Contract
Exhibit 4.1
ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE REPAYMENT OF THE OBLIGATIONS EVIDENCED BY
THIS NOTE, THE LIENS AND SECURITY INTERESTS SECURING THE OBLIGATIONS EVIDENCED BY THIS NOTE, THE
EXERCISE OF ANY RIGHT OR REMEDY WITH RESPECT THERETO, AND CERTAIN OF THE RIGHTS OF THE HOLDER
HEREOF ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF
MARCH 12, 2007 (AS AMENDED, RESTATED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM TIME TO TIME, THE
“INTERCREDITOR AGREEMENT”), BY AND BETWEEN XXXXX FARGO FOOTHILL, INC., AS SENIOR AGENT, AND
NEWCASTLE PARTNERS, L.P., AS SUBORDINATED CREDITOR. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS
OF THE INTERCREDITOR AGREEMENT AND THIS NOTE, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN
AND CONTROL.
AMENDED AND RESTATED
CONVERTIBLE PROMISSORY NOTE
CONVERTIBLE PROMISSORY NOTE
| $10,000,000 | March 12, 2007 |
FOR VALUE RECEIVED, each of the undersigned, XXXX INDUSTRIES, INC., a California corporation
(the “Maker” or “Company”) and XXXX INDUSTRIES, INC., a Minnesota corporation (together with Maker,
referred to herein collectively as the “Obligors”), hereby jointly and severally promise to pay to
the order of Newcastle Partners, L.P. a Texas limited partnership, or its assigns (the “Payee”), at
such place as the Payee may designate in writing, the principal sum of Ten Million ($10,000,000),
or such other amount as shall equal the outstanding principal amount hereof, under the terms set
forth herein. Capitalized terms used but not defined herein shall have the respective meanings
given to such terms in the Purchase Agreement, dated as of January 31, 2007 (the “Purchase
Agreement”), between the Maker and the Payee.
1. Interest. Except as otherwise provided herein, the unpaid principal balance hereof
from time to time outstanding shall bear interest from January 31, 2007 at the rate of eight
percent (8%) per annum, subject to adjustment as provided for in Section 6. Interest shall accrue
on the outstanding unpaid principal amount (as increased pursuant to Section 2(a) below) until such
principal amount is paid (or converted as provided herein) from January 31, 2007. Interest on this
Note shall be computed on the basis of a 365-day year.
2. Payment of Interest and Principal. Except as otherwise provided herein (including,
without limitation, Sections 5 and 6 hereof), and subject to any default hereunder, the principal
and interest hereof is payable as follows:
(a) Interest shall be paid in kind and shall accrete as additional principal on this Note on
the applicable interest payment date; provided that, following January 31, 2008, if both (i)
Maker’s senior lenders (including Agent, in the event that the Senior Credit Agreement remains in
effect) consent in writing to the payment of cash interest and (ii) the Current Market Price at the
date of election (which shall be on or following January 31, 2008) is at least 200% of the
Conversion Price, interest on the then outstanding principal balance of this Note may be paid in
cash at the election of Maker; provided further that, if such election to pay cash interest is
made,
the interest rate set forth in Section 1 hereof shall be increased to the lesser of (a)
sixteen percent (16%) or (b) the highest lawful interest rate permitted by applicable law; and
provided further that any accrued interest as of the date of such election shall accrete as
additional principal on this Note as of such election date. Interest shall be payable in arrears
on December 31, March 31, June 30 and September 30 of each year, beginning March 31, 2007. All
references herein to the “principal” of this Note shall include all interest accreted thereon as
additional principal pursuant to the foregoing sentence.
(b) The entire outstanding principal amount of the Note together with all accrued but unpaid
interest shall be due in cash on January 31, 2017 (the “Maturity Date”) from the Obligors.
