Contract
THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN
EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND ANY
APPLICABLE STATES SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO XXXXXX EQUIPMENT, INC. (F/K/A
MAXIM MORTGAGE CORPORATION) THAT SUCH REGISTRATION IS NOT
REQUIRED.
AMENDED
AND RESTATED
SECURED
REVOLVING NOTE
FOR
VALUE
RECEIVED, each of XXXXXX
EQUIPMENT, INC.
(f/k/a
Maxim Mortgage Corporation), a Delaware corporation (“Xxxxxx
Equipment”),
and
XXXXXX VENTURES, INC., a Delaware corporation (“Xxxxxx
Ventures”
and
together with Xxxxxx Xxxxxxxxx, each a “Borrower”
and
collectively the “Borrowers”),
jointly and severally promises to pay to LAURUS MASTER FUND, LTD., c/o M&C
Corporate Services Limited, P.O. Box 309 GT, Xxxxxx House, South Church Street,
Xxxxxx Town, Grand Cayman, Cayman Islands, Fax: 000-000-0000 (the “Holder”)
or its
registered assigns, on order, the sum of Twenty Two Million Dollars
($22,000,000) or, if different, the aggregate principal amount of all
“Revolving
Loans”
(as
such term is defined in the Security Agreement referred to below), together
with
any accrued and unpaid interest hereon, on November 9, 2007 (the “Maturity
Date”)
Capitalized
terms used herein without definition shall have the meanings ascribed to
such
terms in the Security and Purchase Agreement among the Borrowers and the
Holder
dated as of November 9, 2004 (as amended, modified and supplemented from
time to
time, the “Security
Agreement”).
The
following terms shall apply to this Note:
ARTICLE
I
CONTRACT
RATE & PREPAYMENTS
1.1. Interest
Rate.
Subject
to Sections 3.11, 4.1 and 5.7 hereof, interest payable on this Note shall
accrue
at a rate per annum equal to the “prime rate” published in The
Wall Street Journal
from
time to time (the “Prime
Rate”),
plus
three percent (3%) (the “Contract
Rate”).
The
Prime Rate shall be increased or decreased as the case may be for each increase
or decrease in the Prime Rate in an amount equal to such increase or decrease
in
the Prime Rate; each change to be effective as of the day of the change in
such
rate in accordance with the terms of the Security Agreement. Subject to Section
1.2, the Contract Rate shall not be less than seven and one-half percent
(7.50%).
1.2. Contract
Rate Adjustments and Payments.
The
Contract Rate shall be calculated on the last business day of each month
hereafter until the Maturity Date (each a “Determination
Date”)
and
shall be subject to adjustment as set forth herein. If (i) Xxxxxx Equipment
shall have registered the shares of Xxxxxx Equipment’s common stock delivered to
the Holder on the Closing Date and the shares of Xxxxxx Equipment’s Common
underlying each of the conversion of the Minimum Borrowing Notes, the Secured
Convertible Term Note, the Options and that certain warrant issued to Holder
on
a registration statement declared effective by the Securities and Exchange
Commission (the “SEC”),
and
(ii) the market price (the “Market
Price”)
of the
Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined
below) for the five (5) trading days immediately preceding a Determination
Date
exceeds the then applicable Fixed Conversion Price by at least twenty five
percent (25%), the Contract Rate for the succeeding calendar month shall
automatically be reduced by 200 basis points (200 b.p.) (2.0%) for each
incremental twenty five percent (25%) increase in the Market Price of the
Common
Stock above the then applicable Fixed Conversion Price. Notwithstanding the
foregoing (and anything to the contrary contained in herein), in no event
shall
the Contract Rate be less than zero percent (0%). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears,
commencing on December 1, 2004 and on the first business day of each consecutive
calendar month thereafter until the Maturity Date (and on the Maturity Date),
whether by acceleration or otherwise (each, a “Contract
Rate Payment Date”).
1.3. Allocation
of Principal to Minimum Borrowing Note.
In the
event that the amount due and payable hereunder should equal or exceed
$8,000,000, to the extent that the outstanding balance on the Minimum Borrowing
Note shall be less than $8,000,000 (the difference of $8,000,000 less the
actual
balance of the Minimum Borrowing Note, the “Available
Minimum Borrowing”),
such
portion of the balance hereof as shall equal the Available Minimum Borrowing
shall be deemed to be simultaneously extinguished on this Note and transferred
to, and evidenced by, a Minimum Borrowing Note.
