Contract
Exhibit 10.7
The indebtedness evidenced by this instrument is subordinated to the prior payment in full of the
Senior Indebtedness as defined in, and to the extent provided in, the Agreement dated as of March
27, 2008, among Taberna Capital Management, LLC, Beachwold Partners, L.P., Mr. Xxxxxx Xxxxxxxxxx
and Tarragon Corporation.
Amended and Restated Promissory Note
| $10,000,000.00 | March 27, 2008 |
For value received, Tarragon Corporation, a Nevada corporation (“Borrower”), promises
to pay to the order of Xxxxxx X. Xxxxxxxxxx (“Lender”), the principal sum of Ten Million
Dollars and 00/100 ($10,000,000.00), or so much thereof as may be outstanding, with interest on the
unpaid principal balance thereof at the rate set forth in the Loan Agreement (as defined below).
1. Defined Terms. This Amended and Restated Promissory Note (this “Note”) is given
pursuant to that certain letter agreement dated as of the date hereof among Borrower, Beachwold
Partners, L.P. and Lender (the “Loan Agreement”). As used in this Note, (i) the term “Lender”
means the holder of this Note, (ii) the term “Indebtedness” means the principal of, interest on, or
any other amounts due at any time under, this Note including late charges and default interest, and
any other sums due and owing pursuant to the Loan Agreement, (iii) “Event of Default” means any
failure to pay any portion of the Indebtedness within the earlier to occur of (a) 30 days after the
due date therefor and (b) the Maturity Date (as defined below) or any failure by Borrower to
otherwise comply in any respect with its obligations under the Loan Agreement and (iv) “Termination
Date” means the later to occur of (a) March 27, 2013, and (b) the second anniversary of the
repayment in full of the Senior Indebtedness.
2. Address for Payment. All payments due under this Note shall be payable c/o
Beachwold Partners, L.P., 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX
00000, Attn: Xxxxxxx X. Xxxxxxxx.
3. Payment of Principal and Interest. The unpaid principal balance of the Loan (as
defined in the Loan Agreement), including any PIK Interest (as defined below) added to the unpaid
principal balance of the Loan as described below, shall bear interest in an amount equal to (a)
cash interest at the rate of 5.00% per annum (“Cash Interest”) plus (b) payment-in-kind interest at
the rate of 7.50% per annum (“PIK Interest”). Interest shall be calculated hereunder on the basis
of a 360-day year consisting of twelve 30 day months. In no event shall interest be charged
hereunder which would violate any applicable law. Accrued and unpaid Cash Interest is due and
payable in cash in immediately available funds on the later of (i) each January 30, April 30, July
30 and October 30 of each year and (ii) the day after required quarterly interest payments are
made with respect to the Senior Indebtedness. So long as the Senior Indebtedness has not been paid in
full, accrued and unpaid PIK Interest is automatically added to the unpaid principal balance of the
Loan as additional principal of the Loan on the first day of each month (and such interest will no
longer be accrued and unpaid). After the Senior Indebtedness has been paid in full, accrued and
unpaid PIK Interest is due and payable in cash in immediately available funds on each date that
Cash Interest is due and payable. The outstanding principal balance of the Loan (including any PIK
Interest added to the unpaid principal balance of the Loan as described above) is payable in full
on the Maturity Date. All accrued and unpaid interest, and all other sums owed under the Loan,
shall be due and payable on the earliest to occur of (A) the Termination Date and (B) any earlier
date on which the unpaid principal balance of this Note becomes due and payable, by acceleration or
otherwise (the “Maturity Date”).
