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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
INTERNATIONAL META SYSTEMS, INC.
____________________________________________________________
(Name of Issuer)
Common Stock, $0.0001 par value
____________________________________________________________
(Title of Class of Securities)
45986B 10 8
____________________________________________________________
(CUSIP Number)
Amerscan Partners III, Limited Partnership
c/o Amerscan Capital Management Ltd.
Cedar House, 41 Cedar Avenue, Hamilton HM 12, Bermuda
Attention: Mr. Martin S. Albert, (1)(441) 295-2244
____________________________________________________________
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 15, 1997
____________________________________________________________
(Date of Event Which Requires Filing
of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with this statement. [ ]
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Page 1 of 9 pages
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SCHEDULE 13D
_________________________ __________________________
CUSIP NO. 45986B 10 8 PAGE 2 OF 9 PAGES
________________________________________________________________________________
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Amerscan Partners III, Limited Partnership
_______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
_______________________________________________________________________________
3 SEC USE ONLY
_______________________________________________________________________________
4 SOURCE OF FUNDS
WC
_______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) or 2(e) [ ]
N/A
_______________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
________________________________________________________________________________
<TABLE>
<S> <C> <C>
7 SOLE VOTING POWER
$1,500,000 convertible into shares of Common
Stock at the option of the Reporting Person on
the terms and conditions of the Convertible
NUMBER OF Promissory Note attached as Exhibit 1 hereto.
SHARES ______________________________________________
BENEFICIALLY
OWNED BY SHARED VOTING POWER
EACH
REPORTING 8 0
PERSON ___________________________________________
WITH
SOLE DISPOSITIVE POWER
9 $1,500,000 convertible into shares of Common
Stock at the option of the Reporting Person on
the terms and conditions of the Convertible
Promissory Note attached as Exhibit 1 hereto.
______________________________________________
10 SHARED DISPOSITIVE POWER
0
</TABLE>
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
$1,500,000 convertible into shares of Common Stock at the option
of the Reporting Person on the terms and conditions of the
Convertible Promissory Note attached as Exhibit 1 hereto.
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
$1,500,000 convertible into shares of Common Stock at the option
of the Reporting Person on the terms and conditions of the
Convertible Promissory Note attached as Exhibit 1 hereto.
________________________________________________________________________________
14 TYPE OF REPORTING PERSON
PN
________________________________________________________________________________
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ITEM 1. SECURITY AND ISSUER.
The statement on Schedule 13D relating to the common stock, $0.0001 par
value per share, of International Meta Systems, Inc. (the "Company Common
Stock"), a Delaware corporation (the "Company"), as previously filed by Paragon
Limited Partnership, and as previously amended by Paragon Limited Partnership,
Den Norske Krigsforsikring for Skib, Investeringsselskapet Amandus AS, A/S
Selvaag Invest, Andreas Ugland, Woodbridge Asset Management Limited, J. Arthur
Olafsen, Pollex A/S, Martin S. Albert, Filab A/S and Bent Aasnaes (collectively
the "Prior Reporting Persons") is hereby amended and supplemented with respect
to the items set forth below, including the addition of a new Reporting Person
for which this filing is being made.
ITEM 2. IDENTITY AND BACKGROUND.
(a), (b), (c) and (f) This amendment is being filed by Amerscan Partners
III, Limited Partnership, an exempted limited partnership organized under the
laws of Bermuda ("Amerscan Partners III" or the "Reporting Person").
The sole general partner of Amerscan Partners III is Amerscan Capital
Management Ltd., an exempted limited duration company organized under the laws
of Bermuda ("Amerscan Capital Management").
Amerscan Partners III and Amerscan Capital Management are principally
engaged in the business of investing in the securities of emerging growth
companies. The address of the principal business and registered office of
Amerscan Partners III and Amerscan Capital Management is Cedar House, 41 Cedar
Avenue, Hamilton HM 12, Bermuda.
The name, citizenship, business or residence address and present principal
occupation or employment of each of Amerscan Capital Management's officers and
directors, and the name and principal address of any corporation or other
organization in which such employment is conducted, are set forth on Schedule
A-1 hereto, which is incorporated herein by reference.
Mr. Martin Albert serves as a director and Deputy Chairman, Mr. Rolv
Norderhaug serves as Vice President and a director and Mr. Erik Tiller serves
as a director, of Amerscan Capital Management. Messrs. Albert, Norderhaug and
Tiller also serve as directors and officers of Paragon Capital Management LLC,
an exempted limited liability company organized under the laws of the Cayman
Islands, British West Indies ("Paragon Capital Management"). Paragon Capital
Management is the sole general partner of Paragon Limited Partnership, an
exempted limited partnership organized under the laws of the Cayman Islands,
British West Indies ("Paragon"). As of February 15, 1996, Paragon beneficially
owns 2,000,000 shares of Company Common Stock, and, subject to
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the terms of the Shareholders Agreement, had the sole power to vote
and the sole power to dispose of such shares.
As of March 26, 1996, Woodbridge Capital Management Limited, an exempted
limited company incorporated under the laws of Bermuda ("Woodbridge"),
beneficially owned 266,667 shares of Company Common Stock, and, subject to the
terms of the Shareholders Agreement, had the sole power to vote and the sole
power to dispose of such shares. Woodbridge purchased such shares of Company
Common Stock on March 26, 1996. Mr. Tiller is a controlling person of
Woodbridge.
As of March 26, 1996, Mr. Albert beneficially owned 133,333 shares of
Company Common Stock, and, subject to the terms of the Shareholders Agreement,
had the sole power to vote and the sole power to dispose of such shares. Mr.
Albert purchased such shares of Company Common Stock on March 26, 1996.
Mr.Albert is also a director of Amerscan, Inc. ("Amerscan, Inc."), TTI Holdings
Inc., Transitional Technology, Inc., Nx Server Inc., Dolphin Interconnect
Solutions Inc., Parlance, Inc., NovaStor Corporation, Timpanogas Research Group
Inc. and OfficeNet, Inc.
The preceding summary of the interests of the Reporting Person and certain
of the Prior Reporting Persons is not intended to be complete and is qualified
in its entirety by reference to the full text of Schedule 13D (Amendment No. 1)
filed in respect of an event which occurred on March 26, 1996 and which is
incorporated herein by reference.
(d) and (e) During the last five years, the Reporting Person has not and
neither, to the best knowledge of the Reporting Person, have any of the
individuals named in this Item 2 or in Schedule A-1 hereto been: (i) convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors); or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The amounts and sources of funds used in connection with the consideration
for the extension of credit to the Company pursuant to the convertible
promissory note referred to below consisted of $1,500,000 contributed by
Amerscan Partners III from partnership funds.
ITEM 4. PURPOSE OF TRANSACTION.
Amerscan Partners III has extended credit to the Company pursuant to the
Convertible Promissory Note dated July 15, 1997, executed and delivered by the
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Company, payable to Amerscan Partners III and convertible into shares of the
Company Common Stock (the "Note") for investment purposes.
