Contract
Exhibit
10.1
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER
THE ACT AND THE RULES AND REGULATIONS THEREUNDER.
EACH
HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE
BOUND BY THE PROVISIONS OF THIS NOTE. THIS NOTE AND THE RIGHTS AND
OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE TO CERTAIN INDEBTEDNESS AS SET
FORTH HEREIN.
THIS NOTE
MAY NOT BE ASSIGNED, NEGOTIATED OR TRANSFERRED EXCEPT AS SET FORTH
HEREIN.
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$2,191,123
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February
28, 2008
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FOR VALUE
RECEIVED, the undersigned, MTM TECHNOLOGIES, INC., a New York corporation (the
"Borrower"),
promises to pay to PEQUOT PRIVATE EQUITY FUND III, L.P. (the "Holder"), the
principal sum of two million one hundred ninety one thousand one hundred twenty
three dollars ($2,191,123) with interest on the unpaid balance from the date
hereof, at the rate of eight and one-half percent (8.5%) per annum in lawful
money of the United States of America, at c/o Pequot Capital Management, Inc.,
000 Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, or at such other place as the
Holder may designate in writing.
The
principal of and interest on this Note shall be due and payable in full
on the later
of (a) March 29, 2008, or (b) the date that the Borrower has obtained all
necessary consents from its Senior Lenders (as hereinafter defined) to such
payment (the "Maturity
Date"). Interest on this Note shall be due and payable in cash
or, at the option of the Borrower, in shares of the series of preferred stock of
the Borrower next designated by the Borrower after the date hereof, at a price
per share of $.561.
On the
date hereof, in addition to the issuance of this Note, the Borrower issued to
another lender another note. All such notes issued by the Borrower on the date
hereof were for the aggregate amount of $2,500,000. All such notes issued by the
Borrower on the date hereof are referred to herein as the “February 28, 2008
Notes”.
All
computations of interest payable hereunder shall be made on the basis of the
actual number of days in the period for which such interest is payable and a
year of 365 or 366 days, as applicable. Notwithstanding any other
provision of this Note, to the extent permitted by applicable law, interest
shall be due and payable on any overdue unpaid installment of principal or
interest on this Note (including amounts due and unpaid upon any acceleration of
this Note) within five (5) days of its due date at a rate equal to the lesser of
(i) ten and one-half percent (10.5%) and (ii) the maximum rate permitted by
applicable law.
1. Payment and Prepayment of
the Note. The principal of this Note and the interest accrued
hereon may be prepaid in whole at any time.
2. Event of Default;
Remedies. (a) Upon the occurrence and
during the continuance of an Event of Default, this Note may be accelerated upon
the written consent and direction of the holders holding a majority of the then
outstanding aggregate principal balance of the February 28, 2008 Notes and as
provided in this Section 2 and the Holder shall have all of the rights and
remedies provided herein. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(for any reason, whether voluntary, involuntary or effected or required by
law):
(i) The
Borrower shall fail to pay when due the principal of this Note or any
of the February 28, 2008 Notes.
(ii) The
Borrower shall fail to pay when due the interest on this Note or any of the
February 28, 2008 Notes and such failure shall have continued for a period of
three Business Days; provided, however, that for the avoidance of doubt, any
accrual of interest permitted under this Note or any of the February 28, 2008
Notes (in lieu of payment thereof) shall not constitute an Event of
Default. For the purposes of this Note a “Business Day” shall
mean any day other than a Saturday, Sunday, public holiday under the laws of the
State of New York or any other day on which banking institutions are authorized
to close in New York City
(iii) A
proceeding shall have been instituted in respect of the Borrower or any of its
material subsidiaries (each, a “Material
Party”):
(A) seeking to have an
order for relief entered in respect of such Material Party, or seeking a
declaration or entailing a finding that such Material Party is insolvent or a
similar declaration or finding, or seeking dissolution, winding-up, charter
revocation or forfeiture, liquidation, reorganization, arrangement, adjustment,
composition or other similar relief with respect to such Material Party, its
assets or its debts under any law relating to bankruptcy, insolvency, relief of
debtors or protection of creditors, termination of legal entities or any other
similar law now or hereafter in effect, or
(B) seeking appointment
of a receiver, trustee, liquidator, assignee, sequestrator or other custodian
for such Material Party or for all or any substantial part of its property, and
such proceeding shall result in the entry, making or grant of any such order for
relief, declaration, finding, relief or appointment, or such proceeding shall
remain undismissed and unstayed for a period of 60 consecutive
days.