The principal balance of this Note, together with all accrued and unpaid interest and all
other amounts then payable hereunder shall also be due and payable within ten (10) days after
demand by Lender if, at any time after the Subordinated Notes (as hereinafter defined) have been
paid in full, there shall occur a Change of Control (as hereinafter defined). For purposes of the
preceding sentence:
(i) “Subordinated Notes” shall mean those certain unsecured subordinated notes previously
issued by Borrower, which are held by Taberna Preferred Fundings II Ltd., holder of $37,500,000 of
Subordinated Notes, Taberna Preferred Funding III, Ltd., holder of $27,500,000 of Subordinated
Notes, Taberna Preferred Funding IV, Ltd., holder of $24,375,000 of Subordinated Notes, Taberna
Preferred Funding V, Ltd., holder of $25,000,000 of Subordinated Notes and Taberna Preferred
Funding VI, Ltd., holder of $10,625,000 of Subordinated Notes; and
(ii) “Change in Control” shall mean the occurrence of any of the following events:
| (A) | upon the approval by the Board of Directors of Borrower (the “Board”) (or if approval of the Board is not required as a matter of law, the stockholders of the Borrower) of (A) any consolidation or merger of the Borrower in which the Borrower is not the continuing or surviving entity or pursuant to which shares of Borrower’s common stock would be converted into cash, securities or other property other than a merger in which the holders of shares of Borrower’s common stock immediately prior to the merger will have the same proportionate ownership of common stock of the surviving entity immediately after the merger, (B) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Borrower or (C) adoption of any plan or proposal for the liquidation or dissolution of the Borrower; |
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| (B) | when any “person” (as defined in Section 13(d) of the Exchange Act), other than the Borrower or any subsidiary or affiliate or employee benefit plan or trust maintained by the Borrower, shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 20% of the Borrower’s common stock outstanding at the time, without the prior approval of the Board; | ||
| (C) | at any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board shall cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the stockholders of the Borrower of each new director during such two year period was approved by a vote of at least two-thirds of the directors then still in office who were Directors at the beginning of such two-year period; | ||
| (D) | a filing pursuant to any federal or state law in connection with any tender offer for shares of the Borrower (other than a tender offer by the Borrower); or | ||
| (E) | the occurrence of any other event or series of events, which, in the opinion of the Board, will, or is likely to, if carried out, result in a change of control of the Borrower. |
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable
at such time, Lender may apply that payment to amounts then due and payable in any manner and in
any order determined by Lender, in Lender’s discretion. Borrower agrees that neither Lender’s
acceptance of a payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender’s application of such payment shall constitute or be deemed to constitute either
a waiver of the unpaid amounts or an accord and satisfaction.
5. Acceleration. If an Event of Default has occurred and is continuing, the
Indebtedness may, at the option of Lender, without any prior notice to Borrower, at once become due
and payable.
6. Default Rate. If an Event of Default has occurred and is continuing, PIK Interest
shall, at Lender’s option, accrue and be payable at the lesser of 25.00% per annum or the maximum
interest rate which may be collected from Borrower under applicable law. Borrower acknowledges
that its failure to make timely payments will cause Lender to incur additional expenses in
servicing and processing the Loan, that, during the time that any monthly installment or other
payment under this Note is delinquent for more than 30 days, Lender will incur additional costs and
expenses arising
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from its loss of the use of the money due and from the adverse impact on Lender’s
ability to meet is other obligations and to take advantage of other investment opportunities, and
that it is extremely difficult and impractical to determine those additional costs and expenses.
Borrower also acknowledges that, during the time that any monthly installment or other payment due
under this Note is delinquent for more than 30 days, Lender’s risk of nonpayment of this Note will
be materially increased and Lender is entitled to be compensated for such increased risk. Borrower
agrees that the increase in the rate of interest payable under this Note as set forth in this
Section 6 represents a fair and reasonable estimate, taking into account all circumstances existing
on the date of this Note, of the additional costs and expenses Lender will incur by reason of the
Borrower’s delinquent payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
7. Prepayments. The principal amount of the Indebtedness evidenced by this Note is
prepayable in full or in part at any time, without premium. If (x) the Senior Indebtedness or (y)
any indebtedness issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund, the Senior Indebtedness (including any accrued and
unpaid interest thereon) has been repaid in full, then within 10 days after the date on which
Borrower files its next quarterly report with the Securities Exchange Commission for the fiscal
quarter in which the Senior Indebtedness or such other indebtedness has been repaid in full and for
each subsequent fiscal quarter as long as the Indebtedness remains outstanding, Borrower shall
prepay an aggregate principal amount of the Indebtedness equal to the lesser of (a) 25% of (i) cash
and cash equivalents set forth on Borrower’s balance sheet as of the end of such fiscal quarter (as
reduced by “cut” but “uncashed” checks reflected as overdrafts in Borrower’s general ledger as of
such fiscal quarter-end) minus (ii) $10,000,000 and (b) 25% of (i) the lowest amount of Excess Cash
(as defined below) available to Borrower as of the last business day of any month in the next
twelve (12) month period following such fiscal quarter minus (ii) $10,000,000; provided that the
aggregate principal amount of the Indebtedness to be repaid pursuant to this Section 7 at any time
shall be determined and approved by the disinterested members of Borrower’s board of directors,
whose determination shall be final and binding. For purposes of this Section 7, “Excess Cash”
shall mean the excess cash forecasted to be available to Borrower as of the last business day of
each month of the relevant rolling twelve month period following each fiscal quarter-end, as set
forth in Borrower’s business plan for such period, which business plan shall have been prepared in
a manner consistent with past practice.