Pursuant to the Note, Amerscan Partners III agreed to loan the Company up
to $1,500,000 within 60 days of the date of the Note and the Company agreed to
repay Amerscan Partners III the principal sum of the Note, together with
accrued interest thereon at a rate of 8% per annum, on July 15, 1998. Under
the terms of the Note, Amerscan Partners III has the option to convert the
unpaid principal amount of the Note, together with accrued and unpaid interest
thereon, into shares of the Company Common Stock at a conversion rate equal to
the unpaid principal amount of the Note, together with accrued and unpaid
interest thereon, divided by the lower of: (i) $1.00 per share (subject to
adjustments for stock splits, reverse stock splits, stock dividends and/or
recapitalizations of the Company Common Stock), and (ii) 75% of the average of
the mean between the closing bid and asked price per share of the Company
Common Stock for the five trading days preceding the notice date of the
exercise of such option. Amerscan Partners III may exercise such option at any
time prior to July 15, 1998. Under the terms of the Note, so long as any
amount payable under the Note remains unpaid, Amerscan Capital Management shall
be entitled to appoint one member of the Company's Board of Directors and such
appointed director shall be further authorized to appoint the chairman of the
Finance Committee of the Board of Directors, such committee to consist of at
least three members of the Board of Directors of the Company. Pursuant to the
Security Agreement dated as of July 15, 1997 between the Company and Amerscan
Partners III (the "Security Agreement"), the Company has granted to Amerscan
Partners III a security interest in the Company's intellectual property
relating to its Meta 6000 chip to secure the obligations of the Company under
the Note.
For its services in arranging the extension of credit to the Company
pursuant to the Note, the Company has agreed to pay Amerscan, Inc., an
affiliate of Amerscan Partners III, an arrangement fee equal to 8% of the
aggregate amount borrowed by the Company under the Note. Such agreement is
evidenced by a letter agreement dated July 15, 1997 (the "Fee Letter") between
Amerscan, Inc. and the Company.
The preceding summary of certain provisions of the Note and the Security
Agreement is not intended to be complete and is qualified in its entirety by
reference to the full text of the Note, the Security Agreement and the Fee
Letter, copies of which are filed as Exhibits 1, 2 and 3 hereto, respectively,
and which are incorporated herein by reference.
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Other than as described above, Amerscan Partners III has no plans or
proposals that relate to or would result in any of the actions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a), (b) and (c) As of July 15, 1997, Amerscan Partners III beneficially
owned the right to convert the unpaid principal of, and interest on, the Note
(the original principal amount of which is $1,500,000), into shares of Company
Common Stock on the terms and conditions set out in the Note. Upon any such
conversion, Amerscan Partners III will sign an endorsement to the Shareholders
Agreement agreeing to be bound by the terms of such Shareholders Agreement as
though Amerscan Partners III were an original party thereto and will have the
sole power to vote and the sole power to dispose of such shares of Company
Common Stock subject to the terms of such Shareholders Agreement. A copy of
the Shareholders Agreement was filed as Exhibit 6 to Schedule 13D (Amendment
No. 1) filed in respect of an event which occurred March 26, 1996 and is
incorporated herein by reference.
(d) and (e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as provided in the Note, or as set forth herein, the Reporting
Person has not, nor, to the best of the Reporting Person's knowledge, have any
of the individuals named in Schedule A-1 hereto had any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of the Company, including, but not
limited to, transfer or voting of any securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or losses, or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Conformed copy of a Convertible Promissory Note dated as of July 15,
1997, executed and delivered by International Meta Systems, Inc. and
payable to Amerscan Partners III, Limited Partnership
2. Conformed copy of a Security Agreement dated as of July 15, 1997 between
International Meta Systems, Inc. and Amerscan Partners III, Limited
Partnership
3. Confirmed copy of a Fee Letter dated July 15, 1997 between Amerscan, Inc.
and International Meta Systems, Inc.
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SIGNATURE
After reasonable inquiry and to the best knowledge and belief of each of
the undersigned, each of the undersigned certifies that the information set
forth in this amendment to the statement on Schedule 13D is true, complete and
correct and that such statement, as amended hereby, is true, complete and
correct.
Dated: July 25, 1997
AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP
By AMERSCAN CAPITAL
MANAGEMENT LTD., as its
General Partner
By /s/ Martin S. Albert
--------------------
Martin S. Albert
Director and Deputy Chairman
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SCHEDULE A-1
DIRECTORS AND EXECUTIVE OFFICERS
OF AMERSCAN CAPITAL MANAGEMENT
The name, business or residence address, citizenship and present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is conducted, of
each of the directors of Amerscan Capital Management Ltd., a Bermuda exempted
limited duration company, is set forth below:
<TABLE>
<S> <C> <C>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND ADDRESS CITIZENSHIP
- ---- ------------------------------------- -----------
Executive Officers and Directors
James M. Keyes, Partner British
Chairman and Director Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Martin S. Albert, President and Chief Executive Officer Unites States of
Deputy Chairman and Director Dolphin Interconnect Solutions Inc. America
3625 East Thousand Oaks Blvd.
Suite 50
Westlake Village, California 91362
Rolv E. Norderhaug, President Norway
Vice President and Director Hexagon Capital Management Ltd.
Paradise View
9 Rocklands Drive
Warwick WK07
Bermuda
Erik C. T. Tiller, Vice President Norway
Director Amerscan, Inc.
3609 East Thousand Oaks Blvd.
Suite 309
Westlake Village, California 91362
Michael Wood, Corporate Administrator Canadian
Secretary Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
1. Conformed copy of a Promissory Note dated as
of July 15, 1997, executed and delivered by
International Meta Systems, Inc. and payable
to Amerscan Partners III, Limited Partnership
2. Conformed copy of a Security Agreement dated
as of July 15,1997 between International Meta
Systems, Inc. and Amerscan Partners III,
Limited Partnership
3. Conformed copy of a Fee Letter dated July 15,
1997 between Amerscan, Inc. and International
Meta Systems, Inc.
</TABLE>
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Exhibit 1
Conformed Copy
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). NEITHER THIS NOTE NOR ANY OF SUCH SECURITIES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE ACT.
CONVERTIBLE PROMISSORY NOTE
US$1,500,000.00 July 15, 1997
FOR VALUE RECEIVED, INTERNATIONAL META SYSTEMS, INC., a corporation
organized and existing under the laws of the State of Delaware, USA, (the
"Company"), hereby promises to pay to AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP (the "Holder") for account of its principal office, located on the
date hereof at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, at The
Chase Manhattan Bank, London Branch (account name: "Amerscan Partners III,
Limited Partnership"), the principal sum of One Million Five Hundred Thousand
Dollars ($1,500,000) and any and all other amounts due hereunder, in lawful
money of the United States of America and in immediately available funds, on
the date and in the amount specified below, and to pay interest on the
outstanding principal amount hereof and any such other amount, at such office
and account, in like money and funds, for the period from and including the
date hereof to but excluding the date on which such principal amount shall have
been paid in full, at a rate of eight percent (8%) per annum, on the date
specified below. Interest hereunder shall be calculated on the basis of a year
of 360 days and the actual number of days elapsed.
The principal amount of this Note shall be lent to the Company by the
Holder in three equal installments of Five Hundred Thousand Dollars ($500,000)
each. The first such loan shall be made as soon as the conditions precedent
set forth in Section 3 hereof shall have been fulfilled. The second and third
such loans shall be made by the Holder within three (3) business days of the
Holder's receipt of the written request of the Company therefor, but in any
event no later than sixty (60) days after the date of this Note, provided that
the conditions precedent set forth in Section 3 hereof have been fulfilled on
or prior to the date of the making of each such loan. The proceeds of each
such loan shall be paid to the Company's account at Merrill Lynch & Co. by
means of wire transfer.
