Attached files
| file | filename |
|---|---|
| 8-K - Paradigm Holdings, Inc | v187133_8k.htm |
| EX-10.7 - Paradigm Holdings, Inc | v187133_ex10-7.htm |
| EX-10.5 - Paradigm Holdings, Inc | v187133_ex10-5.htm |
| EX-10.1 - Paradigm Holdings, Inc | v187133_ex10-1.htm |
| EX-10.4 - Paradigm Holdings, Inc | v187133_ex10-4.htm |
| EX-10.2 - Paradigm Holdings, Inc | v187133_ex10-2.htm |
| EX-10.6 - Paradigm Holdings, Inc | v187133_ex10-6.htm |
| EX-99.1 - Paradigm Holdings, Inc | v187133_ex99-1.htm |
| EX-10.9 - Paradigm Holdings, Inc | v187133_ex10-9.htm |
| EX-10.8 - Paradigm Holdings, Inc | v187133_ex10-8.htm |
| EX-10.10 - Paradigm Holdings, Inc | v187133_ex10-10.htm |
THE
ISSUANCE AND SALE OF THE SECURITY REPRESENTED BY THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THIS SECURITY MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THIS SECURITY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITY.
Paradigm
Holdings, Inc.
Senior
Secured Subordinated Note
|
Issuance
Date: May 26, 2010
|
Original
Principal Amount: U.S.
$[__________]
|
FOR VALUE RECEIVED, Paradigm
Holdings, Inc., a Wyoming corporation (the “Company”), hereby promises to
pay to [________] or its registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof
pursuant to redemption or otherwise, the “Principal”) when due, whether
upon the Maturity Date (as defined below), acceleration, redemption or otherwise
(in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding
Principal at a rate per annum equal to the Interest Rate (as defined below),
from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes
due and payable, whether upon an Interest Date (as defined below), the Maturity
Date, acceleration, redemption or otherwise (in each case in accordance with the
terms hereof). This Senior Secured Subordinated Note (including all
Senior Secured Subordinated Notes issued in exchange, transfer or replacement
hereof, this “Note”) is
one of an issue of Senior Secured Subordinated Notes (collectively, the “Notes” and such other Senior
Secured Subordinated Notes, the “Other Notes”) issued pursuant to the
Securities Purchase Agreement (as defined below). The Company shall
also pay Holder on the Issuance Date a financing fee in the amount of $[_______]
in Common Shares (as defined in the Securities Purchase Agreement) at a price
per Common Share equal to $0.086. Certain capitalized terms are
defined in Section 25.
(1) MATURITY. On
the Maturity Date, the Holder shall surrender this Note to the Company and the
Company shall pay to the Holder an amount in cash representing all outstanding
Principal, accrued and unpaid Interest and accrued and unpaid Late Charges, if
any. The “Maturity Date” shall be the first
anniversary of the Issuance Date.
(2) INTEREST; INTEREST
RATE. (a) Interest on this Note shall
commence accruing on the Issuance Date at a rate per annum equal to the Interest
Rate and shall be computed on the basis of a 365-day year and actual days
elapsed. Except as otherwise provided herein, Interest payable
pursuant to this Note shall be payable in arrears on the last Business Day of
each calendar month during the period beginning on the Issuance Date and ending
on such date all obligations hereunder have been paid in full to the Holder
(each, an “Interest
Date”) with the first
Interest Date being June 30, 2010.
(b) From
and after the occurrence of an Event of Default, the Interest Rate shall be
increased to eighteen percent (18%). In the event that such Event of
Default is subsequently cured, the adjustment referred to in the preceding
sentence shall cease to be effective as of the date of such cure; provided that
the Interest as calculated at such increased rate during the continuance of such
Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of
cure of such Event of Default.
(3) RIGHTS UPON EVENT OF
DEFAULT.
(a) Event of
Default. Each of the following events shall constitute an
“Event of
Default”:
(i) the
Company's failure to pay to the Holder any amount of Principal (including,
without limitation, any redemption payments), Interest, Late Charges or other
amounts when and as due under this Note or any other Transaction Document (as
defined in the Securities Purchase Agreement), except, in the case of a failure
to pay Interest and Late Charges when and as due, in which case only if such
failure continues for a period of at least three (3) Business Days;
(ii) any
default under, redemption of or acceleration prior to maturity of any
Indebtedness of the Company or any of its Subsidiaries (as defined in the
Securities Purchase Agreement) exceeding $100,000 individually or in the
aggregate, other than with respect to any Other Notes;
(iii) the
Company or any of its Subsidiaries, pursuant to or within the meaning of Title
11, U.S. Code, or any similar Federal, foreign or state law for the relief of
debtors (collectively, “Bankruptcy Law”), (A)
commences a voluntary case, (B) consents to the entry of an order for relief
against it in an involuntary case, (C) consents to the appointment of a
receiver, trustee, assignee, liquidator or similar official (a “Custodian”), (D) makes a
general assignment for the benefit of its creditors or (E) admits in writing
that it is generally unable to pay its debts as they become due;
(iv) a
court of competent jurisdiction enters an order or decree under any Bankruptcy
Law that (A) is for relief against the Company or any of its Subsidiaries in an
involuntary case, (B) appoints a Custodian of the Company or any of its
Subsidiaries or (C) orders the liquidation of the Company or any of its
Subsidiaries;
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(v) a
final judgment or judgments for the payment of money aggregating in excess of
$100,000 are rendered against the Company or any of its Subsidiaries and which
judgments are not, within sixty (60) days after the entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within sixty (60)
days after the expiration of such stay; provided, however, that any judgment
which is covered by insurance or an indemnity from a credit worthy party shall
not be included in calculating the $100,000 amount set forth above so long as
the Company provides the Holder a written statement from such insurer or
indemnity provider (which written statement shall be reasonably satisfactory to
the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company will receive the proceeds of such insurance or
indemnity within thirty (30) days of the issuance of such judgment;
(vi) the
Company breaches any representation, warranty, covenant or other term or
