LAURUS MASTER FUND, LTD.
c/o Laurus Capital Management, LLC
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
May 12, 2006
Xxxxxx Equipment, Inc.
Xxxxxx Ventures, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxx
Re: Amendment to Security and Purchase Agreement
--------------------------------------------
Ladies and Gentlemen:
Reference is made to the Security and Purchase Agreement dated as of
November 9, 2004 (as amended, restated, modified and supplemented from time to
time, the "Agreement") among Xxxxxx Equipment, Inc. (f/k/a Maxim Mortgage
Corporation) ("Xxxxxx Equipment") and Xxxxxx Ventures, Inc. ("Xxxxxx Ventures")
(Xxxxxx Equipment and Xxxxxx Ventures, each a "Company" and collectively,
"Companies") and Laurus Master Fund, Ltd. ("Laurus"). Capitalized terms used
herein that are not defined shall have the meanings given to them in the
Agreement.
Companies have requested that Laurus amend the Agreement and Laurus is
willing to do so on the terms and conditions set forth below.
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto hereby agree as follows:
Subject to satisfaction of the conditions precedent set forth below, the
Agreement is hereby amended as follows:
(a) Section 2(d) of the Agreement is hereby amended in its
entirety to provide as follows:
"(d) Term Loans.
(i) Subject to the terms and conditions set forth herein
and in the Ancillary Agreements, Laurus shall make a term loan (the
"Closing Date Term Loan") to Company and the Eligible Subsidiaries
in an aggregate amount equal to $6,000,000. The Closing Date Term
Loan shall be advanced on the Closing Date and shall be, with
respect to principal, payable in consecutive monthly installments of
principal commencing on July 1, 2005 and on the first day of each
month thereafter, subject to acceleration upon the occurrence of an
Event of Default or termination of this Agreement. The first
twenty-eight principal installments shall each be in the amount of
$206,896 and the twenty-ninth and final installment shall be in an
amount equal to the unpaid principal balance of the Closing Date
Term Loan plus all accrued and unpaid interest thereon. The Closing
Date Term Loan shall be evidenced by the Closing Date Secured
Convertible Term Note.
(ii) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Laurus shall make a term
loan (the "Second Term Loan") to Company and the Eligible
Subsidiaries in an aggregate amount equal to $1,900,000. The Second
Term Loan shall be advanced on February 28, 2005 and shall be, with
respect to principal, payable in consecutive monthly installments of
principal commencing on July 1, 2005 and on the first day of each
month thereafter, subject to acceleration upon the occurrence of an
Event of Default or termination of this Agreement. The first
twenty-eight principal installments shall each be in the amount of
$65,517 and the twenty-ninth and final installment shall be in an
amount equal to the unpaid principal balance of the Second Term Loan
plus all accrued and unpaid interest thereon. The Second Term Loan
shall be evidenced by the Second Secured Convertible Term Note.
(iii)Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Laurus shall make a term
loan (the "Third Term Loan") to Company and the Eligible
Subsidiaries in an aggregate amount equal to $4,640,000. The Third
Term Loan shall be advanced on January 6, 2006 and shall be payable
in full together with all accrued and unpaid interest thereon and
all other amounts due and owing with respect thereto, subject to
acceleration upon the occurrence of an Event of Default or
termination of this Agreement, upon the earlier of (A) July 6, 2006
and (B) the consummation of any offering of Xxxxxx Equipment's
Common Stock to a Person other than Laurus. The Third Term Loan
shall be evidenced by the Third Term Note.
(iv) Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Laurus shall make a term
loan (the "Fourth Term Loan" and together with the Closing Date Term
Loan, the Second Term Loan and the Third Term Loan, each a "Term
Loan" and collectively the "Term Loans") to Company and the Eligible
Subsidiaries in an aggregate amount equal to $8,500,000. The Fourth
Term Loan shall be advanced on May 12, 2006 and shall be, with
respect to principal, payable in consecutive monthly installments of
principal in the amounts set forth in the Fourth Term Note
commencing on September 1, 2006 and on the first day of each month
thereafter, subject to acceleration upon the occurrence of an Event
of Default or termination of this Agreement. The Fourth Term Loan
shall be evidenced by the Fourth Term Note. Notwithstanding anything
herein to the contrary, Laurus may, in its sole discretion, increase
the principal amount of the Fourth Term Loan, from time to time
following Company Agent's request therefor, by additional amounts
not to exceed $6,500,000 in the aggregate in accordance with and
pursuant to the terms of that certain side letter dated May 12, 2006
from Laurus to Company and the Eligible Subsidiaries and all such
amounts so provided by Laurus to Company and the Eligible
Subsidiaries shall be deemed Obligations hereunder secured by the
Collateral; provided, however, nothing contained herein shall be
deemed a commitment by Laurus to extend any such additional
financial accommodations to Company or any Eligible Subsidiary."