The Company shall pay to the Holder the outstanding principal amount of
this Note, and this Note shall mature, on July 15, 1998. Accrued interest on
the outstanding principal amount of this Note shall be due and payable on July
15, 1998, and shall be payable only to the extent this Note is not converted in
whole or in part as set forth herein. Prepayments of principal,
<PAGE> 2
together with accrued interest thereon up to but excluding the date of payment,
may be made at any time without penalty.
1. CONVERSION
1.1 OPTIONAL CONVERSION
The entire outstanding principal amount of this Note, together with any
accrued and unpaid interest thereon up to but excluding the Conversion Date (as
defined below), shall be convertible at any time, at the option of the Holder,
into shares of common stock of the Company (the "Shares"). The number of
Shares of the Company to be issued upon such conversion shall be equal to the
quotient obtained by dividing (a) the outstanding principal amount of this Note
on the Conversion Date plus any accrued and unpaid interest thereon to but
excluding the Conversion Date by (b) the lower of (i) US$1 per Share, as
adjusted for any stock splits, reverse stock splits, stock dividends and/or
recapitalizations after the date hereof, and (ii) Seventy-Five Percent (75%) of
the average of the mean between the closing bid and asked price per Share for
the five (5) trading days immediately preceding the date of the Conversion
Notice if on such date the Shares are traded and listed on a Stock Exchange. As
used herein, "Conversion Date" shall mean the date specified as such in a
Conversion Notice, and "Stock Exchange" shall mean the American Stock Exchange,
the New York Stock Exchange, the Nasdaq National Market System, the Nasdaq
SmallCap Market or the NASD Bulletin Board (the Over the Counter Market), as
applicable. In addition, the Company shall have the right to require the
Holder, upon written request of the Company at any time on or prior to July 15,
1998, to convert the entire outstanding principal amount of this Note, together
with any accrued interest thereon up to but excluding the Conversion Date, on
and subject to the terms specified in this Section 1, if on the date of such
written request by the Company, the mean between the closing bid and asked
price per Share is greater than US$2 per Share, as adjusted for any stock
splits, reverse stock splits, stock dividends and/or recapitalizations after
the date hereof.
1.2 CONVERSION PROCEDURE
If the Holder wishes (or is required) to convert this Note into Shares in
accordance with Section 1.1 hereof, the Holder shall deliver a Conversion
Notice in the form attached as Annex A hereto (a "Conversion Notice") to the
Company in accordance with Section 7.2 hereof.
1.3 DELIVERY OF SHARE CERTIFICATES; FRACTIONAL SHARES
As promptly as practicable after return of this Note to the Company by the
Holder in accordance with Section 1.2 hereof, the Company (at its expense)
shall issue and deliver to the Holder a certificate or certificates for the
number of full Shares issuable upon conversion of this Note. No fractional
shares shall be issued upon conversion of this Note. In lieu of any fractional
share to which the Holder would otherwise be entitled, such fractional share
shall be rounded to the nearest whole Share.
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1.4 RESERVATION OF SHARES ISSUABLE UPON CONVERSION
At all times while the Holder retains the option to convert this Note into
Shares of the Company, the Company shall reserve and keep available out of its
authorized but unissued Shares (which shall not be subject to pre-emption or
any similar rights) such number of its Shares as shall be sufficient to effect
the conversion of this Note.
1.5 REGISTER; REPLACEMENT NOTES
The Company shall maintain a register in which it shall provide for the
registration of this Note and any transfers of this Note. The Holder shall be
entitled to have this Note subdivided by exchange for Notes of lesser
denominations in connection with an assignment of all or any portion of this
Note by the Holder pursuant to Section 7.6 hereof. Whenever this Note is
surrendered for exchange, the Company shall execute the Note(s) which the
Holder and/or its assignee is entitled to receive in connection with such
exchange. Each Note issued upon any exchange of this Note shall be the valid
obligation of the Company, evidencing the same debt, and entitled to the same
benefits, as this Note.
2. BOARD APPOINTMENT RIGHT
Until all principal of, interest on and any other amount owing under this
Note shall have been paid in full, Amerscan Capital Management Ltd., the
general partner of the Holder, or its designee, shall have the right to appoint
one (1) member to the Board of Directors of the Company. Such member of the
Board of Directors, shall have the right to appoint the chairman of the Finance
Committee of the Board of Directors, which shall consist of at least three (3)
members of the Board of Directors.
3. CONDITIONS PRECEDENT
(a) The obligation of the Holder to make its initial loan hereunder is
subject to the receipt by the Holder on or prior to the date hereof of (i) this
Note, (ii) the Security Agreement dated as of the date hereof between the
Company and the Holder (as amended, supplemented or otherwise modified and in
effect from time to time, the "Security Agreement") and (iii) the letter
agreement dated the date hereof between Amerscan, Inc. and the Company (the
"Fee Letter"), each duly executed and delivered by the Company.
(b) The obligation of the Holder to make each of the second and third
loans hereunder to the Company is subject to the further conditions precedent
that (i) the Holder shall have received a written request from the Company for
such loan and (ii) both immediately prior to the making of such loan and after
giving effect thereto: (A) no Event of Default shall have occurred and be
continuing; and (B) the representations and warranties made by the Company in
Section 4 hereof shall be true and correct on and as of the date of the making
of such loan with the same force and effect as if made on and as of such date.
3
<PAGE> 4
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Holder that:
(a) The Company has taken all necessary action to authorize the execution,
delivery and performance of this Note, the Security Agreement and the Fee
Letter (including, without limitation, obtaining the approval thereof by the
Board of Directors of the Company).
(b) Each of this Note, the Security Agreement and the Fee Letter has been
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms;
(c) No consent, approval or authorisation of any third party is required
for the execution, delivery or performance of this Note, the Security Agreement
or the Fee Letter by the Company which has not been received, and the
execution, delivery and performance of this Note, the Security Agreement or the
Fee Letter do not and will not violate, conflict with, result in a violation or
breach of, or constitute a default under, any law, rule, regulation or judicial
or administrative decision to which the Company may be subject, the Company's
Certificate of Incorporation or By-Laws, or any indenture, agreement or
instrument to which the Company or any of its property is subject, or which
would create a mortgage, pledge, lien, charge, debenture, assignment,
hypothecation or security interest or any other agreement or arrangement having
the effect of conferring security (hereinafter a "Lien") or restriction of any
kind upon the Company or any of its property or revenues;
(d) The Company's obligations under this Note, the Security Agreement and
the Fee Letter rank in all respects at least pari passu in priority of payment
and in right of security with all of the Company's other unsecured
indebtedness, whether now or hereafter incurred; and
(e) No Event of Default (as hereinafter defined) has occurred and is
continuing, nor has any event occurred which but for the giving of notice or
the lapse of time or both might constitute an Event of Default.
5. COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with the Holder that:
(a) The Company will ensure that its obligations under this Note, the
Security Agreement and the Fee Letter will at all times constitute its direct,
general and unconditional obligations and rank in all respects at least pari
passu in priority of payment and in right of security with all of the Company's
other unsecured indebtedness;
(b) The Company will pay all and any taxes, levies, duties, imposts,
charges and withholdings of any nature whatsoever (hereinafter "Taxes") owing
by the Company as a result of the conversion of this Note in accordance with
Section 1.1 hereof;
4
<PAGE> 5
(c) The Company will promptly, but in no event later than three business
days after notice to the Company of the occurrence of any of the events
described in clauses (i) through (v) (inclusive) of this Section 5(c), notify
the Holder by facsimile of the particulars of such occurrence and the action,
if any, proposed to be taken with respect thereto: (i) any Event of Default
(as hereinafter defined) or any event which, but for the giving of notice or
the lapse time or both would constitute an Event of Default; (ii) any
involuntary Lien shall have been created upon the property of the Company in an
amount which, if the Company were required to pay such amount, is likely to
materially and adversely affect the Company's ability to perform its
obligations under this Note or the Security Agreement; (iii) any judgment
against the Company shall have been entered on a claim not covered by insurance
in an amount which, if the Company were required to pay such amount, is likely
to materially and adversely affect the Company's ability to perform its
obligations under this Note or the Security Agreement; (iv) any Taxes are
imposed upon any payments made hereunder; or (v) any other event or condition
shall occur or exist with respect to the Company which is likely to materially
and adversely affect the Company's ability to perform its obligations under
this Note or the Security Agreement;
(d) The Company will furnish, or cause to be furnished, to the Holder (i)
simultaneously with the filing thereof with the Securities and Exchange
Commission, the annual report and financial statements of the Company for the
relevant financial year of the Company bearing an auditor's report, (ii) as
soon as the same are available (and in any event within 50 days after the end
of each fiscal quarter), the unaudited financial statements of the Company for
such fiscal quarter (including, without limitation, any management reports or
accounts included in the Company's publicly filed reports) and (iii) such
additional documents, opinions, certificates or other instruments or
information as the Holder may from time to time request;
(e) The Company will use its best efforts to obtain and maintain all of
the permits, consents, authorizations and approvals which are reasonably
necessary or advisable to enable it to observe and perform the relevant terms
and conditions of this Note, the Security Agreement and the Fee Letter;
(f) The Company will not, without prior notice to the Holder, create,
assume, permit or suffer to exist any Lien on any of the Company's assets or
revenues (other than Liens arising pursuant to the Security Agreement);
(g) The Company will not, without the prior written consent of the Holder,
(i) issue in excess of 100,000 shares of capital stock of any class other than
those issued on the date hereof or those Shares necessary to effect the
conversion of the principal amount of this Note in accordance with Section 1.1
hereof and such number of Shares as may be necessary to effect the conversion
of any accrued and unpaid interest on this Note in accordance with Section 1.1
hereof, or (ii) undertake any stock split, reverse stock split,
recapitalization or stock dividend; and
(h) Subject to the terms of any agreement entered into by the Company
prior to the date of this Note, the Company will not sell, assign, transfer or
otherwise dispose of all or any part of its interests in the Collateral under
(and as defined in) the Security Agreement without the prior written consent of
the Holder.
5
<PAGE> 6
6. EVENTS OF DEFAULT; ACCELERATION
If one or more of the following events (each, an "Event of Default") shall
occur and be continuing:
(a) The Company shall have failed to pay when due any principal of or
interest on this Note or any other amount due hereunder, under the Security
Agreement or under the Fee Letter; or
(b) Any representation or warranty made by the Company in this Note or the
Security Agreement, or in any statement made in any certificate, report or
financial statement furnished by the Company to the Holder, shall prove to have
been materially false or misleading when made in light of the circumstances in
which it was made; or
(c) The Company shall fail to perform or comply with any of the covenants
or provisions set forth in this Note or the Security Agreement which failure
remains unremedied for a period of 10 days after written notice thereof has
been given to the Company by the Holder; or
(d) The Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or all or a substantial part of its assets, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the United States Bankruptcy Code of 1978, as amended (as now or
hereafter in effect, the "Bankruptcy Code"), (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts, (v) fail
to controvert in a timely and appropriate manner, or acquiesce in writing to,
any petition filed against it in an involuntary case under the Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(e) A proceeding or case shall be commenced, without the application or
consent of the Company, in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company or of all or a substantial
part of its assets, (iii) similar relief in respect of the Company under any
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
60 or more days; or any order for relief against the Company shall be entered
in an involuntary case under the Bankruptcy Code; or
(f) Subject to the terms of any agreement entered into by the Company
prior to the date of this Note, the Liens created by the Security Agreement
shall at any time not constitute a valid and perfected, first priority Lien on
the collateral described therein in favor of the Holder, free and clear of all
other Liens, or the Security Agreement shall cease to be in full force and
effect or shall be declared null and void or the validity or enforceability
thereof shall be contested by the Holder;
6
<PAGE> 7
Thereupon: (i) in the case of an Event of Default other than one referred
to in clause (d) or (e) above, the Holder may, by notice to the Company, cancel
the Holder's obligation to make further loans hereunder and declare the
principal amount then outstanding of, the accrued interest on, and all other
amounts due under, this Note to be forthwith due and payable, whereupon such
amounts shall be immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; and (ii) in the case of the occurrence of an Event of
Default referred to in clause (d) or (e) above, the obligation of the Holder to
make any further loans hereunder shall automatically be cancelled and the
principal amount then outstanding of, the accrued interest on, and all other
amounts due under, this Note shall automatically become immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Company.
7. MISCELLANEOUS
7.1 WAIVER
No failure on the part of the Holder to exercise and no delay in
exercising, and no course of dealing with respect to, any right, power,
privilege or remedy under this Note shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power, privilege or remedy
under this Note preclude any other or further exercise thereof or the exercise
of any other right, power, privilege or remedy. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
7.2 NOTICES
All notices and other communications provided for herein (including,
without limitation, any modifications of, or waivers or consents under, this
Note) shall be given or made by facsimile or by hand in writing and transmitted
by facsimile, mailed or delivered to, in the case of the Company, its "Address
for Notices" specified below its name on the signature page hereof; and, in the
case of the Holder, c/o Amerscan, Inc., 3609 East Thousand Oaks Boulevard,
Suite 209, Westlake Village, California 91362, USA, Attention: Mr. Martin S.
Albert, Telephone No. 805-371-7715, Fax No. 805-497-7154, or, as to any party,
at such other address as shall be designated by such party in a notice to the
other party. All such communications shall be deemed to have been duly given
when transmitted by facsimile or personally delivered in the manner described
above or, in the case of a mailed notice, upon receipt, in each case, given or
addressed as aforesaid.
7.3 EXPENSES
The Company agrees to pay or reimburse the Holder for (a) all reasonable
out-of-pocket costs and expenses of the Holder (including, without limitation,
the fees and expenses of counsel to the Holder) incurred prior to the
Conversion Date in connection with any amendment, supplement, modification or
waiver of any of the terms of this Note or the Security Agreement, (b) all
costs and expenses of the Holder (including the fees and expenses of counsel)
in connection with any default or Event of Default and any enforcement or
collection proceedings resulting therefrom and (c) all Taxes levied by any
governmental or revenue authority in respect of this Note.
7
<PAGE> 8
7.4 AMENDMENTS
This Note may be waived, amended or modified only by an instrument in
writing duly executed by the Company and the Holder. Any waiver, amendment or
modification effected in accordance with this Section 7.4 shall be binding upon
the Holder (and any securities into which this Note is convertible), each
future holder of all such securities and the Company.