condition of any Transaction Document, except, in the case of a breach of a
covenant which is curable, only if such breach continues for a period of at
least ten (10) consecutive Business Days after notice of such
breach;
(vii) any
Material Adverse Effect (as defined in the Securities Purchase
Agreement);
(viii) any
provision of any Transaction Document (including, without limitation, the
Security Documents (as defined in the Securities Purchase Agreement) and the
Guaranties (as defined in the Securities Purchase Agreement)) shall at any time
for any reason (other than pursuant to the express terms thereof) cease to be
valid and binding on or enforceable against the parties thereto, or the validity
or enforceability thereof shall be contested by any party thereto, or a
proceeding shall be commenced by the Company or any Subsidiary or any
governmental authority having jurisdiction over any of them, seeking to
establish the invalidity or unenforceability thereof, or the Company or any
Subsidiary shall deny in writing that it has any liability or obligation
purported to be created under any Transaction Document (including, without
limitation, the Security Documents and the Guaranties);
(ix) the
Security Documents shall for any reason fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
second priority Lien on the Collateral (as defined in the Security Agreement) in
favor of each of the Secured Parties (as defined in the Security Agreement);
or
(x) any
material damage to, or loss, theft or destruction of, any Collateral (other than
immaterial items), whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other casualty
which causes, for more than fifteen (15) consecutive days, the cessation or
substantial curtailment of revenue producing activities at any facility of the
Company or any Subsidiary, if any such event or circumstance could have a
Material Adverse Effect;
(xi) any
withdrawal occurs with respect to the Performance Bond (as defined in the
Securities Purchase Agreement);
(xii) any
material breach or material failure in any respect to comply with Section 10 of
this Note; or
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(xiii) any
Event of Default (as defined in the Other Notes) occurs with respect to any
Other Notes.
Upon the
occurrence of an Event of Default with respect to this Note or any Other Note,
the Company shall within two (2) Business Days deliver written notice thereof
via facsimile and overnight courier (an “Event of Default Notice”) to
the Holder.
(b) Redemption
Right. At any time after the earlier of the Holder's
receipt of an Event of Default Notice and the Holder becoming aware of an Event
of Default, the Holder may require the Company to redeem all or any portion of
this Note by delivering written notice thereof (the “Event of Default Redemption
Notice”, and such redemption, a “Event of Default Redemption”)
to the Company, which Event of Default Redemption Notice shall indicate the
portion of this Note the Holder is electing to redeem. Each portion
of this Note subject to redemption by the Company pursuant to this Section 3(b)
shall be redeemed by the Company at a price equal to sum of (x) the Outstanding
Amount being redeemed and (y) the Present Value of Interest of such Outstanding
Amount (the “Event of
Default Redemption
Price”). Redemptions required by this Section 3(b) shall be
made in accordance with the provisions of Section 6. To the extent
redemptions required by this Section 3(b) are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments.
(4) RIGHTS UPON FUNDAMENTAL
TRANSACTION AND CHANGE OF CONTROL.
(a) Assumption. The
Company shall not enter into or be party to a Fundamental Transaction unless the
Successor Entity assumes in writing all of the obligations of the Company under
this Note and the other Transaction Documents in accordance with the provisions
of this Section 4(a) pursuant to written agreements in form and substance
reasonably satisfactory to the Required Holders and approved by the Required
Holders prior to such Fundamental Transaction, including agreements to deliver
to each holder of Notes in exchange for such Notes a security of the Successor
Entity evidenced by a written instrument substantially similar in form and
substance to the Notes, including, without limitation, having a principal amount
and interest rate equal to the principal amounts and the interest rates of the
Notes held by such holder and having similar ranking to the Notes, and
reasonably satisfactory to the Required Holders. Upon the occurrence
of any Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Note referring to the “Company” shall refer
instead to the Successor Entity), and may exercise every right and power of the
Company and shall assume all of the obligations of the Company under this Note
with the same effect as if such Successor Entity had been named as the Company
herein. The provisions of this Section shall apply similarly and
equally to successive Fundamental Transactions.
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(b) Redemption
Right. Until the later to occur (i) no sooner than fifteen
(15) days nor later than ten (10) days prior to the consummation of a Change of
Control, or (ii) the public announcement of such Change of Control, the Company
shall deliver written notice thereof via facsimile and overnight courier to the
Holder (a “Change of
Control Notice”). At any
time during the period beginning after the Holder's receipt of a Change of
Control Notice and ending ten (10) Trading Days after the later of (x) the date
of the consummation of such Change of Control and (y) the date of the expiration
of the applicable Blockage Period (as defined in the Subordination Agreement),
if any, the Holder may require the Company to redeem all or any portion of this
Note by delivering written notice thereof (“Change of Control Redemption
Notice”, and such redemption, a “Change of Control Redemption”)
to the Company, which Change of Control Redemption Notice shall indicate the
Outstanding Amount the Holder is electing to redeem. The portion of
this Note subject to redemption pursuant to this Section 4 shall be redeemed by
the Company in cash at a price equal to the sum of (x) the Outstanding Amount
being redeemed and (y) the Present Value of Interest of such Outstanding Amount
(the “Change of Control
Redemption Price”). Redemptions required by this Section 4
shall be made in accordance with the provisions of Section 6. To the
extent redemptions required by this Section 4(b) are deemed or determined by a
court of competent jurisdiction to be prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments.