ARTICLE
II
HOLDER’S
CONVERSION RIGHTS
2.1. Optional
Conversion.
Subject
to the terms of this Article II, the Holder shall have the right, but not
the
obligation, at any time until the Maturity Date, or during an Event of Default
(as defined in Article IV), and to convert all or any portion of the outstanding
Principal Amount and/or accrued interest and fees due and payable into fully
paid and nonassessable restricted shares of the Common Stock at the Fixed
Conversion Price (defined below). For purposes hereof, subject to Section
2.5
hereof, the “Fixed
Conversion Price”
means an
amount equal to $1.50.
2.2. Conversion
Limitation.
Notwithstanding anything contained herein to the contrary, the Holder shall
not
be entitled to convert pursuant to the terms of this Note an amount that
would
be convertible into that number of Conversion Shares which would exceed the
difference between the number of shares of Common Stock beneficially owned
by
such Holder or issuable upon exercise of the warrant and the option held
by such
Holder and 9.99% of the outstanding shares of Common Stock of Xxxxxx Equipment.
For the purposes of the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange Act
and
Regulation 13d-3 thereunder. The Conversion Shares limitation described in
this
Section 2.2 shall automatically become null and void without any notice to
any
Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 65 days prior notice to Xxxxxx
Equipment.
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2.3. Mechanics
of Holder’s Conversion.
In the
event that the Holder elects to convert this Note into Common Stock, the
Holder
shall give notice of such election by delivering an executed and completed
notice of conversion (“Notice
of Conversion”)
to
Xxxxxx Equipment and such Notice of Conversion shall provide a breakdown
in
reasonable detail of the Principal Amount, accrued interest and fees that
are
being converted. On each Conversion Date (as hereinafter defined) and in
accordance with its Notice of Conversion, the Holder shall make the appropriate
reduction to the Principal Amount, accrued interest and fees as entered in
its
records and shall provide written notice thereof to Xxxxxx Equipment on the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to Xxxxxx Equipment in accordance with the provisions hereof shall
be
deemed a Conversion Date (the “Conversion
Date”).
A
form of Notice of Conversion to be employed by the Holder is annexed hereto
as
Exhibit A. Pursuant to the terms of the Notice of Conversion, Xxxxxx Equipment
will issue instructions to the transfer agent accompanied by an opinion of
counsel within two (2) business days of the date of the delivery to Xxxxxx
Equipment of the Notice of Conversion and shall cause the transfer agent
to
transmit the certificates representing the Conversion Shares to the Holder
by
crediting the account of the Holder’s designated broker with the Depository
Trust Corporation (“DTC”)
through its Deposit Withdrawal Agent Commission (“DWAC”)
system
within three (3) business days after receipt by Xxxxxx Xxxxxxxxx of the Notice
of Conversion (the “Delivery
Date”).
In
the case of the exercise of the conversion rights set forth herein the
conversion privilege shall be deemed to have been exercised and the Conversion
Shares issuable upon such conversion shall be deemed to have been issued
upon
the date of receipt by Xxxxxx Equipment of the Notice of Conversion. The
Holder
shall be treated for all purposes as the record holder of such Common Stock,
unless the Holder provides Xxxxxx Equipment written instructions to the
contrary.
2.4. Late
Payments.
Each
Borrower understands that a delay in the delivery of the shares of Common
Stock
in the form required pursuant to this Article beyond the Delivery Date could
result in economic loss to the Holder. As compensation to the Holder for
such
loss, each Borrower agrees to jointly and severally pay late payments to
the
Holder for late issuance of such shares in the form required pursuant to
this
Article III upon conversion of the Note, in the amount equal to $500 per
business day after the Delivery Date. Each Borrower shall pay any payments
incurred under this Section in immediately available funds upon demand.
2.5. Adjustment
Provisions.
The
Fixed Conversion Price and number and kind of shares or other securities
to be
issued upon conversion determined pursuant to Section 2.1 shall be subject
to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:
A. Reclassification.
If
Xxxxxx Equipment at any time shall, by reclassification or otherwise, change
the
Common Stock into the same or a different number of securities of any class
or
classes, this Note, as to the unpaid Principal Amount and accrued interest
thereon, shall thereafter be deemed to evidence the right to purchase an
adjusted number of such securities and kind of securities as would have been
issuable as the result of such change with respect to the Common Stock (i)
immediately prior to or (ii) immediately after, such reclassification or
other
change at the sole election of the Holder.
