EXHIBIT 10.8
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 STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO RIVIERA TOOL COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE TERM NOTE
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FOR VALUE RECEIVED, RIVIERA TOOL COMPANY, a Michigan
corporation (the "COMPANY"), 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 or successors in interest, the sum of Three
Million Two Hundred Thousand Dollars ($3,200,000), together with any accrued and
unpaid interest hereon, on May 17, 2008 (the "MATURITY DATE") if not sooner
paid.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in that certain Securities Purchase
Agreement dated as of the date hereof by and between the Company and the Holder
(as amended, modified and supplemented from time to time, the "PURCHASE
AGREEMENT").
The following terms shall apply to this Secured Convertible
Term Note (this "NOTE"):
ARTICLE I
CONTRACT RATE AND AMORTIZATION
1.1 Contract Rate. Subject to Sections 4.2 and 5.10,
interest payable on the outstanding principal amount of this Note (the
"PRINCIPAL AMOUNT") 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
four percent (4%) (the "CONTRACT RATE"). The Contract 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 the Prime Rate. Subject to Section
1.2, the Contract Rate shall not be less than six and one half percent (6.50%).
1.2 Contract Rate Adjustments and Payments. The Contract
Rate shall be calculated on the last business day of each calendar month
hereafter (other than for increases or decreases in the Prime Rate which shall
be calculated and become effective in accordance with the terms of Section 1.1)
until the Maturity Date (each a "DETERMINATION DATE") and shall be subject to
adjustment as set forth herein. If (i) the Company shall have registered the
shares of the Common Stock underlying the conversion of this Note and the Option
on a registration statement declared effective by the Securities and Exchange
Commission (the "SEC"), and
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(ii) the market price (the "MARKET PRICE") of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market 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%) 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
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 June 1, 2005 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. For the
avoidance of doubt, all determinations with respect to market price and trading
volume of the Common Stock shall be made based upon information reported by
Bloomberg, L.P. on the relevant date(s).
1.3 Principal Payments. Amortizing payments of the aggregate
principal amount outstanding under this Note at any time (the "PRINCIPAL
AMOUNT") shall be made by the Company on September 1, 2005 and on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "AMORTIZATION DATE"). Subject to Article III below, commencing on the first
Amortization Date, the Company shall make monthly payments to the Holder on each
Repayment Date, each such payment in the amount of $96,969.70 together with any
accrued and unpaid interest on such portion of the Principal Amount plus any and
all other unpaid amounts which are then owing under this Note, the Purchase
Agreement and/or any other Related Agreement (collectively, the "MONTHLY
AMOUNT"). Any outstanding Principal Amount together with any accrued and unpaid
interest and any and all other unpaid amounts which are then owing by the
Company to the Holder under this Note, the Purchase Agreement and/or any other
Related Agreement shall be due and payable on the Maturity Date.
ARTICLE II
CONVERSION AND REDEMPTION
2.1 Payment of Monthly Amount.
(a) Payment in Cash or Common Stock. If the Monthly
Amount (or a portion of such Monthly Amount if not all of the Monthly Amount may
be converted into shares of Common Stock pursuant to Section 3.2) is required to
be paid in cash pursuant to Section 2.1(b), then the Company shall pay the
Holder an amount in cash equal to 102% of the Monthly Amount due and owing to
the Holder on the Amortization Date. If the Monthly Amount (or a portion of such
Monthly Amount if not all of the Monthly Amount may be converted into shares of
Common Stock pursuant to Section 3.2) is required to be paid in shares of Common
Stock pursuant to Section 2.1(b), the number of such shares to be issued by the
Company to the Holder on such Amortization Date (in respect of such portion of
the Monthly Amount converted into shares of Common Stock pursuant to Section
2.1(b)), shall be the number determined by dividing (i) the portion of the
Monthly Amount converted into shares of Common Stock, by (ii) the then
applicable Fixed Conversion Price. For purposes hereof, subject to Section 3.6
hereof, the initial "FIXED CONVERSION PRICE" means $1.66.
