1
EXHIBIT 10.22.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS
FROM SUCH REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF
SUCH EXEMPTION.
NOTE
PROBEX FLUIDS RECOVERY, INC.
7% SENIOR SECURED CONVERTIBLE NOTE, DUE NOVEMBER 29, 2004
No.______ $_______ November 29, 2000
FOR VALUE RECEIVED, the undersigned, PROBEX FLUIDS RECOVERY, INC.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Delaware, hereby promises to pay to _______, or registered
assigns, the principal sum of _______ DOLLARS on November 28, 2004, with
interest (computed on the basis of a 360-day year of twelve 30-day months)
payable semiannually, on the 1st day of January and July in each year,
commencing on January 1, 2001 (or, upon the occurrence of an Event of Default
(as defined in the Note Purchase Agreement referred to below) and until such
Event of Default has been cured or waived in writing (such period constituting a
"Default Interest Period"), at the option of the Holder hereof, on demand),
until the principal hereof shall have been paid in full, (a) on the unpaid
balance hereof at the rate of 7% per annum and (b) during a Default Interest
Period on the unpaid balance hereof and on all other obligations of the Company
under the Note Purchase Agreement referred to below, including, to the extent
permitted by law, on any overdue payment (including any overdue prepayment) of
principal, and any overdue payment of interest, at the Default Rate (as defined
in the Note Purchase Agreement referred to below).
Terms with initial capital letters which are used but not otherwise
defined herein shall have the meanings given to such terms in the Note Purchase
Agreement referenced below.
1. GENERAL.
1.1. Payments of principal of this Note are to be made in lawful money
of the United States of America and, at the option of the Holder of this Note,
interest on this Note may be made in either (a) lawful money of the United
States of America or (b) if the Holder so notifies the Company in writing prior
to the purchase of this Note, in Probex Common Stock in an amount equal to the
amount of such interest payment divided by the
1
2
Current Market Price of the Probex Common Stock. Notwithstanding 1.1(b) above,
if the stockholders of Probex have not approved for issuance a sufficient number
of shares of Probex Common Stock to make the interest payments in Probex Common
Stock or the Probex Common Stock to be issued for payment of interest is issued
at a price less than $1.40 per share, the interest payment shall be made in
accordance with 1.1(a) above. Payments of principal and interest on this Note
shall be made at Dallas, Texas, or at such other place as the Holder of this
Note shall have designated by written notice to the Company as provided in the
Note Purchase Agreement referred to below. This Note is not prepayable except
upon acceleration by the Holders after an Event of Default as provided in
Section 10 of the Note Purchase Agreement.
1.2. This Note is one of a series of Senior Secured Convertible Notes
(herein called the "Notes") issued pursuant to the Note Purchase Agreement, of
even date herewith (as from time to time amended, the "Note Purchase
Agreement"), between the Company and the Purchasers named therein and is
entitled to the benefits thereof. Each Holder of this Note will be deemed by its
acceptance hereof to have made the representation set forth in Section 6 of the
Note Purchase Agreement.
1.3. This Note is a registered Note and, as provided in the Note
Purchase Agreement, upon surrender of this Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered Holder hereof or such Holder's attorney duly authorized in
writing, and upon the delivery by Holder to the Company of an opinion of counsel
satisfactory to the Company confirming an exemption from registration under the
Securities Act and any available state securities law (provided that if the
beneficial ownership of the Note remains the same no such opinion of counsel
shall be required), a new Note for a like principal amount will be issued to,
and registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
1.4. If an Event of Default occurs, the Holder shall be entitled to
pursue the remedies set forth in Section 11 of the Note Purchase Agreement.
1.5. The payment of all principal or premium, if any, and interest on
this Note and the other Notes outstanding under the Note Purchase Agreement has
been unconditionally Guaranteed by Probex Corp., parent of the Company, pursuant
to the Guaranty Agreement. Reference is hereby made thereto for a statement of
the rights and benefits accorded thereby.
1.6. This Note is equally and ratably secured by the Security
Documents. Reference is hereby made to the Security Documents for a description
of the collateral thereby mortgaged, warranted, bargained, sold, released,
conveyed, assigned, transferred, pledged and hypothecated, the nature and extent
of the security for the Notes, the rights of the Holders of the Notes, the
Collateral Agent in respect of such security and otherwise.
