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EXHIBIT 10.14
EXHIBIT A
THE SECURITIES EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE LAW, AND
NO INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION INVOLVING THESE SECURITIES, (B) THE COMPANY RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES (CONCURRED IN BY LEGAL COUNSEL
FOR THE COMPANY) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION OR
(C) THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
SUBORDINATED PROMISSORY NOTE
$400,000 Portland, Oregon
June 30, 2000
FOR VALUE RECEIVED, the undersigned, MICROFIELD GRAPHICS INC.
("Maker"), hereby promises to pay to the order of JMW CAPITAL PARTNERS, INC.
("Holder") in immediately available funds the principal sum of Four Hundred
Thousand Dollars ($400,000), together with interest at the Applicable Rate
(calculated on the basis of a 360-day year and actual days elapsed) as follows:
(a) interest in arrears on the last day of each quarter beginning September 30,
2000; and (b) the outstanding principal balance and all accrued and unpaid
interest on the earlier of (i) June 30, 2005 or (ii) demand by Holder made at
any time (or from time to time if demand is for less than all of the then
outstanding principal) after June 30, 2003. Each payment on account of the
obligations evidenced by this Note shall be applied first to expenses for which
Maker is liable hereunder, next to accrued interest and the balance to
outstanding principal.
Maker shall apply all proceeds from the exercise of Warrants (as
defined in the Note Purchase Agreement) to prepay amounts due under this Note,
without payment of any Prepayment Fee. On ten days' prior written notice to
Holder, Maker may, at any time, prepay all or any portion of the amount due
under this Note, together with (a) accrued interest to the date of such
prepayment on the principal amount prepaid and (b) the applicable Prepayment
Fee, provided, however, that each partial prepayment shall be in an aggregate
principal
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amount of at least $100,000. The applicable Prepayment Fee shall also be payable
upon any mandatory prepayment due to an acceleration of amounts due under this
Note in connection with an Event of Default.
As used herein:
"APPLICABLE RATE" means, at any date, the lesser of (a) 10% per annum
PLUS; during the continuation of an Event of Default, 200 basis
points, or (b) the Highest Lawful Rate.
"EVENT OF DEFAULT" means the occurrence of any of the following
events:
(i) Maker fails to pay when due any obligation
evidenced hereby;
(ii) Maker fails to pay any indebtedness for
borrowed money when due or any event occurs or exists which
gives the holder of any such indebtedness the right to
accelerate the payment thereof;
(iii) Maker shall become insolvent, or shall
suffer or consent to or apply for the appointment of a
receiver, trustee, custodian or liquidator of its property,
or shall generally be unable to or fail to pay its debts as
they become due, or shall make a general assignment for the
benefit of creditors;
(iv) Maker shall file a voluntary petition in
bankruptcy, or seek to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy
Code, or under any state or other Federal law granting
relief to debtors, whether now or hereafter in effect; or
any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or other
Federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Maker and
is not dismissed, stayed or vacated within sixty days
thereafter; Maker shall file an answer admitting the
jurisdiction of the court and the material allegations of
any involuntary petition; or Maker shall be adjudicated a
bankrupt, or an order for relief shall be entered by any
court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or Federal law relating to
bankruptcy, reorganization or other relief for debtors;
(v) Any representation or warranty made by Maker
(or any of its officers) under or in connection with any
Transaction Document (as defined in the Note Purchase
Agreement) shall prove to have been incorrect in any
material respect when made;
(vi) The Company shall fail to perform or observe
any term, covenant or agreement contained in any
Transaction Document on its part to be performed
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or observed and such failure shall remain unremedied for 15
days after written notice thereof shall have been given to
the Company by the Holder;
(vii) Any judgment or order for the payment of
money (net of anticipated insurance proceeds, as determined
in good faith by Maker's Board of Directors) in excess of
$150,000 shall be rendered against the Company and either
(A) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order or (B) there shall
be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
(viii) John B. Conroy shall at any time prior to
June 30, 2002, for any reason, cease to be active in the
management of Maker;
(ix) Designees of JMW Capital Partners, Inc.
shall represent less than 40% of all members of the Maker's
Board of Directors;
(x) Maker shall sell or otherwise transfer or
dispose of all or substantially all of its assets or shall
effect any merger, consolidation, reorganization or other
transaction or series of related transactions (other than a
mere reincorporation merger) resulting in the exchange of
outstanding shares of Maker's capital stock for securities
or consideration issued or caused to be issued by the
acquiring entity or any of its affiliates and as a result
of which the shareholders of Maker immediately prior to
such transaction hold or receive, by virtue of their
ownership of securities of Maker, less than 50% of the
capital stock of the resulting entity; or
(xi) Maker shall contest the enforceability of
this Note, any other Transaction Document or
any transaction contemplated hereby or
thereby.
