WESTWOOD COMPUTER CORPORATION SUBORDINATED PROMISSORY NOTE

Contract Categories: Business Finance - Note Agreements
EX-10.6 7 c48141_ex10-6.htm

Exhibit 10.6

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR STATE SECURITIES LAWS OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.

WESTWOOD COMPUTER CORPORATION

SUBORDINATED PROMISSORY NOTE

 $1,002,900  
Made as of: February 5, 2007

                    Westwood Computer Corporation, a New Jersey corporation (the “Company,” which term includes any successor corporation or other business entity), for value received, hereby promises to pay to DARR Global Holdings, Inc. (the “Holder”), the principal sum of One Million Two Thousand Nine Hundred Dollars ($1,002,900) (the “Principal Amount”).

                    This Note is issued in connection with the execution of a termination agreement dated as of the date hereof, by and among the Company and the Holder (the “Termination Agreement”) pursuant to which the Company’s obligations under that certain management services agreement by and between the Company and the Holder are being terminated.

                    The following is a statement of the rights of the Holder and the terms and conditions to which this Note is subject, and to which the Holder hereof, by acceptance of this Note, agrees:

                    1.           Interest. The Company promises to pay interest (computed on the basis of actual days elapsed and a year of 360 days) on the unpaid Principal Amount of this Note at an interest rate equal to five percent (5%) per annum.

                    2.           Prepayment. This Note may be prepaid at any time in whole or in part without premium or penalty.

                    3.           Repayment.

                                  (a)           This Note shall be repaid at a rate of $250,000 per annum in equal monthly principal payments of $20,833 per month, with such payments beginning on the first day of the month immediately following issuance of this Note until the Note is paid in full. Each principal payment shall be accompanied by all interest then accrued and unpaid on this Note.


                                  (b)           Notwithstanding the provisions of Section 3(a) above, in the event that either (i) Emtec, Inc., a Delaware corporation (the “Parent”), achieves EBITDA (as defined below) of $8,000,000 for the preceding twelve month period or (ii) all amounts due and owing under the Grabel Notes (as defined in Section 6) are paid in full, then this Note shall be repaid at a rate of $350,000 per annum in equal monthly principal payments of $29,166 per month, with such payments beginning on the first day of the month immediately following issuance of this Note until the Note is paid in full. Each principal payment shall be accompanied by all interest then accrued and unpaid on this Note. For purposes of this Note, “EBITDA” means, for any period, the sum of Parent’s earnings before interest and taxes on a consolidated basis for such period plus depreciation expenses of Parent on a consolidated basis for such period plus amortization expenses of Parent on a consolidated basis for such period

                    4.           Method of Payment. The Company will pay the outstanding principal in currency of the United States that at the time of payment is legal tender for payment of public and private debts. Payments shall be made to the Holder by delivering a check at the Holder’s address listed on the books of the Company or to such other address designated in writing by the Holder and provided to the Company at least ten (10) business days before the Maturity Date.

                    5.           Events of Default.

                                  (a)           An “Event of Default” under this Note occurs if:

                                                 (i)           the Company defaults in the payment of the principal of this Note when the same becomes due and payable on the Maturity Date or otherwise and such default continues for thirty (30) days; or

                                                 (ii)          the Company shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against the Company seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and in the case of any such proceeding instituted against the Company such proceeding shall not be stayed or dismissed within sixty (60) days from the date of institution thereof.

                                  (b)           Acceleration. If an Event of Default occurs and is continuing, the Holder, by written notice to the Company, may declare the unpaid principal of this Note to be immediately due and payable. The Holder by written notice to the Company may rescind an acceleration and its consequences if (i) all existing Events of Default, other than the nonpayment of principal of this Note which has become due solely because of the acceleration, have been cured or waived and (ii) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

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                                  (c)           Interest Rate Upon Default. If an Event of Default (other than an Event of Default specified in clauses (a)(ii) or (a)(iii) of Section 5) occurs and is continuing, the Interest Rate on this Note shall increase by five percent (5%) (the “Default Interest Rate”). The Default Interest Rate shall apply only to those periods during which an Event of Default is continuing. Upon the Company curing any Event of Default, the Default Interest Rate shall revert to the Interest Rate. Upon an Event of Default, the Company promises to pay all costs and expenses of collection of this Note and to pay all reasonable attorneys’ fees incurred in such collection.

                                  (d)           Waiver of Past Defaults. The Holder may waive an existing Default or Event of Default and its consequences. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Note; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

                    6.           Subordination.

                                  (a)           Definitions. The following terms have the following meanings:

                              “Affiliate” means any person or entity (“Person”), each of the Persons that directly or indirectly, through one or more intermediaries, owns or controls, is controlled by or is under common control with, such Person. For the purpose of this Agreement, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise.

