THIS DOCUMENT IS A COPY OF THE EXHIBIT FILED ON OCTOBER 24, 1996
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
AMENDED AND RESTATED
PROMISSORY NOTE
THIS AMENDED AND RESTATED PROMISSORY NOTE is made this 10th day of October
1996 by and between DELTA COMPUTEC INC., a New York corporation with its
principal office and place of business 000 Xxxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx
00000 ("Borrower") and NATIONAL CANADA FINANCE CORP., a Delaware corporation
with an office and place of business at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000 ("Lender").
W I T N E S S E T H :
WHEREAS, Borrower, Delta Data Net, Inc. ("DDI") and Lender entered into a
certain Credit Agreement dated as of April 1, 1994, as amended by Credit
Agreement Amendment No. 1 dated November 17, 1994, Credit Agreement Amendment
No. 2 dated January 24, 1995, Credit Agreement Amendment No. 3 dated April 3,
1995, Credit Agreement Amendment No. 4 dated May 1, 1995 and Credit Agreement
Amendment No. 5 dated October 27, 1995 (as amended, the "Credit Agreement"); and
WHEREAS, Borrower and DDI executed and delivered to Lender a Promissory
Note dated April 1, 1994, as amended and restated by an Amended and Restated
Promissory Note dated May 1, 1995 and as further amended and restated by a Third
Amended and Restated Promissory Note dated October 27, 1995 (as amended and
restated, the "Promissory Note"); and
WHEREAS, on the date hereof, Lender is assigning to Xxxxxx X. Xxxxxxx XX
("Xxxxxxx") all indebtedness of DDI to Lender and all but $750,000 of the
indebtedness owed to Lender by Borrower evidenced by the Credit Agreement and
the Promissory Note; and
WHEREAS, Borrower and Lender desire to enter into a new agreement which
amends and restates, in its entirety, the portions of the Credit Agreement and
the Promissory Note evidencing the indebtedness which Lender is not assigning to
Xxxxxxx.
NOW, THEREFORE, Borrower and Lender agree as follows:
1. Promise to Pay. For value received, Borrower promises to pay to Lender,
on the earlier to occur of: (a) October 10, 2001 (the "Maturity Date"); or (b)
the day upon which Lender accelerates the Indebtedness (as herein defined)
following the occurrence of an Event of Default and, if applicable, the
expiration of any cure period related to such Event of Default, the principal
sum of Seven Hundred Fifty Thousand and 00/100 Dollars ($750,000.00) (the
"Principal"), plus interest as agreed below and all reasonable attorneys' fees
and disbursements Lender incurs in order to collect any amount due
Page 81 of 207 Pages
under this Note. All of Borrower's obligations to Lender described in the
preceding sentence, together with Borrower's obligations to make Quarterly
Premium Payments, as such term is defined below, are collectively referred to as
the "Indebtedness".
2. Interest. The unpaid Principal balance of this Note shall earn interest
calculated on the basis of a 360-day year for the actual number of days of each
year (365 or 366) from and including the date hereof to but not including the
date all amounts hereunder are paid in full at a rate per year that shall on
each day be one percent (1%) above the rate in effect on that day as the rate
announced by Lender as its Prime Rate of interest. Until the outstanding
Principal is paid in full, payments of all accrued and unpaid interest in
amounts which will vary will become due and payable on the first day of each
month commencing on November 1, 1996. "Prime Rate" shall mean the interest rate
per annum announced from time to time by Lender as its Prime Rate. The Prime
Rate may be greater or lesser than other interest rates charged by Lender to
other borrowers and is not solely based or dependent upon the interest rate
which Lender may charge any particular borrower or class of borrowers.
3. Interest Rate Cap. It is the intent of Lender and Borrower that in no
event shall interest be payable at a rate in excess of the maximum rate
permitted by applicable law (the "Maximum Legal Rate"). Solely to the extent
necessary to prevent interest under this Note from exceeding the Maximum Legal
Rate, any amount that would be treated as excessive under a final judicial
interpretation of applicable law shall be deemed to have been a mistake and
automatically canceled, and, if received by Lender, shall be refunded to
Borrower.
