10.1.4 by reference to the actual or when issued trading market for any
securities comprising such distribution, it must in doing so consider the prices
in such market over the same period used in computing the Market Price per share
pursuant to Section 10.1.7of this Section. For purposes of this Section 10.1.4,
any dividend or distribution that includes shares of Common Stock or rights,
warrants or options to subscribe for or purchase shares of Common Stock shall be
deemed instead to be (i) a dividend or distribution of the evidences of
indebtedness, cash, property, shares of capital stock or securities other than
such shares of Common Stock or such rights, warrants or options (making any
Conversion Price reduction required by this Section 10.1.4) immediately followed
by (ii) a dividend or distribution of such shares of Common Stock or such
rights, warrants or options (making any further Conversion Price reduction
required by Section 10.1.1 or Section 10.1.2), except (i) the Reference Date of
such dividend or distribution as defined in this Section 10.1.4 shall be
substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "the date fixed for the
determination of stockholders entitled to receive such rights, warrants or
options" and "the date fixed for such determination" within the meaning of
Section 10.1.1 and Section 10.1.2 and (ii) any shares of Common Stock included
in such dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the meaning of
Section 10.1.1).
10.1.5 In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Maximum Conversion Price in
effect at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and, conversely,
in case outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Maximum Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
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opening of business on the day following the day upon which such subdivision or
combination becomes effective.
10.1.6 In case a tender or exchange offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and such
tender or exchange offer shall involve an aggregate consideration having a fair
market value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Company's
Board of Directors) at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it may be
amended) that, together with (i) the aggregate of the cash plus the fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Company's
Board of Directors), as of the expiration of the other tender or exchange offer
referred to below, of consideration payable in respect of any other tender or
exchange offer by the Company or a Subsidiary for all or any portion of the
Common Stock concluded within the preceding 12 months and in respect of which no
Conversion Price adjustment pursuant to this Section 10.1.6 has been made and
(ii) the aggregate amount of any distributions to all holders of the Common
Stock made exclusively in cash within the preceding 12 months and in respect of
which no Conversion Price adjustment pursuant to Section 10.1.5 has been made,
exceeds five percent (5%) of the product of the Market Price per share
(determined as provided in Section 10.1.7) of the Common Stock on the Expiration
Time times the number of shares of Common Stock outstanding (including any
tendered shares) on the Expiration Time, the Maximum Conversion Price shall be
reduced (but not increased) so that the same shall equal the price determined by
multiplying the Maximum Conversion Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be (i) the product of
the Market Price per share (determined as provided in Section 10.1.7) of the
Common Stock at the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration Time
minus (ii) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of all shares validly
tendered or exchanged and not withdrawn as of the Expiration Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and the denominator shall be the product of (i) such Market Price per
share at the Expiration Time times (ii) such number of outstanding shares at the
Expiration Time less the number of Purchased Shares, such reduction to become
effective immediately prior to the opening of business on the day following the
Expiration Time.
10.1.7 For the purpose of any computation of the Market Price under
this Section 10.1.7and Section 10.1.2, Section 10.1.4 and Section 10.1.5, (i) if
the "ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 10.1.1 through Section 10.1.6above ("Other
Event") occurs on or after the tenth Stock Exchange Business Day prior to the
date in question and prior to the "ex" date for the issuance or distribution
requiring such computation (the "Current Event"), the closing price for each
Stock Exchange Business Day prior to the "ex" date for such Other Event shall be
adjusted by multiplying such closing price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such Other Event,
(ii) if the "ex" date for any Other Event occurs after the "ex" date for the
Current Event and on or prior to the date in question, the closing price for
each Stock Exchange Business Day on and after the "ex" date for such Other Event
shall be adjusted by multiplying such closing price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted as a result
of such Other Event, (iii) if the "ex" date for any Other Event occurs on the
"ex" date for the Current Event, one of those events shall be deemed for
purposes of clauses (i) and (ii) of this proviso to have an "ex" date occurring
prior to the "ex" date for the other event, and (iv) if the "ex" date for the
Current Event is on or prior to the date in question, after taking into account
any adjustment required pursuant to clause (ii) of this proviso, the closing
price for each Stock Exchange Business Day on or after such "ex" date shall be
