Contract
Exhibit
99.7
ANYTHING
HEREIN TO THE CONTRARY NOTWITHSTANDING, THE REPAYMENT OF THE OBLIGATIONS
EVIDENCED BY THIS NOTE, THE LIENS AND SECURITY INTERESTS SECURING THE
OBLIGATIONS EVIDENCED BY THIS NOTE, THE EXERCISE OF ANY RIGHT OR REMEDY WITH
RESPECT THERETO, AND CERTAIN OF THE RIGHTS OF THE HOLDER HEREOF ARE SUBJECT TO
THE PROVISIONS OF THE INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF
MARCH 12, 2007 (AS AMENDED, RESTATED, SUPPLEMENTED, OR OTHERWISE MODIFIED FROM
TIME TO TIME, THE “INTERCREDITOR AGREEMENT”), BY AND BETWEEN XXXXX FARGO
FOOTHILL, INC., AS SENIOR AGENT, AND NEWCASTLE PARTNERS, L.P., AS SUBORDINATED
CREDITOR. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE
INTERCREDITOR AGREEMENT AND THIS NOTE, THE TERMS OF THE INTERCREDITOR AGREEMENT
SHALL GOVERN AND CONTROL. THIS NOTE AND THE SECURITIES UNDERLYING
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT AS OTHERWISE AGREED BY MAKER, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO MAKER THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
SECOND
AMENDED AND RESTATED
CONVERTIBLE
PROMISSORY NOTE
|
$11,137,321
|
June
13, 2008
|
FOR VALUE
RECEIVED, each of the undersigned, XXXX INDUSTRIES, INC., a California
corporation (the “Maker” or the “Company”) and XXXX INDUSTRIES, INC., a
Minnesota corporation (together with Maker, referred to herein collectively as
the “Obligors”), hereby jointly and severally promise to pay to the order of
Newcastle Partners, L.P. a Texas limited partnership, or its assigns (the
“Payee”), at such place as the Payee may designate in writing, the principal sum
of $11,137,321 (Eleven Million One Hundred Thirty Seven Thousand Three Hundred
Twenty One Dollars), or such other amount as shall equal the outstanding
principal amount hereof, under the terms set forth herein. Capitalized terms
used but not defined herein shall have the respective meanings given to such
terms in the Purchase Agreement, dated as of January 31, 2007 (the “Purchase
Agreement”), between the Maker and the Payee, unless the provisions of this Note
indicate otherwise. This Second Amended and Restated Convertible
Promissory Note is referred to herein as the “Note”.
1. Interest. Except
as otherwise provided herein, the unpaid principal balance hereof from time to
time outstanding shall bear interest from the date hereof at the rate of four
percent (4%) per annum unless otherwise provided in this
Note. Interest shall accrue on the outstanding unpaid principal
amount (as increased pursuant to Section 2(a) below) until such principal amount
is paid (or converted as provided herein) from the date
hereof. Interest on this Note shall be computed on the basis of a
365-day year.
2. Payment of Interest and
Principal. Except as otherwise provided herein (including,
without limitation, Section 5 hereof), and subject to any default hereunder, the
principal and interest hereof is payable as follows:
(a) Interest
shall be paid in kind and shall accrete as additional principal on this Note on
the applicable interest payment date; provided that, following January 31, 2009,
if the Current Market Price at the date of election (which shall be on or
following January 31, 2009) is at least 200% of the Conversion Price (as defined
in Section 3(b)), interest on the then outstanding principal balance of this
Note may be paid in cash at the election of Maker; provided further that, if
such election to pay cash interest is made, the interest rate set forth in
Section 1 hereof shall be increased to the lesser of (a) eight percent (8%) or
(b) the highest lawful interest rate permitted by applicable law; and provided
further that any accrued interest as of the date of such election shall accrete
as additional principal on this Note as of such election
date. Interest shall be payable in arrears on December 31, March 31,
June 30 and September 30 of each year. All references herein to the
“principal” of this Note shall include all interest accreted thereon as
additional principal pursuant to the foregoing sentence.
(b) The
entire outstanding principal amount of the Note together with all accrued but
unpaid interest shall be due in cash on January 31, 2017 (the “Maturity Date”)
from the Obligors.
(c) On
and following January 31, 2010, so long as the Current Market Price (determined
on the date of prepayment) is greater than 200% of the Conversion Price, the
Maker will have right of early prepayment of this Note at an amount equal to
105% of the aggregate outstanding principal on this Note. For the
purposes of this Note, the “Current Market Price” on any date means the average
of the daily Closing Prices per share of Common Stock for all Trading Days
included in 90 consecutive calendar days preceding the date in
question. For purposes of the foregoing, (i) the “Closing Price”
shall be the last reported sales price or, if no such reported sale takes place
on any particular date, the average of the reported closing bid and asked prices
on the principal exchange on which the Common Stock is listed (or if the Common
Stock is not so listed, the average of the closing bid and asked prices
furnished by any two members of the Financial Industry Regulatory Authority
(FINRA) as selected by Payee for such purpose) on the date in question and (ii)
“Trading Days” shall mean any day on which the market on which the Common Stock
is then traded is open for trading. Any such prepayment under this
Section 2(c) shall be on 30 days advance notice to Payee.
3. Conversion
at the Option of Payee.
(a) At
any time while any portion of the principal or interest of this Note is
outstanding, the Payee may give the Maker written notice of its intention to
convert all or any portion of the outstanding principal and/or accrued but
unpaid interest on this Note into such number of shares of the Maker’s common
stock (the “Common Stock”), equal to the amount to be converted divided by the
Conversion Price in effect at such time. Upon receipt of the Payee’s
written notice, the Maker shall cause certificates representing those shares to
be delivered to Payee within three business days of Maker’s receipt of such
notice. The person or persons entitled to receive the shares of
Common Stock issuable upon a conversion of this Note shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on the
date the applicable conversion notice is given.