4. Prepayment Premium.
(a) During the period from the date hereof through and including
October 10, 1997, Borrower may prepay all or any portion of this Note at
any time without premium or penalty. During the period from October 10,
1997 through and including October 10, 1999, Borrower may prepay all or any
portion of this Note at any time; provided, however, any prepayment of this
Note in full must be accompanied by all accrued and unpaid Quarterly
Premium Payments, as such term is defined below. Thereafter, Borrower may
prepay all or any portion of this Note at any time without premium or
penalty.
(b) A premium of $25,000 per quarter (a "Quarterly Premium Payment")
shall accrue as of the first day of each three-month period beginning on
October 10, 1997, but the aggregate of all Quarterly Premium Payments shall
not exceed $200,000.
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(c) If a portion of this Note, but not the entire Note, is paid as of
the date any Quarterly Premium Payment accrues (a "QPP Reduction Ratio
Date"), the Quarterly Premium Payment accruing as of such QPP Reduction
Ratio Date shall be reduced by the proportion that all prepayments made on
this Note as of that QPP Reduction Ratio Date (the "QPP Prepayment Total")
bears to $750,000; provided, however, that, except to the extent provided
in the Pledge Agreement, as hereinafter defined, no such prepayment shall
affect Lender's right to Warrant Shares or Option Shares, as these terms
are defined in that certain Pledge Security Agreement dated the date hereof
between Lender and Xxxxxxx (the "Pledge Agreement").
5. Additional Consideration. As of the date hereof, for and in
consideration of Lender's agreement, at the request of Borrower and Xxxxxxx to
enter into this Note and related documents: (a) Xxxxxxx, pursuant to that
certain Limited Nonrecourse Guaranty and Suretyship Agreement (the "Xxxxxxx
Guaranty") and the Pledge Agreement, has agreed to deliver to Lender certain
common shares of Borrower and warrants or options related to common shares of
Borrower in such amounts as are set forth in the Xxxxxxx Guaranty and the Pledge
Agreement; and (b) Borrower, pursuant to Section 6(l) of this Note, has agreed
to take certain action. The agreements set forth in clauses (a) and (b) above
are referred to herein as the "Security Obligations".
6. Representations and Covenants. Borrower represents to and agrees with
Lender that now and until this Note is paid in full:
(a) Good Standing; Authority. Borrower is a corporation (i) duly
organized and existing and in good standing under the laws of the
jurisdiction in which it was formed, (ii) duly qualified, in good standing
and authorized to do business in every jurisdiction in which failure to be
so qualified would have a material adverse effect on its business or assets
and (iii) having the power and authority to own each of its assets and to
use them as contemplated now or in the future.
(b) Legality. The execution, issuance, delivery to Lender and
performance by Borrower of this Note (i) are in furtherance of Borrower's
purposes and within its power and authority; (ii) do not violate Borrower's
certificate of incorporation or other governing instrument or result in a
lien or encumbrance on any assets of Borrower; and (iii) have been duly
authorized by all necessary corporate action.
(c) Compliance. Borrower conducts its business and operations and the
ownership of its assets in compliance with each applicable statute,
regulation and other law, including without limitation environmental laws.
All approvals, including without
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limitation authorizations, permits, consents, franchises, licenses,
registrations, filings, declarations, reports and notices (the "Approvals")
necessary to the conduct of Borrower's business and for Borrower's due
issuance of this Note have been duly obtained and are in full force and
effect. Borrower is in compliance with all conditions of each Approval.
(d) Financial and Other Information. For each year until this Note is
paid in full, Borrower shall provide to Lender: (i) within 60 days after
the end of each fiscal quarter of Borrower, unaudited consolidated
quarterly financial statements certified by an officer of Borrower to have
been prepared in accordance with generally accepted accounting principles
and to be correct, complete and in accordance with Borrower's records, (ii)
on or before the earlier to occur of (A) the date on which Borrower files
its annual 10K report with the U.S. Securities and Exchange Commission, or
(B) 120 days after the end of Borrower's fiscal year, audited annual
consolidated financial statements of Borrower.
