0001011438-01-500221.txt : 20011018
0001011438-01-500221.hdr.sgml : 20011018
ACCESSION NUMBER: 0001011438-01-500221
CONFORMED SUBMISSION TYPE: SC 13D
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011010
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: SIMEX INC
CENTRAL INDEX KEY: 0001160306
STANDARD INDUSTRIAL CLASSIFICATION: []
IRS NUMBER: 000000000
STATE OF INCORPORATION: A6
FILING VALUES:
FORM TYPE: SC 13D
BUSINESS ADDRESS:
STREET 1: 511 KING STREET WEST
STREET 2: SUITE 130
CITY: TORONTO, ONTARIO
STATE: A6
ZIP: 00000
BUSINESS PHONE: 4165971585
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: IWERKS ENTERTAINMENT INC
CENTRAL INDEX KEY: 0000830404
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE THEATERS [7830]
IRS NUMBER: 954439361
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC 13D
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-42611
FILM NUMBER: 1756043
BUSINESS ADDRESS:
STREET 1: 4520 WEST VALERIO ST
CITY: BURBANK
STATE: CA
ZIP: 91505
BUSINESS PHONE: 8188417766
MAIL ADDRESS:
STREET 1: 4520 WEST VALERIO ST
CITY: BURBANK
STATE: CA
ZIP: 91505
SC 13D
1
sc13-d.txt
SIMEX SCH. 13-D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. __)*
IWERKS ENTERTAINMENT, INC.
--------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE PER SHARE
--------------------------------------------------------------------------------
(Title of Class of Securities)
465916203
--------------------------------------------------------------------------------
(CUSIP Number)
ROBERT D. RYAN
SIMEX INC.
VICE PRESIDENT, CORPORATE DEVELOPMENT AND CHIEF FINANCIAL OFFICER
511 KING STREET WEST, SUITE 130
TORONTO, ONTARIO M5V 1K4
(416) 597-1585
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
COPY TO:
RICHARD WILLOUGHBY, ESQ.
TORYS
237 PARK AVENUE
NEW YORK, NEW YORK 10017-3142
TELEPHONE: (212) 880-6000
AUGUST 31, 2001
--------------------------------------------------------------------------------
(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 that is the subject of this Schedule 13D, and is filing this
schedule because of ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box [_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See s.240.13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
CUSIP No. 465916203 13D Page 2 of 9 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
SIMEX INC. TAX ID NUMBER: NOT APPLICABLE
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
WC AND OO
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
ONTARIO, CANADA
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 317,460 (1)
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
393,956 (2)
OWNED BY
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 317,460 (1)
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
0
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
711,416 (3)
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.1% (1)
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
________________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
------------------------
(1) 317,460 Shares issuable upon conversion of the Note (as defined below).
(2) Includes 159,295 Shares (as defined below) issuable pursuant to outstanding
employee stock options exerciseable within 60 days of August 31, 2001
beneficially owned by the Selling Stockholders (as defined below) and
234,661 Shares beneficially owned by the Selling Stockholders, in both
cases subject to the Voting Agreements (as defined below).
(3) Based on 3,449,303 Shares outstanding as of August 31, 2001. Includes
317,460 Shares issuable upon conversion of the Note and 159,295 Shares
issuable pursuant to outstanding employee stock options exercisable within
60 days of August 31, 2001 beneficially owned by the Selling Stockholders
which are subject to the Voting Agreements.
Page 2 of 9
Item 1. Security and Issuer
The class of equity securities to which this statement on Schedule 13D
relates is the shares of common stock, $0.001 par value per share (the "Shares")
of Iwerks Entertainment, Inc., a Delaware corporation with its principal
executive offices located at 4520 West Valerio Street, Burbank, California
91505-1046 (the "Issuer").
Item 2. Identity and Background
This statement is being filed by SimEx Inc.
(a) SimEx, Inc. ("SimEx") is a corporation incorporated under the laws of
the Province of Ontario, Canada.
(b) The address of the principal executive offices of SimEx is 511 King
Street West, Suite 130, Toronto, Ontario M5V 1K4.
(c) SimEx builds turnkey special venue attractions that feature film or
digital projection, simulation technology and themed environments.
