Exhibit 10.11
TalentPoint, Inc.
SENIOR SUBORDINATED NOTE
This Note has not been registered under the Securities Act of 1933, as amended,
and may not be sold or otherwise transferred in the absence of such registration
or an exemption therefrom under such Act.
This Note and the rights and obligations evidenced hereby are subordinate, in
the manner and to the extent set forth in that certain Subordination Agreement
(the "Subordination Agreement") dated as of June 13, 2000, among TalentPoint,
Inc., Parthenon Investors, L.P., PCIP Investors, and Fleet National Bank, to the
indebtedness (including interest) owed by the Borrower pursuant to the Loan
Agreement; and each holder of this instrument, by its acceptance hereof, shall
be bound by the provisions of the Subordination Agreement.
This note was originally issued with original issue discount for federal income
tax purposes. For federal income tax information regarding the amount of the
original issue discount and the issue price, issue date and yield to maturity of
this Note, contact the Chief Financial Officer of TalentPoint, Inc. by telephone
at (000) 000-0000.
U.S. $9,659,436 June 16, 2000
FOR VALUE RECEIVED, TalentPoint, Inc., a Pennsylvania corporation (the
"Company"), hereby promises to pay to Parthenon Investors, L.P., or registered
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assigns (the "Noteholder"), at the Company's principal office, or at such other
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place as the Noteholder shall from time to time have designated to the Company
in writing, on June 16, 2004 (the "Maturity Date"), NINE MILLION SIX HUNDRED
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FIFTY NINE THOUSAND FOUR HUNDRED THIRTY SIX United States Dollars (U.S.
$9,659,436) (the "principal amount"). Interest will accrue daily (computed on
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the basis of a 360-day year) on the principal amount hereof from time to time
unpaid to and including June 16, 2001 at a rate of thirteen percent (13.0%) per
annum, and thereafter to and including the Maturity Date at a rate of sixteen
percent (16.0%) per annum), and shall accrue on overdue principal and, to the
extent permitted by applicable law, on overdue installments of interest, at a
rate of four percent (4.0%) in excess of the interest rate otherwise then
applicable. Subject to Section 5 hereof, interest shall be payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing September 30, 2000, and on the date of any prepayment (in whole or in
part), and at maturity, whether by acceleration or otherwise. Interest payable
after maturity (by acceleration or otherwise) shall be payable upon demand.
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At the Company's option, each interest payment due on this Note (as defined
below), other than interest on overdue principal and overdue installments of
interest which shall be paid solely in cash, may be made in cash or by issuing
additional senior subordinated notes in an original principal amount equal to
the amount of the interest payable (the "Interest Notes"); provided, however,
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that the Company must pay in cash the portion of each interest payment equal to
the amount of federal and state taxes that would be owed by the Noteholder
(assuming a marginal combined federal and state effective tax rate of 50%) on
the interest accrued on this Note, together with any amounts included in the
taxable income of Noteholder pursuant to Sections 1271 through 1275 of the
Internal Revenue Code of 1986, as amended, during the interest period in respect
of which interest is being paid, as reasonably determined by the Noteholder and
furnished to the Company at least 10 days prior to the applicable interest
payment date. The Interest Notes shall be in the form of this Note, except that
(a) each Interest Note shall be dated the date of its issuance, (b) Section 1 of
each Interest Note shall be modified to reflect the fact that the Interest Note
is an Interest Note, and (c) all interest payments on all Interest Notes shall
be made solely in cash. Each issuance of Interest Notes shall be made so that
each holder of Notes (as hereinafter defined) shall receive Interest Notes in a
principal amount bearing the same ratio, as nearly as may be, to the total
principal amount of all such Interest Notes then being issued as the principal
amount of Notes held by such holder bears to the aggregate principal amount of
all Notes then outstanding.
1. GENERAL. This Note (this "Note") is one of a series of notes issued
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pursuant to the Securities Purchase Agreement dated as of June 13, 2000 (the
"Agreement") by and among the Company, Parthenon Investors, L.P. and PCIP
Investors. Certain capitalized terms used in this Note are defined in Section 6
hereof.
