EXHIBIT II
No. 1 $1,900,000
XXXXXX INDUSTRIES, INC.
Senior Convertible Promissory Note
due January 1, 1999
THIS SENIOR CONVERTIBLE PROMISSORY NOTE (THE "SENIOR NOTE") IS ISSUED PURSUANT
TO THE TERMS OF, IS ENTITLED TO THE BENEFITS OF, AND TRANSFER THEREOF IS
RESTRICTED BY, A SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT") OF
EVEN DATE HEREWITH BETWEEN XXXXXX INDUSTRIES, INC. AND THE HOLDERS OF SENIOR
NOTES. A COPY OF THE PURCHASE AGREEMENT IS ON FILE AND MAY BE EXAMINED AT THE
PRINCIPAL OFFICE OF THE COMPANY. TERMS USED HEREIN WHICH ARE NOT DEFINED HEREIN
HAVE THE SAME MEANINGS USED IN THE PURCHASE AGREEMENT UNLESS THE CONTEXT
OTHERWISE REQUIRES.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION
FROM THE REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION OF THE PART OF
THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED,
DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
FOR VALUE RECEIVED, the undersigned Xxxxxx Industries, Inc., a
Delaware corporation (the "Company"), hereby promises to pay to WHITE OWL
CAPITAL PARTNERS, the registered holder or registered assigns hereof (the
"Holder"), the principal amount of One Million Nine Hundred Thousand
($1,900,000) Dollars payable on the 1st day of January, 1999 (the "Maturity
Date"), together with interest on the outstanding principal amount of this
Senior Note at a rate equal to the Prime Rate of interest of Citibank, N.A. plus
200 basis points, calculated on the basis of a 360-day year or the actual number
of days elapsed. Such interest shall begin to accrue on July 1, 1998, and shall
be payable monthly on the last day of each month that this Senior Note is
outstanding, commencing on July 31, 1998, and at the Maturity Date. This Senior
Note shall, in addition, bear interest payable at the Default Rate (as
hereinafter defined) in certain circumstances as hereinafter provided ("Default
Interest").
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1. Payments and Prepayments.
1.1. Payments of principal and interest on this Senior Note shall
be made to the Holder at the address set forth in the Purchase Agreement or on
the Senior Convertible Promissory Note Register or such other place or places
within the United States as may be specified by the Holder of this Senior Note
in a written notice to the Company at least 10 Business Days before a given
payment date.
1.2. Payments of principal and interest on this Senior Note shall
be made in lawful money of the United States of America by mailing the Company's
good check in the proper amount to the Holder at least three days prior to the
due date of each payment or otherwise transferring funds so as to be received by
the Holder on the due date of each such payment.
1.3. If any payment on this Senior Note becomes due and payable
on a Saturday, Sunday or other day on which commercial banks in the City of New
York, New York are authorized or required by law to close, the due date of such
payment shall be extended to the next succeeding business day, and, with respect
to payments of principal, interest thereon shall be payable during such
extension at the then applicable rate.
1.4. The Company shall not be entitled to prepay this Senior Note
either in whole or in part.
2. Obligation Absolute. The obligations under this Senior Note
are absolute and unconditional obligations of the Company, subject to Sections
3, 4 and 5 below, and no modification, release, consent, waiver, removal,
rearrangement or amendment shall impair the obligations of the Company
hereunder.
3. Purchase Agreement.
This Senior Note is issued simultaneously with other Senior Notes
of like tenor in an aggregate principal amount of up to $2,500,000, pursuant to
the Purchase Agreement of even date herewith among the Company and the holders
of the Senior Notes, which Purchase Agreement contains provisions as to Events
of Default (inclusive of acceleration provisions with respect thereto) and other
terms of the Senior Notes. The foregoing provisions of the Purchase Agreement
and the representations and warranties of the Company set forth in the Purchase
Agreement are hereby incorporated herein as if set forth at length herein, which
provisions and representations shall survive the execution and delivery hereof
so long as any amount is owed under this Senior Note. Any notice herein required
shall be given in accordance with the notice provisions of the Purchase
Agreement.
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4. Detachable Warrants.
Contemporaneously with the execution and delivery hereof pursuant
to the Purchase Agreement, The Company has issued to the Holder a detachable
warrant to purchase 1.6 shares of the Common Stock, for each $1 principal amount
of this Senior Note at an initial warrant exercise price of $0.625 per share of
Common Stock.
