EXHIBIT 10.2
PROMISSORY NOTE
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X.X. XXXXXX GROUP INC., a Delaware corporation (the "BORROWER"), for
value received, promises and agrees to pay to XXXXXX FINANCIAL SERVICES, INC., a
North Carolina corporation (the "LENDER"), or order, at the Payment Office (as
such term is hereinafter defined) the aggregate principal sum of all Loans (as
such term is hereinafter defined) outstanding from time to time under this Note,
which aggregate principal sum shall not exceed the maximum amount of ONE MILLION
SIX HUNDRED THOUSAND AND NO/100 DOLLARS ($1,600,000.00), in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided for herein, and to pay interest on the unpaid
principal amount of the Loans made by the Lender to the Borrower hereunder, at
such Payment Office, in like money and funds, for the time period commencing on
the date each Loan is made until such Loan shall be finally and indefeasibly
paid in full, at the rates per annum and on the dates provided for herein.
The Lender is hereby authorized by the Borrower to endorse on Schedule
1(a) (or continuation thereof) attached to this Note, the principal amount of
each Loan, the date such Loan is made, the amount of any payments or
prepayments, the dates of any such payments or prepayments, and the principal
balance of the Note outstanding from time to time. The entries made by the
Lender on Schedule 1(a) (or any continuation thereof) shall be prima facie
evidence of the existence and amounts of the obligations recorded therein,
provided that any failure by the Lender to make any such endorsement shall not
affect the obligations of the Borrower under this Note in respect of the Loans
or otherwise.
By accepting this Note, the Lender agrees to comply with the
obligations of the Lender that are expressly and specifically set forth herein.
Section 1. TERMS GENERALLY; ACCOUNTING TERMS; GAAP; DEFINED TERMS. The
definitions of terms herein shall apply equally to the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (b) any reference herein to any Person shall be construed to
include such Person`s successors and assigns, (c) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Note in its entirety and not to any particular provision hereof, (d) all
references herein to Sections and Schedules shall be construed to refer to
Sections of, and Schedules to, this Note and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower notifies the Lender
that the Borrower requests an amendment to any provision hereof to eliminate the
effect of any change occurring after the date hereof in GAAP or in the
application thereof on the operation of such provision (or if the Lender
notifies the Borrower that the Lender requests an amendment to any provision
hereof for such purpose), regardless of whether any such notice is given before
or after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
As used in this Note, the following terms shall have the meanings set
forth below:
"AFFILIATE" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"AVAILABILITY PERIOD" means the time period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
the termination of the Commitment.
"BORROWER" has the meaning set forth in the first paragraph of this
Note.
"BORROWING REQUEST" means a request by the Borrower for a Loan in
accordance with Section 3.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City, New York or Houston, Texas are
authorized or required by law to remain closed.
"CAPITAL LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CHANGE IN CONTROL" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of Equity
Interests of the Borrower representing more than 20% of the aggregate ordinary
voting power represented by all of the issued and outstanding Equity Interests
of the Borrower; (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither (i)
nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated; or (c) the acquisition of direct or indirect Control of
the Borrower by any Person or group.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
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"COMMITMENt" means the commitment of the Lender to make Loans
hereunder, as such commitment may be reduced from time to time in accordance
with the provisions hereof. The initial amount of the Lender`s Commitment is
$1,600,000.00.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"DOLLARS" or "$" refers to lawful money of the United States of America.
"DMG NOTE" means that certain promissory note of even date herewith in
the original principal amount of $900,000.00 executed by the Borrower payable to
the order of the DMG Entities.
"DMG ENTITIES" means, collectively, DMG Legacy International Ltd., DMG
Legacy Institutional Fund LLC and DMG Legacy Fund LLC.
"EFFECTIVE DATE" means the date on which the conditions specified in
Section 8(a) are satisfied (or waived in accordance with Section 14).
"EQUITY INTERESTS" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
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receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 12.
"GAAP" means generally accepted accounting principles in the United
States of America.
"GENERAL SECURITY AGREEMENT" has the meaning assigned to such term in
the Master Agreement.
"GUARANTEE" of or by any Person (the "GUARANTOR") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers` acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person`s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
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"INDEMNITEE" has the meaning specified in Section 15(b).
"LENDER" has the meaning specified in the first paragraph of this Note.
