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EXHIBIT 10.20
DEBENTURE PURCHASE AGREEMENT
BETWEEN
NFRONT, INC.
AND
NORO-XXXXXXX PARTNERS IV, L.P.
DATED APRIL 22, 1999
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DEBENTURE PURCHASE AGREEMENT
THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement"), dated as of the
22nd day of April, 1999, is made and entered into on the terms and conditions
hereinafter set forth, by and among NFRONT, INC., a Georgia corporation
("Borrower") and NORO-XXXXXXX PARTNERS IV, L.P., a Georgia limited partnership
(the "Lender").
RECITALS:
WHEREAS, Borrower has requested that Lender make available to Borrower
a loan in the aggregate principal amount of up to $5,000,000 (the "Loan") on
the terms and conditions hereinafter set forth, and for the purposes
hereinafter set forth; and
WHEREAS, in order to induce Lender to make the Loan available to
Borrower, Borrower has made certain representations to Lender and has agreed to
issue to Lender a warrant to purchase shares of Borrower's common stock; and
WHEREAS, Lender, in reliance upon the representations and inducements
of Borrower, has agreed to make the Loan if and when requested by Borrower upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the agreement of Lender to make
the Loan, the mutual covenants and agreements hereinafter set forth, and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Lender hereby agree as follows:
ARTICLE I
DEBENTURES AND WARRANT
1.01 Authorization of Debentures and Warrant. Borrower has
authorized the issue and sale of (a) its Senior Subordinated Debentures dated
of even date herewith, in the aggregate principal amount of up to $5,000,000
(the "Debentures"), which shall be in substantially the form attached hereto as
Exhibit A, and (b) a Stock Purchase Warrant (the "Warrant"), which shall be in
substantially the form attached hereto as Exhibit B. The parties agree that
upon the issuance of the Warrant they will, in good faith, determine the
aggregate fair market value of the Warrant for purposes of IRC Treasury
Regulations Section 1.1273-2(h). Borrower and Lender agree to use the fair
market value as so determined for U.S. federal tax purposes with respect to the
transactions contemplated by this Agreement (unless otherwise required by final
determination by the Internal Revenue Service or a court of competent
jurisdiction); provided, however, that the fair market value of the Warrant for
purposes of financial reporting shall be in accordance with generally accepted
accounting principles consistently applied ("GAAP").
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1.02 Sale and Purchase of Debentures and Issuance of Warrant.
(a) Loan Commitment. From time to time during the Commitment
Period (as hereinafter defined) and subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set forth,
Borrower shall have the right to issue and sell to Lender and Lender shall be
obligated to purchase from Borrower on the date set forth in the Notice of
Borrowing (as hereinafter defined) a Debenture in the principal amount set
forth on the Notice of Borrowing at a price of 100% of the principal amount
thereof, provided that the aggregate principal amount of the Debentures issued
hereunder shall not exceed $5,000,000. "Commitment Period" shall mean the
period commencing on the date of this Agreement and ending on or before the
earlier of (i) one year from the date of this Agreement or (ii) the closing of
an underwritten initial public offering of Borrower's common stock pursuant to
a registration statement which has become effective under the Securities
Exchange Act of 1933, as amended (the "Securities Act"). The last day of the
Commitment Period shall be referred to herein as the "Expiration Date."
(b) Notice of Borrowing. For each borrowing hereunder, Borrower
shall give Lender prior written notice (a "Notice of Borrowing") specifying the
principal amount of the Debenture and the requested date of the purchase and
sale of the Debenture. Borrower shall deliver to Lender the Notice of Borrowing
not later than twenty (20) business days prior to the requested date of the
borrowing.
(c) Delivery. Delivery of the Debenture will be made at the office
of Borrower's counsel against payment therefor by federal funds wire transfer
to Borrower's account in immediately available funds and to the accounts and in
the amounts in accordance with Borrower's written instructions (the "Closing"),
on the requested borrowing date set forth on the Notice of Borrowing, or such
later date as Borrower and Lender shall agree (the "Closing Date"). The
Debenture delivered to Lender on the Closing Date will be delivered to Lender
in the form of a single Debenture for the full amount of such purchase by
Lender (unless different denominations are specified by Lender, each registered
in Lender's name or in the name of such nominee as Lender may specify and, with
appropriate instructions) all as Lender may specify at least twenty-four (24)
hours prior to the date fixed for delivery.