(c) On and following January 31, 2010, so long as the Current Market Price (determined on the
date of prepayment) is greater than 150% of the Conversion Price and the Shareholder Approval shall
have been received, the Maker will have right of early prepayment of this Note at an amount equal
to 105% of the aggregate outstanding principal on this Note. For the purposes of this Note, the
“Current Market Price” on any date means the average of the daily Closing Prices per share of
Common Stock for all Trading Days included in 90 consecutive calendar days preceding the date in
question. For purposes of the foregoing, (i) the “Closing Price” shall be the last reported sales
price or, if no such reported sale takes place on any particular date, the average of the reported
closing bid and asked prices on the principal exchange (or on NASDAQ) on which the Common Stock is
listed (or if the Common Stock is not so listed, the average of the closing bid and asked prices
furnished by any two members of the National Association of Securities Dealers as selected by Payee
for such purpose) on the date in question and (ii) “Trading Days” shall mean any day on which the
market on which the Common Stock is then traded is open for trading. Any such prepayment under
this Section 2(c) shall be on 30 days advance notice to Payee.
3. Conversion at the Option of Payee.
(a) At any time while any portion of the principal or interest of this Note is outstanding,
the Payee may give the Maker written notice of its intention to convert all or any portion of the
outstanding principal and/or accrued but unpaid interest on this Note into such number of shares of
the Maker’s common stock (the “Common Stock”), equal to the amount to be converted divided by the
Conversion Price in effect at such time. Upon receipt of the Payee’s written notice, the Maker
shall cause certificates representing those shares to be delivered to Payee within three business
days of Maker’s receipt of such notice. The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the date the applicable conversion
notice is given.
(b) The “Conversion Price” shall be $3.81, subject to any adjustment. The Conversion Price
shall be adjusted proportionally for any subsequent stock dividend or split, stock combination or
other similar recapitalization, reclassification or reorganization of or affecting Maker’s Common
Stock. In addition, the Conversion Price shall also be appropriately adjusted in the event that
Maker issues shares of Common Stock (or issues securities, including warrants or similar rights,
entitling holders to exercise, convert or exchange into, or otherwise subscribe for, shares of
Common Stock) at a price per share less than the Current Market Price as
of the date of such issuance, as follows: the new Conversion Price shall be reduced to equal
(x) the prevailing Conversion Price (i.e., prior to any adjustment hereunder) multiplied by (y) the
quotient obtained by dividing (a) the Market Value Share Number by (b) the total number of shares
of Common Stock that would be outstanding after giving effect to the exercise, conversion or
exchange of any rights or other derivative Company securities outstanding (determined pro forma for
the applicable issuance giving rise to the adjustment in the Conversion Price hereunder). For
purposes of the foregoing, the “Market Value Share Number” shall equal the sum of (i) the total
number of shares of Common Stock that would be outstanding after giving effect to the exercise,
conversion or exchange of any rights or other derivative Company securities outstanding (determined
prior to the applicable issuance giving rise to the adjustment in the Conversion Price) plus (ii)
the quotient obtained by dividing (A) the aggregate consideration received by the Company in the
applicable issuance (or, in the case of the issuance of any rights or other derivative Company
securities giving rise to the adjustment in the Conversion Price hereunder, such aggregate
consideration to be received upon the exercise, conversion or exchange of any such rights or
derivative Company securities) by (B) the Current Market Price.
(c) In case of a Change of Control, instead of receiving shares of Maker’s Common Stock upon
conversion of this Note, Payee shall have the right thereafter to receive the kind and amount of
shares of stock and other securities, cash and property which the Payee would have owned or have
been entitled to receive immediately after such Change of Control had the same portion of this Note
been converted immediately prior to the effective date of such Change of Control and, in any such
case, if necessary, appropriate adjustment shall be made in the application of the provisions set
forth in this Section with respect to the rights and interests thereafter of the Payee, to the end
that the provisions set forth in this Section shall thereafter correspondingly be made applicable,
as nearly as may reasonably be, in relation to any shares of stock and other securities, cash and
property thereafter deliverable in connection with this Note. The provisions of this subsection
shall similarly apply to successive Changes of Control.
