EXHIBIT 10.5
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 SUCH
REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
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FOR VALUE RECEIVED, each of 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, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands,
Fax: 345-949-8080 (the "HOLDER") or
its registered assigns or successors in
interest, the sum of Two Million Dollars
($2,000,000), or, if different, the
aggregate principal amount of all
outstanding Loans (as defined in the
Security Agreement referred to below)
without duplication of any amounts owing by
the Company to the Holder under the
Revolving Note (as defined in the Security
Agreement referred to below),
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 the
Security Agreement among the Company
and the Holder dated as of the date hereof
(as amended, modified and
supplemented from time to time, the
"SECURITY AGREEMENT").
The following terms shall apply to this Secured Convertible
Minimum Borrowing Note (the "NOTE"):
ARTICLE I
CONTRACT RATE
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 one and one
quarter percent (1.25%) (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
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the Common Stock underlying the conversion
of each Minimum Borrowing Note and
each Option on a registration statement
declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii)
the market price (the "MARKET PRICE")
of the Common Stock as reported by
Bloomberg, L.P. on the Principal Market 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).
ARTICLE II
LOANS; PAYMENTS UNDER THIS NOTE
2.1 Loans. All Loans evidenced by this Note shall be made in
accordance with the terms and provisions of
the Security Agreement.
2.2 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.
2.3 Optional Redemption in Cash. The Company will have the
option of prepaying this Note ("OPTIONAL
REDEMPTION") by paying to the Holder a
sum of money equal to one hundred twenty
percent (120%) 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 other Ancillary
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) 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
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Companies fail to pay the Redemption Amount
on the Redemption Payment Date, then
such Redemption Notice shall be null and
void.
ARTICLE III
CONVERSION RIGHTS AND FIXED CONVERSION PRICE
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 during an
Event of Default (as defined in
Article IV), and, subject to the
limitations set forth in Section 3.2 hereof, 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
the Common Stock at the Fixed Conversion
Price. For purposes hereof, subject to
Section 3.6 hereof, the initial "FIXED
CONVERSION PRICE" means $1.66. 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 Revolving Note (as
defined in the Security Agreement), the
Security Agreement, any Ancillary
Agreement, the Secured Convertible Term
Note made by the Company to the Holder
dated the date hereof (as amended, modified
and/or supplemented from time to
time, the "TERM NOTE"), the Purchase
Agreement (as defined in the Term Note) or
any Related Agreement (as defined in the
Term Note) 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 Revolving Note, the Security
Agreement, any Ancillary Agreement, the
Term Note, the Purchase Agreement or any
Related 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 Revolving Note, the Security
Agreement, any Ancillary Agreement, the
Term Note, the Purchase Agreement or any
Related 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
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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.
3.3 Mechanics of
Holder'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
Peter Canepa, Kenneth Rieth and John
LeHoty) 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
transf