(5) SALE
REDEMPTION. No earlier than fifteen (15) days prior to nor
later than ten (10) days following the consummation of any Sale, the Company
shall deliver written notice thereof via facsimile and overnight courier (a
“Sale Notice”) to the
Holder, which shall include the calculations of the amount of Net Sale Proceeds
for such Sale. At any time prior to the later of (i) ten (10)
Business Days following the consummation of any Sale and (ii) ten (10) Business
Days following receipt of the Sale Notice, the Holder may require the Company to
redeem (a “Sale
Redemption”), with the Net Sale Proceeds of such Sale, all or part of the
Outstanding Amount, which amount shall not exceed the applicable Sale Redemption
Eligibility Amount (the “Sale
Redemption Amount”) by delivering written notice thereof (the “Sale Redemption Notice”) to
the Company. The Sale Redemption Notice shall state (i) the date the
Company is required to pay to the Holder the Sale Redemption Price (as defined
below) (the “Sale Redemption
Date”), which date shall be no earlier than ten (10) Business Days
following the date of delivery of such Sale Redemption Notice and (ii) the
allocation of such Sale Redemption Amount between this Note and any Notes held by the
Holder. Each portion of this Note subject to redemption pursuant to
this Section 5 shall be redeemed by the Company at a price equal to the sum of
(x) the Outstanding Amount being redeemed and (y) the Present Value of Interest
of such Outstanding Amount (the “Sale Redemption
Price”). Redemptions required by this Section 5 shall be made
in accordance with the provisions of Section 6. To the extent
redemptions required by this Section 5 are deemed or determined by a court of
competent jurisdiction to be prepayments of the Note by the Company, such
redemptions shall be deemed to be voluntary prepayments.
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(6) HOLDER'S
REDEMPTIONS.
(a) Mechanics. The
Company shall deliver the applicable Event of Default Redemption Price to the
Holder within five (5) Business Days after the Company's receipt of the Holder's
Event of Default Redemption Notice (such date, the “Event of Default Redemption
Date”). If the Holder has submitted a Change of Control
Redemption Notice in accordance with Section 4(b), the Company shall deliver the
applicable Change of Control Redemption Price to the Holder concurrently with
the consummation of such Change of Control if such notice is received prior to
the consummation of such Change of Control and within ten (10) Business Days
after the Company's receipt of such notice otherwise (such date, the “Change of Control Redemption
Date”). If the Holder has submitted a Sale Redemption Notice
in accordance with Section 5, the Company shall pay the Sale Redemption Price on
the Sale Redemption Date. In the event of a redemption of less than
all of the Outstanding Amount of this Note, the Company shall promptly cause to
be issued and delivered to the Holder a new Note (in accordance with Section
15(d)) representing the outstanding Principal which has not been
redeemed. In the event that the Company does not pay the Redemption
Price to the Holder within the time period required, at any time thereafter and
until the Company pays such unpaid Redemption Price in full, the Holder shall
have the option, in lieu of redemption, to require the Company to promptly
return to the Holder all or any portion of this Note representing the
Outstanding Amount that was submitted for redemption and for which the
applicable Redemption Price (together with any Late Charges thereon) has not
been paid. Upon the Company's receipt of such notice, (x) the
Redemption Notice shall be null and void with respect to such Outstanding
Amount, and (y) the Company shall immediately return this Note, or issue a new
Note (in accordance with Section 15(d)) to the Holder representing such
Outstanding Amount. The Holder's delivery of a notice voiding a
Redemption Notice and exercise of its rights following such notice shall not
affect the Company's obligations to make any payments of Late Charges which have
accrued prior to the date of such notice with respect to the Outstanding Amount
subject to such notice.
(b) Redemption by Other
Holders. Upon the Company's receipt of notice from any of the
holders of the Other Notes for redemption or repayment as a result of an event
or occurrence substantially similar to the events or occurrences described in
Section 3(b) or Section 4(b) (each, an “Other Redemption Notice”), the
Company shall immediately, but no later than one (1) Business Day of its receipt
thereof, forward to the Holder by facsimile a copy of such notice. If
the Company receives a Redemption Notice and one or more Other Redemption
Notices, during the period beginning on and including the date which is three
(3) Business Days prior to the Company's receipt of the Holder's Redemption
Notice and ending on and including the date which is three (3) Business Days
after the Company's receipt of the Holder's Redemption Notice and the Company is
unable to redeem all principal, interest and other amounts designated in such
Redemption Notice and such Other Redemption Notices received during such seven
(7) Business Day period, then the Company shall redeem a pro rata amount from
each holder of the Notes (including the Holder) based on the principal amount of
the Notes submitted for redemption pursuant to such Redemption Notice and such
Other Redemption Notices received by the Company during such seven (7) Business
Day period.
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(c) Alternative Redemption in
Shares of Common Stock. If the Company fails to pay the
applicable Redemption Price on the applicable Redemption Date, at the option of
the Holder, the Holder may elect by written notice to the Company (a “Conversion Notice”, and the
date the Company receives such Conversion Notice, the “Conversion Date”), in lieu of
receiving such Redemption Price in cash, to receive such number of shares of
Common Stock equal to the quotient of (x) such Redemption Price and (y)
$0.086. On or before the first (1st) Trading Day following the
date of receipt of a Conversion Notice, the Company shall transmit by facsimile
an acknowledgment of confirmation of receipt of such Conversion Notice to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before
the second (2nd) Trading Day following the date of receipt of a Conversion
Notice, the Company shall (x) provided that the Transfer Agent is participating
in The Depository Trust Company’s (“DTC”) Fast Automated
Securities Transfer Program, credit such aggregate number of shares of Common
Stock to which the Holder shall be entitled to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal at Custodian system or
(y) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight courier)
to the address as specified in the Conversion Notice, a certificate, registered
in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled. If this Note is physically
surrendered for conversion and the outstanding Principal of this Note is greater
than the Principal portion of the Conversion Amount being converted, then the
Company shall as soon as practicable and in no event later than three (3)
Business Days after receipt of this Note and at its own expense, issue and
deliver to the Holder (or its designee) a new Note (in accordance with Section
15(d)) representing the outstanding Principal not converted. The Person or
Persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.