(b) The
“Conversion Price” shall be $0.20 per share of Common Stock, subject to any
adjustment. The Conversion Price shall be adjusted proportionally for
any subsequent stock dividend or split, stock combination or other similar
recapitalization, reclassification or reorganization of or affecting Maker’s
Common Stock. In addition, the Conversion Price shall also be
appropriately adjusted in the event that Maker issues shares of Common Stock (or
issues securities, including warrants or similar rights, entitling holders to
exercise, convert or exchange into, or otherwise subscribe for, shares of Common
Stock) at a price per share less than the Current Market Price as of the date of
such issuance, as follows: the new Conversion Price shall be reduced
to equal (x) the prevailing Conversion Price (i.e., prior to any adjustment
hereunder) multiplied by (y) the quotient obtained by dividing (a) the Market
Value Share Number by (b) the total number of shares of Common Stock that would
be outstanding after giving effect to the exercise, conversion or exchange of
any rights or other derivative Company securities outstanding (determined pro
forma for the applicable issuance giving rise to the adjustment in the
Conversion Price hereunder). For purposes of the foregoing, the
“Market Value Share Number” shall equal the sum of (i) the total number of
shares of Common Stock that would be outstanding after giving effect to the
exercise, conversion or exchange of any rights or other derivative Company
securities outstanding (determined prior to the applicable issuance giving rise
to the adjustment in the Conversion Price) plus (ii) the quotient obtained by
dividing (A) the aggregate consideration received by the Company in the
applicable issuance (or, in the case of the issuance of any rights or other
derivative Company securities giving rise to the adjustment in the Conversion
Price hereunder, such aggregate consideration to be received upon the exercise,
conversion or exchange of any such rights or derivative Company securities) by
(B) the Current Market Price. Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price pursuant to this Section 3(b) in connection
with shares of Common Stock (or issues of securities, including warrants or
similar rights, entitling holders to exercise, convert or exchange into, or
otherwise subscribe for, shares of Common Stock: (i) issuable or issued to
employees, consultants or directors of the Maker (or any subsidiary thereof) in
an aggregate amount representing not more than 40% of the shares of Common Stock
outstanding on the date hereof and pursuant to a stock option plan or other
equity incentive plan approved by the Board of Directors of Maker or (ii)
issuable or issued in connection with bona fide acquisitions, mergers, strategic
transactions, joint ventures or similar transactions, the terms of which are
approved by the Board of Directors of Maker.
(c) In
case of a Change of Control, instead of receiving shares of Maker’s Common Stock
upon conversion of this Note, Payee shall have the right thereafter to receive
the kind and amount of shares of stock and other securities, cash and property
which the Payee would have owned or have been entitled to receive immediately
after such Change of Control had the same portion of this Note been converted
immediately prior to the effective date of such Change of Control and, in any
such case, if necessary, appropriate adjustment shall be made in the application
of the provisions set forth in this Section with respect to the rights and
interests thereafter of the Payee, to the end that the provisions set forth in
this Section shall thereafter correspondingly be made applicable, as nearly as
may reasonably be, in relation to any shares of stock and other securities, cash
and property thereafter deliverable in connection with this Note. The provisions
of this subsection shall similarly apply to successive Changes of
Control.
(d) “Change
of Control” means that the Maker shall, directly or indirectly, in one or more
related transactions, (i) consolidate or merge with or into (whether or not the
Maker is the surviving corporation) another person, (ii) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties or
assets of the Maker to another person, (iii) allow another person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the person or persons making or party to, or associated or
affiliated with the persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization
or spin-off) with another person whereby such other person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other person or other persons making or party to, or
associated or affiliated with the other persons making or party to, such stock
purchase agreement or other business combination); provided, however, that a
transaction in which Newcastle Partners, L.P. or any of its affiliates is the
acquiring party shall not be deemed to constitute a Change of
Control.
(e) No
fractional shares of Maker’s Common Stock shall be issued upon conversion of the
Note. In lieu of any fractional shares to which Payee would otherwise
be entitled, the Maker shall pay cash equal to the product of such fraction
multiplied by the average of the closing prices of the Common Stock on the
principal exchange on which the Common Stock is listed (or the exchange on which
Maker’s Common Stock trades) for the five consecutive trading days immediately
preceding the date of the conversion.
(f) In
the event of an adjustment to the Conversion Price, the Maker shall promptly
deliver to the Payee a certificate, signed by its Chief Financial Officer,
setting forth the new Conversion Price and a calculation in reasonable detail of
the adjustment to the Conversion Price.
(g) The
Maker shall pay any and all taxes that may be payable with respect to the
issuance and delivery of Common Stock upon conversion of this Note; provided
that the Maker shall not be required to pay any tax that may be payable in
respect of any issuance of Common Stock to any person other than the Payee or
with respect to any income tax due by the Payee with respect to such Common
Stock.
(h) Notwithstanding
anything to the contrary contained in this Note, in no event shall this Note be
converted by Payee into a number of shares of Common Stock which, when
added together with any other outstanding shares of Common Stock and
any shares of Common Stock into which derivative securities of Maker are then
convertible or exercisable, exceed the maximum number of authorized shares of
Common Stock of Maker under its existing Certificate of Incorporation; provided
that, following Maker’s 2008 Annual Meeting of Stockholders, if the
convertibility of this Note would be limited in any respect by the foregoing
restriction (assuming for this purpose that Payee then elected to convert the
entire principal balance of the Note but without any obligation of Payee to
actually convert all or any portion of the Note), the interest rate on the
Excess Outstanding Principal Balance for purposes of Section 1 shall be
increased to the lesser of (i) 14% per annum or (ii) the highest lawful interest
rate permitted by applicable law. For purposes the foregoing, the
“Excess Outstanding
Principal Balance” shall mean the principal balance of the Note, determined as
of the first day of every calendar quarter, in excess of the Convertible
Principal Balance, and “Convertible Principal Balance” means the principal
balance of the Note, determined as of the first day of every calendar quarter,
that converts into a number of shares of Common Stock which, when added together
with any other then outstanding shares of Common Stock and any shares of Common
Stock into which any then outstanding derivative securities of Maker (including
but not limited to all options, warrants, convertible securities and other
securities) are convertible or exercisable, results in the precise number of
authorized shares of Common Stock of Maker. Maker agrees to seek an amendment to
its Certificate of Incorporation at the 2008 Annual Meeting of Stockholders (and
any subsequent meeting if necessary) to increase its authorized shares of Common
Stock to permit the full convertibility of this Note such that the foregoing
restriction would not apply.
4. Redemption Upon Change of
Control. No sooner than 15 days nor later than 10 days prior
to the consummation of a Change of Control, the Maker shall deliver written
notice of such Change of Control to the Payee (a “Change of Control
Notice”). At any time during the period beginning after the Payee’s
receipt of a Change of Control Notice and ending on the day immediately
preceding the consummation of such Change of Control, the Payee may require the
Maker to redeem all or any portion of this Note by delivering written notice
thereof (a “Change of Control Redemption Notice”) to the Maker, which Change of
Control Redemption Notice shall indicate the portion of the outstanding
principal amount of this Note that the Payee is electing to redeem. The portion
of this Note subject to redemption pursuant to this Section 4 shall be redeemed
by the Maker at a price equal to 110% of the principal amount being redeemed,
plus accrued but unpaid interest on such principal amount (the “Change of
Control Redemption Price”). Redemptions required by this Section 4
shall be made on the date of the consummation of the Change of Control and shall
have priority to payments to shareholders of the Maker in connection with such
Change of Control. Notwithstanding anything to the contrary in this
Section 4, until the Change of Control Redemption Price is paid in full, the
principal amount submitted for redemption under this Section 4 (together with
any accrued but unpaid interest thereon) may be converted, in whole or in part,
by the Payee into Common Stock pursuant to Section 3. If the cash funds of Maker
then legally available for payment of the Change of Control Redemption Price are
insufficient to pay in full the Change of Control Redemption Price, those funds
which are legally available will be used to redeem the maximum portion of this
Note subject to redemption, with the remaining portion of the Note remaining
outstanding and entitled to the rights and benefits provided for
herein.