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B. Stock
Splits, Combinations and Dividends.
If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common
Stock
or any preferred stock issued by Xxxxxx Equipment in shares of Common Stock,
the
Fixed Conversion Price shall be proportionately reduced in case of subdivision
of shares or stock dividend or proportionately increased in the case of
combination of shares, in each such case by the ratio which the total number
of
shares of Common Stock outstanding immediately after such event bears to
the
total number of shares of Common Stock outstanding immediately prior to such
event.
C. Share
Issuances.
Subject
to the provisions of this Section 2.5, if Xxxxxx Equipment shall at any time
prior to the conversion or repayment in full of the Principal Amount issue
any
shares of Common Stock or securities convertible into Common Stock to a person
other than the Holder (except (i) pursuant to Subsections A or B above; (ii)
pursuant to options, warrants, or other obligations to issue shares outstanding
on the date hereof as disclosed to Holder in writing; (iii) pursuant to options
that may be issued under any employee incentive stock option and/or any
qualified stock option plan adopted by Xxxxxx Equipment or (iv) pursuant
to an
acquisition by Borrower permitted under the terms of the Security Agreement)
for
a consideration per share (the “Offer
Price”)
less
than the Fixed Conversion Price in effect at the time of such issuance, then
the
Fixed Conversion Price shall be immediately reset to such lower Offer Price.
For
purposes hereof, the issuance of any security of Xxxxxx Equipment convertible
into or exercisable or exchangeable for Common Stock shall result in an
adjustment to the Fixed Conversion Price upon the issuance of such
securities.
D. Computation
of Consideration.
For
purposes of any computation respecting consideration received pursuant to
Subsection C above, the following shall apply:
(a) in
the
case of the issuance of shares of Common Stock for cash, the consideration
shall
be the amount of such cash, provided that in no case shall any deduction
be made
for any commissions, discounts or other expenses incurred by Xxxxxx Xxxxxxxxx
for any underwriting of the issue or otherwise in connection
therewith;
(b) in
the
case of the issuance of shares of Common Stock for a consideration in whole
or
in part other than cash, the consideration other than cash shall be deemed
to be
the fair market value thereof as determined in good faith by the Board of
Directors of Xxxxxx Xxxxxxxxx (irrespective of the accounting treatment
thereof); and
(c) Upon
any
such exercise, the aggregate consideration received for such securities shall
be
deemed to be the consideration received by Xxxxxx Equipment for the issuance
of
such securities plus the additional minimum consideration, if any, to be
received by Xxxxxx Xxxxxxxxx upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as provided
in
clauses (a) and (b) of this Subsection (D)).
4
2.6. Reservation
of Shares.
During
the period the conversion right exists, Xxxxxx Equipment will reserve from
its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of Common Stock upon the full conversion of this Note. Xxxxxx
Equipment represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. Xxxxxx Equipment agrees that its issuance
of this Note shall constitute full authority to its officers, agents, and
transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the conversion of this Note.
ARTICLE
III
EVENTS
OF DEFAULT
The
occurrence
of any of the events set forth in Sections 3.1 through 3.10, inclusive, shall
be
an Event of Default (“Event
of Default”):
3.1. Failure
to Pay Principal, Interest or other Fees.
Any
Borrower fails to pay when due any installment of principal, interest or
other
fees hereon or on any other Note issued pursuant to the Security Agreement,
or
any Borrower fails to pay when due any amount due under any other promissory
note issued by such Borrower, when due in accordance with the terms thereof,
and
in any such case, such failure shall continue for a period of three (3) days
following the date upon which any such payment was due.
3.2. Breach
of Covenant.
Any
Borrower breaches any covenant or other term or condition of this Note, the
Security Agreement or any Ancillary Agreement in any material respect and
such
breach, if subject to cure, continues for a period of fifteen (15) days after
the occurrence thereof.
3.3. Breach
of Representations and Warranties.
Any
representation or warranty of any Borrower or any of its Subsidiaries made
herein, or the Security Agreement, or in any Ancillary Agreement shall be
false
or misleading in any material respect.
