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EXHIBIT 10.2
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
SENIOR SUBORDINATED CONVERTIBLE UNSECURED NOTE
OF
HENCIE, INC.
$1,400,000 September 22, 2000
FOR VALUE RECEIVED, on or before November 21, 2001 ("Maturity Date"),
Hencie, Inc., a Delaware corporation (hereinafter referred to as "Borrower" or
"Company"), promises to pay to the order of Edge Technology Group, Inc., a
Delaware corporation and a lender ("Lender" or "Holder") at the offices of
Lender at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal
amount equal to ONE MILLION FOUR HUNDRED THOUSAND AND 00/100 DOLLARS
($1,400,000.00) (the "Principal Amount"), together with interest on the
Principal Amount under this Senior Subordinated Convertible Unsecured Note
("Note") at a fixed rate per annum equal to the lesser of (a) the Maximum Rate
(as hereinafter defined) or (b) eight percent (8%) (the "Contract Rate"),
calculated on the basis of actual days elapsed but computed as if each year
consisted of 360 days. 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. If applicable law ceases to
provide for such a maximum rate of interest, the Maximum Rate shall be equal to
eighteen percent (18%) per annum. The outstanding principal balance of this
Note, together with all accrued but unpaid interest, shall be due and payable on
the Maturity Date.
The following is a statement of the rights of Holder and the conditions
to which this Note is subject, and to which Holder, by acceptance of this Note,
agrees:
1. Subordination.
This Note and all indebtedness represented hereby shall be expressly
subordinate to: (i) any indebtedness of HCSI (as hereinafter defined) to Bank of
America, N.A.; and (ii) any indebtedness of Borrower for money borrowed which
has been afforded a security interest under applicable law (collectively,
"Senior Indebtedness"). If there shall occur any receivership, insolvency,
assignment for the benefit of creditors, bankruptcy, reorganization, or
arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of HCSI or
the Company: (i) no amount shall be paid by HCSI or the Company in respect of
the principal of, interest on or other amounts due with respect to this Note at
the time outstanding, unless and until the principal of and interest on the
Senior Indebtedness then outstanding shall be paid in full; and (ii) no claim or
proof of claim shall be filed with HCSI or the Company by or on behalf of Holder
of this Note which shall assert any right to receive any payments in respect of
the principal of and interest on this Note except subject to the payment in full
of the principal of and interest on all of the Senior Indebtedness then
outstanding.
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Holder, by its acceptance hereof, shall be deemed to acknowledge and agree that
the foregoing subordination provisions are, and are intended to be, an
inducement to and a consideration of each holder of Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after the creation of
the indebtedness evidenced by this Note, and each such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and holding, or in continuing to hold, such Senior
Indebtedness.
2. Penalty Interest.
Upon an Event of Default, including failure to pay upon final maturity,
the Lender at its option, may, if permitted under applicable law, do one or both
of the following: (a) increase the Contract Rate to eighteen percent (18%) per
annum, and (b) add any unpaid accrued interest to principal and such sum will
bear interest therefrom until paid at the rate provided in this Note (including
any increased Contract Rate).
3. Prepayment.
Borrower may from time to time after the expiration of the Conversion
Period (as hereinafter defined) prepay all or any portion of the principal of
this Note without premium or penalty. 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, delinquency charges and other charges; provided, however, that
upon any delinquency or other Event of Default, the Lender reserves the right to
apply payments among principal, interest, delinquency charges, collection costs
and other charges, at its sole discretion. All prepayments shall be applied to
the indebtedness owing hereunder in such order and manner as the Lender may from
time to time determine in its sole discretion. All payments and prepayments 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 the
Lender indicated above, or such other place as the holder of this Note 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 the Lender
shall be prima facie evidence of all outstanding principal of and accrued and
unpaid interest on this Note.
4. Events of Default.
Borrower agrees that upon the occurrence of any one or more of the
following events of default ("Event of Default"):
(a) failure of Borrower to pay any installment of principal of or
interest on this Note or on any other indebtedness of Borrower to the
Lender when due;
(b) the bankruptcy or insolvency of, the assignment for the
benefit of creditors by, or the appointment of a receiver for any of
the property of, or the liquidation, termination, dissolution or death
or legal incapacity of, any party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise; or
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(c) failure of Borrower to comply with the covenants contained in
Section 9 ("Negative Covenants") of this Note.
the holder of this Note may, at its option, and without further notice or
demand: (i) declare the outstanding principal balance of and accrued but unpaid
interest on this Note at once due and payable; (ii) refuse to advance any
additional amounts under this Note; (iii) foreclose all liens securing payment
of this Note; (iv) pursue any and all other rights, remedies and recourses
available to the holder hereof, including but not limited to any such rights,
remedies or recourses under this Note, at law or in equity; or (v) pursue any
combination of the foregoing.