5. Conversion On Maturity
Date. On the Maturity Date, in lieu of receiving the payment
required by Section 2(b), the Payee may elect to have Maker issue to the Payee a
certificate representing such number of shares of Common Stock as is equal to
the quotient obtained by dividing the entire principal amount of this Note then
outstanding, plus all accrued but unpaid interest thereon, by the Conversion
Price in effect at such time, in full satisfaction of this Note (the “Maturity
Date Conversion”). The applicable provisions of Section 3 shall apply
with equal force to the Maturity Date Conversion. In the event that
the Shareholder Approval has not then been obtained, Payee may elect to receive
both (1) such number of shares as the Maker shall be permitted to issue under
exchange rules in the absence of a shareholder vote and (2) cash in lieu of any
remaining principal balance.
6. Representations of the
Obligors. In order to induce the Payee to enter into
this Note, each Obligor makes the following representations and
warranties to the Payee which shall be true, correct, and complete, in all
material respects, as of the date hereof and such representations and warranties
shall survive the execution and delivery of this Note:
(a) Each
Obligor is duly organized and existing and in good standing under the laws of
the jurisdiction of its organization and qualified to do business in any state
where the failure to be so qualified reasonably could be expected to result in a
Material Adverse Change. Each Obligor and its subsidiaries have all
requisite power and authority, and has all material governmental licenses,
authorizations, consents and approvals necessary, to own its assets and to carry
on its business as now conducted, and is qualified to do business in, and is in
good standing in, every jurisdiction where such qualification is required,
except where failure to have such power, authority, licenses, authorizations,
consents, approvals and qualifications could not reasonably be expected to have
a Material Adverse Change.
(b) The
execution, delivery, and performance by such of this Note and the Loan Documents
to which it is a party have been duly authorized by all necessary action on the
part of each Obligor.
(c) The
execution, delivery, and performance by each Obligor of this Note and the other
Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to any
Obligor, the bylaws or articles of incorporation of any Obligor, or any order,
judgment, or decree of any court or other governmental authority binding on any
Obligor, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contract of any
Obligor or any subsidiary thereof, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
any Obligor or any subsidiary thereof, other than Permitted Liens, or (iv)
require any approval of any Obligor’s interestholders or any approval or consent
of any person under any material contract of any Obligor or any subsidiary
thereof, other than consents or approvals that have been obtained and that are
still in force and effect, or as contemplated by Section 3(h) of this
Note.
(d) This
Note and the other Loan Documents to which each Obligor is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Obligor will be the legally valid and binding obligations of such Obligor,
enforceable against such Obligor in accordance with their respective
terms.
(e) No Material Adverse
Change. All financial statements relating to Obligors and
their subsidiaries that have been delivered by Obligors to the Payee have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and present fairly in all material respects, Obligors’ and their
subsidiaries’ financial condition as of the date thereof and results of
operations for the period then ended. Except for information
otherwise known to Payee, there has not been a Material Adverse Change with
respect to Obligors and their subsidiaries since March 31, 2008.
(f) SkyTel
Sale. The SkyTel Sale Agreements comply with, and the
transactions thereunder have been consummated in accordance with, all applicable
laws. Except for the consent of the Federal Communications
Communication to transfer the wireless spectrum licenses that are subject to the
SkyTel Sale Agreements, the execution, delivery, and performance by the Company
of the SkyTel Sale Agreements do not and will not require any material
registration with, consent, or approval of, or notice to, or other action with
or by any governmental authority, other than consents or approvals that have
been obtained and that are still in full force and effect.
7. Dividends. If,
at any time while any portion of the principal or interest on the Note is
outstanding, Maker declares a distribution in cash, property (including
securities) or a combination thereof, whether by way of dividend or otherwise,
with respect to its Common Stock, the Payee shall participate pro rata in such
distribution on an as-converted basis with holders of Maker’s Common
Stock.
8. Security;
Subordination. THE OBLIGATIONS DUE UNDER THIS NOTE ARE SECURED
BY A SECURITY AGREEMENT EXECUTED BY THE OBLIGORS IN FAVOR OF
PAYEE. ADDITIONAL RIGHTS OF THE PAYEE ARE SET FORTH IN THE SECURITY
AGREEMENT. This Note will rank senior to all existing and future
secured or unsecured indebtedness of Maker; provided that, notwithstanding
anything to the contrary, the Indebtedness evidenced by this Note is hereby
expressly subordinated in the manner set forth in the Intercreditor
Agreement.
9. Certain Defined
Terms. The following terms in this Note shall have the
meanings specified below. Any terms in this Section 9 that are not
specified below or otherwise defined in this Note or in Purchase Agreement shall
have the meaning ascribed thereto in the California Uniform Commercial Code, as
in effect from time to time (the “Code”).
“Adjusted EBITDA”
means, with respect to any fiscal period, the Company’s and its’ subsidiaries’
consolidated net earnings (or loss), minus extraordinary gains and interest
income, plus interest expense, income taxes, depreciation and amortization, and
all non-cash charges for such period, and excluding (x) any SkyTel EBITDA
included in the calculation thereof and (y) any gain or loss resulting from the
consummation of the SkyTel Disposition in the calculation thereof, in each case,
determined on a consolidated basis in accordance with GAAP.
“Agent” means Xxxxx
Fargo Foothill, Inc., in its capacity as the arranger and administrative agent
for the Lenders, together with its successors and assigns, if any, in such
capacity.
“Borrowers” means,
individually and collectively, jointly and severally, Xxxx Industries, Inc., a
California corporation, and Xxxx Industries, Inc., a Minnesota corporation, and
any subsidiaries thereof.
“Capital
Expenditures” means, with respect to any entity for any period, the
aggregate of all expenditures by such entity and its subsidiaries during such
period that are capital expenditures as determined in accordance with GAAP,
whether such expenditures are paid in cash or financed.
“Capital Lease” means
a lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.
“Closing Date” The
date that this Second Amended and Restated Promissory Note is
executed.
“IBM Debt” means
Indebtedness owed by Maker to International Business Machines Corporation
(“IBM”) in connection with those certain Agreements for Wholesale Financing
entered into prior to the Closing Date by and between Maker, on the one hand,
and IBM, on the other hand.
