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EXHIBIT 3
CONVERTIBLE SECURED
U.S. $40,000,000 PROMISSORY NOTE
DATED: AUGUST 3, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Definitions................................................................................1
2. Loans; Payments; Prepayment; and Status of Obligations.....................................4
3. Grant of Security Interest.................................................................6
4. Events of Default..........................................................................6
5. Rights and Remedies of HP upon Default.....................................................8
6. Conversion.................................................................................8
7. Conversion Adjustments....................................................................10
8. Representations and Warranties............................................................13
9. Covenants Relating to Collateral..........................................................14
10. Affirmative Covenants.....................................................................14
11. Negative Covenants........................................................................16
12. Successors and Assigns....................................................................16
13. Notices...................................................................................16
14. Usury.....................................................................................17
15. Governing Law.............................................................................17
16. Waiver of Jury Trial......................................................................17
17. Waivers...................................................................................17
18. Waivers and Amendments....................................................................17
19. Remedies Cumulative.......................................................................17
20. Expenses..................................................................................17
21. No Offset.................................................................................18
</TABLE>
SCHEDULE A Transactions on Note
SCHEDULE B Conditions to Funding
SCHEDULE C Collateral
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THIS NOTE AND THE SECURITIES REPRESENTED HEREUNDER HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED WITHOUT A REGISTRATION STATEMENT OR AN OPINION OF
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
CONVERTIBLE SECURED
U.S. $40,000,000 PROMISSORY NOTE
Dated: August 3, 2000
FOR VALUE RECEIVED, MSI Holdings, Inc., a Utah corporation doing
business as Aperian (the "Company"), promises to pay to Hewlett-Packard Company,
a Delaware corporation, and its successors and assigns ("HP"), in lawful money
of the United States of America and in immediately available funds, the
aggregate unpaid principal amount of all advances (each such advance being a
"Loan") made hereunder as set forth on Schedule A, as the same may from time to
time be modified or amended, together with accrued and unpaid interest thereon,
each due and payable on the dates and in the manner set forth in this Note. The
Company hereby authorizes HP to list on Schedule A all advances made by HP
hereunder, which notations shall, in the absence of manifest error, be
conclusive; provided, however, that the failure to make a notation or the
inaccuracy of the notation shall not limit or otherwise affect the obligations
of the Company under this Note. Subject to the provisions of Sections 2, 5 and 6
below, all outstanding principal and unpaid interest shall be due and payable on
the Maturity Date (as defined below). This Note has been issued pursuant to the
terms of a Note Purchase Agreement (as defined below).
The following is a statement of the rights of HP and the conditions to
which this Note is subject, and to which HP agrees:
1. Definitions. As used in this Note, the following capitalized terms have the
following meanings:
"Capital Stock" shall mean the capital stock of the Company.
"Capital Stock Equivalents" shall have the meaning given to that term
in Section 7(a).
"Certificate" shall mean the Certificate of Incorporation or Articles
of Incorporation of the Company as the same may be amended from the time to
time.
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"Change of Control" shall mean, with respect to the Company on or after
the date hereof, (i) that any change in the composition of the shareholders of
the Company as of the date hereof shall occur which would result in any person
or entity (or group of persons or entities acting in concert), acquiring in
excess of fifty percent (50%) of the votes attaching in the aggregate to all
classes of Capital Stock of the Company which carry voting rights in all
circumstances, or (ii) that any person or entity (or group of persons or
entities acting in concert) shall otherwise acquire the power to direct the
management or affairs of the Company by obtaining proxies, entering into voting
agreements or trusts, acquiring securities or otherwise.
"Collateral" shall have the meaning given to that term in Section 3.
"Common Stock" shall mean the Common Stock of the Company, $0.10 par
value.
"Company" shall have the meaning set forth in the introductory
paragraph.
"Conversion Price" shall have the meaning given to that term in Section
6(a).
"Effective Date" shall mean August 3, 2000.
"Event of Default" shall have the meaning given to that term in Section
4.
"Exchange Event" shall have the meaning given to that term in Section
7(d).
"HP" shall have the meaning set forth in the introductory paragraph.
"HP Invoices" shall mean any and all invoices issued by HP to the
Company that evidence obligations of the Company to pay HP for goods or services
purchased by the Company from HP, including any service or penalty charges
related thereto.
"Loan" shall have the meaning set forth in the introductory paragraph.
"Maturity Date" shall mean August 3, 2004.
"Maximum Loan Commitment" shall have the meaning given to such term in
Section 2(a).
"Note" shall mean this Convertible Secured U.S. $40,000,000 Promissory
Note, issued by the Company in favor of HP, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms hereof.