(d) “Change of Control” means that the Maker shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the Maker is the
surviving corporation) another person, (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Maker to another person, (iii) allow
another person to make a purchase, tender or exchange offer that is accepted by the holders of more
than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held
by the person or persons making or party to, or associated or affiliated with the persons making or
party to, such purchase, tender or exchange offer), or (iv) consummate a stock purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization or
spin-off) with another person whereby such other person acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the other person or other
persons making or party to, or associated or affiliated with the other persons making or party to,
such stock purchase agreement or other business combination); provided, however, that a transaction
in which Newcastle Partners, L.P. or any of its affiliates is the acquiring party shall not be
deemed to constitute a Change of Control.
(e) No fractional shares of Maker’s Common Stock shall be issued upon conversion of the Note.
In lieu of any fractional shares to which Payee would otherwise be entitled, the Maker shall pay
cash equal to the product of such fraction multiplied by the average of the closing prices of the
Common Stock on the American Stock Exchange (or the exchange on which Maker’s Common Stock trades
for the five consecutive trading days immediately preceding the date of the conversion.
(f) In the event of an adjustment to the Conversion Price, the Maker shall promptly deliver to
the Payee a certificate, signed by its Chief Financial Officer, setting forth the new Conversion
Price and a calculation in reasonable detail of the adjustment to the Conversion Price.
(g) The Maker shall pay any and all taxes that may be payable with respect to the issuance and
delivery of Common Stock upon conversion of this Note; provided that the Maker shall not be
required to pay any tax that may be payable in respect of any issuance of Common Stock to any
person other than the Payee or with respect to any income tax due by the Payee with respect to such
Common Stock.
4. Redemption Upon Change of Control. No sooner than 15 days nor later than 10 days
prior to the consummation of a Change of Control, the Maker shall deliver written notice of such
Change of Control to the Payee (a “Change of Control Notice”). At any time during the period
beginning after the Payee’s receipt of a Change of Control Notice and ending on the date of the
consummation of such Change of Control, the Payee may require the Maker to redeem all or any
portion of this Note by delivering written notice thereof (a “Change of Control Redemption Notice”)
to the Maker, which Change of Control Redemption Notice shall indicate the portion of the
outstanding principal amount of this Note that the Payee is electing to redeem. The portion of this
Note subject to redemption pursuant to this Section 4 shall be redeemed by the Maker at a price
equal to 110% of the principal amount being redeemed, plus accrued but unpaid interest on such
principal amount (the “Change of Control Redemption Price”). Redemptions required by this Section 4
shall be made on the date of the consummation of the Change of Control and shall have priority to
payments to shareholders of the Maker in connection with such Change of Control. Notwithstanding
anything to the contrary in this Section 4, until the Change of Control Redemption Price is paid in
full, the principal amount submitted for redemption under this Section 4 (together with any accrued
but unpaid interest thereon) may be converted, in whole or in part, by the Payee into Common Stock
pursuant to Section 3.
5. Conversion On Maturity Date. On the Maturity Date, in lieu of receiving the payment
required by Section 2(b), the Payee may elect to have Maker issue to the Payee a certificate
representing such number of shares of Common Stock as is equal to the quotient obtained by dividing
the entire principal amount of this Note then outstanding, plus all accrued but unpaid interest
thereon, by the Conversion Price in effect at such time, in full satisfaction of this Note (the
“Maturity Date Conversion”). The applicable provisions of Section 3 shall apply with equal force to
the Maturity Date Conversion. In the event that the Shareholder Approval has not then been
obtained, Payee may elect to receive both (1) such number of shares as the Maker shall be permitted
to issue under exchange rules in the absence of a shareholder vote and (2) cash in lieu of any
remaining principal balance.
