EXHIBIT 4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION AND MAY
NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR
QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY RECEIVES AN OPINION, IN REASONABLY ACCEPTABLE FORM AND SCOPE, OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION, QUALIFICATION OR
OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS. THE TRANSFER AND SALE
OF THIS NOTE IS ALSO RESTRICTED PURSUANT TO SECTION 8 OF THIS NOTE.
SENIOR SECURED PROMISSORY NOTE
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$ 5,000,000 February 22, 2005
FOR VALUE RECEIVED, Xxxxxxx Imaging Corporation, a Delaware corporation
(the "COMPANY"), hereby promises to pay to the order of ComVest Investment
Partners II LLC, a Delaware limited liability company, or registered assigns
(the "HOLDER"), the sum of Five Million Dollars ($5,000,000) (the "PRINCIPAL"),
with interest thereon, on the terms and conditions set forth herein and in the
Note and Warrant Purchase Agreement dated February 22, 2005 between the Company
and the Holder (the "PURCHASE AGREEMENT").
Payments of principal of, interest on and any other amounts with
respect to this Senior Secured Promissory Note (this "NOTE") are to be made in
lawful money of the United States of America.
The amounts due under this Note are secured pursuant to the terms of
that certain Security Agreement between the Company and the Holder of even date
herewith. The Holder shall release its security interest upon payment in full of
the entire Principal balance of this Note and all accrued Interest and other
amounts payable hereunder.
Notwithstanding any provision of this Note, the Purchase Agreement or
any other agreement to the contrary, the Company shall not be required to pay,
and the Holder shall not be permitted to contract for, take, reserve, charge or
receive, any compensation that constitutes interest under Applicable Law in
excess of the maximum amount of interest permitted by Applicable Law.
All terms used in this Note but not defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement. The original Holder
of this Note will be deemed, by its acceptance hereof, to have agreed to the
provisions and to have made the representations and warranties set forth in
Article 3 of the Purchase Agreement.
1. INTEREST; PAYMENTS.
(a) This Note shall bear interest on Principal amounts
outstanding from time to time from the date hereof until maturity at an annual
rate of eight and one-half percent (8.50%) ("INTEREST"); provided, however, that
upon the occurrence and during the continuance of any Event of Default
hereunder, the applicable Interest rate hereunder shall be 11.50% per
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annum. All Interest shall be calculated on the basis of a 360-day year counting
the actual days elapsed. Accrued Interest shall be payable, commencing November
15, 2005, and quarterly thereafter on each February 15, May 15, August 15 and
November 15 thereafter (or, if such day is not a business day, on the next
succeeding business day).
(b) The Principal of this Note shall be payable (i) in ten (10)
equal quarterly installments, each such installment in an amount equal to one
(1%) percent of the original Principal amount of this Note, which installments
shall be payable commencing February 15, 2006, and shall continue quarterly
thereafter on each May 15, August 15, November 15 and February 15 thereafter
(or, if such day is not a business day, on the next succeeding business day),
and (ii) in an eleventh (11th) and final installment due and payable on August
15, 2008.
(c) Anything contained in Sections 1(a) and 1(b) above to the
contrary notwithstanding, all unpaid Principal and the accrued and unpaid
Interest thereon shall be due and payable on the earlier of (i) August 15, 2008,
or (ii) the Sale of the Company (the "MATURITY DATE").
2. PREPAYMENT.
(a) The unpaid Principal balance of this Note, together with all
accrued and unpaid Interest, may at the Company's option be prepaid in whole or
in part, at any time or from time to time upon fifteen (15) days' prior written
notice to the Holder stating the Principal amount to be prepaid and the date on
which such prepayment shall be made.
(b) Within five (5) business days after the Company's receipt of
any Equity Proceeds at any time or from time to time, the Company shall be
required to make a prepayment of Principal under this Note in an amount equal to
(i) one-half of such Equity Proceeds, multiplied by (ii) a fraction, the
numerator of which shall be the Principal balance of this Note as of the date of
such prepayment, and the denominator of which shall be the aggregate principal
balance of all outstanding Notes as of the date of such prepayment.
