AGREEMENT ON DISPOSITION OF CONVERTIBLE DEBENTURESConvertible Promissory Note |
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You are currently viewing: This Convertible Promissory Note involves
Cornell Capital Partners, LP | Crosshill Georgetown Capital, LP | Garrett Information Enterprise Center, 685 Mosser Road, Suite 11, McHenry, Maryland 21541, Resurgence Partners, LLC | Solution Technology International, Inc | YA Global Investments, LP. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here. |
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AGREEMENT ON DISPOSITION OF CONVERTIBLE DEBENTURES
This Agreement on Disposition of Convertible Debentures (this “ Agreement ”) is entered into as of September 9, 2008, by and among Solution Technology International, Inc. (the “ Company ”), with its principal place of business at Garrett Information Enterprise Center, 685 Mosser Road, Suite 11, McHenry, Maryland 21541, Resurgence Partners, LLC (“ Resurgence Partners ”), a Virginia limited liability company, with its principal place of business at 205 South Whiting Street, Suite 311, Alexandria, VA 22304, and YA Global Investments, L.P. (“ YA Global ”) (f/k/a Cornell Capital Partners, LP), a Cayman Islands limited partnership, with its principal place of business at 101 Hudson Street, Suite 3700, Jersey City, New Jersey 07302.
WHEREAS , the Company has issued convertible debentures to YA Global in the principal amount of $2,875,000 in connection with secured loans made by YA Global to the Company (the “ Debentures ”), a list of which is attached hereto and incorporated herein as Schedule 1 , and has issued warrants to purchase shares of its common stock, par value $.01 per share (“ Common Stock ”) to YA Global (the Warrants ”); and
WHEREAS , YA Global has entered into an Intercreditor Agreement with Crosshill Georgetown Capital, L.P. (“ Crosshill ”) to arrange for a division of the blanket lien against the Company’s assets under UCC-1 financing statements on file in the State of Delaware (the “ YA/Crosshill Intercreditor Agreement ”); and
WHEREAS , the Company requires additional financing to achieve its business plan; and
WHEREAS , the Company has entered into discussions with a Resurgence Partners to invest not less than $2,500,000 (the “ Financing ”) assuming that (i) the Company has eliminated existing secured debt from its balance sheet, (ii) it effects a reverse split of its shares of common stock to provide the financing group with 92.5% ownership of the Company’s issued and outstanding shares of common stock, par value $.01 per share (the “ Common Stock ”) and the existing shareholders 7.5% of the Company’s issued and outstanding shares of Common Stock post reverse split (the “ Reverse Split ”) and (iii) it eliminates all liens against its assets; and
WHEREAS , the Company, as a precondition to receipt of the Financing, must enter into an agreement with YA Global to terminate the Debentures or allow Resurgence Partners to purchase the Debentures, terminate the YA/Crosshill Intercreditor Agreement and terminate all liens against the Company and any outstanding warrants; and
WHEREAS , YA Global is willing to terminate or sell to Resurgence Partners the Debentures and to terminate the YA/Crosshill Intercreditor Agreement, its lien against the Company’s assets and the Warrants in return for receipt of $700,000 cash and a deferred payment of $150,000.
NOW THEREFORE , in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Cash Payment by the Company; Closing . Upon YA Global’s execution of this Agreement and compliance with sections 4, 5 and 6 below (the “ Closing ”), the Company shall pay to YA Global $700,000 by wire transfer in immediately available funds (the “ Cash Payment ”).
Section 2. Deferred Payment . At the Closing, Resurgence Partners shall purchase all but $150,000 of the Debentures (the “ Assigned Debentures”) from YA Global, by executing the Non-Recourse Assignment attached hereto as Schedule 2 . (The debentures that YA Global retains shall be referred to herein as the “ YA Global Debentures” ). The security interest held by YA Global in the Company’s assets shall be subordinated to the security interest in all of its now owned or hereafter acquired personal property of the Company, including the Company’s software (the “ Collateral ”) held by Resurgence Partners following its purchase of the Debentures, as set forth in the Intercreditor Agreement of even date herewith in the form attached hereto as Schedule 3 pursuant to which Resurgence Partners will have the authority to make all decisions regarding the security on behalf of itself and YA Global. In the event that the Company files for protection under Chapter 11 of the U.S. Bankruptcy Code, Resurgence Partners shall, within three (3) days of entry of a final plan of reorganization, or other final disposition of the bankruptcy action execute a note in the form attached hereto as Schedule 4 , (the “Note”) whose principal amount shall be $150,000, and which shall bear interest at 10% per annum, such interest to accrue and be paid annually, and shall have a maturity date two years from the date of this Agreement. The Note shall be secured by a pledge of shares equal to five and one half percent (5.5%) of the number of shares in the Company (or in any successor entity or entities of the Company) received by Resurgence in the final plan of reorganization, or other final disposition of the bankruptcy action. The pledge shall be implemented by execution of the Pledge Agreement attached hereto as Schedule 5 .
Section 3. Exercise of Conversion Rights . Immediately prior to the Closing, YA Global intends to issue a notice of conversion (the “ Conversion Notice”) to obtain shares of the Company’s Common Stock under the terms of its outstanding Convertible Debentures that will allow YA Global to own up to 9.99% of the outstanding shares of the Company’s Common Stock pre-Reverse Split. The Company agrees to honor the notice of conversion and issue the number of shares of Common Stock set forth in the conversion notice. The Company agrees further that, upon execution of this Agreement, all limitations on share ownership contained in the YA Global Debentures shall be amended to be 9.99% of the outstanding shares of Common Stock of the Company.
Section 4. Termination of the YA/Crosshill Intercreditor Agreement . YA Global hereby agrees that the YA/Crosshill Intercreditor Agreement shall be terminated at Closing. YA Global acknowledges that concurrently with the execution and delivery of this Agreement, Crosshill is terminating its agreements with the Company and releasing its lien on the assets of the Company, in exchange for a cash payment (the “Cash Payment”). Crosshill’s agreement to accept the Cash Payment is being made in reliance upon YA Global’s express termination of the YA/Crosshill Intercreditor Agreement and YA Global’s Agreement to waive any and all interest in the Cash Payment. YA Global hereby waives any and all interest in the Cash Payment and agrees that Crosshill may rely on this Agreement in terminating its agreements and releasing the collateral pledged to Crosshill.
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Section 5. Sale of the Debentures . At Closing YA Global shall sell, and Resurgence Partners will purchase, the Assigned Debentures. The terms of such sale shall be as set forth in the Non-Recourse Assignment between Resurgence Partners and YA Global of even date herewith, which shall provide for the ownership of the Assigned Debentures by Resurgence Partners contemporaneously with the Closing. YA Global shall have three (3) days from the date of the Closing to physically deliver the assigned debentures to Resurgence Partners. In the event that such assigned debentures are not delivered in accordance with this section 5 YA Global authorizes the Company to cancel the Assigned De |
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