"LIEN" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"LOAN" means each loan made by the Lender to the Borrower pursuant to
Section 3 of this Note.
"MASTER AGREEMENT" means that certain Master Subordination, Waiver,
Release and Indemnification Agreement dated of even date herewith, executed by
and among the Borrower, the Lender, SDS Merchant Fund, L.P., and the other
parties thereto.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and the Subsidiaries taken as a whole, (b) the ability of the
Borrower to perform any of its obligations under this Note or the documents
executed by the Borrower in connection herewith, or (c) the rights of or
benefits available to the Lender under this Note.
"MATERIAL INDEBTEDNESS" means Indebtedness (other than the Loans), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Borrower and its Subsidiaries in an aggregate principal amount exceeding
$75,000. For purposes of determining Material Indebtedness, the "PRINCIPAL
AMOUNT" of the obligations of the Borrower or any Subsidiary in respect of any
Swap Agreement at any time shall be the maximum aggregate amount (giving effect
to any netting agreements) that the Borrower or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.
"MATURITY DATE" means the later of (a) June 18, 2002 and (b) the date
on which the Lender demands payment hereunder.
"XXXXX`S" means Xxxxx`s Investors Service, Inc.
"MULTIEMPLOYER PLAN" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"NET PROCEEDS" means with respect to any sale, lease or other
disposition of any property of the Borrower or any Subsidiary (to the extent
that the same is permitted hereunder, herein referred to as a "PERMITTED
DISPOSITION"), the gross amount received by the Borrower or any of its
Subsidiaries from such Permitted Disposition, MINUS the sum of (a) the amount,
if any, of all taxes paid or payable by the Borrower or any of its Subsidiaries
directly resulting from such Permitted Disposition (including the amount, if
any, estimated by the Borrower in good faith at the time of such Permitted
Disposition for taxes payable by the Borrower or any of its Subsidiaries on or
measured by net income or gain resulting from such Permitted Disposition), AND
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(ii) the reasonable out-of-pocket costs and expenses incurred by the Borrower or
such Subsidiary in connection with such Permitted Disposition (including
reasonable brokerage fees paid to a Person other an Affiliate of the Borrower,
but excluding any fees or expenses paid to an Affiliate of the Borrower).
"NOTE" means this Promissory Note, as amended, supplemented or modified
from time to time.
"PAYMENT OFFICE" has the meaning specified in Section 7.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"PERMITTED ENCUMBRANCES" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 10(d);
(b) carriers`, warehousemen`s, mechanics`, materialmen`s, repairmen`s,
Liens related to margin loans, and other like Liens imposed by law, arising in
the ordinary course of business and securing obligations that are not overdue by
more than 30 days or are being contested in compliance with Section 10(d);
(c) pledges and deposits made in the ordinary course of business in
compliance with workers` compensation, unemployment insurance and other social
security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business;
(e) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Section 12;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of the Borrower or any Subsidiary;
(g) Liens securing the amounts outstanding under this Note;
(h) Liens granted under the General Security Agreement to secure the
DMG Note; and
(i) Liens granted under the Software Security Agreement to secure
certain obligations therein identified to New York Community Investment Company
L.L.C.
PROVIDED that, except with respect to clause (b) as it concerns Liens related to
margin loans and except with respect to clauses (g) through (i), the term
"Permitted Encumbrances" shall not include any Lien securing Indebtedness.
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"PERMITTED INVESTMENTS" means:
(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America (or by
any agency thereof to the extent such obligations are backed by the full faith
and credit of the United States of America), in each case maturing within one
year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Xxxxx`s;
(c) investments in certificates of deposit, banker`s acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;
and
(e) money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940, (ii) are rated AAA by S&P and Aaa by Xxxxx`s and (iii) have portfolio
assets of at least $5,000,000,000.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, governmental
authority or other entity.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"RESTRICTED PAYMENT" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any Equity Interests in
the Borrower or any Subsidiary, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Borrower or any Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in the Borrower or
any Subsidiary.
"SECURITY DOCUMENTS" means the agreements and instruments described in
Schedule 1(b) hereto and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower or any other Person as security
for the payment or performance of the obligations of the Borrower hereunder,
including any guarantees of such obligations.
"S&P" means Standard & Poor`s.
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"SOFTWARE SECURITY AGREEMENT" has the meaning specified in the Master
Agreement.
"SOURCE CODE ESCROW AGREEMENT" has the meaning specified in the Master
Agreement.