5. Conversion Right.
(a) The Holder of this Senior Note shall have the right,
exercisable at any time while this Senior Note is outstanding, by notice to the
Company at its principal office, to cause the conversion of this Senior Note at
the principal amount hereof into that number of shares of the Common Stock of
the Company, obtained by dividing the aggregate face amount of this Senior Note
by the exercise price per share of the detachable warrants of the Company (the
"Conversion Price Per Share"). The Conversion Price Per Share and the securities
or other property to be issued upon conversion of this Senior Note shall be
subject to adjustment in the same manner as the exercise price per share of the
detachable warrants of the Company and the securities or other property to be
issued upon exercise of such warrants.
(b) Subject to the right of the person in whose name this Senior
Note is registered on the record date to receive all interest (including Default
Interest) on such Senior Note accrued through the date of conversion, no
adjustment for interest (including Default Interest) or dividends will be made
upon the conversion of this Senior Note. No fractional shares will be issued
upon conversion, but if the conversion results in a fraction, an appropriate
amount will be paid by the Company in cash. This right of conversion shall cease
upon payment in full of all principal and accrued interest and Default Interest
and other amounts due in respect of this Senior Note, provided that the right of
conversion shall not cease upon a prepayment of this Senior Note without the
consent of the Holder.
(c) The Company hereby agrees that at all times there shall be
reserved for issuance upon the exercise of the conversion right under this
Senior Note such number of shares of its Common Stock as shall be required for
issuance upon exercise of conversion rights under this Senior Note and that the
par value of such shares will at all times be less than or equal to the lesser
of $0.625 per share or the applicable Conversion Price Per Share. The Company
further agrees that all shares which may be issued upon the exercise of any
rights represented by this Senior Note will, upon issuance, be validly issued,
fully paid and non-assessable, free from all taxes, liens and charges with
respect to the issuance thereof other than income or gross receipt taxes and
taxes, if any, in respect of any transfer occurring contemporaneously with such
issuance and other than transfer restrictions imposed by federal and state
securities laws.
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(d) Notices to Holders.
(i)
Notice of Record Date. In case, at any time while
this Senior Note is outstanding:
(A) the Company shall take a record of the holders of
its Common Stock (or other stock or securities at
the time receivable upon the exercise of any
conversion rights under this Senior Note) for the
purpose of entitling them to receive any dividend
(other than a cash dividend payable out of earned
surplus of the Company) or other distribution, or
any right to subscribe for or purchase any shares
of stock of any class or any other securities, or
to receive any other right; or
(B) of any capital reorganization of the Company, any
reclassification of the capital stock of the
Company, any consolidation with or merger of the
Company into another corporation, or any conveyance
of all or substantially all of the assets of the
Company to another corporation; or
(C) of any voluntary dissolution, liquidation or
winding-up of the Company;
then, and in each such case, the Company will mail or cause to be
mailed to the Holder hereof at the time outstanding a notice
specifying, as the case may be, (x) the date on which a record is
to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend,
distribution or right, or (y) the date on which such
reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up is to take
place, and the time, if any, is to be fixed, as of which the
holders of record of Common Stock (or such stock or securities at
the time receivable upon the exercise of the conversion rights
under this Senior Note) shall be entitled to exchange their
shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice
shall be mailed at least 30 days prior to the record date therein
specified, or if no record date shall have been specified
therein, at least 30 days prior to such other specified date.
(ii) Notice of Adjustments. Whenever any Conversion Price
Per Share shall be adjusted, pursuant to Section 5(a) hereof, the
Company shall promptly make a certificate signed by its Chairman,
its CEO, its President or a Vice President and by its Treasurer
or Assistant Treasurer or its Secretary or Assistant
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Secretary, setting forth in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated and the Conversion
Price Per Share after giving effect to such adjustment, and shall
promptly cause copies of such certificates to be mailed (by first
class mail postage prepaid) to the Holder of this Senior Note.
6. Default Interest.
Upon any default in the payment of any interest, principal or
other payment required hereunder, such payment and the unpaid principal balance
hereof shall bear interest thereafter at the rate of five percent (5%) per annum
in excess of the then current applicable rate of interest being charged
hereunder, or at the highest permissible legal rate, which ever is lower (the
"Default Rate"), until the default shall have been cured.
7. Senior Note Holder Not a Stockholder.
The Holder of this Senior Note, as such, shall not be entitled by
reason of this Senior Note to any rights whatsoever as a stockholder of the
Company.
