This Note has not been registered under the
Securities Act of 1933, as amended, and may be
offered and sold only if so registered or, in
the opinion of counsel acceptable to
the Company, an exemption from
registration is available.
XXXXXX XXXXXX HOLDING CORPORATION
CONVERTIBLE REVOLVING CREDIT NOTE
May __, 1997 Note No. _______
For value received, Xxxxxx Xxxxxx Holding Corporation, a Texas
corporation (the "Company"), hereby promises to pay to _____________,
(the "Holder"), or registered assigns, the principal sum of ONE MILLION
DOLLARS AND NO CENTS ($1,000,000), on the dates specified herein, with
interest as specified herein.
This Note is subject to the following additional provisions, terms
and conditions:
ARTICLE 1. DEFINITIONS.
1.1 Certain Definitions.
"Applicable Rate" means the annual rate of interest before maturity,
and shall be the equivalent of the rate described by the Wall Street
Journal as the prime rate in effect from time to time (computed on a
365-day basis) ("Prime Rate"), plus one and one-half percent (1.5%.)
"Credit Agreement" means that one certain Revolving Line of Credit
Agreement, dated as of October 1, 1996, by and between the Company and
the Lender named therein, and assigned to the Holder herein as of May 8,
1997, as such may be amended, supplemented, restated or otherwise
modified from time to time.
"Default Rate" means 13% per annum.
"Holder" has the meaning given to such term in the first paragraph
of this Note.
"Interest Payment Date" means each of June 30, 1997, September 30,
1997, December 31, 1997, and March 31, 1998.
"Maximum Rate" means the maximum nonusurious interest rate permitted
under applicable law.
"Note" or "Notes" means this Convertible Promissory Note made by the
Company payable to the Holder, together with all amendments and
supplements hereto, all substitutions and replacements herefor, and all
renewals, extensions, increases, restatements, modifications,
rearrangements and waivers hereof from time to time.
1.2 Incorporated Definitions. Capitalized terms used in this Note
and not otherwise defined herein shall have the meanings set forth in the
Credit Agreement.
ARTICLE 2. BASIC TERMS.
2.1 Identification. This Note is one of the Notes referred to
in the Credit Agreement and is entitled to the benefits thereof,
including, but not limited to, Article VII thereof, which sets forth
certain Events of Default and remedies.
2.2 Principal. (a) Scheduled Repayment. The principal of this
Note shall be due and payable on May 13, 1998 (the "Maturity Date.")
(b) Optional Prepayment. The Company may at any time and from
time to time prepay all or any part of the unpaid principal balance of
this Note without premium or penalty. All optional prepayments shall be
accompanied by all accrued interest on the principal amount being prepaid
to the date of prepayment and all partial prepayments shall be in the
amount of $10,000 of principal or more.
2.3 Interest. (a) The Company agrees to pay interest in respect of
the unpaid principal amount of this Note at a rate per annum equal to the
lesser of the Applicable Rate and the Maximum Rate. Notwithstanding the
preceding sentence, the Company agrees to pay interest in respect of
overdue principal, and, to the extent permitted by law, overdue interest,
at a rate per annum equal to the lesser of the Default Rate and the
Maximum Rate.
(b) Interest on the principal of this Note shall be due and
payable (i) on each Interest Payment Date and the Maturity Date, (ii)
upon the payment or prepayment, in full or in part, of any of the
principal of this Note, (iii) at the maturity of this Note (whether by
acceleration or otherwise), and (iv) after maturity (whether by
acceleration or otherwise), on demand.
(c) All computations of interest, both before and after
maturity, shall be made on the basis of a year of 365 days (or 366 days,
as applicable) for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest
is payable.
2.4 Conversion. (a) Conversion of any portion of principal or
interest that may be or become due on this Note shall be subject to (i)
the Offshore Securities Subscription Agreement between the Holder and the
Corporation dated _________, 1997, (ii) the provisions of Article II of
the Credit Agreement, reference to which is hereby made for a statement
of the rights and obligations of the Company and the Holder with respect
to conversion of this Note into Common Stock, and (iii) the following:
Beginning on June 26, 1997, Holder may convert any balance due on this
Note into such number of Common Shares of the Company $.01 par value (the
"Conversion Shares") as is obtained by dividing the aggregate balance
being so converted by Ninety-three and Three-quarter Cents ($0.9375) (the
"Conversion Price"), which represents Seventy-five percent (75%) of the
closing price of the Common Stock on May 7, 1997.
(b) The conversion right provided by Section (a) hereof may be
exercised only by the Holder of this Note, in whole or in part, by the
surrender of this Note at the principal office of the Corporation (or at
such other place as the Corporation may designate in a written notice
sent to the holder by first-class mail, postage prepaid, at its address
shown on the books of the Corporation) against delivery of that number of
whole Common Shares as shall be computed by dividing (1) the balance of
the Note so surrendered, if any, by (2) the Conversion Price. In the
event of any exercise of the conversion right of the Note granted herein
(i) share certificates representing the Common Shares purchased by virtue
of such exercise shall be delivered to the Holder within 5 days of notice
of conversion free of restrictive legend or stop transfer orders, and
(ii) unless the Note has been fully converted, a new note representing
the balance of the Note not so converted, if any, shall also be delivered
to the Holder within 5 days of notice of conversion, or carried on the
Corporation's ledger, at Holder's option. The Holder may exercise its
right to convert the Note by telecopying an executed and completed Notice
of Conversion to the Corporation, and within 72 hours thereafter,
delivering the original Notice of Conversion and the Note to the
Corporation by express courier. Each date on which a telecopied Notice
of Conversion is received by the Corporation in accordance with the
provisions hereof shall be deemed a Conversion Date. The Corporation
will transmit the Common Shares certificates issuable upon conversion of
the Note (together with the note representing the balance not so
converted) to the Holder via express courier within three business days
after the conversion date if the Corporation has received the original
Notice of Conversion and the Note being so converted by such date.
