EXHIBIT 99.40
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE
BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, OR (C) IF
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT, DATED AS OF THE
DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS
PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS
AMONG THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A)
LIMIT THE CONVERSION RIGHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY AND
MANDATORY REPAYMENT, PREPAYMENT AND REDEMPTION- RIGHTS AND OBLIGATIONS
AND (C) SPECIFY EVENTS OF DEFAULT FOLLOWING WHICH THE REMAINING BALANCE
DUE AND OWING HEREUNDER MAY BE ACCELERATED.
No. 1 $1,550,000
CONVERTIBLE NOTE
of
Universal Automotive Industries, Inc., a Delaware corporation (together
with its successors, the "Company"), for value received hereby promises to pay
to:
GLOBAL CAPITAL FUNDING GROUP, L.P.
(the "Holder") and registered assigns, the principal sum of One Million Five
Hundred Fifty Thousand ($1,550,000) or, if less, the principal amount of this
Note then outstanding, on the Maturity Date by wire transfer of immediately
available funds to the Holder in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts. The Maturity Date is July 7, 2005.
Upon an Event of Default, and until such Default has been cured,
interest shall accrue at a rate of 12% per annum ("Default Interest"). All
payments of principal and interest hereunder shall be made for the benefit of
the Holder pursuant to the terms of the Agreement (hereafter defined).
This Convertible Note (this "Convertible Note") is one of a duly
authorized issuance of $1,550,000 aggregate principal amount Convertible Note
made by the Company referred to in that certain Securities Purchase Agreement
dated as of the date hereof between the Company and the Purchaser named therein
(the "Agreement"). The Agreement contains certain additional agreements among
the parties with respect to the terms of this Convertible Note, including,
without limitation, provisions which (A) limit the conversion rights of the
Holder, (B) specify voluntary and mandatory redemption rights and obligations
and (C) specify Events of Default following which the remaining balance due and
owing hereunder maybe accelerated. All such provisions are an integral part of
this Convertible Note and are incorporated herein by reference. This Convertible
Note is transferable and assignable to one or more Persons, in accordance with
the limitations set forth in the Agreement.
The Company shall keep a register (the "Register") in which shall be
entered the names and addresses of the registered holder of this Convertible
Note and particulars of this Convertible Note held by such holder and of all
transfers of this Convertible Note. References to the Holder or "Holders" shall
mean
the Person listed in the Register as registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. Certain Terms Defined. All terms defined in the Agreement and
not otherwise defined herein shall have for purposes hereof the meanings
provided for in the Agreement.
2. Covenants. The Company covenants and agrees to observe and
perform each of its covenants, obligations and undertakings contained in the
Agreement, which obligations and undertakings are expressly assumed herein by
the Company and made for the benefit of the holder hereof
3. Payment of Principal.
3.1 Prepayment of Note. For so long as no Event of Default shall
have occurred and is continuing and the Company is not in receipt of a Notice of
Conversion from the Holder of the Note, the Company may, at its option, prepay,
in whole or in part, this Convertible Note for a pre-payment price (the
"Prepayment Price") equal to (i) $l,320,000 from the date of this Convertible
Note until 120 days thereafter; (ii) $1,425,000 from the 121 day following the
date of this Convertible Note until the first anniversary of the date of this
Convertible Note and (iii) the outstanding principal amount of the Note, plus
all accrued and unpaid interest on any day following the first anniversary of
this Convertible Note. Any partial prepayment of the Convertible Note, at any
time after issuance, shall be credited to the principal amount of the
Convertible Note on a dollar for dollar basis. The Company shall not be entitled
to send any notice of prepayment and begin the prepayment procedure unless it
has (i) the appropriate Prepayment Price, in cash, available in a demand or
other immediately available account in a bank or similar financial institution
or equivalent means acceptable to Holder or (ii) immediately available credit
facilities, in the amount of the appropriate Prepayment Price, with a bank or
similar financial institution on the date the prepayment notice is sent to the
Holders of this Convertible Note. Provided, however, the Company will process
any Notice of Conversion received prior to the issuance of a notice of
prepayment; and further provided that, after a notice of prepayment has been
issued, the Holder may issue a Notice of Conversion which will not be honored
unless the Company fails to make the prepayment payment when due. In the event
of such failure, the Notice of Conversion will be honored as of the date of the
Notice of Conversion. Further, provided, that in the event the Company sends a
notice of prepayment pursuant to subclauses (i) or (ii) or this Section 3.1 and
does not effect such prepayment, the Prepayment Price for the Note shall be the
amount set forth in subclause (iii) for the remaining term of this Convertible
Note.