(d) Failure to Deliver
Shares. If within three (3) Trading Days after the Company’s
receipt of a Conversion Notice (whether via facsimile or otherwise), the Company
shall fail to issue and deliver a certificate to the Holder and register such
shares of Common Stock on the Company’s share register or credit the Holder’s or
its designee’s balance account with DTC for the number of shares of Common Stock
to which the Holder is entitled upon the Holder’s conversion hereunder (as the
case may be) (a “Conversion Failure”), and if on or after such third (3rd)
Trading Day the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of
shares of Common Stock issuable upon such conversion that the Holder anticipated
receiving from the Company, then, in addition to all other remedies available to
the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an
amount equal to the Holder’s total purchase price (including brokerage
commissions and other out-of-pocket expenses, if any) for the shares of Common
Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such shares of Common Stock) shall terminate, or (ii)
promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit the Holder’s
balance account with DTC for the number of shares of Common Stock to which the
Holder is entitled upon the Holder’s conversion hereunder (as the case may be)
and pay cash to the Holder in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock
multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day
immediately preceding the Conversion Date.
(7) SECURITY. This
Note and the Other Notes are secured to the extent and in the manner set forth
in the Transaction Documents (including, without limitation, the Security
Agreement, the other Security Documents and the Guaranties).
(8) NONCIRCUMVENTION. The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Note, and will at all
times in good faith carry out all of the provisions of this Note and take all
action as may be required to protect the rights of the Holder of this
Note.
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(9) VOTING
RIGHTS. The Holder shall have no voting rights as the holder
of this Note, except as required by law and/or expressly provided in this
Note.
(10) COVENANTS.
(a) Rank. All
payments due under this Note (a) shall rank pari passu with all Other
Notes and (b) shall be senior to all other Indebtedness of the Company, other
than Senior Indebtedness, Capitalized Lease Obligations and Purchase Money
Indebtedness.
(b) Incurrence of
Indebtedness. So long as this Note is outstanding, the Company
shall not, and the Company shall not permit any of its Subsidiaries to, directly
or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness,
other than (i) the Indebtedness evidenced by this Note and the Other Notes and
(ii) Permitted Indebtedness.
(c) Existence of
Liens. So long as this Note is outstanding, the Company shall
not, and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, allow or suffer to exist any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its
Subsidiaries (collectively, “Liens”) other than Permitted
Liens.
(d) Restricted
Payments. The Company shall not, and the Company shall not
permit any of its Subsidiaries to, directly or indirectly, redeem, defease,
repurchase, repay or make any payments in respect of, by the payment of cash or
cash equivalents (in whole or in part, whether by way of open market purchases,
tender offers, private transactions or otherwise), all or any portion of any
Indebtedness (other
than the Senior Indebtedness or as otherwise permitted or provided under this
Note or the Other Notes), whether by way of payment in respect of principal of
(or premium, if any) or interest on, such Indebtedness if at the time such
payment is due or is otherwise made or, after giving effect to such payment, an
event constituting, or that with the passage of time and without being cured
would constitute, an Event of Default has occurred and is
continuing.
(e) Restriction on Redemption
and Cash Dividends. The Company shall not, and the Company shall cause
each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or
declare or pay any cash dividend or distribution on any of the Common Stock
without the prior express written consent of the Holder.
(f) Restriction on Transfer of
Assets. The Company shall not, and the Company shall cause each of its
Subsidiaries to not, directly or indirectly, sell, lease, license, assign,
transfer, convey or otherwise dispose of any assets or rights of the Company or
any Subsidiary owned or hereafter acquired whether in a single transaction or a
series of related transactions, other than (i) sales, leases, licenses,
assignments, transfers, conveyances and other dispositions of such assets or
rights by the Company and its Subsidiaries that, in the aggregate, do not have a
fair market value in excess of $100,000 in any twelve (12) month period and (ii)
sales of inventory in the ordinary course of business.
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(g) Intellectual
Property. So long as any Note is outstanding, the Company
shall not, and shall not permit any Subsidiary to, directly or indirectly, (i)
assign, transfer or otherwise encumber or allow any other Person to have any
rights or license to any of the Intellectual Property (as defined in the
Security Agreement) of the Company or its Subsidiaries other than Permitted
Indebtedness and Permitted Liens, (ii) grant any royalties and other
Indebtedness with respect to any of the Intellectual Property other than
Permitted Indebtedness or (ii) take any action or inaction to impair the value
of the Intellectual Property .
(h) Maturity of
Indebtedness. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, permit any Indebtedness of the
Company or any of the Subsidiaries to mature or accelerate prior to the Maturity
Date, other than Permitted Indebtedness.
(i) New Subsidiaries.
Simultaneously with the acquisition or formation of each New Subsidiary (other
than a Foreign Subsidiary (as defined in the Security Documents), the Company
shall cause such New Subsidiary to execute, and deliver to each holder of Notes,
all Security Documents (as defined in the
Securities Purchase Agreement) and Guaranties (as defined in the Securities
Purchase Agreement) as requested by the Holder. The Company shall also deliver to the
Secured Parties (as defined in the Security Documents) an opinion of counsel to
such New Subsidiary that is reasonably satisfactory to the Secured Parties
covering such legal matters with respect to such New Subsidiary becoming a
guarantor of the Company’s obligations, executing and delivering the Security
Documents and the Guaranties and any other matters that the Secured Parties may
reasonably request. The Company shall deliver, or cause the
applicable Subsidiary to deliver, each of the physical stock certificates of
such New Subsidiary, along with undated stock powers for each such certificates,
executed in blank (or, if any such shares of capital stock are uncertificated,
confirmation and evidence reasonably satisfactory to the Secured Parties that
the security interest in such uncertificated securities has been transferred to
and perfected by the Secured Parties, in accordance with Sections 8-313, 8-321
and 9-115 of the Uniform Commercial Code or any other similar or local or
foreign law that may be applicable) (except to the extent the Company or such
Subsidiary is obligated to deliver such certificates to the Senior Lender
pursuant to the Senior Indebtedness).