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(b) Monthly Amount Conversion Conditions. Subject to
Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of
Common Stock all or a portion of the Monthly Amount due on each Amortization
Date if the following conditions (the "CONVERSION CRITERIA") are satisfied: (i)
the average closing price of the Common Stock as reported by Bloomberg, L.P. on
the Principal Market for the five (5) trading days immediately preceding such
Amortization Date shall be greater than or equal to 115% of the Fixed Conversion
Price, and (ii) the amount of such conversion does not exceed twenty five
percent (25%) of the aggregate dollar trading volume of the Common Stock for the
period of twenty-two (22) trading days immediately preceding such Amortization
Date. If subsection (i) of the Conversion Criteria is met but subsection (ii) of
the Conversion Criteria is not met as to the entire Monthly Amount, the Holder
shall convert only such part of the Monthly Amount that meets subsection (ii) of
the Conversion Criteria. Any portion of the Monthly Amount due on an
Amortization Date that the Holder has not been able to convert into shares of
Common Stock due to the failure to meet the Conversion Criteria, shall be paid
in cash by the Company at the rate of 102% of the Monthly Amount otherwise due
on such Amortization Date, within three (3) business days of such Amortization
Date.
2.2 No Effective Registration. Notwithstanding anything to
the contrary herein, none of the Company's obligations to the Holder may be
converted into Common Stock unless (a) either (i) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists, or (ii) an exemption from registration for resale of
all of the Common Stock issued and issuable is available pursuant to Rule 144 of
the Securities Act, and (b) no Event of Default (as hereinafter defined) exists
and is continuing, unless such Event of Default is cured within any applicable
cure period or otherwise waived in writing by the Holder.
2.3 Optional Redemption in Cash. The Company may prepay this
Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of money equal to one
hundred twenty percent (120%) of the Principal Amount outstanding at such time
together with accrued but unpaid interest thereon and any and all other sums
due, accrued or payable to the Holder arising under this Note, the Purchase
Agreement or any other Related Agreement (the "REDEMPTION AMOUNT") outstanding
on the Redemption Payment Date (as defined below). The Company shall deliver to
the Holder a written notice of redemption (the "NOTICE OF REDEMPTION")
specifying the date for such Optional Redemption (the "REDEMPTION PAYMENT
DATE"), which date shall be seven (7) business days after the date of the Notice
of Redemption (the "REDEMPTION PERIOD"). A Notice of Redemption shall not be
effective with respect to any portion of this Note for which the Holder has
previously delivered a Notice of Conversion (as hereinafter defined) or for
conversions elected to be made by the Holder pursuant to Section 3.3 during the
Redemption Period. The Redemption Amount shall be determined as if the Holder's
conversion elections had been completed immediately prior to the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must
be paid in good funds to the Holder. In the event the Company fails to pay the
Redemption Amount on the Redemption Payment Date as set forth herein, then such
Redemption Notice will be null and void.
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ARTICLE III
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms set forth in
this Article III, the Holder shall have the right, but not the obligation, 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 shares of
Common Stock at the Fixed Conversion Price. The shares of Common Stock to be
issued upon such conversion are herein referred to as, the "CONVERSION SHARES."
3.2 Conversion Limitation. Notwithstanding anything
contained herein to the contrary, the Holder shall not be entitled to exercise
pursuant to the terms of this Note an amount that would be convertible into that
number of shares of Common Stock which would exceed the difference between the
number of shares of Common Stock beneficially owned by such Holder or issuable
upon exercise of any option or warrant held by such Holder and 4.99% of the
outstanding shares of Common Stock of the Company. 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 limitation described in this Section 3.2 shall automatically
become null and void without any notice to the Company upon the occurrence and
during the continuance beyond any applicable grace period of an Event of
Default, or upon 65 days prior notice to the Company, except that at no time
shall the beneficial ownership exceed 19.99% of the Common Stock.