3.4. Stop
Trade.
An SEC
stop trade order or Principal Market trading suspension of the Common Stock
shall be in effect for 5 consecutive days or 5 days during a period of 10
consecutive days, excluding in all cases a suspension of all trading on a
Principal Market, provided that Xxxxxx Equipment shall not have been able
to
cure such trading suspension within 30 days of the notice thereof or list
the
Common Stock on another Principal Market within 60 days of such notice. The
“Principal Market” for the Common Stock shall include the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock
Exchange, or New York Stock Exchange (whichever of the foregoing is at the
time
the principal trading exchange or market for the Common Stock), or any
securities exchange or other securities market on which the Common Stock
is then
being listed or traded.
3.5. Receiver
or Trustee.
Any
Borrower or any of its Subsidiaries shall make an assignment for the benefit
of
creditors, or apply for or consent to the appointment of a receiver or trustee
for it or for a substantial part of its property or business; or such a receiver
or trustee shall otherwise be appointed.
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3.6. Judgments.
Any
money judgment, writ or similar final process shall be entered or filed against
any Borrower or any of its Subsidiaries or any of their respective property
or
other assets for more than $250,000 in the aggregate for Borrower and all
such
Subsidiaries, and shall remain unvacated, unbonded or unstayed for a period
of
thirty (30) days.
3.7. Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law for the relief
of
debtors shall be instituted by or against any Borrower or any of its
Subsidiaries.
3.8. Default
Under Other Agreements.
The
occurrence of an Event of Default under and as defined in the Security Agreement
or any Ancillary Agreement or any event of default (or similar term) under
any
other agreement evidencing indebtedness of at least $250,000.
3.9. Failure
to Deliver Common Stock or Replacement Note.
Xxxxxx
Equipment’s failure to timely deliver Common Stock to the Holder pursuant to and
in the form required by this Note and the Security Agreement, if such failure
to
timely deliver Common Stock shall not be cured within two (2) days. If any
Borrower is required to issue a replacement Note to Holder and such Borrower
shall fail to deliver such replacement Note within seven (7) Business Days.
The
occurrence of a change in the controlling ownership of the Company.
3.10. Change
in Control.
The
occurrence of a change in the controlling ownership of any
Borrower.
DEFAULT
RELATED PROVISIONS
3.11. Default
Interest Rate.
Following the occurrence and during the continuance of an Event of Default,
interest on this Note shall automatically be increased by one and one-half
percent (1.50%) per month, and all outstanding Obligations, including unpaid
interest, shall continue to accrue interest from the date of such Event of
Default at such interest rate applicable to such Obligations until such Event
of
Default is cured or waived.
3.12. Conversion
Privileges.
The
conversion privileges set forth in Article III shall remain in full force
and
effect immediately from the date hereof and until this Note is paid in
full.
3.13. Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
ARTICLE
IV
DEFAULT
PAYMENTS
4.1. Default
Payment.
If an
Event of Default occurs and is continuing beyond any applicable grace period,
the Holder, at its option, may elect, in addition to all rights and remedies
of
Holder under the Security Agreement and the Ancillary Agreements and all
obligations of each Borrower under the Security Agreement and the Ancillary
Agreements, to require the Borrowers to make a Default Payment (“Default
Payment”).
The
Default Payment shall be 115% of the outstanding principal amount of the
Note,
plus accrued but unpaid interest, all other fees then remaining unpaid, and
all
other amounts payable hereunder. The Default Payment shall be applied first
to
any fees due and payable to Holder pursuant to the Notes or the Ancillary
Agreements, then to accrued and unpaid interest due on the Notes and then
to
outstanding principal balance of the Notes.
6
4.2. Default
Payment Date.
The
Default Payment shall be due and payable immediately on the date that the
Holder
has exercised its rights pursuant to Section 5.1 (“Default
Payment Date”).
4.3. Cumulative
Remedies.
The
remedies under this Note shall be cumulative.
ARTICLE
V
MISCELLANEOUS
5.1. Failure
or Indulgence Not Waiver.
No
failure or delay on the part of the Holder hereof 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 right, power or privilege. All
rights and remedies existing hereunder are cumulative to, and not exclusive
of,
any rights or remedies otherwise available.
