Exhibit 10.3
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 BP INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
FOR VALUE RECEIVED, BP INTERNATIONAL, INC. a Delaware corporation (the
"BORROWER") promises to pay to LAURUS MASTER FUND, LTD., M&C Corporate Services
Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand
Cayman, Cayman Islands, Fax: 345-949-8080 (the "HOLDER") or its registered
assigns, on order, the sum of One Million Dollars ($1,000,000), or, if
different, the aggregate principal amount of all "Loans" (as such term is
defined in the Security Agreement referred to below), together with any accrued
and unpaid interest hereon, on December 2, 2007 (the "MATURITY DATE").
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in the Security Agreement between Borrower,
certain Subsidiaries of the Borrower and the Holder dated as of December 2, 2004
(as amended, modified and supplemented from time to time, the "SECURITY
AGREEMENT").
The following terms shall apply to this Minimum Borrowing Note (the
"Note"):
ARTICLE 1.
INTEREST
1.1 Contract Rate. Subject to Sections 4.2, 5.1 and 6.7 hereof,
interest payable on this Note shall accrue at a rate per annum equal to nine
percent (9%) (the "Contract Rate").
1.2 Contract Rate Adjustments and Payments. The Contract Rate shall be
subject to adjustment on the last business day of each month hereafter until the
Maturity Date (each a "Determination Date"), as set forth in this Section 1.2.
If (i) the Borrower shall have registered the shares of the Borrower's common
stock underlying each of the conversion of each Minimum Borrowing Note then
outstanding and that certain warrant issued to Holder on a registration
statement declared effective by the Securities and Exchange Commission 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. 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").
ARTICLE 2.
ADVANCES, PAYMENTS UNDER NOTE
2.1 Mechanics of Advances. All Loans evidenced by this Note shall be
made in accordance with the terms and provisions of the Security Agreement.
2.2 Fixed Conversion Price. For purposes hereof, subject to Section 3.5
hereof, the initial "FIXED CONVERSION PRICE" means $0.44.
2.3 No Effective Registration. Notwithstanding anything to the contrary
herein, the Holder shall not be required to accept shares of Common Stock as
payment following a conversion by the Holder if there fails to exist an
effective current Registration Statement (as defined in the Registration Rights
Agreement) covering the shares of Common Stock to be issued, or if an Event of
Default hereunder exists and is continuing, unless such requirement is otherwise
waived in writing by the Holder in whole or in part at the Holder's option.
2.4 Optional Redemption in Cash. The Borrower will have the option of
prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to one hundred thirty percent (130%) of the principal amount of this
Note 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 Security
Agreement, or any Ancillary Agreement the "REDEMPTION AMOUNT") outstanding on
the Redemption Payment Date (as defined below). The Borrower 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) 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 (defined below) pursuant to Section
3.1, or for conversions elected to be made by the Holder pursuant to Section 3.1
during the Redemption Period. The Redemption Amount shall be determined as if
such 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 (plus any additional interest and fees accruing on the Notes during the
Redemption Period) must be irrevocably paid in full in immediately available
funds to the Holder. In the event the Borrower fails to pay the Redemption
Amount on the Redemption Payment Date, then such Redemption Notice will be null
and void.
ARTICLE 3.
HOLDER'S CONVERSION RIGHTS
3.1 Optional Conversion. Subject to the terms of this Article III, the
Holder shall have the right, but not the obligation, at any time until the
Maturity Date, or thereafter during an Event of Default (as defined in Article
IV), and, subject to the limitations set forth in Section 3.2 hereof, to convert
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all or any portion of the outstanding principal amount of this Note and/or
accrued interest and fees due and payable into fully paid and nonassessable
shares of the 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 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 4.99% of the outstanding shares
of Common Stock of the Borrower and the number of shares of Common Stock
beneficially owned by such Holder or issuable upon exercise of warrants held by
such Holder. 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 3.2 shall automatically become null and void without any notice
to Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 75 days prior notice to the
Borrower.