adjusted by adding thereto the amount of any cash and the fair market value on
the date in question (as determined in good faith by the Board of Directors in a
manner consistent with any determination of such value for purposes of this
Section 10.1.3 or Section 10.1.4, whose determination shall be conclusive and
described in a resolution of the Company's Board of Directors) of the portion of
the rights, warrants, options, evidences of indebtedness, shares of capital
stock, securities, cash or property being distributed applicable to one share of
Common Stock. For the purpose of any computation under Section 10.1.6, the
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Market Price per share of Common Stock on any date in question shall be deemed
to be the Market Price on the date selected by the Company commencing on or
after the latest (the "Commencement Date") of (i) the date 20 Stock Exchange
Business Days before the date in question, (ii) the date of commencement of the
tender or exchange offer requiring such computation and (iii) the date of the
last amendment, if any, of such tender or exchange offer involving a change in
the maximum number of shares for which tenders are sought or a change in the
consideration offered, and ending not later than the date of the Expiration Time
of such tender or exchange offer (or, if such Expiration Time occurs before the
close of trading on a Stock Exchange Business Day, not later than the Stock
Exchange Business Day immediately preceding the date of such Expiration Time);
PROVIDED, HOWEVER, that if the "ex" date for any Other Event (other than the
tender or exchange offer requiring such computation) occurs on or after the
Commencement Date and on or prior to the date of the Expiration Time for the
tender or exchange offer requiring such computation, the closing price for each
Stock Exchange Business Day prior to the "ex" date for such Other Event shall be
adjusted by multiplying such closing price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such other event.
For purposes of this Section 10.1.7, the term "ex" date, (i) when used with
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the relevant exchange or in the relevant
market from which the closing price was obtained without the right to receive
such issuance or distribution, (ii) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which the Common
Stock trades regular way on such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (iii) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
Expiration Time of such tender or exchange offer.
10.1.8 The Company may make such reductions in the Conversion Price,
in addition to those required by Section 10.1.1 through 10.1.6, as it considers
to be advisable in order that any event treated for Federal income tax purposes
as a dividend of stock or stock rights shall not be taxable to the recipients.
10.1.9 No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least five percent
(5%) in the Conversion Price; PROVIDED, HOWEVER, that any adjustments which by
reason of this Section 10.1.9are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
10.1.10 In addition to the foregoing, in the event the Company
at any time issues shares of Common Stock or Common Stock Equivalents
at a price less than the then effective Maximum Conversion Price, the
Maximum Conversion Price shall be deemed adjusted to the price at which
such shares of Common Stock or Common Stock Equivalents were issued and
Lender shall have the right and option to convert the Note at such
price (the "Temporary Conversion Price") into shares of Common Stock
for a period of sixty (60) calendar days following notice by the
Company of any such Temporary Conversion Price; provided, however, that
the foregoing shall not apply to any issuances (i) pursuant to the
conversion or exercise of currently issued and outstanding shares of
Common Stock or Common Stock Equivalents (including the conversion of
the Company's Series A Preferred Stock even if the conversion ratio for
such stock is increased from 10 to 1 to 75 to 1); (ii) pursuant to the
Note; (iii) pursuant to conversion of any currently outstanding
securities of the Company (including any warrants) or any Warrants
issued pursuant to the Offering; (iv) pursuant to any plan adopted by
the Company for the purchase of stock in connection with any employee
compensation or benefit plan of the Company or any of its Subsidiaries
whether now in effect or hereafter created or amended, including, but
not limited to, the Company's 1995 Stock Plan, 1994 Stock Option Plan,
1995 Director Option Plan and 1995 Employee Stock Purchase Plan; and
(v) pursuant to any compensation arrangement approved by the Board of
Directors of the Company with any director, officer or employee or
proposed director, officer, or employee of the Company or any
Subsidiary. Prior to the Effective Date, the Company will not issue
shares of Common Stock or Common Stock Equivalents at less than the
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Conversion Price, except as provided under (i) through (vii) above.
Notice of any such issuance shall be given by the Company to Lender.
Upon any such conversion of the Note pursuant to the foregoing, payment
will be made for interest accrued during the period from the most
recent Interest Payment Date to the Conversion Date. Immediately after
expiration of such sixty (60) day period, the Conversion Price shall be
deemed reset to the Conversion Price as in effect immediately prior to
such issuance of Common Stock or Common Stock Equivalents, subject to
any adjustments that would otherwise have been made in such Conversion
Price pursuant to this Section 10.1 during the effectiveness of such
Temporary Conversion Price.
