November 8, 2006 Thomas Equipment, Inc. Milwaukee, Wisconsin 53202 Re: Forbearance and Modification Agreement
November
8, 2006
Xxxxxx
Equipment, Inc.
0000
Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxx 00000
Ladies
and Gentlemen:
Reference
is made to the Securities Purchase Agreement dated as of April 19, 2005 (the
“Purchase Agreement”) among Xxxxxx Equipment, Inc., a Delaware corporation (the
“Company”), the undersigned (the “Investor”) and certain other parties, the
Company’s Amended and Restated Certificate of Designation of Preferences, Rights
and Limitations of Series A Convertible Preferred Stock (the “Certificate of
Designation”), and the common stock purchase warrants issued to the Investor in
connection with the Purchase Agreement (the “Warrant”). Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in
the
Purchase Agreement.
In
consideration for the various agreements below and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the
parties hereto hereby agree as follows:
1. Simultaneously
with the execution and delivery of this Agreement, Section 6(b) of the
Certificate of Designation shall be amended to read in its entirety as
follows:
”(b)
Conversion Price.
The
conversion price for the Preferred Stock shall equal $0.125 (the
“Conversion
Price”),
subject to adjustment herein.”
2. Section
2(b) of each the Warrant and the additional common stock purchase warrant issued
to the Investor in June 2006 is hereby amended to read in its entirety as
follows:
”(b)
Exercise Price.
The
exercise price of the Common Stock under this Warrant shall be $0.125, subject
to adjustment hereunder (the “Exercise
Price”).”
3. Simultaneously
with the execution and delivery of this Agreement, the Company shall issue
new
common stock purchase warrants (the “New Warrants”) to the Investor, in the form
of Exhibit A hereto. 50% of such New Warrants shall have an exercise price
of
$0.125 and 50% of such New Warrants shall have an exercise price of $0.01.
The
New Warrants shall be exercisable into _______________________ shares of the
Company’s common stock (“Common Stock”).
4. Simultaneously
with the execution and delivery of this Agreement, the Company shall enter
into
a registration rights agreement with the Investor (the “New Registration Rights
Agreement”), in the form of Exhibit B hereto. The additional shares of Common
Stock issuable upon conversion of the Preferred Stock as a result of the
provisions of Section 1 of this Agreement and upon exercise of the New Warrants
shall be subject to the New Registration Rights Agreement.
5. The
Company acknowledges that all of the shares of Common Stock issuable upon
conversion of the Preferred Stock and the exercise of the Warrants (including,
in each case, the additional shares of Common Stock so issuable as a result
of
the provisions of Section 1 of this Agreement) shall be “Registrable Securities”
for the purposes of the Registration Rights Agreement, dated April 19, 2005,
among the Company and the stockholders of the Company party thereto.
Accordingly, the Company agrees to prepare and file with the Commission (as
defined below) within 120 days of the date hereof such amendments to the
registration statement and the prospectus used in connection therewith covering
the resale of the shares issuable upon conversion of the Preferred Stock and
exercise of the Warrant (the “Current Registration Statement”) as may be
necessary to keep such registration statement continuously effective until
all
of the shares owned by the Investor and required to be registered for sale
thereunder have been sold or may be sold without volume restrictions pursuant
to
Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the Investor.
6. Promptly
following the execution and delivery of this Agreement, the Company shall take
such actions as may be necessary to effectuate changes to the capitalization
of
the Company as set forth in Exhibit C attached hereto. In connection therewith,
the irrevocable proxy agreement in the form of Exhibit D attached hereto,
executed by Xxxxxxx Equity Partners LLC, Xxxxx Xxxxx and Xxxxx Xxxxxxxx, who
collectively hold a majority of the issued and outstanding shares of the
Company, shall be delivered to the Investor.
