AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (this "Amendment") is entered into as of February
28, 2005, by and among Xxxxxx Equipment, Inc., a Delaware corporation ("Xxxxxx
Equipment"), Xxxxxx Ventures, Inc., a Delaware corporation ("Xxxxxx Ventures"
and together with Xxxxxx Equipment, each a "Company" and collectively the
"Companies") and Laurus Master Fund, Ltd. ("Laurus").
BACKGROUND
Companies and Laurus are parties to a Security and Purchase Agreement
dated as of November 9, 2004 (as amended, restated, supplemented or otherwise
modified from time to time, the "Security and Purchase Agreement") pursuant to
which Laurus provides Companies with certain financial accommodations.
Xxxxxx Equipment and Laurus are parties to a Registration Rights Agreement
dated as of November 9, 2004 (as amended, restated, supplemented or otherwise
modified from time to time, the "Registration Rights Agreement) pursuant to
which Xxxxxx Equipment, among other things, has agreed to file a registration
statement covering the Registrable Securities (as therein defined).
Companies have requested that Laurus amend the Security and Purchase
Agreement and the Registration Rights Agreement, and Laurus is willing to do so
on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall have
the meanings given to them in the Security and Purchase Agreement.
2. Amendments to Security and Purchase Agreement. Subject to satisfaction of
the conditions precedent set forth in Section 4 below, the Security and Purchase
Agreement is hereby amended as follows:
(a) Section 2(d) of the Security and Purchase Agreement is hereby
amended in its entirety to provide as follows:
"(d) Term Loans. Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Laurus shall make a term
loan (the "Closing Date Term Loan") to Company and the Eligible
Subsidiaries in an aggregate amount equal to $6,000,000. The Closing
Date Term Loan shall be advanced on the Closing Date and shall be,
with respect to principal, payable in consecutive monthly
installments of principal commencing on July 1, 2005 and on the
first day of each month thereafter, subject to acceleration upon the
occurrence of an Event of Default or termination of this Agreement.
The first twenty-eight principal installments shall each be in the
amount of $206,896 and the twenty-ninth and final installment shall
be in an amount equal to the unpaid principal balance of the Closing
Date Term Loan plus all accrued and unpaid interest thereon. The
Closing Date Term Loan shall be evidenced by the Closing Date
Secured Convertible Term Note. Subject to the terms and conditions
set forth herein and in the Ancillary Agreements, Laurus shall make
a term loan (the "Second Term Loan" and together with the Closing
Date Term Loan, each a "Term Loan" and collectively the "Term
Loans") to Company and the Eligible Subsidiaries in an aggregate
amount equal to $1,900,000. The Second Term Loan shall be advanced
on February 28, 2005 and shall be, with respect to principal,
payable in consecutive monthly installments of principal commencing
on July 1, 2005 and on the first day of each month thereafter,
subject to acceleration upon the occurrence of an Event of Default
or termination of this Agreement. The first twenty-eight principal
installments shall each be in the amount of $65,517 and the
twenty-ninth and final installment shall be in an amount equal to
the unpaid principal balance of the Second Term Loan plus all
accrued and unpaid interest thereon. The Second Term Loan shall be
evidenced by the Second Secured Convertible Term Note."
(b) The following subsection is hereby added to the end of Section
13 of the Security and Purchase Agreement:
"(u) Offerings. Company shall not commence any offering of any
of its Common Stock or other equity securities intended, in whole or
in part, to raise capital for the benefit of Company and/or any of
its Subsidiaries, without the prior written consent of Laurus,
unless the aggregate amount of proceeds that Company receives from
such offering is sufficient to indefeasibly pay in full the
Obligations and the indebtedness owing by Company and its
Subsidiaries to Roynat Merchant Capital Inc. and the proceeds of
such offering or a portion thereof, as applicable, are used by
Company to indefeasibly pay the Obligations in full or in part, at
Laurus' option. Each of Company and each Eligible Subsidiary hereby
acknowledges that Company's breach of this Section 13(u) shall
constitute an automatic Event of Default and no cure or grace period
shall be applicable thereto notwithstanding any other provision of
this Agreement to the contrary."
(c) Section 19(p) of the Security and Purchase Agreement is hereby
amended by deleting the word "of" on the first line thereof and replacing the
same with the word "or".
(d) Section 19(t) of the Security and Purchase Agreement is hereby
amended by deleting all references to "the Subordination Agreement" and
replacing the same with the words "any Subordination Agreement".
(e) Annex A to the Security and Purchase Agreement is hereby amended
as follows:
(i) the defined term "Secured Convertible Term Note" is hereby
deleted in its entirety.
