Exhibit 10.2
THIS INSTRUMENT IS SUBJECT TO THE SUBORDINATION AGREEMENT DATED AS OF
MAY _, 2006, AMONG TECHNOLOGY INVESTMENT CAPITAL CORP., THE MAKER HEREOF,
CERTAIN SUBSIDIARY GUARANTORS OF THE MAKER HEREOF, XXXXXXX INVESTMENTS LLC.,
PEQUOT HEALTHCARE FUND, L.P., PEQUOT HEALTHCARE OFFSHORE FUND, INC., PREMIUM
SERIES PCC LIMITED - CELL 32, PEQUOT DIVERSIFIED MASTER FUND, LTD., PEQUOT
HEALTHCARE INSTITUTIONAL FUND, L.P., NORTH SOUND LEGACY INSTITUTIONAL FUND
LLC, AND NORTH SOUND LEGACY INTERNATIONAL LTD. , WHICH, AMONG OTHER THINGS,
CONTAINS PROVISIONS SUBORDINATING THE OBLIGATIONS OF THE MAKER OF THIS
INSTRUMENT TO THE PAYEE HEREOF TO SUCH MAKER'S OBLIGATIONS TO THE HOLDERS OF
THE SENIOR INDEBTEDNESS (AS DEFINED IN SAID SUBORDINATION AGREEMENT), TO
WHICH PROVISIONS EACH HOLDER OF THIS INSTRUMENT, BY ACCEPTANCE HEREOF, AGREES.
SUBORDINATED PROMISSORY NOTE
$4,838,710 May 9, 2006
FOR VALUE RECEIVED, the undersigned, XXXXXXX.XXX INC., a Delaware
corporation (the "Debtor"), hereby promises to pay to the order of Xxxxxxx
Investments LLC, Pequot Healthcare Fund, L.P., Pequot Healthcare Offshore Fund,
Inc., Premium Series PCC Limited - Cell 32, Pequot Diversified Master Fund,
Ltd., Pequot Healthcare Institutional Fund, L.P., North Sound Legacy
Institutional Fund LLC and North Sound Legacy International Ltd. (collectively
"Holders"), the sum of FOUR MILLION EIGHT HUNDRED THIRTY EIGHT THOUSAND AND
SEVEN HUNDRED TEN DOLLARS ($4,838,710) as set forth on Exhibit A hereto (such
principal amount, together with all accrued but unpaid interest the "Debt"), all
as provided in this subordinated promissory note (the "Note"). Capitalized terms
used but not otherwise defined herein shall have the respective meanings
ascribed thereto in the Loan Agreement (as defined below).
1. Interest; Principal Amount and Payment; Fees. The Debt shall bear
interest on the unpaid principal balance thereof outstanding from time to time
and until such principal balance is repaid in full, at an annual rate equal to
eighteen and one half percent (18.5%) per annum compounded annually; provided,
however, that in the event that an Event of Default shall have occurred and be
continuing (or would have occurred and been continuing but for the proviso to
the definition of the term "Event of Default" set forth in Section 4 hereof),
such rate shall be 20.5% per annum. Interest shall accrue in arrears and
together with the unpaid principal balance of this Note shall be due and payable
in full on the Maturity Date. For the
purposes hereof, the term "Maturity Date" shall mean the earliest of (i) July 1,
2009, (ii) the first date on which the Debtor or any of its subsidiaries shall
consummate a Qualified Financing, and (iii) the first date on which any
mandatory prepayment is payable under Section 1.4 of the Loan Agreement (as
hereinafter defined) or there shall occur any sale of all or substantially all
of the assets of the Debtor or its subsidiaries, or merger, consolidation or
other business combination involving the Debtor or its subsidiaries if all
Senior Indebtedness (as defined in the Subordination Agreement referred to
below) is first paid in full in cash in connection with any such transaction.
For the purposes hereof, the term "Qualified Financing" shall mean either (x)
any public or private placement, or series of related placements, of shares of
common stock of the Debtor or any other equity security of the Debtor that is
convertible into or exchangeable for common stock of the Debtor, or any right,
warrant or option to acquire any such common stock or any such convertible or
exchangeable equity security which provides gross proceeds to the Debtor of at
least $16,000,000, if and only if at the time of such Qualified Financing either
(A) all Senior Indebtedness shall have previously been paid in full in cash or
shall first be paid in full in cash in connection with such transaction, or (B)
(i) all amounts received by the Holder in payment of amounts payable under this
Note or the other Financing Documents are immediately remitted to the Debtor as
consideration for the purchase by the Holder of such common stock, convertible
or exchangeable equity securities or rights, warrants or options and (ii) the
Debtor shall not be subject to any obligation, absolute or contingent, to redeem
or repurchase any of such common stock, convertible or exchangeable equity
securities or rights, warrants or options at any time prior to the final
maturity date of the Senior Indebtedness, or (y) provided that all Senior
Indebtedness shall have previously been paid in full in cash or shall first be
paid in full in cash in connection with such transaction, the incurrence, or
series of related incurrences, by the Debtor or any of its subsidiaries of any
Indebtedness (as defined in that certain Note and Warrant Purchase Agreement
between Technology Investment Capital Corp., Borrower, et al. dated March 31,
2004, as in effect on the date hereof) with gross proceeds to the Debtor or such
subsidiary of at least $16,000,000.