2. PAYMENT PROVISIONS. The Company covenants that so long as this Note is
outstanding:
2.1. Payment at Maturity of Note. On the Maturity Date, or on any
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accelerated maturity of this Note under Section 4 hereof, the Company will pay
the entire principal amount of this Note then outstanding, together with all
accrued and unpaid interest hereon.
2.2. Voluntary Prepayments. The Company may at any time and from time to
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time prepay all or any part of the principal amount or accrued but unpaid
interest of this Note, without premium or penalty.
2.3. Prepayment Provisions. Upon each prepayment of this Note, in whole or
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in part, the Company will pay to the Noteholder the principal amount to be
prepaid and any unpaid interest accrued thereon to the prepayment date. From
(and including) the date such payment is actually made, interest on the
principal amount so prepaid shall cease to accrue. In the case of a partial
prepayment, such prepayment shall be made pro rata among all the Notes by
principal amount.
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2.4. Manner and Time of Payment. All payments made by the Company pursuant
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to this Note shall be made without defense, set off or counterclaim, in same day
funds and delivered to the holders of the Notes not later than Noon (New York
time) on the date such payment is due, provided that funds received by such
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holders after Noon (New York time) shall be deemed to have been paid by the
Company on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Business Day, the
payment shall be made on the next succeeding Business Day and such additional
period shall be included in the computation of the payment of interest
hereunder.
2.5. Transfer.
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2.5.1. Transfer of Note. With ten (10) days prior notice to the
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Company, the Noteholder shall have the right at any time, to sell, assign,
transfer or negotiate all or any part of this Note to one or more Persons
(other than a Company Competitor). The Noteholder may grant participations
in all or any part of this Note or the loans evidenced thereby to one or
more Persons. In the case of any sale, assignment, transfer or negotiation
of all or part of this Note authorized under this Section 2.5 (but not in
the case of a participation), the assignee, transferee or recipient shall
have, to the extent of such sale, assignment, transfer or negotiation, the
same rights, benefits and obligations as it would if it were the Noteholder
with respect to this Note or the loans evidenced thereby.
2.5.2. Registration of Transfer. The Company shall keep at its
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principal office a register in which the Company shall provide for the
registration of this Note and for the transfer of the same. Upon surrender
for registration of transfer of this Note at the principal office of the
Company, the Company shall, at its expense, promptly execute and deliver
one or more new Notes of like tenor and of a like aggregate principal
amount, registered in the name of such transferee or transferees and, in
the case of a transfer in part, such transferor.
2.5.3. Transferee; Confidentiality. In connection with any sale,
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assignment or transfer of this Note or any grant of any participation in
this Note, the holder of such Note effecting any such transaction shall
give notice to the Company and the Agent Bank of the identity of such
parties and obtain agreements from the transferees that all nonpublic
information given to such parties respecting the Company and its
subsidiaries will be held in strict confidence pursuant to a written
confidentiality agreement reasonably satisfactory to the Company.
3. AFFIRMATIVE AND NEGATIVE COVENANTS. The Company covenants that so long as
this Note is outstanding:
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3.1. Notice of Default. The Company will provide to the Noteholder,
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promptly on the Company's receipt thereof, any notice of default received by it
under any Loan Document.
3.2. Information. The Company will provide to the Noteholder all of the
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documents, financial statements, notices and other information required to be
provided to the Agent Bank under the Loan Agreement from time to time or at any
time.
3.3. Books, Records and Inspections. The Company will permit the
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Noteholder to visit and inspect any of the Company's properties and the
properties of each of its Subsidiaries, to examine their books of account and
records, to make copies and extracts therefrom, to observe the taking of any
physical inventories of their properties by them or their accountants, to
discuss their affairs, finances and accounts with their officers and employees,
and their independent public accountants (whose reasonable fees and expenses
shall be paid by the Company), all upon reasonable prior notice to the Company
and at such reasonable times (during normal business hours) and intervals as the
Noteholder requests.
3.4. Amendments to Other Documents. The Company will not, and will not
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permit any of its Subsidiaries to, consent to or request any amendment,
modification or supplement to or waiver of any provision of any of the
Transaction Agreements (other than the Loan Documents) in a manner that would
reasonably be expected to affect the interests of the Noteholder materially and
adversely without in each case having obtained the prior written consent of the
Noteholder.