2
3
1.7. This Note is convertible as provided in Section 2 below.
Securities issued upon conversion of this Note as therein provided shall be
subject to the registration rights set forth in Section 21 of the Note Purchase
Agreement.
1.8. This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the law of the State of Texas,
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such State.
2. CONVERSION. At any time, at the option of the Holder, all or any portion of
the outstanding principal amount of this Note together with accrued and unpaid
interest thereon to the date of conversion (the "Conversion Amount"), shall be
convertible into the number of fully-paid and nonassessable shares of Probex
Common Stock obtained by dividing the Conversion Amount by the Conversion Price
then in effect as adjusted pursuant to Section 3. The initial Conversion Price
shall be $1.40.
2.1. The applicable Conversion Price from time to time in effect is
subject to adjustment as provided in Section 3 hereof.
2.2. Probex shall not issue fractions of shares of Probex Common Stock
upon conversion of this Note or scrip in lieu thereof. If any fraction of a
share of Probex Common Stock would, except for the provisions of this Section
2.2, be issuable upon conversion of all or any part of this Note, Probex shall
in lieu thereof pay to the person entitled thereto an amount in cash equal to
the Current Market Value of such fraction, calculated to the nearest
one-hundredth (1/100) of a share.
2.3. Whenever the Conversion Price shall be adjusted as provided in
Section 3 hereof, Probex shall mail to each Holder, a statement, signed by the
chairman of the board, the president, any vice president or treasurer of Probex,
showing in reasonable detail the facts requiring such adjustment and the
Conversion Price that will be effective after such adjustment. Probex shall also
cause a notice setting forth any such adjustments to be sent by mail, first
class, postage prepaid, to the Holder of this Note at its address appearing on
the stock register. If such notice relates to an adjustment resulting from an
event referred to in Section 3.7, such notice shall be included as part of the
notice required to be mailed and published under the provisions of Section 3.7
hereof.
2.4. In order to exercise the conversion privilege, the Holder of this
Note shall surrender this Note to the principal office of the Company, and shall
give written notice to the Company and Probex that the Holder of this Note
elects to convert all or any portion of the Conversion Amount. Such notice shall
also state the name or names (with address) in which the certificate or
certificates for shares of Probex Common Stock which shall be issuable on such
conversion shall be issued, subject to any restrictions on transfer relating to
shares of Probex Common Stock upon conversion thereof. If so required by the
Company or Probex, the Note surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Company, duly authorized in writing. The date of receipt by
the Company of the Note and Probex of such notice shall be the conversion date.
As soon as
3
4
practicable after receipt of such notice and the surrender of the Note as
aforesaid, Probex shall cause to be issued and delivered at such office to the
Holder of this Note, or on his or its written order, a certificate or
certificates for the number of full shares of Probex Common Stock issuable on
such conversion in accordance with the provisions hereof and cash as provided in
Section 2.2 in respect of any fraction of a share of Probex Common Stock
otherwise issuable upon such conversion. Upon conversion of less than the full
Conversion Amount, the amount so converted shall be deemed to reduce first, the
amount of any accrued and unpaid interest on the Note, and second, the principal
amount of the Note, and Probex shall issue to the order of the Holder of this
Note, a new Note in principal amount equal to the remaining principal balance of
this Note.
2.5. Probex shall at all times when the Conversion Amount shall be
outstanding, reserve and keep available out of its authorized but unissued
capital stock, for the purposes of effecting the conversion of this Note, such
number of duly authorized shares of Probex Common Stock as shall from time to
time be sufficient to effect the conversion of this Note. Before taking any
action which would cause an adjustment reducing the Conversion Price below the
then par value of the shares of Probex Common Stock issuable upon conversion of
the Note, Probex will take any corporate action which may, in the opinion of its
counsel, be necessary in order that Probex may validly and legally issue
fully-paid and nonassessable shares of such Probex Common Stock at such adjusted
Conversion Price.