10.2 NOTICE OF CERTAIN CORPORATE ACTION.
In case:
10.2.1 the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in cash
or (ii) exclusively in cash in an amount that would require a Conversion Price
adjustment pursuant to Section 10.1.3; or
10.2.2 the Company shall authorize the granting to the holders of its
Common Stock of rights, warrants or options to subscribe for or purchase any
shares of capital stock of any class or of any other rights (excluding employee
stock options); or
10.2.3 of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of Common
Stock), or of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of the
sale or transfer of all or substantially all of the assets of the Company; or
10.2.4 of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
10.2.5 the Company or any Subsidiary of the Company shall commence a
tender or exchange offer for all or a portion of the Company's outstanding
shares of Common Stock (or shall amend any such tender or exchange offer);
then the Company shall cause to be mailed to Lender within ten (10) Business
Days after the date on which Notice is sent to the holders of the Company's
Common Stock, a Notice stating (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, warrants or
options, 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, rights,
warrants or options are to be determined, or (ii) 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 shares of Common Stock for securities, cash or other property
deliverable upon such re-classification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, or (iii) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto).
10.3 PROVISIONS IN CASE OF RECLASSIFICATION CONSOLIDATION, MERGER OR SALE OF
ASSETS.
In the event that the Company shall be a party to any transaction,
including without limitation any (i) recapitalization or reclassification of the
Common Stock (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 of the Common Stock), (ii) any consolidation of the Company with, or
merger of the Company into, any other person, any merger of another person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of all of the outstanding shares of Common
Stock of the Company), (iii) any sale or transfer of all or substantially all of
the assets of the Company, or (iv) any compulsory share exchange pursuant to
which the Common Stock is converted into the right to receive other securities,
cash or other property, then lawful provision shall be made as part of the terms
of such transaction whereby Lender shall have the right thereafter to convert
the Note only into the kind of common stock receivable upon such transaction by
a holder of Common Stock (at an adjusted Conversion
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Price equal to (a) the Conversion Price determined pursuant to Section 10.1 as
though all such securities, cash or property (other than common stock) had been
distributed in a dividend covered by Section 10.1.4 with an "ex" date on the
date of such transaction divided by (b) the number of shares (or fraction
thereof) of common stock receivable upon such transaction in respect of each
share of Common Stock).
11. SENIORITY OF NOTE
As set forth above, the Company's obligations under the Note and
hereunder do and will rank at all times junior to the Secured Senior
Indebtedness and the Permitted Subsidiary Indebtedness.
12. IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
No recourse shall be had for the payment of the principal of or
interest on the Note or any part thereof, or for any claim based thereon or
otherwise in respect thereof, or of the indebtedness represented hereby, or upon
any obligation, covenant or agreement of the Note, against any incorporator, or
against any stockholder, officer or director, as such, past, present or future,
of the Company, or of any predecessor or successor Person, either directly or
through the Company or any such predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, it being expressly agreed and understood
that the Note is solely a corporate obligation, and that no personal liability
whatsoever shall attach to, or be insured by, any such incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any predecessor or successor Person, either directly or through
the Company or any such predecessor or successor Person, because of the
indebtedness hereby authorized or under or by reason of any of the obligations,
covenants, promises or agreements contained in the Note or to be implied
herefrom or therefrom; and that any such personal liability is hereby expressly
waived and released as a condition of, and as part of the consideration for, the
execution of the Note; PROVIDED, HOWEVER, that nothing herein contained shall be
taken to prevent recourse to and the enforcement of the liability, if any, of
any stockholder or subscriber to capital stock of the Company upon or in respect
of shares of capital stock not fully paid up.
13. MISCELLANEOUS
13.1 GOVERNING LAW.
This Note is governed by, and will be construed in accordance with, the
laws of the State of New York.