3.5. Minimum EBITDA. From the date hereof and thereafter for so long as
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there is any amount outstanding under this Note, the Company and its
Subsidiaries shall have consolidated EBITDA not less than the amounts set forth
below for the periods set forth below:
Period Amount
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Three months ended March 31, 2000 $ 13,000
Six months ended June 30, 2000 ($1,449,000)
Nine months ended September 30, 2000 ($7,500,000)
Twelve months ended December 31, 2000 ($11,800,000)
Three months ended March 31, 2001 ($3,600,000)
Six months ended June 30, 2001 ($5,500,000)
Nine months ended September 30, 2001 ($6,000,000)
Twelve months ended December 31, 2001 ($4,500,000)
Three months ended March 31, 2002 $ 4,000,000
Three months ended June 30, 2002 $ 7,000,000
Three months ended September 30, 2002 $ 9,000,000
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Three months ended December 31, 2002 $ 12,000,000
Three months ended March 31, 2003 $ 13,000,000
Three months ended June 30, 2003 $ 13,000,000
Three months ended September 30, 2003 $ 13,000,000
Three months ended December 31, 2003 $ 13,000,000
Three months ended March 31, 2004 $ 13,000,000
3.6. Capital Expenditures. The Capital Expenditures of the Company and its
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subsidiaries shall not exceed $3,000,000 in the aggregate for the twelve month
period ending December 31, 2000 unless the Company shall have received the
consent of the Noteholder.
3.7. Working Capital Ratio. The ratio of the Company's current assets to
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the Company's current liabilities shall be at least 1.10 to 1.00. For the
purposes of this section, the Company's current liabilities shall not include
amounts due under any Note issued pursuant to the Securities Purchase Agreement.
4. EVENTS OF DEFAULT.
If one or more of the following events (herein referred to as "Events of
Default") shall occur and be continuing:
4.1. Payment Default. The Company shall fail to pay (a) any principal of
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this Note when the same becomes due and payable, whether upon maturity,
prepayment, acceleration or otherwise or (b) any interest on this Note, for a
period of five (5) Business Days after the same shall become due and payable or
(c) any other amount due hereunder within 30 days after demand therefor; or
4.2. Acceleration of Other Indebtedness. Any default or event of default
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shall have occurred under any Indebtedness of the Company or any Subsidiary in
excess of $1,000,000 in the aggregate resulting in the acceleration of such
Indebtedness, whether by having become due and payable by its terms or by having
been declared due and payable prior to its stated maturity; provided, however,
that if any such default or event of default is cured by the Company in
accordance with the terms of such Indebtedness, then no default shall be deemed
to have occurred under this Note; or
4.3. Other Terms. The Company shall default in the performance or
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observance of any covenant or condition of this Note (other than those described
or referred to in any other paragraph of this Section 4) and such default shall
continue for more than 60 days after the first to occur of (a) the Chief
Executive Officer or the Chief Financial Officer obtaining actual
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knowledge of such default or (b) the Company's receipt of written notice of such
default from the Noteholder; or
4.4. Breach of Representations or Warranties. Any representation or
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warranty made by the Company in the Agreement or in any statement or certificate
at any time given by it in writing in connection herewith or therewith shall
(taken as a whole) be false in any material respect on the date when made; or
4.5. Involuntary Bankruptcy, Appointment of Receiver, etc. (a) A court
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having jurisdiction shall enter a decree or order for relief in respect of the
Company or TalentPoint Technology, Inc. in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or any other similar relief shall be granted and
remain unstayed under any applicable federal or state law; or (b) an involuntary
case is commenced against the Company or TalentPoint Technology, Inc. under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or a decree or order of a court having jurisdiction in the premises is
entered for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over the Company or TalentPoint
Technology, Inc. or over all or a substantial part of any of their respective
properties, or an interim receiver, trustee or other custodian of the Company or
TalentPoint Technology, Inc. for all or a substantial part of their respective
properties is involuntarily appointed, or a warrant of attachment, execution or
similar process is issued against any substantial part of the property of the
Company or TalentPoint Technology, Inc., and in the case of each of the events
specified in this clause (b) such event continues for 60 days without being
dismissed, bonded, stayed, vacated or discharged; or
4.6. Voluntary Bankruptcy, Appointment of Receiver, etc. The Company or
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TalentPoint Technology, Inc. shall have an order for relief entered with respect
to it or commence a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or the Company or TalentPoint
Technology, Inc. shall make any assignment for the benefit of creditors;
4.7. Judgments and Attachments. One or more judgments or decrees shall be
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entered against the Company or any of its Subsidiaries (and shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof) involving aggregate liability (to the extent not paid or fully
covered by insurance) in excess of $1,000,000; then, (a) upon the occurrence of
any Event of Default described in Section 4.5 or 4.6, the unpaid principal
amount of this Note, together with accrued interest thereon, shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by the
Company, and (b)
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upon the occurrence of any other Event of Default the Required Noteholders may,
upon written notice to the Company, declare this Note to be due and payable,
whereupon the principal amount of this Note, together with accrued interest
thereon, shall automatically become immediately due and payable, without any
other notice of any kind, and without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company; provided, however, that the acceleration of principal and interest with
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respect to this Note and the exercise of judicial and foreclosure remedies shall
be subject to the restrictions referred to in Section 5 below.