(iv) Any
Material Party shall voluntarily suspend transaction of its business; shall make
a general assignment for the benefit of creditors; shall institute (or fail to
controvert in a timely and appropriate manner) a proceeding
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described
in Section 2(a)(iii)(A) or (whether or not any such proceeding has been
instituted) shall consent to or acquiesce in any such order for relief,
declaration, finding or relief described therein; shall institute (or fail to
controvert in a timely and appropriate manner) a proceeding described in Section
2(a)(iii)(B), or (whether or not any such proceeding has been instituted) shall
consent to or acquiesce in any such appointment or to the taking of possession
by any such custodian of all or any substantial part of its property; shall
dissolve, wind-up, revoke or forfeit its charter or liquidate itself or any
substantial part of its property; or shall take any action in furtherance of any
of the foregoing.
(v) An
event or condition shall have occurred which the Holder reasonably believes
creates a Material Adverse Effect. For the purposes of this Note, a “Material Adverse
Effect” shall mean an effect which is materially adverse to the business,
assets, properties, operations, results of operations or condition (financial or
otherwise) of the Borrower individually or of the Borrower and its subsidiaries
taken as a whole (excluding general economic conditions or acts of war or
terrorism).
(b) Exercise
of Remedies. If an Event of Default has occurred and is
continuing hereunder:
(i) the
Holder may declare the entire unpaid principal and interest due on the Note,
immediately due and payable, without presentment, notice or demand, all of which
are hereby expressly waived by the Borrower;
(ii) upon
the occurrence of any Event of Default specified in Section 2(a)(iii), above,
the entire unpaid principal and interest, shall become automatically and
immediately due and payable; and
(iii) the
Holder may exercise any remedy permitted by this Note or at law or in
equity.
3. Waiver of Certain
Rights. Subject to any applicable notice periods, all parties
to this Note, including Borrower and any sureties, endorsers, or guarantors,
hereby waive protest, presentment, notice of dishonor, and notice of
acceleration of maturity and agree to continue to remain bound for the payment
of principal, interest and all other sums due under this Note notwithstanding
any change or changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any extension or
extensions of time for the payment of principal and interest; and all such
parties waive all and every kind of notice of such change or changes and agree
that the same may be without notice or consent of any of them. No
Event of Default shall be waived by the Holder except in a writing signed by the
Holder. No waiver of any Event of Default shall extend to any other
or further Event of Default.
4. Pro-Rata
Payment. If the Borrower is not able to pay to the holders of the
February 28, 2008 Notes the full amounts due at any time when payments under the
February 28, 2008 Notes become due and payable by the Borrower, either on
the
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Maturity
Date or upon the occurrence of an Event of Default, the holders of the February
28, 2008 Notes shall share ratably in any distribution of the Borrower pro rata
in proportion to the respective amounts of each such holder’s February 28, 2008
Notes.
5.
Subordination.
The right of repayment of principal of
and interest on this Note shall be subordinated to the rights and security
interest of (i) GE Commercial Distribution Finance Corporation (“CDF”) in connection
with the August 21, 2007, secured Credit Facilities Agreement (“Credit Facilities
Agreement”) with CDF, as Administrative Agent, GECC Capital Markets
Group, Inc., as Sole Lead Arranger and Sole Bookrunner, and CDF and the other
lenders listed in the Credit Facilities Agreement, and (ii) Columbia Partners, L.L.C. Investment Management, as
Investment Manager and National Electric Benefit Fund (“NEBF”) in connection
with the November 23, 2005, secured credit agreement (the “CP/NEBF Credit
Agreement”) with Columbia Partners, L.L.C. Investment Management, as
Investment Manager, and NEBF, as Lender (CDF and NEBF collectively, the “Senior Lenders” and
the Credit Facilities Agreement and the CP/NEBF Credit Agreement collectively
the “Senior
Debt”). The issuance of this Note requires the consent of the
Senior Lenders pursuant to the Senior Debt. The Borrower is seeking such
consent. While any default or event of default has occurred and is
continuing with respect to any Senior Debt, the Borrower shall not make and the
Holder shall not accept any payments or distribution in respect of this Note of
any kind. The Holder agrees that this Note shall remain unsecured at all
times and the Holder shall not accept any collateral security in respect
hereof. For so long as any Senior Debt remains outstanding or any
Senior Lender shall have any obligation to lend to the Borrower, the Holder
shall not exercise any remedies or take any enforcement action against the
Borrower with respect to this Note.