"HIGHEST LAWFUL RATE" means, at the particular time in question, the
maximum rate of interest which, under applicable law, Holder is then
permitted to charge Maker on the obligations evidenced hereby, and if
the maximum rate changes at any time, the Highest Lawful Rate shall
increase or decrease, as the case may be, as of the effective time of
each such change, without notice to Maker.
"NOTE PURCHASE AGREEMENT" means the Note and Warrant Purchase
Agreement dated as of June __, 2000 between Maker and JMW Capital
Partners, Inc., as the same may be amended, supplemented or modified.
"PREPAYMENT FEE" means, with respect to any prepayment hereunder, an
amount equal to the principal amount prepaid multiplied by the
appropriate percentage set forth below:
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<TABLE>
<CAPTION>
APPLICABLE
TIMING OF PAYMENT PERCENTAGE
<S> <C>
Prior to June 30, 2001 3%
After June 30, 2001 but prior 2%
to June 30, 2002
After June 30, 2002 but 1%
prior to June 30, 2003
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"SENIOR CREDITOR" means any bank, commercial finance company,
insurance company or other institutional lender.
"SENIOR INDEBTEDNESS" means all obligations now or hereafter owed by
Maker to Senior Creditors for or in connection with borrowed money,
capitalized leases, guaranties or other similar obligations, the
aggregate principal amount of which does not exceed $1,000,000. The
$1,000,000 limitation shall be applied first to include obligations
owed to Maker's senior secured working capital lender, next to
include other secured obligations and last to include unsecured
obligations.
Subject to the rights of holders of Senior Indebtedness set forth
herein, if an Event of Default shall occur and be continuing, the Holder may, by
notice to Maker, declare all amounts payable hereunder to be due and payable,
whereupon all such amounts shall be due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by Maker; PROVIDED, HOWEVER, that in the event of an entry of an order
for relief with respect to Maker under the Federal Bankruptcy Code or Maker's
voluntary filing under the Federal Bankruptcy Code, all such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
Maker.
The obligations evidenced hereby are subordinate and junior in right
of payment to Senior Indebtedness. No payment shall be made pursuant to this
Note if Maker is in default of any of its obligations with respect to Senior
Indebtedness (or if such payment would itself constitute a default) until such
default is cured to the written satisfaction of or waived by the applicable
Senior Creditor, provided that Maker's failure to make any such payment shall
nonetheless constitute a default by Maker of its obligations to Holder
hereunder. Upon any dissolution, winding up, liquidation or reorganization of
Maker, whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Indebtedness shall first be paid
in full in cash, or payment thereof provided for, before any payment is made on
the obligations evidenced by this Note, and any payment received by Holder in
violation of the foregoing shall be paid to the holders of Senior Indebtedness
for application to the payment of all Senior Indebtedness remaining unpaid to
the extent
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necessary to pay all Senior Indebtedness in full in cash, after giving effect to
any concurrent payment to the holders of Senior Indebtedness. The provisions of
this paragraph are included solely for the purpose of defining the relative
rights of Holder and holders of Senior Indebtedness, and nothing herein shall
impair, as between Maker and Holder, Maker's unconditional and absolute
obligation to pay Holder all amounts owing hereunder.
Maker shall pay all costs of collection, including reasonable
attorneys' fees (whether incurred at the trial or appellate level, in an
arbitration proceeding, in bankruptcy (including, without limitation, any
adversary proceeding, contested matter or motion) or otherwise). No delay or
failure on the part of Holder to exercise any of its rights hereunder shall be
deemed a waiver of such rights or any other right of Holder nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of such
rights or any other right on any future occasion. Maker and every surety,
indorser and guarantor of this Note waive presentment, demand, protest, notice
of intention to accelerate, notice of acceleration, notice of nonpayment and all
other notices of every kind, and agree that their liability under this Note
shall not be affected by any renewal, postponement or extension in the time of
payment hereof, by any indulgence granted by any holder hereof with respect
hereto, or by any release or change in any security for the payment of this
Note, and they hereby consent to any and all renewals, extensions, indulgences,
releases or changes, regardless of the number of such renewals, extensions,
indulgences, releases or changes.
Time is of the essence in the performance of all obligations of Maker
under this Note. This Note shall be governed by and construed in accordance with
the laws of the State of Oregon.
This Note shall be binding upon and inure to the benefit of Maker and
Holder and their respective successors, heirs, legal representatives and
permitted assigns. Maker may not assign its rights or obligations under this
Note without the prior written consent of Holder. Holder may not assign its
rights or obligations under this Note without the prior written consent of
Maker, which shall not be unreasonably withheld; provided, however, that no
consent of Maker shall be required for any transfer by Holder to any person or
entity that controls, is controlled by or is under common control with Holder.
UNDER OREGON LAW, MOST AGREEMENTS, PROMISES, AND COMMITMENTS MADE BY
HOLDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
MAKER'S RESIDENCE, MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
HOLDER TO BE ENFORCEABLE.
MICROFIELD GRAPHICS, INC.
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By:_________________________
Title:_______________________
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