“Indebtedness” means
(a) all obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations as a lessee under
capital leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Person or its subsidiaries, irrespective of whether such
obligation or liability is assumed, (e) all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business and repayable in accordance with customary trade practices),
(f) all obligations owing under hedge agreements, and (g) any obligation
guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (f) above.
“Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of title 11 of the United States Code (as in effect from time to
time) or under any other state or federal bankruptcy or insolvency law,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
“Investment” means,
with respect to any Person, any investment by such Person in any other Person
(including Affiliates) in the form of loans, guarantees, advances, or capital
contributions (excluding (a) commission, travel, and similar advances to
officers and employees of such Person made in the ordinary course of business,
and (b) bona fide Accounts arising in the ordinary course of business consistent
with past practice), purchases or other acquisitions of Indebtedness, capital
stock, or all or substantially all of the assets of such other Person (or of any
division or business line of such other Person), and any other items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP.
“GE Debt” means the
Indebtedness owed by Maker to GE Commercial Distribution Finance Corporation or
Deutsche Financial Services Corporation in connection with those certain
Agreements for Wholesale Financing entered into prior to the Closing Date by and
between Parent, on the one hand, and GE Commercial Distribution Finance
Corporation or Deutsch Financial Services Corporation, on the other
hand.
“Lenders” means,
individually and collectively, the lenders from time to time party to the Senior
Credit Agreement.
“Lien” means any
interest in an asset securing an obligation owed to, or a claim by, any Person
other than the owner of the asset, irrespective of whether (a) such interest is
based on the common law, statute, or contract, (b) such interest is recorded or
perfected, and (c) such interest is contingent upon the occurrence of some
future event or events or the existence of some future circumstance or
circumstances. Without limiting the generality of the foregoing, the
term “Lien” includes the Lien or security interest arising from a mortgage, deed
of trust, encumbrance, notice of Lien, levy or assessment, pledge,
hypothecation, assignment, deposit arrangement, security agreement, conditional
sale or trust receipt, or from a lease, consignment, or bailment for security
purposes and also includes reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting real property.
“Loan Documents”
means this Note, the Waiver and Amendment Agreement, and any other agreement
previously or in the future entered into by the Company or any of its
subsidiaries and the Payee in connection with this Note or in connection with
the amended and restated convertible promissory note dated March 12, 2007 in the
original principal amount of $10,000,000.
“Material Adverse
Change” means (a) a material adverse change in the business, operations,
results of operations, assets, liabilities or condition (financial or otherwise)
of the Company and its subsidiaries, taken as a whole, (b) a material impairment
of the Company and its subsidiaries ability to perform their obligations under
the Loan Documents to which they are parties or of the Payee’s ability to
enforce the Obligations or realize upon the Collateral, or (c) a material
impairment of the enforceability or priority of the Payee’s Liens with respect
to the Collateral as a result of an action or failure to act on the part of the
Company or any of its subsidiaries.
“Net Debt” means, as
of the date of determination, the total Indebtedness of the Borrowers minus the
total cash and cash equivalents of the Borrowers, each determined on a
consolidated basis in accordance with GAAP.
“Obligations” means
(a) all loans, debts, principal, interest (including any interest that accrues
after the commencement of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding) owing by Borrowers to the Payee pursuant to the Loan Documents, and
(b) all liabilities, guaranties, covenants, and duties of any kind and
description owing by Borrowers to the Payee pursuant to the Loan
Documents.
“Paid in Full” means
the payment in full in cash of all Senior Debt and the termination of all
commitments of the holders of the Senior Debt to extend further credit to
Borrowers, or, in the case of Senior Debt consisting of contingent obligations
in respect of letters of credit, hedging obligations, bank product obligations,
or other reimbursement obligations, the setting apart of cash sufficient to
discharge such portion of the Senior Debt in an account for the exclusive
benefit of the holders thereof, in which account such holders shall be granted a
first priority perfected security interest in a manner reasonably acceptable to
such holders.
“Permitted
Dispositions” means (a) sales or other dispositions of equipment that is
substantially worn, damaged, or obsolete in the ordinary course of business, (b)
sales of inventory to buyers in the ordinary course of business, (c) the use or
transfer of money or cash equivalents in a manner that is not prohibited by the
terms of this Note or the other Loan Documents, (d) the licensing, on a
non-exclusive basis, of patents, trademarks, copyrights, and other intellectual
property rights in the ordinary course of business, and (e) transfers or
dispositions not in excess of $500,000 for fair value and other than to any
affiliate of the Company.
“Permitted
Investments” means (a) Investments in cash and cash equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in settlement of amounts due to a Borrower
effected in the ordinary course of business or owing to a Borrower as a result
of insolvency proceedings involving an account debtor or upon the foreclosure or
enforcement of any Lien in favor of a Borrower, and (e) loans or advances or the
repayment of loans or advances from one Borrower to another
Borrower.
“Permitted Liens”
means (a) Liens held by Payee, (b) Liens for unpaid taxes, assessments, or other
governmental charges or levies that either (i) are not yet delinquent, or (ii)
do not have priority over the Payees’s Liens and the underlying taxes,
assessments, or charges or levies are the subject of Permitted Protests, (c)
judgment Liens that do not otherwise constitute an Event of Default under this
Note, (d) the interests of lessors under operating leases, (e) purchase money
Liens or the interests of lessors under Capital Leases to the extent that such
Liens or interests secure Permitted Purchase Money Indebtedness, so long as (i)
such Lien attaches only to the asset purchased or acquired and the proceeds
thereof, and (ii) such Lien only secures the Indebtedness that was incurred to
acquire the asset purchased or acquired or any Refinancing Indebtedness in
respect thereof, (f) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of business and not in connection with the borrowing of
money, and which Liens either (i) are for sums not yet delinquent, or (ii) are
the subject of Permitted Protests, (g) Liens on amounts deposited in connection
with obtaining worker’s compensation or other unemployment insurance, (h) Liens
on amounts deposited in connection with the making or entering into of bids,
tenders, or leases in the ordinary course of business and not in connection with
the borrowing of money, (i) Liens on amounts deposited as security for surety or
appeal bonds in connection with obtaining such bonds in the ordinary course of
business, (j) with respect to any Real Property, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof; (k) Liens held by the holders of the Senior Debt; and (l)
Liens in respect of GE Debt and the IBM Debt.
“Permitted Protest”
means the right of a Borrower to protest any Lien (other than any Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien), or rental payment, provided that
(a) a reserve with respect to such obligation is established on the Company’s or
its subsidiaries’ books and records in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by a
Borrower, as applicable, in good faith, and (c) Payee is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Payee’s Liens.