"SUBSIDIARY" means, with respect to any Person (the "PARENT") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent`s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"SUBSIDIARY" means any subsidiary of the Borrower, including X.X.
Xxxxxx, Inc.
"SWAP AGREEMENT" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement involving, or
settled by reference to, one or more rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Borrower or the Subsidiaries shall be a Swap Agreement.
"WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 2. COMMITMENT. Subject to the terms and conditions set forth
herein, the Lender agrees to make Loans to the Borrower from time to time during
the Availability Period in an aggregate principal amount that will not result in
the aggregate principal amount of all Loans outstanding hereunder exceeding the
Commitment. Within the foregoing limits and subject to the terms and conditions
set forth herein, the Borrower may obtain Loans hereunder from time to time,
provided that the Borrower may not re-borrow the amount of any Loans that have
been paid or prepaid. Unless previously terminated, the Commitment shall
terminate on the Maturity Date.
Section 3. REQUESTS FOR LOANS. To request the funding of a Loan
hereunder, the Borrower shall notify the Lender of such request by telephone not
later than 11:00 a.m., New York City time, one Business Day before the date of
the proposed Loan. Each such telephonic Borrowing Request shall be irrevocable
and shall be confirmed promptly by hand delivery or telecopy to the Lender of a
written Borrowing Request in a form approved by the Lender and signed by the
Borrower. Each such telephonic and written Borrowing Request shall specify the
following information:
(a) the aggregate amount of the requested Loan;
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(b) the date on which such Loan is to be made, which shall be a
Business Day; and
(c) the location and number of the Borrower`s account to which the loan
funds are to be disbursed.
Section 4. REPAYMENT OF LOANS; INTEREST. (a) The Borrower shall pay to
the Lender the then unpaid aggregate outstanding principal amount of all Loans
on the Maturity Date.
(b) Each Loan shall bear interest at a fixed interest rate of ten
percent (10%) per annum from the date such Loan is made until such Loan is
finally and indefeasibly paid in full. Accrued interest on each Loan shall be
due and payable on the Maturity Date, provided that any interest accrued
pursuant to paragraph (c) of this Section shall be payable on demand.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any other amount payable by the Borrower hereunder is not paid when
due, whether at stated maturity, upon acceleration or otherwise, such overdue
amount shall bear interest, after as well as before judgment, at a fixed
interest rate of twelve percent (12%) per annum.
(d) All interest hereunder shall be computed on the basis of a year of
360 days, and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
Section 5. PREPAYMENTS OF THE LOANS; MANDATORY PREPAYMENTS. (a) The
Borrower shall have the right at any time and from time to time to prepay any
Loan in whole or in part, provided that the Borrower shall notify the Lender by
telephone (confirmed by fax) of any prepayment hereunder not later than 11:00
a.m. New York City time, one Business Day before the date of the prepayment.
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of the Loan or Loans to be prepaid. Each such prepayment
shall be accompanied by accrued unpaid interest on the amount prepaid. The
Borrower shall have no right to re-borrow any amounts prepaid.
(b) At any time that the Borrower and/or any of its Subsidiaries sell,
lease, or otherwise dispose of any of their property, the Borrower shall
promptly prepay an aggregate principal amount of the Loans (which prepayment
shall be pro rata with any contemporaneous prepayment of the loans under the DMG
Note) equal to 64% of Net Proceeds in excess of $10,000.
Section 6. TAXES. Any and all payments by or on account of any
obligation of the Borrower hereunder or under any document executed in
connection herewith (including the Security Documents) shall be made free and
clear of and without deduction for any taxes; provided that if the Borrower
shall be required to deduct any taxes from such payments, then (a) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (b) the Borrower shall make such
deductions and (c) the Borrower shall pay the full amount deducted to the
relevant governmental authority in accordance with applicable law.