5.2. Notices.
Any
notice herein required or permitted to be given shall be in writing and provided
in accordance with the terms of the Security Agreement.
5.3. Amendment
Provision.
The
term “Note” and all reference thereto, as used throughout this instrument, shall
mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented, and any successor instrument
as it may be amended or supplemented.
5.4. Assignability.
This
Note shall be binding upon each Borrower and its successors and assigns,
and
shall inure to the benefit of the Holder and its successors and assigns,
and may
be assigned by the Holder in accordance with the requirements of the Security
Agreement.
5.5. Cost
of Collection.
If
default is made in the payment of this Note, each Borrower shall jointly
and
severally pay the Holder hereof reasonable costs of collection, including
reasonable attorneys’ fees.
5.6. Governing
Law.
This
Note shall be governed by and construed in accordance with the laws of the
State
of New York, without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts
of New
York or in the federal courts located in the state of New York. Each party
hereto and the individual signing this Note on behalf of each Borrower agree
to
submit to the jurisdiction of such courts. The prevailing party shall be
entitled to recover from the other party its reasonable attorney’s fees and
costs. In the event that any provision of this Note is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be
deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision
which
may prove invalid or unenforceable under any law shall not affect the validity
or unenforceability of any other provision of this Note. Nothing contained
herein shall be deemed or operate to preclude the Holder from bringing suit
or
taking other legal action against any Borrower in any other jurisdiction
to
collect on the Borrower’s obligations to Holder, to realize on any collateral or
any other security for such obligations, or to enforce a judgment or other
court
order in favor of Xxxxxx.
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5.7. Maximum
Payments.
Nothing
contained herein shall be deemed to establish or require the payment of a
rate
of interest or other charges in excess of the maximum permitted by applicable
law. In the event that the rate of interest required to be paid or other
charges
hereunder exceed the maximum permitted by such law, any payments in excess
of
such maximum shall be credited against amounts owed by the Borrowers to the
Holder and thus refunded to the Borrowers.
5.8. Security
Interest.
The
Holder has been granted a security interest in certain assets of the Borrowers
as more fully described in the Security Agreement.
5.9. Construction.
Each
party acknowledges that its legal counsel participated in the preparation
of
this Note and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Note to favor any party against the
other.
5.10. Amendment
and Restatement.
This
Note amends and restates in its entirety (and is given in substitution for
but
not in satisfaction of) (a) that certain $16,000,000 Secured Revolving Note
dated as of November 9, 2004 executed by the Borrowers in favor of the Holder
and (b) that certain $20,000,000 Amended and Restated Secured Revolving Note
dated as of January 25, 2005 executed by the Borrowers in favor of the Holder
(collectively, the “Prior
Notes”).
This
Note does not effect a refinancing of all or any portion of the Obligations
heretofore evidenced by the Prior Notes, it being the intention of the Borrowers
and the Holder to avoid effectuating a novation of such
Obligations.
[Balance
of page intentionally left blank; signature page follows.]
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IN
WITNESS WHEREOF,
the
Borrower has caused this Amended and Restated Secured Revolving Note to be
signed in its name effective as of November 9, 2004.
XXXXXX
EQUIPMENT, INC.
(f/k/a Maxim Mortgage Corporation)
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By: | /s/ XXXXX XXXXX | |
Name: Xxxxx Xxxxx |
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Title: Chairman | ||
WITNESS: | |||
XXXXXX
EQUIPMENT, INC.
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By: | /s/ XXXXX XXXXX | |
Name: Xxxxx Xxxxx |
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Title: Chairman |
WITNESS: | |||
9
NOTICE
OF CONVERSION
(To
be
executed by the Holder in order to convert the Note)
The
undersigned hereby elects to convert $_________ of the principal and $_________
of the interest due on the Amended and Restated Secured Revolving Note issued
by
Xxxxxx Xxxxxxxxx, Inc. (f/k/a Maxim Mortgage Corporation) (“Xxxxxx Equipment”)
and Xxxxxx Ventures, Inc. on November ___, 2005 into Shares of Common Stock
of
Xxxxxx Equipment according to the conditions set forth in such Note, as of
the
date written below.
Date
of Conversion:
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Conversion
Price:
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Shares
To Be Delivered:
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Signature:
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Print
Name:
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Address:
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Holder
DWAC
instructions
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