1.03 Issuance of Warrant. In consideration of Lender's commitment
to make the Loan pursuant to Section 1.02(a) hereof, Borrower shall issue to
Lender the Warrant on the earlier of (i) the date upon which the Company's
registration statement for its initial underwritten public offering (the
"Company IPO") is declared effective (the "IPO Effective Date") by the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act") or (ii) September 1, 1999. The Warrant shall
entitle Lender to purchase a number of shares of Borrower's common stock, no
par value per share ("Common Stock"), equal to the quotient of $500,000 divided
by the Exercise Price, at a price per share equal to the Exercise Price. The
shares of Common Stock subject to the Warrant are referred to herein as the
"Warrant Shares". "Exercise Price" shall mean (i) the price per share of the
Common Stock offered pursuant to the Company IPO set forth on the prospectus
therefor on the IPO Effective Date or (ii) if the IPO
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Effective Date has not occurred on or before September 1, 1999, $23.80 (as
adjusted hereafter for any recapitalization, subdivision or split of
outstanding Common Stock or similar transactions with respect to the capital
stock of the Company occurring after the date of this Agreement). The Warrant
shall be substantially in the form set forth on Exhibit B. Lender shall make no
additional payment for the Warrant.
1.04 Fourth Addendum to Shareholder Agreement. In order to confirm
that Lender will have the registration rights with respect to the Warrant
Shares provided in that certain Shareholder Agreement, dated as of May 13,
1998, by and among the Company, its holders of Common Stock and Lender, as
amended pursuant to the First Addendum to Shareholder Agreement, dated as of
August 25, 1998, the Second Addendum to Shareholder Agreement, dated as of
September 21, 1998, and the Third Addendum to Shareholder Agreement, dated as
of April 14, 1999, the Company shall execute, and shall use its best efforts to
cause the holders of at least 67% of the shares of capital stock of the Company
to execute, a Fourth Addendum to Shareholder Agreement in the form of Exhibit C
hereto simultaneously with the execution of this Agreement.
ARTICLE II
SUBORDINATION
2.01 Subordination. Notwithstanding anything to the contrary in
this Agreement or in the Debentures, the indebtedness evidenced by the
Debentures, including principal and interest, shall be subordinate and junior
to the prior payment of the obligations described in Section 2.01 of the
Disclosure Schedule delivered by Borrower to the Lender in connection with this
Agreement (the "Disclosure Schedule"), together with all obligations (whether
to the same lender or otherwise) issued in refinancings, renewal, deferral,
extension, refunding, amendment or modification of any such indebtedness
(collectively, the "Senior Indebtedness"). Nothing in this Agreement shall be
deemed to preclude payments of principal and interest or other amounts pursuant
to the Debentures to the extent that no event of default has occurred with
respect to the Senior Indebtedness such that the Senior Indebtedness has become
due in full.
2.02 Liquidation, etc. (a) Upon any distribution of assets of
Borrower in connection with any dissolution, winding up, liquidation or
reorganization of Borrower (whether in bankruptcy, insolvency, or receivership
proceedings or upon an assignment for the benefit of creditors or otherwise),
the holders of all Senior Indebtedness shall first be entitled to receive
payment in full of the principal thereof, premium, if any, and interest due
thereon, and all costs and expenses (including reasonable attorneys' fees)
related thereto, before the holder(s) of the Debentures shall be entitled to
receive any payment on account of the principal of or interest on or any other
amount owing with respect to the Debentures (other than payment in shares of
capital stock of Borrower as reorganized or readjusted, or securities of
Borrower or any other corporation provided for by a plan of reorganization or
readjustment, which stock and securities are subordinated to the payment of all
Senior Indebtedness and securities received in lieu thereof that may at the
time be outstanding). Under the circumstances provided in this Agreement, the
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holders of the Senior Indebtedness shall have the right to receive and collect
any distributions made with respect to the Debentures until such time as the
Senior Indebtedness is paid in full, and shall have the further right to take
such actions as may be deemed necessary or required to so receive and collect
such distributions including making or filing any proofs of claim relating
thereto.
(b) Without in any way modifying the provisions of this Article II
or affecting the subordination effected hereby if such notice is not given,
Borrower shall give prompt written notice to Lender of any dissolution, winding
up, liquidation or reorganization of Borrower (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise).
2.03 Subrogation. Upon the prior payment in full of all Senior
Indebtedness, Lender shall be subrogated to the rights of the holders of the
Senior Indebtedness to receive payments or distributions of assets of Borrower
applicable to the Senior Indebtedness until all amounts owing on the Debentures
shall be paid in full, and for the purpose of such subrogation, no payments or
distributions to Lender otherwise payable or distributable to the holders of
Senior Indebtedness shall, as between Borrower, its creditors (other than the
holders of Senior Indebtedness) and Lender, be deemed to be payment by Borrower
to or on account of the Debentures, it being understood that the provisions of
this Article II are and are intended solely for the purpose of defining the
relative rights of Lender, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
2.04 Borrower's Obligations Not Impaired. (a) Nothing contained in
this Article II or in the Debentures is intended to or shall impair, as between
Borrower and Lender, the obligation of Borrower, which is absolute and
unconditional other than with respect to the holders of the Senior
Indebtedness, to pay Lender the principal of and interest on the Debentures as
and when the same shall become due and payable in accordance with the terms of
the Debentures or is intended to or shall affect the relative rights of Lender
nor, except as expressly provided in this Article II shall anything in this
Agreement or therein prevent Lender from exercising all remedies otherwise
permitted by applicable law upon the occurrence of an Event of Default under
this Agreement or under the Debentures.