SimEx has film production studios in Los Angeles, Toronto and
Vancouver, and international sales and service offices in Tokyo,
Osaka, Florida, New York, Lisbon and London. SimEx attractions can be
found worldwide in theme parks, science centers, museums, shopping
centers and world expos.
(d) During the last five years, SimEx has not been convicted in any
criminal proceeding.
(e) During the last five years, SimEx has not been a party to a civil
proceeding of a judicial or administrative body of competent
jurisdiction, as a result of which it is or was 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.
Information regarding the directors and executive officers of SimEx is set
forth on Schedule I attached hereto. The citizenship of the directors and
executive officers of SimEx is as stated on Schedule I. During the last five
years, to the knowledge of SimEx, no person named on Schedule I has been (a)
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (b) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
is or was 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
On August 31, 2001, SimEx and the Issuer entered into an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which SimEx will acquire all of
the outstanding
Page 3 of 9
Shares of the Issuer for a total cash consideration of US$2.25 million. Based on
cash on hand and existing financing commitments (consisting of subordinated debt
on terms to be agreed upon), SimEx has all the funds necessary to consummate the
transactions contemplated by the Merger Agreement. At the effective time of the
merger of SimEx Acquisition Co., a Delaware corporation and wholly owned
subsidiary of SimEx ("Acquisition Co."), with and into the Issuer pursuant to
the Merger Agreement (the "Merger"), each Share outstanding immediately prior to
the effective time of the Merger (other than Shares held in treasury which are
to be cancelled at the effective time of the Merger or Shares held by
stockholders who perfect their appraisal rights under Delaware General
Corporation Law) will be cancelled and automatically converted into the right to
receive a ratable portion of the US$2.25 million equal to the quotient obtained
by dividing (i) US$2.25 million by (ii) the number of Shares outstanding
immediately prior to the effective time of the Merger. At August 31, 2001, the
Issuer had 3,449,303 Shares issued and outstanding (not including Shares held in
treasury), 105,000 Shares underlying "in-the-money" options or warrants and
732,168 Shares underlying "out-of-the-money" options or warrants. Assuming the
exercise or conversion of all "in-the-money" securities (other than the Note)
prior to the effective time of the Merger, the per share consideration to be
offered to the Issuer's stockholders will be approximately US$0.63.
The Merger is subject to stockholder approval and other customary closing
conditions. If the Merger is consummated, the Issuer will become a wholly owned
subsidiary of SimEx.
In connection with the Merger Agreement, each member of the board of
directors and the chief financial officer of the Issuer, namely Donald W.
Iwerks, Gary J. Matus, Peter Hanelt, Jeffrey M. Dahl and Bruce Beda
(collectively, the "Selling Stockholders"), entered into Voting Agreements dated
August 31, 2001 with SimEx (each a "Voting Agreement" and collectively, the
"Voting Agreements") to, among other matters, (i) vote their Shares in favor of
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby and in favor of any matter that could reasonably be
expected to facilitate the transactions contemplated by the Merger Agreement,
and (ii) granted to certain officers of SimEx an irrevocable proxy to vote their
Shares to approve and adopt the Merger Agreement and other actions contemplated
thereby and in favor of each of the other actions in furtherance thereof.
On August 21, 2001, the Issuer issued a promissory note (the "Note") in
favor of SimEx in the principal sum of US$200,000. The Note is convertible at
the option of SimEx, in whole or in part, at any time prior to the maturity date
thereunder, into Shares of the Issuer, at a conversion price of US$0.63, subject
to adjustment as provided in the Note. Assuming SimEx were to convert the Note
into Shares of the Issuer at the conversion price of US$0.63, SimEx would be
entitled to 317,460 Shares.
References to, and descriptions of, the Merger, the Merger Agreement, the
Voting Agreements and the Note as set forth above in this Item 3 are qualified
in their entirety by reference to the copies of the Merger Agreement, the Voting
Agreement and the Note, respectively, included as Exhibits 1, 2 and 3 to this
Schedule 13D, and incorporated in this Item 3 in their entirety where such
references and descriptions appear.
Page 4 of 9
Item 4. Purpose of Transaction
It is expected that, initially following the Merger, the operations of the
Issuer will be continued substantially as they are currently being conducted.
