EXHIBIT 10.2
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THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF
THIS NOTE ARE SUBORDINATED TO THE PAYMENT OF SENIOR
INDEBTEDNESS AND THE RIGHTS OF THE HOLDERS OF SENIOR
INDEBTEDNESS UPON THE TERMS OF SUBORDINATION SET FORTH IN
THAT CERTAIN SUBORDINATION AGREEMENT DATED MAY 31, 2006 BY
AND AMONG THE ISSUER OF THIS NOTE AND TD BANKNORTH, N.A.,
AS AMENDED, MODIFIED AND SUPPLEMENTED FROM TIME TO TIME.
U.S. $4,000,000.00 May 31, 2006
FOR VALUE RECEIVED, the undersigned, Touchstone
Applied Science Associates, Inc. a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of
Questar Data Systems, Inc., as paying agent (the "Agent")
for the Selling Shareholders (as defined in the Stock
Purchase Agreement referenced below), having an address at
0000 Xxxx Xxxxxxx Xxxx, Xxxxx, XX 00000, the principal sum
of FOUR MILLION AND 00/100 DOLLARS ($4,000,000.00), which
principal sum shall bear interest from the date hereof at
the rate of six percent (6.0%) per annum on the unpaid
principal balance, calculated on the basis of a 360 day
year consisting of twelve 30 day months.
Interest on the unpaid principal balance of this Note
shall be paid commencing July 1, 2006, and continuing on
the 1st day of each succeeding January 1 and July 1
thereafter (each such date being hereinafter referred to as
an "Interest Payment Date"), to and including January 1,
2011. Subject to the provisions for prepayment described
below, the interest payment to be made on July 1, 2006
shall be equal to TWENTY THOUSAND SIX HUNDRED SIXTY-SIX and
67/100 DOLLARS ($20,666,67), and each subsequent interest
payment through and including the January 1, 2011 payment
shall be equal to ONE HUNDRED TWENTY THOUSAND AND 00/100
DOLLARS ($120,000.00). The entire outstanding principal
balance and accrued interest thereon shall in any event be
due and payable in full on May 30, 2011 (the "Maturity
Date").
If any principal or accrued interest is not paid when
due (whether at the Maturity Date, by acceleration or
otherwise), the Borrower hereby promises to pay, on demand,
interest on such overdue amount from and including the due
date to, but excluding the date such amount is paid in
full, at a fluctuating rate equal to six percent (6.0%) per
annum in excess of LIBOR (the "Default Interest Rate").
The interest rate applicable to any such overdue amounts
shall change on the first day of each calendar month based
upon LIBOR as published in the Wall Street Journal on the
last Business Day of such month. "LIBOR" means the rate
published each business day in the Wall Street Journal for
notes maturing one (1) month after issuance under the
caption "Money Rates, London Interbank Offered Rates
(Libor)". In the event that no LIBOR shall be published,
the Agent may substitute another rate approximating the
LIBOR (which substitute rate may be reasonably adjusted by
Agent) to the effect that such substitute rate will provide
for an interest rate equivalent to the Default Interest
Rate which would have been effective if the LIBOR were
quoted, as determined by the Agent.
This Note is being delivered pursuant to that certain
Stock Purchase Agreement, dated May 31, 2006 among the
Borrower, the Selling Shareholders and Questar Educational
Systems, Inc., a Minnesota corporation (the "Stock Purchase
Agreement"). All capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to such
terms in the Stock Purchase Agreement.
1. Subordination.
The Agent's right to payment pursuant to the terms of
this Note shall be subordinated to the extent and on the
terms and conditions set forth in the Subordination
Agreement, dated May 31, 2006, by and among the Borrower,
TD BankNorth, N.A. (the "Senior Lender"), Agent and the
Selling Shareholders (the "Subordination Agreement"), and
the terms and provisions of the Subordination Agreement are
incorporated herein by reference.
2. Payment.
Payment of the Principal Sum on the Maturity Date and
Interest on each Interest Payment Date shall be made by
wire transfer to the Agent in accordance with the
instructions set forth in Section 6 hereof (or in such
other manner or at such other place as the Agent hereof
shall notify the Borrower in writing) in lawful money of
the United States of America. The Borrower may prepay this
Note at any time, without premium or penalty, in whole or
in part, with accrued interest to the date of such payment
on the amount prepaid. If the Maturity Date or any
Interest Payment Date occurs on a date that is not a
Business Day then the Principal Sum or Interest then due
shall be paid on the next succeeding Business Day.
"Business Day" shall mean any day other than Saturday,
Sunday or any day upon which banks in the city of New York,
New York are authorized or required to be closed.