7.5 SUCCESSORS AND ASSIGNS
This Note shall be binding upon, and inure to the benefit of, the Company
and the Holder and their respective successors and permitted assigns.
7.6 ASSIGNMENTS AND PARTICIPATIONS
The Company may not assign any of its rights or obligations under this
Note without the prior written consent of the Holder. The Holder may assign
this Note or sell a participation in this Note to any person or entity;
provided that any assignment of this Note shall only be made with the prior
written consent of the Company.
7.7 SURVIVAL
The obligations of the Company under Section 5(b) and Section 7.3 hereof
shall survive the repayment of the principal amount or the conversion of this
Note.
7.8 HEADINGS
The section headings appearing herein are included solely for convenience
of reference and are not intended to affect the interpretation of any provision
of this Note.
7.9 GOVERNING LAW; SUBMISSION TO JURISDICTION
This Note shall be governed by, and construed in accordance with, the laws
of the State of California, United States of America. The Company hereby
irrevocably submits to the non-exclusive jurisdiction of the United States
District Court for the Central District of California or any court of the State
of California located in the County of Los Angeles for the purposes of any
action, suit or proceeding arising out of or relating to this Note or the
Security Agreement or any of the transactions contemplated hereby or thereby.
The Company irrevocably waives, to the fullest extent permitted by applicable
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum. The Company hereby irrevocably consents to the service of any and all
process in connection with any such suit, action or proceeding by mailing
copies of such process to it at its address provided in Section 7.2 hereof.
The Company agrees that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in any other jurisdiction by suit on
the judgment or in any other manner provided by law. Nothing in this Section
7.9 shall affect the right of the Holder to serve
8
<PAGE> 9
legal process in any other manner permitted by law or affect the right of the
Holder to bring any suit, action or proceeding against the Company or its
property in any other court or jurisdiction.
7.10 SEVERABILITY
If one or more provisions of this Note are held to be unenforceable under
applicable law, such provision(s) shall be excluded from this Note and the
balance of the Note shall be interpreted as if such provision(s) were so
excluded and shall otherwise be enforceable in accordance with its terms.
9
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
as of the day and year first above written at El Segundo, California.
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
-----------------------------
George W. Smith
Chief Executive Officer
Address for Notices
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
USA
Attention: Chief Executive Officer
Tel. 310-524-9300
Fax. 310-524-9303
10
<PAGE> 11
Annex A
CONVERSION NOTICE
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
USA
Attention: Chief Executive Officer
The undersigned hereby elects to convert the Convertible Promissory Note
dated July 15, 1997 in the principal amount of US$1,500,000 (the "Note")
pursuant to Section 1.1 of the Note into _____ of the shares of common stock of
International Meta Systems, Inc. (the "Company"). The Conversion Date shall be
______________.
The original Note, which shall be cancelled by the Company, accompanies
this Conversion Notice.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares of common stock for its own account for investment
purposes only, and not for resale or with a view to distribution of such shares
or any part thereof. Such shares should be registered in the name of
_________________________.
[NAME OF HOLDER]
By___________________
Name:
Title:
Date: _____________, 199__
11
<PAGE> 1
Exhibit 2
Conformed Copy
________________________________________________________________________________
SECURITY AGREEMENT
Dated as of July 15, 1997
between
INTERNATIONAL META SYSTEMS, INC.,
as the Borrower
and
AMERSCAN PARTNERS III, LIMITED PARTNERSHIP,
as the Lender
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Section 1. Definitions; Interpretation. 1
Section 2. Representations and Warranties. 3
Section 3. Collateral. 4
Section 4. Further Assurances; Remedies. 4
Section 5. Miscellaneous. 9
</TABLE>
<PAGE> 3
SECURITY AGREEMENT dated as of July 15, 1997 (this "Agreement") between
INTERNATIONAL META SYSTEMS, INC., a corporation organized and existing under
the laws of the State of Delaware (as borrower under the Note referred to below
and as pledgor hereunder, the "Borrower"), and AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP (as lender under the Note referred to below and as pledgee
hereunder, together with its successors and assigns in such capacity, the
"Lender").
WITNESSETH
WHEREAS, pursuant to the Convertible Promissory Note dated July 15, 1997
(as amended, supplemented or otherwise modified and in effect from time to
time, the "Note"), executed and delivered by the Borrower in favor of the
Lender, the Lender will make loans to the Borrower in an aggregate amount up to
but not exceeding US$1,500,000 to give the Borrower with working capital to
finance its product development, including, without limitation, the development
of the Borrower's Meta 6000 semiconductor chip (the "Meta 6000 Chip"); and
WHEREAS, it is a condition to the making of loans by the Lender pursuant
to the Note that the Borrower shall have executed and delivered this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; INTERPRETATION.
(a) Unless otherwise defined herein, terms defined in the Note are used
herein as therein defined. In addition, as used herein:
"Borrower" shall have the meaning specified in the preamble hereof.
"Collateral" shall have the meaning specified in Section 4 hereof.
"Copyright Collateral" shall mean all copyrights, copyright registrations
and applications for copyright registrations, including, without limitation,
all renewals and extensions thereof, the right to recover for all past, present
and future infringements thereof, and all other rights of any kind whatsoever
accruing thereunder or pertaining thereto, whether now owned or hereafter
acquired by the Borrower, that relate to or are associated with the Meta 6000
Chip.
"Default" shall mean any event which with notice or lapse of time or both
would become an Event of Default.
"Intellectual Property" shall mean, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral, together with
(a) all inventions, processes, production methods, proprietary information,
know-how and trade secrets used or useful in the development, manufacture,
marketing, distribution or sale of the Meta 6000 Chip and related products; (b)
all licenses or user or other agreements granted to the Borrower with respect
to any of the foregoing, in each case, whether now or hereafter owned or used,
including, without limitation, the licenses or other agreements with respect to
the Copyright Collateral, the Patent Collateral or the Trademark Collateral;
(c) all information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, engineering
reports, test reports, manuals, materials, standards, processing standards,
performance standards, catalogs,
<PAGE> 4
computer software and programs, and the like relating to the Meta 6000 Chip;
(d) all field repair data, sales data and other information relating to the
Meta 6000 Chip; (e) all accounting information which pertains to the
development, manufacture, marketing, distribution or sale of the Meta 6000 Chip
and all media in which or on which any of the information or knowledge or data
or records which pertain to the Meta 6000 Chip may be recorded or stored and
all computer programs used for the compilation or printout of such information,
knowledge, records or data; (f) all licenses, consents, permits, variances,
certifications and approvals of government agencies now or hereafter held by
the Borrower pertaining to the development, manufacture, marketing,
distribution or sale of the Meta 6000 Chip; and (g) all causes of action,
claims and warranties now or hereafter owned or acquired by the Borrower in
respect of the items listed above.
"Lender" shall have the meaning specified in the preamble hereof.
"Meta 6000 Chip" shall have the meaning specified in the first recital
hereto.
"Note" shall have the meaning specified in the first recital hereof.