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Section 7. PAYMENTS GENERALLY. The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, or other
amounts payable hereunder) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without set-off or counterclaim. Any
amounts received after such time on any date may, in the discretion of the
Lender, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to the
Lender at its offices at 0000 Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000
(the "PAYMENT OFFICE"), or such other office as the Lender may direct in writing
to the Borrower. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
Section 8. CONDITIONS. (a) CONDITIONS PRECEDENT TO INITIAL LOAN. The
obligation of the Lender to make its initial Loan shall not become effective
until the date on which each of the following conditions is satisfied (or waived
in accordance with Section 14):
(i) the Lender shall have received this Note, duly executed
and delivered by the Borrower; and
(ii) the Lender shall have received the Master Agreement, duly
executed and delivered by all parties thereto;
(iii) the Lender shall have received a copy of the DMG Note,
and the original of the DMG Note shall have by duly executed and delivered by
the Borrower to the DMG Entities, and the conditions precedent for the funding
of the initial loan under the DMG Note shall have been satisfied (or waived in
accordance with Section 14 of the DMG Note);
(iv) the Lender shall have received the General Security
Agreement, duly executed and delivered by all parties thereto;
(v) the Lender shall have received the Software Security
Agreement, duly executed and delivered by all parties thereto;
(vi) the Lender shall have received the Source Code Escrow
Agreement, duly executed and delivered by all parties thereto, and the Borrower
shall have delivered the source code for the Software (as such term is defined
in the Master Agreement) to the Lender pursuant to the provisions of the Source
Code Escrow Agreement;
(vii) the Lender shall have received financing statements, as
appropriate, sufficient to perfect the security interests created by the
Security Documents; and
(viii) the Lender shall have received certified copies of the
resolutions of the Board of Directors of the Borrower approving the Loans, this
Note, and the Security Documents, and all other documents executed in connection
herewith, if any, to which the Borrower is a party and evidencing corporate
authorization with respect to such documents;
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(ix) the Lender shall have received a certificate of the
secretary or an assistant secretary of the Borrower certifying (A) the name,
title and true signature of each officer of the Borrower authorized to execute
this Note and the Security Documents, and (ii) that attached thereto is a true
and complete copy of the certificate of incorporation and bylaws of the
Borrower, as amended to date, and a recent good standing certificate; and
(x) the Lender shall have received an opinion of counsel
addressed to the Lender covering such matters as the Lender may reasonably
request.
(b) CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the Lender to
make each Loan hereunder is also subject to the satisfaction of the following
conditions:
(i) the representations and warranties of the Borrower set
forth in this Note shall be true and correct on and as of the date such Loan is
made;
(ii) at the time of and immediately after giving effect to the
making of such Loan, no Default shall have occurred and be continuing;
(iii) contemporaneously with the funding of a Loan under this
Note, the Borrower shall have satisfied the conditions for borrowing under and
shall obtain a pari passu loan under the DMG Note as contemplated in Recital H
of the Master Agreement; and
(iv) the Lender shall have received such other documents as
the Lender may reasonably request, all in form and substance satisfactory to the
Lender.
Each borrowing of a Loan hereunder shall be deemed to constitute a
representation and warranty by the Borrower on the date that such Loan is made
as to the matters specified in the immediately preceding clauses (i), (ii) and
(iii).
Section 9. REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants to the Lender that:
(a) ORGANIZATION; POWERS. The Borrower and each of its Subsidiaries is
duly organized, validly existing and, except as set forth on Schedule 9(a), in
good standing under the laws of the jurisdiction of its organization, has all
requisite power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
(b) AUTHORIZATION; ENFORCEABILITY. The transactions contemplated by
this Note are within the Borrower`s corporate powers and have been duly
authorized by all necessary corporate and, if required, stockholder action. This
Note and the other documents executed in connection herewith (including the
Security Documents) have been duly executed and delivered by the Borrower and
constitute legal, valid and binding obligations of the Borrower, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors` rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
11
(c) GOVERNMENTAL APPROVALS; NO CONFLICTS. The transactions contemplated
hereby (i) do not require any consent or approval of, registration or filing
with, or any other action by, any governmental authority, except such as have
been obtained or made and are in full force and effect, (ii) will not violate
any applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or any of its Subsidiaries or any order of any
governmental authority, (iii) will not violate or result in a default under any
indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any of its Subsidiaries, and (iv) will not
result in the creation or imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
(d) FINANCIAL CONDITION. The Borrower has heretofore furnished to the
Lender its (i) Annual Report on Form 10-K/A for the fiscal year ended September
30, 2001, and (ii) Quarterly Reports on Form 10-Q for the period ended December
31, 2001. Such Reports present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower and its
consolidated Subsidiaries as of such dates and for such periods in accordance
with GAAP, subject, with respect to the Form 10Q, to year-end audit adjustments.