(b) If any payment or distribution shall be received in
respect of any of the Debentures in contravention of the terms of this Article
II, such payment or distribution shall be held in trust for the holders of the
Senior Indebtedness, and shall be immediately delivered to such holders in the
same form as received.
2.05 Further Assurances. If requested by Borrower or a
holder of Senior Indebtedness, Lender hereby agrees to negotiate in good faith
with such holder of Senior Indebtedness the terms and conditions of a
subordination or intercreditor agreement that would supersede the provisions
for subordination set forth in this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
3.01 Corporate Status. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation, and has the corporate power to own and operate its properties,
to carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement, the Debentures and the Warrant. Except as set
forth in Section 3.01 of the Disclosure Schedule, Borrower is duly qualified to
do business and is in good standing in each state in which a failure to be so
qualified would have a materially adverse effect on Borrower's financial
position or its ability to conduct its business in the manner now conducted
("Material Adverse Effect").
3.02 Subsidiaries. Borrower has no subsidiaries and has no direct
or indirect ownership interests in any other entity.
3.03 Authorization. Borrower has full legal right, power and
authority to enter into and perform its obligations under this Agreement, the
Debentures and Warrant. The execution and delivery of this Agreement, the
borrowing hereunder, the execution and delivery of the Debentures and of the
Warrant, and the performance by Borrower of its obligations hereunder and/or
thereunder are within its corporate powers and have been duly authorized by all
necessary corporate action properly taken, have received all necessary
governmental approvals, if any were required, and do not and will not
contravene or conflict with any provision of law, any applicable judgment,
ordinance, regulation or order of any court or governmental agency, the
Articles of Incorporation or Bylaws of Borrower or any agreement binding upon
it or its properties. The officer(s) executing this Agreement, the Debentures
and the Warrant is (are) duly authorized to act on behalf of Borrower.
3.04 Validity and Binding Effect. This Agreement, the Debentures
and the Warrant are the legal, valid and binding obligations of Borrower
enforceable in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally affecting creditors' rights and to the effect on
enforceability of certain remedies of rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.05 No Consent Required. Except as set forth in Except as set
forth in Section 3.05 of the Disclosure Schedule, delivery and performance of
this Agreement, the Debentures and the Warrant by Borrower do not require the
consent or approval of or the giving of notice to any person or entity, other
than the approval of the Board of Directors of Borrower.
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3.06 Capitalization. Section 3.06 of the Disclosure Schedule sets
forth, as of the date hereof, Borrower's total authorized capitalization and
the number of shares of each class of capital stock which are issued and
outstanding. The Company has reserved a sufficient number of shares of Common
Stock for issuance upon exercise of the Warrant. All the outstanding shares of
capital stock of Borrower have been duly authorized, are validly issued and are
fully paid and nonassessable. The shares of Common Stock issuable upon exercise
of the Warrant, upon issuance, will have been duly authorized, will be validly
issued and will be fully paid and nonassessable. Except as set forth in Section
3.06 of the Disclosure Schedule, there are no options, warrants or rights to
acquire shares of the capital stock or other securities of Borrower authorized,
issued or outstanding.
3.07 Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of Borrower, threatened, against Borrower, at law
or in equity, or before any governmental or administrative agency, except
actions, suits and proceedings that are fully covered by insurance and that, if
adversely determined, would not impair the ability of Borrower to perform each
and every one of its obligations under and by virtue of this Agreement; and
Borrower is not in default with respect to any order, writ, injunction, decree
or demand of any court or any governmental authority.
3.08 Financial Statements. The audited balance sheets of Borrower
as of June 30, 1998 and June 30, 1997, and the related statements of
operations, stockholders' equity, and cash flows for the fiscal year ended June
30, 1998 and for the period from June 17, 1996 (date of inception) through June
30, 1997, heretofore delivered to Lender have been prepared on the basis of
GAAP, and fairly present the financial condition of Borrower as of the date(s)
thereof. No materially adverse change has occurred in the financial condition
of Borrower since the date(s) thereof.
3.09 No Defaults. Consummation of the transactions hereby
contemplated and the performance of the obligations of Borrower under and by
virtue of the Debenture and the Warrant will not result in any breach of, or
constitute a default under, the Articles of Incorporation or Bylaws of Borrower
or any mortgage, security deed or agreement, deed of trust, lease, loan or
credit agreement, partnership agreement, license, franchise or any other
material instrument or agreement to which Borrower is a party or by which
Borrower or its properties may be bound or affected.