7. Certain
Triggering Events have occurred and are continuing under the Certificate of
Designation by virtue of, among other things: (1) the Company’s failure to pay
accrued dividends when due; and (2) the creditor protection proceedings
undertaken by the Company’s operating subsidiaries (the “Existing Triggering
Events”). The Existing Triggering Events entitle the Investor to immediately
enforce all the rights and remedies set forth in the Certificate of Designation,
including, but not limited to, the right of the Investor to seek cash redemption
of amounts due under the Certificate of Designation and otherwise. The Company
acknowledges and agrees that the Investor is not in any way agreeing to waive
such Existing Triggering Events as a result of this Agreement or the performance
by the parties of their respective obligations hereunder and the Investor
expressly reserves its rights and remedies in regards thereof. Subject to the
conditions contained herein and performance by the Company of all of the terms
of this Agreement, the Investor agrees to forbear from enforcing the remedies
set forth in Section 9 of the Certificate of Designation with respect to the
Existing Triggering Events for a period of six months from the date hereof
(the
“Forbearance Period”). Notwithstanding the foregoing, the Forbearance Period
shall immediately expire and be of no further force or effect upon the earliest
to occur of (i) any default under this Agreement, (ii) the acceleration of
the
maturity of any indebtedness for borrowed money in excess of $50,000 owed by
the
Company or any subsidiary, or (iii) a material adverse change in the Company’s
business or operations taken as a whole. This forbearance shall not be construed
as an agreement by the Investor to forbear from exercising any of its rights
or
remedies under the Certificate of Designation with respect to any Triggering
Events other than the Existing Triggering Events.
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8. Representations
of Investor.
The
Investor hereby makes the representations and warranties set forth below to
the
Company:
8.1 Reliance
on Exemptions.
The
Investor acknowledges that this transaction has not been reviewed by the United
States Securities and Exchange Commission or any state agency because it is
intended to be a nonpublic offering exempt from the registration requirements
of
the Securities Act of 1933, as amended (the “Securities Act”), and state
securities laws. The Investor understands that the Company is relying in part
upon the truth and accuracy of, and the Investor’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Investor set forth herein in order to determine the availability of such
exemption and the eligibility of the Investor to acquire the New
Warrants.
8.2 Investment
Purpose.
Except
as otherwise provided in Section 4 (a) above, Investor represents that the
New
Warrants are being acquired for its own account, for investment purposes only
and not for distribution or resale to others in contravention of the
registration requirements of the Securities Act. The Investor agrees that it
will not sell or otherwise transfer the New Warrants and the Warrant Shares
unless they are registered under the Securities Act or unless an exemption
from
such registration is available.
8.3 Accredited
Investor.
The
Investor represents and warrants that it is an “accredited investor” as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
8.4 Legends.
The
Investor understands that the certificates representing the New Warrants and
the
shares of Common Stock issuable upon exercise thereof, until such time as they
have been registered under the Securities Act, shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of such certificates or other instruments):
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
(B)
AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS, OR (II) UNLESS
SOLD
PURSUANT TO RULE 144 UNDER SAID ACT.
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8.6 Insufficient
Authorized Shares.
The
Investor acknowledges that the Company does not have a sufficient number of
authorized but unissued shares of Common Stock as of the date hereof to
effectuate the conversion of all shares of Preferred Stock, Warrants and or
New
Warrants. The Company undertakes to prepare, file with the SEC not later than
February 5, 2007, and distribute a proxy statement which seeks approval from
the
Company’s stockholders to (i) increase in the Company’s authorized shares of
Common Stock to 250,000,000 shares, (ii) obtain aproval for the issuance of
more
than 20% of the Company’s outstanding Common Stock, if required, and (iii)
reverse split the Company’s outstanding shares of Common Stock on a one for 25
basis (collectively, the “Proxy Matters”). Until such time as the Proxy Matters
are approved by the Company’s stockholders and appropriate amendments to the
Company’s certificate of incorporation are implemented, the Investor agrees and
acknowledges that it may not be able to convert shares of Preferred Stock or
or
New Warrants for the full number of shares of Common Stock issuable upon the
conversion or exercise thereof.
9. Representations
of Company.