6.
Representations and
Warranties of the Borrower
(a) Organization and
Qualification. Each of the Borrower and its subsidiaries is
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization and has the requisite
power and authority to own, lease and operate its assets, properties and
business and to carry on its business as it is now being conducted or proposed
to be conducted. Each of the Borrower and its subsidiaries is duly
qualified as a foreign corporation to transact business, and is in good
standing, in each jurisdiction where it owns or leases real property or
maintains employees or where the nature of its activities make such
qualification necessary, except where such failure to qualify would not have a
Material Adverse Effect.
(b) Certificate of Incorporation
and Bylaws. The Borrower has delivered to the Holder true,
correct, and complete copies of the Borrower’s certificate of incorporation as
in effect on the date hereof (the “Existing
Certificate”) and the Borrower’s bylaws as in effect on the date hereof
(the “Bylaws”).
(c) Corporate Power and
Authority. The Borrower has all requisite corporate power and
authority to execute and deliver this Note. The Borrower has all
requisite corporate power and authority to carry out and perform its obligations
under the terms of this Note.
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(d) Authorization. The
execution, delivery and performance by the Borrower of this Note, and the
performance of all of the obligations of the Borrower under this Note have been
authorized by the Board of Directors (or a duly authorized committee thereof),
and no other corporate action on the part of the Borrower and no other corporate
or other approval or authorization is required on the part of the Borrower, or
any person by law or otherwise in order to make this Note the valid, binding and
enforceable obligations (subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable remedies)
of the Borrower. This Note constitutes a valid and legally binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief, or other equitable
remedies.
(e) Consents. No
consent, approval, waiver or authorization, or designation, declaration,
notification, or filing with any person or entity (governmental or private), on
the part of the Borrower is required in connection with the valid execution,
delivery and performance of this Note or the consummation of any other
transaction contemplated hereby (other than such notifications or filings
required under applicable federal or state securities laws, if any), except for
such consents, approvals, waivers, authorizations, designations, declarations,
notifications, or filings that have been received prior to the date
hereof.
(f) Brokers or
Finders. The Borrower has not incurred, directly or
indirectly, as a result of any action taken by the Borrower, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in
connection with this Note or any transaction contemplated hereby or
thereby.
(g) Offering
Exemption. Assuming the truth and accuracy of the
representations and warranties contained in Section 7, this issuance and
delivery to the Holder of this Note is exempt from registration under the
Securities Act of 1933, as amended (the “Securities Act”), and
will be registered or qualified (or exempt from registration or qualification)
under applicable state securities and “blue sky” laws, as currently in
effect.
(h) SEC Reports. (A) The
Borrower has filed all required forms, reports and documents with the Securities
and Exchange Commission (the “SEC”) since April 1,
2001, each of which has complied in all material respects with all applicable
requirements of the Securities and the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), and the rules and regulations promulgated thereunder, each as in
effect on the date such forms, reports and documents were filed. (B) None of the
following contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein in
light of the circumstances under which they were made not misleading: (i) this
Note, (ii) the Borrower’s Existing Certificate, (iii) the Bylaws, or (iv) the
SEC Reports. There is no fact which, to the Knowledge of the
Borrower, has not been disclosed to the Holder, which could be expected to have
a Material Adverse Effect on the ability of the Borrower to perform its
obligations under the Existing Certificate, Bylaws or this Note. (C) The
Borrower is not aware of any correspondence (other than routine communications),
action or proposed or
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threatened
action by the SEC or Nasdaq with regard to the Borrower since April 1, 2006,
other than such correspondence that has been disclosed by the Company in its SEC
Reports. For the purposes of this Note, “Knowledge” shall mean
with respect to the Borrower, the knowledge, after diligent investigation, of
the directors, officers and senior management of the Borrower and of the person
or persons in such entity with responsibility for the matter with respect to
which the knowledge is applicable.