3.10 Compliance With Law. Borrower has obtained all licenses,
permits and governmental approvals and authorizations necessary or proper in
order to conduct its business and affairs as heretofore conducted and as
hereafter intended to be conducted except where the failure to obtain such
licenses, permits, approvals or authorizations would not, individually or in
the aggregate, have a Material Adverse Effect. Borrower is in material
compliance with all laws, regulations, decrees and orders applicable to it
(including, but not limited to, laws, regulations, decrees and orders relating
to environmental, occupational and health standards and controls, antitrust,
monopoly, restraint of trade or unfair competition) and any noncompliance, in
the aggregate, cannot reasonably be expected to have an adverse effect on its
business, operations,
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property or financial condition and will not adversely affect its ability to
perform its obligations under this Agreement, Debenture or the Warrant.
3.11 Taxes. Borrower has filed or caused to be filed all tax
returns that are required to be filed (except for returns that have been
appropriately extended), and has paid all taxes shown to be due and payable on
said returns and all other taxes, impositions, assessments, fees or other
charges imposed on it by any governmental authority, agency or instrumentality,
prior to any delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved),
except where the failure to file any such return or to pay any such tax would
not have a Material Adverse Affect.
3.12 Title to Property. Borrower does not own any real property. As
of the date hereof Borrower has good and marketable title to all of the
property and assets used in its business, and has good title to all its
leasehold interests, free and clear of any and all claims, liens, encumbrances,
equities and restrictions of every kind and nature whatsoever, except as set
forth in Section 3.12 of the Disclosure Schedule and except for such claims,
liens, encumbrances, equities and restrictions as are not in the aggregate
material to the business, operations or financial condition of Borrower.
3.13 Margin Requirements. Without expanding the limited uses of
proceeds of the Loan set forth in Section 5.01 of this Agreement, Borrower
agrees that Borrower shall not use any of the funds advanced under the Loan for
the purpose of acquiring or carrying "margin stock" for the purposes of
Regulations G, T, X or U of the Federal Reserve Board.
3.14 ERISA Compliance. Borrower does not maintain a pension or
profit sharing plan, and, to the best knowledge of Borrower, is not subject to
any of the funding or vesting requirements of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any requirement which could
create an accumulated funding deficiency within the meaning of ERISA. Borrower
has not incurred any liability to the Pension Benefit Guaranty Corporation
established under ERISA (or any successor thereto under ERISA). The
consummation of the transaction set forth in this Agreement will not constitute
a "prohibited transaction" within the meaning of Section 4975 of the Internal
Revenue Code of 1986, as amended, or Section 406 of ERISA.
3.15 Small Business Concern. Borrower, together with its
"affiliates" (as that term is defined in 13 C.F.R. Section 121.103), if any, is
a "Small Business" within the meaning of 15 U.S.C. Section 662(5), that is
Section 103(5) of the Small Business Investment Act of 1958, as amended (the
"SBIC Act"), and the regulations thereunder, including 13 C.F.R. Section
107.710, and meets the applicable size eligibility criteria set forth in 13
C.F.R. Section 121.301(c)(1) or the industry standard covering the industry in
which Borrower is primarily engaged as set forth in 13 C.F.R. Section
121.301(c)(2). Neither Borrower nor any of its subsidiaries presently engages
in any activities for which a small business investment company is prohibited
from
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providing funds by the SBIC Act and the regulations thereunder, including 13
C.F.R. Section 107.
3.16 Disclosure. To the best of Borrower's knowledge, this
Agreement, the Schedules and exhibits hereto, when taken as a whole, does not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein not misleading
in light of the circumstances under which they were made.
ARTICLE IV
LENDER'S REPRESENTATIONS AND WARRANTIES
Lender hereby represents and warrants to Borrower as follows:
4.01 Purchase for Own Account. Lender is acquiring the Warrant and,
upon issuance of each Debenture hereunder will acquire the Debenture, for
Lender's own account and not with a present view towards the distribution
thereof or the Warrant Shares (the Warrant Shares collectively with the Warrant
and the Debentures, the "Securities").
4.02 Information. Lender has had an opportunity to review all
materials relating to the business, finances and operations of Borrower. Lender
has been afforded the opportunity to ask questions of Borrower and has received
what Lender believes to be satisfactory answers to any such inquiries.
4.03 Authorization; Enforcement. Lender has the requisite power and
authority to enter into and perform its obligations under this Agreement and to
purchase the Debenture and acquire the Warrant in accordance with the terms
hereof. This Agreement has been duly and validly authorized, executed and
delivered on behalf of Lender and is a valid and binding agreement of Lender
enforceable against Lender in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other laws affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
4.04 Transfer or Resale. Lender understands that (i) the Securities
have not been and are not being registered under the Securities Act or any
state securities laws, and may not be transferred unless (a) subsequently
registered thereunder, or (b) Lender shall have delivered to Borrower an
opinion of counsel reasonably acceptable to Borrower (which opinion shall be in
form, substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Securities to be sold or transferred may
be sold or transferred under an exemption from such registration, or (c) sold
under Rule 144 promulgated under the Securities Act (or a successor rule); and
(ii) neither Borrower nor any other person or entity is under any obligation to
register such Securities under the Securities Act or any state securities laws
to comply with the terms and conditions of any exemption thereunder.