"Patent Collateral" shall mean all patents and patent applications,
including, without limitation, the inventions and improvements described and
claimed therein together with the reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, all income, royalties, damages
and payments now or hereafter due and/or payable under, and with respect
thereto, including, without limitation, damages and payments for past or future
infringements thereof, the right to sue for past, present and future
infringements thereof, and all rights corresponding thereto throughout the
world, whether now owned or hereafter acquired by the Borrower, in each case,
relating to or are associated with the Meta 6000 Chip, including any of those
that relate to any and all electrical properties of the Meta 6000 Chip, such as
the net list and logic design, and any of those that relate to any and all
physical properties of the Meta 6000 Chip, including, without limitation, the
circuit design and layout of the Meta 6000 Chip and any and all Meta 6000 micro
architectural specifications.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, trust, unincorporated organization, government (or
any agency, instrumentality or political subdivision thereof).
"Secured Obligations" shall mean (a) the principal of and interest on the
Note and all other amounts from time to time owing to the Lender under the Note
and (b) all amounts from time to time owing to the Lender by the Borrower
hereunder.
"Trademark Collateral" shall mean all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and applications for
trademark and service mark registrations, including, without limitation, all
renewals of trademark and service mark registrations, all rights corresponding
thereto throughout the world, the right to recover for all past, present and
future infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product
lines and goodwill of the business connected with the use of, and symbolized
by, each such trade name, trademark and service mark, whether now owned or
hereafter acquired by the Borrower in each case, relating to or are associated
with the Meta 6000 Chip (including, without limitation, the trade name "Meta
6000"). Notwithstanding the foregoing, the Trademark Collateral does not and
shall not include
2
<PAGE> 5
any item which would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect in the State of California from time to time.
(b) Except as otherwise expressly provided herein, the following rules of
interpretation shall apply to this Agreement:
(i) the singular shall include the plural, and the plural shall include
the singular;
(ii) a reference to any agreement, note, contract or other document
(including, without limitation, the Note) shall mean such agreement, note,
contract or other document as amended, supplemented or otherwise modified and
in effect from time to time;
(iii) a reference to any law or statute shall include any amendment or
modification thereto and any rules or regulations issued thereunder;
(iv) a reference to any Person shall include its successors and permitted
assigns under any agreement, contract or other document; and
(v) a reference to a "Section" is a reference to a Section of this
Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Lender that:
(a) Subject to the terms of any agreement entered into by the Company
prior to the date of this Agreement, the Borrower is the sole legal and
beneficial owner of the Collateral in which it purports to grant a security
interest pursuant to Section 4 hereof, and no Lien exists or will exist in or
upon such Collateral at any time, except for the security interest in favor of
the Lender created or provided for herein, which security interest constitutes
a valid and enforceable first priority perfected security interest in and to
all of such Collateral;
(b) Subject to the terms of any agreement entered into by the Company
prior to the date of this Agreement, the Borrower owns and possesses the right
to use, and has done nothing to authorize or enable any other Person to use,
any Copyright Collateral, Patent Collateral or Trademark Collateral and all
registrations, if any, in respect of any such Copyright Collateral, Patent
Collateral or Trademark Collateral are valid and in full force and effect; and
(c) To the Borrower's knowledge, (i) there is no violation by others of
any right of the Borrower with respect to any Copyright Collateral, Patent
Collateral or Trademark Collateral and (ii) the Borrower is not infringing in
any respect upon the rights of any other Person in respect of any Copyright
Collateral, Patent Collateral or Trademark Collateral; and no proceedings have
been instituted or are pending against the Borrower or, to the Borrower's
knowledge, threatened, and no claim against the Borrower has been received by
the Borrower, alleging any such violation.
3
<PAGE> 6
SECTION 3. COLLATERAL.
As collateral security for the prompt payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the Secured Obligations, the
Borrower hereby grants to the Lender a security interest in all of the
Borrower's right, title and interest in, to and under the following property,
whether now owned by the Borrower or hereafter acquired and whether now
existing or hereafter coming into existence and wherever located (all such
property being collectively referred to herein as the "Collateral"):
(a) all Intellectual Property of the Borrower; and
(b) all fruits, products, income, proceeds, rents, revenues, accessions,
issues, profits, royalties, benefits, additions, substitutions and replacements
of and to any and all of the property of the Borrower described in clause (a)
of this Section 3 and, to the extent related to any property described in said
clause or such proceeds, any and all books, correspondence, records and other
papers.
SECTION 4. FURTHER ASSURANCES; REMEDIES.
In furtherance of the grant of the security interest pursuant to Section 4
hereof, the Borrower hereby agrees with the Lender as follows:
4.01 Delivery and Other Perfection.
(a) The Borrower shall:
(i) upon the request of the Lender, give, execute, deliver, file and/or
record any financing statement, notice, instrument, document, agreement or
other papers that may be necessary or desirable to create, preserve, perfect or
validate any security interest granted pursuant hereto to enable the Lender to
exercise and enforce its rights hereunder with respect to such security
interest;
(ii) keep full and accurate books and records relating to the Collateral,
and stamp or otherwise mark such books and records in such manner as the Lender
may reasonably require in order to reflect the security interests granted by
this Agreement;
(iii) furnish to the Lender from time to time (but, unless a Default or
Event of Default shall have occurred and be continuing, no more frequently than
quarterly) statements and schedules further identifying and describing the
Copyright Collateral, the Patent Collateral and the Trademark Collateral,
respectively, and such other reports in connection with the Copyright
Collateral, the Patent Collateral and the Trademark Collateral, as the Lender
may reasonably request, all in reasonable detail;
(iv) promptly upon the request of the Lender, following receipt by the
Lender of any statements, schedules or reports pursuant to clause (iii) above
or otherwise, modify this Agreement to include a description of any item of
Intellectual Property which becomes part of the Collateral under this
Agreement;
4
<PAGE> 7
(v) permit representatives of the Lender, upon reasonable notice, at any
time during normal business hours to inspect and make abstracts from its books
and records pertaining to the Collateral, and permit representatives of the
Lender to be present at the Borrower's place of business to receive copies of
all communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by the Borrower with respect
to the Collateral all in such manner as the Lender may require; and
(vi) at any time or from time to time, upon request of the Lender, cause
the Lender to be listed as the lienholder on any certificate of title or
ownership covering any of the Collateral and promptly deliver evidence of the
same to the Lender.
(b) The Borrower hereby authorizes the Lender to the fullest extent
permitted by law to furnish notices and effect registrations and other
additions as required under Section 4.01(a).
(c) It is the intention of the Borrower that the continuing grant of the
security interest provided for in this Agreement shall remain in effect as
security for the payment and performance of all of the Secured Obligations,
whether presently existing or hereinafter incurred by future advances or
otherwise, until the same are repaid by the Borrower in full.
(d) The Borrower hereby agrees that it shall pay any state duties or other
fees or Taxes levied by, or payable to, any governmental authority in
connection with any and all recordations, registrations and filings made
pursuant to Section 4.01(a) relating to the security interest granted hereby or
the perfection thereof.
4.02 Other Financing Statements and Liens. Without the prior written
consent of the Lender, the Borrower shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Lender is not named as the sole secured party.
4.03 Preservation of Rights. The Lender shall not be required to take
steps necessary to preserve any rights against prior parties to any of the
Collateral.