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(ii) the following defined terms are hereby added thereto in
their appropriate alphabetical order:
"Closing Date Secured Convertible Term Note" means the Amended
and Restated Secured Convertible Term Note made by Company and
each Eligible Subsidiary in favor of Laurus in the aggregate
principal amount of Six Million Dollars ($6,000,000), as the
same may be amended, modified and supplemented from time to
time.
"Hydramen" means Hydramen Fluid Power Limited, a corporation
organized under the laws of Canada.
"Pneutech" means Pneutech Inc., a corporation organized under
the laws of Canada
"Xxxxxxxx" means Xxxxxxxx Controls Inc., a corporation
organized under the laws of Canada.
"Second Secured Convertible Term Note" means the Secured
Convertible Term Note made by Company and each Eligible
Subsidiary in favor of Laurus in the aggregate principal
amount of One Million Nine Hundred Thousand Dollars
($1,900,000), as the same may be amended, modified and
supplemented from time to time.
"Secured Convertible Term Notes" means, collectively, the
Closing Date Secured Convertible Term Note and the Second
Secured Convertible Term Note.
"Term Loans" has the meaning set forth in Section 2(d).
(iii) the following defined terms are hereby amended in their
entirety:
"Acquisition Documentation" means (i) the Agreement of
Purchase and Sale of Assets between Xxxxxx Canada and Seller
dated as of October 1, 2004 (as amended by the Amending
Agreement between Xxxxxx Canada and Seller dated October 13,
2004), (ii) the Agreement and Plan of Reorganization, (iii)
the Subscription Agreement between Xxxxxx Canada and McCain
Foods Limited dated as of October 26, 2004, (iv) the
Transitional Services Agreement between Xxxxxx Canada and
Seller dated October 1, 2004, (v) the Promissory Note in the
original principal amount of Cdn. $2,700,000 made by Xxxxxx
Canada in favor of Seller, (vi) the Shareholders' Agreement
among Seller, Company and Xxxxxx Canada dated as of October
26, 2004, (vii) the Agreement and Plan of Amalgamation among
Company, 4274458 Canada, Inc. and Pneutech Inc. dated as of
December 22, 2004, and (viii) all other documents, instruments
and agreements entered into in connection with the
transactions contemplated thereby.
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"Canadian Documentation" means collectively, (a) the New
Brunswick Government Guarantee, (b) each General Security
Agreement made by Xxxxxx Canada, Pneutech, Xxxxxxxx and
Hydramen in favor of Laurus, (c) each Guarantee made by Xxxxxx
Canada, Pneutech, Xxxxxxxx and Hydramen in favor of Laurus and
(d) each Security Agreement made by Xxxxxx Canada, Pneutech,
Xxxxxxxx and Hydramen in favor of Laurus, as each of the same
may be amended, modified and supplemented from time to time.
"Loans" means the Revolving Loans, the Term Loans and all
other extensions of credit hereunder and under any Ancillary
Agreement.
"Notes" means each of the Minimum Borrowing Notes, the
Revolving Note and the Secured Convertible Term Notes made by
Company and each Eligible Subsidiary in favor of Laurus in
connection with the transactions contemplated hereby, as the
same may be amended, modified and supplemented from time to
time, as applicable.
"Revolving Note" means that certain Amended and Restated
Secured Revolving Note made by Company and each Eligible
Subsidiary in favor of Laurus in the aggregate principal
amount of Twenty Million Dollars ($20,000,000), as the same
may be amended, modified and supplemented from time to time.
"Subordination Agreement" means the collective reference to
any one or more of the following agreements: (a) the
Subordination Agreement dated as of the date hereof among
Seller, McCain Foods Limited, Xxxxxx Canada, Laurus, Xxxxxx
Equipment and Xxxxxx Ventures, (b) the Subordination and
Intercreditor Agreement dated as of February 28, 2005 among
Roynat Capital Inc., Laurus, Xxxxxx Equipment, Xxxxxx
Ventures, Xxxxxx Canada, Pneutech, Xxxxxxxx and Hydramen, (c)
the Postponement and Subordination Agreement dated as of
February 28, 2005 among Xxxxxxx X. X. Xxxxxxxx, Xxxxxxxx
Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx Van Den Ende, Xxxxx Xxxxx Van
Den Ende, Xxxxx Xxxxxxxxxx, Laurus, Pneutech and Xxxxxxxx, (d)
the Subordination and Postponement Agreement dated as of
February 28, 2005 among 3156176 Canada Inc., 4237901 Canada
Inc., Laurus and Pneutech and (e) any and all subordination
agreements entered into from time to time in favor of Laurus
with respect to the Obligations, as each of the same may be
amended, modified and supplemented from time to time.