(c) Within forty-five (45) days after the close of each fiscal
quarter (60 days in the case of the last fiscal quarter of each fiscal year)
commencing with the fiscal quarter ending December 31, 2005, the Company shall
be required to make a prepayment of Principal under this Note in an amount equal
to (i) one-half of the positive Excess Cash Flow (if any) for such fiscal
quarter, multiplied by (ii) a fraction, the numerator of which shall be the
Principal balance of this Note as of the close of such fiscal quarter, and the
denominator of which shall be the aggregate principal balance of all outstanding
Notes as of the close of such fiscal quarter issued pursuant to the Purchase
Agreement.
(d) Any and all prepayments of Principal hereunder shall be
applied to the remaining installments under Section 1 above in inverse order of
maturity. Each prepayment of Principal shall be accompanied by all accrued
Interest on the Principal amount prepaid accrued to the date of prepayment.
3. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
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7(a) "APPLICABLE LAW" means that law in effect from time to time
and applicable to this Note which lawfully permits the contracting, charging,
taking, reserving and/or collection of the highest permissible lawful,
non-usurious rate of interest or amount of interest on or in connection with
this Note.
(b) "EBITDA" means, for the subject fiscal quarter, the sum of the
following, determined in accordance with generally accepted accounting
principles consistently applied and on a consolidated basis for the Company and
its Subsidiaries: (i) Net Income, plus (ii) the sum of the following to the
extent deducted in determining Net Income: (A) income and franchise taxes, (B)
interest expense, and (C) depreciation, amortization, impairment of good will or
other intangible assets, and other non-cash charges (including, without
limitation, any impairment or similar charges), minus (iii) any non-cash gains.
(c) "EQUITY PROCEEDS" means the aggregate proceeds (which, to the
extent received in a form other than cash, shall be deemed to be a cash amount
equal to the fair market value of the non-cash proceeds) received by or on
behalf of the Company or any of its Subsidiaries at any time and from time to
time from or in respect of the issuance and/or exercise of any equity securities
and/or any options, warrants, convertible securities or other rights to purchase
or acquire equity securities of the Company or any Subsidiary other than (i)
issuances of securities under any Option Plan or similar plan approved by the
stockholders of the Company, (ii) the exercise of any option granted or to be
granted under any Option Plan or similar plan approved by the stockholders of
the Company or (iii) the exercise of the Warrants, in each case net of any
underwriting commissions, placement agent fees and other reasonable expenses
paid or incurred by the Company in respect thereof (exclusive of any amounts
paid or payable to officers, directors or other affiliates of the Company or any
Subsidiary).
(d) "EXCESS CASH FLOW" means, for the subject fiscal quarter, the sum
of the following, determined in accordance with generally accepted accounting
principles consistently applied and on a consolidated basis for the Company and
its Subsidiaries: (i) EBITDA, minus (ii) income and franchise taxes to the
extent paid or due and payable in cash, minus (iii) interest expense to the
extent paid or due and payable in cash, minus (iv) all net principal payments
made in respect of indebtedness for money borrowed (excluding mandatory
prepayments hereunder measured by Excess Cash Flow), minus (v) capital
expenditures paid in cash (including principal payments made under capitalized
leases and purchase money financing of capital assets) up to a maximum of
$312,500 per fiscal quarter, plus (vi) without limitation of Section 5.12(c) of
the Purchase Agreement, net cash proceeds of any new borrowings (other than
borrowings represented by Notes issued pursuant to the Purchase Agreement and
borrowings solely for the purchase of capital assets within the limitations of
Section 5.12(1) of the Purchase Agreement).
(e) "NET INCOME" means, with respect to any fiscal quarter, the
consolidated net income (or loss) of the Company and its Subsidiaries,
determined on a consolidated basis and accordance with generally accepted
accounting principles consistently applied, provided that, for purposes of
calculating Net Income, there shall be excluded and no effect shall be given to
(i) any restoration of any contingency reserve, except to the extent that
provision for such reserve was made out of income during the subject fiscal
quarter, and/or (ii) any amounts deducted for amortization of depreciation to
the extent resulting from the write-up of any asset.