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4.05 Legends. Lender understands that until such time as the
Warrant, the Warrant Shares or the Debentures, as applicable, have been
registered under the Securities Act or otherwise sold by Lender under Rule 144,
the certificates for such securities shall bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.
4.06 Accredited Investor Status. Lender is an "Accredited Investor"
as that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
4.07 General Solicitation. Lender was not solicited by means of a
"general solicitation," as such term is defined in Regulation D with respect to
any of the Securities being offered hereby.
4.08 Brokers or Finders. Borrower has not, and will not, incur,
directly or indirectly, as a result of any action taken by Lender, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS
5.01 Use of Proceeds, Restrictions on Activities.
(a) Neither Borrower nor any of its subsidiaries will engage in
any activities or use directly or indirectly the proceeds from the Loan for any
purpose for which a small business investment company is prohibited from
providing funds by the SBIC Act and the regulations promulgated thereunder,
including 13 C.F.R. Section 107.
(b) Borrower will use the proceeds from the Loan for the purposes
and in the amounts set forth in Section 5.01 of the Disclosure Schedule. Upon
Lender's request, Borrower will deliver within ninety (90) days of the Closing
to Lender a written report, certified as correct by Borrower's chief executive
officer or chief financial officer, verifying the purposes and the amounts for
which proceeds from the Loan have been disbursed. Borrower will supply to
Lender such information and documents as Lender reasonably requests with
respect to use of proceeds and will permit Lender to have reasonable access to
any and all records and information and
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personnel of Borrower as Lender reasonably deems necessary to verify how
proceeds have been or are being used and to assure that the proceeds have been
used for the purposes specified.
(c) Borrower will not, without obtaining the prior written consent
of the Lender, change within one year of the Closing hereunder Borrower's
business activity from that currently conducted to a business activity for
which a small business investment company is prohibited from providing funds by
the SBIC Act and the regulations promulgated thereunder. Borrower agrees that
any such changes in its business activity without such prior written consent of
the Lender will at the Lender's sole option constitute an event of default
under the Debenture (an "Activity Event of Default"). Subject to the provisions
of Article II hereof, if an Activity Event of Default occurs, the Lender shall
have the right to demand immediate repayment of the Debenture with interest to
the date of repayment, and Borrower will immediately make such payment within
three (3) days of receipt of a demand. The payment remedy is in addition to any
and all other rights and remedies against Borrower and others to which Lender
may be entitled.
5.02 Limitations on Debt and Obligations. Borrower shall not issue,
assume, guarantee or otherwise become liable or permit to exist any
indebtedness except (i) the Senior Indebtedness, provided that unanimous
approval of the members of Borrower's Board of Directors shall be required for
any Senior Indebtedness in excess of $3,000,000; (ii) the indebtedness incurred
pursuant to the Debentures, provided that unanimous approval of the members of
Borrower's Board of Directors shall be required for the issuance of a Notice of
Borrowing pursuant to Section 1.02(b) hereof if the principal amount of the
Debenture to be issued thereunder when aggregated with any other
then-outstanding Debentures is in excess of $3,000,000; (iii) accounts payable
and other trade payables incurred in the ordinary course of business; (iv)
obligations of Borrower pursuant to capitalized leases and/or purchase money
financing of equipment not exceeding $500,000 in the aggregate, or (v)
indebtedness that refinances Senior Indebtedness under clause (i) above.
Borrower agrees to use commercially reasonable efforts to refinance all
outstanding indebtedness pursuant to the Debentures prior to the Expiration
Date.
5.03 Financial Statements and Reports. From and after the date of
this Agreement and until the earlier of the date each of the Debentures is no
longer outstanding or the Expiration Date, Borrower shall furnish to Lender (i)
within ninety (90) days after the end of each fiscal year of Borrower, an
audited balance sheet of Borrower as of the close of such fiscal year, an
audited income statement of Borrower for such fiscal year, and audited
statements of cash flows for Borrower for such fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and in such form as has customarily
been prepared by Borrower; (ii) within forty-five (45) days of the end of each
calendar month, balance sheets of Borrower as of the close of such month and an
income statement of Borrower for such month, all in reasonable detail, and
prepared on the basis of accounting principles consistently applied, together
with a certificate of Borrower's Chief Executive Officer and/or Chief Financial
Officer confirming Borrower's compliance (or lack thereof) with all the terms
and conditions of this Agreement; and (iii) with reasonable promptness, such
other financial data as Lender may reasonably request from time to time.
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5.04 Maintenance of Books and Records, Inspection. Borrower shall
maintain its books, accounts and records on the basis of accounting principles
consistently applied, and permit a representative of Lender, at Lender's
expense and upon two (2) business days' prior written notice, to visit and
inspect any of its properties, corporate books and financial records, and to
discuss its accounts, affairs and finances with Borrower or the principal
officers of Borrower during business hours, and without interruption of
Borrower's business, all at such times as Lender may reasonably request.