                              “Credit Agreement” means any loan document entered into by the Company and the Lender (including agreements relating to any interest or exchange rate hedging agreement or other derivative obligation) and any guaranty of the Company’s or any of the Company’s subsidiaries’ obligations thereunder pursuant to the Senior Loan Documents, as such agreement may hereafter be amended, extended, supplemented, increased, renewed, refinanced or otherwise modified, and any loan, financing or credit agreement entered into with any Refinancing Lender.

                              “Holder” as used in this Section 6 means a holder or owner of this Note and any other holder or owner of Subordinated Debt.

                              “Indebtedness” means, without duplication, with respect to any person, (a) all indebtedness of such person for borrowed money; (b) all obligations of such person for the deferred purchase price of property or services; (c) all obligations of such person evidenced by notes, bonds, debentures or other similar instruments; (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such person (even though the rights and remedies of the seller or lender under such

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agreement in the event of default are limited to repossession or sale of such property); (e) all obligations of such person as lessee under leases that have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases; (f) all obligations, contingent or otherwise, of such person under acceptance, letter of credit or similar facilities; (g) all obligations of such person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; (h) all obligations of such person under interest rate protection agreements, foreign currency exchange agreements or other interest or exchange rate hedging agreements (i) all Indebtedness of the type referred to in clauses (a) through (h) abo ve guaranteed directly or indirectly in any manner by such person, or in effect guaranteed directly or indirectly by such person through an agreement (i) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss, (iii) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (iv) otherwise to assure a creditor against loss; and (j) all Indebtedness of the type referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien on property (including, without limi tation, accounts and contract rights) owned by such person, even though such person has not assumed or become liable for the payment of such Indebtedness, but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue for more than 90 days, or as to which a dispute exists and adequate reserves in conformity with United States generally accepted accounting principles have been established on the books of such person.

                              “Lender” means any bank or other independent financial institution providing Senior Debt to the Company.

                              “Loan Parties” shall mean the Company and any Subsidiary which is an obligor under the Credit Agreement or any other Senior Loan Document.

                              “Non-payment Default” means any default or event of default (other than a Payment Default) under any agreement or instrument relating to Senior Debt. For purposes of the immediately preceding sentence, an “event of default” shall exist when as a result thereof the holders of the pertinent Senior Debt are then permitted to cause such Senior Debt to become due prior to its scheduled maturity.

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                              “Payment Default” means any default in the payment of principal of, premium, if any, interest on, or other amounts payable on, or in connection with Senior Debt, irrespective of whether such default in payment results from a failure to pay any amount when originally scheduled to be paid or upon acceleration or otherwise.

                              “Post Petition Interest” means interest payable on any Senior Debt following the filing of a case against any Loan Party under Title 11 of the United States Code or any other bankruptcy, insolvency or similar law.

                              “Refinancing Lender” shall mean any lender which shall refinance in whole or part, the Senior Debt payable to the Lender or a successor lender thereto and any lender which shall provide additional financing to the Company and/or its Subsidiaries from time to time, subject to the limitations contained in this Note.

                              “Senior Creditors” means the Lender or any Refinancing Lender until the Senior Debt has been finally and indefeasibly paid in full and thereafter any other holders of Senior Debt as their interests may appear.

                              “Senior Debt” means all Indebtedness except Indebtedness that by its terms is subordinated or pari passu in right of payment to this Note. Senior Debt shall include, without limitation, (a) all Indebtedness of the Company and its Subsidiaries to De Lage Landen Financial Services, Inc. (“DLL”) under the credit agreement dated as of December 7, 2006, as amended, including principal, premium, if any, and interest on such Indebtedness and all other amounts due on or in connection with such Indebtedness, including all charges, fees, indemnities, and expenses (including reasonable fees and expenses of counsel), (b) any amendment, modification, extension or replacement of any of the Company’s existing credit facilities so long as the formula utilized to calculate the indebtedness permitted by such facilities does not exceed 100% of the Company’s cash, accounts receivable and inventory (including floor plan financing inventory) and all other amounts due on or in connection with such Indebtedness, including all charges, fees, indemnities, and expenses (including reasonable fees and expenses of counsel), (c) the Subordinated Note made in favor of Four Kings Management LLC in the amount of $750,000, including principal, fees and interest under such Note, (d) the Subordinated Notes made in favor or each of Keith Grabel and Mary Grabel dated February 5, 2007 in the amounts of $671,300 and $655,600, respectively (together with the Four Kings Note, the “Grabel Notes”), and (e) all amendments, extensions, renewals, refinancings and deferrals of the Indebtedness referred to in clauses (a) through (d) above.