SimEx will continue to evaluate the business and operations of the Issuer during
the pendency of and after the consummation of the Merger, and will take such
actions as it deems appropriate under the circumstances then existing. SimEx
intends to seek additional information about the Issuer during this period.
Thereafter, SimEx intends to review such information as part of a comprehensive
review of the Issuer's business, operations, capitalization and management
(including changes to the present Board) with a view to optimizing the Issuer's
potential in conjunction with SimEx's businesses. It is expected that the
business and operations of the Issuer will form an important part of SimEx's
future business plans.
Except as set forth herein and as contemplated by the Merger Agreement,
SimEx does not have any formal plans or proposals which relate to or would
result in (i) the acquisition by any person of additional securities of the
Issuer, or the disposition of securities of the Issuer; (ii) any extraordinary
corporate transaction, such as a merger, reorganization or liquidation of the
Issuer or any of its material subsidiaries; (iii) any sale or transfer of a
material amount of assets of the Issuer or any of its material subsidiaries;
(iv) any material change in the Issuer's present capitalization or dividend
policy; (v) any other material change in the Issuer's business or corporate
structure; (vi) changes in the Issuer's charter, by-laws or instruments
corresponding thereto or other actions which may impede the acquisition of
control of the Issuer by any person; or (vii) any action similar to any of those
enumerated above.
If the Merger is consummated as planned, the Shares will be deregistered
under the Securities Act of 1933, as amended, and the Exchange Act and cease to
be authorized to be listed on the Over The Counter Bulletin Board.
Item 5. Interest in Securities of the Issuer
(a)-(b) As of the date hereof, SimEx beneficially owns and has the sole
power to vote and to direct the vote of, and the sole dispositive power with
respect to, 317,460 Shares and SimEx beneficially owns and has shared voting and
dispositive power of 393,956 Shares (which is comprised of 159,295 Shares
issuable to the Selling Stockholders upon exercise of employee stock options
exercisable within 60 days of August 31, 2001 and 234,661 Shares beneficially
owned by the Selling Shareholders, in both cases subject to the Voting
Agreements), representing in the aggregate of 18.1% of the outstanding Shares of
the Issuer. The calculation of the foregoing percentage is based on the number
of Shares disclosed to SimEx by the Issuer as outstanding as of August 31, 2001
and Shares issuable pursuant to outstanding employee stock options exercisable
within 60 days of August 31, 2001 beneficially owned by the Selling Stockholders
which are a subject to the Voting Agreements and 317,460 Shares issuable upon
conversion of the Note. Except as set forth herein, to the knowledge of SimEx,
no director or executive officer of SimEx beneficially owns any other Shares of
the Issuer.
(c) There have been no transactions by SimEx in securities of the Issuer
during the past 60 days, other than the Note issued in favor of SimEx. To the
knowledge of SimEx,
Page 5 of 9
there have been no transactions by any director or executive officer of SimEx in
securities of the Issuer during the past 60 days.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to
Securities of the Issuer
Other than the Merger Agreement, the Voting Agreements and the Note, to the
knowledge of SimEx, there are no contracts, arrangements, understandings or
relationships among SimEx and between it and any person with respect to any
securities of the Issuer, including but not limited to the transfer or voting of
any of the securities of the Issuer, finder's fees, joint ventures, loan or
option arrangement, puts or calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits
1. Agreement and Plan of Merger, dated as of August 31, 2001, among SimEx,
Acquisition Co. and the Issuer (incorporated herein by reference to Annex A
to the Issuer's Proxy Statement on Schedule 14A previously filed on
September 25, 2001).
2. Form of Voting Agreement, dated as of August 31, 2001, among SimEx and each
of the Selling Stockholders (incorporated herein by reference to Annex B to
the Issuer's Proxy Statement on Schedule 14A previously filed on September
25, 2001).
3. Promissory Note, dated as of August 21, 2001, made by the Issuer in favor
of SimEx.
4. Joint Press Release of SimEx and the Issuer issued September 4, 2001
(incorporated herein by reference to Exhibit 99.1 to the Issuer's Current
Report on Form 8-K previously filed on September 10, 2001).