(j) Change in Nature of
Business. The Company shall not, and the Company shall cause each of
its Subsidiaries to not, directly or indirectly, engage in any material line of
business substantially different from those lines of business conducted by the
Company and each of its Subsidiaries on the Issuance Date or any business
substantially related or incidental thereto. The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, modify its or their corporate structure or purpose.
(k) Preservation of Existence,
Etc. The Company shall maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain, and cause each of its Subsidiaries to become
or remain, duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary.
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(l) Maintenance of Properties,
Etc. The Company shall maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, in all material respects all of
its properties which are necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted,
and comply, and cause each of its Subsidiaries to comply, at all times in all
material respects with the provisions of all leases to which it is a party as
lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.
(m) Maintenance of
Insurance. The Company shall maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations with respect to its properties (including all real
properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated.
(n) Amendments
to Transaction Documents. So long as any Note remains
outstanding, the Company shall not, and shall not permit any of its Subsidiaries
to, enter into, become or remain subject to any agreement or instrument, except
for the Transaction Documents, that would prohibit or require the consent of any
Person to any amendment, modification or supplement to any of the Transaction
Documents.
(11) PARTICIPATION. The
Holder, as the holder of this Note, shall not be entitled to any dividends paid
or distributions made to the holders of Common Stock.
(12) VOTE TO ISSUE, OR CHANGE THE
TERMS OF, NOTES. The written consent of the Company and the
affirmative vote at a meeting duly called for such purpose or the written
consent without a meeting of the Required Holders shall be required for any
change or amendment to this Note or the Other Notes.
(13) TRANSFER. This
Note may be offered, sold, assigned or transferred by the Holder without the
consent of the Company, subject only to the provisions of Section 4.1 of the
Securities Purchase Agreement.
(14) REGISTRATION. The
Company shall maintain a register (the “Register”) for the recordation
of the names and addresses of the holders of each Note and the principal amount
of the Notes held by such holders (the “Registered
Notes”). The entries in the Register shall be conclusive and
binding for all purposes absent manifest error. The Company and the
holders of the Notes shall treat each Person whose name is recorded in the
Register as the owner of a Note for all purposes, including, without limitation,
the right to receive payments of principal and interest hereunder,
notwithstanding notice to the contrary. A Registered Note may be
assigned or sold in whole or in part only by registration of such assignment or
sale on the Register. Upon its receipt of a request to assign or sell
all or part of any Registered Note by a Holder, the Company shall record the
information contained therein in the Register and issue one or more new
Registered Notes in the same aggregate principal amount as the principal amount
of the surrendered Registered Note to the designated assignee or transferee
pursuant to Section 21.
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(15) REISSUANCE OF THIS
NOTE.
(a) Transfer. If
this Note is to be transferred, the Holder shall surrender this Note to the
Company, whereupon the Company will forthwith issue and deliver upon the written
order of the Holder a new Note (in accordance with Section 15(d)), registered in
the Company's Register of Notes as the Holder may request in writing ,
representing the outstanding Principal being transferred by the Holder and, if
less then the entire outstanding Principal is being transferred, a new Note (in
accordance with Section 15(d)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this Section 15(a), following redemption of any portion of this Note, the
outstanding Principal represented by this Note may be less than the Principal
stated on the face of this Note.
(b) Lost, Stolen or Mutilated
Note. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and,
in the case of mutilation, upon surrender and cancellation of this Note, the
Company shall execute and deliver to the Holder a new Note (in accordance with
Section 15(d)) representing the outstanding Principal.
(c) Note Exchangeable for
Different Denominations. This Note is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Note or Notes (in accordance with Section 15(d) and in principal amounts of at
least $1,000 and multiples of $1,000) representing in the aggregate the
outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.
(d) Issuance of New
Notes. Whenever the Company is required to issue a new Note
pursuant to the terms of this Note, such new Note (i) shall be of like tenor
with this Note, (ii) shall represent, as indicated on the face of such new Note,
the Principal remaining outstanding (or in the case of a new Note being issued
pursuant to Section 15(a) or Section 15(c), the Principal designated by the
Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining
outstanding under this Note immediately prior to such issuance of new Notes),
(iii) shall have an issuance date, as indicated on the face of such new Note,
which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note (subject, however, to any actions already
taken under or with respect to this Note at any time prior thereto), and (v)
shall represent accrued unpaid Interest and Late Charges on the Principal and
Interest of this Note, from the Issuance Date.
(16) REMEDIES, CHARACTERIZATIONS,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note and any of the other Transaction Documents at
law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the Holder's right to pursue
actual and consequential damages for any failure by the Company to comply with
the terms of this Note. Amounts set forth or provided for herein with
respect to payments, redemption and the like (and the computation thereof) shall
be the amounts to be received by the Holder and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
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(17) PAYMENT OF COLLECTION,
ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the
hands of an attorney for collection or enforcement or is collected or enforced
through any legal proceeding or the Holder otherwise takes action to collect
unpaid amounts due under this Note or to enforce the provisions of this Note or
(b) there occurs any bankruptcy, reorganization, receivership of the Company or
other proceedings affecting Company creditors' rights and involving a claim
under this Note, then the Company shall pay the reasonable costs incurred by the
Holder for such collection, enforcement or action or in connection with such
bankruptcy, reorganization, receivership or other proceeding, including, but not
limited to, reasonable attorneys' fees and disbursements.