4.04 Special Provisions Relating to Certain Collateral
(a) For the purposes of enabling the Lender to exercise rights and
remedies under Section 4.05 hereof (in the event of an unremedied default) at
such time as the Lender shall be lawfully entitled to exercise such rights and
remedies, and for no other purpose, the Borrower hereby grant to the Lender, to
the extent assignable, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to the Borrower) to use,
assign, license or sublicense any of the Intellectual Property (other than the
Trademark Collateral or goodwill associated therewith) now owned or hereafter
acquired by the Borrower, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may
be recorded or stored and to all computer programs used for the compilation or
printout thereof.
(b) Notwithstanding anything contained herein to the contrary, but subject
to the provisions of Section 5(h) of the Note which limit the right of the
Borrower to dispose of its property, so long as no Event or Default shall have
occurred and be continuing, the Borrower
5
<PAGE> 8
may exploit, use, enjoy, protect, license and sublicense the Intellectual
Property in the ordinary course of its business. The exercise of rights and
remedies under Section 4.05 hereof by the Lender shall not terminate the rights
of the holders of any licenses or sublicenses theretofore granted by the
Borrower in accordance with the first sentence of this clause (b).
4.05 Events of Default, Etc. During the period in which an Event of
Default shall have occurred and be continuing:
(a) the Borrower shall, at the request of the Lender, assemble the
Collateral at such place or places, reasonably convenient to both the Lender
and the Borrower, designated at the request of the Lender;
(b) the Lender shall have all of the rights and remedies with respect to
the Collateral of a secured party under the Uniform Commercial Code (whether or
not in effect in the jurisdiction in which such rights and remedies are
asserted) and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the right,
to the maximum extent permitted by law, to exercise all consensual and other
powers of ownership pertaining to the Collateral as if the Lender were the sole
and absolute owner thereof (and the Borrower agrees to take all such action as
may be appropriate to give effect to such rights);
(c) the Lender may make any reasonable compromise or settlement deemed
desirable with respect to all of the Collateral or any part thereof and may
extend the time of payment, arrange for payment in installments, or otherwise
modify the terms of, all of the Collateral or any part thereof;
(d) the Lender in its discretion may, in its name or in the name of the
Borrower or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange for any
of the Collateral, but shall be under no obligation to do so; and
(e) the Lender may enforce its security interest in, foreclose on and take
possession of the Collateral or any part thereof, in each case, without
applying to any court or arbitral tribunal or otherwise and, thereafter, sell,
lease, assign or otherwise dispose of all or any part of such Collateral which
has come into the possession, custody or control of the Lender or any of its
agents, at such place or places as the Lender deems best, and for cash or for
credit or for future delivery (without thereby assuming any credit risk), at
public or private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such notice
as is required above or by applicable statute and cannot be waived), and the
Lender or any other Person may be the purchaser, lessee, assignee or recipient
of any or all of the Security so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely free from any claim or right of whatsoever kind, including any right
or equity of redemption (statutory or otherwise), of the Borrower, any such
demand, notice and right or equity being hereby expressly waived and released.
In the event of any sale, assignment, or other disposition of any of the
Trademark Collateral, the goodwill of the business connected with and
symbolized by the Trademark Collateral subject to such disposition shall be
included, and the Borrower shall supply to the Lender or its designee, for
inclusion in such sale, assignment or other disposition, all Intellectual
Property relating to such Trademark
6
<PAGE> 9
Collateral. The Lender may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for such sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
4.06 Removals, Etc. Without at least 30 days' prior written notice to the
Lender, the Borrower shall not (a) maintain any of its records relating to any
of the Collateral at any office or maintain its principal place of business at
any place other than at the address indicated beneath its signature hereto or
(b) change its corporate name, or the name under which it does business, from
the name shown on the signature pages hereto.
4.07 Private Sale. The Lender shall incur no liability as a result of the
sale of the Collateral, or any part thereof, at any private sale pursuant to
Section 4.05 hereof conducted in a commercially reasonable manner. The
Borrower hereby waives any claims against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Lender accepts the first offer received and does not offer the Collateral
to more than one offeree.
4.08 Deficiency. If the process of sale, collection or other realization
of or upon the Collateral pursuant to Section 4.05 hereof are insufficient to
cover the costs and expenses of such realization and the payment in full of the
Secured Obligations, the Borrower shall remain liable for any deficiency.
4.09 Application of Proceeds. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by or on behalf of the Lender under this Section 4, shall be applied by the
Lender:
First, to the payment of the costs and expenses of such collection, sale
or other realization (if any) and the costs, fees, expenses and other amounts
owing to the Lender under Section 4.05 hereof;
Next, to the payment in full of the Secured Obligations, in each case,
equally and ratably in accordance with the amounts then due and owing; and
Finally, after payment in full of the foregoing, the payment to the
Borrower, or its successors or assigns, or as a court of competent jurisdiction
may direct, of any Collateral surplus then remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash and
other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reoganization, liquidation
or adjustment of debt of the Borrower.
4.10 Attorney-in-Fact. Without limiting any other rights or powers
granted by this Agreement to the Lender, upon the occurrence and during the
continuance of any Default or Event of Default, the Lender is hereby appointed
the attorney-in-fact of the Borrower for the purpose of carrying out the
provisions of this Section 4 and taking any action and executing any
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instruments which the Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, so
long as the Lender shall be entitled under this Section 4 to make collections
in respect of the Collateral, the Lender shall have the right and power to
receive, endorse and collect all checks and other instruments made payable to
the order of the Borrower representing any royalty, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
4.11 Perfection. Prior to or concurrently with the execution and delivery
of this Agreement, the Borrower shall file such financing statements and other
documents in such offices as the Lender may request to perfect the security
interests granted by Section 3 of this Agreement.
4.12 Termination. When all secured obligations have been paid in full and
the obligation of the Lender under the Note to make loans to the Borrower shall
have expired or been terminated, this Agreement shall terminate and the Lender
shall forthwith cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral and money received in respect thereof, to or on the order
of the Borrower.
4.13 Indemnity and Expenses.
(a) The Borrower agrees to indemnify the Lender from and against any and
all claims, losses, liabilities and expenses arising out of or resulting from
(i) this Agreement (including, without limitation, enforcement of this
Agreement) or (ii) any refund or adjustment of any amount paid or payable to
the Lender under or in respect of this Agreement, or any interest therein, that
may be ordered or otherwise required by any Person.
(b) The Borrower will, on demand, pay to the Lender the amount of all
expenses (including the fees and expenses of counsel and of experts and agents)
of, or incident to, the enforcement of any of the provisions of this Section 4,
or performance by the Lender of any obligations of the Borrower in respect of
the Collateral which the Borrower has failed or refused to perform, or any
actual or attempted sale, or any exchange, enforcement, collection, compromise
or settlement in respect of all of the Collateral or any part thereof, and for
the care of the Collateral and defending or asserting rights and claims of the
Lender in respect thereof, by litigation or otherwise, and all such expenses
shall be Secured Obligations.
4.14 Further Assurances. The Borrower agrees that, from time to time upon
the written request of the Lender, the Borrower will execute and deliver such
further documents and do such other acts and things as the Lender may
reasonably request in order fully to effectuate the purposes of this Agreement.
SECTION 5. MISCELLANEOUS.
5.01 No Waiver. No failure on the part of the Lender or any of its agents
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by the Lender or any of its agents of any
right, power or remedy hereunder preclude any other or further
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exercise thereof or the exercise of any other right, power or remedy. The
remedies provided herein are cumulative and are not exclusive of any remedies
provided by law.