13.2 RULES OF CONSTRUCTION. For all purposes of the Note, except as
otherwise expressly provided or unless the context otherwise requires:
13.2.1 all the terms defined in this Note have the meanings assigned
to them in this Note, and include the plural as well as the singular;
13.2.2 all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
13.2.3 all ratios and computations based on GAAP contained in the
Note shall be computed in accordance with the definition of GAAP set forth
above;
13.2.4 the words "herein," "hereof" and "hereunder" and other words
of similar import refer to the Note as a whole and not to any particular Section
or other subdivision of the Note;
13.2.5 the words "therein," "thereof" and "thereunder" and other
words of similar import refer to the Note as a whole and not to any particular
Section or other subdivision of the Note;
13.2.6 "or" is not exclusive;
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13.2.7 all references to $, U.S.$, dollars or United States dollars
shall refer to the lawful currency of the United States of America;
13.2.8 provisions apply to successive events and transactions; and
13.2.9 all references to Sections refer to Sections of this Note
unless otherwise indicated.
13.3 COMPLIANCE CERTIFICATES AND OPINIONS. Every certificate or opinion with
respect to compliance with a condition or covenant provided for in the Note
shall include:
13.3.1 a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions relating
thereto;
13.3.2 a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
13.3.3 a statement that, in the opinion of each such individual, such
individual has made such examination or investigation as is necessary to enable
such individual to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
13.3.4 a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
13.4 NOTICES. Any request, demand, authorization, direction, declaration,
notice, consent, waiver, or other document provided or pertained by the Note
(herein collectively called "Notice") to be made upon, given or furnished to, or
filed with:
13.4.1 the Lender by the Company shall be sufficient for every
purpose hereunder if made, given, furnished or filed in writing to or with:
RemoteData Partners
800 North Shoreline Boulevard
Suite 2200 South
Corpus Christi, Texas 78401
13.4.2 the Company shall be sufficient for every purpose hereunder
(unless otherwise expressly provided) if made, given, furnished or filed in
writing to or with the Company addressed to it at the address of its principal
office which shall initially be: 1181 Grier Drive, Suite B, Las Vegas, Nevada
89119.
Any Notice to be given hereunder by any party to another shall be in
writing and in English (by letter, telex or fax) delivered in person or by
courier service requiring acknowledgment of delivery, mailed by first class
mail, postage prepaid, or sent by fax to the addressee (including telecopier
number, if applicable) set forth herein. Notices to the Lender given by mail,
fax, personal delivery or courier service shall be effective upon actual
receipt. Any such Notice or other communication which would otherwise take
effect after 4:00 p.m. on any particular day shall not take effect until 10:00
a.m. on the immediately succeeding Business Day in the place of the addressee. A
party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address.
13.5 EFFECT OF HEADINGS.
The Section headings herein are for convenience only and shall not
affect the construction hereof.
13.6 SUCCESSORS AND ASSIGNS.
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This Note may be assigned by Lender in part or in whole without the
consent of the Company. All covenants and agreements in the Note by the Company
shall bind its permitted successors and assigns, whether so expressed or not.
13.7 SEPARABILITY CLAUSE.
In case any provision in the Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions, to the extent permitted by law, shall not in any way be affected or
impaired thereby.
13.8 BENEFITS OF THE NOTE.
Nothing in the Note, express or implied, shall give to any Person,
other than the parties thereto, and their respective successors thereunder, any
legal or equitable right, remedy or claim under the Note.
13.9 PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Interest and all other payments due on the Note, shall be paid Lender
at the address specified in the Note or at such other address as is specified by
Lender.
14. DEFINITIONS.
In addition to the terms defined above, the following terms have the
following meanings:
"Adjusted Market Price" has the meaning set out in Section 5.1.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Alternative Stock Exchange" means other than OTC, any national or
regional stock exchange or quotation service such as NASDAQ National Market
System or any similar quotation service maintained by the National Quotation
Bureau or any successor thereto agreed between the Company and Lender.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is a day on which banking institutions in New York, New York are
not authorized or obliged by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's capital stock whether now outstanding or issued on or after the date of
the Note, including, without limitation, all Common Stock and Preferred Stock.
"Capitalized Lease Obligation" means the amount of the liability under
any capital lease that, in accordance with GAAP, is required to be capitalized
and reflected as a liability on the balance sheet of the relevant Person.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company, as in effect on the date hereof and as amended or restated from
time to time hereafter.
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"Commencement Date" has the meaning set out in Section 10.1.
"Commission" shall have the meaning as specified in Section 5.6.
"Common Stock Equivalent" means equity or debt securities (other than
Common Stock) of the Company which are convertible into or exercisable for
shares of Common Stock (including, without limitation, shares, units of shares,
preferred stock and other convertible securities) which the Board of Directors
has deemed to have the same value or economic rights as shares of Common Stock.