(e) Accounting; Tax Returns and Payment of Claims. Borrower will
maintain a system of accounting and reserves in accordance with generally
accepted accounting principles, will file each tax return required of it
and, except as disclosed in an attached schedule, will pay when due each
tax, assessment, fee, charge, fine and penalty imposed by any taxing
authority upon Borrower or any of its assets, income or franchises.
(f) Insurance. Borrower will maintain its property in good repair and
will maintain and on request provide Lender with evidence of insurance
coverage satisfactory to Lender including without limitation fire and
hazard, liability, worker's compensation and flood hazard insurance as
required.
(g) Judgments and Litigation. There is no pending claim, action or
other legal proceeding or judgment, order or award of any court, agency or
other governmental authority or arbitrator (each an "Action") which
involves Borrower or its assets and would have a material adverse effect
upon Borrower or threaten the validity of this Note. Borrower will
immediately notify Lender in writing upon acquiring knowledge of any such
Action.
(h) Notice of Change of Address and of Default. Borrower will
immediately notify Lender in writing (i) of any change in its address or of
the location of any collateral securing this Note, (ii) of the occurrence
of any Event of Default defined below and (iii) of any material change in
Borrower's ownership or management.
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(i) Payment of a portion of equity proceeds. In the event that DCI
raises capital in any offering of additional equity, DCI shall, within ten
(10) business days of the receipt of immediately available funds as a
result of such offering, remit fifty percent (50%) of such immediately
available funds to Lender to be applied by Lender as a permanent reduction
in the Indebtedness.
(j) Spare Parts Inventory Certification. Subject to the Inventory
Covenant Cure Period, as such term is defined below, Borrower shall furnish
to Lender on or before the fifth business day of any month a certification
in the form attached hereto as Exhibit A (a "Spare Parts Inventory
Certificate") as of the last day of the preceding month of the value
(determined in accordance with generally accepted accounting principles) of
Borrower's Spare Parts Inventory, as such term is defined in the Amended
and Restated Security Agreement dated the dated hereof between Borrower and
Lender.
(k) Collateral Coverage Ratio. Subject to the Inventory Covenant Cure
Period, Borrower shall have, as of the last day of each month and as
certified on the Spare Parts Inventory Certificate, a ratio (the "Spare
Parts Inventory Ratio") of the value (determined in accordance with
generally accepted accounting principles) of the Spare Parts Inventory to
an amount equal to the outstanding principal balance of this Note, plus the
amount of any indebtedness secured by a lien in favor of the Internal
Revenue Service or purchase money security interest, which lien or security
interest encumbers the Spare Parts Inventory and has priority over NCFC's
security interest in the Spare Parts Inventory, less any cash collateral
securing this Note, of at least 2.5 to 1. Lender agrees that Borrower's
failure to have the Spare Parts Inventory Ratio required by the preceding
sentence and as required by clause 7(d) below, may be cured by (i) a
reduction in the principal amount of this Note, (ii) delivery of cash
collateral to the Lender, (iii) the acquisition of additional Spare Parts
Inventory or (iv) furnishing a further Spare Parts Inventory Certificate
certifying that Borrower has a Spare Parts Inventory Ratio that meets the
requirements of the foregoing covenant.
(l) Warrant. Borrower shall use its reasonable efforts to present to
its shareholders for approval a resolution authorizing Borrower to issue to
Lender by October 10, 1999, a warrant, in substantially the form attached
as Exhibit A to the Pledge Agreement, for a number of common shares of
Borrower that when added to the Pledged Shares, as such term is defined in
the Pledge Agreement, will give Lender rights to 17 1/2% of the issued and
outstanding common shares of Borrower, subject, however, to adjustment as
provided in Section 4 of the Pledge Agreement. If such resolution is
approved, Borrower shall promptly issue such warrant.