3.2 Payment on Maturity Date. The Company shall repay the
remaining unpaid balance of this Convertible Note on the Maturity Date.
4. Conversion.
4.1 Conversion of Convertible Note. Subject to Section 5 hereof,
the Holder shall have the right, at its option, at any time from and after 180
days following the date of this Convertible Note, to convert up to $775,000 of
the outstanding principal amount of the Convertible Note and the remaining
$775,000 principal amount shall be convertible 300 days following the date of
issuance of this Convertible Note. This Convertible Note shall be convertible
into that number of fully paid and nonassessable shares of Common Stock (as such
shares shall then be constituted) determined pursuant to this Section 4.1. The
number of shares of Common Stock to be issued upon each conversion of this
Convertible Note shall be determined by dividing the Conversion Amount (as
defined below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Company, as applicable, by the
Holder by facsimile or other reasonable means of communication dispatched prior
to 5:00 p.m., E. S .T. The term "Conversion Amount" means, with respect to any
conversion of this Convertible Note, the sum of(1) the principal amount of this
Convertible Note to be converted in such conversion plus (2) accrued and unpaid
interest, if any, on such principal amount at the interest rates provided in
this Convertible Note to the Conversion Date plus (3) Default Interest, if any,
on the interest referred to in the immediately preceding clause (2) plus (4) at
the Holder's option, any amounts owed to the Holder pursuant to Section 4.3
hereof, Section 10.1 of the Agreement or Section 10.4 of the Agreement.
4.2 Conversion Price. At the option of the Holder, any portion or
all of the outstanding principal amount of this Convertible Note shall be
converted into a number of shares of Common Stock at the conversion price (the
"Conversion Price") equal to the greater of(i) the volume weighted average sales
price, as reported on Bloomberg, L.P., for the ten trading days immediately
prior to the date of the related notice of conversion and (ii) $0.35.
4.3 Authorized Shares.
(a) Consistent with Section 7.11 of the Agreement, the
Company (i) shall promptly irrevocably instruct the Company's transfer agent to
issue certificates for the Common Stock issuable upon conversion of this
Convertible Note and (ii) agrees that its issuance of this Convertible Note
shall constitute full authority to its officers and agents who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the terms and
conditions of this Convertible Note.
(b) If at anytime the Holder submits a Notice of
Conversion and (x) the Company does not have sufficient authorized but unissued
shares of Common stock available to effect such conversion in full in accordance
with Article 4 or (y) the Company is prohibited by the Nasdaq Small Cap Market
of the National Market on which the Common Shares are listed and traded at that
time to effect such conversion in full, without shareholder approval, the
Company shall issue to the Holder all of the shares of Common Stock which are
then available to effect such conversion. The portion of this Convertible Note
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the "Excess
Amount") shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock until the date additional shares of Common
Stock are authorized by the Company, or its shareholders, as applicable. The
Company shall use its best efforts to authorize, or cause its shareholders to
authorize within 40 days of the submission of the Conversion Notice, a
sufficient number of shares of Common Stock to effect the full conversion set
forth in the Conversion Notice.
(c) In no event shall the Company issue upon conversion
of this Convertible Note more than the maximum number of shares allowable
without shareholder approval under the applicable rules of the National Market
on which the Common Shares are listed and traded unless the Company shall have
obtained approval by the shareholders of the Company or a waiver of such
requirement. Once the maximum number of shares has been issued (the date of
which is hereinafter referred to as the "Maximum Conversion Date"), unless the
Company shall have obtained shareholder approval or a waiver of such requirement
within 40 days of the Maximum Conversion Date, the Company shall pay to the Fund
the Redemption Price.
(d) The Maximum Number of Shares shall be subject to
adjustment from time to time for stock splits, stock dividends, combinations,
capital reorganizations and similar events relating to the Common Stock
occurring after the date hereof as contemplated by Article XI of the Agreement.
In the event that the Company obtains Stockholder Approval, approval of the
Nasdaq Small Cap Market or the National Market on which the Common Shares are
listed and traded at that time, or otherwise is able to increase the number of
shares to be issued above the Maximum Number of Shares (such increased number
being the "New Maximum Number of Shares"), the references to Maximum Number of
Shares above shall be deemed to be, instead, references to the New Maximum
Number of Shares.
