Exhibit 10.41
SUBORDINATED NOTE
$4,250,000.00 Madison, Wisconsin
January 25, 2002
FOR VALUE RECEIVED, Integrated Information Systems, a Delaware
corporation (the "Borrower"), promises to pay to the order of AnchorBank, fsb
("Lender"), or the holder hereof, the principal sum of Four Million Two Hundred
Fifty Thousand and no/100 Dollars ($4,250,000.00) plus $0 for purchased Eligible
Receivables set forth on Exhibit A hereto or as it may be amended, together with
interest on the unpaid principal balance from the date hereof, until paid, at
the rate of seven percent (7%) per annum. Interest shall be calculated on the
basis of a 360-day year over the actual number of days elapsed in a period. All
payments by Borrower shall be made in lawful currency of the United States and
in immediately available funds. Prior to any default hereunder, ▇▇▇▇▇▇ agrees to
accept payment by check. Payments hereunder shall be applied first to the
payment of interest with the balance, if any, to principal. The principal and
interest shall be due and payable at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, or such other place as Lender may designate, in writing, as follows:
1. Commencing on the fifteenth (15th) day of April, 2002, and
continuing on the same day of every third month thereafter
until January 15, 2003, Borrower shall make quarterly payments
of interest only (in arrears) on the outstanding principal
balance hereunder.
2. Commencing on the fifteenth (15th) day of April, 2003, and
continuing on the same day of every third month thereafter
during the remaining term of this Note, Borrower shall make
quarterly payments of principal and interest in an amount
sufficient to fully amortize the original principal balance
hereunder if paid over a period of ten (10) years.
3. Unless sooner paid, the unpaid principal balance and all
accrued interest thereon shall be paid in full on the fourth
(4th) annual anniversary of the date of this Note.
If any installment or payment due under this Note is not received by
Lender within ten (10) calendar days after the installment or payment is due,
the undersigned shall pay to the holder a late charge of Five Percent (5%) of
such installment or payment, such late charge to be immediately due and payable
without demand by Lender.
If (i) Borrower fails to pay any installment of principal and/or
interest due hereunder as and when due, and such default continues for ten (10)
days after Lender gives written notice thereof to Borrower or (ii) defaults or
permits a default to occur in the performance of any of the terms contained
herein, or in any renewal, extension or modification hereof, or in any other
document evidencing, securing or referring to payment hereunder, or in any
document or instrument executed and/or delivered by Borrower in connection
herewith or in connection with any other indebtedness of Borrower to Lender and
such default is not cured within the applicable cure periods, if any, set forth
therein or (iii) any financial information, representation or warranty given by
Borrower to Lender in writing in connection with the borrowing evidenced by this
Note shall prove untrue in any material respect as of the time when given; or
(iv) any judgment shall be obtained against the Borrower which, together with
all other outstanding unsatisfied judgments against the Borrower, shall exceed
the sum of Five Hundred Thousand Dollars ($500,000.00) and shall remain
unsatisfied, unvacated, unbonded or unstayed for a period of sixty (60) days
following the date of entry thereof (excluding the items disclosed to Lender in
Schedule 3.c to the Security Agreement, as defined below); or (v) Borrower
shall: (1) become insolvent; or (2) be unable, or admit in writing its inability
to pay the majority of its debts as
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they mature; or (3) make a general assignment for the benefit of creditors or to
an agent authorized to liquidate any substantial amount of its property; or (4)
file a petition in bankruptcy, or for reorganization, or to effect a similar
plan or other arrangement with substantially all of its creditors; or (5) file
an answer to a creditor's petition (admitting the material allegations thereof)
for an involuntary bankruptcy or reorganization or to effect a similar plan or
other arrangement with substantially all of its creditors; or (6) apply to a
court for the appointment of a receiver for any of its assets; or (7) have a
receiver appointed for any of its assets (without the consent of the Borrower)
and such receiver shall not be discharged within sixty (60) days after his
appointment; then the entire unpaid principal balance, plus accrued interest,
shall, at the option of the holder hereof and without notice, which is hereby
expressly waived, mature and be immediately due and payable. Failure to exercise
this option following any event above shall not constitute a waiver of the right
to exercise the same at a later time or upon the occurrence of any such
subsequent event or events. During any period in which Borrower is in default
hereunder, this Note shall bear interest at the rate of Five Percent (5%) per
annum in excess of the Note rate in effect immediately prior to the default from
the date of such default until such default is cured, or, if acceleration has
occurred, until this Note has been paid; provided, however, that such rate shall
not exceed the highest rate permitted by law.
During the term of this Note, Borrower may prepay all or any part of
the principal balance hereof without penalty or fee. Prepayments shall be
applied against the outstanding principal balance of this Note and shall not
extend or postpone the due date of any subsequent monthly payment or change the
amount of such monthly payment unless Lender shall agree otherwise in writing.
As used herein, the term prepayment shall include all voluntary payments and all
payments occurring as a result of the acceleration by Lender of the principal
amount of this Note, but shall not include payments occurring because of the
application by Lender of insurance proceeds or condemnation awards to the
indebtedness evidenced hereby.