(i) Financial
Statements. Included in the Borrower’s filings with the SEC
are the audited financial statements of the Borrower and its subsidiaries as at
and for the years ended March 31, 2007, 2006 and 2005 (the “Financial
Statements”). The Financial Statements have been prepared in
accordance with GAAP and fairly present the financial condition and operating
results of the Borrower and its subsidiaries as of the date, and for the period,
indicated therein.
(j) Absence of Conflicts.
The Borrower is not in violation of or default under any provision of its
Existing Certificate or Bylaws. The execution, delivery, and performance of, and
compliance with this Note and the consummation of the transactions contemplated
hereby, have not and will not:
(i) violate,
conflict with or result in a breach of any provision of or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default), under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien upon any of the assets,
properties or business of the Borrower and the subsidiaries under, any of the
terms, conditions or provisions of the Existing Certificate or the Bylaws, or
any material contract of the Borrower (for purposes of this Section 6(j)(i) a
material contract of the Borrower shall be only those agreements that are
included as exhibits to the Borrower filings with the SEC); or
(ii) violate any
judgment, ruling, order, writ, injunction, award, decree, or any law or
regulation of any court or federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority which is
applicable to the Borrower or any subsidiary or any of their assets, properties
or business, which violation would have a Material Adverse Effect.
7. Representations and
Warranties of Holder
The Holder hereby represents and
warrants that:
(a) Organization and
Qualification. The Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization to carry on its business as it is now being conducted or proposed
to be conducted.
(b) Power and
Authority. The Holder has all requisite power and authority to
execute and deliver this Note, and to carry out and perform its obligations
under the terms of this Note.
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(c) Authorization. The
execution, delivery and performance by the Holder of this Note, and the
performance of all of the obligations of the Holder under this Note has been
duly and validly authorized, and no other action, approval or authorization is
required on the part of the Holder or any Person by Law or otherwise in order to
make this Note the valid, binding and enforceable obligations (subject to (i)
laws of general application relating to bankruptcy, insolvency, and the relief
of debtors, and (ii) rules of law governing specific performance, injunctive
relief, or other equitable remedies) of the Holder. This Note when
executed and delivered by the Holder will constitute a valid and legally binding
obligation of the Holder, enforceable against the Holder in accordance with its
terms subject to: (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief, or other equitable remedies.
(d) Acquired Entirely for Own
Account. This Note will be acquired for investment for the
Holder’s own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof. The Holder’s principal
office is 000 Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000. The
Holder is aware that the Borrower is issuing this Note pursuant to Section 4(2)
of the Securities Act and Regulation D promulgated thereunder without complying
with the registration provisions of the Securities Act or other applicable
federal or state securities laws. The Holder is also aware that the
Borrower is relying upon, among other things, the representations and warranties
of the Holder contained in this Note for purposes of complying with Regulation
D.
(e) Disclosure of
Information. The Holder has received and carefully reviewed
all the information it considers necessary or appropriate for deciding whether
to enter into this Note. The Holder further represents that the
Borrower has made available to the Holder, at a reasonable time prior to the
date of this Note, an opportunity to (a) ask questions and receive answers from
the Borrower regarding the terms and conditions of this Note and the business,
properties and financial condition of the Borrower, all of which questions (if
any) have been answered to the reasonable satisfaction of the Holder, and (b)
obtain additional information, all of which was furnished by the Borrower to the
reasonable satisfaction of the Holder. The foregoing, however, does
not limit or modify the representations and warranties of the Borrower in
Section 6 of this Note or the right of the Holder to rely thereon.
(f) Investment
Experience. The Holder acknowledges that it is able to fend
for itself, can bear the economic risk of its investment, and has such knowledge
and experience in investing in companies similar to the Borrower and in
financial or business matters such that it is capable of evaluating the merits
and risks of this Note. The Holder has made the determination to
enter into this Note based upon its own independent evaluation and assessment of
the value of the Borrower and its present and prospective business
prospects.
(g) Accredited
Investor. The Holder is an “accredited investor”
within the meaning of SEC Rule 501 of Regulation D, as presently in
effect.