“Permitted Purchase Money
Indebtedness” means Indebtedness (other than the Obligations, but
including obligations under Capital Leases), incurred at the time of, or within
20 days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof in an aggregate principal amount
outstanding at any one time not in excess of $5,000,000.
“Person” means natural
persons, corporations, limited liability companies, limited partnerships,
general partnerships, limited liability partnerships, joint ventures, trusts,
land trusts, business trusts, or other organizations, irrespective of whether
they are legal entities, and governments and agencies and political subdivisions
thereof.
“Refinancing
Indebtedness” means refinancings, renewals, or extensions of Indebtedness
so long as: (a) the terms and conditions of such refinancings, renewals, or
extensions do not, in Payee’s reasonable judgment, materially impair the
prospects of repayment of the Obligations by Borrowers or materially impair
Borrowers’ creditworthiness, (b) such refinancings, renewals, or extensions do
not result in a material increase in the principal amount of the Indebtedness so
refinanced, renewed, or extended, (c) such refinancings, renewals, or extensions
do not result in a material increase in the interest rate with respect to the
Indebtedness so refinanced, renewed, or extended, (d) such refinancings,
renewals, or extensions do not result in a material shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor
are they on terms or conditions that, taken as a whole, are materially more
burdensome or restrictive to Borrowers, (e) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension must include subordination terms and conditions that are at least as
favorable to the Payee and the Lenders as those that were applicable to the
refinanced, renewed, or extended Indebtedness, and (f) the Indebtedness that is
refinanced, renewed, or extended is not recourse to any Person that is liable on
account of the Obligations other than those Persons which were obligated with
respect to the Indebtedness that was refinanced, renewed, or
extended.
“Security Agreement”
means that certain Security Agreement, dated as of March 12, 2007 and certain
related agreements made by the Borrowers to grant Payee a security interest in
the assets of Borrowers.
“Senior Credit
Agreement” means that certain Credit Agreement, dated as of January 31,
2007, by and among Borrowers, the lenders party thereto from time to time, and
Agent, as amended, restated, supplemented, or otherwise modified from time to
time.
“Senior Debt” means
all obligations (whether now outstanding or hereafter incurred, contingent or
non-contingent, liquidated or unliquidated, or primary or secondary) of
Borrowers in respect of (a) principal under the Senior Credit Agreement or any
other Senior Loan Document (or any refinancing agreement entered into with
respect thereto), (b) all interest and premium, if any, in respect of the
Indebtedness referred to in clause (a) above, (c) all fees (including attorneys
fees) and expenses payable pursuant to any Senior Loan Document (or a
refinancing agreement entered into with respect thereto), (d) all other
Obligations (as defined in the Senior Credit Agreement) or other payment
obligations (including costs, expenses, letter of credit reimbursement
obligations, hedging obligations, bank product obligations, or otherwise) of
Borrowers to Agent or Lenders under or arising pursuant to any Senior Loan
Document (or to third persons under provisions of a refinancing agreement
entered into with respect thereto), including contingent reimbursement
obligations with respect to outstanding letters of credit, all costs and
expenses incurred by Agent or any Lender in connection with its or their
enforcement of any rights or remedies under the Senior Loan Documents,
including, by way of example, attorneys fees, court costs, appraisal and
consulting fees, auctioneer fees, rent, storage, insurance premiums, and like
items, and irrespective of whether allowable as a claim against Borrowers in any
Insolvency Proceeding, (e) post-petition interest on the Indebtedness referred
to in clauses (a) through (d) above, at the rate provided for in the instrument
or agreements evidencing such Indebtedness, accruing subsequent to the
commencement of an Insolvency Proceeding (whether or not such interest is
allowed as a claim in such Insolvency Proceeding), and (f) any refinancings,
renewals, or extensions of the Indebtedness referred to in clauses (a) through
(e) above.
“Senior Loan
Documents” means the Senior Credit Agreement and the other Loan Documents
(as defined in the Senior Credit Agreement), each as amended, restated
supplemented, or otherwise modified from time to time, including any agreement
extending the maturity of, consolidating, or otherwise restructuring (including
adding subsidiaries of Borrowers thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender, or group and whether or not
increasing the amount of Indebtedness that may be incurred
thereunder.
“SkyTel Disposition”
means the sale transaction contemplated by the Skytel Sale
Agreements.
“SkyTel EBITDA” means,
with respect to any fiscal period, Company’s consolidated net earnings (or
loss), minus extraordinary gains and interest income, plus interest expense,
income taxes, depreciation and amortization, and all non-cash charges for such
period, in each case, to the extent attributable to the results of operations of
the SkyTel business which is being sold pursuant to the Skytel Sale Agreements
and determined on a consolidated basis in accordance with GAAP.
“SkyTel Sale
Agreements” means the Asset Purchase Agreement, dated as of March 30,
2008 and as amended by Amendment No. 1 to the Asset Purchase Agreement dated as
of June 13, 2008, by and between Maker and Velocita Wireless LLC, and any and
all other documents entered into to give effect thereto.
“Waiver and Amendment
Agreement” means that certain Waiver and Amendment Agreement entered into
as of June 13, 2008 by and between the Obligors and Newcastle Partners,
L.P.
10. Affirmative
Covenants. Each Obligor covenants and agrees that, until
termination of all of the Obligations, the Obligors will and will cause their
respective subsidiaries to:
(a) Compliance with Applicable
Laws. Comply in all respects with the requirements of all
applicable statutes, laws, rules, regulations and orders of any governmental
authority, except where contested in good faith and by proper proceedings, other
than statutes, laws, rules, regulations and orders the noncompliance with which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change.
(b) Licenses. Obtain
and maintain all licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its properties or to the conduct of
its business, except where the failure to maintain such license, permits,
franchises or other governmental authorizations, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change.
(c) Financial
Reporting. Deliver to Payee each of the financial statements,
reports, or other items set forth on Schedule 10(c) hereto at the times
specified therein. In addition, the Company agrees that no subsidiary
of the Company will have a fiscal year different from that of the
Company.
(d) Inspection. Permit
Payee and its duly authorized representatives or agents to visit any of its
properties and inspect any of its assets or books and records, to examine and
make copies of its books and records, and to discuss its affairs, finances, and
accounts with, and to be advised as to the same by, its officers and employees
at such reasonable times and intervals as Payee or any such Lender may designate
and, so long as no Default or Event of Default exists, with reasonable prior
notice to such Obligor.
(e) Taxes. Cause
all assessments and taxes, whether real, personal, or otherwise, due or payable
by, or imposed, levied, or assessed against Borrowers, their subsidiaries, or
any of their respective assets to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax shall be the subject of a Permitted
Protest. Borrowers will and will cause their subsidiaries to make
timely payment or deposit of all tax payments and withholding taxes required
of them by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Payee with proof satisfactory to Payee indicating
that the applicable Borrower or subsidiary of a Borrower has made such payments
or deposits.