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(b) Section 13(e) of the Agreement is hereby amended in its
entirety to provide as follows:
"(e) Use of Funds. It will use the proceeds of the Loans only
to fund the transactions contemplated by the Acquisition
Documentation and for Company's and each Eligible Subsidiary's
working capital purposes. Notwithstanding anything herein to the
contrary, Company and each Eligible Subsidiary will use (i) the
proceeds of the Third Term Loan solely to pay for Company's, such
Eligible Subsidiary's, Xxxxxx Canada's and/or Xxxxxx Asia's (A)
outstanding accounts payable owing to their suppliers, (B) the
purchase of materials and parts for the assembly of their Inventory
and (C) employee gross wages, taxes and benefits in the normal
course of their businesses and (ii) the proceeds of the Fourth Term
Loan as follows: (A) $5,336,000 to repay in full the Third Term Loan
and (B) $3,164,000 (net of all fees payable by Company and each
Eligible Subsidiary in connection with the closing and funding of
the Fourth Term Loan) solely to pay for Company's, such Eligible
Subsidiary's, Xxxxxx Canada's and/or Xxxxxx Asia's (x) outstanding
accounts payable owing to their suppliers, (y) the purchase of
materials and parts for the assembly of their Inventory and (z)
employee gross wages, taxes and benefits in the normal course of
their businesses; provided, however, the use of the proceeds of any
Loan shall be approved by the Financial Consultant prior to the use
of such proceeds for any purpose including, without limitation, for
the purposes described in subsections (i) and (ii) above (other than
for the purposes described in subsection (A) above and the payment
of any fees, expenses and other amounts by Company and any Eligible
Subsidiary to Laurus in connection with the Loans). Company and each
Eligible Subsidiary hereby acknowledge that breach of this Section
13(e) shall constitute an automatic Event of Default and no cure or
grace period shall be applicable thereto notwithstanding any other
provision of this Agreement to the contrary."
(c) The following subsections are hereby added to the end of
Section 13 of the Agreement:
"(v) Financial Consultant. Each of Company and each Eligible
Subsidiary covenants and agrees that Company shall retain a
financial consultant selected by Company from a list of financial
consultants acceptable to Company and Laurus (the "Financial
Consultant"). Company and each Eligible Subsidiary shall fully
cooperate with the Financial Consultant so retained and shall
authorize the Financial Consultant to provide such information and
reports from time to time with respect to Company and each Eligible
Subsidiary and their financial condition, business, assets,
liabilities and prospects, as Laurus shall from time to time
request. All fees and expenses of the Financial Consultant or shall
be solely the responsibility of Company and each Eligible Subsidiary
and in no event shall Laurus have any liability or responsibility
for the payment of any such fees or expenses, nor shall Laurus have
any obligation or liability to Company and/or any Eligible
Subsidiary or any other Person by reason of any acts or omissions of
the Financial Consultant. Company and each Eligible Subsidiary
hereby acknowledge that breach of this Section 13(v) shall
constitute an automatic Event of Default and no cure or grace period
shall be applicable thereto notwithstanding any other provision of
this Agreement to the contrary.
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(w) Korean Companies. Each of Company and each Eligible
Subsidiary covenants and agrees that, on or prior to May 15, 2006,
it shall cause, or cause its Subsidiaries to cause, each Korean
Company to (i) guaranty all of the Obligations, (ii) grant to Laurus
a Lien (free and clear of any other Liens other than Liens permitted
by Laurus) in all of its assets (real and personal) to secure all of
such Korean Company's obligations and liabilities under its guaranty
of the Obligations and (iii) execute and deliver to Laurus all such
certificates, instruments, documents, agreements and opinions of
counsel as may be required by Laurus or its counsel in connection
with the requirements set forth in subsections (i) and (ii) above.
Company and each Eligible Subsidiary hereby acknowledge that breach
of this Section 13(w) shall constitute an automatic Event of Default
and no cure or grace period shall be applicable thereto
notwithstanding any other provision of this Agreement to the
contrary.