2.6. The Conversion Amount which shall have been surrendered for
conversion as herein provided shall no longer be deemed to be outstanding and
all rights under the Note surrendered with respect thereto shall forthwith cease
and terminate, except only the right of the Holder of this Note to receive
shares of Probex Common Stock in exchange therefor and cash in lieu of
fractional shares and, in the case of conversion of less than the full
Conversion Amount, a new Note pursuant to Section 2.4 above.
2.7. The conversion right evidenced by this Article 2 shall terminate
at any time after the expiration of twelve months from the date of this Note
upon (a) written notice from Probex to the Holder (via certified mail, return
receipt requested) stating (i) that the sale or bid price for Probex Common
Stock has closed at or above $5.60 per share for a consecutive 30 day trading
period (and enclosing evidence of such fact) and (ii) that the Holder has a
period of 30 days to exercise the conversion or it will terminate (which
statement shall be conspicuous, and in bold faced type) pursuant to this Article
2.7 upon the expiration of 30 days following delivery of such notice.
3. ANTI-DILUTION PROVISIONS
3.1. In order to prevent dilution of the right granted hereunder, the
Conversion Price shall be subject to adjustment from time to time in accordance
with this Section 3. At any given time the Conversion Price, whether as the
initial Conversion Price ($1.40 per share) or as last adjusted, shall be that
dollar (or part of a dollar) amount the payment of which shall be sufficient at
the given time to acquire one share of Probex Common Stock upon conversion of
the Conversion Amount. For purposes of this Section 3, the
4
5
term "Number of Common Shares Deemed Outstanding" at any given time shall mean
the sum of (x) the number of shares of Probex Common Stock outstanding at such
time, and (y) the number of shares of Probex Common Stock deemed to be
outstanding under Sections 3.2(1) to (9), inclusive, at such time.
3.2. Except as provided in Section 3.3 or Section 3.6 below, if and
whenever on or after the date of initial issuance of the Note (the "Initial
Issuance Date"), Probex shall issue or sell, or shall in accordance with
Sections 3.2(1) to (9), inclusive, be deemed to have issued or sold any shares
of Probex Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then
forthwith upon such issue or sale (the "Triggering Transaction"), the Conversion
Price shall, subject to subparagraphs (1) to (9) of Section 3.2, be reduced to
the Conversion Price (calculated to the nearest tenth of a cent) determined by
dividing:
o an amount equal to the sum of (x) the product derived by multiplying the
Number of Common Shares Deemed Outstanding immediately prior to such
Triggering Transaction by the Conversion Price then in effect, plus (y) the
consideration, if any, received by Probex upon consummation of such
Triggering Transaction, by
o an amount equal to the sum of (x) the Number of Common Shares Deemed
Outstanding immediately prior to such Triggering Transaction plus (y) the
number of shares of Probex Common Stock issued (or deemed to be issued in
accordance with Sections 3.2(1) to (9)) in connection with the Triggering
Transaction.
For purposes of determining the adjusted Conversion Price under this
Section 3.2, the following subsections (1) to (9), inclusive, shall be
applicable:
(1) In case Probex at any time shall in any manner grant
(whether directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of, Probex Common
Stock or any stock or other securities convertible into or exchangeable for
Probex Common Stock (such rights or options being herein called "Options" and
such convertible or exchangeable stock or securities being herein called
"Convertible Securities"), whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately exercisable and the
price per share for which the Probex Common Stock is issuable upon exercise,
conversion or exchange (determined by dividing (x) the total amount, if any,
received or receivable by Probex as consideration for the granting of such
Options, plus the minimum aggregate amount of additional consideration payable
to Probex upon the exercise of all such options, plus, in the case of such
Options which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (y) the
total maximum number of shares of Probex Common Stock issuable upon the exercise
of such Options or the conversion or exchange of such Convertible Securities)
shall be less than the Conversion Price in effect immediately prior to the time
of the granting of such Option, then the total maximum amount of Probex Common
Stock issuable upon the exercise of such Options or in the case of Options for
Convertible Securities, upon the conversion or exchange of such Convertible
Securities shall (as of the date of granting of such options) be deemed to be
outstanding and to have
5
6
been issued and sold by Probex for such price per share. No adjustment of the
Conversion Price shall be made upon the actual issue of such shares of Probex
Common Stock or such Convertible Securities upon the exercise of such Options,
except as otherwise provided in subparagraph (3) below.
