EXHIBIT 10.4
NEITHER
THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND LAW OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND LAW. SUCH SECURITIES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED HEREIN.
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
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September 11, 2007
6:00 p.m. EST |
FOR VALUE RECEIVED, on or before
September 11, 2008, subject to an Extension (as defined below)
(the “ Maturity Date ”), Origen Financial,
L.L.C. (“ Borrower ”) promises to pay to the
order of the William M. Davidson Trust u/a/d 12/13/04 (“
Lender ”) at 2300 Harmon Road, Auburn Hills, Michigan
48326, the principal amount of FIVE MILLION AND NO/100 DOLLARS
($5,000,000) (“ Total Principal Amount ”), or
such amount less than the Total Principal Amount which is
outstanding from time to time if the total amount outstanding under
this Senior Secured Convertible Promissory Note (“
Note ”) is less than the Total Principal Amount,
together with accrued but unpaid interest thereon as provided
below. The Maturity Date may be extended by Borrower for up to two,
sixty-day periods (each, an “ Extension ”) upon
payment by Borrower to Lender of a fee in the amount of $58,334 for
each such Extension. Interest on the unpaid principal balance
hereof from time to time outstanding shall accrue for the period
from and including the date hereof, to but excluding the date this
Note is paid in full, at the fixed rate per annum equal to eight
percent (8%), calculated on the basis of actual days elapsed in a
year of 365 days. Borrower shall pay such interest, unless
earlier payment is required hereunder, in cash in arrears on the
last day of each three-month period during which this Note remains
outstanding (each an “ Interest Payment Date ”)
with the first Interest Payment Date occurring on December 31,
2007. If an Event of Default (as defined below) occurs or if this
Note is not paid when due by maturity, acceleration or otherwise,
then notwithstanding the above, interest shall be payable
thereafter at the rate which is six percent (6%) per annum in
excess of the rate described above (the “ Default Rate
”). In no event shall the aggregate interest rate payable
under this Note exceed the Maximum Rate. The term “
Maximum Rate ,” as used herein, shall mean at the
particular time in question the maximum rate of interest, which,
under applicable law, may then be charged on this Note.
The principal of and all accrued but
unpaid interest on this Note shall be due and payable in full on
the Maturity Date.
Borrower may prepay all or any
portion of the principal of this Note at any time without payment
of any premium or penalty upon at least thirty (30) days prior
written notice to Lender; provided that Borrower may only prepay
the principal of this Note after the payment in full of all
principal of and accrued but unpaid interest on that certain Senior
Secured Promissory Note of even date herewith of Borrower in favor
of Lender in the principal amount of $10,000,000. Unless otherwise
agreed to in writing, or otherwise required by applicable law,
payments will be applied first to unpaid accrued interest, then to
principal, and any remaining amount to any unpaid collection costs.
All payments of principal of or interest on this Note shall be made
in lawful money of the United States of America in immediately
available funds, at the address of Lender indicated above, or such
other place as the Lender shall designate in writing to Borrower.
If any payment of principal of or interest on this Note shall
become due on a day which is not a Business Day (as hereinafter
defined), such payment shall be made on the next succeeding
Business Day and any such extension of time shall be included in
computing interest in connection with such payment. As used herein,
the term “ Business Day ” shall mean any day
other than a Saturday, Sunday or any other day on which national
banking associations are authorized to be closed. The books and
records of Lender shall be prima facie evidence of
all outstanding principal of and accrued and unpaid interest on
this Note.
This Note is issued by Borrower
pursuant to the provisions of the Senior Secured Loan Agreement of
even date herewith (the “ Loan Agreement ”) by
and between Borrower and Lender. Payment of this Note is secured by
a Security Agreement of even date herewith (the “ Security
Agreement ”), by and between Borrower and Lender,
covering certain collateral as more particularly described therein.
All capitalized terms used but not defined herein have the meanings
ascribed to them in the Loan Agreement.
This Note, the Loan Agreement, the
Security Agreement and all other documents evidencing, securing,
governing, guaranteeing and/or pertaining to this Note, including
but not limited to those documents described above, are hereinafter
collectively referred to as the “ Loan Documents
.” The Lender is entitled to the benefits and security
provided in the Loan Documents.
Borrower agrees that all advances
hereunder shall be used solely for proper corporate purposes,
including for working capital of Borrower.
Borrower agrees that upon the
occurrence of an Event of Default (as defined in the Loan
Agreement) Lender shall have the remedies set forth herein and in
the Loan Agreement.
The Lender shall have the right, at
such Lender’s option, at any time while this Note remains
outstanding, to convert the outstanding principal balance of this
Note, in accordance with the below provisions, in whole but not in
part, into fully paid and nonassessable shares of common stock,
$0.01 par value per share (“ Common Stock ”), of
Origen Financial, Inc., Borrower’s sole member (“
Issuer ”). The number of shares of Common Stock into
which this Note may be converted shall be determined by dividing
the aggregate unpaid principal amount of this Note by the
Conversion Price. “ Conversion Price ” shall
mean $6.237 per share, the closing consolidated bid price of the
Company’s Common Stock at 4:00 pm (EST) on the date
hereof, plus $.077 per share (an amount allocated to the Common
Stock to attribute the value associated
2
with the
Stock Purchase Warrant granted to the Lender by the Issuer of even
date herewith (“ Warrant ”)).
Before the Lender shall be entitled
to convert all but not less than all of the principal balance of
this Note into shares of Common Stock, it shall surrender this Note
for cancellation at the office of Borrower and shall give written
notice to Borrower and the Issuer at their addresses for notices as
specified in the Loan Agreement, of the election to convert the
same, and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be
issued. Borrower shall, as soon as practicable thereafter, pay to
Lender all accrued but unpaid interest under the Note and Issuer
shall issue and deliver at such office to Lender a certificate or
certificates for the number of shares of Common Stock to which
Lender shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business
on the date of such surrender of this Note, and the person or
persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such
date.
No fractional shares of Common Stock
shall be issued upon conversion of this Note. In lieu of Issuer
issuing any fractional shares to the Lender upon the conversion of
this Note, Borrower shall pay to Lender the amount of outstanding
principal that is not so converted.
The Conversion Price and the number
of shares of Common Stock issuable upon the conversion of this Note
shall be subject to adjustment from time to time upon the
occurrence of certain events described herein. Upon each adjustment
of the Conversion Price, the holder of this Note shall thereafter
upon conversion of this Note be entitled to be issued, at the
Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price
in effect immediately prior to such adjustment by the number of
shares of Common Stock issuable pursuant hereto immediately prior
to such adjustment (based on the aggregate principal balance
outstanding under this Note at such time), and dividing the product
thereof by the Conversion Price resulting from such
adjustment:
(i) In case at any time or from
time to time Issuer shall:
(A) issue to the holders of its
Common Stock a dividend payable in, or other distribution of,
shares of Common Stock (a “ Stock Dividend
”),
(B) subdivide its outstanding shares
of Common Stock into a larger number of shares of Common Stock,
including, without limitation, by means of a stock split (a “
Stock Subdivision ”), or
(C) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock (a
“ Stock Combination ”),
then the
number of
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