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(f) "PERSON" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, Section 13D group, or a governmental
entity (or any department, agency or political subdivision thereof).
(g) "SALE OF THE COMPANY" means any transaction or series of
transactions pursuant to which any Person(s) other than the Holder acquire(s)
(i) interests in the Company (or the surviving or resulting entity in such
transaction or transactions) possessing more than fifty percent (50%) of the
voting power (other than voting rights accruing only in the event of a default,
breach or event of noncompliance), whether by merger, consolidation,
reorganization, combination, issuance, sale or transfer of the Company's capital
stock, or otherwise, or (ii) more than fifty percent (50%) of the Company's and
its Subsidiaries' assets determined on a consolidated basis (measured by either
book value in accordance with generally accepted accounting principles
consistently applied or fair market value determined in the reasonable good
faith judgment of the Company's Board of Directors).
(h) "SUBSIDIARY" means, at the time as of which any determination is
being made, any entity in which the Company owns, either directly or indirectly
through Subsidiaries, a general partner's interest, or shares of stock or
membership interests having a majority of the general voting power in electing
the board of directors or managers of such entity.
4. PRIORITY OF NOTE. This Note shall be senior in right of payment to
all classes of the Company's capital stock, including but not limited to, the
Common Stock and any shares of preferred stock of the Company, shall be pari
passu in right of payment to any and all other Notes issued pursuant to the
Purchase Agreement, and shall be senior to all other indebtedness of the
Company.
5. TIME OF THE ESSENCE. It is agreed that time is of the essence on
this Note.
6. EVENTS OF DEFAULT. Each of the following shall be deemed an "Event
of Default":
(a) The Company shall default in the payment when due of any
Principal of or Interest on this Note whether on a scheduled payment date, at
maturity, by reason of any mandatory prepayment in accordance with Section 2(b)
or Section 2(c), or by acceleration or otherwise, and such default shall
continue for fifteen (15) business days in the case of a default with respect to
a mandatory prepayment under Section 2(c) or five (5) business days in any other
case; or
(b) The Company or any of its Subsidiaries (i) shall admit in
writing its inability to pay its debts as they mature, or (ii) shall make a
general assignment for the benefit of creditors, or (iii) shall be adjudicated
bankrupt or insolvent, or (iv) shall commence a voluntary proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; or
(c) An involuntary proceeding shall be commenced against the
Company or any of its Subsidiaries seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or a receiver, liquidator, trustee,
custodian, conservator or other such person shall be appointed by
Page 4 of 8 Page Note
any court to take charge of the Company's or any Subsidiary's affairs, assets or
business, and (i) the Company or the subject Subsidiary shall admit to the
material allegations of the petition or complaint in such proceeding, or (ii)
such involuntary proceeding or appointment shall remain undismissed and unstayed
for a period of sixty (60) days; or
(d) If any representation or warranty made by the Company in the
Purchase Agreement, the Security Agreement or the FDA Certificate shall be
determined to have been false or misleading in any material respect as of the
date made; or
(e) Any failure by the Company to perform or observe any of its
covenants contained in (i) the Purchase Agreement other than the covenants in
Sections 5.3, 5.4, 5.6, 5.11 (a)-(h) or 5.13(b) or (ii) the Security Agreement,
the Registration Rights Agreement or in Sections 5.3, 5.4, 5.6, 5.11(a)-(h) or
5.13(b) of the Purchase Agreement where such failure continues for a period in
excess of fifteen (15) days after written notice from the Holder or actual
knowledge of the Company of such failure; provided however, that any failure
requiring the payment of cash fees under Section 2(c) of the Registration Rights
Agreement shall not constitute an Event of Default under this Section 6; or
(f) If a final judgment or judgments in an aggregate uninsured
amount in excess of $250,000 shall be rendered against the Company or any of its
Subsidiaries which is not, within thirty (30) days after the entry thereof,
discharged or the execution thereof stayed pending appeal, or within thirty (30)
days after the expiration of any such stay, such judgment is not discharged; or