The failure to exercise the option to accelerate the maturity of this
Note or any other right, remedy or recourse available to the holder hereof upon
the occurrence of an Event of Default hereunder shall not constitute a waiver of
the right of the holder of this Note to exercise the same at that time or at any
subsequent time with respect to such Event of Default or any other Event of
Default. The rights, remedies and recourses of the holder hereof, as provided in
this Note, shall be cumulative and concurrent and may be pursued separately,
successively or together as often as occasion therefore shall arise, at the sole
discretion of the holder hereof. The acceptance by the holder hereof of any
payment under this Note which is less than the payment in full of all amounts
due and payable at the time of such payment shall not: (i) constitute a waiver
of or impair, reduce, release or extinguish any right, remedy or recourse of the
holder hereof, or nullify any prior exercise of any such right, remedy or
recourse; or (ii) impair, reduce, release or extinguish the obligations of any
party liable under this Note as originally provided herein.
5. Usury.
This Note is intended to be performed in accordance with, and only to
the extent permitted by, all applicable usury laws. If any provision hereof or
the application hereof to any person or circumstance shall, for any reason and
to any extent, be invalid or unenforceable, neither the application of such
provision to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected thereby and it
shall be enforced to the greatest extent permitted by law. It is expressly
stipulated and agreed to be the intent of the holder hereof to at all times
comply with the usury and other applicable laws now or hereafter governing the
interest payable on the indebtedness evidenced by this Note. If the applicable
law is ever revised, repealed or judicially interpreted so as to render usurious
any amount called for under this Note, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by this Note, or
if exercise of the option to accelerate the maturity of this Note, or if any
prepayment by Borrower results in Borrower having paid any interest in excess of
that permitted by law, then it is the express intent of Borrower and the Lender
that all excess amounts theretofore collected by the Lender be credited on the
principal balance of this Note (or, if this Note and all other indebtedness
arising hereunder have been paid in full, refunded to Borrower), and the
provisions of this Note immediately be deemed reformed and the amounts
thereafter collectable hereunder and thereunder reduced, without the necessity
of the execution of any new document, so as to comply with the then applicable
law, but so as to permit the recovery of the fullest amount otherwise called for
hereunder or thereunder. All sums paid, or agreed to be paid, by Borrower for
the use, forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to the Lender under this Note shall, to the maximum
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full
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term of such indebtedness until payment in full so that the rate or amount of
interest on account of such indebtedness does not exceed the usury ceiling from
time to time in effect and applicable to such indebtedness for so long as such
indebtedness is outstanding. To the extent federal law permits the Lender to
contract for, charge or receive a greater amount of interest, the Lender will
rely on federal law instead of the Texas Finance Code, as supplemented by Texas
Credit Title, for the purpose of determining the Maximum Rate. Additionally, to
the maximum extent permitted by applicable law now or hereafter in effect, the
Lender may, at its option and from time to time, implement any other method of
computing the Maximum Rate under the Texas Finance Code, as supplemented by
Texas Credit Title, or under other applicable law, by giving notice, if
required, to Borrower as provided by applicable law now or hereafter in effect.
Notwithstanding anything to the contrary contained herein, it is not the
intention of the Lender to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
In no event shall Chapter 346 of the Texas Finance Code (which
regulates certain revolving loan accounts and revolving tri-party accounts)
apply to this Note. To the extent that Chapter 303 of the Texas Finance Code, is
applicable to this Note, the "weekly ceiling" specified in such Chapter 303 is
the applicable ceiling; provided that, if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.
6. Attorneys Fees.
If this Note is placed in the hands of an attorney for collection, or
is collected in whole or in part by suit or through probate, bankruptcy or other
legal proceedings of any kind, Borrower agrees to pay, in addition to all other
sums payable hereunder, all costs and expenses of collection, including but not
limited to reasonable attorneys' fees.
7. Waiver of Presentment.
Borrower waives presentment for payment, notice of nonpayment, protest,
demand, notice of protest, notice of intent to accelerate, notice of
acceleration and dishonor, diligence in enforcement and indulgences of every
kind and without further notice hereby agree to renewals, extensions, exchanges
or releases of collateral, taking of additional collateral, indulgences or
partial payments, either before or after maturity.
8. Conversion.
(a) Voluntary Conversion by Holder. At any time commencing with the
date of this Note and ending at 5:00 p.m. Dallas, Texas time on November 22,
2000 (such time period, the "Conversion Period"), the Holder shall have the
unqualified right, at the Holder's sole discretion, to convert the aggregate
outstanding principal and interest under this Note, in accordance with the
provisions of Section 8(b) below, into duly issued, fully paid and nonassessable
shares of the Series A Convertible Preferred Stock, $.01 par value per share, of
Hencie, Inc., a Delaware corporation (the "Series A Preferred"). The number of
shares of Series A Preferred Stock into which this Note may be converted shall
be 885,543.
(b) Conversion Procedure. Before Holder shall be entitled to convert
the unpaid principal and interest under this Note into shares of Series A
Preferred pursuant to Section 8(a), Holder shall
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surrender this Note, duly endorsed, at the office of the Company and shall give
written notice by registered or certified mail, postage prepaid, to the Company
at its principal corporate office, of the election to convert the same pursuant
to Section 8(a), and shall state therein the name or names in which the
certificate or certificates for shares of Series A Preferred are to be issued.