5. SUBORDINATION.
The Subordination Agreement is incorporated in this Note by this reference
and constitutes a part of this Note with the same force and effect as if set
forth at length herein. The indebtedness this Note evidences is, in all
respects, subordinate and subject in right of payment in full of all Senior
Indebtedness (as the Subordination Agreement defines that term) to extent
provided in the Subordination Agreement. Each holder of this Note, by accepting
the same, agrees to and will be bound by those provisions.
6. DEFINITIONS.
The following terms used in this Note shall have the following meanings:
6.1. "Agent Bank" at any time has the meaning set forth in the Loan
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Agreement at such time.
6.2. "Bankruptcy Code" means Title 11 of the United States Code and any
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successor statute.
6.3. "Business Day" means any day excluding Saturday, Sunday and any day
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which is a legal holiday under the laws of the State of New York or is a day on
which banking institutions located in New York, New York, are authorized or
required by law or other governmental action to close.
6.4. "Capital Expenditures" shall have the meaning set forth in the Loan
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Agreement.
6.5. "Company Competitor" shall mean any company that is engaged
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principally in the business of recruitment, recruitment software development,
sales force, management and customer service training, employee survey, pre-
employment testing and assessment or Oracle technology consulting.
6.6. "Default" means any event, act or condition which with notice or lapse
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of time, or both, would constitute an Event of Default.
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6.7. "EBITDA" shall have the meaning set forth in the Loan Agreement as of
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the date hereof and without giving effect to any amendment or replacement
thereof, unless otherwise agreed by the Noteholder.
6.8. "Incorporated by Reference" means, with respect to any referenced
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provision of the Loan Agreement, the incorporation of that provision to this
Note with the same effect and for all purposes as if set forth in full in this
Note, together with any referenced definitions or schedules and any cross
referenced provisions included in such referenced provision of the Loan
Agreement, except that, where any such included cross referenced provision has
been likewise Incorporated by Reference and as so incorporated has been modified
or supplemented, such cross reference shall be deemed to be to the cross
referenced provision as so Incorporated by Reference, as so modified or
supplemented.
6.9. "Indebtedness" has the meaning set forth in the Loan Agreement, as in
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effect on the date hereof.
6.10. "Loan Agreement" means the Loan Agreement dated as of December 27,
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1999 among the Company, Fleet National Bank, as Agent and a lender, and the
other financial institutions party thereto, together with any schedules,
exhibits, appendices or other attachments thereto, as such Agreement may be
amended, restated, extended, renewed, supplemented, refinanced, replaced or
otherwise modified from time to time.
6.11. "Loan Documents" at any time means, collectively, the Loan Agreement,
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the related security agreements, guarantees, pledge agreements, notes and the
other documents executed and delivered by the Company or any of its Subsidiaries
pursuant to the terms thereof at such time.
6.12. "Notes" means this Note, each other Note (as defined in the
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Agreement), each Interest Note issued pursuant to any Note and each successor
Note issued upon transfer or exchange of any Note.