3. Default and Remedies.
(a) If any of the following events or conditions
(each an "Event of Default") shall occur and be continuing:
(i) the Borrower shall fail to pay an
installment of principal or interest within 10 days of when
and as the same shall become due and payable, whether at
the Maturity Date, by acceleration or otherwise;
(ii) the Borrower shall fail to comply with
the provisions of Section 4.4.2 of the Stock Purchase
Agreement;
(ii) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a
court of competent jurisdiction seeking (A) relief in
respect of the Borrower, or of a substantial part of the
property or assets of the Borrower, under Title 11 of the
United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such
statute, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (B) the
appointment of a receiver, trustee, custodian, conservator
or similar official for the Borrower or for a substantial
part of the properties or assets of the Borrower or (C) the
winding-up, liquidation or dissolution of the Borrower; and
such proceeding or petition shall continue un-dismissed for
90 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(iii) the Borrower (A) voluntarily commences
any proceeding or files any petition seeking relief under
Title 11 of the United States Code, as now constituted or
hereafter amended, or any successor to or replacement of
such statute, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (B) consents to,
or fails to contest in a timely and appropriate manner, the
commencement against of any proceeding or the filing of any
petition described in clause (v) above, (C) applies for or
consents to the appointment of a receiver, trustee,
custodian, conservator or similar official for the Borrower
or for a substantial part of the properties or assets of
the Borrower, (D) files an answer admitting the material
allegations of a petition filed against it in any such
proceeding, (E) makes a general assignment for the benefit
of creditors, (F) becomes unable, admits in writing its
inability or fails generally to pay its debts as they
become due or (G) takes any action for the purpose of
effecting any of the foregoing; or
(iv) The occurrence of any uncured default or
event of default under any agreement with the Senior Lender
or under any other agreement, note, debenture, deed of
trust, mortgage or other instrument to which Borrower is a
party or by which it is bound relating to the borrowing of
money;
then, in the case of an Event of Default, the Agent may, at
any time during the continuance of such Event of Default,
by written notice to the Borrower, declare the entire
outstanding principal sum, together with all accrued and
unpaid interest, to be immediately due and payable.
(b) In the case of an Event of Default, the Borrower
will pay to the Agent such further amount as shall be
sufficient to cover the costs and expenses of collection,
including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
(c) The Borrower shall promptly furnish the Agent
notice of any Event of Default or event which, with notice,
lapse of time or both, would become an Event of Default
under this Section 3.
4. Notices.
All notices, instructions and other communications
given hereunder or in connection herewith shall be in
writing. Any such notice, instruction or communication
shall be sent either (i) by certified mail, return receipt
requested, postage prepaid or (ii) via a reputable
nationwide overnight courier, in each case to the address
set forth below. Any such notice, instruction or
communication shall be deemed to have been delivered upon
receipt of confirmation of delivery after it is sent by
certified mail, return receipt requested, postage prepaid,
or one (1) Business Day after it is sent via a reputable
nationwide overnight courier service.
If to the Borrower to: Touchstone Applied Science
Associates, Inc.
4 Hardscrabble Heights
X.X. Xxx 0000
Xxxxxxxx, XX 00000
Att: President
With a copy to: Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Att: Xxxxxxx Crush, Esq.
If to the Agent to: Questar Data Systems, Inc.
0000 Xxxx Xxxxxxx Xxxx,
Xxxxx, XX 00000
Att: Xxxxxxxx Xxxxxxx
With a copy to: Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Att: Xxxx X. Xxxxxx, Esq.
Wire transfer instructions
for payments: Bank: Associated Bank
ABA Number: xxxxxxxxx
Account Name: Transaction Account
Account Number: xxxxxxxxxx
Either party may give any notice, instruction or
communication in connection with this Note using any other
means (including personal delivery or ordinary mail), but
no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is
received by the party to whom it was sent. Either party may
change the address to which notices, instructions or
communications are to be delivered by giving the other
party to this Note notice thereof in the manner set forth
in this Section 4.
5. Miscellaneous.
(a) This Note shall be governed, construed and
enforced in accordance with the laws of the State of New
York, without regard to its conflicts of laws rules. The
Borrower waives presentment, demand, notice, protest and
all other demands and notices in connection with the
delivery, acceptance, performance, default and enforcement
of this Note. The Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to
the exclusive jurisdiction of the courts of the State of
New York of the United States District Court for the
Southern District of New York, and any appellate court of
such courts, in any action or proceeding arising out of or
relating to this Note, or for recognition or enforcement of
any judgment, and the Borrower hereby irrevocably and
unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in
such New York court (or, to the extent permitted by law, in
such federal court). The Borrower agrees that a final, non-
appealable judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by
law. Nothing in this Note shall affect any right that the
Agent may otherwise have to bring any action or proceeding
relating to this Note against the Borrower or its
properties in the courts of any jurisdiction.
(b) THE AGENT AND THE BORROWER AGREE THAT NEITHER OF
THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER
ACTION BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY
RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY
THE AGENT AND THE BORROWER, AND THESE PROVISIONS SHALL BE
SUBJECT TO NO EXCEPTIONS. NEITHER THE AGENT NOR THE
BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT
THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED
IN ALL INSTANCES.
(c) If any provision of this Note shall be held
invalid or unenforceable by any court of competent
jurisdiction, that holding shall not invalidate or render
unenforceable any other provision hereof.
(d) This Note may not be changed, amended or modified
except by agreement in writing signed by the Borrower and
the Agent.
(e) The Agent has provided as Attachment "A" hereto
the employer identification numbers(s) to be used by
Borrower when issuing any Forms 1099 in connection with
interest payments made pursuant hereto.
IN WITNESS WHEREOF, the Borrower has caused this Note
to be signed on its behalf, in its corporate name, by its
duly authorized officer, as of the day and year first above
written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ XXXXXX X. XXXXX
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Name: Xxxxxx X. Xxxxx
Title: President