(e) PROPERTIES. (i) Each of the Borrower and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
(ii) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(f) LITIGATION. There are no actions, suits or proceedings by or before
any arbitrator or governmental authority pending against or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any of its
Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than as disclosed on Schedule 9(f) hereto) or (ii) that involve this Note or the
transactions contemplated hereby.
(g) COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrower and its
Subsidiaries is in compliance with all laws, regulations and orders of any
governmental authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
(h) INVESTMENT AND HOLDING COMPANY STATUS. Neither the Borrower nor any
of its Subsidiaries is (i) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended or (ii) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935, as amended.
12
(i) TAXES. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all tax returns and reports required to have been filed
and has paid or caused to be paid all taxes required to have been paid by it,
except (i) taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves or (ii) to the extent that the failure
to do so could not reasonably be expected to result in a Material Adverse Effect
or (iii) as disclosed on Schedule 9(a) hereto.
(j) ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $50,000 the fair market value of the assets of such Plan, and the present
value of all accumulated benefit obligations of all underfunded Plans (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the most recent financial statements
reflecting such amounts, exceed by more than $50,000 the fair market value of
the assets of all such underfunded Plans.
(k) DISCLOSURE. The Borrower has disclosed to the Lender all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Borrower to the Lender in
connection with the negotiation of this Note or delivered hereunder (as modified
or supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time.
(l) SUBSIDIARIES. As of the Effective Date, the Borrower has no
Subsidiaries except those shown on Schedule 9(l), which Schedule is complete and
accurate.
Section 10. AFFIRMATIVE COVENANTS. Until the Commitment has expired or
been terminated and the principal of and interest on the Loans and all other
amounts payable hereunder have been finally and indefeasibly paid in full, the
Borrower covenants and agrees with the Lender that:
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will
furnish to the Lender:
(i) promptly after the same become publicly available, copies
of all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission, or
any governmental authority succeeding to any or all of the functions of said
13
Commission, or with any national securities exchange, or distributed by the
Borrower to its shareholders generally, as the case may be; and
(ii) promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition
of the Borrower or any Subsidiary, or compliance with the terms of this Note, as
the Lender may reasonably request.
(b) NOTICE OF MATERIAL EVENTS. The Borrower will furnish to the Lender
prompt written notice of the following:
(i) the occurrence of any Default;
(ii) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or governmental authority against or
affecting the Borrower or any Affiliate thereof that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
(iii) the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of the Borrower and its Subsidiaries in an
aggregate amount exceeding $50,000; and
(iv) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
the chief financial officer or other executive officer of the Borrower setting
forth the details of the event or development requiring such notice and any
action taken or proposed to be taken with respect thereto.
(c) EXISTENCE; CONDUCT OF BUSINESS. The Borrower will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business.
(d) PAYMENT OF OBLIGATIONS. The Borrower will, and will cause each of
its Subsidiaries to, pay its obligations, including tax liabilities, that, if
not paid, could result in a Material Adverse Effect before the same shall become
delinquent or in default, except where (i) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (ii) the Borrower or
such Subsidiary has set aside on its books adequate reserves with respect
thereto in accordance with GAAP and (iii) the failure to make payment pending
such contest could not reasonably be expected to result in a Material Adverse
Effect.
(e) MAINTENANCE OF PROPERTIES; INSURANCE. The Borrower will, and will
cause each of it Subsidiaries to, (i) keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted, and (ii) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.
14
(f) BOOKS AND RECORDS; INSPECTION RIGHTS. The Borrower will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each of its Subsidiaries to, permit any representatives designated by the
Lender, upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
(g) COMPLIANCE WITH LAWS. The Borrower will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any
governmental authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
(h) USE OF PROCEEDS. The proceeds of the Loans will be used only for
(a) the payment of operating expenses of the Borrower incurred in the ordinary
course of its business, and (b) loans or capital contributions to X.X. Xxxxxx,
Inc. for use in the ordinary course of its business, provided, that in no event
shall all or any part of the proceeds of the Loans be used to acquire Equity
Interests in any Person or to acquire material assets from any Person. No part
of the proceeds of any Loan will be used, whether directly or indirectly, for
any purpose that entails a violation of any Federal, state or local law, rule or
regulation (including investment limitations) or any of the regulations of the
Board of Governors of the Federal Reserve System, including Regulations T, U and
X.