(2) In case Probex at any time shall in any manner issue
(whether directly or by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Probex
Common Stock is issuable upon such conversion or exchange (determined by
dividing (x) the total amount received or receivable by Probex as consideration
for the issue or sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to Probex upon the
conversion or exchange thereof, by (y) the total maximum number of shares of
Probex Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Probex Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding and to have been issued
and sold by Probex for such price per share. No adjustment of the Conversion
Price shall be made upon the actual issue of such Probex Common Stock upon
exercise of the rights to exchange or convert under such Convertible Securities,
except as otherwise provided in subparagraph (3) below.
(3) If the purchase price provided for in any Options referred
to in subparagraph (1), the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities referred to in
subparagraphs (1) or (2), or the rate at which any Convertible Securities
referred to in subparagraph (1) or (2) are convertible into or exchangeable for
Probex Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution of the type set forth in Section
3.2 or Section 3.4), the Conversion Price in effect at the time of such change
shall forthwith be readjusted to the Conversion Price which would have been in
effect at such time had such options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Option referred to in subparagraph (1) or the
rate at which any Convertible Securities referred to in subparagraphs (1) or (2)
are convertible into or exchangeable for Probex Common Stock, shall be reduced
at any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Probex Common Stock
upon the exercise of any such Option or upon conversion or exchange of any such
Convertible Security, the Conversion Price then in effect hereunder shall
forthwith be adjusted to such respective amount as would have been obtained had
such Option or Convertible Security never been issued as to such Probex Common
Stock and had adjustments been made upon the issuance of the shares of Probex
Common Stock delivered as aforesaid, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is hereby reduced.
6
7
(4) On the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities, the Conversion Price
then in effect hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such expiration or termination
had such Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(5) In case any Options shall be issued in connection with the
issue or sale of other securities of Probex, together comprising one integral
transaction in which no specific consideration is allocated to such options by
the parties thereto, such Options shall be deemed to have been issued without
consideration.
(6) In case any shares of Probex Common Stock, Options or
Convertible Securities shall be issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received by Probex therefor. In case any shares of Probex Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
Probex shall be the fair value of such consideration as determined in good faith
by the board of directors of Probex. In case any shares of Probex Common Stock,
Options or Convertible Securities shall be issued in connection with any merger
in which Probex is the surviving company, the amount of consideration therefor
shall be deemed to be the fair value of such portion of the net assets and
business of the non-surviving company as shall be attributable to such Probex
Common Stock, Options or Convertible Securities, as the case may be.
(7) The number of shares of Probex Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
Probex, and the disposition of any shares so owned or held shall be considered
an issue or sale of Probex Common Stock for the purpose of this paragraph 3.2.
(8) In case Probex shall declare a dividend or make any other
distribution upon the stock of Probex payable in Options or Convertible
Securities, then in such case any Options or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration.
(9) For purposes of this paragraph 3.2, in case Probex shall
take a record of the holders of its Probex Common Stock for the purpose of
entitling them (x) to receive a dividend or other distribution payable in Probex
Common Stock, Options or in Convertible Securities, or (y) to subscribe for or
purchase Probex Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Probex Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the case may be.
3.3. In the event Probex shall declare a dividend upon the Probex
Common Stock (other than a dividend payable in Probex Common Stock) payable
otherwise than
7
8
out of capital surplus, determined in accordance with generally accepted
accounting principles, including the making of appropriate deductions for
minority interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the conversion of all or any
portion of this Note, Probex shall pay to the person converting this Note an
amount equal to the aggregate value at the time of such exercise of all
Liquidating Dividends (including but not limited to the Probex Common Stock
which would have been issued at the time of such earlier exercise and all other
securities which would have been issued with respect to such Probex Common Stock
by reason of stock splits, stock dividends, mergers or reorganizations, or for
any other reason). For the purposes of this Section 3.3, a dividend other than
in cash shall be considered payable out of capital surplus only to the extent
that such capital surplus is charged an amount equal to the fair value of such
dividend as determined in good faith by the Board of Directors of Probex.