6. Condition to Issuance of Shares Upon Conversion. Notwithstanding anything to the
contrary contained in Section 3 or Section 5 of this Note, it shall be a condition precedent to
Maker’s issuance of shares of Common Stock under this Note in an amount greater than 19.9% of the
Company’s then issued and outstanding Common Stock upon conversion of this Note, whether on the
Maturity Date or otherwise, that the Shareholder Approval shall have been obtained prior to such
issuance; provided that, in the event that the Shareholder Approval is not obtained, Payee shall be
permitted to convert this Note into such number of shares as the Maker shall be permitted to issue
under exchange rules in the absence of a shareholder vote (and Payee shall be permitted to retain
the Note in respect of any remaining principal balance). In addition, notwithstanding anything to
the contrary, in the event that the Shareholder Approval is not obtained, the interest rate set
forth in Section 1 hereof in respect of the Disallowed Excess Principal on this Note shall be
increased to the lesser of (a) sixteen percent (16%) or (b) the highest lawful interest rate
permitted by applicable law. For purposes of this Note, the “Disallowed Excess Principal” shall
mean the principal balance of the Note (determined after giving effect to any accretion for
interest that has become payable) in excess of the principal balance of the Note then convertible
at the Conversion Price into the maximum number of shares permitted under applicable exchange rules
in the absence of a shareholder vote. For the avoidance of doubt, the Disallowed Excess Principal
shall increase with each subsequent payment of interest that accretes as additional principal on
this Note.
7. Dividends. If, at any time while any portion of the principal or interest on the
Note is outstanding, Maker declares a distribution in cash, property (including securities) or a
combination thereof, whether by way of dividend or otherwise, with respect to its Common Stock, the
Payee shall participate pro rata in such distribution on an as-converted basis with holders of
Maker’s Common Stock.
8. Security; Subordination. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED BY A
SECURITY AGREEMENT (THE “SECURITY AGREEMENT”) EXECUTED BY THE OBLIGORS IN FAVOR OF PAYEE.
ADDITIONAL RIGHTS OF THE PAYEE ARE SET FORTH IN THE SECURITY AGREEMENT. Notwithstanding anything
to the contrary, the Indebtedness evidenced by this Note is hereby expressly subordinated in the
manner set forth in the Subordination Agreement. This Note will rank senior to all existing and
future unsecured indebtedness of Maker.
9. Certain Defined Terms. The following terms in this Note shall have the meanings
specified below:
“Agent” means Xxxxx Fargo Foothill, Inc., in its capacity as the arranger and
administrative agent for the Lenders, together with its successors and assigns, if any, in such
capacity.
“Borrowers” means, individually and collectively, jointly and severally, Xxxx
Industries, Inc., a California corporation, and Xxxx Industries, Inc., a Minnesota corporation.
“Indebtedness” means (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other
financial products, (c) all obligations as a lessee under capital leases, (d) all obligations
or liabilities of others secured by a Lien on any asset of a Person or its subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all obligations to pay the
deferred purchase price of assets (other than trade payables incurred in the ordinary course of
business and repayable in accordance with customary trade practices), (f) all obligations owing
under hedge agreements, and (g) any obligation guaranteeing or intended to guarantee (whether
directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any
obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (f)
above.
“Insolvency Proceeding” means any proceeding commenced by or against any Person under
any provision of title 11 of the United States Code (as in effect from time to time) or under any
other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
“Lenders” means, individually and collectively, the lenders from time to time party to
the Senior Credit Agreement.
“Lien” means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a) such interest is based on
the common law, statute, or contract, (b) such interest is recorded or perfected, and (c) such
interest is contingent upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances. Without limiting the generality of the foregoing, the term
“Lien” includes the Lien or security interest arising from a mortgage, deed of trust, encumbrance,
notice of Lien, levy or assessment, pledge, hypothecation, assignment, deposit arrangement,
security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment
for security purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and
encumbrances affecting real property.
“Paid in Full” means the payment in full in cash of all Senior Debt and the
termination of all commitments of the holders of the Senior Debt to extend further credit to
Borrowers, or, in the case of Senior Debt consisting of contingent obligations in respect of
letters of credit, hedging obligations, bank product obligations, or other reimbursement
obligations, the setting apart of cash sufficient to discharge such portion of the Senior Debt in
an account for the exclusive benefit of the holders thereof, in which account such holders shall be
granted a first priority perfected security interest in a manner reasonably acceptable to such
holders.