(x) Royal Bank of Canada. Each of Company and each Eligible
Subsidiary covenants and agrees that Laurus, at any time, may, at
its sole option, refinance all of the obligations and liabilities
owing by Pneutech, Xxxxxxxx and Hydramen to Royal Bank of Canada
(the "RBC Indebtedness") so long as Pneutech, Xxxxxxxx, Hydramen and
Laurus mutually agree on the terms of the documentation evidencing
such financing. Upon such mutual agreement, each of Company and each
Eligible Subsidiary shall cause Pneutech, Xxxxxxxx and Hydramen to
execute and deliver to Laurus all such certificates, instruments,
documents, agreements and opinions of counsel as may be required by
Laurus or its counsel in order to consummate Laurus' refinancing of
the RBC Indebtedness. Company and each Eligible Subsidiary hereby
acknowledge that breach of this Section 13(x) shall constitute an
automatic Event of Default and no cure or grace period shall be
applicable thereto notwithstanding any other provision of this
Agreement to the contrary."
(d) The following definitions in Annex A to the Agreement are
hereby amended in their entirety to provide as follows:
"Notes" means each of the Minimum Borrowing Notes, the
Revolving Note, the Secured Convertible Term Notes, the Third Term
Note and the Fourth Term Note made by Company and each Eligible
Subsidiary in favor of Laurus in connection with the transactions
contemplated hereby, as the same may be amended, modified,
supplemented and restated from time to time, as applicable.
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"Seller" means McBan Equipment Ltd. (as successor in interest
of 016133 N.B. Ltd., f/k/a Xxxxxx Equipment Ltd.), a corporation
organized under the laws of Canada.
"Subordination Agreement" means the collective reference to
any one or more of the following agreements: (a) the Subordination
Agreement dated as of the date hereof among Seller, McCain Foods
Limited, Xxxxxx Canada, Laurus, Xxxxxx Equipment and Xxxxxx
Ventures, (b) the Subordination Agreement dated as of the date
hereof made by Xxxxxxxx Group, LLC, Xxxxx Xxxxxxxx, Xxxxxxxx Xxxx,
Xxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx X. Xxxxx and Laurus, (c) the
Acknowledgment, Direction and Subordination Agreement dated as of
July 27, 2005 among Royal Bank of Canada, Laurus, Xxxxxx Equipment,
Xxxxxx Ventures, Xxxxxx Canada, Pneutech, Xxxxxxxx and Hydramen, (d)
the Postponement and Subordination Agreement dated as of February
28, 2005 among Xxxxxxx X. X. Xxxxxxxx, Xxxxxxxx Xxxxxxxx, Xxxxx
Xxxxxxxx, Xxxx Van Den Ende, Xxxxx Xxxxx Van Den Ende, Xxxxx
Xxxxxxxxxx, Laurus, Pneutech and Xxxxxxxx, (e) the Subordination and
Postponement Agreement dated as of February 28, 2005 among 3156176
Canada Inc., 4237901 Canada Inc., Laurus and Pneutech and (f) any
and all subordination agreements entered into from time to time in
favor of Laurus with respect to the Obligations, as each of the same
may be amended, modified and supplemented from time to time.
"Term Loans" has the meaning set forth in Section 2(d)(iv).
"Total Investment Amount" means $38,400,000, as such amount
may be increased from time to time pursuant to Section 2(d)(iv).
(e) the following definitions are hereby added to Annex A to the
Agreement in their appropriate alphabetical order:
"Financial Consultant" has the meaning set forth in Section
13(v).
"Fourth Term Note" means the Secured Term Note made by Company
and each Eligible Subsidiary in favor of Laurus in the aggregate
principal amount of Eight Million Five Hundred Thousand Million
Dollars ($8,500,000), as the same may be amended, modified,
supplemented and restated from time to time.
"Korean Companies" means, collectively, Xxxxxx Asia and
Samsung.
"Samsung" means Samsung Industries Co., Inc., a company
organized under the laws of the Republic of Korea.
This letter agreement shall become effective upon satisfaction of the
following conditions precedent: Laurus shall have received (i) a management fee
for the benefit of Laurus Capital Management, LLC in the amount of $297,500
which fee shall be deducted from the proceeds of the Fourth Term Loan, be fully
earned as of the date hereof and shall not be subject to reduction, rebate or
proration whatsoever, (ii) a copy of this Amendment executed by Companies and
consented and agreed to by each guarantor listed below, (iii) fully executed
originals of all documents instruments and agreements set forth on the
transaction checklist attached hereto as Exhibit A and (iv) all such other
certificates, instruments, documents, agreements and opinions of counsel as may
be required by Laurus or its counsel, each of which shall be in form and
substance satisfactory to Laurus and its counsel.
