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 REVOLVING 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 Three Million Dollars ($3,000,000) without
duplication of any amounts owing by Borrower to Holder under the Minimum
Borrowing Notes (as defined in the Security Agreement referred to below), 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 the Borrower, certain
Subsidiaries party thereto 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 Note:
ARTICLE 1.
CONTRACT RATE & PREPAYMENTS
1.1 Interest Rate. Subject to Sections 3.2, 4.1 and 5.7 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 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").
1.3 Allocation of Principal to Minimum Borrowing Note. In the event that
the amount due and payable hereunder should equal or exceed $500,000, to the
extent that the outstanding balance on the Minimum Borrowing Note shall be equal
to or less than $500,000 (the difference of $1,000,000 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 the Revolving Note and transferred
to, and evidenced by, a Minimum Borrowing Note.
ARTICLE 2.
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 III), and,
subject to the limitations set forth in Section 2.2 hereof, to convert 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 restricted
shares of the Common Stock at the Fixed Conversion Price (defined below). For
purposes hereof, subject to Section 2.5 hereof, the initial "FIXED CONVERSION
PRICE" means $0.44. The shares of Common Stock to be issued upon such conversion
are herein referred to as the "CONVERSION SHARES."
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 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 Securities
Exchange Act of 1934 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 Borrower upon the occurrence and during the
continuance beyond any applicable grace period of an Event of Default, or upon
seventy-five (75) days prior notice to the Borrower.
2.3 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.
2.4 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
pursuant to this Article II 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.
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 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 2.5,
if the Borrower 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; 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;
(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)).
2.6 Reservation of Shares. On and after the 90th day following the Closing
Date, 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.
ARTICLE 3.
EVENTS OF DEFAULT
DEFAULT RELATED PROVISIONS
3.1 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.
3.2 Default Interest. 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.
3.3 Conversion Privileges. The conversion privileges set forth in Article
II shall remain in full force and effect immediately from the date hereof and
until this Note is paid in full.
3.4 Cumulative Remedies. The remedies under this Note shall be cumulative.
ARTICLE 4.
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 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 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.
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 4.1 ("DEFAULT PAYMENT DATE").
ARTICLE 5.
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 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.
5.5 Cost of Collection. If default is made in the payment of this Note,
the Borrower shall 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. 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 or 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.
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 the Borrower to the Holder and thus refunded to the
Borrower.
5.8 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 (x) the Security Agreement and (y) 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 Borrower under
this Note are guaranteed by certain Subsidiaries of the Borrower pursuant to the
Subsidiary Guaranty dated as of the date hereof.
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.
[Balance of page intentionally left blank; signature page follows.]
IN WITNESS WHEREOF, the Borrower has caused this Secured Convertible
Revolving 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 Revolving 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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