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THIS INSTRUMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THAT CERTAIN
SUBORDINATION AND INTERCREDITOR AGREEMENT DATED AS OF SEPTEMBER 25, 1997, BY AND
BETWEEN SOLO SERVE CORPORATION, SANWA BUSINESS CREDIT CORPORATION, XXXXXXX
XXXXXX AND THE XXXXXX FAMILY TRUST AND THIS INSTRUMENT IS SUBORDINATE IN RIGHT
OF PAYMENT TO THE SENIOR SECURED OBLIGATIONS (AS SUCH TERM IS DEFINED IN SAID
AGREEMENT).
SUBORDINATED PROMISSORY NOTE
$400,000.00 San Antonio, Texas
September 25,1997
FOR VALUE RECEIVED, SOLO SERVE CORPORATION, a Delaware corporation
("Maker"), hereby unconditionally promises to pay to the order of XXXXXXX
XXXXXX ("Payee"), as hereinafter provided, the principal amount of FOUR HUNDRED
THOUSAND AND NO/100 DOLLARS ($400,000.00), together with interest on the unpaid
principal balance from time to time outstanding at the lesser of (i) the
Applicable Rate (as defined herein) or (ii) the Maximum Rate (as defined
herein). All past due principal hereof and accrued unpaid interest thereon
shall bear interest from the maturity thereof until paid at the Maximum Rate.
Interest shall be calculated on the basis of a 365 or 366 day calendar year, as
the case may be.
For purposes hereof, "Applicable Rate" shall mean, at any time, the
rate of interest per annum equal to the sum of the Prime Rate (as defined
herein) in effect from day to day plus one percent (1%). "Prime Rate" shall
mean the highest prime rate of interest quoted, from time to time, by The Wall
Street Journal as the "base rate on corporate loans at large U.S. money center
commercial banks"; provided, however, that in the event The Wall Street Journal
ceases quoting a prime rate of the type described, "Prime Rate" shall mean the
highest per annum rate of interest quoted as the "Bank Prime Loan" rate for
"This week" in Statistical Release H.15(519) published from time to time by the
Board of Governors of the Federal Reserve System. The Prime Rate shall change
effective on the date of the publication of any change in the applicable index
by which such "Prime Rate" is determined.
"Maximum Rate" shall mean the maximum lawful rate of interest per
annum which may be contracted for, charged, taken, received or reserved by
Payee in accordance with the applicable laws of the State of Texas (or
applicable United States Federal Law to the extent that it permits Payee to
contract for, charge, take, receive or reserve a greater amount of interest
under Texas laws).
This Note shall be repaid as follows:
(a) Interest, calculated on a daily basis, shall be
payable monthly commencing on the first day of November, 1997, and
continuing on the first day of each calendar month thereafter until
October 31, 2002 (the "Maturity Date").
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(b) The outstanding principal balance hereof and any and
all accrued but unpaid interest thereon shall be due and payable in
full on the Maturity Date or upon earlier maturity hereof, whether by
acceleration or otherwise.
Payments of principal and interest shall be made in lawful money of
the United States of America by wire transfer of immediately available funds or
cash or check at [address] or at such other place as Payee shall designate to
Maker in writing.
Any check, draft, money order or other instrument given in payment of
all or any portion hereof may be accepted by Payee and handled in collection in
the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
The failure of Maker to make any payment required hereunder when due
shall constitute an Event of Default hereunder. Maker's failure to make any
payment required by that certain $100,000.00 Promissory Note of even date
herewith from Maker to The Xxxxxx Family Trust when same is due shall also
constitute an Event of Default hereunder.
Subject to the provisions of the succeeding paragraph hereof, upon the
occurrence of any Event of Default, the unpaid principal balance hereof,
together with accrued unpaid interest thereon, shall, at the option of Payee,
immediately become due and payable without presentment, protest, demand, notice
of intention to accelerate, notice of acceleration, notice of non-payment,
notice of protest, or other notice of any kind, all of which are hereby
expressly waived by Maker. If this Note is not paid at maturity, however such
maturity may be brought about, and the same is placed in the hands of an
attorney for collection, and/or if this Note is collected by suit or through
bankruptcy, probate, or other legal proceedings, the Maker agrees to pay all
attorney's fees, court costs and other expenses incurred by Payee in connection
with such collection efforts.