Section 11. NEGATIVE COVENANTS. Until the Commitment has expired or
been terminated and the principal of and interest on the Loans and all other
amounts payable hereunder have been finally and indefeasibly paid in full, the
Borrower covenants and agrees with the Lender that:
(a) INDEBTEDNESS. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(i) Indebtedness created hereunder and under the DMG Note;
(ii) Indebtedness existing on the date hereof and set forth in
Schedule 11(a) , but not any extensions, renewals and replacements of any such
Indebtedness; and
(iii) other unsecured Indebtedness of the Borrower and/or any
of its Subsidiaries in an aggregate principal amount not exceeding $100,000 at
any time outstanding.
(b) LIENS. The Borrower will not. and will not permit any of its
Subsidiaries to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:
(i) Permitted Encumbrances; and
(ii) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 11(b); provided
that (i) such Lien shall not apply to any other property or asset of the
15
Borrower or any Subsidiary and (ii) such Lien shall secure only those
obligations which it secures on the date hereof.
(c) FUNDAMENTAL CHANGES. (i) The Borrower will not, and will not permit
any Subsidiary to, merge into or consolidate with any other Person, or permit
any other Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of transactions) all
or any part of its assets (whether now owned or hereafter acquired), or
liquidate or dissolve, except that the Borrower or any Subsidiary may (A) sell
inventory or other similar assets in the ordinary course of business, and (B)
sell, transfer or otherwise dispose of personal property in the ordinary course
of business or when, in the reasonable judgment of the Borrower or such
Subsidiary, such property is no longer used or useful in the conduct of its
business.
(ii) The Borrower will not, and will not permit any
of its Subsidiaries to, engage to
any material extent in any business other than businesses of the type conducted
by the Borrower and its Subsidiaries on the date of execution of this Note and
businesses reasonably related thereto.
(d) INVESTMENTS, LOANS, ADVANCES, GUARANTEES AND ACQUISITIONS. The
Borrower will not, and will not permit any of its Subsidiaries to, purchase,
hold or acquire (including pursuant to any merger with any Person that was not a
wholly owned Subsidiary prior to such merger) any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:
(i) Permitted Investments;
(ii) investments by the Borrower existing on the date hereof
in the capital stock of its Subsidiaries;
(iii) loans or advances made by the Borrower to X.X. Xxxxxx,
Inc.;
(iv) Guarantees constituting Indebtedness permitted by Section
11(a); and
(v) investments that exist on the date hereof and that are
disclosed in Schedule 11(d) hereto.
(e) SWAP AGREEMENTS. The Borrower will not, and will not permit any of
its Subsidiaries to, enter into any Swap Agreement, except (i) Swap Agreements
entered into to hedge or mitigate risks to which the Borrower or any Subsidiary
has actual exposure (other than those in respect of Equity Interests of the
Borrower or any of its Subsidiaries), and (ii) Swap Agreements entered into in
order to effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of the Borrower or
any Subsidiary.
16
(f) RESTRICTED PAYMENTS. The Borrower will not, and will not permit any
of its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except (i) the Borrower may declare and pay
dividends with respect to its Equity Interests payable solely in additional
shares of its common stock, (ii) Subsidiaries may declare and pay dividends to
the Borrower, and (iii) the Borrower may make Restricted Payments pursuant to
and in accordance with stock option plans or other benefit plans for management
or employees of the Borrower and its Subsidiaries.
(g) TRANSACTIONS WITH AFFILIATES. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (i) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm`s-length basis from unrelated third parties, and (ii) any
Restricted Payment permitted by Section 11(f).
(h) RESTRICTIVE AGREEMENTS. The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (i) the ability of the Borrower or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets, or (ii)
the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or make or repay loans or advances to
the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary, provided that (A) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Note or the DMG
Note, (B) the foregoing shall not apply to restrictions and conditions existing
on the date hereof identified on Schedule 11(h) (but shall apply to any
extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (C) the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Note if such restrictions or conditions apply
only to the property or assets securing such Indebtedness, and (D) the foregoing
shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
(i) STOCK. The Borrow will not authorize or issue any capital stock to
any Person.