                              “Senior Default” means a Payment Default or a Non-payment Default.

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                              “Senior Loan Documents” means all documents executed in connection with any financing provided by a Lender or Refinancing Lender.

                              “Significant Subsidiary” means any subsidiary of the Company that would be a “significant subsidiary” as defined in Rule 1.02(v) of Regulation S-X promulgated pursuant to the Securities Act.

                              “Subsidiary” means any entity more than 50% of the outstanding voting power of the voting stock or other voting interest of which is controlled, directly or indirectly, by the Company.

                              “Subordinated Debt” means all obligations of the Company now or hereafter existing (a) under this Note (whether created directly or acquired by assignment or otherwise), as it may hereafter be amended, extended, supplemented or otherwise modified from time to time, whether for principal, interest (including, without limitation, Post-Petition Interest), fees, expenses or otherwise, (b) all obligations of any of the Loan Parties in respect of (i) any Indebtedness incurred by any of the Loan Parties to extend, increase, refund or refinance, in whole or in part, the Subordinated Debt, including interest and premium on any such Indebtedness, (ii) any loan or credit agreement entered into by any of the Loan Parties in connection wit h any such Indebtedness, as such agreement may be amended, extended, supplemented or otherwise modified from time to time, and (iii) all other amounts payable in respect of any such Indebtedness or agreement, including, without limitation, amounts payable (A) in respect of any indemnity and (B) in respect of any breach of a representation or a warranty, (c) the Subordinated Note in favor of DARR Westwood LLC in the amount of $750,000 and (d) the Promissory Note in favor of DARR Westwood LLC in the amount of $1,102,794.

                                  (b)           Subordinated Debt Subordinated to Senior Debt. The Company, for itself and its successors, and each Holder, by its acceptance thereof, agrees that the Subordinated Debt is and shall be subordinated in right of payment to the prior final and indefeasible payment in full of all Senior Debt. For the purposes of this Note, Senior Debt shall not be deemed to have been finally and indefeasibly paid in full until the holders or owners of the Senior Debt shall have indefeasibly received payment of all Senior Debt in cash and as long as the Lender or any Refinancing Lender shall have any obligation to lend or advance under the Senior Loan Documents. This Section 6 shall constitute a continuing offer to all persons who, in reliance upon such provisions, become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt, and such holders are made obligees hereunder and any one or more of them may enforce such provisions.

                                  (c)           No Payment on Subordinated Debt in Certain Circumstances.

                                                 (i)           Upon the maturity of all or any part of any Senior Debt by lapse of time, acceleration (unless waived in writing) or otherwise, all Senior Debt then due shall

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first be finally and indefeasibly paid in full, or such payment duly provided for in cash or cash equivalents in a manner satisfactory to the holders of such Senior Debt, before any payment is made on account of the Subordinated Debt, and until the Senior Debt is finally and indefeasibly paid in full, any distribution to which the Holder would be entitled but for this Section 6 shall be made to holders of Senior Debt as their interests may appear.

                                                 (ii)          In the event that (i) any Payment Default shall have occurred and be continuing, unless and until such default shall have been cured or waived in writing, or (ii) any judicial proceeding shall be pending with respect to any such Payment Default, then no payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to payment of the Subordinated Debt) shall be made by or on behalf of the Company for or on account of any Subordinated Debt (but not including any payment by accrual), and the Holder shall not take or receive from the Company or any Subsidiary, directly or indirectly, in cash or other property, or by set-off or in any other manner, including, without limitation, from or by way of collateral, payment of all or any of the Subordinated Debt. The Holder shall immediately deliver to the Lender or any Refinancing Lender (or the Representative (as defined below) of the Senior Creditors if the Senior Debt has been finally and indefeasibly paid in full) any monies, securities or other property received by the Holder or its equivalent in cash, with proper endorsement or assignment if necessary, and prior to such delivery shall hold in trust, such monies, securities or other properties solely as trustee for and for the benefit of the Senior Creditors as set forth in this sentence.

                                                 (iii)         Upon written notice from the Lender or any Refinancing Lender (or, if the Senior Debt has been paid finally and indefeasibly in full, the representative selected by holders of 50% or more of the Senior Debt of the applicable Senior Creditor (the “Representative”)) to the Company and the Holder of a Non-payment Default and such Non-payment Default shall not have been cured or waived in writing, no payment (including any payment which may be payable by reason of the payment of any other Indebtedness of the Company being subordinated to payment of the Subordinated Debt) shall be made by or on behalf of the Company for or on account of any Subordinated Debt, and the Holder shall not take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, including, without limitation, from or by way of collateral, payment of all or any of the Subordinated Debt, during the period (the “Payment Blockage Period”) commencing on the date of receipt by the Company of such notice (which shall give prompt notice to the Holder), and ending (unless earlier terminated by notice from the Lender or any Refinancing Lender (or, if the Senior Debt has been paid finally and indefeasibly in full, the Representative of the Senior Creditors) on the earliest of (A) the date when such Non-payment Default shall have been cured or waived in writing (B) the date an Event of Default occurs under Section 5, and (C) the date on which the Senior Debt is accelerated and declared immediately due and payable.