Under no circumstances shall the Debtor be charged more than the highest
rate of interest that lawfully may be charged by the Holders and paid by the
Debtor on the Debt. It is, therefore, agreed that if at any time interest on the
Debt would otherwise exceed the highest lawful rate, only such highest lawful
rate will be paid by the Debtor. Should any amount be paid by the Debtor in
excess of such highest lawful amount, such excess shall be deemed to have been
paid in reduction of the principal sum due hereunder.
In the event that the holders of Senior Indebtedness shall receive any fee
or charge (not constituting a part of the principal amount of the Senior
Indebtedness or interest accrued thereon) in connection with any waiver by such
holders of any Event of Default (as defined in the Senior Loan Agreement
referred to in the Subordination Agreement referred to below), then the Holders
shall be entitled to receive (pro rata in accordance with their respective
percentages set forth in Exhibit A hereto) an amount equal in the aggregate to
the product of the amount of such fee or charge multiplied by a fraction, the
numerator of which is equal to the outstanding principal amount of this Note and
the denominator of which is equal to the then outstanding principal amount of
the Senior Indebtedness, provided, that, in the event that such payment shall be
made in cash (rather than in the form of equity securities or instruments
convertible into or exchangeable for equity securities) such amount shall not be
paid until the Maturity Date.
2. Prepayment. The Debt may not be prepaid at any time, in whole or in
part, except in accordance with the Loan Agreement, subject in all cases to the
Subordination Agreement (as hereinafter defined). All payments on this Note
shall be allocated among the Holders in their respective portions of this Note
as set forth in Exhibit A hereto or as otherwise agreed by the Holders.
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3. Loan Agreement. This Note is issued pursuant to and is governed by the
terms of that certain Loan Agreement of even date herewith between the Holders
and the Debtor (as amended from time to time, the "Loan Agreement").
4. Defaults. Each of the following events shall constitute a default under
this Note (each, an "Event of Default"), provided that no such event (other than
the failure of the Debtor to pay in full on or prior to July 1, 2009 the
principal amount of the Debt, together with all interest accrued thereon and all
other amounts then due hereunder and under the other Financing Documents) shall
be deemed to be or to result in a default or an Event of Default hereunder or
under any of the other Financing Documents at any time prior to the date on
which all of the Senior Indebtedness (as defined in the Subordination Agreement)
shall be indefeasibly paid in full in cash:
(a) any default (whether in whole or in part) shall occur in the
payment of any amount payable under this Note;
(b) the occurrence of any Event of Default under the Loan Agreement;
(c) the Debtor or any Guarantor shall become unable, fail generally
or admit in writing its inability to pay its debts as they become due;
(d) the Debtor or any Guarantor shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (e) of this Section 4, (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Debtor or any Guarantor or for all or a substantial
part of its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;
(e) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Debtor or any Guarantor or its debts, or of all or a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Debtor or any Guarantor or for all or a substantial
part of its assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;
(f) the Debtor or any Guarantor dissolves, liquidates, winds-up, or
sells or otherwise disposes of all or substantially all of its business or
assets;
(g) any event or condition shall occur that results in any
Indebtedness of the Debtor or any Guarantor exceeding in the aggregate $500,000
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any such Indebtedness or any trustee or agent on its or their
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behalf to cause any such Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(h) one or more judgments for the payment of money in an aggregate
amount in excess of $500,000 shall be rendered against the Debtor or any
Guarantor, or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of the Debtor or any Guarantor to enforce any such
judgment; or
(i) any Guaranty of a Guarantor ceases to be in full force and
effect or any Guarantee of a Guarantor is declared to be null and void and
unenforceable or any Guarantee of a Guarantor is found to be invalid or any
Guarantor denies its liability under its Guarantee.
5. Remedies upon an Event of Default.
(a) If any Event of Default described in clause (d), (e) or (f) of
Section 4 shall have occurred (taking into account all grace periods), the
principal on and under the this Note then outstanding, together with accrued
interest thereon and all fees and other obligations of the Debtor accrued
hereunder and under the other Financing Documents, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Debtor and the Guarantors.
(b) If any other Event of Default described in Section 4 shall have
occurred (which, for clarity, is after taking into account all grace periods set
forth in Section 4), and at any time thereafter during the continuance of such
Event of Default, the Majority Lenders may, by notice to the Debtor, declare the
principal on and under this Note to be due and payable in whole, and thereupon
the principal on and under this Note, together with accrued interest thereon and
all fees and other obligations of the Debtor accrued hereunder and under the
other Financing Documents, shall become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Debtor and the Guarantors.
(c) No course of dealing and no delay on the part of any Holder in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such Holder's rights, powers or remedies. No right, power or
remedy conferred by this Note or by any other Financing Document upon any Holder
shall be exclusive of any other right, power or remedy referred to herein or
therein or now or hereafter available at law, in equity, by statute or otherwise
(d) The Debtor will deliver written notice of the occurrence of any
Event of Default under this Note or any other Financing Document within three
(3) business days following the occurrence of such Event of Default.