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 10, 2001
SIMEX INC.
By: /S/ROBERT D. RYAN
----------------------------------------
Name: Robert D. Ryan
Title: Vice President, Corporate Development
and Chief Financial Officer
Page 6 of 9
EXHIBIT INDEX
1. Agreement and Plan of Merger, dated as of August 31, 2001, among SimEx,
Acquisition Co. and the Issuer (incorporated herein by reference to Annex A
to the Issuer's Proxy Statement on Schedule 14A previously filed on
September 25, 2001).
2. Form of Voting Agreement, dated as of August 31, 2001, among SimEx and each
of the Selling Stockholders (incorporated herein by reference to Annex B to
the Issuer's Proxy Statement on Schedule 14A previously filed on September
25, 2001).
3. Promissory Note, dated as of August 21, 2001, made by the Issuer in favor
of SimEx.
4. Joint Press Release of SimEx and the Issuer issued September 4, 2001
(incorporated herein by reference to Exhibit 99.1 to the Issuer's Current
Report on Form 8-K previously filed on September 10, 2001).
Page 7 of 9
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF SIMEX
DIRECTORS AND EXECUTIVE OFFICERS OF SIMEX. The following table sets forth the
name, age, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employment and business addresses thereof for the past five years of each
director and executive officer of SimEx. Except for Donald R. Gordon, who is a
citizen of the United States, each such person is a citizen of Canada. Unless
otherwise indicated, the current business address of each person is SimEx. Each
occupation set forth opposite an individual's name refers to employment with
SimEx, unless otherwise noted.
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND CURRENT DURING THE PAST FIVE YEARS AND
BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
--------------------------- --------------------------------------
Michael J. Needham, 60 President, Chief Executive Officer,
c/o SimEx Inc. Chairman and Director since the
130 - 511 King St. W. inception of SimEx in 1991.
Toronto, Ontario Co-founded Helix Investments Limited,
M5V 1K4 a private investment company, in 1968
and served as its President until
1991.
Robert D. Ryan, 43 Chief Financial Officer and
c/o SimEx Inc. Vice-President, Corporate Development
130 - 511 King St. W. of SimEx since March 2001. Mr. Ryan
Toronto, Ontario has held senior finance and
M5V 1K4 operations positions with SunBlush
Technologies Corporation (1999-2001),
CXW Capital Corp. (1998-2001),
Insight Information Inc. (1992-1998)
and the Jim Pattison Group
(1986-1992).
Shiori Sudo, 55 Executive Vice-President, Secretary
c/o SimEx Inc. and Director since the inception of
130 - 511 King St. W. SimEx in 1991. Prior to joining
Toronto, Ontario SimEx, Ms. Sudo served as a Special
M5V 1K4 Advisor to Helix Investments Limited
with respect to its interests in Japan
and Southeast Asia from 1984 - 1991.
Brian R. Peebles, 39 Senior Vice President, Operations and
c/o SimEx Inc. Director since the inception of SimEx
130 - 511 King St. W. in 1991. Prior to joining SimEx, Mr.
Toronto, Ontario Peebles was employed by InterActive
M5V 1K4 Entertainment Inc. in various
management capacities, including
General Manager of TOUR OF THE UNIVERSE
and Director of Operations from 1984 to
1991.
Moses Znaimer, 59 Co-founded CityTV, a Toronto
c/o City TV independent television station, in
299 Queen St. W. 1972 and has served as CityTV's
Toronto, Ontario President and Executive Producer
M5V 2Z5 since 1972. Mr. Znaimer has been a
Director of SimEx since April 1997.
Donald R. Gordon, 63 First Vice-President of Janney
c/o Janney Montgomery Scott Inc. Montgomery Scott Inc., a New York
26 Broadway, 8th Floor based securities brokerage and
New York, New York investment banking firm since 1989.
10004-1776 Mr. Gordon has been a Director of
SimEx since September 1996.
Page 8 of 9
Dr. Alexander Mikalachki, 68 Professor, specializing in business
c/o Richard Ivey School of Business strategy and the management of
1151 Richmond St. N. change, at the Ivey School of
London, Ontario Business at the University of Western
N6A 3K7 Ontario since 1971. Dr. Mikalachki
has been a Director of SimEx since
April 1996.
