THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
Senior Subordinated Note
due January 31, 2009 (except as provided
herein)
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QuaTech, Inc. and DPAC Technologies
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Canal
Mezzanine Partners, L.P.
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$250,000
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13% per
annum
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16%
per annum
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October 10, 2008
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Hudson, Ohio
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January 31, 2009 (except as provided herein)
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Interest : Last day of each month beginning October 31,
2008
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Principal: January 31, 2009 (except as provided
herein)
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This is the Senior Subordinated Note due
January 31, 2009 (the “ Note ”) provided
for in the Senior Subordinated Note and Warrant Purchase Agreement
dated as of January 31, 2008 (as amended, restated,
supplemented or otherwise modified from time to time, the “
Purchase Agreement ”) by and between the Payee, as
purchaser, and the Makers, as sellers.
This Note is
one of the Related Documents referred to in the Purchase
Agreement.
FOR VALUE RECEIVED
, the Makers hereby promises to
pay to the order of the Payee the Principal Amount of TWO HUNDRED
FIFTY THOUSAND DOLLARS ($250,000), together with Interest,
Prepayment Premium, if any, and Assessments (each as defined herein
or in the Purchase Agreement), upon the terms and subject to the
conditions set forth in this Note.
Section 1. Definitions and Miscellaneous
Provisions
Any capitalized term used but not otherwise
defined in this Note shall have the definition given such term as
set forth in the Purchase Agreement, which definition is, to the
extent applicable, incorporated herein by reference. The provisions
of Section 12 of the Purchase Agreement are applicable
to this Note and are incorporated herein by reference.
Section 2. Maturity and Pay
Off
The unpaid Principal Amount of this Note,
together with all accrued but unpaid Interest and Assessments,
shall be due and payable in full on the Maturity Date, provided
that if such unpaid Principal and Interest shall not have been
refinanced pursuant to a transaction with Payee or any affiliate
thereof, or otherwise repaid, on or before the Maturity Date (a
“ Refinancing ”), then such Principal Amount
shall become due and payable in full on the Maturity Date set forth
in the Initial Note (January 31, 2013) and the Makers shall
pay to the Payee a $250,000 extension fee on the January 31,
2008 (such fee shall be the joint and several liability of each of
the Makers). Payment of the Principal Amount and all accrued but
unpaid Interest and Assessments may be Accelerated upon the
occurrence of an Event of Default as provided for in this Note.
Upon request of the Makers, the Payee will furnish to the Makers a
letter setting forth the amount of Principal Amount, Interest,
Prepayment Premium and Assessments required to pay this Note in
full as of a specified Pay Off Date.
Interest shall accrue on the unpaid Principal
Amount from the date of this Note through and including the Pay Off
Date at the applicable interest rate (“ Interest
”). All accrued but unpaid Interest shall be paid monthly in
arrears on each Payment Date specified above, commencing
October 31, 2008.
At all times that the Default Interest Rate is
not in effect, the interest rate on this Note shall be a fixed rate
per annum equal to the Stated Interest Rate. Upon the occurrence of
an Event of Default, this Note shall accrue interest at a rate per
annum equal to the Default Interest Rate unless the Payee elects,
in the sole exercise of its discretion, to waive imposition of the
Default Interest Rate by giving written notice of such election to
the Makers (a “ Default Rate Waiver ”). Absent a
Default Rate Waiver, the interest rate on this Note shall be a
fixed rate per annum equal to the Default Interest Rate, and the
Default Interest Rate shall continue to be the interest rate on
this Note until the Event of Default has been remedied or waived
and no other Default or Event of Default is continuing, unremedied
or unwaived, provided that the Note has not been
Accelerated.