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7. Events of Default; Acceleration. An event of default ("Event of
Default") will have occurred if, prior to the payment in full by Borrower of its
Indebtedness hereunder:
(a) Borrower fails to pay any amount of interest due under this Note
within forty-five (45) days after receipt of a written notice from Lender
that an amount of interest was not timely paid in accordance with paragraph
2 hereof;
(b) Borrower fails to pay when due, whether upon maturity, by
acceleration or otherwise, any other amount due under this Note within
forty-five (45) days after receipt of a written notice from Lender that any
other amount due under this Note was not timely paid;
(c) Borrower fails to furnish to Lender on or before the fifth
business day of any month a Spare Parts Inventory Certificate as of the
last day of the preceding month of the value (determined in accordance with
generally accepted accounting principles) of Borrower's spare parts
inventory and such failure continues unremedied for at least forty-five
days (the "Inventory Covenant Cure Period"); provided, however, that Lender
shall provide Borrower with at least twenty five days prior written notice
(which twenty five day period may run concurrently with the Inventory
Covenant Cure Period) before taking any remedial action against Borrower
based upon this subsection (c);
(d) Borrower fails to have, as of the last day of each month, and as
certified on a Spare Parts Inventory Certificate, a Spare Parts Inventory
Ratio of at least 2.5 to 1 and such failure continues unremedied for at
least the Inventory Covenant Cure Period; provided, however, that Lender
shall provide Borrower with at least twenty five days prior written notice
(which twenty five day period may run concurrently with the Inventory
Covenant Cure Period) before taking any remedial action against Borrower
based upon this subsection (d);
(e) Xxxxxxx declares an event of default under any of the documents
evidencing the indebtedness of Borrower to Xxxxxxx and any such event of
default continues beyond the expiration of all applicable grace and cure
periods, and any such event of default is further not waived in writing by
Xxxxxxx, and thereafter, Xxxxxxx actively takes action to enforce, realize
upon or foreclose his security interest in any tangible assets which secure
the indebtedness of Borrower to Xxxxxxx under an Amended and Restated
Promissory Note dated the date hereof;
(f) Borrower breaches or is in default under any other agreement with
Lender and any such event of default continues beyond the expiration of any
applicable grace or cure period(s);
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(g) Borrower is dissolved;
(h) A receiver or similar trustee is appointed for Borrower or its
assets (with or without its consent), or Borrower makes an assignment for
the benefit of creditors or commences or has commenced against it a
proceeding pursuant to any bankruptcy law and, with respect to the
appointment of any such receiver or trustee or the commencement of any such
proceeding against Borrower, the failure to have such appointment vacated,
or such proceeding dismissed, within ninety (90) days;
(i) Any representation or warranty made in a Spare Parts Inventory
Certificate proves to have been made with the affirmative intention of
deceiving Lender as to the value (determined in accordance with generally
accepted accounting principles) of Borrower's spare parts inventory.
(j) Xxxxxxx breaches or is in default under the Pledge Agreement and
any such breach or default continues beyond the expiration of any
applicable grace or cure period(s);
(k) A final judgment or judgements are entered or an order or orders
of any judicial authority or governmental entity is issued against Borrower
(such judgment(s) and order(s) hereinafter collectively referred to as
"Judgment") for payment of money, which Judgment exceeds Two Hundred Fifty
Thousand Dollars ($250,000) and which is not covered by insurance or
otherwise the subject of an appeal as to which a bond has been provided; or
(l) Borrower raises capital in any offering of additional equity and
fails, within ten (10) business days of the receipt of immediately
available funds as a result of such equity offering, to remit fifty percent
(50%) of such immediately available funds to Lender to be applied as a
permanent reduction to the Indebtedness; or
(m) Lender's agent fails to deliver to Lender a share certificate for
the Pledged Shares within twenty one days of the date of this Note.
