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 Million Dollars ($20,000,000)
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").
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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 Xxxxxx'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)).
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.
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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.
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.
5
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.
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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 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) that
certain $16,000,000 Secured Revolving Note dated as of November 9, 2004 executed
by the Borrowers in favor of the Holder.
[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 this 26th day of
January, 2005.
Xxxxxx Equipment, INC.
(f/k/a Maxim Mortgage Corporation)
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Chairman
WITNESS:
XXXXXX VENTURES, INC.
By: /s/ XXXXX XXXXX
-------------------------------------
Name: Xxxxx Xxxxx
Title: Chairman
WITNESS:
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 January ___, 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: ________________________________________________
Conversion Price: ________________________________________________
Shares To Be Delivered: ________________________________________________
Signature: ________________________________________________
Print Name: ________________________________________________
Address: ________________________________________________
Holder DWAC
instructions ________________________________________________