5.02 Notices. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by facsimile or by hand in
writing and transmitted by facsimile, mailed or delivered to the intended
recipient at the "Address for Notices" specified below its name on the
signature pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to the other party. All such
communications shall be deemed to have been duly given when transmitted (if
sent by facsimile), when delivered (if personally delivered) or upon receipt
(if mailed), in each case, given or addressed as aforesaid.
5.03 Amendments and Waivers. This Agreement may be amended or modified
only by an instrument in writing signed by the Borrower and the Lender, and any
provision of this Agreement may be waived only by any instrument in writing
signed by the Lender. Any waiver shall be effective only in the specific
instance and for the specified purpose for which it was given.
5.04 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the Borrower,
the Lender and each holder of any of the Secured Obligations (provided,
however, that the Borrower shall not assign or transfer its rights hereunder
without the prior written consent of the Lender).
5.05 Agreement Supersedes; Effectiveness. This Agreement supersedes all
prior agreements, written or oral, among the parties with respect to the
subject matter of this Agreement.
5.06 Severability. If any provision hereof is invalid or unenforceable in
any jurisdiction, then, to the fullest extent permitted by law, (a) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Lender in order to carry out
the intentions of the parties hereto as nearly as may be possible and (b) the
invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.
5.07 Lender's Duty of Care. The Lender shall not have any duty of care
with respect to the Collateral, except to exercise reasonable care with respect
to the Collateral in its custody but shall be deemed to have exercised
reasonable care if it exercises the same degree of care and skill with respect
to the Collateral as a prudent Person would in the conduct of his or her own
affairs, or if the Lender takes such action with respect to the Collateral as
the Borrower requests in writing, but neither failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall be
deemed a failure to exercise reasonable care.
5.08 Security Interest Absolute. The rights and remedies of the Lender
hereunder, the security interests created hereby and the obligations of the
Borrower hereunder (commencing on the date hereof and until the Termination
Date) are absolute, irrevocable and unconditional, irrespective of:
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(a) any amendment to, waiver of, consent to or departure from, or failure
to exercise any right, remedy, power or privileges under or in respect of, any
of the Secured Obligations, or any other agreement or instrument relating
thereto;
(b) the acceleration of the maturity of any of the Secured Obligations or
any other modification of the time of payment thereof;
(c) any substitution, release or exchange of any other security for or
guarantee of any of the Secured Obligations or the failure to create, preserve,
validate, perfect or protect any other security interest granted to, or
purported to be granted to, or in favor of, the Lender; or
(d) any other event or circumstance whatsoever which might otherwise
constitute a legal or equitable discharge of a surety or a guarantor, it being
the intent of this Section 5.08 that the obligations of the Borrower hereunder
shall be absolute, irrevocable and unconditional under any and all
circumstances.
5.09 Reinstatement. This Agreement, the Secured Obligations and the
security interests created hereunder shall automatically be reinstated if and
to the extent that for any reason any payment by or on behalf of the Borrower
in respect of the Secured Obligations is rescinded or must otherwise be
restored or repaid by the Lender or any holder of the Secured Obligations,
whether as a result of any proceedings in bankruptcy or reorganization or
otherwise, and the Borrower shall indemnify the Lender on demand for all
reasonable costs and expenses (including, without limitation, fees of counsel)
incurred by the Lender in connection with such rescission or restoration.
5.10 Governing Law; Submission to Jurisdiction. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
California. The Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of the United States District Court for the Central District of
California or any court of the State of California located in the County of Los
Angeles for the purposes of any action, suit or proceeding arising out of or
relating to this Agreement or any of the transactions contemplated hereby. The
Borrower irrevocably waives, to the fullest extent permitted by applicable law,
any objection which it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
The Borrower hereby irrevocably consents to the service of any and all process
in connection with any such suit, action or proceeding by mailing copies of
such process to it at its address provided in Section 5.02. The Borrower agrees
that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Nothing in this Section 5.10
shall affect the right of the Lender to serve legal process in any other manner
permitted by law or affect the right of the Lender to bring any suit, action or
proceeding against the Borrower or its property in any other court or
jurisdiction.
5.11 Waiver of Jury Trial. THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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5.12 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
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IN WITNESS WHEREOF, the parties hereto, by their respective officers duly
authorized, have caused this Security Agreement to be duly executed and
delivered as of the date first above written.
The Borrower
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
-----------------------------
George W. Smith
Chief Executive Officer
Address for Notices:
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
Attention: Chief Executive Officer
Tel: 310-524-9300
Fax: 310-524 9303
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The Lender
AMERSCAN PARTNERS III, LIMITED
PARTNERSHIP
by its General Partner
AMERSCAN CAPITAL MANAGEMENT
LTD., as General Partner
By /s/ Martin S. Albert
-----------------------------
Martin S. Albert
Director and Deputy Chairman
Address for Notices:
Amerscan Capital Management Ltd.
c/o Amerscan, Inc.
3609 East Thousand
Oaks Boulevard
Suite 209
Westlake Village
California 91362
Attention: Secretary
Tel: 805-371-7715
Fax: 805-497-7154
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<PAGE> 1
Exhibit 3
Conformed Copy
AMERSCAN, INC.
3609 THOUSAND OAKS BOULEVARD
SUITE 209
WESTLAKE VILLAGE, CALIFORNIA 91362
July 15, 1997
International Meta Systems, Inc.
100 North Sepulveda Boulevard
Suite 601
El Segundo, California 90245
Attention: Mr. George W. Smith
Chief Executive Officer
RE: ARRANGEMENT OF FUNDING
FOR INTERNATIONAL META SYSTEMS, INC.
Dear Mr. Smith:
We are pleased that International Meta Systems, Inc., a Delaware
corporation ("IMS"), has engaged Amerscan, Inc. (the "Arranger"), to arrange up
to $1,500,000 of funding for IMS pursuant to the Convertible Promissory Note
dated July 15, 1997 (the "Note"), executed and delivered by IMS and payable to
Amerscan Partners III, Limited Partnership (the "Funding"). This letter will
confirm our acceptance and set forth the terms of our engagement.
For its services in connection with the Funding, IMS agrees to pay the
Arranger an arrangement fee equal to 8% of the aggregate amount borrowed by IMS
under the Note (such fee not to exceed $120,000) (the "Arrangement Fee"). The
Arrangement Fee shall be due and payable by IMS by wire transfer, in
immediately available funds, to such account(s) as shall be notified to IMS by
the Arranger, on the earlier of (a) the date 60 days after July 15, 1997 and
(b) the date on which IMS shall have borrowed $1,500,000 under the Note.
This letter agreement shall be governed by, and construed in accordance
with, the laws of the State of California. This letter agreement may not be
modified or amended except in a writing duly executed by the parties hereto.
This letter agreement may be executed in any number of counterparts, all of
which, taken together, shall constitute one and the same instrument and any of
the parties hereto may execute this letter agreement by signing any such
counterpart.
If the foregoing correctly sets forth our agreement, please sign the
enclosed copy of this letter agreement in the space provided below and return
it to us.
<PAGE> 2
Yours truly yours,
AMERSCAN, INC.
By /s/ Martin S. Albert
____________________
Martin S. Albert
President
Agreed to and accepted as of
the date first above written:
INTERNATIONAL META SYSTEMS, INC.
By /s/ George W. Smith
___________________
George W. Smith
Chief Executive Officer
2