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By their signatures below, each of Pneutech, Xxxxxxxx and Hydramen (each a
"Pneutech Entity" and collectively, the "Pneutech Entities") covenants and
agrees that Laurus, at any time, may, at its sole option, refinance all of the
obligations and liabilities owing by the Pneutech Entities to Royal Bank of
Canada (the "RBC Indebtedness") so long as the Pneutech Entities and Laurus
mutually agree on the terms of the documentation evidencing such financing. Upon
such mutual agreement, each Pneutech Entity agrees to execute and deliver to
Laurus all such certificates, instruments, documents, agreements and opinions of
counsel as may be required by Laurus or its counsel in order to consummate
Laurus' refinancing of the RBC Indebtedness.
For good and valuable consideration, receipt of which is hereby
acknowledged, Laurus hereby appoints Xxxxxx Equipment (the "Proxy Holder"), with
a mailing address at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, with
full power of substitution, as proxy, to vote all shares of Common Stock of
Xxxxxx Equipment, now or in the future owned by Laurus, but solely to the extent
issuable upon exercise of the Option dated November 9, 2004 (the "November 2004
Option") made by Xxxxxx Equipment in favor of Laurus (the "Shares"). This proxy
is irrevocable and coupled with an interest. Upon the sale or other transfer of
the Shares, in whole or in part, or the assignment of the November 2004 Option,
this proxy shall automatically terminate (x) with respect to such sold or
transferred Shares at the time of such sale and/or transfer, or (y) with respect
to all Shares in the case of an assignment of the November 2004 Option, at the
time of such assignment, in each case, without any further action required by
any Person. Laurus shall use its best efforts to forward to Proxy Holder within
two (2) Business Days following Laurus' receipt thereof, at the address for
Proxy Holder set forth above, copies of all materials received by Laurus
relating, in each case, to the solicitation of the vote of shareholders of
Xxxxxx Equipment. This proxy shall remain in effect with respect to the Shares
of Xxxxxx Equipment during the period commencing on the date hereof and
continuing until the payment in full of all obligations and liabilities owing by
Xxxxxx Equipment to Laurus (as the same may be amended, restated, extended or
modified from time to time).
Xxxxxx Equipment acknowledges that it has an affirmative obligation to
make prompt public disclosure of material agreements and material amendments to
the Agreement and the Ancillary Agreements. It is Xxxxxx Equipment's
determination that, except as shall be set forth in Xxxxxx Equipment's Form 8-K
to be filed no later than two (2) Business Days following the date hereof, a
copy of which shall be delivered to Laurus, neither this letter agreement nor
the terms and provisions of this letter agreement (collectively, the
"Information") are material. Xxxxxx Equipment has had an opportunity to consult
with counsel concerning this determination. Xxxxxx Equipment hereby agrees that
Laurus shall not be in violation of any duty to Xxxxxx Equipment or its
shareholders, nor shall Laurus be deemed to be misappropriating any information
of Xxxxxx Equipment, if Laurus sells shares of common stock of Xxxxxx Equipment,
or otherwise engages in transactions with respect to securities of Xxxxxx
Equipment, while in possession of the Information.
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Except as specifically amended herein, the Agreement and the Ancillary
Agreements shall remain in full force and effect, and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this letter agreement
shall not operate as a waiver of any right, power or remedy of Laurus, nor
constitute a waiver of any provision of the Agreement or any of the Ancillary
Agreements. This letter agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns and shall be
governed by and construed in accordance with the laws of the State of New York.
[Remainder of Page Intentionally Left Blank]
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This letter agreement may be executed by the parties hereto in one or more
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
Very truly yours,
LAURUS MASTER FUND, LTD.
By: /s/ XXXXX GRIN
--------------------------
Name: Xxxxx Grin
Title: Fund Manager
CONSENTED AND AGREED TO:
XXXXXX EQUIPMENT, INC.
(f/k/a Maxim Mortgage Corporation)
By: /s/ XXXXX XXXXX
-----------------------------
Name: Xxxxx Xxxxx
Title: Chairman
XXXXXX VENTURES, INC.
By: /s/ XXXXX XXXXX
----------------------------
Name: Xxxxx Xxxxx
Title: Chairman
XXXXXX EQUIPMENT 2004 INC.
By: /s/ XXXXX XXXXX
----------------------------
Name: Xxxxx Xxxxx
Title: Chairman
[Additional Signature Page to Follow]
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PNEUTECH INC.
By: /s/ XXXXXXXX XXXX
----------------------------
Name: Xxxxxxxx Xxxx
Title: President
XXXXXXXX CONTROLS INC.
By: /s/ XXXXXXXX XXXX
----------------------------
Name: Xxxxxxxx Xxxx
Title: President
HYDRAMEN FLUID POWER LIMITED
By: /s/ XXXXXXXX XXXX
----------------------------
Name: Xxxxxxxx Xxxx
Title: President
[Signature Page to Amendment to Security and Purchase Agreement]
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Exhibit A
Closing Checklist
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