“Person” means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.
“Senior Credit Agreement” means that certain Credit Agreement, dated as of January 31,
2007, by and among Borrowers, the Lenders, and Agent, as amended, restated, supplemented, or
otherwise modified from time to time
“Senior Debt” means all obligations (whether now outstanding or hereafter incurred,
contingent or non-contingent, liquidated or unliquidated, or primary or secondary) of Borrowers in
respect of (a) principal under the Senior Credit Agreement or any other Senior Loan Document (or
any refinancing agreement entered into with respect thereto), (b) all interest and premium, if any,
in respect of the Indebtedness referred to in clause (a) above, (c) all fees (including attorneys
fees) and expenses payable pursuant to any Senior Loan Document (or a refinancing agreement entered
into with respect thereto), (d) all other Obligations (as defined in the Senior Credit Agreement)
or other payment obligations (including costs, expenses, letter of credit reimbursement
obligations, hedging obligations, bank product obligations, or otherwise) of Borrowers to Agent or
Lenders under or arising pursuant to any Senior Loan Document (or to third persons under provisions
of a refinancing agreement entered into with respect thereto), including contingent reimbursement
obligations with respect to outstanding letters of credit, all costs and expenses incurred by Agent
or any Lender in connection with its or their enforcement of any rights or remedies under the
Senior Loan Documents, including, by way of example, attorneys fees, court costs, appraisal and
consulting fees, auctioneer fees, rent, storage, insurance premiums, and like items, and
irrespective of whether allowable as a claim against Borrowers in any Insolvency Proceeding, (e)
post-petition interest on the Indebtedness referred to in clauses (a) through (d) above, at the
rate provided for in the instrument or agreements evidencing such Indebtedness, accruing subsequent
to the commencement of an Insolvency Proceeding (whether or not such interest is allowed as a claim
in such Insolvency Proceeding), and (f) any refinancings, renewals, or extensions of the
Indebtedness referred to in clauses (a) through (e) above.
“Senior Loan Documents” means the Senior Credit Agreement and the other Loan Documents
(as defined in the Senior Credit Agreement), each as amended, restated supplemented, or otherwise
modified from time to time, including any agreement extending the maturity of, consolidating, or
otherwise restructuring (including adding subsidiaries of Borrowers thereunder) all or any portion
of the Indebtedness under such agreement or any successor or replacement agreement and whether by
the same or any other agent, lender, or group and whether or not increasing the amount of
Indebtedness that may be incurred thereunder.
10. Affirmative Covenants. Except to the extent permitted by the Senior Credit
Agreement so long as such facility remains in effect, from the date hereof and until payment in
full of this Note, the Maker will, and will cause each of its Subsidiaries to:
(a) Maintenance of Existence. Do all things necessary to preserve and keep in full force and
effect its existence as a corporation.
(a) Compliance with Applicable Laws. Comply in all material respects with the requirements of
all applicable statutes, laws, rules, regulations and orders of any governmental authority, except
where contested in good faith and by proper proceedings.
(b) Licenses. Obtain and maintain all material licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its properties or to the conduct of its
business.
(c) Financial Reporting. Comply with the financial reporting requirements set forth in the
Senior Credit Agreement.
10. Negative Covenants.
(a) Indebtedness. Except to the extent permitted by the Senior Credit Agreement so long as
such facility remains in effect, neither the Company nor any Subsidiary will incur indebtedness for
borrowed money except the following:
(i) Senior Debt under Senior Credit Agreement in an aggregate principal amount not to exceed
$40 million;
(ii) Indebtedness for borrowed money that is not secured by a Lien on any assets, property or
capital stock owned by the Company or any of its Subsidiaries in an amount not to exceed
$1,000,000; and
(iii) any other Indebtedness permitted to be incurred under Section 6.1 of the Senior Credit
Agreement so long as such facility remains in effect.