The Company shall, promptly thereafter, issue and deliver at such office to
Holder of this Note a certificate or certificates representing 885,543 shares of
Series A Preferred (bearing such legends as are required by any applicable
agreement in effect for the Company and applicable state and federal securities
laws in the opinion of counsel to the Company). The conversion shall be deemed
to have been effected immediately prior to the close of business on the date of
the surrender of this Note, and the person or persons entitled to receive the
shares of Series A Preferred upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Series A Preferred as
of such date.
(c) Reservation of Series A Preferred Issuable Upon Conversion. The
Company shall at all times reserve and keep available out of its authorized but
unissued shares of Series A Preferred, solely for the purpose of effecting the
conversion of this Note, such number of its shares of Series A Preferred as
shall from time to time be sufficient to effect the conversion of this Note.
(d) Automatic Conversion. The aggregate outstanding principal and
interest under this Note shall be automatically converted into 885,543 shares of
Series A Preferred upon the election of Lender to effect the Installment
Payment, as defined in the Investment Agreement of even date herewith by and
among the Company, Lender and Khan.
9. Negative Covenants. Borrower hereby expressly covenants and agrees
that, prior to the expiration of the Conversion Period, Borrower shall not: (i)
issue any capital stock, any debt securities or any derivative securities of any
nature whatsoever; or (ii) incur any indebtedness except in the ordinary course
of conduct of the business of the Company.
10. Notices.
Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered or mailed by registered or certified mail, postage prepaid,
or by recognized overnight courier or personal delivery at the respective
addresses of the parties as set forth in that certain Investment Agreement of
even date herewith by and among the Company, the Lender and ▇▇▇▇ ▇▇▇▇. Any party
hereto may by notice so given change its address for future notice hereunder.
Notice shall conclusively be deemed to have been given when received.
11. Governing Law.
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THIS NOTE HAS BEEN EXECUTED UNDER, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT AS SUCH LAWS ARE
PREEMPTED BY APPLICABLE FEDERAL LAWS.
BORROWER:
HENCIE, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇
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▇▇▇▇ ▇▇▇▇
President
GUARANTY
FOR VALUE RECEIVED, ▇▇▇▇ ▇▇▇▇, an individual residing in the State of
Texas ("Khan"), individually and Hencie Consulting Services, Inc., a Texas
corporation ("HCSI") (Khan and HCSI, collectively hereinafter, the "Guarantors")
hereby jointly and severally guarantee payment of the within Note, according to
the terms thereof, both as to interest and as to principal, and hereby waive
demand, all notices, including notice of intention to accelerate the maturity,
notice of acceleration of maturity, notice of nonpayment, presentment for
payment, protest, notice of protest, suit, diligence and any notice of or
defense on account of the extension of time payments or change in methods of
payments and consent to any and all renewals and extensions in the time of
payment of this Note.
With respect to any form of promissory note or notes issued by either
of the Guarantors or any of their respective affiliates (collectively, the
"Guarantor Group") in favor of ▇▇▇▇ ▇. ▇▇▇▇▇▇ (collectively, the "▇▇▇▇▇▇
Notes"), the Guarantors hereby expressly acknowledge and agree, for themselves
and on behalf of their respective affiliates, that any ▇▇▇▇▇▇ Notes and any and
all indebtedness represented by any ▇▇▇▇▇▇ Notes shall be expressly subordinate
to the indebtedness represented by this Note. If there shall occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization, or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), sale of all or substantially all of the
assets, dissolution, liquidation, or any other marshaling of the assets and
liabilities of any member of the Guarantor Group: (i) no amount shall be paid by
any member of the Guarantor Group in respect of the principal of, interest on or
other amounts due with respect to any ▇▇▇▇▇▇ Notes at the time outstanding,
unless and until the principal of and interest on this Note then outstanding
shall be paid in full; and (ii) no claim or proof of claim shall be filed with
any member of the Guarantor Group by or on behalf of any holder of any ▇▇▇▇▇▇
Notes which shall assert any right to receive any payments in respect of the
principal of and interest on any ▇▇▇▇▇▇ Notes except subject to the payment in
full of the principal of and interest on this Note then outstanding. Any holder
of any ▇▇▇▇▇▇ Notes shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of the Holder of this Note, and the Holder of this Note shall be
deemed conclusively to have relied on such subordination provisions in acquiring
and holding, or in continuing to hold, this Note.
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/s/ ▇▇▇▇ ▇▇▇▇
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▇▇▇▇ ▇▇▇▇, individually
HENCIE CONSULTING SERVICES, INC.,
a Texas corporation
By: /s/ ▇▇▇▇ ▇▇▇▇
Name: /s/ ▇▇▇▇ ▇▇▇▇
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Title: CEO
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