"Company" means the Person named as the "Company" in the first
paragraph of the Note, until a successor Person shall have become such pursuant
to the applicable provisions of the Note, and thereafter "Company" shall mean
such successor Person.
"Conversion Date" means the Business Day on which either (i) the
Conversion Right is exercised by delivery to the Company of completed Conversion
Notice or (ii) the date of conversion as specified in the Company's notice of
mandatory conversion delivered in accordance with Section 5.5 of the Note.
"Conversion Notice" shall have the meaning as set forth in Section 5.2.
"Conversion Period" shall have the meaning as set out in Section 5.1.
"Conversion Price" shall have the meaning as set out in Section 5.1.
"Conversion Right" means the right of Lender to convert the Note into
Conversion Shares.
"Conversion Shares" means the Shares into which the Note is convertible
including the additional Shares Lender is entitled pursuant to the Note.
"Corporation" includes corporations, limited liability companies,
limited and general partnerships, associations, joint-stock companies and
business trusts.
"Current Event" has the meaning set out in Section 10.1.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Default Rate" means a rate of interest of 18% per annum.
"Designated Indebtedness" means (i) Indebtedness currently in existence
and more fully described on Exhibit C attached hereto, (ii) Indebtedness for
which the Company or any of its Subsidiaries are the sole obligors and obligees,
(iii) Indebtedness secured by Permitted Liens and (iv) other indebtedness
permitted pursuant to Exhibit E.
"Effective Date" means the earlier of (a) the first Business Day
following the date upon which the Commission declares to be effective a
registration statement filed by the Company pursuant to the Securities Act
relating to the Conversion Shares and (b) the first Business Day occurring after
the expiration of the Distribution Compliance Period.
"Event of Default" shall have the meaning specified in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Time" has the meaning set out in Section 10.1.
"Federal Bankruptcy Code" means the Bankruptcy Act or Title 11 of the
United States Code, as
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amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company and its Subsidiaries in the preparation of its financial
statements.
"Guaranty" means all obligations of any Person (other than endorsements
in the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other obligation, of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including without limitation all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation or any Property or assets constituting
security therefor, or (ii) to advance or supply funds (1) for the purchase or
payment of such Indebtedness or obligation, or (2) to enable the recipient of
such funds to maintain certain financial conditions (e.g. agreed amount of
working capital) under loan or similar documents, or (iii) to lease Property or
to purchase securities or other Property or services primarily for the purpose
of assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of the Indebtedness or obligation, or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the primary
obligor against loss in respect thereof. For the purposes of all computations
made under the Note, a Guaranty in respect of any Indebtedness shall be deemed
to be Indebtedness equal to the principal amount and accrued interest of such
Indebtedness which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Indebtedness" of any Person means and includes all present and future
obligations of such Person, which shall include, without limitation, all
obligations (i) which in accordance with GAAP shall be classified upon a balance
sheet of such Person as liabilities of such Person, (ii) for borrowed money,
(iii) which have been incurred in connection with the acquisition of Property
(including, without limitation, all obligations of such Person evidenced by any
debenture, bond, note, commercial paper or other similar security, but
excluding, in any case, obligations arising from the endorsement in the ordinary
course of business of negotiable instruments for deposit or collection), (iv)
secured by any Lien existing on Property owned by such Person, even though such
Person has not assumed or become liable for the payment of such obligations, (v)
created or arising under any conditional sale or other title retention agreement
with respect to Property acquired by such Person, notwithstanding the fact that
the rights and remedies of the seller, lender or lessor under such agreement in
the event of default are limited to repossession or sale of such Property, (vi)
which are Capitalized Lease Obligations, (vii) for all Guaranties, whether or
not reflected in the balance sheet of such Person, (viii) that are rental
obligations under leases for personal property or fixtures and (ix) which are
all reimbursement and other payment obligations (whether contingent, matured or
otherwise) of such Person in respect of any acceptance or documentary credit.
Notwithstanding the foregoing, Indebtedness shall not include (i) accounts
payable incurred in the ordinary course of business, and (ii) Indebtedness
represented by rental or lease obligations for personal property or fixtures not
to exceed $1,500,000 in any period of 12 months for any Person and its
Subsidiaries.
"Interest Payment Date" has the meaning set out in Section 3.