3.3 Mechanics of Holder'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 the Borrower and such Notice of Conversion shall
provide a breakdown in reasonable detail of the principal amount of this Note,
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 of this Note,
accrued interest and fees as entered in its records and shall provide written
notice thereof to the Borrower within two (2) business days after the Conversion
Date. Each date on which a Notice of Conversion is delivered or telecopied to
the Borrower 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, the Borrower will issue instructions to the transfer
agent accompanied by an opinion of counsel within one (1) business day of the
date of the delivery to Borrower 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 the
Borrower 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 Borrower 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
the Borrower written instructions to the contrary.
3.4 Late Payments. The 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, the Borrower agrees to pay late
payments to the Holder for late issuance of such shares in the form required
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pursuant to this Article III upon conversion of the Note, in the amount equal to
$500 per business day after the Delivery Date. The Borrower shall pay any
payments incurred under this Section in immediately available funds upon demand.
3.5 Adjustment Provisions. The Fixed Conversion Price and number and
kind of shares or other securities to be issued upon conversion determined
pursuant to Section 2.2 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, etc. If the Borrower 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 of this Note 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 Borrower 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
3.5, if the Borrower shall at any time prior to the conversion or repayment in
full of the principal amount of this Note 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; 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 Borrower) 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 the Borrower 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 the Borrower for any underwriting of the issue or
otherwise in connection therewith;
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(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 the Borrower (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 the Borrower for the issuance of such securities plus
the additional minimum consideration, if any, to be received by the Borrower
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)).
3.6 Reservation of Shares. During the period the conversion right
exists, the Borrower 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. The Borrower represents that upon issuance,
such shares will be duly and validly issued, fully paid and non-assessable. The
Borrower 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.
3.7 Registration Rights. The Holder has been granted registration
rights with respect to the shares of Common Stock issuable upon conversion of
this Note as more fully set forth in a Registration Rights Agreement dated as of
the date hereof between the Borrower and the Holder.
ARTICLE 4.
EVENTS OF DEFAULT
DEFAULT RELATED PROVISIONS
4.1 Events of Default. The occurrence of any of the events set forth in
Section 19 of the Security Agreement shall constitute an Event of Default
("Event of Default") hereunder.
4.2 Default Interest Rate. Following the occurrence and during the
continuance of an Event of Default, the Borrower shall pay additional interest
on this Note in an amount equal to two percent (2%) per month, and all
outstanding Obligations, including unpaid interest, shall continue to accrue
such additional interest from the date of such Event of Default until the date
such Event of Default is cured or waived.
4.3 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.
4.4 Cumulative Remedies. The remedies under this Note shall be
cumulative.
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ARTICLE 5.
DEFAULT PAYMENTS
5.1 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 Borrower under the Security
Agreement and the Ancillary Agreements, to require the Borrower to make a
Default Payment ("DEFAULT PAYMENT"). The Default Payment shall be one hundred
twenty five 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 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.
5.2 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").
ARTICLE 6.
MISCELLANEOUS
6.1 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.
6.2 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.
6.3 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.
6.4 Assignability. This Note shall be binding upon the 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.
6.5 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder reasonable costs of collection, including
reasonable attorneys' fees.
6.6 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
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New York. Both parties and the individual signing this Note on behalf of the
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 enforceability of any other provision of this
Note. Nothing contained herein shall be deemed to operate to preclude the Holder
from bringing suit or taking other legal action against the 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 Holder.
6.7 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 the Borrower to the Holder and thus refunded to the
Borrower.
6.8 Security Interest and Guarantee. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Security Agreement and (ii) pursuant to the Stock
Pledge Agreement dated as of the date hereof. The obligations of the Borrower
under this Note are guaranteed by certain Subsidiaries of the Borrower pursuant
to the Subsidiary Guaranty dated as of the date hereof.
6.9 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.
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IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible
Minimum Borrowing Note to be signed in its name effective as of this 2nd day of
December, 2004.
BP INTERNATIONAL, INC.
By:
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Name:
Title:
WITNESS:
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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 Secured Convertible Minimum Borrowing
Note issued by BP International, Inc. on November __, 2004 into Shares of Common
Stock of BP International, Inc. (the "Borrower") according to the conditions set
forth in such Note, as of the date written below.
Date of Conversion:
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Conversion Price:
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Shares To Be Delivered:
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Signature:
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Print Name:
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Address:
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Holder DWAC instructions
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