Upon the occurrence of any Event of Default and the expiration of any grace
or cure period applicable thereto, all amounts hereunder shall become
immediately due and payable at Lender's option and, subject to the provisions of
the Intercreditor Agreement, Lender may thereupon exercise all rights and
remedies available to it under this Note and all documents entered into in
connection with this Note and applicable law.
8. Cumulative Nature of Bank's Rights and Remedies. All rights and remedies
of Lender under applicable law and this and other agreements of Borrower are
cumulative and not
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exclusive. No single, partial or delayed exercise by Lender of any right or
remedy shall preclude full and timely exercise by Lender at any time of any
right or remedy of Lender without notice. No course of dealing or other conduct,
no oral agreement or representation made by Lender or usage of trade shall
operate as a waiver of any right or remedy of Lender. No waiver shall be
effective against either party unless made specifically in writing by the party
against whom such waiver is sought to be charged.
9. Miscellaneous. This Note, with any related security agreements and
guaranties, contains the entire agreement between Lender and Borrower with
respect to this Note, and supersedes every course of dealing, other conduct,
oral agreement and representation previously made by Lender. No change in this
Note shall be effective unless made in a writing duly executed by both parties.
This Note shall be governed by the internal laws of the State of New York,
without regard to its principles of conflict of laws. This Note is a binding
obligation enforceable against Borrower and its successors and assigns and shall
inure to the benefit of Lender and its successors and assigns. Each provision of
this Note shall survive until all amounts due under this Note are paid to
Lender, shall be interpreted as consistent with existing law and shall be deemed
amended to the extent necessary to comply with any conflicting law. If a court
deems any provision invalid, the remainder of the Note shall remain in effect.
Section headings are for convenience only. Singular number includes plural and
neuter gender includes masculine and feminine as appropriate.
10. Notices. Notices to Borrower by Lender and to Lender by Borrower must
be in writing, refer specifically to this Note and be delivered by telecopy and
confirmed by overnight mail or other nationally recognized overnight delivery
service directed to Borrower or Lender, as the case may be, at the address of
each stated on the first page of this Agreement and, when forwarded to Borrower,
with a copy to Xxxxx X. Xxxxxx, Esq., Xxxxxxx Xxxxxxxxxxx & Mugel, LLP, Xxxxx
000, 00 Xxxxx Xxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, and when forwarded to Lender,
with a copy to Xxxxxx X. Xxxxxxxxxx, Esq., Xxxxx, Xxxxxx & Xxxxxxxx, Xxx
Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxx Xxxxxx 00000. Notices shall be deemed
delivered only when actually received by an officer of Borrower or Lender or by
addressee, as the case may be. Telecopy numbers are as follows: Lender
000-000-0000; Xxxxxx X. Xxxxxxxxxx, Esq. at 000-000-0000; Borrower,
000-000-0000, Attention: President; and Xxxxx X. Xxxxxx, Esq. at 000-000-0000.
11. Borrower's Waivers and Consents. In any action or other legal
proceeding relating to this Note, Borrower (1) consents to the personal
jurisdiction of any state or federal court located in the State of New York and
(2) agrees that in any
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legal proceeding, a copy of this Note kept in Lender's course of business may be
admitted into evidence as an original.
12. Trial by Jury. Borrower agrees that any suit, action or proceeding,
whether claim or counterclaim, brought or instituted by Borrower or any
successor or assign of Borrower on or with respect to this Note or any other
document executed and delivered in connection with this Note or the dealings of
the parties with respect hereto, shall be tried only by a court and not by a
jury. BORROWER HEREBY KNOWING, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING. Further, Borrower waives
any right it may have to claim or recover, in any such suit, action or
proceeding, any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. BORROWER ACKNOWLEDGES AND
AGREES THAT THIS SECTION IS A SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT
LENDER WOULD NOT ENTER INTO THIS SECTION WERE NOT A PART OF THIS NOTE.
