EXHIBIT 10.2
THIS NOTE AND THE SHARES OF PREFERRED STOCK WHICH MAY BE PURCHASED UPON THE
CONVERSION OF THIS NOTE (AND THE SHARES OF COMMON STOCK WHICH MAY BE ISSUED UPON
CONVERSION OF SUCH SHARES OF PREFERRED STOCK) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND THE RULES AND
REGULATIONS THEREUNDER. THE CONVERSION OF THIS NOTE IS SUBJECT TO THE APPLICABLE
REQUIREMENTS OF THE XXXX-XXXXX-XXXXXX ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE
MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT DATED
AS OF DECEMBER ____, 2004, AS AMENDED (THE "SUBORDINATION AGREEMENT") BY AND
AMONG PEQUOT PRIVATE EQUITY FUND III, L.P., AS COLLATERAL AGENT, THE JUNIOR
LENDERS NAMED THEREIN, MTM TECHNOLOGIES, INC. (THE "BORROWER") AND TEXTRON
FINANCIAL CORPORATION (THE "SENIOR LENDER"), TO THE INDEBTEDNESS (INCLUDING
INTEREST) OWED BY THE BORROWER PURSUANT TO THAT CERTAIN AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT DATED AS OF MAY 21, 2004 (THE "LOAN AGREEMENT"), BY
AND AMONG THE BORROWER, SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY
THERETO AND THE SENIOR LENDER, AS SUCH LOAN AGREEMENT HAS BEEN AND HEREAFTER MAY
BE AMENDED, SUPPLEMENTED, RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME
(SUBJECT TO THE TERMS OF THE SUBORDINATION AGREEMENT) AS CONTEMPLATED BY THE
SUBORDINATION AGREEMENT.
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE ARE SUBJECT
TO THE TERMS OF A CERTAIN AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT, DATED
DECEMBER ___, 2004, AMONG THE BORROWER AND CERTAIN STOCKHOLDERS SIGNATORY
THERETO (THE "STOCKHOLDERS' AGREEMENT"). THE STOCKHOLDERS' AGREEMENT CONTAINS
CERTAIN RESTRICTIVE PROVISIONS RELATING TO THE VOTING OF SUCH SECURITIES
(INCLUDING THE GRANT OF AN IRREVOCABLE PROXY RELATIVE TO VOTING MATTERS). A COPY
OF THE STOCKHOLDERS' AGREEMENT IS ON FILE AT THE BORROWER'S PRINCIPAL OFFICES.
UPON WRITTEN REQUEST TO THE BORROWER'S SECRETARY, A COPY OF THE STOCKHOLDERS'
AGREEMENT WILL BE PROVIDED WITHOUT CHARGE TO THE HOLDER HEREOF.
THIS NOTE MAY NOT BE ASSIGNED, NEGOTIATED OR TRANSFERRED EXCEPT AS SET FORTH
HEREIN.
THIS NOTE MAY NOT BE CONVERTED PRIOR TO SHAREHOLDER APPROVAL, AS DESCRIBED
HEREIN.
SECURED SUBORDINATED CONVERTIBLE PROMISSORY NOTE
$____________ _________ ____, 2004
FOR VALUE RECEIVED, the undersigned, MTM Technologies, Inc., a New
York corporation (the "Borrower"), promises to pay to ___________ (the
"Holder"), the principal sum of _______________ ($_________) with interest on
the unpaid balance from the date hereof, at the rate of seven percent (7%) per
annum in lawful money of the United States of America, at __________________, or
at such other place as the Holder may designate in writing. This Note is one of
the secured subordinated convertible promissory notes (collectively, the
"Notes") referred to in, and purchased pursuant to, the Purchase Agreement dated
December __, 2004, among the Borrower and the Purchasers named therein (the
"Purchase Agreement") and evidences a borrowing from the Holder by the Borrower
under the Purchase Agreement. The obligations of the Borrower under this Note
are secured as provided in the Purchase Agreement and the Loan Documents. This
Note is subject to acceleration pursuant to the terms of the Purchase Agreement.
