Exhibit 10.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR APPLICABLE STATE LAW, AND NO INTEREST THEREIN MAY BE
SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT AS
OTHERWISE SET FORTH HEREIN AND UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH
TRANSACTION, (B) THE COMPANY RECEIVES AN OPINION OF LEGAL COUNSEL FOR THE HOLDER
SATISFACTORY TO THE COMPANY STATING THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION OR (C) THE COMPANY OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION
IS EXEMPT FROM REGISTRATION.
September 27, 2004 $
ZONES, INC.
UNSECURED, SUBORDINATED PROMISSORY NOTE
Zones, Inc., a Washington corporation (the "Company"), for value received,
promises to pay to ____________ (the "Holder") the principal sum of $__________,
(the "Principal Amount"), in accordance with the terms of this Note. This Note
is one of three notes issued pursuant to that certain Interest Termination and
Settlement Agreement, by and among the Company, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, individually and as Trustee of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Declaration of
Trust Dated September 17, 1997, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "Interest Holders"),
dated September 27, 2004 (the "Settlement Agreement"), and in full cancellation
of the Promissory Notes and termination of the Contingent Payments (as defined
in the Stock Purchase Agreement). Capitalized terms used but not defined herein
shall have the meanings given such terms in that certain Stock Purchase
Agreement by and among the Company, the Interest Holders and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
as the Seller Representative, dated as of March 31, 2003 (the "Stock Purchase
Agreement").
The following is a statement of the rights of the Holder and the conditions
to which this Note is subject, to which the Holder, by the acceptance of this
Note, agrees:
1. Principal Amount and Interest; Payment; Prepayment
(a) Principal Amount and Interest. Interest shall accrue on the unpaid
Principal Amount at the rate of, as of the date of any determination, the
greater of (A) the highest "prime rate" published in the "Money Rates" column of
The Wall Street Journal on the first business day of the month, plus 1/4%, or
(B) four and one-half percent (4.50%) ("Interest"), measured from the date set
forth above. Interest will be computed on the basis of a 365-day year. Subject
to the presence or absence of any claim for indemnification or offset pursuant
to Article IX of the Stock Purchase Agreement, as described in Section 2 below,
the Company will make payments on accrued interest and the outstanding Principal
Amount (as it may have been adjusted pursuant to the provisions hereof) in
accordance with the payment schedule set forth on attached Exhibit A.
(b) Prepayment. The Company may at any time prepay in whole or in part the
Principal Amount and any accrued and unpaid Interest thereon without penalty.
(c) Withholding. The Sellers acknowledge that the Company may be required
to withhold on payments of Interest if the Sellers do not provide the Company
with properly completed and executed Forms W-9 and hereby authorize the Company
to withhold as required by law.
2. Note Subject to Stock Purchase Agreement
This Note is expressly subject to the Stock Purchase Agreement, as amended,
and the Settlement Agreement, and shall be treated as a "Promissory Note" for
purposes of Article IX of the Stock Purchase Agreement.
3. Subordination
(a) Senior Debt. This Note and any amounts that may become due hereunder
are "Junior Liabilities" as defined in that certain Subordination Agreement
dated March 31, 2003, excecuted by the Holder, in favor of GE Distribution
Finance (fka Transamerica Commercial Finance Corporation) and its successors and
assigns ("GE"). This Note and any amounts that may become due hereunder are also
be subordinate to payment of any and all of the Company's indebtedness at any
time to IBM Credit Corporation (together with the Company's liabilitis to GE,
the "Senior Indebtedness"). In the event the Company from time to time enters
into agreements for debt financing with different lenders to provide financing
which will substitute for or replace the debt financing provided by the Senior
Indebtedness or the then existing successor lender, ▇▇▇▇▇▇ agrees to subordinate
▇▇▇▇▇▇'s rights under this Note on such terms and conditions as such substitute
lender or lenders may reasonably request.
(b) Undertaking. By its acceptance of this Note, ▇▇▇▇▇▇ agrees to execute
and deliver such additional documents relating to subordination of this Note and
the relationship of the Holder to the lender of the Senior Indebtedness as may
be reasonably requested from time to time by the Company or the lender of any
Senior Indebtedness in order to implement, supplement, modify, or amplify the
provisions of this Section 3.