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"Note Purchase Agreement" shall mean the Note Purchase Agreement, dated
as of this date, between the Company and HP, as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by the Company to HP of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the Transaction Documents, including, all Loans, interest,
fees, charges, expenses, attorneys' fees and costs chargeable to and payable by
the Company hereunder and thereunder, in each case, whether direct or indirect,
absolute or contingent, due or to become due, and whether or not arising after
the commencement of a proceeding under Title 11 of the United States Code (11
U.S.C., Section 101 et seq.), as amended from time to time (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
"Other Transaction Documents" shall mean all Transaction Documents
other than this Note.
"Permitted Liens" shall mean the following:
(a) any liens for taxes, fees, assessments, or other
governmental charges or levies, or liens created by
operation of law, which are not delinquent or are
being contested in good faith by appropriate
proceedings;
(b) liens (i) upon or in any equipment acquired or held
by the Company to secure the purchase price of such
equipment or indebtedness incurred solely for the
purpose of financing the acquisition of such
equipment, or (ii) 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, accessions thereto and the
proceeds thereof;
(c) liens on equipment leased by the Company pursuant to
a capital lease in the ordinary course of business
(including proceeds thereof and accessions thereto)
incurred solely for the purpose of financing the
lease of such equipment;
(d) liens granted to secure any indebtedness senior to
that of HP; and
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(e) liens existing as of the date hereof disclosed in
writing to, and approved by, HP.
"Preferred Provider" shall mean the entity whose products and services
the Company uses rather than those of another manufacturer or provider of such
products or services.
"Preferred Provider Products and Services" shall have the meaning given
to such term in Section 10(f).
"Public Offering" shall mean a firmly underwritten public offering of
common stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement dated as of the date hereof by and between the Company and HP.
"Representative" shall have the meaning set forth in Section 10(a).
"Senior Lienholder" shall have the meaning set forth in Section 8(b).
"Transaction Documents" shall mean the Note Purchase Agreement, this
Note, the Registration Rights Agreement and the UCC-1 financing statements and
any other documents executed in connection with this Note, in each case as the
same may be amended, restated, supplemented, or otherwise modified from time to
time in accordance with the terms thereof.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be enacted and in effect in the State of California. Unless otherwise
defined herein, all terms defined in the UCC shall have the respective meanings
given to those terms in the UCC.
2. Loans; Payments; Prepayment; and Status of Obligations.
(1) Loans. This Note shall evidence the Company's obligations to
repay the Loans and all other Obligations outstanding
hereunder. The Company may request Loans hereunder from time
to time in an aggregate principal amount not to exceed
$40,000,000 (the "Maximum Loan Commitment"). The Company may
request a maximum of four (4) Loans hereunder upon
satisfaction of the requirements established for each Loan in
Schedule B, as determined by HP in its sole discretion. The
Company
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may request a Loan by submitting a written request to HP not
less than two (2) business days prior to the desired funding
date.
(2) Principal and Interest Payments. Interest shall accrue on the
Loans from the date of this Note at a rate per annum equal to
ten and one-half percent (10.5%). Upon the occurrence and
during the continuance of an Event of Default interest shall
accrue on the unpaid balance at a rate per annum equal to
twelve percent (12%). Interest shall be payable quarterly in
arrears on the first business day after the end of any
quarter, commencing on February 1, 2001, and shall accrue on
all outstanding interest that has not yet been paid when due.
Unpaid accrued interest shall be added to the principal
balance hereunder on a quarterly basis. Interest shall be
computed on the basis of the actual number of days elapsed and
a year of 360 days. Notwithstanding the foregoing, all
outstanding principal, unpaid interest and other amounts due
shall be due and payable in full in cash (in immediately
available funds) on the Maturity Date, if not sooner paid in
full. Any amounts that are paid by the Company on account of
this Note may not be reborrowed by the Company under Section
2(a).
(3) Payments. The Company will make all payments due under this
Note by check on the date such payments are due to the
following address:
Hewlett-Packard Company
3585 Atlanta Avenue
Hapeville, GA 30354
Attn: REI/Lockbox 101511
or in any other manner that HP may from time to time direct.
(4) Prepayment. The Company may prepay this Note, in increments of
at least U.S. $1,000,000 (One Million U.S. Dollars) or a
lesser amount if payment is in full, provided that the Company
gives HP at least forty-five (45) days prior written notice of
such prepayment. The Company's option to prepay is subject to
HP's right to convert as provided below, immediately and at
any time prior to the expiration of such forty-five (45) day
notice period. Prepayments in part shall be applied first to
reimbursable fees and expenses, second to outstanding
interest, and third to principal. Any amounts that are prepaid
by the Company pursuant to this section may not be reborrowed
by the Company under Section 2(a).