Section 12. EVENTS OF DEFAULT. If any of the following events ("EVENTS
OF DEFAULT") shall occur:
(a) the Borrower shall fail to pay any principal of or interest on any
Loan or any other amount payable under this Note, when and as the same shall
become due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;
(b) any material provision of this Note or the Security Documents after
delivery thereof shall, for any reason, except to the extent permitted by the
terms thereof, cease to be in full force and effect and valid, binding and
enforceable (except as such enforceability may be limited as stated in Section
9(b)) in accordance with its terms, or, in the case of any Security Document
purporting to create a Lien, cease to create a valid and perfected Lien of the
priority contemplated thereby on any of the collateral purported to be covered
thereby, or the Borrower (or any other Person who may have granted or purported
17
to grant such a Lien) shall so state in writing;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with this Note or any
Security Document or any amendment or modification hereof or waiver hereunder or
thereunder, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with this Note or any Security Document
or any amendment or modification hereof or waiver hereunder or thereunder, shall
prove to have been incorrect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Sections 8(c), 10(b), 10(c) (with respect to
the Borrower`s existence), or 10(h) or in Section 11;
(e) (i) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Note (other than those specified in
clause (a), (b) or (d) of this Section), and such failure shall continue
unremedied for a period of 10 days after notice thereof from the Lender to the
Borrower, or (ii) default is made in the due observance or performance by the
Borrower or any Subsidiary of any of the covenants or agreements contained in
any of the Security Documents, and such default continues unremedied beyond the
expiration of any applicable grace period which may be expressly allowed under
such Security Document;
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (g) shall not apply to secured Indebtedness
that becomes due as a result of the voluntary sale or transfer of the property
or assets securing such Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or their respective debts, or of a
substantial part of their respective assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Subsidiary or for a
substantial part of their respective assets, and, in any such case, such
proceeding or petition shall continue undismissed for 60 days or an order or
decree approving or ordering any of the foregoing shall be entered;
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Section, (iii) apply for or consent to
18
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or such Subsidiary or for a substantial part
of their respective assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $75,000 shall be rendered against the Borrower, any
Subsidiary, or any combination thereof, and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any action shall be legally taken by a judgment creditor
to attach or levy upon any assets of the Borrower or any Subsidiary to enforce
any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect; or
(m) a Change in Control shall occur;
then, and in every such event (other than an event with respect to the
Borrower or any Subsidiary described in clause (h) or (i) of this Section), and
at any time thereafter during the continuance of such event, the Lender may, by
notice to the Borrower, take either or both of the following actions, as the
same time or different times: (i) terminate the Commitment, and thereupon the
Commitment shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all other obligations of
the Borrower accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; and in case of any event with respect to the
Borrower or any Subsidiary described in clause (h) or (i) of this Section, the
Commitment shall automatically terminate and the principal of all Loans then
outstanding, together with accrued interest thereon and all other obligations of
the Borrower accrued hereunder, shall automatically become due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower.
Section 13. NOTICES. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by fax, as follows:
(i) if to the Borrower, to it at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, Attention of Xxxx Xxxxxxxx (Fax No. 000-000-0000); and
19
(ii) if to the Lender, to it at 0000 Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx, 00000, Attention of Xxxx Xxxxxxxxxxx (Fax No.
000-000-0000).
(b) Any party hereto may change its address or fax number for notices
and other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Note shall be deemed to have been given on the date of
receipt.
Section 14. WAIVERS; AMENDMENTS. (a) No failure or delay by the Lender
in exercising any right or power hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Lender hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Note or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
(b) Neither this Note nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrower and the Lender.
Section 15. EXPENSES; INDEMNITY; DAMAGE WAVIER. (a) The Borrower shall
pay (i) all reasonable out-of-pocket expenses incurred by the Lender, including
the reasonable fees, charges and disbursements of counsel for the Lender, in
connection with the preparation and administration of this Note and the Security
Documents or any amendments, modifications or waivers of the provisions hereof
or thereof (whether or not the transactions contemplated hereby or thereby shall
be consummated), and (ii) all out-of-pocket expenses incurred by the Lender,
including the fees, charges and disbursements of any counsel for the Lender, in
connection with the enforcement or protection of its rights in connection with
this Note and the Security Documents, including its rights under this Section,
or in connection with the Loans made hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of any Loan.