8. Costs and Expenses. Borrower shall pay on demand all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of investigation,
incurred by Lender as a result of any Event of Default or in connection with efforts to collect any
amount due under this Note, or to enforce the provisions of the Loan Agreement, including those
incurred in post-judgment collection efforts and in any bankruptcy proceedings (including any
action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial
foreclosure proceeding.
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9. Forbearance. Any delay by Lender in exercising any right or remedy under this Note
or the Loan Agreement or otherwise afforded by applicable law, shall not be a waiver of or preclude
the exercise of that or any other right or remedy. The acceptance by Lender of any payment after
the due date of such payment, or in an amount which is less than the required payment, shall not be
a waiver of Lender’s right to require prompt payment when due of all other payments or to exercise
any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of
any remedy for Borrower’s obligations under this Note shall not constitute an election by Lender of
remedies so as to preclude the exercise of any other right or remedy available to Lender.
10. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity, presentment for
payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness
are waived by Borrower, and all endorsers and guarantors of this Note and all other third
party obligors.
11. Loan Charges. Borrower and Lender intend at all times to comply with the laws of
the State of New York governing the maximum rate or amount of interest payable on or in connection
with this Note and the Indebtedness (or applicable United Sates federal law to the extent that it
permits Lender to contract for, charge, take, reserve, or receive a greater amount of interest than
under New York law). If the applicable law is ever judicially interpreted so as to render usurious
any amount payable under this Note, or contracted for, charged, taken, reserved or received with
respect to the Indebtedness, or of acceleration of the maturity of this Note, or if any prepayment
by Borrower results in Borrower having paid any interest in excess of that permitted by any
applicable law, then Borrower and Lender expressly intend that all excess amounts collected by
Lender shall be applied to reduce the unpaid principal balance of this Note (or, if this Note has
been or would thereby be paid in full, shall be refunded to Borrower), and the provisions of this
Note and the Loan Agreement immediately shall be deemed reformed and the amounts thereafter
collectible under this Note or the Loan Agreement reduced, without the necessity of the execution
of any new documents, so as to comply with any applicable law, but so as to permit the recovery of
the fullest amount otherwise payable under this Note or the Loan Agreement. The right to
accelerate the maturity of this Note does not include the right to accelerate any interest which
has not otherwise accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of acceleration. All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the Indebtedness shall, to the extent permitted by any
applicable law, be amortized, prorated, allocated and spread throughout the full term of the
Indebtedness until payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the applicable usury ceiling. Notwithstanding any provision contained
in this Note that permits the compounding of interest, including any provision by which any accrued
interest is added to the principal amount of this Note, the total amount of interest that Borrower
is obligated to pay and Lender is entitled to receive with respect to the Indebtedness shall not
exceed the amount calculated on a simple (i.e. noncompounded) interest basis at the maximum
rate on principal amounts actually advanced to or for the account of Borrower, including all
current and prior advances.
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12. Commercial Purpose. Borrower represents that the Indebtedness is being incurred
by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for
personal, family or household purposes.
13. Counting of Days. Except where otherwise specifically provided, any reference in
this Note to a period of “days” means calendar days, not Business Days.
14. Governing Law. This Note shall be governed by the laws of the State of New York.
15. Captions. The captions of the sections of this Note are for convenience only and
shall be disregarded in construing this Note.
16. Notices. All notices, demands and other communications required or permitted to
be given by Lender to Borrower pursuant to this Note shall be given by registered or certified
mail, or by overnight delivery service to Borrower at the address set forth below, and to the
Lender at the address set forth in Section 2.
17. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising
under or in relation to this Note shall be litigated exclusively in New York, New York (the
“Jurisdiction”). The state and federal courts and authorities with jurisdiction in the
Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in
relation to this Note. Borrower irrevocably consents to service, jurisdiction, and venue of such
courts for any such litigation and waives any other venue to which it might be entitled by virtue
of domicile, habitual residence or otherwise.
18. Replacement Note. This Note amends, supercedes and replaces in its entirety that
certain $10,000,000.00 Promissory Note from Borrower to Lender dated January 7, 2008 (the “Original
Note”), and all amounts outstanding thereunder are now owed and outstanding under this Note, with
all accrued interest and other non-principal amounts outstanding under the Original Note as of the
date hereof being allocated to this Note.
19. Waiver. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREE NOT TO ELECT
A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE
PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVE ANY RIGHT TO TRIAL
BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE.
THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY,
WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
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In Witness Whereof, Borrower has signed and delivered this Note, or has caused this
Note to be signed and delivered by its duly authorized representative, on the 27th day of March,
2008.
| Borrower: | ||||||
| Tarragon Corporation | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxxxxxx
|
|||||
| Name: Xxxxxxx X. Xxxxxxxxxx | ||||||
| Title: Executive Vice President | ||||||
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