"Issue Date" means July 28, 2000.
"Lien" means any mortgage, charge, pledge, lien, security interest or
encumbrance of any kind whatsoever, including any interest in Property securing
an obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of the Note, the Company or its Subsidiary
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, financing lease or other arrangement
pursuant to which title to the Property has been retained by or vested in some
other Person for
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security purposes.
"Mandatory Conversion" means conversion of the Note at the option of
the Company pursuant to Section 5.5.
"Mandatory Conversion Date" shall have the meaning specified in Section
5.5.
"Market Price" shall have the meaning as set out in Section 5.1.
"Maturity," when used with respect to the Note, means the date on which
the principal of the Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity or the Redemption Date and whether by declaration
of acceleration, call for redemption or otherwise.
"Maximum Conversion Price" means U.S. $0.30 per Conversion Share.
"Note" means this 12% Senior Convertible Note as originally executed
and as it may from time to time be supplemented or amended.
"Notice" has the meaning specified in Section 13.4.
"Officers' Certificate" means a certificate signed by the Chairman, its
Chief Executive Officer, the President or a Vice President, and by the Chief
Financial Officer, its Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, and delivered to Lender. Any one individual
holding the requisite titles may sign and deliver an Officers' Certificate
without cosignature of another individual with a requisite title.
"Offering" means the Company's issuance of the 12% Senior Convertible
Debentures constituted by the Trust Indenture dated on or about July 28, 2000.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall be
reasonably acceptable to Lender.
"OTC" means the over-the-counter bulletin board as maintained by the
National Association of Securities Dealers, Inc.
"Other Event" has the meaning set out in Section 10.1.
"Permitted Liens" means (a) Liens or deposits made to secure payment of
worker's compensation (or to participate in any fund in connection with worker's
compensation), unemployment insurance, pensions, or social security programs,
(b) Liens imposed by mandatory provisions of law such as for materialmen's
mechanics, warehousemen's and other Liens arising in the ordinary course of the
business of the Company or its Subsidiaries, securing Indebtedness on which
payment is not yet due, (c) Liens for taxes imposed upon the Company's or any of
its Subsidiaries' income, profits or property, if the same are not yet due and
payable or if the same are being contested in good faith and as to which
adequate reserves are maintained in accordance with GAAP, (d) Liens in
connection with leases, real estate bids, or contracts (other than contracts
involving the borrowing of money) or to secure (or in lieu of) surety, stay,
appearance or customs bonds and Liens to secure the payment of taxes,
assessments, customs, duties or other similar charges, (e) Liens consisting of
zoning restrictions, easements or other restrictions on the use of real property
PROVIDED THAT such Liens do not impair the use of such property for the uses
intended, and none of which is violated by existing or proposed structure or
land use, (f) any Lien existing on any property of any person at the time it
becomes a Subsidiary or of a successor to or merged with or into the Company so
long as (i) that Lien does not encumber any other property of any Company or any
Subsidiary and (ii) the aggregate amount of Indebtedness secured by that Lien
never exceeds 100% of the fair market value of that property, (g) Liens on any
personal property or fixtures acquired by the Company or any Subsidiary after
the date of the Note and created contemporaneously with the date of that
acquisition to secure Indebtedness incurred in connection with the purchase,
rental or lease of such personal property or fixtures, and (h) any Lien
described in clauses (f) and (g) above resulting from renewing, extending, or
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refunding outstanding Indebtedness so long as the principal amount of the
Indebtedness so secured is not increased and that Lien is not extended to any
other property.
"Permitted Subsidiary Indebtedness " means as to a Subsidiary of the
Company, Indebtedness currently in existence and more fully described on Exhibit
D attached hereto.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participation or other equivalents (however designated) of
such Person's preferred or preference stock whether now outstanding or issued on
or after the date of the Note, and includes, without limitation, all classes and
series of preferred or preference
stock.
"Principal Amount" has meaning as defined in Section 1.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Redemption Date," when used with respect to the Note, means the date
fixed for such redemption by or pursuant to the Note.
"Redemption Price," when used with respect to the Note, means the price
at which it is to be redeemed pursuant to the terms hereof, plus accrued
interest as provided herein, expressed in either a number of Conversion Shares
into which the Note shall be converted in the event the Note is to be redeemed
for Shares or, in the event of any other redemption, a cash amount.