4. Transfer of Note; Restrictions on Transfer
This Note may be transferred or assigned only with the consent of the
Company. In addition, this Note may be transferred only in compliance with
applicable federal and state securities laws and only upon surrender of the
original Note for registration of transfer, duly endorsed, or accompanied by a
duly executed written instrument of transfer in form satisfactory to the
Company. A new Note for like Principal Amount and Interest will be issued to,
and registered in the name of, the transferee. Interest and Principal Amount are
payable only to the registered holder of the Note. The Holder agrees to provide
a Form W-9 to the Company upon request.
5. Events of Default
The term "Event of Default" as used in this Note means any of the following
events:
(i) Company at any time fails to pay any payment due on this Note within
fifteen (15) days after Company receives written notice from Holder that such
payment is past due; or
(ii) Company fails to make any payment of principal or interest when due on
any indebtedness in excess of $50,000 owed to any creditor holding a security
interest in the assets of the Company, including, without limitation, the Senior
Indebtedness, which Company fails to cure within the applicable cure period;
provided however, it shall not be considered a default hereunder if Company, in
good faith, is withholding payment to a creditor in connection with a dispute;
or
(iii) Company is served with petition for relief under 11 U.S.C. ss. 101 et
seq. or any similar federal or state statute, or an action is commenced to
appoint a receiver or trustee for all or substantially all of Company's
property, and Company fails to cause such proceeding to be dismissed within
sixty (60) days after it is instituted against Company; or
(iv) Company files any petition for relief under 11 U.S.C. ss. 101 et seq.,
or any similar federal or state statute, Company makes a general assignment of
its assets for the benefit of its creditors, or Company consents to the
appointment of a receiver or trustee for all or substantially all of Company's
property.
6. Miscellaneous
6.1 Remedies
The Company and all endorsers of this Note hereby waive notice,
presentment, protest and notice of dishonor.
6.2 Holder as Owner
The Company may deem and treat the holder of record of this Note as the
absolute owner for all purposes regardless of any notice to the contrary.
6.3 No Shareholder Rights
This Note shall not entitle the Holder to any voting rights or any other
rights as a shareholder of the Company or to any other rights except the rights
stated herein.
6.4 Shareholders, Officers and Directors Not Liable
In no event shall any shareholder, officer or director of the Company be
liable for any amounts due or payable pursuant to this Note.
6.5 Notices
Unless otherwise provided, any notice under this Note shall be given in
writing and shall be deemed effectively given (a) upon personal delivery to the
party to be notified, (b) upon confirmation of receipt by fax by the party to be
notified, (c) one business day after deposit with a reputable overnight courier,
prepaid for overnight delivery and addressed as set forth below, or at such
other address as such party may designate by ten days' advance written notice to
the other party given in the foregoing manner.
If to the Holder:
To the address or number last furnished in writing to the
Company by the Holder
If to the Company:
Zones, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇
6.6 Amendments and Waivers
Any term of this Note may be amended and the observance of any term may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the Holder (or
the Seller Representaive as provided in the Stock Purchas Agreement). Any
amendment or waiver shall be binding on each future Holder and the Company.
6.7 Governing Law; Arbitration; Jurisdiction; Venue
This Note shall be subject to the provisions of Section 11.8 of the Stock
Purchase Agreement.
6.8 Successors and Assigns
The terms and conditions of this Note shall inure to the benefit of and be
binding on the respective successors and assigns of the parties.
6.9 Severability
If one or more provisions of this Note are held to be unenforceable under
applicable law, such provision shall be excluded from this Note, and the balance
of this Note shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.
ZONES, INC.
By:____________________
Name:__________________
Its:___________________
AGREED AND ACCEPTED:
_________________________
("HOLDER")
EXHIBIT A
Payment Schedule
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Date Principal Amount of Payment Due
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October 1, 2004
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March 15, 2005
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April 28, 2005
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October 1, 2005
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March 15, 2006
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April 25, 2006
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TOTAL
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