(g) Any default with respect to any other indebtedness or
liabilities of the Company or any of its Subsidiaries in any amount in excess of
(i) $250,000 individually or in the aggregate with respect to indebtedness, (ii)
$250,000 individually with respect to liabilities and (iii) $750,000 in the
aggregate with respect to liabilities and indebtedness, in each case if the
effect of such default is to permit the holder(s) to accelerate the maturity of
such indebtedness or liabilities as the case may be; or
(h) The occurrence of any levy upon or seizure or attachment of
any property of the Company or any of its Subsidiaries having an aggregate fair
market value in excess of $250,000, which levy, seizure or attachment shall not
be set aside, bonded or discharged within thirty (30) days after the date
thereof; or
(i) The suspension of all or any substantial portion of the normal
business operations of the Company and its Subsidiaries (taken as a whole) for
any period in excess of ten (10) consecutive days; or
(j) Any liquidation, dissolution or winding up of the Company and
its Subsidiaries (taken as a whole) or its business; or
(k) Any prepayment under any of the other Notes issued pursuant to
the Purchase Agreement unless, simultaneously with such prepayment, the Company
makes a prepayment under this Note equal (on a percentage basis) to the portion
of such other Note which is then being prepaid; or
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(l) The occurrence of any "Event of Default" under and as defined
in any of the other Notes issued pursuant to the Purchase Agreement.
7. CONSEQUENCES OF AN EVENT OF DEFAULT.
(a) NON-PAYMENT; BANKRUPTCY. If there shall occur any Event of
Default specified in subsections (a), (b) or (c) of Section 6 hereof, the unpaid
Principal balance of this Note and all accrued Interest thereon shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are expressly waived.
(b) OTHER DEFAULTS. If any other Event of Default shall occur, the
Holder may, at its option, by written notice to the Company, declare the entire
unpaid Principal balance of this Note and all accrued Interest thereon due and
payable, and the same shall thereupon become immediately due and payable without
presentment, demand, protest or (except as expressly required hereby) notice of
any kind, all of which are expressly waived.
(c) FINANCIAL STATEMENTS. Upon the occurrence and during the
continuance of any Event of Default, upon the request of the Holder, the Company
shall provide to the Holder monthly financial statements of the Company within
fifteen (15) days after the end of each month.
8. RESTRICTIONS ON SALE AND TRANSFER. Until thirty (30) days after
the expiration of the Post-Closing Commitment, the Holder may not assign or
transfer this Note or any right or obligation hereunder. After such date, this
Note may only be transferred in amounts of at least $1,000,000 and upon fifteen
(15) days prior written notice to the Company. Neither this Note nor any
interest or participation herein may be assigned or transferred to Hologic,
Inc., General Electric Medical Systems, Philips Medical Systems, Ethicon
Endo-Surgery, Inc. or Siemens Medical Solutions; to any other business or entity
which directly or indirectly engages in the business of developing, designing,
manufacturing, supplying and/or distributing diagnostic medical imaging products
competitive with any of the Company's then current product lines; to Xxxxxx
Xxxxxx or any business or entity in which he is employed or is otherwise
involved or has a greater than 5% ownership interest; or to any Affiliate of any
of the foregoing. Notwithstanding the foregoing, the Holder shall be entitled to
transfer all or any portion of this Note to its Affiliates or to make a
distribution of all or any portion of the Notes to its members.
9. PAYMENT; DELIVERY. Any check, draft, money order or other
instrument given in payment of all or any portion hereof may be accepted by the
Holder and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Holder except to the
extent that actual cash proceeds of such instrument are unconditionally received
by the Holder.
10. COMPLIANCE WITH APPLICABLE LAW. It is expressly stipulated and
agreed to be the intent of Company and Holder at all times to comply with the
Applicable Law in connection with this Note. All sums paid or agreed to be paid
to the Holder for the use, forbearance or detention of the indebtedness
evidenced hereby shall, to the extent permitted by Applicable Law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until
Page 6 of 8 Page Note
payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the applicable usury ceiling.