6.13. "Person" at any time has the meaning set forth in the Loan Agreement
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at such time.
6.14. "Subsidiary" at any time has the meaning set forth in the Loan
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Agreement at such time.
6.15. "Transaction Agreements" has the meaning set forth in the Securities
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Purchase Agreement.
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7. MISCELLANEOUS.
7.1. Amendments and Waivers. Any provision of this Note may be amended,
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modified, terminated or waived only with the written consent of the Noteholder
and the Company. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on the Company in any case shall entitle the Company to any further
notice or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 7.1
shall be binding upon the Noteholder at the time of such effectuation and each
future holder thereof.
7.2. Independence of Covenants. All covenants hereunder shall be given
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independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of an Event of Default or Default if such action is taken or
condition exists.
7.3. Notices. All notices, demands or other communications to be given or
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delivered to the Company or the Noteholder under or by reason of the provisions
of the Notes shall be in writing and delivered personally, mailed by certified
or registered mail, return receipt requested and postage prepaid, sent via a
nationally recognized overnight courier, or via facsimile. Such notices,
demands and other communications will be sent to the address indicated in
Section 12.4 of the Securities Purchase Agreement or, if no address is specified
for the Noteholder in such Section 12.4, to it at its record address reflected
in the transfer register for the Note, or, in each case to such other address or
to the attention of such other Person as the recipient party shall have
specified by prior written notice to the sending party; provided that the
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failure to deliver copies of notices as indicated above shall not affect the
validity of any notice. Any such communication shall be deemed to have been
given (i) on the date actually received, if personally delivered, or sent by
nationally recognized overnight courier or sent via facsimile or e-mail or (ii)
on the third Business Day following the date on which the piece of mail
containing such communication is posted if sent by certified or registered mail.
7.4. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
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delay on the part of the Noteholder in the exercise of any power, right or
privilege hereunder or under this Note shall impair such power, right or
privilege or (in the absence of a written waiver that complies with Section 7.3)
be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under the Note are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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7.5. Severability. If and to the extent that any provision in this Note
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shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions of this Note, or of such
provision or obligation in any other jurisdiction, or of such provision to the
extent not invalid, illegal or unenforceable shall not in any way be affected or
impaired thereby.
7.6. Headings. Section and subsection headings in this Note are included
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herein for convenience of reference only and shall not constitute a part of this
Note for any other purpose or be given any substantive effect.
7.7. Governing Law. This Note shall be governed by and construed in
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accordance with the domestic substantive laws of the Commonwealth of
Pennsylvania, without giving effect to any choice or conflict of law provision
or rule that would cause the application of the laws of any other jurisdiction.
7.8. Consent to Jurisdiction. The Company, by its execution hereof, and
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the Noteholder, by its acceptance hereof, (i) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Pennsylvania or the United
States District Court located in the District of Pennsylvania for the purpose of
any action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation arising out of or based upon this Note or
relating to the subject matter hereof, (ii) hereby waives to the extent not
prohibited by applicable law, and agrees not to assert by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Note or the subject
matter hereof may not be enforced in or by such court, and (iii) hereby agrees
not to make any motion or take any other action seeking or intending to cause
the transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Each of the Company and the Noteholder hereby consents to
service of process in any such proceeding in any manner permitted by
Pennsylvania law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to Section 7.3
hereof is reasonably calculated to give actual notice.
7.9. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
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WHICH CANNOT BE WAIVED, THE COMPANY, BY ITS EXECUTION HEREOF, AND THE
NOTEHOLDER, BY ITS ACCEPTANCE HEREOF, HEREBY WAIVES, AND COVENANTS THAT IT NOT
WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY
JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR
SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION
ARISING OUT OF OR BASED UPON THIS NOTE OR THE SUBJECT
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Exhibit 10.11
MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING. THE COMPANY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE NOTEHOLDER
THAT THIS SECTION 7.9 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE
NOTEHOLDER IS RELYING AND WILL RELY IN PURCHASING THIS NOTE. ANY PERSON MAY FILE
AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF EACH PERSON REFERENCED HEREIN TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
a duly authorized officer as of the date first written above.
TalentPoint, Inc.
By: /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Chief Operating Officer
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