(18) CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by
the Company and all the Holders and shall not be construed against any person as
the drafter hereof. The headings of this Note are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Note.
(19) FAILURE OR INDULGENCE NOT
WAIVER. No failure or delay on the part of the Holder in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege.
(20) DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Conversion Price, the
Closing Bid Price, the Closing Sale Price or fair market value (as the case may
be) or the arithmetic calculation of the Conversion Rate or the applicable
Redemption Price (as the case may be), the Company or the Holder (as the case
may be) shall submit the disputed determinations or arithmetic calculations (as
the case may be) via facsimile (i) within two (2) Business Days after receipt of
the applicable notice giving rise to such dispute to the Company or the Holder
(as the case may be) or (ii) if no notice gave rise to such dispute, at any time
after the Holder learned of the circumstances giving rise to such dispute
(including, without limitation, as to whether any issuance or sale or deemed
issuance or sale was an issuance or sale or deemed issuance or sale of Excluded
Securities). If the Holder and the Company are unable to agree upon such
determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation (as the case may be) being submitted to
the Company or the Holder (as the case may be), then the Company shall, within
two (2) Business Days, submit via facsimile (a) the disputed determination of
the Conversion Price, the Closing Bid Price, the Closing Sale Price or fair
market value (as the case may be) to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed
arithmetic calculation of the Conversion Rate or any Redemption Price (as the
case may be) to the Company’s independent, outside accountant. The Company shall
cause at its expense the investment bank or the accountant (as the case may be)
to perform the determinations or calculations (as the case may be) and notify
the Company and the Holder of the results no later than ten (10) Business Days
from the time it receives such disputed determinations or calculations (as the
case may be). Such investment bank’s or accountant’s determination or
calculation (as the case may be) shall be binding upon all parties absent
demonstrable error.
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(21) NOTICES;
PAYMENTS.
(a) Notices. Whenever
notice is required to be given under this Note, unless otherwise provided
herein, such notice shall be given in accordance with Section 6.4 of the
Securities Purchase Agreement. The Company shall provide the Holder
with prompt written notice of all actions taken pursuant to this Note, including
in reasonable detail a description of such action and the reason
therefore.
(b) Payments. Whenever
any payment of cash is to be made by the Company to any Person pursuant to this
Note, such payment shall be made in lawful money of the United States of America
by a check drawn on the account of the Company and sent via overnight courier
service to such Person at such address as previously provided to the Company in
writing (which address, in the case of each of the Holders, shall initially be
as set forth in the Securities Purchase Agreement); provided that the Holder may
elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such
request and the Holder's wire transfer instructions. Whenever any
amount expressed to be due by the terms of this Note is due on any day which is
not a Business Day, the same shall instead be due on the next succeeding day
which is a Business Day and, in the case of any Interest Date which is not the
date on which this Note is paid in full, the extension of the due date thereof
shall not be taken into account for purposes of determining the amount of
Interest due on such date. Any amount of Principal or other amounts
due under the Transaction Documents, other than Interest, which is not paid when
due shall result in a late charge being incurred and payable by the Company in
an amount equal to interest on such amount at the rate of eighteen percent (18%)
per annum from the date such amount was due until the same is paid in full
(“Late
Charge”).
(22) CANCELLATION. After
all Principal, accrued Interest and other amounts at any time owed on this Note
has been paid in full, this Note shall automatically be deemed canceled, shall
be surrendered to the Company for cancellation and shall not be
reissued.
(23) WAIVER OF
NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.
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(24) GOVERNING LAW; JURISDICTION;
JURY TRIAL. This Note shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Note shall be governed by, the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. The Company hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address it set forth on the signature page hereto and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. In the event that any
provision of this Note is invalid or unenforceable under any applicable statute
or rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of this Note. Nothing contained herein shall be
deemed or operate to preclude the Holder from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company's obligations to the Holder, to realize on any collateral or any other
security for such obligations, or to enforce a judgment or other court ruling in
favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.
(25) CERTAIN
DEFINITIONS. For purposes of this Note, the following terms
shall have the following meanings:
(a) “Approved Stock Plan” means any
employee benefit plan which has been approved by the board of directors of the
Company prior to or subsequent to the date hereof pursuant to which shares of
Common Stock and standard options to purchase Common Stock may be issued to any
employee, officer or director for services provided to the Company in their
capacity as such.
(b) “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.
(c) “Capitalized Lease Obligations”
means without duplication, all monetary obligations of the Company or any of its
Subsidiaries under any leasing or similar arrangement which, in accordance with
GAAP, would be classified as capitalized leases, and, for purposes of this
Agreement and each other Transaction Document, the amount of such obligations
shall be the capitalized amount thereof, determined in accordance with GAAP and
the amount of such obligations outstanding at any one time shall not to exceed
$1,500,000 in the aggregate.
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(d) “Change of Control” means any
Fundamental Transaction other than (i) any reorganization, recapitalization or
reclassification of the Common Stock in which holders of the Company's voting
power immediately prior to such reorganization, recapitalization or
reclassification continue after such reorganization, recapitalization or
reclassification to hold publicly traded securities and, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (ii) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company. For the avoidance of doubt, the
transactions contemplated by the Plan and Agreement of Merger dated May 5, 2010
(the “Reincorporation
Agreement”) between the Company and Paradigm Holdings, Inc., a Nevada
corporation, shall not constitute a “Change of Control” hereunder.
(e) “Closing Bid Price” and “Closing Sale Price” means, for
any security as of any date, the last closing bid price and last closing trade
price, respectively, for such security on the Principal Market, as reported by
Bloomberg, or, if the Principal Market begins to operate on an extended hours
basis and does not designate the closing bid price or the closing trade price
(as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the last closing bid price or last trade price,
respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade price, respectively, is reported for such security by
Bloomberg, the average of the bid prices, or the ask prices, respectively, of
any market makers for such security as reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a
particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be
the fair market value as mutually determined by the Company and the Holder. If
the Company and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved in accordance with the
procedures in Section 20 of such Note. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during such period.