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(5) Right to Convert. HP shall have the right at any time to
convert the outstanding principal and unpaid accrued interest
under this Note into shares of Capital Stock pursuant to
Section 6(a) below.
(6) Prepayment at the Option of HP. In the event that the Company
enters into an agreement, or becomes the subject of an
agreement, whether or not approved by its Board of Directors,
for:
(1) the sale of all or substantially all of its assets or
intellectual property; or
(2) the acquisition of it by another entity or entities
who after such acquisition controls fifty percent
(50%) or more of the Company's voting shares;
then the Company shall give HP at least forty-five (45) days'
prior written notice of such event, and at HP's option, HP may
either (A) convert into shares of Capital Stock pursuant to
Section 6(a) below, or (B) declare all amounts due and owing
under this Note due and payable in cash effective upon
delivery of written notice of demand for prepayment given by
HP to the Company within ninety (90) days after the date of
such notice to HP by the Company. Any amounts that are prepaid
by the Company pursuant to this section may not be reborrowed
by the Company under Section 2(a).
3. Grant of Security Interest. To secure the unpaid or unperformed Obligations,
the Company hereby pledges and assigns to HP and grants to HP a security
interest in all right, title, and interests of the Company in and to the
property described in Schedule C hereto (collectively and severally, the
"Collateral").
4. Events of Default. The occurrence of any of the following shall constitute an
"Event of Default" under this Note:
(1) Failure to Pay. The Company fails to pay any principal,
interest or any fees or expenses when due under this Note or
the Other Transaction Documents, and such failure shall
continue for a period of five (5) business days after written
notice to the Company by HP; or
(2) Covenant Default. The Company shall default in the performance
of any of its obligations hereunder or under any of the Other
Transactions Documents and such default shall continue
unremedied for a period of fifteen (15) business days after
written notice to the Company by HP; or
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(3) Representations and Warranties. Any representation, warranty
or certification made herein or in the Other Transaction
Documents shall prove to have been false or misleading in any
material respect when made or deemed made; or
(4) Voluntary Bankruptcy or Insolvency Proceedings. The Company
shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of a
substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they
mature, (iii) make a general assignment for the benefit of its
or any of its creditors, (iv) be dissolved or liquidated in
full or in part, (v) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or
consent to any relief or to the appointment of or taking
possession of its property by any official in an involuntary
case or other proceeding commenced against it, or (vi) take
any action for the purpose of effecting any of the foregoing;
or
(5) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings
for the appointment of a receiver, trustee, liquidator or
custodian of the Company or of all or a substantial part of
its property, or an involuntary case or other proceedings
seeking liquidation, reorganization or other relief with
respect to the Company or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such
proceeding shall not be dismissed or discharged within sixty
(60) days of commencement; or
(6) Cross-Default. The Company shall default under any other
material agreement, note, indenture, instrument or other
contract pursuant to which the Company has borrowed money and
such default shall result in the holder having accelerated the
maturity of the outstanding indebtedness under such other
agreements, or the Company shall default under any material
equipment lease agreement, which shall result in the lessor
having terminated the lease arrangement; or
(7) Collateral. A material portion of the Collateral is lost,
stolen, substantially damaged, destroyed, sold or encumbered,
or any levy, seizure, or attachment is made upon the
Collateral.
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5. Rights and Remedies of HP upon Default. Upon the occurrence and during the
continuance of any Event of Default under Sections 4(a), (b), (c), (f), (g) or
(h) above, HP, by written notice to the Company, may cease making Loans
hereunder, and may declare all principal, accrued and unpaid interest, and any
other amounts payable under the Transaction Documents, to be immediately due and
payable without presentment, demand, protest or any other notice of any kind,
all of which are waived by the Company. Upon the occurrence and during the
continuance of any Event of Default described in Sections 4(d) or (e),
immediately and without notice, cease making Loans hereunder and all outstanding
amounts payable by the Company under the Transaction Documents shall
automatically become immediately due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are waived by the Company.
In addition to any rights set forth in this Note, upon the occurrence
and during the continuance of any Event of Default, HP shall have the rights of
a secured creditor under the UCC and applicable federal law. Without limiting
the generality of the foregoing, HP may sell, resell, lease, use, assign,
license, sublicense, transfer or otherwise dispose of any or all of the
Collateral in its then condition or following any commercially reasonable
preparation or processing at public or private sale, by one or more contracts,
in one or more parcels, at the same or different times, or for cash or credit,
all as HP deems reasonably advisable; provided, however, that the Company shall
be credited with the net proceeds of sale only when such proceeds are collected
by HP. HP shall have the right upon any such public sale, and, to the extent
permitted by law, upon any such private sale, to purchase the whole or any part
of the Collateral so sold. The Company hereby agrees that the sending of notice
by ordinary mail, postage prepaid, to the address of the Company set forth
herein, of the place and time of any public sale or of the time after which any
private sale or other intended disposition is to be made, shall be deemed
reasonable notice thereof if such notice is sent ten (10) days prior to the date
of such sale or other disposition or the date on or after which such sale or
other disposition may occur.