Bruce Wylie, 34 Vice President of Working Ventures
c/o Working Ventures Canadian Fund Canadian Fund Inc., a labour
1600 - 250 Bloor St. E. sponsored venture capital fund, since
Toronto, Ontario 1994. Mr. Wiley has been a Director
M4W 1E6 of the Company since July 1999.
Page 9 of 9
EXHIBIT 3
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH STATE SECURITIES LAWS, OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. PRIOR TO ANY SALE OR TRANSFER OF THIS NOTE, EXCEPT PURSUANT TO THE
PROVISIONS OF RULE 144 UNDER THE ACT OR A REGISTRATION STATEMENT EFFECTIVE UNDER
THE ACT COVERING SUCH SALE OR TRANSFER, THE HOLDER HEREOF SHALL HAVE DELIVERED
TO THE MAKER HEREOF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE MAKER
HEREOF TO THE EFFECT THAT SUCH SALE OR TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT.
PROMISSORY NOTE
US $200,000 AUGUST 21, 2001
FOR VALUE RECEIVED, the undersigned, IWERKS ENTERTAINMENT INC., a Delaware
corporation ("Maker") hereby promises to pay to the order of SIMEX INC., an
Ontario, Canada corporation ("Lender"), the principal sum of TWO HUNDRED
THOUSAND AND NO/100 DOLLARS ($200,000), plus any Interest thereon (as set forth
below). This Promissory Note supercedes and cancels that certain Promissory Note
dated as of the dated hereof, in the aggregate principal amount equal to Two
Hundred Thousand Dollars ($200,000) issued by Maker to Lender, and such
cancellation is hereby acknowledged by Maker and Lender.
The principal balance of this Note (the "Principal Balance") shall bear
interest at the rate of zero percent (0%) per annum from the period beginning on
the date the principal sum is to be advanced by Lender, August 21, 2001, and
ending on the earlier of (i) August 31, 2005 or (ii) the acceleration of the
Note (as provided for herein) upon the occurrence of a Triggering Event (as
defined below) (the "Maturity Date"). If the Principal Balance is not paid in
full by the Maturity Date (a "Default"), the Note shall bear interest at the per
annum rate of twelve percent (12%) (the "Interest"). All Interest shall be (i)
computed on the basis of a year consisting of 360 days and (ii) charged for the
actual number of days the Maker is in Default..
All funds received by Lender during the existence of a Default shall be
applied first to accrued and unpaid Interest and then to the Principal Balance.
This Note shall be secured by one portable simulation unit, certified by
Maker to be without material defect and in good working order. Such security
shall be evidenced by a Uniform Commercial Code filing in favor of Lender and a
security agreement or other documentation in a form to be mutually agreed upon
and reasonably satisfactory to Maker and Lender (the "Security Agreement").
This Note may be prepaid, in whole or in part, without premium or penalty.
Lender shall have the right to convert, in whole or in part, at any time,
for greater certainty prior to or after the Maturity Date, until the entire
unpaid and unconverted
Page 1
Principal Balance of this Note, plus all accrued but unpaid Interest hereon,
into shares of Common Stock of Maker (the "Shares"), at a conversion price of
sixty-three cents ($0.63) per Share (the "Conversion Price"), subject to
adjustment as hereinafter provided. Upon the surrender of this Note to Maker for
conversion, Maker shall issue and deliver to Lender as promptly as possible but
in no event later than five (5) business days after Maker's receipt of the
surrendered Note, certificate(s) evidencing the Shares. Certificates for Shares
issued upon the conversion of this Note shall be issued in the name of, or in
such names as may be directed by, Lender. All Shares issued upon conversion
shall be deemed issued as of the close of business on the date the Note is
surrendered in accordance with this paragraph and received by Maker. The Shares
issued upon conversion of this Note shall be issued as fully paid and
nonassessable Shares of Maker. Maker shall, prior to the conversion date,
reserve and keep available for the purpose of effecting the conversion of this
Note such number of its duly authorized Shares as shall be sufficient to effect
the conversion of the Note (both Principal Balance and Interest).