(f) “Common Stock” means the common
stock, par value $0.01 per share, of the Company.
(g) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto.
(h) “Eligible Market” means the
Principal Market, The New York Stock Exchange, the NYSE Amex, the Nasdaq Capital
Market, the Nasdaq Global Market or the Nasdaq Global Select
Market.
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(i) “Excluded Securities” means any
debt or equity securities of the Company issued or issuable: (i) to directors,
officers or employees of the Company in their capacity as such pursuant to an
Approved Stock Plan or employment agreement with the Company or any of its
Subsidiaries; (ii) upon the conversion or exercise of outstanding securities of
the Company as in effect as of the Issuance Date and (iii) pursuant to the
Securities Purchase Agreement.
(j) “Fundamental Transaction” means
that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into
(whether or not the Company or any of its Subsidiaries is the surviving
corporation) another Person, or (2) sell, lease, license, assign, transfer,
convey or otherwise dispose of all or substantially all of its respective
properties or assets to any other Person, or (3) allow another Person to make a
purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Voting Stock of the Company (not including any
shares of Voting Stock of the Company held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (4) consummate a stock or share purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than 50% of the
outstanding shares of Voting Stock of the Company (not including any shares of
Voting Stock of the Company held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party to,
such stock or share purchase agreement or other business combination), or (5)
reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
1934 Act and the rules and regulations promulgated thereunder) (other than Hale
Capital Partners, LP, EREF Para, LLC or any of their Affiliates (as defined in
the Securities Purchase Agreement)) is or shall become the “beneficial owner”
(as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of
the aggregate ordinary voting power represented by issued and outstanding Voting
Stock of the Company.
(k) “GAAP” means United States
generally accepted accounting principles, consistently applied.
(l) “Holder Pro Rata Amount” means
a fraction (i) the numerator of which is the original Principal amount of this
Note on the Closing Date (as defined in the Securities Purchase Agreement) and
(ii) the denominator of which is the aggregate original principal amount of all
Notes issued to the Purchasers (as defined in the Securities Purchase Agreement)
pursuant to the Securities Purchase Agreement on the Closing
Date.
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(m) “Indebtedness” of any Person
means, without duplication (i) all indebtedness for borrowed money, (ii) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case with respect
to any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (vi) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (vii) all
indebtedness referred to in clauses (i) through (vi) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (viii) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (i)
through (vii) above.
(n) “Interest Rate” means 6.00% per
annum.
(o) “Net Sale Proceeds” means, with
respect to any Sale, an amount equal to: (A) the sum of cash payments and cash
equivalents received by the Company or any of its Subsidiaries, from such Sale
(including any cash or cash equivalents received by way of deferred payment
pursuant to, or by monetization of, a note receivable or otherwise, but only as
and when so received), minus (B) any
reasonable direct out-of-pocket actual and estimated professional fees and other
costs or expenses incurred in connection with such Sale.
(p) “Outstanding Amount” means the
sum of (A) the portion of the Principal to be redeemed or otherwise with respect
to which this determination is being made, (B) accrued and unpaid Interest with
respect to such Principal and (C) accrued and unpaid Late Charges with respect
to such Principal and Interest.
(q) “Parent Entity” of a Person
means an entity that, directly or indirectly, controls the applicable Person and
whose common stock or equivalent equity security is quoted or listed on an
Eligible Market, or, if there is more than one such Person or Parent Entity, the
Person or Parent Entity with the largest public market capitalization as of the
date of consummation of the Fundamental Transaction.
(r)
“Permitted
Indebtedness” means (A) the Senior Indebtedness, (B) Indebtedness
incurred by the Company that is made expressly subordinate in right of payment
to the Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which
Indebtedness does not provide at any time for (1) the payment, prepayment,
repayment, repurchase or defeasance, directly or indirectly, of any principal or
premium, if any, thereon until ninety-one (91) days after the Maturity Date or
later and (2) total interest and fees at a rate in excess of the Interest Rate
hereunder (C) Indebtedness secured by Permitted Liens, (D) Capitalized Lease
Obligations, (E) Purchase Money Indebtedness, (F) Indebtedness to trade
creditors incurred in the ordinary course of business, and (G) extensions,
refinancings and renewals of any items of Permitted Indebtedness, provided that
the principal amount is not increased or the terms modified to impose more
burdensome terms upon the Company or its Subsidiary, as the case may
be.
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(s) “Permitted Liens” means (i) any
Lien for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of
business by operation of law with respect to a liability that is not yet due or
delinquent, (iii) any Lien created by operation of law, such as materialmen's
liens, mechanics' liens and other similar liens, arising in the ordinary course
of business with respect to a liability that is not yet due or delinquent or
that are being contested in good faith by appropriate proceedings, (iv) Liens
securing the Company's obligations under the Notes, (v) Liens (A) upon or in any
equipment acquired or held by the Company or any of its Subsidiaries to secure
the purchase price of such equipment or indebtedness incurred solely for the
purpose of financing the acquisition or lease of such equipment, or (B) existing
on such equipment at the time of its acquisition, provided that the Lien is
confined solely to the property so acquired and improvements thereon, and the
proceeds of such equipment, (vi) Liens incurred in connection with the
extension, renewal or refinancing of the indebtedness secured by Liens of the
type described in clauses (i) and (v) above, provided that any extension,
renewal or replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the Indebtedness being extended,
renewed or refinanced does not increase, (vii) Liens securing the Company's
obligations under the Senior Indebtedness, Capitalized Lease Obligations and
Purchase Money Indebtedness; (viii) leases or subleases and licenses and
sublicenses granted to others in the ordinary course of the Company's business,
not interfering in any material respect with the business of the Company and its
Subsidiaries taken as a whole, (ix) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payments of custom duties in
connection with the importation of goods, (x) Liens incurred or deposits made in
the ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security, and mechanic’s Liens,
carrier’s Liens and other Liens to secure the performance of tenders, statutory
obligations, contract bids, government contracts, performance and return of
money bonds and other similar obligations, incurred in the ordinary course of
business, whether pursuant to statutory requirements, common law or contractual
arrangements; and (xi) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section
3(a)(v).