6. Conversion
(1) Optional Conversion by HP. HP shall have the right, prior to
the Maturity Date, by providing written notice to the Company,
to convert all, or some, of the outstanding Obligations under
this Note into shares of Common Stock at the price of
$8.333333 per share, subject to adjustment as provided in
Section 7 below (the "Conversion Price").
(2) Mechanics and Effect of Conversion. Promptly after the
conversion of this Note, HP shall surrender this Note,
endorsed, at the principal office of the Company. As soon as
possible (or as otherwise noted in the
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provisions above) and after HP has executed documentation
necessary to satisfy all applicable federal and state
securities laws, if any, the Company shall issue and deliver
to HP at its principal office a certificate or, if HP so
requests, certificates for the number of shares of Capital
Stock into which this Note is convertible and to which HP
shall be entitled upon conversion (bearing such legends as are
required by applicable federal and state securities laws in
the opinion of counsel to the Company, if any). All such
shares shall be issued and fully paid and non-assessable, and
free and clear of all liens. If HP converts less than all of
the amounts payable under this Note, the Company shall issue a
replacement note or notes for the remaining balance containing
terms substantially identical to this Note.
(3) Right to Convert. HP's right to convert shall terminate upon
the sale by the Company of substantially all of its assets or
the merger or consolidation of the Company with another person
or entity in which the Company is not the surviving entity
(except for any transaction done solely for the purpose of
changing the Company's state of incorporation), provided in
either case that HP is given at least forty-five (45) days
prior written notice of such event so that HP may exercise its
conversion rights as provided herein.
(4) Shareholder Proxy. Without limiting the Company's obligations
under Section 7(g) below, the Company agrees to put to
shareholders for approval and vote the necessary motions to
effectuate the obligations and commitments made by the Company
hereunder.
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7. Conversion Adjustments.
(1) Adjustments for Stock Splits and Subdivisions. In the event
the Company, at any time from time to time after the date of
issuance hereof, while this Note is outstanding, (i) fixes a
record date to effect a split or subdivision of the Capital
Stock into which this Note is convertible, or (ii) determines
that the holders of such class or series of shares is entitled
to receive a dividend or other distribution payable in
additional shares of such class or series or other securities
or rights convertible into, or entitling the holder to receive
directly or indirectly, additional shares of such class or
series other than options to purchase the Capital Stock
("Capital Stock Equivalents") without payment of any
consideration by such holder for the additional shares of such
class or series or the Capital Stock Equivalents (including,
if convertible preferred stock or other convertible securities
have been issued, the additional shares of the Capital Stock
issuable upon conversion thereof), then, as of such record
date (or the date of such dividend distribution, split or
subdivision if no record date is fixed), the Conversion Price
shall be appropriately decreased and the number of shares of
the Capital Stock issuable upon conversion of this Note shall
be increased in proportion to such increase of outstanding
shares.
(2) Adjustments for Reverse Stock Splits. If the number of shares
of the Capital Stock into which this Note is convertible which
are outstanding at any time after the Effective Date is
decreased by a combination of the outstanding shares of such
class or series, then, following the record date of such
combination, the Conversion Price shall be appropriately
increased and the number of shares of the Capital Stock
issuable on conversion shall be appropriately decreased in
proportion to such decrease in outstanding shares.
(3) Merger, Sale of Assets. If at any time while the Loans are
outstanding there shall be (i) a reorganization (other than a
combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another entity in
which the Company is not the surviving entity, or a reverse
triangular merger in which the Company is the surviving entity
but the shares of the Capital Stock outstanding immediately
prior to the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Company's
properties and assets as, or substantially as, an entirety to
any other person or persons (which person or persons shall,
for purposes of this Note, be considered a successor to the
Company even if for other purposes such person or persons
would not be deemed
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a successor) (each, an "Exchange Event"), then, as a part of
such Exchange Event, lawful provision shall be made so that
the successor company assumes the terms and obligations of
this Note in a manner that provides that HP shall thereafter
be entitled to receive upon proper exercise of this Note,
during the period specified herein and upon payment of the
Conversion Price then in effect, (A) to the extent the
consideration received by the Company or its shareholders
consists of stock or other securities, the number of shares of
stock or other securities of the successor company resulting
from such reorganization, merger, consolidation, sale or
transfer which a holder of the shares deliverable upon
exercise of this Note would have been entitled to receive in
such Exchange Event if this Note had been exercised
immediately prior to such Exchange Event, and (B) to the
extent that the consideration received by the Company or its
shareholders in connection with such Exchange Event consists
of cash or property other than securities, the number of
shares of common stock (or its equivalent) of the successor
company that could be purchased at the fair market value of
such securities on the closing date of the Exchange Event for
the total value of the cash or property other than securities
to which the holder would have been entitled if this Note had
been converted immediately prior to the record date taken in
connection with such Exchange Event, in both cases (A) and (B)
subject to further adjustment as provided in this Section 7.