Payee agrees that the indebtedness evidenced by this Note shall be (i)
subordinate, to the extent and the manner hereinafter set forth, in right of
payment to the prior payment in full of all Senior Indebtedness (as defined
herein), whether for principal, interest, fees, expenses or otherwise; and (ii)
pari passu in right of payment to all other Indebtedness of Maker. Payee agrees
not to ask for, demand, xxx for, take or receive from Maker, and Maker shall
not pay, transfer, or otherwise set aside, directly or indirectly, in cash or
other property or by setoff or in any other manner, payment of all or any
portion of the indebtedness evidenced hereby at any time while any of the
Senior Indebtedness is outstanding and unpaid; similarly, Payee shall not be
permitted to accelerate the maturity of this Note while any of the Senior
Indebtedness is outstanding; provided, however, that, to the extent that no
default, or no event which with the passage of time, giving of notice, or both,
would constitute a default, has occurred and be then continuing in the payment
of the Senior Indebtedness, then, in
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such event, Maker may and shall make scheduled payments of principal and
interest when due to Payee hereunder.
For all purposes of this Note, "Senior Indebtedness" means all
Indebtedness (as defined herein) of the Maker, whether outstanding on the date
of execution of this Note, or hereafter created, assumed or incurred, pursuant
to (i) that certain Loan and Security Agreement dated as of September 25, 1997
and entered into by and between Maker and Sanwa Business Credit Corporation, or
(ii) that certain Letter of Credit and Security Agreement dated as of September
25, 1997 and entered into by and between Maker and General Atlantic
Corporation, together with (a) all renewals, modifications, restatements,
amendments, increases, and extensions thereof and (b) any Indebtedness incurred
in whole or in part to replace any of the foregoing. "Indebtedness" shall mean
(i) every obligation of the Maker for money borrowed; (ii) every obligation of
the Maker evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of the Maker with
respect to letters of credit, banker's acceptances or similar facilities issued
for the account of the Maker; (iv) every obligation of the Maker issued or
assumed as the deferred purchase price of property or services (including,
without limitation, all accounts payable relating to inventory purchases, and
other accrued liabilities arising in the ordinary course of business as the
deferred purchase price of property or services); (v) every capital lease
obligation of the Maker; (vi) all indebtedness of the Maker for claims in
respect of derivative products, including interest rate, foreign exchange rate
and commodity forward contracts, options and swaps and similar arrangements;
and (vii) every obligation of the type referred to in clauses (i) through (vi)
of any other person or entity and all dividends of any other entity the payment
of which, in either case, the Maker has guaranteed or is responsible or liable
for, directly or indirectly, as obligor or otherwise.
Notwithstanding that this Note is pari passu in right of payment to all
Indebtedness of Maker other than the Senior Indebtedness, it is expressly
agreed that vis-a-vis this Note and that certain $100,000.00 Promissory Note
(the "Other Note") of even date herewith made by Maker and payable to the order
of The Xxxxxx Family Trust, this Note shall be "senior" and "superior" in right
of repayment to the Other Note. So long as no default has occurred and be then
continuing in payment of this Note, Maker may and shall make scheduled payments
of principal and interest when due to the Holder of the Other Note in
accordance with the terms thereof. Upon the occurrence of a default in payment
of this Note, Maker shall not be entitled to make any direct or indirect
payment (in cash, cash equivalents, property, by set off or otherwise) of or on
account of the Other Note at any time prior to the indefeasible payment in full
of this Note. In the event of any distribution, division, or application
(partial or complete, voluntary, or involuntary, by operation of law or
otherwise) of all or any part of the assets of Maker or the proceeds thereof to
the creditors of Maker or readjustment of the obligations and indebtedness of
Maker, whether by reason of liquidation, bankruptcy, arrangement, receivership,
assignment for the benefit of creditors,
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marshaling of assets of Maker or any other action or proceeding involving the
readjustment of all or any part of the indebtedness or other obligations of
Maker or the application of the assets of Maker to the payment or liquidation
thereof, or upon the dissolution or other winding up of Maker's business, or
upon the sale of all or substantially all of Maker's assets then, and in such
event, (i) the Payee hereunder shall first receive indefeasible payment in
full, in cash, of all of the outstanding balance of this Note prior to the
payment of all or any part of the balance of the Other Note, and (ii) until the
indefeasible payment in full of this Note, Payee shall be entitled to receive
any payment or distribution of any kind or character, whether in cash,
securities or other property which may be payable or deliverable in respect of
the Other Note.