5.05 Insurance. Borrower shall maintain insurance with coverages
and in such amounts as shall be reasonably necessary and appropriate to protect
Borrower's assets.
5.06 Taxes and Assessments. Borrower shall (a) file all tax returns
and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency, (b) pay and discharge all
taxes, assessments and governmental charges or levies imposed upon Borrower,
upon its income and profits or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and (c) pay all taxes, assessments
and governmental charges or levies that, if unpaid, might become a lien or
charge upon any of its properties; provided, however, that Borrower in good
faith may contest any such tax, assessments and governmental charge or levy
described in the foregoing clauses (b) and (c) so long as adequate reserves are
maintained with respect thereto.
5.07 Corporate Existence. Borrower shall maintain its corporate
existence and good standing in the state of its incorporation and its
qualification and good standing as a foreign corporation in each jurisdiction
in which such qualification is required by applicable law, except where the
failure to be so qualified would not have a Material Adverse Effect.
5.08 Compliance with Law and Agreements, Borrower shall maintain
its business operations and property owned or used in connection therewith in
compliance in all material respects with (i) all applicable federal, state and
local laws, regulations and ordinances governing such business operations and
the use and ownership of such property, and (ii) all agreements, licenses,
franchises, indentures, mortgages and deeds of trust to which Borrower is a
party or by which Borrower or any of its properties is bound.
5.09 Notice of Default. Borrower shall give written notice to
Lender of the occurrence of any Event of Default (as defined below) under this
Agreement or any event of default under the Debentures or the Warrant promptly
upon the occurrence thereof.
5.10 Negative Covenants.
(a) For so long as any Debenture remains outstanding or
upon the Expiration Date, if a Debenture has not been issued as of such date
(except as specifically provided under Section 5.10(a)(iii) and except with
respect to the Senior Indebtedness or in connection with the repayment of the
Senior Indebtedness), Borrower shall not, without the prior written consent of
Lender:
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(i) if there has been an Event of Default under
a Debenture (as defined in Section 7.01 hereof), declare or pay any dividends
on Common Stock, or declare or pay any dividends on the Preferred Stock;
(ii) repurchase or redeem any shares of Preferred
Stock or Common Stock except as required (but not optionally permitted) under
Borrower's Articles of Incorporation;
(iii) sell or otherwise dispose of all or
substantially all of the assets of the Company, or merge or consolidate the
Company with or into any other corporation or corporations, or merge or
consolidate any other corporation or corporations into the Company; provided,
however, that this restriction shall not apply if less than $500,000 in
principal amount of the Debentures remains outstanding; or
(iv) enter into any guaranty arrangement, or
mortgage or pledge, or create a security interest in, or permit any subsidiary
to mortgage, pledge or create a security interest in, all or substantially all
of the assets of the Company or such subsidiary, other than a guaranty
arrangement or a security interest in the assets of the Company or such
subsidiary granted to a lender pursuant to a credit facility approved by the
Board of Directors, or those security interests that arise by operation of law;
or
(v) enter into or be a party to any transaction
or arrangement with any officer, director or affiliate (including, without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of Borrower's business
and upon fair and reasonable terms no less favorable to Borrower than would
obtain in a comparable arm's-length transaction with a person other than an
affiliate, in each case as determined in good faith by a majority of the
qualified directors of Borrower (as the term "qualified" is used in Section
14-2-862 of the Georgia Business Corporation Code).
(vi) without the prior written consent of the
Lender, amend or repeal any provision of or add any provision to, Borrower's
Articles of Incorporation or Bylaws which materially affects Borrower's
obligations to Lender under this Agreement, the Debenture or the Warrant; or
(vii) without the prior written consent of the
Lender, reclassify any Common Stock into shares having any preference or
priority as to dividends, voting or assets superior to the Common Stock.
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ARTICLE VI
CONDITIONS TO CLOSING
The obligation of Lender to purchase and pay for a Debenture on the
Closing Date for such Debenture shall be subject to the fulfillment on or
before such Closing Date of each of the following conditions.
6.01 Representations and Warranties. The representations and
warranties of Borrower contained in this Agreement, in the Disclosure Schedule,
and in any other schedule hereto or any document or instrument delivered to
Lender, shall have been true and correct in all material respects when made and
shall be true and correct in all material respects as of the Closing Date as if
made on such date, except to the extent such representations and warranties
expressly relate to a specific date. Borrower shall have duly performed in all
material respects all of the covenants and agreements to be performed by it
hereunder on or prior to the Closing Date.
6.02 Required Consents. Any consents or approvals required to be
obtained from any third party, including any holder of indebtedness or any
outstanding security of Borrower, and any amendments of agreements which shall
be necessary to permit the consummation of the transactions contemplated hereby
on the Closing Date, shall have been obtained.