Notwithstanding anything contained herein to the contrary, the number of shares
of Common Stock issuable by the Company and acquirable by the Holder at a price
below $1.10 per share pursuant to the terms of this Note, the Purchase
Agreement, any Related Agreement, the Secured Convertible Minimum Borrowing Note
made by the Company to the Holder dated the date hereof (as amended, modified
and/or supplemented from time to time, the "MB Note"), the Secured Revolving
Note made by the Company to the Holder dated the date hereof (as amended,
modified and/or supplemented from time to time, the "Revolving Note" and
together with the MB Note, the "Other Notes"), the Security Agreement (as
defined in the MB Note) or any Ancillary Agreement (as defined in the Security
Agreement), shall not exceed an aggregate of 754,492 shares of the Company's
Common Stock (subject to appropriate adjustment for stock splits, stock
dividends, or other similar recapitalizations affecting the Common Stock) (the
"Maximum Common Stock Issuance"), unless the issuance of shares hereunder in
excess of the Maximum Common Stock Issuance shall first be approved by the
Company's shareholders. If at any point in time and from time to time the number
of shares of Common Stock issued pursuant to the terms of this Note, the
Purchase Agreement, any Related Agreement, the Other Notes, the Security
Agreement or any Ancillary Agreement together with the number of shares of
Common Stock that would then be issuable by the Company to the Holder in the
event of a conversion or exercise pursuant to the terms of this Note, the
Purchase Agreement, any Related Agreement, the Other Notes, the Security
Agreement or any Ancillary Agreement would exceed the Maximum Common Stock
Issuance but for this paragraph, the Company shall promptly call a shareholders
meeting to solicit shareholder approval for the issuance of the shares of Common
Stock hereunder in excess of the Maximum Common Stock Issuance. Shares of Common
Stock which may not be issued due to the limitations set forth in this Section
3.2 shall not be deemed to be Conversion Shares under this Note unless and until
their issuance is otherwise permitted as contemplated herein.
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3.3 Mechanics of Xxxxxx's Conversion. In the event that the
Holder converts amounts outstanding under this Note into Common Stock, the
Holder shall give notice of such election by delivering (by facsimile or email)
an executed and completed notice of conversion in substantially the form of
Exhibit A hereto (appropriately completed) ("NOTICE OF CONVERSION") to the
Company and such Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees that are being
converted. The Company shall have two and one half (2.5) hours from the time
that such Notice of Conversion is delivered to the Company (which Notice of
Conversion shall be delivered via facsimile or email by the Holder to each of
Xxxxx Xxxxxx, Xxxxxxx Xxxxx and Xxxx XxXxxx) to provide the Holder with written
notice (delivered to Holder via facsimile or email) of the Company's decision to
purchase the number of shares of Common Stock otherwise deliverable to the
Holder pursuant to the Notice of Conversion (the "Designated Shares") for a
purchase price determined by multiplying the Designated Shares by the intraday
high price of the Common Stock on the day the Notice of Conversion was submitted
to the Company (the "Disposition Price"). The Disposition Price shall be paid by
the Company to the Holder by wire transfer of immediately available funds within
two (2) business days of the date of the Notice of Conversion. 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 the Company within two (2) Business Days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Company in accordance with the provisions hereof shall be
deemed a Conversion Date (the "CONVERSION DATE"). Pursuant to the terms of the
Notice of Conversion, the Company 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 the Company 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 the Company of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of the Conversion
Shares, unless the Holder provides the Company written instructions to the
contrary.
3.4 Late Payments. The Company understands that a delay in
the delivery of the Conversion Shares 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, the Company shall pay late payments to
the Holder for any late issuance of Conversion Shares in the form required
pursuant to this Article II upon conversion of this Note, in the amount equal to
$500 per business day after the Delivery Date. The Company shall make any
payments incurred under this Section in immediately available funds upon demand.