(b) The Borrower shall indemnify the Lender and its Affiliates and the
respective directors, officers, employees, agents and advisors of the Lender and
its Affiliates (each such Person being called an "INDEMNITEE") against, and hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Note, the Security Documents or any agreement or instrument
contemplated hereby or thereby, or the performance by the parties hereto of
their respective obligations hereunder or the consummation of the transactions
contemplated hereby or thereby, (ii) the Loans or the use of the proceeds
therefrom, or (iii) any actual or prospective claim, litigation, investigation
or proceeding relating to any of the foregoing, whether based on contract, tort
or any other theory and regardless of whether any Indemnitee is a party thereto;
20
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee.
(c) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Note or any agreement or instrument contemplated hereby, the Loans, or
the use of the proceeds thereof.
(d) All amounts due under this Section shall be payable promptly after
written demand therefor.
Section 16. SUCCESSORS AND ASSIGNS. The provisions of this Note shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of the Lender (and any attempted assignment or
transfer by the Borrower without such consent shall be null and void). Nothing
in this Note, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby, and the Indemnitees) any legal or equitable right, remedy or
claim under or by reason of this Note. The Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Note
(including all or a portion of any Loan at the time owing to it) without the
consent of the Borrower.
Section 17. SURVIVAL. All covenants, agreements, representations and
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Note shall be
considered to have been relied upon by the Lender and shall survive the
execution and delivery of this Note and the making of each Loan, regardless of
any investigation made by any such the Lender or on its behalf and
notwithstanding that the Lender may have had notice or knowledge of any Default
or incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any other amount payable under this
Note is outstanding and unpaid. The provisions of Sections 6 and 15 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, or the
termination of this Note or any provision hereof.
Section 18. INTEGRATION. This Note and the other agreements executed in
connection herewith constitute the entire contract among the parties relating to
the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof.
Section 19. SEVERABILITY. Any provision of this Note held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
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Section 20. RIGHT OF SETOFF. If an Event of Default shall have occurred
and be continuing, the Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any obligations at any time owing by the Lender or Affiliate to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Note,
irrespective of whether or not the Lender shall have made any demand under this
Note and although such obligations may be unmatured. The rights of the Lender
under this Section are in addition to other rights and remedies (including other
rights of setoff) which the Lender may have.
Section 21. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) This Note shall be construed in accordance with and governed by the law of
the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the non-exclusive jurisdiction of the District Court
of the State of Texas sitting in Xxxxxx County, Texas and of the United States
District Court of the Southern District of Texas, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Note, or for recognition or enforcement of any judgment, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such Texas State
or, to the extent permitted by law, in such Federal court. Such Texas State
court or federal court shall apply the substantive laws of the State of New York
in interpreting and construing this Note. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Note shall affect any right that the Lender may
otherwise have to bring any action or proceeding relating to this Note against
the Borrower or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Note in any court referred to in paragraph
(b) of this Section. Each of the Borrower and the Lender hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) The Borrower and the Lender hereto irrevocably consent to service
of process in the manner provided for notices in Section 13. Nothing in this
will affect the right of the Borrower or the Lender to serve process in any
other manner permitted by law.
Section 22. WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER
HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE BORROWER AND
THE LENDER (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
22
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Borrower has executed this Promissory Note as
of the 27th day of March, 2002.
X.X. XXXXXX GROUP INC.
By:_____________________________
Name:
Title:
S-1
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SCHEDULE 1(A)
INFORMATION REGARDING LOANS
The foregoing Note evidences Loans made by the Lender to the Borrower,
which Loans were in the principal amounts and were made and repaid or prepaid on
the dates set forth below:
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PRINCIPAL AMOUNT OF DATE EACH LOAN WAS DATE OF PAYMENT OR AMOUNT PAID OR BALANCE OUTSTANDING
EACH LOAN MADE PREPAYMENT PREPAID
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SCHEDULE 1(B)
SECURITY DOCUMENTS
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1. Master Agreement
2. General Security Agreement
3. Software Security Agreement
4. Source Code Escrow Agreement
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SCHEDULE 9(A)
EXCEPTION TO GOOD STANDING AND TAX REPRESENTATIONS
The Borrower is delinquent in the payment of approximately $95,000 in
Delaware franchise taxes, which franchise taxes were due on March 1, 2002.
26
SCHEDULE 9(F)
LITIGATION
27
SCHEDULE 9(L)
SUBSIDIARIES
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SCHEDULE 11(A)
INDEBTEDNESS
29
SCHEDULE 11(B)
LIENS
30
SCHEDULE 11(D)
INVESTMENTS
31
SCHEDULE 11(H)
RESTRICTIVE AGREEMENTS
32