6.03 Conditions of Lender's Obligations. Lender shall have received
the following documents:
(a) Corporate Documents. A copy of the Articles of Incorporation
of Borrower, as amended and restated, certified by the Secretary of State of
Georgia, and certificates of good standing from the secretaries of state of
each state where Borrower conducts business, all as of a recent date.
(b) Officer's Certificate. A certificate of the President of
Borrower in the form of Exhibit D hereto certifying, among other things, to the
fulfillment of the conditions specified in Sections 6.01 and 6.02 of this
Agreement.
(c) Debenture. The Debenture, duly completed and executed.
(d) SBA Documentation. SBA Form 480 (Size Status Declaration) and
SBA Form 652 (Assurance of Compliance), which have been completed and executed
by Borrower, and SBA Form 1031 (portfolio Finance Report), Part A and Part B of
which have been completed by Borrower.
(e) Senior Indebtedness. Copies of the documentation evidencing
and securing the Senior Indebtedness.
(f) Miscellaneous. Such other documents as the Lender may
reasonably request.
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ARTICLE VII
DEFAULT AND REMEDIES
7.01 Events of Default. The occurrence of any of the following
shall constitute an Event of Default hereunder:
(a) Default in the payment of the principal of or interest on the
indebtedness evidenced by a Debenture in accordance with the terms of the
Debenture, which default is not cured within ten (10) business days;
(b) Any material misrepresentation by Borrower as to any matter
hereunder or under any of the other Loan Documents, or delivery by Borrower of
any schedule, statement, resolution, report, certificate, notice or writing to
Lender that is untrue in any material respect on the date as of which the facts
set forth therein are stated or certified;
(c) Failure of Borrower to perform any of its obligations under
this Agreement, the Debenture or the Warrant;
(d) Borrower's (i) admission in writing its inability to pay its
debts generally as they become due; or (ii) assignment for the benefit of
creditors or petition or application to any tribunal for the appointment of a
custodian, receiver or trustee for it or a substantial part of its assets; or
(iii) voluntary commencement of any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction, whether now or hereafter in effect, or the
involuntary commencement of any such proceeding that is not dismissed within
ninety (90) days; or (iv) suffering to exist any such petition or application
or any such proceeding against it in which an order for relief is entered or an
adjudication or appointment is made; or (v) indication, by any act or omission,
of its consent to, approval of or acquiescence in any such petition,
application, proceeding or order for relief or the appointment of a custodian,
receiver or trustee for it or a substantial part of its assets, or (vi)
permitting any such custodianship, receivership or trusteeship to continue
undischarged for a period of ninety (90) days or more;
(e) Borrower's liquidation, dissolution, partition or termination;
(f) (i) Borrower's default in the timely payment or performance of
the Senior Indebtedness or any principal of or premium or interest on any other
debt owed by Borrower (other than the Loan), which is outstanding in a
principal amount of at least $500,000 in the aggregate, when the same becomes
due and payable (whether by scheduled maturity, acceleration, demand or
otherwise), if such failure shall continue after any cure period applicable
thereto; or (ii) the occurrence of any other event or condition under any
agreement or instrument relating to any such indebtedness that continues after
any applicable cure period, if the effect of such event or condition is to
accelerate such indebtedness; or (iii) the acceleration of any such
16
indebtedness or otherwise declaration to be due and payable prior to the stated
maturity thereof of any such indebtedness; or (iv) requirement that any such
indebtedness be prepaid, redeemed, purchased or defeased prior to the stated
maturity thereof.
With respect to any Event of Default described above that is
capable of being cured and that does not already provide its own cure procedure
(a "Curable Default"), the occurrence of such Curable Default shall not
constitute an Event of Default hereunder if such Curable Default is fully cured
and/or corrected within thirty (30) days (ten (10) days, if such Curable
Default may be cured by payment of a sum of money) of notice thereof to
Borrower.
7.02 Acceleration of Maturity, Remedies Cumulative, No
Waiver. Upon the occurrence of any Event of Default described in Section 7.01,
the Debentures shall be immediately due and payable in full; and Lender at any
time thereafter may at its option accelerate the maturity of the Debentures. No
right, power or remedy conferred upon or reserved to Lender by this Agreement
or the Debentures or Warrant is intended to be exclusive of any other right,
power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power
and remedy given hereunder, under the Debentures or Warrant or now or hereafter
existing at law, in equity or by statute. No delay or omission by Lender to
exercise any right, power or remedy accruing upon the occurrence of any Event
of Default shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein, and every right, power and remedy given by this Agreement and the
Debentures or Warrant to Lender may be exercised from time to time and as often
as may be deemed expedient by Lender.
ARTICLE VIII
TERMINATION
This Agreement shall remain in full force and effect (i) if one or
more Debentures is issued hereunder, until the latest Maturity Date of the
Debentures (as defined in the Debentures), or the indefeasible repayment in
full of each of the Debentures, whichever is later, and (ii) if the Debenture
is not issued on or before the Expiration Date, until the Expiration Date. The
representations and warranties in Articles III and IV shall survive termination
hereunder.