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(h) Restricted Securities;
Legends. The Holder recognizes that this Note will not be
registered under the Securities Act or other applicable federal or state
securities laws. The Holder understands that the Note is
characterized as “restricted securities” under the federal securities laws
inasmuch as it is being acquired from the Borrower in a transaction not
involving a public offering. The Holder acknowledges that it may not
to sell or transfer this Note unless it is registered under the Securities Act
and under any other applicable securities laws
(i) No General
Solicitation. The Holder acknowledges that this Note was not
offered to the Holder by means of: (a) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar medium, or
broadcast over television or radio, or (b) any other form of general
solicitation or advertising.
(j) Absence of
Conflicts. The Holder’s execution, delivery, and performance
of, and compliance with this Note and the consummation of the transactions
contemplated hereby , have not and will not:
(i) violate,
conflict with or result in a breach of any provision of or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in the creation of any lien upon any of the assets,
properties or business of the Holder under, any of the terms, conditions or
provisions of (i) its certificate/articles of formation or organization or any
of its other formation or organizational documents, or (ii) any material
contract to which it is a party; or
(ii) violate any
judgment, ruling, order, writ, injunction, award, decree, or any law or
regulation of any court or federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority which is
applicable to the Holder or any of its assets, properties or businesses, which
violation would have a Material Adverse Effect.
(k) Brokers or
Finders. The Holder has not incurred, nor will it incur,
directly or indirectly, as a result of any action taken by the Holder, any
liability for brokerage or finders’ fees or agents’ commissions or any similar
charges in connection with this Note or any transaction contemplated
hereby. The Holder r agrees to indemnify and hold the Borrower
harmless from any liability for any commission or compensation in the nature of
a finders’ fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Holder, or any of its respective officers,
employees or representatives is responsible.
8. Miscellaneous. The
following general provisions apply:
(a) This
Note, and the obligations and rights of the Borrower hereunder, shall be binding
upon and inure to the benefit of the Borrower, the Holder, and their respective
heirs, personal representatives, successors and assigns. The Holder
may not transfer this Note without the consent of the Borrower, which consent
shall not be unreasonably withheld.
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(b) No
amendment or waiver of any provision of the Note, nor consent to any departure
by a party herefrom, shall in any event be effective unless the same shall be in
writing and signed by the holders holding a majority of the then outstanding
aggregate principal balance of the February 28, 2008 Notes. Any
amendment, waiver or consent so made or effected shall be binding upon all of
the holders of the February 28, 2008 Notes; provided, however, the principal
amount of this Note shall not be reduced without the prior written consent of
the holders of at least a majority of the then outstanding principal amount of
the February 28, 2008 . Any principal so reduced shall be so reduced
proportionally for all holders of the February 28, 2008 Notes.
(c) All
payments shall be made in such coin and currency of the United States of America
as at the time of payment shall be legal tender therein for the payment of
public and private debts.
All
notices and other communications required or permitted hereunder shall be in
writing. Notices shall be delivered personally, via recognized
overnight courier (such as Federal Express, DHL or Airborne Express) or via
certified or registered mail. All notices shall be effective upon
receipt. Notices may be delivered via facsimile or e-mail, provided
that by no later than two days thereafter such notice is confirmed in writing
and sent via one of the methods described in the previous
sentence. Notices shall be addressed as follows:
(i) if to the
Borrower, to MTM Technologies, Inc., 0000 Xxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx
00000, Attention: Xxxxxxx Xxxxx, with a copy to Xxxxxx Xxxx Xxxxx Raysman &
Xxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: E. Xxx Xxxx,
facsimile number (000) 000-0000.
(ii) if to the
Holder, to c/o Pequot Capital Management, Inc., 000 Xxxxx Xxxx Xxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000, with a copy to Xxxx Xxxxxxxxxx, c/o Pequot Capital
Management, Inc., 000 Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxx 00000.
(d) Whenever
possible, each provision of this Note will be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Note
is held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
but this Note will be reformed, construed and enforced in such jurisdiction to
the greatest extent possible to carry out the intentions of the parties
hereto.
(e) This
Note shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the laws of the State of New York.
Signature
on the following page
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IN
WITNESS WHEREOF, the Borrower has caused this instrument to be executed in its
corporate name by a duly authorized officer, by order of its Board of Directors
as of the day and year first above written.
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By:
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/s/ Xxxxx Xxxxxxxx | |
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Name:
Xxxxx Xxxxxxxx
Title: President
and Chief Operating Officer
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Signature
Page to MTM Technologies, Inc. Subordinated Promissory Note
for Pequot
Private Equity Fund III, L.P.