Notwithstanding the foregoing, the Company will not owe the Holder any late
payments if the delay in the delivery of the Note Shares beyond the Delivery
Date is solely out of the control of the Company and the Company is actively
trying to cure the cause of the delay. The Company shall pay any payments
incurred under this Section in immediately available funds upon demand and, in
the case of actual damages, accompanied by reasonable documentation of the
amount of such damages. Such documentation shall show the number of shares of
Common Stock the Holder is forced to purchase (in an open market transaction)
which the Holder anticipated receiving upon such
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conversion, and shall be calculated as the amount by which (A) the Holder's
total purchase price (including customary brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (B) the aggregate principal and/or
interest amount of the Note, for which such Conversion Notice was not timely
honored.
3.5 Conversion Mechanics. The number of shares of Common
Stock to be issued upon each conversion of this Note shall be determined by
dividing that portion of the principal and interest and fees to be converted, if
any, by the then applicable Fixed Conversion Price. In the event of any
conversions of a portion of the outstanding Principal Amount pursuant to this
Article III, such conversions shall be deemed to constitute conversions of the
outstanding Principal Amount applying to Monthly Amounts for the remaining
Amortization Dates in chronological order.
3.6 Adjustment Provisions. The Fixed Conversion Price and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to this Note 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 the Company 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.
(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 the Company 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 3.6, if the Company 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 Sections 3.6(a) or (b) above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as
disclosed to the Holder in writing; or (iii) pursuant to options that may be
issued under any employee incentive stock option and/or any qualified stock
option plan adopted by the Company) 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 pursuant to
the formula set forth below. For purposes hereof, the issuance of any security
of the Company convertible into or exercisable or exchangeable for Common Stock
shall result in an adjustment
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to the Fixed Conversion Price upon the issuance of such securities pursuant to
the formula below.
If the Company issues any additional shares of Common Stock
for a consideration per share less than the then-applicable Fixed Conversion
Price pursuant to this Section 3.6 then, and thereafter successively upon each
such issue, the Fixed Conversion Price shall be adjusted by multiplying the then
applicable Fixed Conversion Price by the following fraction:
-----------------------------
A + B
-----------------------------
(A + B) + [((C - D) x B) / C]
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A = Total amount of shares convertible pursuant to the
Notes
B = Actual shares sold in the offering
C = Fixed Conversion Price
D = Offer Price
(d) Computation of Consideration. For purposes of any
computation respecting consideration received pursuant to Section 3.6(c) above,
the following shall apply:
(i) 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 the Company for
any underwriting of the issue or otherwise in connection therewith;
(ii) 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 the Company (irrespective of the accounting treatment
thereof); and
(iii) upon any such exercise, the aggregate
consideration received for such securities shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in subsections (i) and (ii) of this Section 3.6(d)).
3.7 Reservation of Shares. During the period the conversion
right exists, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Conversion
Shares upon the full conversion of this Note. The Company represents that upon
issuance, the Conversion Shares will be duly and validly
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issued, fully paid and non-assessable. The Company 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 the Conversion Shares upon
the conversion of this Note.
3.8 Registration Rights. The Holder has been granted
registration rights with respect to the Conversion Shares as set forth in a
Registration Rights Agreement.