(f) Insurance.
(i) At
Borrowers’ expense, maintain insurance respecting their and their subsidiaries’
assets wherever located, covering loss or damage by fire, theft, explosion, and
all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrowers also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation. All such policies of insurance shall be in such
amounts and with such insurance companies as are reasonably satisfactory to
Payee. Borrowers shall deliver copies of all such policies to Payee
with an endorsement naming Payee as the sole loss payee (under a satisfactory
lender’s loss payable endorsement) or additional insured, as
appropriate. Each policy of insurance or endorsement shall contain a
clause requiring the insurer to give not less than 30 days prior written notice
to Payee in the event of cancellation of the policy for any reason
whatsoever.
(ii) The
Company shall give Payee prompt notice of any loss exceeding $250,000 covered by
such insurance. So long as no Event of Default has occurred and is
continuing, Borrowers shall have the exclusive right to adjust any losses
payable under any such insurance policies which are less than
$250,000. Following the occurrence and during the continuation of an
Event of Default, Payee shall have the exclusive right to adjust any losses
payable under any such insurance policies, without any liability to Borrowers
whatsoever in respect of such adjustments. In the case of any losses
payable under such insurance exceeding $250,000, Payee shall have the exclusive
right to adjust any losses payable under any such insurance policies after
consulting with the Company regarding such adjustment, without any liability to
a Borrower whatsoever in respect of such adjustments; provided, however, that
the failure of Payee to so consult with the Company shall not result in a breach
by Payee of this Note
(iii) For
so long as the Obligations (as defined in the Senior Credit Agreement) remain
outstanding, the Obligors shall not be required to take any action under this
Section 10(f) which conflicts with the Senior Credit Agreement.
(g) Accounting
System. Maintain a system of accounting that enables Borrowers
to produce financial statements in accordance with GAAP and maintain records
pertaining to the Collateral that contain information as from time to time
reasonably may be requested by Payee. Borrowers also shall keep a
reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their subsidiaries’ sales.
(h) Maintenance of
Existence. Do all things necessary to preserve and keep in
full force and effect its existence as a corporation in the jurisdiction of its
incorporation and in each jurisdiction in which the nature of their respective
activities and of their respective properties (both owned and lease) makes such
qualification necessary, except for those jurisdictions in which failure to be
qualified and in good standing would not have a Material Adverse
Change.
(i) Environmental.
(i) Use
its commercially reasonable efforts to keep any property either owned or
operated by any Borrower or any subsidiary of a Borrower free of any liens in
favor of a governmental authority for environmental liabilities or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such environmental liens, and
(ii) Use
its commercially reasonable efforts to comply, in all material respects, with
environmental laws and provide to Payee documentation of such compliance which
Payee reasonably requests.
(j) Formation of
Subsidiaries. At the time that any Borrower forms any direct
or indirect subsidiary or acquires any direct or indirect subsidiary after the
Closing Date, such Borrower shall (a) cause such new subsidiary to provide to
Payee a guaranty in a form reasonably satisfactory to Payee (or, if such
guaranty has already been provided, then provide to Payee a joinder to the
guaranty) and a joinder to the Loan Documents, together with such other security
documents (including mortgages with respect to any real property of such new
subsidiary), as well as appropriate financing statements (and with respect to
all property subject to a mortgage, fixture filings), all in form and substance
satisfactory to Payee (including being sufficient to grant Payee a first
priority Lien (subject to Permitted Liens) in and to the assets of such newly
formed or acquired subsidiary), provided that for so long as
Senior Debt remains outstanding, upon the granting of any guaranty pursuant to
the terms hereof, Obligors shall also cause a guaranty to be provided in favor
of the Agent with respect of the holders of the Senior Debt, (b) provide to
Payee a pledge agreement and appropriate certificates and powers or financing
statements, hypothecating all of the direct or beneficial ownership interest in
such new subsidiary, in form and substance satisfactory to Payee, and (c)
provide to Payee all other documentation, including one or more opinions of
counsel satisfactory to Payee, which in its opinion is appropriate with respect
to the execution and delivery of the applicable documentation referred to above
(including policies of title insurance or other documentation with respect to
all property subject to a mortgage). Any document, agreement, or
instrument executed or issued pursuant to this paragraph shall be a Loan
Document.
(k) Further
Assurances. Except to the extent prohibited by the Senior Loan
Documents, Borrowers shall execute or deliver to Payee, and shall cause their
subsidiaries to execute or deliver to Payee, any and all financing statements,
fixture filings, security agreements, pledges, assignments, endorsements of
certificates of title, mortgages, deeds of trust, opinions of counsel, and all
other documents (collectively, the “Additional Documents”) that Payee may
request in form and substance reasonably satisfactory to Payee, to create,
perfect, and continue perfected or to better perfect the Payee’s Liens in all of
the properties and assets of Borrowers and their subsidiaries (whether now owned
or hereafter arising or acquired, tangible or intangible, real or personal), to
create and perfect Liens in favor of Payee in any real property acquired by
Borrowers or their subsidiaries after the Closing Date, and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents. To the maximum extent permitted by applicable law,
Borrowers authorize Payee to execute any such Additional Documents in Borrowers’
or their subsidiaries’ names, as applicable, and authorizes Payee to file such
executed Additional Documents in any appropriate filing office.
(l) Copyrights. Maintain
the registration of each of its copyrights with the United States Copyright
Office.
(m) In
the case of the Maker, solicit the requisite approval of its shareholders at the
2008 Annual Meeting of Shareholders (and any subsequent meeting if necessary) to
the amendment to the Maker’s Articles of Incorporation in order to effect the
increase to its authorized shares of Common Stock to permit the full
convertibility of this Note.
11. Negative
Covenants. Each Obligor covenants and agrees that, until
termination of all of the Obligations, the Obligors will not and will not permit
any of their respective subsidiaries to do any of the following:
(a) Indebtedness. Create,
incur, assume, suffer to exist, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness except the
following:
(i) Senior
Debt under Senior Credit Agreement in an aggregate principal amount not to
exceed $10.5 million;
(ii) Indebtedness
for borrowed money that is not secured by a Lien on any assets, property or
capital stock owned by the Company or any of its subsidiaries in an aggregate
amount not to exceed $500,000;
(iii) Permitted
Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such
Indebtedness;
(iv) endorsement
of instruments or other payment items for deposit;
(v) Indebtedness
composing Permitted Investments;
(vi) Indebtedness
that is subject to a subordination agreement that has been approved in writing
by Payee or otherwise subordinate to the Obligations as a matter of
law;
(vii) Accounts
payable and related accrued liabilities incurred in the ordinary course of
business consistent with past practice; and
(viii) GE
Debt and IBM Debt in an aggregate amount not to exceed $5,000,000 at any one
time.