1. Payment of Principal. The principal of this Note shall be due and
payable on demand, which may be given by 66-2/3% of the holders of the Notes to
the Borrower, in writing, at any time following the later of the date that is
(x) 150 days following the date of issuance hereof or (y) if the SEC reviews the
Company's filings seeking Shareholder Approval, 180 days following the date of
issuance hereof (any such date, the "Maturity Date"), specifying the amount of
the outstanding principal sought to be repaid.
2. Payment of Interest.
(a) Interest on this Note shall be due and payable quarterly in arrears
on December 31, March 31, June 30 and September 30 of each calendar year the
Note is outstanding and ending with a final partial quarterly interest payment
on the Maturity Date. The interest accrued on this Note on each such payment
date shall be added to the principal of this Note rather than being paid in cash
prior to the Maturity Date.
(b) All computations of interest payable hereunder shall be made on the
basis of the actual number of days in the period for which such interest is
payable and a year of 365 or 366 days, as applicable.
(c) Notwithstanding any other provision of this Note, to the extent
permitted by applicable law, interest shall be due and payable on any overdue
installment of principal or interest on this Note (including amounts due and
unpaid upon any acceleration of this Note) at a rate equal to the lesser of (i)
twelve percent (12%) and (ii) the maximum rate permitted by applicable law (the
"Maximum Rate"). Notwithstanding anything to the contrary herein, interest that
is accrued and added to the principal amount of this Note pursuant to Section
2(a) hereof shall not be considered overdue unless and until the principal on
this Note is due.
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3. No Prepayment of the Note. The principal of this Note and the interest
accrued and unpaid hereon may not be prepaid without the prior written consent
of each holder of the Notes.
4. Automatic Conversion. On the date of the Shareholders Approval, the
outstanding principal of and accrued and unpaid interest on this Note shall be
automatically converted into that number of fully paid and non-assessable shares
of Borrower's Series _______ Preferred Stock determined by dividing (i) the sum
of the aggregate principal amount of this Note and the interest accrued and
unpaid thereon by (ii) $3.25 (subject to proportional adjustments for preferred
stock splits, preferred stock dividends and the like with respect to the
Borrower's Series _______ Preferred Stock through the time of conversion). This
Note may not be converted prior to Stockholder Approval.
5. No Fractional Shares. No fractional shares of Series _______ Preferred
Stock shall be issued upon conversion of this Note. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Borrower shall (after
aggregating all shares into which the Notes held by each holder could be
converted) pay cash equal to such fraction multiplied by the amount set forth in
Section 4(ii) above at the close of business on the date of conversion.
6. Event of Default; Remedies. Upon the occurrence and during the
continuance of an Event of Default, this Note may be accelerated in the manner
described in the Purchase Agreement and the Holder and the Collateral Agent
shall have all of the rights and remedies provided in the Purchase Agreement and
the Loan Documents.
7. Waiver of Certain Rights. Subject to any applicable notice periods, all
parties to this Note, including Borrower and any sureties, endorsers, or
guarantors, hereby waive protest, presentment, notice of dishonor, and notice of
acceleration of maturity and agree to continue to remain bound for the payment
of principal, interest and all other sums due under this Note notwithstanding
any change or changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any extension or
extensions of time for the payment of principal and interest; and all such
parties waive all and every kind of notice of such change or changes and agree
that the same may be without notice or consent of any of them.
8. Enforcement. The Holder may enforce this Note as described in the
Purchase Agreement.
9. Subordination. Repayment of this Note shall be subordinated to the
extent and in the manner set forth in the Subordination Agreement. The Holder
hereby agrees that it will enter into a subordination agreement with any
permitted Senior Lender selected within 90 days from the date of execution of
the Purchase Agreement in connection with any Senior Credit Facility containing
terms no less favorable, as a whole, to the holders of the Notes than those in
the Subordination Agreement.