"Reference Date" has the meaning set out in Section 10.1.
"Registration Default Discount" shall have the meaning specified in
Section 5.6.
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated July 28, 2000 executed by the Company for the benefit of Lender.
"Required Filing Dates" has the meaning specified in Section 6.7.
"Rule 144" means Rule 144, as amended, promulgated by the Commission
pursuant to the Securities Act.
"Secured Senior Indebtedness " means Indebtedness senior in right of
payment to the Note, which Indebtedness is limited to Indebtedness incurred
pursuant to that certain Accounts Receivable Purchase Agreement dated July 7,
2000, or any extension or renewal thereof, with Silicon Valley Financial
Services, which Indebtedness may not at any time exceed $1,000,000.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time by the Commission pursuant
thereto.
"Shares" means the common stock, par value U.S.$0.0001, of the Company
(and all other (if any) shares or stock resulting from any sub-division,
consolidation or reclassification of such shares).
"Stated Maturity" when used with respect to any Indebtedness or any
instalment of principal thereof or interest thereon, means the date specified in
such Indebtedness as the fixed date on which the
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principal of such Indebtedness or such instalment of principal or interest is
due and payable.
"Stock Exchange Business Day" means any day (other than a Saturday or
Sunday) on which OTC is providing quotes or the Alternative Stock Exchange is
open for business.
"Subordinated Obligation" means any Indebtedness of the Company
outstanding on such date which is contractually subordinate or junior in right
of payment to the Note. Notwithstanding the immediately preceding sentence, any
shares of Preferred Stock issued by any Subsidiary shall, for purposes of this
definition, be treated as Subordinated Obligations.
"Subsidiary" of any Person means any Corporation of which at least a
majority of the shares of stock having by the terms thereof ordinary voting
power to elect a majority of the Board of Directors of such Corporation
(irrespective of whether or not at the time stock of any other class or classes
of such Corporation shall have or might have voting power by reason of the
happening of any contingency) is directly or indirectly owned or controlled by
any one of or any combinations of the Company or one or more of its
Subsidiaries.
"Temporary Conversion Price" has the meaning specified in Section
10.1.10.
"U.S. Person" means any Person who is a "U.S. person" as defined in
Regulation S.
"Vice President," when used with respect to the Company, means any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president."
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed in its corporate name by the undersigned duly authorized officers of
the Company.
Dated as of July 28, 2000.
FIBERCHEM, INC.
By: /s/ Melvin W. Pelley
-----------------------
Name: Melvin W. Pelley
-----------------------
Title Secretary & CFO
-----------------------
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EXHIBIT A
NOTEHOLDER'S CONVERSION NOTICE
12% SENIOR CONVERTIBLE PROMISSORY NOTE
To: The Company
The undersigned Holder of the12% Senior Convertible Promissory Note
(the "Note") in the aggregate principal amount of U.S.$_______________
tendered herewith hereby irrevocably exercises the option to convert such
Note into shares of Common Stock (this and other capitalised terms used but
not defined herein have the meanings ascribed to such terms in the Note) in
accordance with the terms of the Note and directs that the Conversion Shares
issuable and deliverable upon such conversion be issued and delivered to the
undersigned in the name and at the address set forth below.
Provided the Conversion Shares are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act of 1933, as amended (the
"Securities Act"), the undersigned Holder (and any Person to which the
Conversion Shares are to be issued other than the undersigned Holder) hereby
certifies to the Company that it:
(1) acknowledges that the Conversion Shares have not been
registered under the Securities Act and may not be offered or sold within the
United States or to, or for the benefit of, U.S. persons except as permitted
below;
(2) understands and agrees that within two years after the date of
original issuance of the Note or within three months after it ceases to be an
affiliate (within the meaning of Rule 144 under the Securities Act) of the
Company, the Conversion Shares may be resold, pledged or transferred only (i) to
the Company, (ii) pursuant to offers and sales to non-U.S. persons that occur
outside the United States in a transaction meeting the requirements of Rules 901
through 905 of Regulation S under the Securities Act, (iii) pursuant to an
exemption from the registration requirements of the Securities Act provided by
Rule 144 (if applicable) under the Securities Act, or (iv) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States;
(5) understands that the certificates representing the Conversion
Shares will bear a restrictive legend describing the foregoing restrictions,
unless otherwise agreed by the Company.