No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee's rights shall be effective unless in writing, and any waiver
of any default or any instance of non-compliance shall be limited to its
express terms and shall not extend to any other default or instance of
non-compliance.
Any notice or communication required or permitted hereunder shall be
in writing and shall be sent either by (a) personal delivery service with
charges therefor billed to shipper, (b) expedited delivery service with charges
therefor billed to shipper, (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by
expedited delivery service or by mail in the manner previously described)
addressed to Maker or Payee, as the case may be, at the address set forth
hereinbelow, or at such other address as Maker or Payee may have designated by
notice to the other given as provided above. Any notice or communication sent
as hereinabove provided shall be deemed given (i) upon receipt if sent by
telegram or telex or if personally delivered (provided that such delivery is
confirmed by the courier delivery service), (ii) on the date of deposit in a
post office or other official depository under the care and custody of the
United States Postal Service, if sent by United States Mail, or (iii) on the
date of delivery to any expedited delivery service.
If more than one person or entity is included within the term "Payee"
or "Maker", then all shall jointly execute and deliver a notice to Payee or
Maker, as applicable, designating a person at a specific address to receive all
notices or other communications permitted or required hereunder. All such
notices or communications given to such designated person in the manner set
forth in the immediately preceding paragraph shall be binding on all persons
and entities included within the terms "Maker" or "Payee", as the case may be,
to the same extent as if each person or entity included within the term "Maker"
or "Payee" had received such notice or communication.
Maker and any and all sureties, guarantors and endorsers of this Note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, protest, notice of any kind (including, but
not limited to,
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notice of dishonor, notice of protest, notice of intention to accelerate and
notice of acceleration) and diligence in collecting and bringing suit against
any party hereto and agree (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for Payee, in order to enforce payment of this Note, to
first institute or exhaust Payee's remedies against Maker or any other party
liable therefor or against any security for this Note.
Notwithstanding anything to the contrary contained in this Note or in
any other agreement entered into in connection herewith, whether now existing
or hereafter arising and whether written or oral, it is agreed that the
aggregate of all interest and any other charges constituting interest, or
adjudicated as constituting interest, and contracted for, chargeable or
receivable under this Note or otherwise in connection with the debt evidenced
hereby, shall under no circumstances exceed the maximum amount of interest
permitted by applicable law. In the event the maturity of this Note is
accelerated by reason of an election by the holder hereof resulting from a
default hereunder or under any other document executed as security herefor or
in connection herewith, or by voluntary prepayment by Maker or otherwise, then
earned interest may never include more than the maximum rate of interest
permitted by applicable law. If from any circumstance any holder of this Note
shall ever receive interest or any other charges constituting interest, or
adjudicated as constituting interest, the amount, if any, of which would exceed
the maximum rate of interest permitted by applicable law (the "Excess
Interest"), then the Excess Interest shall be applied to the reduction of the
principal amount owing on this Note or on account of any other principal
indebtedness of Maker to the holder of this Note, and not to the payment of
interest. If the Excess Interest exceeds the unpaid balance of principal
hereof and such other indebtedness, then that portion of the Excess Interest
which exceeds the unpaid balance of principal hereof and such other
indebtedness shall be refunded to Maker. All sums paid or agreed to be paid to
the holder of this Note for the use, forbearance or detention of the
indebtedness of Maker to the holder of this Note shall be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the actual rate of interest on account of such
indebtedness is uniform throughout the term thereof.
Any provision hereof found to be illegal, invalid or unenforceable for
any reason whatsoever shall not affect the validity, legality or enforceability
of the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and
shall inure to the benefit of Payee and its successors and permitted assigns;
provided that Payee may not transfer or assign this Note or any right or
interest herein to any person or entity without Maker's prior written consent.
This Note shall be construed and interpreted in accordance with, and
all issues relating to this Note or to the transaction which this Note relates
(including, without
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limitation, the validity and/or enforceability of this Note or any portion of
this Note) shall be governed by, the laws of the State of Texas (other than the
conflict of law rules of the State of Texas), except as otherwise required by
mandatory provisions of applicable law and except to the extent that remedies
provided by the laws of any state other than Texas are governed by the laws of
said state.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
has duly executed and delivered this instrument.
SOLO SERVE CORPORATION,
a Delaware corporation
By: /s/ Xxxx X. Xxxxx
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Name: Xxxx X. Xxxxx
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Title: Chief Financial Officer
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