3.9 Issuance of New Note. Upon any partial conversion of
this Note, a new Note containing the same date and provisions of this Note
shall, at the request of the Holder, be issued by the Company to the Holder for
the principal balance of this Note and interest which shall not have been
converted or paid. Subject to the provisions of Article IV of this Note, the
Company shall not pay any costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Events of Default. The occurrence of any of the
following events set forth in this Section 4.1 shall constitute an event of
default ("EVENT OF DEFAULT") hereunder:
(a) Failure to Pay. The Company fails to pay when due
any installment of principal, interest or other fees hereon in accordance
herewith, or the Company fails to pay any of the other Obligations (under and as
defined in the Master Security Agreement) when due, 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;
(b) Breach of Covenant. The Company or any of its
Subsidiaries breaches any covenant or any other term or condition of this Note
in any material respect and such breach, if subject to cure, continues for a
period of fifteen (15) days after the occurrence thereof;
(c) Breach of Representations and Warranties. Any
representation, warranty or statement made or furnished by the Company or any of
its Subsidiaries in this Note, the Purchase Agreement or any other Related
Agreement shall at any time be false or misleading in any material respect;
(d) Other Indebtedness. The occurrence of any event
of default (or similar term) under any indebtedness in excess of $250,000 in the
aggregate which the Company or any of its Subsidiaries is a party with third
parties;
(e) Material Adverse Effect. Any change in the
Company's or any of its Subsidiary's condition or affairs (financial or
otherwise) which in the Holder's reasonable, good faith opinion, could
reasonably be expected to have a Material Adverse Effect;
(f) Bankruptcy. The Company or any of its Subsidiaries
shall (i) apply for, consent to or suffer to exist the appointment of, or the
taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property, (ii)
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make a general assignment for the benefit of creditors, (iii) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(g) Judgments. An attachment or levy is made upon the
Company or any of its Subsidiary's assets having an aggregate value in excess of
$50,000 or a judgment is rendered against the Company's property involving a
liability of more than $50,000 which shall not have been vacated, discharged,
stayed or bonded within thirty (30) days from the entry thereof;
(h) Insolvency. The Company or any of its Subsidiaries
shall admit in writing its inability, or be generally unable to pay its debts as
they become due or cease operations of its present business;
(i) Change in Control. Any Change of Control (as
defined below) shall occur with respect to the Company, unless Xxxxxx shall have
expressly consented to such Change of Control in writing. A "Change of Control"
shall mean any event or circumstance as a result of which (i) any Person or
"group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended) other than Laurus or any of its Affiliate or a Person
or group that is an Affiliate of the Company on the date of this Loan Agreement:
(A) acquires beneficial ownership of 50% or more of outstanding Common Stock of
the Company, or (B) obtains the power (regardless of whether exercised) to elect
a majority of the Company's directors, or (ii) the Company merges or
consolidates with, or sells all or substantially all of its assets to, any other
Person;
(j) Indictment; Proceedings. The indictment of
Company or any of its Subsidiaries or any executive officer of Company or any of
its Subsidiaries under any criminal or civil proceeding against Company or any
of its Subsidiaries or any executive officer of Company or any of its
Subsidiaries pursuant to which statute or proceeding penalties or remedies
sought or available include forfeiture of any of the property of Company or any
of its Subsidiaries;
(k) Related Agreements. (i) An Event of Default shall
occur under and as defined in any Related Agreement, (ii) the Company or any of
its Subsidiaries shall breach any term or provision of the Purchase Agreement or
any Related Agreement in any material respect which is not cured within any
applicable cure or grace period, (iii) the Company or any of its Subsidiaries
attempts to terminate, challenges the validity of, or its liability under, the
Purchase Agreement or any Related Agreement, (iv) any proceeding shall be
brought to challenge the validity, binding effect of the Purchase Agreement or
any Related Agreement, or (v) the Purchase Agreement or any Related Agreement
ceases to be a valid, binding and enforceable obligation of the Company or any
of its Subsidiaries (to the extent such persons or entities are a party
thereto);
(l) Stop Trade. An SEC stop trade order or Principal
Market trading suspension of the Common Stock shall be in effect for five (5)
consecutive days or five (5) days
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during a period of ten (10) consecutive days, excluding in all cases a
suspension of all trading on a Principal Market, provided that the Company shall
not have been able to cure such trading suspension within thirty (30) days of
the notice thereof or list the Common Stock on another Principal Market within
sixty (60) days of such notice;
(m) Failure to Deliver Common Stock or Replacement
Note. The Company's failure to deliver Common Stock to the Holder pursuant to
and in the form required by this Note and the Purchase Agreement and, if such
failure to deliver Common Stock shall not be cured within two (2) business days
or the Company is required to issue a replacement Note to the Holder and the
Company shall fail to deliver such replacement Note within seven (7) business
days;
(n) Any Xxxx created hereunder or under any Related
Agreement ceases to be or is not a valid and perfected Lien having a first
priority interest in favor of Xxxxxx due to actions taken or which fail to be
taken by the Company or any Subsidiary; or
(o) Company directly or indirectly sells, assigns,
transfers, conveys, or suffers or permits to occur any sale, assignment,
transfer or conveyance of any assets of Company or any interest therein, except
as permitted herein or in the Related Agreements.