13. Amendment and Restatement. THIS NOTE IS ISSUED IN ORDER TO AMEND,
RESTATE AND EVIDENCE AND TO BE A SUBSTITUTE FOR, BUT NOT TO BE A PAYMENT,
SATISFACTION, CANCELLATION OR A NOVATION OF A PORTION OF THE INDEBTEDNESS
EVIDENCED BY THE THIRD AMENDED AND RESTATED PROMISSORY NOTE DATED OCTOBER 27,
1995 OF BORROWER AND DDI TO LENDER (THE "SUPERSEDED NOTE"); PROVIDED, HOWEVER,
THAT THE SUBSTITUTION OF THIS AMENDED AND RESTATED NOTE FOR THE SUPERSEDED NOTE
DOES NOT EXTINGUISH THE INDEBTEDNESS EVIDENCED BY THE SUPERSEDED NOTE OR ANY
PORTION THEREOF AND THE LIABILITIES OF BORROWER THEREUNDER AND HEREUNDER ARE
CONTINUOUS. THIS AMENDED AND RESTATED NOTE DOES NOT EVIDENCE ANY NEW ADVANCES OF
CREDIT OR REFLECT ANY AGREEMENT BY LENDER FOR THE EXTENSION OF ANY ADDITIONAL
CREDIT TO BORROWER.
14. Releases. (a) Recognizing and in consideration of Lender's undertakings
as herein set forth, Borrower hereby waives and releases Lender and its
officers, attorneys, agents, and employees from any liability, suit, damage,
claim, loss or expense of any kind or nature whatsoever and howsoever arising
out of or relating to Lender's acts or omissions with respect to Borrower or any
of its lending relationships with Borrower arising on or before the date hereof.
(b) Recognizing and in consideration of Borrower's undertakings as
herein set forth, Lender hereby waives and releases Borrower and its
officers, attorneys, agents and employees from any liability, suit, damage,
claim, loss or expense of any kind or nature whatsoever or howsoever
arising out of or relating to Borrower's acts or omissions with respect to
Lender or any of its lending relationships with Lender arising on or before
the date hereof; provided, however, this paragraph 14(b) is subject in all
respects to paragraph 13 of this Note and specifically excepted from the
terms of the release set forth in
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this paragraph 14(b) shall be the obligations of Borrower pursuant to this
Note and all other documents executed in connection with this Note and
dated the date hereof.
15. Assignment. This Note and the other documents entered into in
connection with this Note: (i) shall be binding upon Lender and Borrower and
upon their respective successors and assigns, and (ii) shall inure to the
benefit of Lender and Borrower; provided, however, that neither Borrower nor
Lender may assign any rights hereunder or any interest herein without obtaining
the prior written consent of the non-assigning party, and any such assignment or
attempted assignment shall be void and of no effect with respect to the
non-assigning party; provided, however, notwithstanding the foregoing, if
Xxxxxxx sells, assigns or otherwise transfers more than fifty percent of the
shares of common stock of Borrower owned by him on the date of this Note, then
Lender may assign this Note and the other documents entered into in connection
with this Note to a financial institution, as such term is defined in Section
3(a)(46) of the Securities Exchange Act of 1934, as amended or any other entity
in the business of buying and selling loans, but in no event shall Lender assign
this Note to a competitor of Borrower.
16. Negation of Partnership or Joint Venture. No provision contained in
this Note nor in any other document executed between or among Borrower, Lender
or Xxxxxxx shall constitute, or be construed to be or to create, a partnership,
joint venture or other non-lending relationship between Borrower, Lender or
Xxxxxxx or any of them. Borrower and Lender specifically acknowledge that no
such relationship is intended hereby, and that Lender has entered into this Note
and all documents entered into in connection with this Note solely in its
capacity as lender to Borrower.
17. Counterparts. This Note may be executed in several counterparts, and
all so executed shall constitute one agreement, binding on all of the parties
hereto, notwithstanding that all of the parties are not signatory to the
original or the same counterpart.
DELTA COMPUTEC INC.
By: /s/ Xxxxxxx Xxxxxx
Name:
Title: Secretary
NATIONAL CANADA FINANCE CORP.
By: /s/ E. Xxxx Xxxxxxx
Name:
Title:
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