2
Notwithstanding any provision of this Note to
the contrary: (i) in no event shall the interest rate on this
Note be a rate per annum in excess of the maximum interest rate
permissible under Applicable Law (including any applicable interest
rate ceiling imposed by United States Small Business Administration
regulations as applicable), and (ii) to the extent that
Interest (or other amounts paid with respect to this Note that are
deemed to be Interest under Applicable Law) results in Interest
payments in excess of those permitted under Applicable Law, such
excess payments shall be applied first to the payment of the unpaid
Principal Amount, second to the payment of any other amounts due
from the Makers to the Payee, and third, if no other obligations
are owing to the Payee, then refunded to the Makers. The Makers
agree that if such excess payments are applied in the manner
provided for in this paragraph, then to the fullest extent
permitted by Applicable Law, Payee shall not be subject to any
penalty provided for by any Applicable Law relating to charging or
collecting Interest in excess of that permitted by Applicable
Law.
Interest shall accrue based upon: (i) the
actual number of days elapsed over each month, including any
additional days elapsed because the scheduled Payment Date fell on
a day other than a Business Day; (ii) months consisting of
thirty (30) days each; (iii) quarters consisting of three
(3) 30-day months, and (iv) monthly compounding of any
Interest or Assessment accrued but unpaid as of each Payment
Date.
Section 4. Principal Amount
The Principal Amount shall be paid in full on
the Maturity Date Date (except as set forth in Section 2
above).
The Makers may prepay the Principal Amount in
whole at any time; provided that (i) the Makers deliver
irrevocable written notice to the Payee at least thirty
(30) days prior to such prepayment, which notice shall include
written confirmation from the Makers that such prepayment is
permissible under the Senior Loan Agreement and (ii) each
partial prepayment of Principal Amount shall be equal to $100,000
or an integral multiple thereof.
If the Principal Amount is paid on or prior to
the Maturity Date of Note, the Makers shall pay all accrued but
unpaid Interest.
If notice of prepayment is given, the Principal
Amount to be prepaid as stated in the notice, together with
Interest accrued thereon through the date of prepayment with
respect to the Principal Amount prepaid and all unpaid Assessments
shall become due and payable on the date specified in the
notice.
3
A payment of Principal Amount, Interest or
Assessment shall be deemed to be a Payment Default if such payment
is not received prior to 2:00 p.m., Hudson, Ohio time on the fifth
day after such payment is due. The Payee may, in the sole exercise
of its discretion, by written notice to the Makers, assess a fee of
$500 for each Payment Date with respect to which there is a late
payment to reimburse the Payee for the cost of processing such late
payment. Such late fee shall be deemed to be an Assessment for
purposes of this Note. The Payee may not assess a late fee with
respect to any Payment Date after payment of this Note is
Accelerated.
Unless otherwise agreed by the Payee, all
payments in connection with this Note shall be made by wire
transfer of immediately available funds to the account of the Payee
at or before 2:00 p.m. Hudson, Ohio time on each Payment Date. Any
wire transfer received by the Payee after 2:00 p.m. Hudson, Ohio
time shall be deemed to have been received by the Payee prior to
such time on the next Business Day.
Unless otherwise specified in writing by the
Payee to the Makers, all such payments shall be wired as
follows:
Morgan Bank,
N.A.
10 West Streetsboro Street
Hudson, Ohio 44236
ABA #
041202702
Account # 128075483
In the event that any scheduled Payment Date
falls on a day other than a Business Day, the Payment Date shall be
deemed to be the following Business Day, and such additional days
shall be deemed to have elapsed for purposes of computing Interest
payable on such Payment Date.
Section 8. Events of Default
(a) Enumeration of Defaults. The
occurrence of each of the following events shall be an “
Event of Default ” for the purposes of this Note. An
Event of Default shall be deemed to continue until waived by
written notice by the Payee to the Makers or remedied by action of
the Makers.
(b) Payment Default. The Makers
default in the payment when due of any Principal Amount, Interest
or Assessment, and such default is not remedied (including the
payment of any Assessment) within the grace period provided for in
Section 6 of this Note (a “
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