6. Subordination of Principal and Interest. Notwithstanding anything to
the contrary contained in this Note, the Debtor and the Holders agree that the
indebtedness evidenced by this Note and all payments of principal, interest and
all other amounts due under this Note are expressly subordinated and junior in
right of payment in full of all indebtedness in favor of Technology Investment
Capital Corp. upon the terms and conditions set forth in, the
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Subordination Agreement dated the date hereof by and among Technology Investment
Capital Corp., the Holders, the Debtor and all subsidiaries of the Debtor which
are executing guaranties of the obligations incurred hereunder (the
"Subordination Agreement"), and all rights and remedies of the Holders hereunder
or under the other Financing Documents or at law or in equity shall be subject
in all respects to the provisions of the Subordination Agreement until all
Senior Indebtedness (as therein defined) shall have been indefeasibly paid in
full in cash.
7. Obligations Absolute. The Debtor acknowledges that this Note and the
Debtor's obligations under this Note are and shall at all times continue to be
absolute and unconditional in all respects, and shall at all times be valid and
enforceable irrespective of any other agreement or circumstances of any nature
whatsoever that might otherwise constitute a defense to this Note or the
obligation of the Debtor under this Note. This Note sets forth the entire
agreement and understanding of the Holders and the Debtor, and the Debtor
absolutely, unconditionally and irrevocably waives any and all right to assert
any defense, setoff, counterclaim or crossclaim of any nature whatsoever with
respect to this Note or the obligations of the Debtor under this Note in any
action or proceeding brought by the Holders to collect the indebtedness
evidenced hereby, or any portion thereof.
8. Notices. All notices or other communications to be given hereunder
shall be in writing and sent in accordance with the Loan Agreement.
9. Costs and Expenses. The Debtor shall be responsible to pay or reimburse
any and all reasonable costs and expenses incurred by the Holders in connection
with the enforcement and collection of this Note. Such payment shall be due and
payable on the Maturity Date or on any date that the Debtor satisfies its
payment obligations hereunder.
10. Amendment. No provision of this Note may be changed, modified, waived
or released, unless it is in writing and signed by the Debtor and the Holders.
11. Waivers. Presentment for payment, notice of dishonor, protest and
notice of protest are hereby each waived by the Debtor. Any other waiver or
consent respecting this Note shall be effective only if in writing and signed by
the Holders and then only in the specific instance and for the specific purpose
for which given. No such other waiver or consent shall be deemed, regardless of
frequency given, to be a further or continuing waiver or consent. The failure or
delay of the Holders at any time or times to require performance of, or to
exercise its rights with respect to, any term or provision of this Note in no
manner shall affect its right at a later time to enforce any such term or
provision. No notice to or demand on the Debtor in any case shall entitle such
party to any other or further notice or demand. All rights, powers, privileges,
remedies and other interests of the Holders under this Note and applicable law
are cumulative and not alternatives.
12. Venue. DEBTOR IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST IT UNDER, ARISING OUT OF OR IN ANY MANNER RELATING TO THIS NOTE OR THE
OTHER FINANCING DOCUMENTS, MAY BE BROUGHT IN ANY COURT OF THE STATE OF NEW YORK
LOCATED IN NEW YORK, NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK. DEBTOR, BY THE EXECUTION AND DELIVERY OF THIS
NOTE, EXPRESSLY AND IRREVOCABLY ASSENTS AND
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SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR
PROCEEDING, AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT,
SUMMONS, NOTICE OR OTHER PROCESS RELATING TO SUCH ACTION OR PROCEEDING BY
DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED FOR IN THIS
NOTE. DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY
SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. DEBTOR SHALL NOT BE
ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR ALLOWED
UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE
IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW YORK. NOTHING IN THIS
NOTE SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF HOLDERS
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST DEBTOR IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
13. Governing Law. This Note has been executed, delivered and accepted in
the State of New York and shall be construed in accordance with and governed by
the internal laws of the State of New York.
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IN WITNESS WHEREOF, the Debtor has executed and delivered this
Subordinated Promissory Note as of the date first written above.
XXXXXXX.XXX INC.
By: /s/ Xxxxxxx Xxxxxxxx
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Name: Xxxxxxx Xxxxxxxx
Title: Chief Executive Officer/Chairman
Exhibit A
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Name Amount Percentage
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Xxxxxxx Investments LLC $ 1,075,269 22.2222%
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Pequot Healthcare Fund, L.P. $ 675,077 13.95%
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Pequot Healthcare Offshore Fund, Inc. $ 628,087 12.98%
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Premium Series PCC Limited - Cell 32 $ 116,578 2.41%
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Pequot Diversified Master Fund, Ltd. $ 70,664 1.46%
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Pequot Healthcare Institutional Fund, L.P. $ 122,497 2.53%
--------------------------------------------------------------------------------
North Sound Legacy Institutional Fund LLC $ 602,151 12.4444%
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North Sound Legacy International Ltd. $ 1,548,387 32.%
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