4.2 Default Interest. Following the occurrence and during
the continuance of an Event of Default, the Company shall pay additional
interest on this Note in an amount equal to one and one half percent (1.50%) per
month, and all outstanding obligations under this Note, the Purchase Agreement
and each Related Agreement, including unpaid interest, shall continue to accrue
interest at such additional interest rate from the date of such Event of Default
until the date such Event of Default is cured or waived.
4.3 Default Payment. Following the occurrence and during the
continuance of an Event of Default, the Holder, at its option, may demand
repayment in full of all obligations owing by Company to the Holder under this
Note, the Purchase Agreement and/or any Related Agreement and/or may elect, in
addition to all rights and remedies of the Holder under the Purchase Agreement
and the other Related Agreements and all obligations of the Company under the
Purchase Agreement and the other Related Agreements, to require the Company to
make a Default Payment ("DEFAULT PAYMENT"). The Default Payment shall be one
hundred twenty percent (120%) 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 the Holder pursuant to this Note and/or the other
Related Agreements, then to accrued and unpaid interest due on this Note and
then to the outstanding principal balance of this Note. The Default Payment
shall be due and payable immediately on the date that the Holder has exercised
its rights pursuant to this Section 4.3.
ARTICLE V
MISCELLANEOUS
5.1 Conversion Privileges. The conversion privileges set
forth in Article III shall remain in full force and effect immediately from the
date hereof until the date this Note is paid in full and irrevocably terminated.
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5.2 Cumulative Remedies. The remedies under this Note shall
be cumulative.
5.3 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.
5.4 Notices. Any notice herein required or permitted to be
given shall be in writing and provided in accordance with the terms of the
Purchase Agreement.
5.5 Amendment Provision. The term "Note" and all references
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 such successor instrument may be
amended or supplemented.
5.6 Assignability. This Note shall be binding upon the
Company 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. The Company may not
assign any of its obligations under this Note without the prior written consent
of the Holder, any such purported assignment without such consent being null and
void.
5.7 Cost of Collection. In case of any Event of Default
under this Note, the Company shall pay the Holder reasonable costs of
collection, including reasonable attorneys' fees.
5.8 Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER
ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS;
PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF
NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE
11
A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH THE COMPANY HEREBY WAIVES ANY OBJECTION
WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS.
(c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED
BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST
COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO
OR THERETO.
5.9 Severability. 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 enforceability of any other provision
of this Note.
5.10 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 rate permitted by such law, any payments in excess of such maximum rate
shall be credited against amounts owed by the Company to the Holder and thus
refunded to the Company.
5.11 Security Interest and Guarantee. The Holder has been
granted a security interest (i) in certain assets of the Company as more fully
described in the Master Security Agreement dated as of the date hereof, and (ii)
pursuant to the Stock Pledge Agreement dated as of the date hereof. The
obligations of the Company under this Note are guaranteed by certain
Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the
date hereof.
5.12 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.
[Balance of page intentionally left blank; signature page follows]
12
IN WITNESS WHEREOF, the Company has caused this Secured
Convertible Term Note to be signed in its name effective as of this 17th day of
May 2005.
RIVIERA TOOL COMPANY
By: /s/
-----------------------------------
Name:
Title:
WITNESS:
-----------------------------------
13
EXHIBIT A
---------
NOTICE OF CONVERSION
--------------------
(To be executed by the Holder in order to convert all or part of
the Secured Convertible Term Note into Common Stock)
[Name and Address of Holder]
The undersigned hereby converts $_________ of the principal
due on [specify applicable Repayment Date] under the Secured Convertible Term
Note dated as of May 17, 2005 (the "NOTE") issued by Riviera Tool Company (the
"COMPANY") by delivery of shares of Common Stock of the Company on and subject
to the conditions set forth in the Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
LAURUS MASTER FUND, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