11. NOTICES. Any notice under this Note must be in writing, and shall
be given or served, unless otherwise expressly provided herein, by depositing
the same in the United States Mail, postpaid and certified and addressed to the
party to be notified, with return receipt requested, or by delivering the same
by courier or in person to such party (or, if the party or parties to be
notified be incorporated, to an officer of such party), or by e-mail to the
e-mail address set forth below. Notice deposited in the mail, postpaid and
certified with return receipt requested, shall be deemed received and effective
upon the deposit in a proper United States depository. Notice given in any other
manner shall be effective only if and when received by the party to be notified.
For the purposes of notice, the addresses of the parties for the receipt of
notice hereunder are:
If to the Company:
------------------
Xxxxxxx Imaging Corporation
00000 X. Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx Ravine
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
If to the Holder:
-----------------
ComVest Investment Partners II LLC
Xxx Xxxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Tel No.: (000) 000-0000
E-mail: xxxxx@xxxxxxx.xxx
Any party shall have the right from time to time, and at any time, to
change its address for the receipt of notice by giving at least five (5) days'
prior written notice of the change of its address to the other parties in the
manner specified herein.
12. ENTIRE AGREEMENT. This Note, those documents expressly referred to
herein and other documents of even date herewith embody the complete agreement
and understanding between the parties and supersede and preempt any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
13. SEVERABILITY. 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 by a court of competent jurisdiction
to be invalid, illegal or unenforceable in any respect under any applicable law,
such provision shall thereupon be deemed modified to the extent necessary to
render same valid, or excised from this Note, as the situation may require, and
this Note shall be construed and enforced as if such provision had been included
herein as so modified in scope or application, or had not been included herein,
as the case may be.
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14. GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL. The provisions
of this Note shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to any choice of law or conflict of
law rules or provisions. The Company hereby irrevocably consents to the
jurisdiction of all courts (state and federal) sitting in the State of New York
in connection with any claim, action or proceeding relating to or for collection
or enforcement of this Note, and hereby waives any defense of inconvenient forum
or other such claim or defense in respect of the lodging of any such claim,
action or proceeding in any such court. THE COMPANY HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY CLAIM, ACTION OR PROCEEDING RELATING TO OR FOR
THE COLLECTION OR ENFORCEMENT OF THIS NOTE.
15. COUNTERPARTS. This Note may be executed in multiple counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
16. MISCELLANEOUS. No delay or failure by the Holder in exercising any
right, power, privilege, or remedy shall be deemed to be a waiver of the same or
any part thereof; nor shall any single or partial exercise thereof or any
failure to exercise the same in any instance preclude any future exercise
thereof, or the exercise of any other right, power, privilege or remedy, and the
rights and remedies provided for hereunder are cumulative and not exclusive of
any other right or remedy available at law or in equity. Neither any provision
of this Note nor any performance hereunder may be amended or waived except
pursuant to an agreement in writing signed by the party against whom enforcement
thereof is sought. Except as otherwise expressly provided in this Note, the
Company hereby waives diligence, demand, presentment for payment, protest,
dishonor, nonpayment, default, and notice of any and all of the foregoing. All
amounts payable hereunder shall be payable without relief under any applicable
valuation and appraisement laws. The Company hereby expressly agrees that this
Note, and/or any payment hereunder, may be extended, modified or subordinated
(by forbearance or otherwise) from time to time, without in any way affecting
the liability of the Company hereunder.
17. COLLECTION COSTS. In the event that the Holder shall, after the
occurrence of an Event of Default, turn this Note over to an attorney for
collection, the Company shall further be liable for and shall pay to the Holder
all collection costs and expenses incurred by the Holder, including reasonable
attorneys' fees and expenses; and the Holder may take judgment for all such
amounts in addition to all other sums payable hereunder.
XXXXXXX IMAGING CORPORATION
By: /s/
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Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
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