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If the Conversion Shares are to be issued in the name of a Person other
than the undersigned, the undersigned Holder will pay all transfer taxes payable
with respect thereto and is delivering herewith a certificate in proper form
certifying that the applicable restrictions on transfer have been complied with.
DATE: _______________
______________________________
Name of Lender
______________________________
Signature(s) of Lender
Name(s) for Registration
of Share Certificates (if
different than Lender): ______________________________
______________________________
Signature(s) of such Person
Address for Delivery
of Share Certificates ______________________________
______________________________
______________________________
______________________________
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EXHIBIT B
ANNUAL REPORTING CERTIFICATE
To: Lender
THAT, the undersigned duly elected and authorized Chief Financial Officer
of FiberChem, Inc. a Delaware corporation (the "Company"), in compliance with
the 12% Senior Convertible Note dated as of [____________] (the "Note") does
hereby certify that:
(a) Attached hereto is a copy of the Annual Report on Form 10-K
for the fiscal year ending September 30, ______.
(b) To the knowledge of the Company, no Default or Event of
Default with respect to the Note has occurred and is continuing as of the date
of this Certificate.
(c) As of the date hereof, the Company is in compliance with the
requirements of the Note.
All terms used and not otherwise defined herein shall have their
respective meanings as set forth in the Note.
DATE: _______________
___________________________
Chief Financial Officer
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EXHIBIT C
DESIGNATED INDEBTEDNESS
1. 8% Senior Notes due February 15, 2002; $172,000 outstanding as of June
30 and July 27, 2000
2. Secured Senior Indebtedness as described in this Indenture; no balance
outstanding as of June 30 and July 27, 2000.
3. Loans from Officers, Directors and Affiliates:
Privatbank Vermag AG; five 8% Notes, $50,000 each; due July 15, 2000,
extended to September 29, 2000
Walter Haemmerli; 9% Convertible Note due July 26, 2002; $50,000
G & G Diagnostics, LP II; 9% Convertible Note due July 26, 2002;
$25,000
G & G Diagnostics, LP II; 9% Convertible Note due July 26, 2002;
$25,000
Melvin W. Pelley; 9% Convertible Note due July 27, 2002; $25,000
Melvin W. Pelley; 9% Convertible Note due September 28, 2002; $40,000
Melvin W. Pelley; 12% Convertible Note due January 11, 2003; $200,000
4. Entrenet Group, LLC; 10% subordinated convertible note due April 11,
2001; $126,500; effective upon consummation of the Arrangement
Agreement, July 27, 2000
5. Indebtedness incurred in connection with the issuance of the
Convertible Preferred Stock of the Company issued on or about July 28,
2000, which Preferred Stock has been placed with the assistance of RP&C
Limited.
6. $1,350,000 of Indebtedness reflected by that certain 12% Convertible
Debentures issued by the Company and dated on or about July 28, 2000.
7. Additional Indebtedness, which in the aggregate and when included with
the Indebtedness represented by the Debentures, and the Indebtedness
represented by the instruments referenced in paragraphs 5 and 6 above
does not exceed $5 million, provided such additional Indebtedness has
on the whole terms no more favorable to the holders of such
Indebtedness as the terms of the Debentures or the Senior Convertible
Note referenced in paragraph 6 above. Through August 14, such
additional Indebtedness may only be placed using the assistance of the
Agent or a Person approved in writing by Agent.
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EXHIBIT D
PERMITTED SUBSIDIARY INDEBTEDNESS
FBI ENVIRONMENTAL, INC.:
Indebtedness under Accounts Receivable Purchase Agreement dated July 7, 1998,
(Silicon Valley Bank) and any extension or renewal thereof. No balance
outstanding as of June 30 and July 27, 2000. This Indebtedness is also
referenced on Exhibit E as the Senior Secured Indebtedness
Deutsche Financial Services; Financing lease agreement; telephone equipment at
Carrollton, Texas; 48 monthly payments of $1,245.80 beginning May 2000
INTREX DATA COMMUNICATIONS CORP:
Advances to and expenses paid on behalf of Intrex by Intrex officers, directors
and affiliates; $360,985 at December 31, 1999.
Harvard Property (Metro crest) LP; Commercial lease agreement for facilities
Carrollton, Texas; 24 monthly rental payments of $5,812.12 beginning April 2000
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