(c) All Common Shares which may be issued upon conversion of the
Note will, upon issuance, be duly issued, fully paid and nonassessable
and free from all taxes, liens, and charges with respect to the issue
thereof. At all times that any balance on the Note is outstanding, the
Corporation shall have authorized, and shall have reserved for the
purpose of issuance upon such conversion, a sufficient number of Common
Shares to provide for the conversion into Common Shares of the balance of
the Note then outstanding.
(d) No fractional Common Shares shall be issued in connection with
any conversion of the Note, but in lieu of such fractional shares, the
Corporation shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Conversion Price.
2.5 General. Whenever any payment to be made under this Note
shall be stated to be due on a day that is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable
at the applicable rate during such extension. Each payment received by
the Holder shall be applied first to late charges and collection
expenses, if any, then to the payment of accrued but unpaid interest
hereunder, and then to the reduction of the unpaid principal balance
hereof
2.6 Surrender of Note on Prepayment or Conversion. Upon any
conversion of any or all of this Note to Common Stock or any partial
prepayment of this Note, this Note may, at the option of the Holder or if
requested by the Company, and shall, as a condition to transfer, be
surrendered to the Company in exchange for a new Note in a principal
amount equal to the principal amount remaining unpaid on the surrendered
Note, or made available to the Company for notation thereon of the
portion of the principal and interest so prepaid or converted. In case
the entire principal amount of this Note is prepaid or converted, this
Note shall be surrendered to the Company for cancellation and shall not
be reissued.
ARTICLE 3. MISCELLANEOUS.
3.1 Amendment. This Note may be amended, modified, superseded
or canceled, and any of the terms, covenants, representations, warranties
or conditions hereof and thereof may be waived, only by a written
instrument that satisfies the requirements of the Subscription Agreement.
3.2 Successors and Assigns. (a) The rights and obligations
of the Company and the Holder under this Note shall be binding upon, and
inure to the benefit of, and be enforceable by, the Company and the
Holder, and their respective permitted successors and assigns.
(b) The Holder may not sell, assign (by operation of law or
otherwise), transfer, pledge, grant a security interest in, or otherwise
dispose of this Note or any portion hereof or any rights or obligations
hereunder except in compliance with the Subscription Agreement, which
contains certain restrictions on the transferability hereof.
(c) The registered owner of this Note may be treated as the
owner of it for all purposes.
3.3 Governing Law. This Note and the validity and
enforceability hereof shall be governed by and construed and interpreted
in accordance with the laws of the State of Texas without giving effect
to conflict of laws rules or choice of laws rules thereof.
3.4 Waivers. Except as may be otherwise provided herein, the
makers, signers, sureties, guarantors and endorsers of this Note
severally waive demand, presentment, notice of dishonor, notice of intent
to demand or accelerate payment hereof, notice of acceleration, diligence
in collecting, grace, notice, and protest, and agree to one or more
extensions for any period or periods of time and partial payments, before
or after maturity, without prejudice to the Holder.
3.5 No Waiver by Xxxxxx. No failure or delay on the part of the
Holder in exercising any right, power or privilege hereunder and no
course of dealing between the Company and the Holder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.
3.6 Limitation on Interest. Notwithstanding any other provision of
this Note, interest on the indebtedness evidenced by this Note is
expressly limited so that in no contingency or event whatsoever, whether
by acceleration of the maturity of this Note or otherwise, shall the
interest contracted for, charged or received by the Holder exceed the
maximum amount permissible under applicable law. If from any
circumstances whatsoever fulfillment of any provisions of this Note or of
any other document evidencing, securing or pertaining to the indebtedness
evidenced hereby, at the time performance of such provision shall be due,
shall involve transcending the limit of validity prescribed by law, then,
ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity, and if from any such circumstances the Holder shall
ever receive anything of value as interest or deemed interest by
applicable law under this Note or any other document evidencing, securing
or pertaining to the indebtedness evidenced hereby or otherwise an amount
that would exceed the highest lawful rate, such amount that would be
excessive interest shall be applied to the reduction of the principal
amount owing under this Note or on account of any other indebtedness of
the Company to the Holder, and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note
and such other indebtedness, such excess shall be refunded to the
Company. In determining whether or not the interest paid or payable with
respect to any indebtedness of the Company to the Holder, under any
specific contingency, exceeds the highest lawful rate, the Company and
the Holder shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium
rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, (c) amortize, prorate, allocate and spread the total
amount of interest throughout the term of such indebtedness so that the
actual rate of interest on account of such indebtedness does not exceed
the maximum amount permitted by applicable law, and/or (d) allocate
interest between portions of such indebtedness, to the end that no such
portion shall bear interest at a rate greater than that permitted by
applicable law. The terms and provisions of this paragraph shall control
and supersede every other conflicting provision of this Note and all
other agreements between the Company and the Holder.
EXECUTED as of the date first written above.
XXXXXX XXXXXX HOLDING CORPORATION
By:______________________________________
Xxxxxxx X. Xxxxxx, President