The foregoing provisions of this Section 7 shall similarly
apply to successive reorganizations, consolidations, mergers,
sales and transfers and to the stock or securities of any
other corporation which are at the time receivable upon the
exercise of this Note. If the shares of stock or other
securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or
transfer, to which HP would be entitled upon conversion hereof
in lieu of Capital Stock, are in a form other than cash or
marketable securities, then the value of such consideration
shall be determined in good faith by the Company's Board of
Directors. In all events, appropriate adjustment (as
determined in good faith by the Company's Board of Directors)
shall be made in the application of the provisions of this
Note with respect to the rights and interests of HP after the
transaction, to the end that the provisions of this Note shall
be applicable after such event, as nearly as reasonably may be
feasible, in relation to any shares or other property
deliverable after such event upon conversion of this Note. The
Company represents and warrants that it will take whatever
action is necessary to ensure that any successors are bound by
the terms of this Section 7(d).
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(4) Reclassification, etc. If the Company at any time while the
Loans are outstanding shall, by reclassification of securities
or otherwise, change any of the securities as to which
conversion rights under this Note exist into the same or a
different number of securities of any other class or classes,
this Note shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as
the result of such change with respect to the securities which
were subject to the purchase rights under this Note
immediately prior to such reclassification or other change,
and the Conversion Price therefor shall be appropriately
adjusted, all subject to further adjustment as provided in
this Section 7.
(5) Notices of Record Date, etc. In the event of:
(1) Any taking by the Company of a record of the holders
of any class of securities of the Company for the
purpose of determining the holders who are entitled
to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as
that of the last such cash dividend paid) or other
distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive
any other right; or
(2) Any capital reorganization of the Company, any
reclassification or recapitalization of the Capital
Stock of the Company or any transfer of all or
substantially all of the assets of the Company to any
other person or entity, or any consolidation or
merger in which the Company is not the surviving
entity (except for any transaction done solely for
the purpose of changing the Company's state of
incorporation); or
(3) Any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then the Company shall mail to HP at least thirty (30) days
prior to the earliest date specified therein, a notice with
(A) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right;
and (B) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up is expected to
become effective and the record date for determining
shareholders entitled to vote thereon.
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(6) Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available, free from
preemptive rights, out of its authorized shares of Common
Stock, for the purpose of effectuating the conversion the this
Note, the full number of shares of Common Stock then issuable
upon the conversion of this Note and shall take all action
necessary so that the shares of Common Stock so issued will be
validly issued fully paid and nonassessable.
(7) Registration of Common Stock. The Company shall at all times
ensure that the full number of shares of Common Stock then
issuable upon the conversion of this Note shall be subject to
an effective registration statement and freely tradable.
8. Representations and Warranties. The Company represents and warrants to HP
that as of the date hereof and as of the date of each subsequent Loan request
made by the Company to HP hereunder:
(1) Title. The Company is the owner of or has a valid interest in
the Collateral (or, in the case of after-acquired Collateral,
at the time the Company acquires rights in the Collateral,
will be the owner thereof) and that no other person has (or,
in the case of after-acquired Collateral, at the time the
Company acquires rights therein, will have) any right, title
claim or interest (by way of lien or otherwise) in, against or
to the Collateral other than Permitted Liens.
(2) Senior Lienholder. No entities have a security interest senior
to that of HP (a "Senior Lienholder") with respect to the
Collateral.
(3) Perfection. HP has (or in the case of after-acquired
Collateral, at the time the Company acquires rights therein,
will have) a perfected security interest in the Collateral,
provided that HP performs all acts necessary to perfect such
security interest.
(4) Location of Collateral and Chief Executive Office. The
Company's principal place of business and chief executive
office is located at: 1121 East 7th Street, Austin, TX 78702.
The Collateral is maintained at the following locations in
addition to the chief executive office: Texas, Florida,
Georgia and Arizona and such other states of which the Company
shall have notified HP in writing pursuant to Section 13
hereof.
(5) Financial Statements. All of the financial statements of the
Company required to be delivered to HP pursuant to the terms
of the Note
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Purchase Agreement, as of such date, have been delivered to
HP, and are true and correct in all material respects.