From time to time, without affecting the obligation of the Borrower or
the successors or assigns of the Borrower to pay the outstanding principal
balance of this Note and observe the covenants of the Borrower contained herein,
without giving notice to or obtaining the consent of the Borrower, the
successors or assigns of the Borrower, and without liability on the part of
Lender, Lender may, at its option, extend the time for payment of said
outstanding principal balance or any part thereof, reduce the payments thereon,
release anyone liable on any of said outstanding principal balance, accept a
renewal of this Note, modify the terms and time of payment of said outstanding
principal balance, join in any extension or subordination agreement, release any
security given herefor, take or release other or additional security, and agree
in writing with the Borrower, its successors or assigns, to modify the rate of
interest or period of amortization of this Note.
▇▇▇▇▇▇▇▇, for itself and successors and assigns, agrees hereby to be
bound, and waives and renounces presentment, protest, demand and notice of
presentment, notice of protest, notice of non-payment of the Note, notice of
dishonor and each and every other notice of any kind respecting this Note.
▇▇▇▇▇▇▇▇, for itself and successors and assigns, waives all lack of diligence or
delays in collection or endorsement hereof.
Nothing contained herein nor in any transaction related hereto shall be
construed or shall so operate either presently or prospectively (a) to require
the payment of interest at a rate greater than is now lawful in such case to
contract for, but shall require payment of interest only to the extent of such
lawful rate, or (b) to require the payment or the doing of any act contrary to
law; but if any clause or provision herein contained shall otherwise so operate
to invalidate this Note and/or the transaction related hereto, in whole or in
part, then such clause(s) and provision(s) only shall be held for naught as
though not contained herein and the remainder of this Note shall remain
operative and in full force and effect.
If for any reason interest in excess of the amount as limited in the
foregoing paragraph shall have been paid hereunder, whether by reason of
acceleration or otherwise, then in that event any such excess interest shall
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constitute and be treated as a payment of principal hereunder and shall operate
to reduce such principal by the amount of such excess, or if in excess of the
principal indebtedness, such excess shall be refunded.
This Note is secured by a Selective Business Security Agreement of even
date herewith given by ▇▇▇▇▇▇▇▇ to Lender (the "Security Agreement"), together
with all other mortgages, security agreements, and assignments in the future
given by ▇▇▇▇▇▇▇▇ to Lender. Borrower warrants and represents that, at present,
no creditors hold a security interest in the collateral pledged to Anchor as
security for this Note. Anchor acknowledges that such collateral was, however,
previously pledged as collateral for obligations to other creditors and that
same collateral remains covered by active financing statements. ▇▇▇▇▇▇▇▇
believes that it is entitled to have such financing statements terminated and
agrees to use commercially reasonable efforts to effect termination of such
financing statements. ▇▇▇▇▇▇ agrees to subordinate all or a portion of its
security interest to a future lender, provided that at the time Lender executes
and delivers said subordination, Lender retains or obtains a first and paramount
lien on collateral acceptable to Lender, having a value at the time of the
subordination of at least twice the amount of the principal remaining owed on
this Note, as determined by an independent valuation expert acceptable to Lender
and paid at Borrower's expense.
All of the covenants herein contained shall bind, and the benefits
hereof shall also inure to, the respective successors and permitted assigns of
the parties hereto. Whenever used, the singular shall include the plural, the
plural the singular, and the use of any gender shall include all genders. The
term "Lender" shall include all subsequent holders of this Note. This Note may
be modified only in a writing executed by the Borrower and ▇▇▇▇▇▇.
Borrower shall cause to be furnished to Lender its financial statement
within forty-five (45) calendar days of each of its fiscal quarter ends (showing
current and year to date amounts). In addition, within ninety (90) days after
each of Borrower's fiscal year ends, Borrower shall furnish to Lender its
audited financial statement for the immediately preceding fiscal year, which
audited statement shall be in form and content acceptable to Lender and prepared
by a certified accounting firm selected by Borrower and reasonably acceptable to
Lender. All quarterly statements shall be certified by the President or Chief
Financial Officer of Borrower to be true, correct and complete.
All notices, consents, waivers, and other communications required or
permitted by this Note shall be in writing and shall be deemed given to a party
when: (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, to Lender at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, with a courtesy copy to
Attorney ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, LLP, ▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, Post Office Box ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-1767, and to the
Borrower at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Financial Officer, with a courtesy copy to Attorney ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P., One Arizona Center, ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇. Either Borrower or Lender may change the address to which notices
intended for it are to be directed by means of notice given to the other party
in accordance with this paragraph. Each party agrees that it will not refuse or
reject delivery of any notice given in accordance with this paragraph, that it
will acknowledge, in writing, the receipt of any notice upon request by the
other party and that any notice rejected or refused by it shall be deemed for
purposes of this paragraph to have been received by the rejecting party on the
date given.
▇▇▇▇▇▇▇▇ agrees that whenever this Note is placed in the hands of an
attorney for collection or to defend or enforce any of ▇▇▇▇▇▇'s rights
hereunder, the undersigned shall pay to Lender its attorneys' fees,
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together with all costs and other expenses incurred or paid Lender in connection
therewith including, without limitation, all pre-judgment and post-judgment
costs and expenses, including attorneys' fees.
This Note and the Loan Documents have all been negotiated in the State
of Wisconsin. Accordingly, it is the intention of the parties that this Note be
governed by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed in
Madison, Wisconsin, as of the date first above written.
Integrated Information Systems, Inc.
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Print Title: Chief Executive Officer
Attest: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ [CORPORATE SEAL]
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Print Title: Assistant Secretary
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