3.4. In case Probex shall at any time (i) subdivide the outstanding
Probex Common Stock or (ii) issue a stock dividend on its outstanding Probex
Common Stock, the number of shares of Probex Common Stock issuable upon
conversion of this Note shall be proportionately increased by the same ratio as
the subdivision or dividend (with appropriate adjustments to the Conversion
Price in effect immediately prior to such subdivision or dividend). In case
Probex shall at any time combine its outstanding Probex Common Stock, the number
of shares issuable upon conversion of this Note immediately prior to such
combination shall be proportionately decreased by the same ratio as the
combination (with appropriate adjustments to the Conversion Price in effect
immediately prior to such combination).
3.5. If any capital reorganization or reclassification of the capital
stock of Probex, or consolidation or merger of Probex with another company, or
the sale of all or substantially all of its assets to another company shall be
effected in such a way that holders of Probex Common Stock shall be entitled to
receive stock, securities, cash or other property with respect to or in exchange
for Probex Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Holder of this Note shall have the right to acquire
and receive upon conversion of the Note, such shares of stock, securities, cash
or other property issuable or payable (as part of the reorganization,
reclassification, consolidation, merger or sale) with respect to or in exchange
for such number of outstanding shares of Probex Common Stock as would have been
received upon conversion of the Conversion Amount at the Conversion Price then
in effect. Probex will not effect any such consolidation, merger or sale, unless
prior to the consummation thereof the successor company (if other than Probex)
resulting from such consolidation or merger or the company purchasing such
assets shall assume by written instrument mailed or delivered to the Holder of
this Note at the last address of the Holder of this Note appearing on the books
of Probex, the obligation to deliver to the Holder of this Note such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase. If a purchase, tender or exchange offer
is made to and accepted by the holders of more than 50% of the outstanding
shares of Probex Common Stock, Probex shall not effect any consolidation, merger
or sale with the person having made such offer or with any Affiliate of such
person, unless prior to the
8
9
consummation of such consolidation, merger or sale the Holder of this Note shall
have been given a reasonable opportunity to then elect to receive upon the
conversion of the Conversion Amount either the stock, securities or assets then
issuable with respect to the Probex Common Stock of Probex or the stock,
securities or assets, or the equivalent, issued to previous holders of the
Probex Common Stock in accordance with such offer. For purposes hereof, the term
"Affiliate", with respect to any given person shall mean any person controlling,
controlled by or under common control with the given person.
3.6. The provisions of this Section 3 shall not apply to any Probex
Common Stock issued or deemed outstanding under Sections 3.2(a) to (i)
inclusive: (i) to any person pursuant to any stock option, stock purchase or
similar plan or arrangement for the benefit of employees of Probex or its
subsidiaries in effect on the Initial Issuance Date or thereafter adopted by the
board of directors of Probex, (ii) pursuant to options, warrants and conversion
rights in existence on the Initial Issuance Date, or (iii) on conversion of this
Note.
3.7. In the event that:
(1) Probex shall declare any cash dividend upon Probex Common
Stock, or
(2) Probex shall declare any dividend upon Probex Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Probex Common Stock, or
(3) Probex shall offer for subscription pro rata to the
holders of Probex Common Stock any additional shares of stock of any class or
other rights, or
(4) there shall be any capital reorganization or
reclassification of the capital stock of Probex, including any subdivision or
combination of its outstanding shares of Probex Common Stock, or consolidation
or merger of Probex with, or sale of all or substantially all of its assets to,
another company, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of Probex;
then, in connection with such event, Probex shall give to the Holder of this
Note:
(1) at least twenty (20) days prior written notice of the date
on which the books of Probex shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to vote
in respect of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up; and
(2) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such
9
10
dividend, distribution or subscription rights, the date on which the holders of
Probex Common Stock shall be entitled thereto, and such notice in accordance
with the foregoing clause (ii) shall also specify the date on which the holders
of Probex Common Stock shall be entitled to exchange their Probex Common Stock
for securities or other property deliverable upon such reorganization,
reclassification consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall be given by first
class mail, postage prepaid, addressed to the holders of the Note at the address
of each such holder as shown on the books of Probex.