(6) Tradenames. The Company does not do business under any names
other than its corporate name identified in the first
paragraph of this Note and "Aperian" and "OuterNet."
9. Covenants Relating to Collateral.
(1) Maintenance of Collateral. The Company hereby agrees to
perform all acts that may be reasonably necessary to maintain,
preserve, protect and perfect the Collateral and the lien
granted to HP herein, including:
(1) not to change the Company's name or place of business
or chief executive office or the location of any of
its other Collateral without giving HP thirty (30)
days' prior written notice;
(2) to appear in and defend any action or proceeding
which may affect its title to or HP's interest in the
Collateral other than with respect to Permitted
Liens; and
(3) to comply with all material requirements of law
relating to the production, possession, operation,
maintenance and control of the Collateral, except to
the extent that the failure to do so could not
reasonably be expected to have a material adverse
effect upon the financial or business condition of
the Company.
(2) Records; Sale or Other Disposition of Collateral. The Company
shall at all times keep at least one complete set of records
concerning the Collateral at its chief executive office and
shall make such records available for inspection by HP at such
times as HP may reasonably request. The Company shall not be
authorized to sell, transfer, grant nonexclusive licenses of
or otherwise dispose of any item of Collateral other than in
the ordinary course of business.
10. Affirmative Covenants. For so long as any amounts are outstanding under this
Note and until conversion of this Note by HP:
(1) Board Observer Seat. The Company shall (i) allow one
representative (the "Representative") designated from time to
time by HP to attend all meetings of the Board of Directors
(and all committees thereof) in a non-voting observer
capacity; and (ii) provide to the Representative copies of
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<PAGE> 17
all notices, minutes, consents and other materials that the
Company provides to its directors in connection with meetings
of the Board of Directors (or any committee thereof, as the
case may be) at the same time such is given to its directors;
provided, that the Company may exclude the Representative from
any such meeting of the Board of Directors or portion thereof
where the Board of Directors determines in good faith that the
presence of the Representative at such meeting would create a
material conflict of interest between HP and the Company or
where the Board of Directors is advised by its counsel that
the presence of the Representative would present a reasonable
likelihood of the waiver or loss of the attorney-client
privilege.
(2) Use of Proceeds. Not less than fifty percent (50%) of the
Note proceeds must be used for the purchase of HP products,
support or services. The remainder may be used for the
purchase of non-HP hardware, software, support and services.
(3) Taxes. The Company shall file all tax returns when due and pay
or cause to be paid before the same shall become delinquent
and before penalties have accrued thereon, all taxes,
assessments and governmental charges or levies imposed on the
income, profits, franchises, property or business of the
Company except to the extent and so long as (i) the same are
being contested in good faith by appropriate proceedings, and
(ii) as to which adequate reserves in conformity with
generally accepted accounting principles with respect thereto
have been provided on the books of the Company.
(4) Notice of Events of Default. The Company shall notify HP
within five (5) business days of the occurrence of any Event
of Default.
(5) Preferred Provider. The Company agrees to make HP its
Preferred Provider of computer products (including all UNIX
servers, NT servers, Linux servers and personal computers),
peripherals (including printers), storage, support, and
network management software for the owned and outsourced
production, and the test and development infrastructure
environments of the Company (collectively, the "Preferred
Provider Products and Services"). This requirement will apply
to the Preferred Provider Products and Services so long as (i)
the pricing, payment and delivery terms offered by HP with
respect to such products or services are competitive with
those offered by other manufacturers or service providers with
respect to comparable products or services, (ii) the
performance, functionality and other specifications of such
products or
15
<PAGE> 18
services are comparable or superior to products or services
offered by other manufacturers or service providers, and (iii)
the client of the Company for which the Company is providing
its services does not specifically require in writing that
non-HP products be provided by the Company. Before the Company
can terminate HP as its Preferred Provider with respect to the
Preferred Provider Products and Services, the Company must (i)
notify HP in writing of the reasons and justifications for
such termination, and (ii) provide HP no less than thirty (30)
days from HP's receipt of any such notice to respond and cure
any problems specified in such notice.
(6) Display of Logos. The Company agrees to prominently display HP
logos (including the "HP Invent" and "Powered by HP" logos) on
its web sites and service and advertising materials.
11. Negative Covenants. For so long as any amounts are outstanding under this
Note and until conversion of this Note by HP, without the prior written consent
of HP:
(1) Dividends. The Company shall not declare or pay any dividends
on any class or classes of Capital Stock (other than stock
dividends to effectuate a "stock split").
(2) Liens. The Company shall not grant or suffer to exist a lien,
encumbrance or security interest in any assets of the Company,
other than Permitted Liens.