"Total Investment Amount" means $27,900,000.
"Warrants" means, collectively, (a) that certain Common Stock
Purchase Warrant No. L-1 dated as of the Closing Date made by
Company in favor of Laurus, (b) that certain Common Stock
Purchase Warrant No. L-2 dated as of January 25, 2005 made by
Company in favor of Laurus, (c) that certain Common Stock
Purchase Warrant No. L-3 dated as of February 28, 2005 made by
Company in favor of Laurus and (d) each other warrant made by
Company in favor Laurus, as each of the same may be amended,
restated, modified and/or supplemented from time to time.
3. Amendments to Registration Rights Agreement. Subject to satisfaction
of the conditions precedent set forth in Section 4 below, the following defined
terms set forth in Section 1 of the Registration Rights Agreement are hereby
amended in their entirety to provide as follows:
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"Effectiveness Date" means, with respect to (1) the
Registration Statement which is required to be filed with
respect to the Revolving Loans evidenced by a Minimum
Borrowing Note made on the Closing Date, June 20, 2005, (2)
the Registration Statement which is required to be filed with
respect to the shares of Common Stock issued to the Purchaser
on the Closing Date, June 20, 2005, (3) the Registration
Statement which is required to be filed with respect to the
shares of Common Stock issuable upon exercise of the Options,
June 20, 2005, (4) the Registration Statement which is
required to be filed with respect to the shares of Common
Stock issuable upon exercise of Warrant No. L-1, June 20,
2005, (5) the Registration Statement which is required to be
filed with respect to the shares of Common Stock issuable upon
exercise of Warrant No. L-2, June 20, 2005, (6) the
Registration Statement which is required to be filed with
respect to the shares of Common Stock issuable upon exercise
of Warrant No. L-3, June 20, 2005, (7) the Registration
Statement which is required to be filed with respect to each
$8,000,000 tranche of Revolving Loans evidenced by a Minimum
Borrowing Note funded after the Closing Date, a date which is
no later than forty-five (45) days following the applicable
Filing Date, (8) the Registration Statement which is required
to be filed with respect to the Loans evidenced by the Secured
Convertible Term Notes, June 20, 2005, (9) the Registration
Statement which is required to be filed with respect to the
shares of Common Stock issuable to the Holder as a result of
adjustments to the Fixed Conversion Price made pursuant to
Section 2.5 of the Revolving Note, Section 3.5 of the Minimum
Borrowing Notes, Section 3.5 of the Secured Convertible Term
Notes, Section 4 of the Warrants, Section 4 of the Option or
otherwise, a date which is no later than forty-five (45) days
following the applicable Filing Date, and (10) with respect to
each additional Registration Statement required to be filed
hereunder, a date which is no later than forty-five (45) days
following the applicable Filing Date.
"Filing Date" means, with respect to (1) the Registration
Statement which is required to be filed with respect to the
Revolving Loans evidenced by a Minimum Borrowing Note made on
the Closing Date, March 31, 2005, (2) the Registration
Statement which is required to be filed with respect to the
shares of Common Stock issued to the Purchaser on the Closing
Date, March 31, 2005, (3) the Registration Statement which is
required to be filed with respect to the shares of Common
Stock issuable upon exercise of the Option, March 31, 2005,
(4) the Registration Statement which is required to be filed
with respect to the shares of Common Stock issuable upon
exercise of Warrant No. L-1, March 31, 2005, (5) the
Registration Statement which is required to be filed with
respect to the shares of Common Stock issuable upon exercise
of Warrant No. L-2, March 31, 2005, (6) the Registration
Statement which is required to be filed with respect to the
shares of Common Stock issuable upon exercise of Warrant No.
L-3, March 31, 2005, (7) the Registration Statement which is
required to be filed with respect to each $8,000,000 tranche
of Revolving Loans evidenced by a Minimum Borrowing Note
funded after the Closing Date, the date which is thirty (30)
days after such funding of such additional $8,000,000 of
Revolving Loans evidenced by a Minimum Borrowing Note, (8) the
Registration Statement which is required to be filed with
respect to the Loans evidenced by the Secured Convertible Term
Notes, March 31, 2005 and (9) the Registration Statement which
is required to be filed with respect to the shares of Common
Stock issuable to the Holder as a result of adjustments to the
Fixed Conversion Price made pursuant to Section 2.5 of the
Revolving Note, Section 3.5 of the Minimum Borrowing Notes,
Section 3.5 of the Secured Convertible Term Notes, Section 4
of the Warrants, Section 4 of the Option or otherwise, thirty
(30) days after the occurrence such event or the date of the
adjustment of the Fixed Conversion Price.