The
Company hereby makes the representations and warranties set forth below to
the
Investor:
9.1 Authorization;
Enforcement. The Company has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by each of this
Agreement, the New Warrants and the New Registration Rights Agreement (the
“Transaction Documents”) and otherwise to carry out its obligations thereunder.
The execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company in connection therewith other than
in
connection with the Required Approvals (as defined below). Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company
in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies.
9.2 No
Conflicts. The execution, delivery and performance of the Transaction Documents
by the Company and the consummation by the Company of the other transactions
contemplated thereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse
of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary or give
to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or
by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or result
in
a violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected.
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9.3 Filings,
Consents and Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than
(i) the filing of a Current Report on Form 8-K, (ii) the filing with
Securities and Exchange Commission (the “Commission”) of the registration
statement meeting the requirements set forth in the New Registration Rights
Agreement and covering the resale of the shares of Common Stock by the Investor
as provided for in the New Registration Rights Agreement, and (iii) the filing
of Form D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required
Approvals”).
9.4 Issuance
of the Securities. The New Warrants are duly authorized and, when issued and
paid for in accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company other than restrictions on transfer provided for in
the
Transaction Documents. The shares of Common Stock issuable upon exercise of
the
New Warrants, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and non-assessable, free and
clear
of all Liens imposed by the Company. Subject to the other provisions hereof,
the
Company has reserved from its duly authorized capital stock a number of shares
of Common Stock for issuance of the Warrant Shares at least equal to the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, on the date hereof. The
Company has not, and to the knowledge of the Company, no Affiliate of the
Company has sold, offered for sale or solicited offers to buy or otherwise
negotiated in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the New Warrants in
a
manner that would require the registration under the Securities Act of the
sale
of the New Warrants to the Investor.
9.5 Private
Placement. Assuming the accuracy of the Investor representations and warranties
set forth in Section 8, no registration under the Securities Act is required
for
the issuance of the New Warrants by the Company to the Investors as contemplated
hereby.
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10. Miscellaneous
10.1 Entire
Agreement; Amendment.
This
Agreement supersedes all other prior oral or written agreements between the
Investor and the Company with respect to the matters discussed herein and
therein, and this Agreement contains the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Investor
makes any representation, warranty, covenant or undertaking with respect to
such
matters. No provision of this Agreement may be amended or waived other than
by
an instrument in writing signed by the Company and the Investor.
10.2 Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
10.3 Governing
Law; Jurisdiction; Waiver of Jury Trial.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in New York County, New
York for the adjudication of any dispute hereunder or in connection herewith
or
with any transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is brought in an inconvenient forum
or that the venue of such suit, action or proceeding is improper. Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
to
such party at the address for such notices to it at the end of this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any manner permitted by law. Each party
hereby irrevocably waives any right it may have, and agrees not to request,
a
jury trial for the adjudication of any dispute hereunder or in connection with
or arising out of this Agreement or any transaction contemplated
hereby.
10.4 Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
10.5 Successors
And Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns and may not be assigned without the
written consent of all other parties hereto.
10.6 No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
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10.7 Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
10.8 Counterparts.
This
Agreement may be executed in one or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other parties;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
10.9 Survival
and Indemnification. The
representations and warranties contained herein shall survive the consummation
of the transactions contemplated by this Agreement for the Applicable statute
of
limitations. Each party agrees to indemnify and hold harmless the other parties
from any and all losses, claims, damages, liabilities, costs (including, without
limitations, reasonable attorneys’ fees) and expenses incurred by such other
parties as a result of any breach of the representations, warranties and
covenants made by such party. All covenants contained herein which, by their
terms, are not fully performed on the date of the consummation of the
transactions contemplated by this Agreement shall survive such date until fully
performed.
10.10 Expenses.
The
Company shall pay the reasonable expenses of the Investor’s counsel incurred in
connection with the consummation of the transactions contemplated by this
Agreement.
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INVESTOR:
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Name:
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Title:
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CONSENTED
AND AGREED TO:
XXXXXX
EQUIPMENT, INC.
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Name:
Xxxxxxx X. Xxxxxx
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Title:
Chief Restructuring Officer
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