(b) Liens. Create,
incur, assume or permit to exist any Lien on or with respect to any of its
assets or property of any character, whether now owned or hereafter acquired, or
any income or profits therefrom, except for Permitted Liens.
(c) Material Asset
Sales. Sell, lease, transfer, license or otherwise dispose of
any of its assets or property including securities (collectively, a “Transfer”),
whether now owned or hereafter acquired, except Permitted
Dispositions.
(d) Mergers,
Etc. (i) enter into any merger, consolidation, reorganization,
or recapitalization, other than any transaction constituting a Change of
Control; provided that the foregoing carveout shall not apply if Payee elects to
require a redemption of the Note under Section 4 but the cash funds then legally
available to Maker are insufficient to pay in full the Change of Control
Redemption Price, (ii) reclassify its capital stock, (iii) liquidate, wind up,
or dissolve itself (or suffer any liquidation or dissolution), (iv) suspend or
go out of a substantial portion of its or their business, or (v) change any
Borrower’s name, organizational identification number, state of organization or
organizational identity; provided, however, that a Borrower may change its name
upon at least 15 days prior written notice to Payee of such change and so long
as such Borrower provides any financing statements necessary to perfect and
continue perfected the Payee’s Liens.
(e) Prepayments and
Amendments. Except in connection with Refinancing Indebtedness
permitted by this Note or as otherwise set forth in the Waiver and Amendment
Agreement, make any payment on account of Indebtedness that has been
contractually subordinated in right of payment if such payment is not permitted
at such time under the subordination terms and conditions.
(f) Distributions. Make
any distribution or declare or pay any dividends (in cash or other property,
other than common stock) on, or purchase, acquire, redeem, or retire any of any
Borrower’s stock, of any class, whether now or hereafter
outstanding.
(g) Investments. Except
for Permitted Investments, directly or indirectly, make or acquire any
Investment or incur any liabilities (including contingent obligations) for or in
connection with any Investment; provided, however, that a Borrower shall not
have Permitted Investments in deposit accounts or securities accounts in an
aggregate amount in excess of $100,000 at any one time unless such Borrower and
the applicable securities intermediary or bank have entered into a control
agreement with Payee governing such Permitted Investments in order to perfect
(and further establish) the Payee’s Liens in such Permitted
Investments.
(h) Inactive
Subsidiaries. Permit any of the inactive subsidiaries to own
any assets, incur any liabilities, or engage in any business
activity.
12. Financial
Covenants. Bell California, on a consolidated basis, covenants
and agrees that, until termination of all of the Obligations, the Obligors will
not and will not permit any of their respective subsidiaries to do any of the
following:
(a) Minimum Adjusted
EBITDA. As of any date of determination from and after April
1, 2008, if Borrowers do not have Net Debt in an amount less than $4,000,000 at
all times during the most recently completed fiscal quarter, then Borrowers
shall not fail to achieve Adjusted EBITDA, measured on a quarter-end basis, of
at least the required amount set forth in the following table for the applicable
period set forth opposite thereto (and the failure to do so shall be deemed an
Event of Default):
|
Applicable
Amount
|
Applicable
Period
|
|
$(1,234,000)
|
For
the 3 month period ending
March
31, 2008
|
|
$(1,246,000)
|
For
the 6 month period ending
June
30, 2008
|
|
$(200,000)
|
For
the 9 month period ending
September
30, 2008
|
|
$(839,000)
|
For
the 12 month period ending
December
31, 2008
|
|
$(750,000)
|
For
the 12 month period ending
March
31, 2009
|
|
$(500,000)
|
For
the 12 month period ending
June
30, 2009
|
|
$(150,000)
|
For
the 12 month period ending
September
30, 2009
|
|
$150,000
|
For
the 12 month period ending
December
31, 2009
|
|
$350,000
|
For
the 12 month period ending
March
31, 2010
|
|
$550,000
|
For
the 12 month period ending
June
30, 2010
|
|
$750,000
|
For
the 12 month period ending
September
30, 2010
|
|
$950,000
|
For
the 12 month period ending
December
31, 2010 and
for
each 12 month period
ending
as of the last day of
each
fiscal quarter thereafter
|
(b) Capital
Expenditures. Make Capital Expenditures in any fiscal year in
excess of the amount set forth in the following table for the applicable period
without the prior written consent of Payee:
|
Fiscal
Year 2008
|
Fiscal
Year 2009
|
Fiscal
Year 2010 and thereafter
|
|
$2,400,000
|
$1,500,000
|
$1,500,000
|
13. Default. The
occurrence of any one or more of the following events shall constitute an event
of default (each, an “Event of Default”), upon which Payee may declare the
entire principal amount of this Note, together with all accrued but unpaid
interest, to be immediately due and payable in cash:
(a) The
Obligors shall fail to make any payment of principal (including, but not limited
to, upon any conversion pursuant to Section 5 hereof or the maturity of the
Note) and/or accrued but unpaid interest (at the applicable rate) on the Note
when due and payable, and such failure, in the case of any interest payment,
shall continue for a period of at least five business days.
(b) The
Obligors shall fail to perform or observe any covenant or other agreement
contained in any of Sections 11 and 12 of this Note or Section 6 of the Security
Agreement;
(c) The
Obligors shall be in material default of any term or provision of this Note
(other than any such term that is the subject of another provision of this
Section 13, in which event such other provision of this Section 13 shall
govern), the Purchase Agreement, the Registration Rights Agreement (as that term
is defined in the Purchase Agreement), the Security Agreement, the Senior Loan
Agreement and the Waiver and Amendment Agreement, and such failure shall
continue through 15 days after Payee gives written notice of such material
default to Maker.
(d) Any
representation or warranty of the Maker contained in this Note shall have been
false in any material respect on the Closing Date.
(e) Maker
or any of its subsidiaries shall (i)(A) fail to make any payment when due under
the terms of any bond, debenture, note or other evidence of indebtedness,
including the Senior Debt, to be paid by such Person (excluding this Note but
including any other evidence of indebtedness of Maker or any of its subsidiaries
to the Payee) and such failure shall continue beyond any period of grace
provided with respect thereto, or (B) default in the observance or performance
of any other agreement, term or condition contained in any such bond, debenture,
note or other evidence of indebtedness, and (ii) in each case, the effect of
such failure or default is to cause, or permit the holder or holders thereof to
cause, indebtedness in an aggregate amount of one million dollars ($1,000,000)
or more to become due prior to its stated date of maturity, unless such
acceleration shall have been rescinded and such failure to pay cured within
thirty (30) days from the date of such acceleration.