4.4 Method of Conversion.
(a) Notwithstanding anything to the contrary set forth
herein, upon conversion of this Convertible Note in accordance with the terms
hereof, the Holder shall not be required to physically surrender this
Convertible Note to the Company unless the entire unpaid principal amount of
this Convertible Note is so converted. Rather, records showing the principal
amount converted (or otherwise repaid) and the date of such conversion or
repayment shall be maintained on a ledger substantially in the form of Annex A
attached hereto (a copy of which shall be delivered to the Company or transfer
agent with each Notice of Conversion). It is specifically contemplated that the
Holder hereof shall act as the
calculation agent for conversions and repayments. In the event of any dispute or
discrepancies, such records maintained by the Holder shall be controlling and
determinative in the absence of manifest error or failure of Holder to record
the principal amount converted (or otherwise repaid) from time to time, in which
events the record of the Company shall be controlling and determinative. The
Holder and any assignee, by acceptance of this Convertible Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following a
conversion of a portion of this Convertible Note, the principal amount
represented by this Convertible Note will be the amount indicated on Annex A
attached hereto (which may be less than the amount stated on the face hereof).
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock or other securities or property on conversion
of this Convertible Note in a name other than that of the Holder (or in street
name), and the Company shall not be required to issue or deliver any such shares
or other securities or property unless and until the person or persons (other
than the Holder or the custodian in whose street name such shares are to be held
for the Holder's account) requesting the issuance thereof shall have paid to the
Company the amount of any such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
(c) Subject to Section 5 hereof, upon receipt by the
Company of a Notice of Conversion, the Holder shall be deemed to be the holder
of record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this
Convertible Note shall be deemed reduced to reflect such conversion, and, unless
the Company defaults on its obligations under this Article 4, all rights with
respect to the portion of this Convertible Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such conversion.
Subject to Section 5 hereof, if the shall have given a Notice of Conversion as
provided herein, the Company's obligation to issue and deliver the certificates
for shares of Common Stock shall be absolute and unconditional, irrespective of
the absence of any action by the Holder to enforce the same, any waiver or
consent with respect to any provisions thereof, the recovery of any judgment
against any person or any action by the Holder to enforce the same, any failure
or delay in the enforcement of any other obligation of the Company to the Holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Company,
and subject to Section 4.4(a) irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with
such conversion. The date of receipt (including receipt via telecopy) of such
Notice of Conversion shall be the Conversion Date so long as it is received
before 5:00 p.m., E.S.T., on such date.
(d) Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the expiration of
the Deadline with respect to a conversion of any portion of this Convertible
Note for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Company), the Holder
shall regain the rights of a Holder of this Convertible Note with respect to
such unconverted portions of this Convertible Note and the Company shall, as
soon as practicable, return such unconverted Convertible Note to the holder or,
if the Convertible Note has not been surrendered, adjust its records to reflect
that such portion of this Convertible Note not been converted. In all cases, the
Holder shall retain all of its rights and remedies including, without
limitation, the right to receive Conversion Default Payments to the extent
required thereby for such Conversion Default and any subsequent Conversion
Default.
(e) In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and its
compliance with the provisions contained in Section 4.1 and in this Section 4.4,
the Company shall use its best efforts to cause its transfer agent to
electronically transmit the Common Stock issuable upon conversion to the Holder
by crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission System.
5. Redemption by Company.
5.1 Mandatory Redemption. In accordance with the provisions of the
Purchase Agreement, the Company may be required under certain circumstances, to
redeem in whole or in part, the remaining unpaid principal amount of this
Convertible Note, for cash at a redemption price (the "Redemption Price") equal
to the greater of (A) the applicable Prepayment Price and (B) (x) the number of
shares of Common Stock into which this Convertible Note is then convertible,
times (y) the average Closing Bid Price of Common Stock for the five (5) Trading
Days as reported by Bloomberg L.P. immediately preceding the date that this
Convertible Note is called for redemption, plus accrued and unpaid Default
Interest.
5.2 Mechanics of Redemption. The Company shall effect each such
redemption within seven business days of receiving a notice to redeem by
facsimile with a copy by either overnight or 2-day courier from the Holder of
this Convertible Note. Such redemption notice shall indicate whether the Company
is required to redeem all or part of such portion of the Convertible Note and
the applicable Redemption Price.
5.3 Payment of Redemption-Price. The Redemption Price shall be
paid to the Holder of this Convertible Note within seven business days of the
delivery of the notice of such redemption to such Holder.
6. Miscellaneous. This Convertible Note shall be deemed to be a
contract made under the laws of the State of Delaware, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and asset to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the State of Delaware and any state court sitting in
Delaware for purposes of all legal proceedings arising out of or relating to
this Convertible Note. The Company irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum. The Company hereby irrevocably waives any and all right to trial by jury
in any legal proceeding arising out of or relating to this Convertible Note.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: July 7, 2003
UNIVERSAL AUTOMOTIVE INDUSTRIES, INC.
By:____________________________________________
Name: Xxxxxx X. Xxxxxx
Title: Vice President & Chief Financial Officer