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10. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Purchase Agreement.
11. No Shareholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent to or receive notice as a shareholder of the Borrower.
12. Miscellaneous. The following general provisions apply:
(a) This Note, and the obligations and rights of the Borrower and the
Holder hereunder, shall be binding upon and inure to the benefit of the
Borrower, the Holder, and their respective heirs, personal representatives,
successors and assigns. The Holder may transfer this Note, the shares of Series
_______ Preferred Stock issuable upon conversion of this Note, and the shares of
Common Stock issuable upon conversion of such shares of Series _______ Preferred
Stock, and the rights and obligations attached thereto, so long as any such
transfer(s) comply with applicable securities laws and the terms of that certain
Amended and Restated Shareholders Agreement, dated December ___, 2004, among the
Borrower and the other parties named therein, as amended. Notwithstanding
anything contained in this Note to the contrary, the Borrower may not assign any
of its obligations under this Note without the prior written consent of the
holders of 66 2/3% of the then outstanding aggregate principal amount of the
Notes.
(b) No amendment or waiver of any provision of the Note, nor consent to
any departure by a party herefrom, shall in any event be effective unless the
same shall be in writing and signed by the holders holding 66 2/3% of the then
outstanding aggregate principal amounts of the Notes. Any amendment, waiver or
consent so made or effected shall be binding upon all of the holders of the
Notes; provided, however, the principal amount of this Note shall not be reduced
or the collateral for this Note released without the prior written consent of
the holders of at least 75% of the then outstanding aggregate principal amounts
of the Notes and, provided further, that the Borrower shall provide all holders
of Notes with amended versions of their respective Notes. Any principal so
reduced shall be so reduced proportionally for all such holders of the Notes.
(c) All payments shall be made in such coin and currency of the United
States of America as at the time of payment shall be legal tender therein for
the payment of public and private debts.
(d) All notices, requests, consents and demands hereunder shall be made
in writing in the manner described in the Purchase Agreement.
(e) Whenever possible, each provision of this Note will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Note is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, but this Note will be reformed, construed and enforced in such
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jurisdiction to the greatest extent possible to carry out the intentions of the
parties hereto.
(f) This Note shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of New
York. Each of the parties hereto hereby irrevocably consents to the
(non-exclusive) jurisdiction of the courts of the State of New York and of any
Federal court located therein in connection with any suit, action or other
proceeding arising out of or relating to this Note and waives any objection to
venue in the State of New York.
(g) Subject to the Subordination Agreement, recourse under this Note
shall be solely as provided in the Purchase Agreement and the Loan Documents and
in no event to the officers, directors or shareholders of the Borrower.
(h) No provision in this Note, or in any instrument or any other
document evidencing the obligations hereunder, executed by the Borrower or any
guarantor, endorser or other party now or hereafter becoming liable for payment
of this Note, shall require the payment or permit the collection of interest in
excess of the Maximum Rate. If any excess of interest in such respect is
provided for herein or in any such instrument, or other document, the provisions
of this paragraph shall govern, and neither the Borrower nor any guarantor,
endorser or other party shall be obligated to pay the amount of such interest to
the extent that it is in excess of the Maximum Rate. The intention of the
Borrower and the Holder being to conform strictly to any applicable federal or
state usury laws now in force, all promissory notes, instruments and other
documents executed by the Borrower or any guarantor, endorser or other party
evidencing the obligations under this Note shall be held subject to reduction to
the amount allowed under said usury laws as now or hereafter construed by the
courts having jurisdiction.
Signature on the following page
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IN WITNESS WHEREOF, the Borrower has caused this instrument to be
executed in its corporate name by a duly authorized officer, by order of its
Board of Directors as of the day and year first above written.
MTM TECHNOLOGIES, INC.
By: ___________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