12. Successors and Assigns. The obligations of the Company and the rights of HP
under this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties. The Company shall not be
entitled to assign, transfer or delegate any of its rights, obligations or
liabilities hereunder without the prior written consent of HP.
13. Notices. Any notice, request, or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given on the
date of delivery if personally delivered, on the date of being faxed if sent by
confirmed fax, on the first business day after being sent if sent by recognized
overnight courier, and on the third business day after being mailed if sent by
registered or certified mail, postage prepaid, addressed (i) if to HP to:
Hewlett-Packard Company, 333 Logue Avenue, MS32, Mountain View, CA 94043,
Attention: General Manager, fax number, (650)919-8013; with a copy to
Hewlett-Packard Company, 3000 Hanover Street, MS20BQ, Palo Alto, CA 94304,
Attention General Counsel, fax number (650)857-4392, or (ii) if to the Company
to: MSI Holdings, Inc., d/b/a Aperian, 1121 East Seventh
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<PAGE> 19
Street, Austin, TX 78702-3220, Attention: Chief Executive Officer, fax number
(512)473-2371.
14. Usury. In the event any interest is paid on this Note which is deemed to be
in excess of the then legal maximum rate, then that portion of the interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of this Note.
15. Governing Law. This Note and all actions arising out of or in connection
with this Note shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflicts of law provisions of
the State of California or of any other state.
16. Waiver of Jury Trial. The Company hereby irrevocably waives any and all
right to trial by jury in any legal proceeding arising out of or relating to
this Note.
17. Waivers. The Company hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge arising from
any extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
18. Waivers and Amendments. No provision of this Note may be amended or modified
without the written consent of the Company and HP. HP shall not be deemed, by
any act or omission, to have waived any of its rights or remedies unless such
waiver is in writing and signed by HP and then only to the extent specifically
set forth in such writing. A waiver with reference to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event. No delay or omission of HP in exercising any right, whether
before or after a default, shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by HP of any
past-due amount shall not be deemed to be a waiver of the right to require
prompt payment of any other amounts due and payable.
19. Remedies Cumulative. The remedies of HP as provided herein, or in any one or
more of the Other Transaction Documents, or in law or equity, shall be
cumulative and concurrent, and may be pursued singularly, successively or
together in HP's sole discretion, and may be exercised as often as occasion
therefor shall occur.
20. Expenses. The Company shall pay on demand all fees and expenses, including
reasonable attorneys' fees and expenses, incurred by HP in connection with
custody, preservation or sale of, or other realization on, any of the Collateral
or the enforcement
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<PAGE> 20
or attempt to enforce any of the Obligations which are not performed as and when
required by the Transaction Documents.
21. No Offset. Notwithstanding any rights of offset, recoupment or other similar
rights that the Company may have in connection with any Transaction Document or
under applicable law, the Company agrees and hereby waives any right to offset,
deduct, recoup, credit or otherwise reduce any amounts owing by the Company to
HP under the terms of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed and delivered by its duly authorized representative as of the date
first written above.
MSI HOLDINGS, INC.,
d/b/a APERIAN
By: /s/ Douglas W. Banister
------------------------------------
Name: Douglas W. Banister
----------------------------------
Title: Vice President, Chief Financial Officer
Accepted:
HEWLETT-PACKARD COMPANY
By: /s/ Craig White
------------------------------------
Name: Craig White
----------------------------------
Title: Vice President and General Manager
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<PAGE> 21
SCHEDULE A
TRANSACTIONS ON NOTE
<TABLE>
<CAPTION>
DATE LOANS PAYMENTS INTEREST PAID BALANCE
---- ----- -------- ------------- -------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE> 22
SCHEDULE B
CONDITIONS TO FUNDING
<TABLE>
<CAPTION>
LOANS CONDITIONS TO FUNDING
----- ---------------------
<S> <C>
First Loan 1. The Loan request does not exceed the
principal amount of $10,000,000;
2. Conditions to the Closing under the Note
Purchase Agreement are met;
3. Either (a) no HP Invoices are outstanding as
of the date of the Loan request, or (b) if
any HP Invoices are outstanding as of the
date of the Loan request, the Company agrees
that all or a portion of the obligations
evidenced by the HP Invoices, at the option
of HP, shall be paid immediately with
proceeds of the Loan, and authorizes HP to
apply such proceeds accordingly;
4. As of the date of the Loan request, no Event
of Default has occurred or is continuing
under the Transaction Documents;
5. The Company has met the following milestone:
the Company has both obtained a listing and
commenced trading on the NASDAQ Market; and
6. The Company represents and warrants that all
of the representations and warranties made
by the Company in the Transaction Documents
were true and correct when made, and, except
to the extent that a particular
representation or warranty by its terms
expressly applies only to an earlier date,
are true and correct as of the date of the
request for the Loan.