(b) Liens. Neither the Company nor any of its Subsidiaries shall create, incur, assume or
permit to exist any Lien on or with respect to any of its assets or property of any character,
whether now owned or hereafter acquired, except for Permitted Liens (as defined in the Senior
Credit Agreement so long as such facility remains in effect; provided that “Permitted Liens” shall
be defined in accordance with Section 9 otherwise).
(c) Material Asset Sales. Neither the Company nor any of its Subsidiaries shall sell, lease,
transfer, license or otherwise dispose of any of its assets or property including securities
(collectively, a “Transfer”), whether now owned or hereafter acquired, except (i) transfers in the
ordinary course of its business consisting of the sale of inventory and sales of worn-out or
obsolete equipment and (ii) transfers not in excess of one million ($1,000,0000) for fair value and
other than to any affiliate of the Company.
(d) Mergers, Etc. Neither the Company nor any of its Subsidiaries shall consolidate with or
merge into any other Person or permit any other Person to merge into it.
11. Default. Except to the extent that any of the following are not “Events of
Default” under the Senior Credit Agreement so long as such facility remains in effect, the
occurrence of any one or more of the following events shall constitute an event of default (each,
an ‘Event of Default”), upon which Payee may declare the entire principal amount of this Note,
together with all accrued but unpaid interest, to be immediately due and payable in cash:
(a) The Obligors shall fail to make any payment of principal (including, but not limited to,
upon any conversion pursuant to Section 5 hereof or the maturity of the Note) and/or accrued but
unpaid interest (at the applicable rate) when due and payable, and such failure, in the case of any
interest payment, shall continue for a period of at least five business days.
(b) The Obligors shall be in material default of any term or provision of this Note, the
Purchase Agreement, the Registration Rights Agreement or the Security Agreement, and such failure
shall continue through 15 days after Payee gives written notice of such default to Maker.
(c) Any representation or warranty of the Maker contained in the Purchase Agreement or the
Registration Rights Agreement shall have been false in any material respect on the Closing Date.
(d) Maker or any of its Subsidiaries shall (i)(A) fail to make any payment when due under the
terms of any bond, debenture, note or other evidence of indebtedness, including the Senior Debt, to
be paid by such Person (excluding this Note but including any other evidence of indebtedness of
Maker or any of its subsidiaries to the Payee) and such failure shall continue beyond any period of
grace provided with respect thereto, or (B) default in the observance or performance of any other
agreement, term or condition contained in any such bond, debenture, note or other evidence of
indebtedness, and (ii) in each case, the effect of such failure or default is to cause, or permit
the holder or holders thereof to cause, indebtedness in an aggregate amount of one million dollars
($1,000,000) or more to become due prior to its stated date of maturity, unless such acceleration
shall have been rescinded and such failure to pay cured within thirty (30) days from the date of
such acceleration.
(e) A final judgment or order for the payment of money in excess of one million dollars
($1,000,000) (exclusive of amounts covered by insurance issued by an insurer not an affiliate of
Maker) shall be rendered against the Maker or any of its Subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not be effectively
stayed, or any judgment, writ, assessment, warrant of attachment, or execution or similar process
shall be issued or levied against a substantial part of the property of the Maker or any of its
subsidiaries and such judgment, writ, or similar process shall not be released, stayed, vacated or
otherwise dismissed within thirty (30) days after issue or levy.
(f) any Liens of Payee in any of the assets of Maker or its Subsidiaries shall cease to be or
shall not be valid and perfected Liens or the Maker or any Subsidiary shall assert that such Liens
are not valid and perfected Liens.
(g) The Maker or any of its Subsidiaries, pursuant to or within the meaning of Title 11, U.S.
Code, or any similar federal, foreign or state law for the relief of debtors (collectively,
“Bankruptcy Law”), (i) commences a voluntary case, (ii) consents to the entry of an order for
relief against it in an involuntary case, (iii) consents to the appointment of a receiver, trustee,
assignee, liquidator or similar official (a “Custodian”), (iv) makes a general assignment for the
benefit of its creditors or (v) admits in writing that it is generally unable to pay its debts as
they become due.