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"Warrants" means, collectively, (a) that certain Common Stock
Purchase Warrant No. L-1 dated as of the Closing Date made by
Company in favor of Laurus, (b) that certain Common Stock
Purchase Warrant No. L-2 dated as of January 25, 2005 made by
Company in favor of Laurus, (c) that certain Common Stock
Purchase Warrant No. L-3 dated as of February 28, 2005 made by
Company in favor of Laurus and (d) each other warrant made by
Company in favor Laurus, as each of the same may be amended,
restated, modified and/or supplemented from time to time.
4. Conditions of Effectiveness. This Amendment shall become effective upon
satisfaction of the following conditions precedent: Laurus shall have received
(i) a closing payment in an amount equal to three and nine-tenths percent
(3.90%) of the aggregate face amount of the Second Secured Convertible Term
Note, (ii) a copy of this Amendment executed by Companies and consented and
agreed to by each Guarantor, (iii) fully executed originals of all documents
instruments and agreements set forth on the transaction checklist attached
hereto as Exhibit A and (iv) all such other certificates, instruments,
documents, agreements and opinions of counsel as may be required by Laurus or
its counsel, each of which shall be in form and substance satisfactory to Laurus
and its counsel.
5. Representations and Warranties. Companies hereby represents and
warrants as follows:
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(a) This Amendment, the Security and Purchase Agreement and
Registration Rights Agreement, as amended hereby, constitute legal, valid and
binding obligations of Companies and are enforceable against Companies in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each Company hereby
reaffirms all covenants, representations and warranties made in the Security and
Purchase Agreement and the Registration Rights Agreement, as applicable, to the
extent the same are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been remade as of the
effective date of this Amendment.
(c) No Event of Default has occurred and is continuing or would
exist after giving effect to this Amendment.
(d) Companies have no defense, counterclaim or offset with respect
to the Security and Purchase Agreement, the Registration Rights Agreement or any
Ancillary Agreement.
6. Effect on the Security and Purchase Agreement and Registration Rights
Agreement.
(a) Upon the effectiveness of Sections 2 and 3 hereof, each
reference in the Security and Purchase Agreement and Registration Rights
Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like
import shall mean and be a reference to the Security and Purchase Agreement and
Registration Rights Agreement, as applicable, as amended hereby.
(b) Except as specifically amended herein, the Security and Purchase
Agreement, the Registration Rights Agreement, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Laurus, nor
constitute a waiver of any provision of the Security and Purchase Agreement, the
Registration Rights Agreement, any Ancillary Agreement or any other documents,
instruments or agreements executed and/or delivered under or in connection
therewith.
7. Waiver of Liquidated Damages under Registration Rights Agreement.
Laurus hereby waives all liquidated damages which have accrued prior to the date
hereof and which would otherwise have been payable by Xxxxxx Equipment to Laurus
under and in accordance with Section 2(b) of the Registration Rights Agreement.
8. Registration Statement. Laurus hereby acknowledges that the
Registration Statement required to be filed on or prior to March 31, 2005 by
Xxxxxx Equipment under the Registration Rights Agreement may cover, in addition
to the Registrable Securities (as defined in the Registration Rights Agreement),
(a) 1,000,000 shares of Common Stock issuable to Roynat Merchant Capital Inc.
upon exercise of the warrant issued by Xxxxxx Equipment to Roynat Merchant
Capital Inc., (b) 250,000 shares of Common Stock issuable to Redwood
Consultants, Inc. upon exercise of the warrant issued by Xxxxxx Equipment to
Redwood Consultants, Inc. and (c) 167,359 shares of Common Stock issued by
Xxxxxx Equipment to Xxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxx Xxxxxx, Xxxxx Xxxxxx, Xxxx
Xxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx and Phat Xxxx Xxx.
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9. Governing Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
10. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
11. Counterparts; Facsimile. This Amendment may be executed by the parties
hereto in one or more counterparts, each of which shall be deemed an original
and all of which when taken together shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.
[Signature Pages to Follow]
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
XXXXXX EQUIPMENT, INC.
By:/s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
XXXXXX VENTURES, INC.
By/s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
LAURUS MASTER FUND, LTD.
By:/s/ XXXXX GRIN
----------------
Name: Xxxxx Grin
Title: Fund Manager
CONSENTED AND AGREED TO:
XXXXXX EQUIPMENT 2004 INC.
By: /s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
PNEUTECH INC.
By: /s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
[Additional Signature Page to Follow]
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XXXXXXXX CONTROLS INC.
By: /s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
HYDRAMEN FLUID POWER LIMITED
By: /s/ XXXXX XXXXX
----------------
Name: Xxxxx Xxxxx
Title: Chairman
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EXHIBIT A
Closing Checklist