8. Applicable Interest Rate.
The Holder of this Senior Note, on the one hand, and the Company,
on the other hand, intend that the obligations evidenced by the Senior Notes
conform strictly to the applicable usury laws from time to time in force. All
agreements between the Company and the Holder of this Senior Note, whether now
existing or hereafter arising and whether oral or written, hereby are expressly
limited so that in no contingency or event whatsoever, whether by acceleration
of maturity hereof or otherwise, shall the amount paid or agreed to be paid to
such Holder, or collected by such Holder, by or on behalf of the Company for the
use, forbearance or detention of the money to be loaned to the Company hereunder
or otherwise, or for the payment or performance of any covenant or obligation
contained herein of the Company to the Holder, or in any other document
evidencing, securing or pertaining to such indebtedness evidenced hereby, exceed
the maximum amount permissible under applicable usury law. If under any
circumstances whatsoever fulfillment of any provision thereof or any other
document, at the time performance of such provisions 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 under any circumstances the Holder of this Senior Note ever shall receive
from or on behalf of the Company an amount deemed interest, by applicable law,
which would exceed the highest lawful rate, such amount that would be excessive
interest under applicable usury laws shall be applied to the reduction of the
principal amount owing hereunder and under this Senior Note and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal and such other indebtedness, the excess shall be deemed to have been a
payment made by mistake and shall be refunded to the Company or to any other
person making such payment on the Company's behalf.
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9. LAW GOVERNING.
THIS SENIOR NOTE AND ALL AMENDMENTS, SUPPLEMENTS, MODIFICATIONS,
WAIVERS AND CONSENTS RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK.
10. SUBMISSION TO JURISDICTION;
Service of Process .
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND
IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SENIOR NOTE,
THE PURCHASE AGREEMENT OR ANY OTHER EXHIBIT TO THE PURCHASE AGREEMENT MAY BE
LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY HAVE
BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING
IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Senior Note, the Purchase Agreement or any other Exhibit thereto, and
for the exclusive benefit of the Holder, the Company irrevocably and
unconditionally submits to the non-exclusive jurisdiction of the United States
District Court for the Southern District of New York, and to the non-exclusive
jurisdiction of any court of the State of New York located in the City and
County of New York, for the purposes of any suit, action or other proceeding
arising out of, or relating to, this Senior Note, the Purchase Agreement or any
other Exhibit thereto or any of the transactions contemplated hereby or thereby,
and hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, that it is not personally subject to the jurisdiction of the above
named courts for any reason whatsoever, that such suit, action or proceeding is
brought in an inconvenient forum, or that the venue of such suit, action or
proceeding is improper, or that this Senior Note, the Purchase Agreement or any
other Exhibit thereto or the subject matter hereof or thereof may not be
enforced in or by such courts. The Company hereby agrees that process against it
may be served by mail or delivery of service of process in any of the
aforementioned action, suits or proceedings to C T Coporation System, 0000
Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (such agent being hereinafter called the
"Process Agent"), which the Company hereby irrevocably designates and appoints
as its attorney-in-fact to receive service of process in any action, suit or
proceeding with respect to any matter as to which it submits to jurisdiction as
set forth above, it being agreed that service to such office or upon such agent
shall constitute valid service upon the Company. The Company hereby directs the
Process Agent to receive and accept all process on its behalf. The Company shall
promptly notify the Holder of any change in the address of the Process Agent and
may, with prior notice given to Holder, appoint a successor
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Process Agent; provided, however, that if the Process Agent shall at any time
cease to exist or its agency shall for any reason cease, the Company shall
designate forthwith a successor Process Agent in the County and State of New
York and shall give prompt notice of such designation to the Holder, together
with evidence of the acceptance of any such appointment. The Company agrees
irrevocably to the service of process of any of the aforementioned courts in any
suit, action or proceeding described above by mailing of copies of such process
to the Company at its address specified in Section 6.7 of the Purchase
Agreement. Nothing herein shall preclude service of process in any other manner
permitted by applicable law or prohibit the Holder from commencing legal
proceedings against the Company or any of its properties in any other
jurisdiction.
11. WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS SENIOR NOTE OR THE PURCHASE
AGREEMENT OR ANY OTHER EXHIBIT THERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY OR THE ACTIONS OF THE HOLDERS IN THE NEGOTIATION OR ENFORCEMENT
HEREOF OR THEREOF.
IN WITNESS WHEREOF, the Company has signed this Senior Note as
of the 15th day of October, 1997.
XXXXXX INDUSTRIES, INC.
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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