3.8. If at any time or from time to time on or after the Initial
Issuance Date, Probex shall grant, issue or sell any Options, Convertible
Securities or rights to purchase property (the "Purchase Rights") pro rata to
the record holders of any class of Probex Common Stock and such grants,
issuances or sales do not result in an adjustment of the Conversion Price under
Section 3.2 hereof, then the Holder of this Note shall be entitled to acquire
(within thirty (30) days after the later to occur of the initial exercise date
of such Purchase Rights or receipt by such holder of the notice concerning
Purchase Rights to which such holder shall be entitled under Section 3.7) and
upon the terms applicable to such Purchase Rights either:
(1) the aggregate Purchase Rights which the Holder of this
Note could have acquired if it had held the number of shares of Probex Common
Stock acquirable upon conversion of the Conversion Amount immediately before the
grant, issuance or sale of such Purchase Rights; provided that if any Purchase
Rights were distributed to holders of Probex Common Stock without the payment of
additional consideration by such holders, corresponding Purchase Rights shall be
distributed to the exercising Holder of this Note as soon as possible after such
exercise and it shall not be necessary for the exercising Holder specifically to
request delivery of such rights; or
(2) in the event that any such Purchase Rights shall have
expired or shall expire prior to the end of said thirty (30) day period, the
number of shares of Probex Common Stock or the amount of property which the
Holder of this Note could have acquired upon such exercise at the time or times
at which Probex granted, issued or sold such expired Purchase Rights.
3.9. If any event occurs as to which, in the opinion of the board of
directors of Probex, the provisions of this Section 3 are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder of this Note in accordance with the essential intent and principles of
such provisions, then the board of directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this Section 3 except in the
case of a combination of shares of a type contemplated in Section 3.4 and then
in no event to an amount larger than the Conversion Price as adjusted pursuant
to Section 3.4.
10
11
4. MAXIMUM LAWFUL RATE
4.1. It is the intent of the Company and the Holders and all other
parties to the Note Purchase Agreement, Note and Security Documents to conform
to and contract in strict compliance with applicable usury law from time to time
in effect. All agreements between Holders or any other holder hereof and the
Company (or any other party liable with respect to any indebtedness under the
Note Purchase Agreement, Note and Security Documents) are hereby limited by the
provisions of this paragraph which shall override and control all such
agreements, whether now existing or hereafter arising and whether written or
oral. In no way, nor in any event or contingency (including but not limited to
prepayment, default, demand for payment, or acceleration of the maturity of any
obligation), shall the interest taken, reserved, contracted for, charged or
received under this Note or otherwise, exceed the maximum nonusurious amount
permissible under applicable law. If, from any possible construction of any
document, interest would otherwise be payable in excess of the maximum
nonusurious amount, any such construction shall be subject to the provisions of
this paragraph and such document shall be automatically reformed and the
interest payable shall be automatically reduced to the maximum nonusurious
amount permitted under applicable law, without the necessity of execution of any
amendment or new document. If the Holder hereof shall ever receive anything of
value which is characterized as interest under applicable law and which would
apart from this provision be in excess of the maximum lawful amount, an amount
equal to the amount which would have been excessive interest shall, without
penalty, be applied to the reduction of the principal amount owing on the
indebtedness evidenced hereby in the inverse order of its maturity and not to
the payment of interest, or refunded to the Company or the other payor thereof
if and to the extent such amount which would have been excessive exceeds such
unpaid principal. The right to accelerate maturity of this Note or any other
indebtedness does not include the right to accelerate any interest which has not
otherwise accrued on the date of such acceleration, and the Holder hereof does
not intend to charge or receive any unearned interest in the event of
acceleration. All interest paid or agreed to be paid to the holder hereof shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full stated term (including any renewal or extension) of
such indebtedness so that the amount of interest on account of such indebtedness
does not exceed the maximum nonusurious amount permitted by applicable law. As
used in this paragraph, the term "applicable law" shall mean the laws of the
State of Texas or the federal laws of the United States, whichever laws allow
the greater interest, as such laws now exist or may be changed or amended or
come into effect in the future.
11
12
IN WITNESS WHEREOF, Probex Fluids Recovery, Inc. and Probex Corp. have
caused this Note to be duly executed and delivered by its duly authorized
officer as of the date first above written.
PROBEX FLUIDS RECOVERY, INC.
By:
--------------------------------------
Its:
--------------------------------------
PROBEX CORP.
By:
--------------------------------------
Its:
--------------------------------------