(h) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that
(i) is for relief against the Maker or any of its Subsidiaries in an involuntary case, (ii)
appoints a Custodian of the Maker or any of its Subsidiaries or (iii) orders the liquidation of the
Maker or any of its Subsidiaries.
Without limiting the above, the Maker acknowledges that payments (including but not limited to
upon conversion of this Note) on the various scheduled due dates are of essence and that any
failure to timely make any applicable payment of the principal or interest (within any permitted
grace period) permits Payee to declare this Note immediately due in cash in its entirety without
any prior notice of any kind to Maker, except for the specific notices provided above. Upon the
occurrence and during the continuance of an event of default, the interest rate under this Note
shall be increased to the lesser of (a) sixteen percent (16%) or (b) the highest lawful interest
rate permitted by applicable law. In the event that such event of default is subsequently cured,
the adjustment referred to in the preceding sentence shall cease to be effective as of the date of
such cure; provided that the interest as calculated and unpaid at such increased rate during the
continuance of such event of default shall continue to apply to the extent relating to the days
after the occurrence of such event of default through and including the date of cure of such event
of default.
12. Applicable Law; Forum. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS PRINCIPLES THEREOF. EACH OF PAYEE AND MAKER CONSENTS TO SUBMIT TO THE PERSONAL JURISDICTION
OF ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF TEXAS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT, AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE IN ANY OTHER COURT. EACH OF THE PARTIES TO THIS AGREEMENT AGREES
NOT TO ASSERT IN ANY ACTION OR PROCEEDING ARISING OUT OF RELATING TO THIS NOTE THAT THE VENUE IS
IMPROPER, AND WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY
OTHER PARTY WITH RESPECT THERETO.
13. Waivers. The Maker hereby waives presentment for payment, notice of dishonor,
protest and notice of payment and all other demands and notices of any kind in connection with the
enforcement of this Note. Any provision of this Note may be amended, waived or modified upon the
written consent of Maker and Payee. No failure or delay on the part of the Payee in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further exercise thereof
or of any other power, right or privilege.
14. No Setoffs. The Maker shall pay (and, if applicable, this Note shall automatically
accrete in respect of) principal and interest under the Note without any deduction for any setoff
or counterclaim.
15. Costs of Collection. If this Note is not paid when due, the Maker shall pay
Payee’s reasonable costs of collection, including reasonable attorneys’ fees.
16. Notices. Whenever notice is required to be given under this Note, such notice
shall be given in accordance with Section 7.7 of the Purchase Agreement.
17. Transferability. This Note shall be transferable by Payee. Neither this Note,
nor any obligations hereunder, shall be assignable by Maker without Payee’s express written
consent.
18. Inspection Rights. The Holder and its representatives shall have the right, at
any time during normal business hours, upon reasonable prior notice, to visit and inspect the
properties of Maker and its corporate, financial and operating records, and make abstracts
therefrom.
19. Severability. The invalidity, illegality or unenforceability of one or more of
the provisions of this Note in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Note in such jurisdiction or the validity, legality or
enforceability of this Note, including any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law. Payee does not agree or intend to contract for, charge, collect,
take, reserve or receive any amount in the nature of interest or otherwise which would in any way
or event (including demand, prepayment or acceleration) cause Payee to collect more on its loan
that the maximum amount Payee would be permitted to charge or collect by federal law or the law of
the State of Texas (as applicable). Any such excess interest shall instead of anything to the
contrary, be applied first to reduce the outstanding principal balance of this Note, and when the
principal balance has been paid in full, be refunded to Maker.
(SIGNATURE PAGE FOLLOWS}
IN WITNESS WHEREOF, the undersigned Obligors have hereunto affixed their signatures.
| XXXX INDUSTRIES, INC., a California corporation | ||||
By
|
/s/ Xxxxx Xxxxxxx | |||
| Its Chief Financial Officer | ||||
| XXXX INDUSTRIES, INC., a Minnesota corporation | ||||
By
|
/s/ Xxxxx Xxxxxxx | |||
| Its Chief Financial Officer | ||||