(f) A
final judgment or order for the payment of money in excess of one million
dollars ($1,000,000) (exclusive of amounts covered by insurance issued by an
insurer not an affiliate of Maker) shall be rendered against the Maker or any of
its subsidiaries and the same shall remain undischarged for a period of thirty
(30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
the Maker or any of its subsidiaries and such judgment, writ, or similar process
shall not be released, stayed, vacated or otherwise dismissed within thirty (30)
days after issue or levy.
(g) If
any Obligor or any subsidiary of an Obligor is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or any material part
of its business affairs.
(h) If
a binding arbitration or final judgment or order renders that (i) any Obligor is
in default of the SkyTel Sale Agreements that causes an order for the payment of
greater than five hundred thousand ($500,000), or (ii) any Obligor must pay an
indemnity claim of greater than five hundred thousand ($500,000) under the
SkyTel Sale Agreements, and such claim shall remain undischarged for a period of
thirty (30) days.
(i) Any
Liens of Payee in any of the assets of Maker or its subsidiaries shall cease to
be or shall not be valid and perfected Liens or the Maker or any subsidiary
shall assert that such Liens are not valid and perfected Liens.
(j) The
Maker or any of its subsidiaries, pursuant to or within the meaning of Title 11,
U.S. Code, or any similar federal, foreign or state law for the relief of
debtors (collectively, “Bankruptcy Law”), (i) commences a voluntary case, (ii)
consents to the entry of an order for relief against it in an involuntary case,
(iii) consents to the appointment of a receiver, trustee, assignee, liquidator
or similar official (a “Custodian”), (iv) makes a general assignment for the
benefit of its creditors or (v) admits in writing that it is generally unable to
pay its debts as they become due.
(k) A
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (i) is for relief against the Maker or any of its subsidiaries in an
involuntary case, (ii) appoints a Custodian of the Maker or any of its
subsidiaries or (iii) orders the liquidation of the Maker or any of its
subsidiaries.
Without
limiting the above, the Maker acknowledges that payments (including but not
limited to upon conversion of this Note) on the various scheduled due dates are
of essence and that any failure to timely make any applicable payment of the
principal or interest (within any permitted grace period) permits Payee to
declare this Note immediately due in cash in its entirety without any prior
notice of any kind to Maker, except for the specific notices provided
above. Upon the occurrence and during the continuance of an event of
default, the interest rate under this Note shall be increased to the lesser of
(a) sixteen percent (16%) or (b) the highest lawful interest rate permitted by
applicable law. In the event that such event of default is
subsequently cured, the adjustment referred to in the preceding sentence shall
cease to be effective as of the date of such cure; provided that the interest as
calculated and unpaid at such increased rate during the continuance of such
event of default shall continue to apply to the extent relating to the days
after the occurrence of such event of default through and including the date of
cure of such event of default.
14. Applicable Law;
Forum. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS
NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF. EACH OF PAYEE
AND MAKER CONSENTS TO SUBMIT TO THE PERSONAL JURISDICTION OF ANY STATE OR
FEDERAL COURT SITTING IN THE STATE OF TEXAS, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT, AND AGREES NOT TO
BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE IN ANY
OTHER COURT. EACH OF THE PARTIES TO THIS AGREEMENT AGREES NOT TO
ASSERT IN ANY ACTION OR PROCEEDING ARISING OUT OF RELATING TO THIS NOTE THAT THE
VENUE IS IMPROPER, AND WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE
MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND, SURETY
OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY WITH RESPECT
THERETO.
15. Waivers. The
Maker hereby waives presentment for payment, notice of dishonor, protest and
notice of payment and all other demands and notices of any kind in connection
with the enforcement of this Note. Any provision of this Note may be
amended, waived or modified upon the written consent of Maker and
Payee. No failure or delay on the part of the Payee in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege.
16. Effect of Shareholder
Vote. No term of this Note shall be modified or voided as a
result of any vote of the Company’s shareholders (or failure to obtain any such
vote) unless the approval of the Company’s shareholders is required by state law
to make such term of this Note effective.
17. No
Setoffs. The Maker shall pay (and, if applicable, this Note
shall automatically accrete in respect of) principal and interest under the Note
without any deduction for any setoff or counterclaim.
18. Costs of
Collection. If this Note is not paid when due, the Maker shall
pay Payee’s reasonable costs of collection, including reasonable attorneys’
fees.
19. Notices. Whenever
notice is required to be given under this Note, such notice shall be given in
accordance with Section 7.7 of the Purchase Agreement.
20. Transferability. This
Note shall be transferable by Payee. Neither this Note, nor any
obligations hereunder, shall be assignable by Maker without Payee’s express
written consent.
21. Inspection
Rights. The Holder and its representatives shall have the
right, at any time during normal business hours, upon reasonable prior notice,
to visit and inspect the properties of Maker and its corporate, financial and
operating records, and make abstracts therefrom.
22. Severability. The
invalidity, illegality or unenforceability of one or more of the provisions of
this Note in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Note in such jurisdiction or the
validity, legality or enforceability of this Note, including any such provision,
in any other jurisdiction, it being intended that all rights and obligations of
the parties hereunder shall be enforceable to the fullest extent permitted by
law. Payee does not agree or intend to contract for, charge, collect,
take, reserve or receive any amount in the nature of interest or otherwise which
would in any way or event (including demand, prepayment or acceleration) cause
Payee to collect more on its loan that the maximum amount Payee would be
permitted to charge or collect by federal law or the law of the State of Texas
(as applicable). Any such excess interest shall instead of anything
to the contrary, be applied first to reduce the outstanding principal balance of
this Note, and when the principal balance has been paid in full, be refunded to
Maker.
23. This
Note is a replacement, consolidation, amendment and restatement of the amended
and restated convertible promissory note by Maker to Payee dated March 12, 2007
in the original principal amount of $10,000,000 (the “Prior Note”) and IS NOT A
NOVATION. Maker shall also pay, and this Note shall also evidence,
any and all unpaid interests on all outstanding principal pursuant to the Prior
Note, and at the interest rate specified therein, for which this Note has been
issued as replacement therefor. Payee confirms that the
representations and warranties made in Section 4 of the Purchase Agreement are
true and correct as of the date hereof with respect to this Note and the
securities underlying this Note.
(SIGNATURE
PAGE FOLLOWS)
IN
WITNESS WHEREOF, the undersigned Obligors have hereunto affixed their
signatures.
|
XXXX
INDUSTRIES, INC., a California corporation
|
|||||
|
By
|
/s/
Xxxxx Xxxxxxx
|
||||
|
Its
|
President
& CEO
|
||||
|
XXXX
INDUSTRIES, INC., a Minnesota corporation
|
|||||
|
By
|
/s/
Xxxxx Xxxxxxx
|
||||
|
Its
|
EVP
& CEO
|
||||