ARTICLE IX
MISCELLANEOUS
9.01 Successors and Assigns Included in Parties. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrower or by or on behalf of Lender shall bind and inure
to the benefit of their heirs, legal representatives, successors,
successors-in-title and assigns, whether so expressed or not.
17
9.02 Costs and Expenses. Each party hereto agrees to pay all costs
and expenses incurred by such party in connection with this Agreement and the
transactions contemplated hereby. Borrower further agrees to pay all of the
out-of-pocket costs and expenses incurred by Lender in connection with the
collection of the Debentures upon an Event of Default, including but not
limited to reasonable attorneys' fees, promptly upon demand of Lender.
9.03 Assignment. The Debentures, this Agreement and the Warrant may
not be endorsed, assigned and/or transferred in whole or in part by Lender
without the prior express written consent of Borrower. Notwithstanding the
foregoing, the Warrant may be transferred, at Lender's option, to one or more
persons, in whole or in part, so long as (i) such transferees (a) are members,
partners, shareholders or affiliates of Lender, (b) agree to hold the Warrant
subject to all the terms hereof and thereof and (c) agree to execute an
Addendum to the Shareholder Agreement referred to in Section 1.04 hereof (as
then amended) upon exercise of the Warrant to become a party to the Shareholder
Agreement; and (ii) such transfer is in compliance with applicable laws.
Borrower shall not assign any of its rights or delegate any of its duties
hereunder or under the Debentures or Warrant without the prior express written
consent of Lender.
9.04 Time of the Essence. Time is of the essence with respect to
each and every covenant, agreement and obligation of Borrower hereunder and
under the Debentures and the Warrant.
9.05 Severability. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
9.06 Interest and Loan Charges Not to Exceed Maximum Allowed by
Law. Anything in this Agreement or the Debentures to the contrary
notwithstanding, in no event whatsoever, whether by reason of advancement of
proceeds of the Loan, acceleration of the maturity of the unpaid balance of the
Debentures, acceptance or exercise of the Warrant, or otherwise, shall the
interest and loan charges agreed to be paid to Lender for the use of the money
advanced or to be advanced hereunder exceed the maximum amounts collectible
under applicable laws in effect from time to time. It is understood and agreed
by the parties that, if for any reason whatsoever the interest or loan charges
paid or contracted to be paid by Borrower in respect of the indebtedness
evidenced by the Debentures shall exceed the maximum amounts collectible under
applicable laws in effect from time to time, then ipso facto, the obligation to
pay such interest and/or loan charges shall be reduced to the maximum amounts
collectible under applicable laws in effect from time to time, and any amounts
collected by Lender that exceed such maximum amounts shall be applied to the
reduction of the principal balance of the Debentures and/or refunded to
Borrower so that at no time shall the interest or loan charges paid or payable
in respect of the Debentures exceed the maximum amounts permitted from time to
time by applicable law.
18
9.07 Article and Section Headings, Defined Terms. Numbered and
titled article and section headings and defined terms are for convenience only
and shall not be construed as amplifying or limiting any of the provisions of
this Agreement.
9.08 Notices. Any and all notices, elections or demands permitted
or required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or nationally recognized courier
service (such as Federal Express), to the other party at the address set forth
below, or at such other address as may be supplied in writing and of which
receipt has been acknowledged in writing. The date of personal delivery,
telecopy or telex or one business day after delivery to such courier service or
two business days after mailing, as the case may be, shall be the date of such
notice, election or demand. For the purposes of this Agreement:
The address of
Lender is: Noro-Xxxxxxx Partners IV, L.P.
0 Xxxxx Xxxxxxx Xxxxxx
0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Telecopy No. (000) 000-0000
The address of
Borrower is: nFront, Inc.
000 Xxxxxxxxx Xxxxx, X.X., Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. "Xxxxx" Xxxxxxx III
Telecopy No. (000) 000-0000
with a copy (which
shall not constitute
notice) to: Xxxxxx, Xxxxxxx & Xxxxxx, L.L.P.
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telecopy No. (000) 000-0000
9.09 Entire Agreement. This Agreement and the other written
agreements between Borrower and Lender represent the entire agreement between
the parties concerning the subject matter hereof, and all oral discussions and
prior agreements are merged in this Agreement.
9.10 Miscellaneous. This Agreement shall be construed and enforced
under the laws of the State of Georgia without respect to the principles of the
choice of law or the conflicts of
19
laws. No amendment or modification hereof shall be effective except in a
writing executed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or have caused this Agreement to be executed by their duly authorized officers,
as of the day and year first above written.
LENDER:
NORO-XXXXXXX PARTNERS IV, L.P.
By: MKFJ-IV, L.L.C., General Partner
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
---------------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Member of General Partner
(SIGNATURES CONTINUED ON FOLLOWING PAGE . . .)
BORROWER:
NFRONT, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