(t) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.
(u) “Present Value of
Interest” means the amount of any
interest that, but for a Change of Control Redemption, Event of Default
Redemption or Sale Redemption, as applicable, would have accrued under this Note
with respect to the principal amount of this Note being redeemed at the Interest
Rate for the period from the Change of Control Redemption Date, Event of Default
Redemption Date or Sale Redemption Date, as applicable, through the Maturity
Date discounted to the present value of such interest using a discount rate
equal to the Interest Rate in effect on the applicable date of
determination.
(v) “Principal Market” means the
OTC Bulletin Board.
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(w) “Purchase Money Indebtedness”
means Indebtedness used to acquire fixed assets for the Company or any of its
Subsidiaries, obtained for the sole purpose of financing all or any part of the
acquisition cost thereof, which may be secured by such assets, but is otherwise
non-recourse to the Company and its Subsidiaries.
(x) “Redemption Notices” means,
collectively, the Event of Default Redemption Notices, the Sale Redemption
Notice and the Change of Control Redemption Notices, and, each of the foregoing,
individually, a Redemption Notice.
(y) “Redemption Prices” means,
collectively, the Event of Default Redemption Price, the Sale Redemption Price
and the Change of Control Redemption Price, and, each of the foregoing,
individually, a Redemption Price.
(z) “Required Holders” means the
holders of Notes representing at least a majority of the aggregate principal
amount of the Notes then outstanding.
(aa) “Sale” means (x) any sale,
lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment,
conveyance, transfer or other disposition to, or any exchange of property with,
any Person, in an arm's length transaction or a series of such transactions, of
all or any part of the Company's or any of its Subsidiaries' businesses, assets
or properties of any kind, whether real, personal, or mixed and whether tangible
or intangible, whether now owned or hereafter acquired, including the sale or
issuance of Stock (as defined in the Security Documents) of any of the Company's
Subsidiaries, other than inventory (or other assets) sold or leased in the
ordinary course of business of the Company or any of its Subsidiaries or the
sale or disposition of obsolete, worn out or surplus property or (y) any sale of
securities of the Company (other than Excluded Securities). For the avoidance of
doubt, the transactions contemplated by the Reincorporation Agreement shall not
constitute a “Sale” hereunder.
(bb) “Sale Redemption Eligibility
Amount” means, with respect to any Sale, the product of (i) the Holder
Pro Rata Amount and (ii) 100% of the Net Sale Proceeds for such
Sale.
(cc) “SEC” means the United States
Securities and Exchange Commission.
(dd) “Securities Purchase Agreement”
means that certain securities purchase agreement dated the Subscription Date by
and among the Company and the initial holders of the Notes pursuant to which the
Company issued the Notes.
(ee) “Senior Indebtedness” means the
Indebtedness incurred by the Company and its Subsidiaries pursuant to the Senior
Facility (as defined in the Securities Purchase Agreement), as amended, and in
connection with the letter of credit dated as of [May __, 2010] issued by
Silicon Valley Bank to Zurich American Insurance Company and Fidelity and
Deposit Company of Maryland (the “Letter of Credit”); provided, however, that the
aggregate outstanding amount of such Indebtedness permitted hereunder (taking
into account the maximum amounts which may be advanced under the loan documents
evidencing such Senior Indebtedness) does not at any time exceed the sum of (x)
$4,500,000 and (y) the amount of the Letter of Credit. .
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(ff) “Senior Lender” shall mean
Silicon Valley Bank or such successor lender pursuant to any outstanding Senior
Indebtedness.
(gg) “Subordination Agreement” shall
mean that certain subordination agreement, dated as of the Issuance Date, among
Silicon Valley Bank and the Holder, with respect to certain indebtedness of the
Company to Silicon Valley Bank., as such may be amended from time to
time.
(hh) “Subscription Date” means May
26, 2010.
(ii) “Successor Entity” means the
Person, which may be the Company, formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been made, provided that if such Person is not a publicly traded
entity whose common stock or equivalent equity security is quoted or listed for
trading on an Eligible Market, Successor Entity shall mean such Person's Parent
Entity.
(jj) “Trading Day” means any day on
which the Common Stock are traded on the Principal Market, or, if the Principal
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock are
then traded.
(kk) “Voting Stock” of a Person
means capital stock of such Person of the class or classes pursuant to which the
holders thereof have the general voting power to elect, or the general power to
appoint, at least a majority of the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time capital stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
(26) DISCLOSURE. Upon
receipt or delivery by the Company of any notice in accordance with the terms of
this Note, unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries, the Company shall within one (1)
Business Day after any such receipt or delivery publicly disclose such material,
nonpublic information on a Current Report on Form 8-K or otherwise. In the event
that the Company believes that a notice contains material, nonpublic
information, relating to the Company or its Subsidiaries, the Company shall
indicate to the Holder contemporaneously with delivery of such notice, and in
the absence of any such indication, the Holder shall be allowed to presume that
all matters relating to such notice do not constitute material, nonpublic
information relating to the Company or its Subsidiaries.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the
Issuance Date set out above.
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PARADIGM
HOLDINGS, INC.
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By:
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Name:
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Title:
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