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C>
Second Loan 1. The Loan request does not exceed the
principal amount equal to (a) $20,000,000
minus (b) the principal amount of all prior
Loans made under the Note;
2. Conditions to the Closing under the Note
Purchase Agreement are met;
3. Either (a) no HP Invoices are outstanding as
of the date of the Loan request, or (b) if
any HP Invoices are outstanding as of the
date of the Loan request, the Company agrees
that all or a portion of the obligations
evidenced by the HP Invoices, at the option
of HP, shall be paid immediately with
proceeds of the Loan, and authorizes HP to
apply such proceeds accordingly;
4. As of the date of the Loan request, no Event
of Default has occurred or is continuing
under the Transaction Documents;
5. As of the date of the Loan request, all
prior milestones have been met; and the
Company has met each of the following
milestones: (a) the Company has opened its
fourth data center in addition to data
centers located in Austin, Dallas and Tampa,
(b) the Company has agreed to a firm
schedule for the opening of it's fifth data
center, and (c) the Company has placed with
HP binding orders for at least $4,000,000 of
HP products and services; and
6. The Company represents and warrants that all
of the representations and warranties made
by the Company in the Transaction Documents
were true and correct when made, and, except
to the extent that a particular
representation or warranty by its terms
expressly applies only to an earlier date,
are true and correct as of the date of the
request for the Loan.
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
Third Loan 1. The Loan request does not exceed the
principal amount equal to (a) $30,000,000
minus (b) the aggregate principal amount of
all prior Loans made under the Note;
2. Conditions to the Closing under the Note
Purchase Agreement are met;
3. Either (a) no HP Invoices are outstanding as
of the date of the Loan request, or (b) if
any HP Invoices are outstanding as of the
date of the Loan request, the Company agrees
that all or a portion of the obligations
evidenced by the HP Invoices, at the option
of HP, shall be paid immediately with
proceeds of the Loan, and authorizes HP to
apply such proceeds accordingly;
4. As of the date of the Loan request, no Event
of Default has occurred or is continuing
under the Transaction Documents;
5. As of the date of the Loan request, all
prior milestones have been met; and the
Company has met the following milestone: the
Company has at least $5,000,000 in quarterly
sales revenue for at least one calendar
quarter; and
6. The Company represents and warrants that all
of the representations and warranties made
by the Company in the Transaction Documents
were true and correct when made, and, except
to the extent that a particular
representation or warranty by its terms
expressly applies only to an earlier date,
are true and correct as of the date of the
request for the Loan.
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C>
Fourth Loan 1. The Loan request does not exceed the
principal amount equal to (a) $40,000,000
minus (b) the aggregate principal amount of
all prior Loans made under the Note;
2. Conditions to the Closing under the Note
Purchase Agreement are met;
3. Either (a) no HP Invoices are outstanding as
of the date of the Loan request, or (b) if
any HP Invoices are outstanding as of the
date of the Loan request, the Company agrees
that all or a portion of the obligations
evidenced by the HP Invoices, at the option
of HP, shall be paid immediately with
proceeds of the Loan, and authorizes HP to
apply such proceeds accordingly;
4. As of the date of the Loan request, no Event
of Default has occurred or is continuing
under the Transaction Documents;
5. As of the date of the Loan request, all
prior milestones have been met; and the
Company has met each of the following
milestones: the Company (a) reaches a
positive gross margin and (b) has at least
$10,000,000 in quarterly sales revenue for
one calendar quarter; and
6. The Company represents and warrants that all
of the representations and warranties made
by the Company in the Transaction Documents
were true and correct when made, and, except
to the extent that a particular
representation or warranty by its terms
expressly applies only to an earlier date,
are true and correct as of the date of the
request for the Loan.
</TABLE>
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<PAGE> 26
SCHEDULE C
COLLATERAL
All right, title and interest of the Company now owned or hereafter
acquired in and to the following:
(1) All Hewlett-Packard equipment and other equipment (including but not
limited to all computer data communications and network control
equipment, storage devices, software and firmware, and all additions,
accessions, substitutions, attachments, improvements and repairs
thereto) acquired from any source with the proceeds of the Loans; and
(2) All products and proceeds of the foregoing, and, in any event, (a) any
and all proceeds of any insurance, indemnity or warranty payable to the
Company from time to time with respect to any of the Collateral, (b)
any and all payments made or due and payable to the Company from time
to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any
governmental authority, (c) any and all recoveries by the Company
against third parties with respect to any litigation or dispute
concerning any of the Collateral, and (d) any and all other amounts
from time to time paid or payable under or in connection with any of
the Collateral, upon disposition or otherwise.
24