In the case Maker at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) the Shares into a greater number of
Shares or pays a dividend or makes a distribution to holders of Shares in the
form of Shares, then the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares obtainable
upon conversion of this Note shall be proportionately increased. If Maker at any
time combines (by reverse stock split or otherwise) the Shares into a smaller
number of Shares, then the Conversion Price in effect immediately prior to such
combination shall be proportionately increased and the number of Shares
obtainable upon conversion of this Note shall be proportionately decreased.
If any capital reorganization or reclassification of the capital stock of
Maker, or consolidation or merger of Maker with another corporation (other than
a merger of Maker with or into Lender or any subsidiary of Lender or other
similar transaction among Maker and Lender and any of their respective
subsidiaries), or the sale, transfer or other disposition of all or
substantially all of its properties to another corporation (collectively, a
"Reorganization Event"), shall be effected, then, as a condition of such
Reorganization Event, lawful and adequate provision shall be made whereby Lender
shall thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions herein specified and in lieu of the Shares issuable
upon conversion of this Note, such shares of stock, securities or properties as
may be issuable or payable with respect to or in exchange for a number of Shares
equal to the number of Shares immediately theretofore issuable upon conversion
of this Note had such Reorganization Event not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
Lender to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any shares
of stock, securities or properties thereafter deliverable upon the exercise
thereof. Maker shall not effect any such Reorganization Event, unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than Maker) resulting from such consolidation or merger or the corporation
purchasing or otherwise acquiring such properties shall assume, by written
instrument executed and mailed or delivered to Lender at the last address of
Lender appearing on the books of Maker, the obligation to deliver to Lender such
shares of stock, securities or
Page 2
properties as, in accordance with the foregoing provisions, Lender may be
entitled to acquire. The above provisions of this paragraph shall similarly
apply to successive Reorganization Events.
Lender shall have the right, without demand or notice, to accelerate this
Note and to declare the entire unpaid Principal Balance hereof and the
obligations evidenced hereby immediately due and payable and to seek and obtain
payment of this Note if any of the following events (each, an "Triggering
Event") shall occur: (a) Maker shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors or shall take any corporate action to authorize any of the
foregoing; (b) an involuntary case or other proceeding shall be commenced
against Maker seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days; or an order for relief
shall be entered against Maker under the federal bankruptcy laws as now or
hereafter in effect; (c) Maker shall fail to pay any amount owing hereunder or
under any Security Agreement when due; or (d) Maker shall default in the due
performance or observance of any term covenant or agreement or shall breach any
of its representations or warranties, contained in this Note or any Security
Agreement; provided, however, that upon the occurrence of any Triggering Event
described in clause (a) or (b) above, the entire unpaid Principal Balance hereof
and the obligations evidenced hereby shall automatically become due and payable
without any declaration or other action being made or taken by Lender.
Maker agrees to pay to Lender all expenses, including, without limitation,
reasonable fees and disbursements of counsel, incurred by Lender in the
enforcement and collection of this Note.
Maker hereby waives presentment for payment, protest and demand and notice
of protest, demand, dishonor and nonpayment of this Note, and expressly agrees
that this Note, or any payment hereunder, may be extended from time to time
before, at or after maturity, without in any way affecting the liability of
Maker hereunder or any guarantor hereof.
This Note shall be construed in accordance with and governed by the laws
and decisions of the State of California.
This Note may not be changed or amended orally, but only by an instrument
in writing making reference hereto signed by the party against whom enforcement
of the change or amendment is sought.
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This Note shall be binding upon Maker and upon Maker's successors and
assigns, and shall inure to the benefit of the successors and permitted assigns
of Lender.
In the event that any provision hereof shall be deemed to be invalid by
reason of operation of any law, or by reason of the interpretation placed
thereon by any court or any governmental body, this Note shall be construed as
not containing such provision and the invalidity of such provision shall not
affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full
force and effect.
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IN WITNESS WHEREOF, this Note has been executed and delivered by Maker by
its duly authorized officer on the date first set forth above.
MAKER
By: /S/ GARY J. MATUS
------------------------------
(Authorized Signature)
ACKNOWLEDGED AND AGREED TO:
LENDER
By: /S/ MICHAEL NEEDHAM
------------------------------
Michael Needham
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