                                                 (iv)          Nothing contained in this Section 6 will limit the right of the Holder to take any action to accelerate the maturity of the securities pursuant to Section 5 or to pursue any rights or remedies hereunder; provided, that the Holder shall take no such action

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following any Senior Default until the earliest of (A) the date when such Senior Default shall have been cured or waived in writing, (B) the date an Event of Default occurs under Section 5, and (C) the date on which the Senior Debt or if the Senior Debt has been finally paid in full, any other Senior Debt held by the applicable Senior Creditor, is accelerated and declared immediately due and payable; provided, further, that in the event that any Subordinated Debt is declared due and payable before its stated maturity, the holders of all Senior Debt shall be entitled to receive final and indefeasible payment in full of all amounts due or to become due (whether or not accelerated) on or in respect of all Senior Debt before the Holder is entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Subordinated Debt) by the Company on account of the Subordinated Debt. The Holder shall immediately deliver to the Lender or any Refinancing Lender (or the Representative of the Senior Creditors if the Senior Debt has been finally and indefeasibly paid in full) any monies, securities or other property received by the Holder or its equivalent in cash, with proper endorsement or assignment if necessary, and prior to such delivery shall hold in trust, such monies, securities or other properties solely as trustee for and for the benefit of the Senior Creditors as set forth in this sentence.

                                                 (v)           Nothing contained in this Section 6 shall prevent interest from accruing to this Note as provided above until this Note paid in full.

                                                 (vi)           Nothing contained in this Section 6(c) shall prevent the Company from making any scheduled payments of principal and interest under this Note so long as (i) no Payment Default has occurred and is continuing or (ii) no judicial proceeding is pending with respect to any such Payment Default.

                                  (d)           Subordinated Debt Subordinated to Prior Payment of Senior Debt on Dissolution. Upon any payment or distribution of all or any of the assets or securities of the Company of any kind or character upon any dissolution, winding up, liquidation, reorganization, arrangement, adjustment, protection, relief or other similar case or proceeding under any federal or state bankruptcy or similar law (whether voluntary or involuntary, in bankruptcy, insolvency, receivership, arrangement, reorganization or relief proceedings or upon any assignment for the benefit of creditors or any marshalling of the assets and liabilities of the Company or otherwise):

                                                 (i)           all Senior Debt shall first be entitled to be finally and indefeasibly paid in full before the Holder is entitled to receive any payment on account of the Subordinated Debt; and

                                                 (ii)           any payment or distribution in respect of the Subordinated Debt to which the Holder would be entitled except for the provisions of this Section 6 (including any payment that may be payable by reason of any other Indebtedness of the Company being subordinated to the payment of the Subordinated Debt), shall be paid by the Company, the liquidating trustee or agent or other person making such payment or distribution directly to the Lender or any Refinancing Lender (in the case of the Senior Debt) or if the Senior Debt has been indefeasibly paid in full, to the holders of the other Senior Debt or their Representative or to the

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trustee under any indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as the case may be, for application (in the case of cash), or as collateral (in the case of non-cash property or securities) for, the payment or prepayment in full of all Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution (in the case of cash) to the holders of such Senior Debt. Any such payment shall be made first to the Senior Debt owed to the Lender and following indefeasible payment in full of the Senior Debt such payment shall be made to other holders of Senior Debt or as otherwise directed by a court of competent jurisdiction.

                                  (e)           Holder to be Subrogated to Rights of Holders of Senior Debt. Upon final and indefeasible payment in full of all Senior Debt, the Holder shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of assets of the Company applicable to the Senior Debt until all Subordinated Debt shall be paid in full, and for the purpose of such subrogation no such payments or distributions to the holders of Senior Debt by or on behalf of the Company or by or on behalf of the Holder by virtue of this Section 6 which otherwise would have been made to the Holder shall, as among the Company, its creditors other than the holders of Senior Debt and the Holder, be deemed to be payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Section 6 are and are intended solely for the purpose of defining the relative rights of the Holder, on the one hand, and the holders of Senior Debt, on the other hand.

                                  If any payment or distribution to which the Holder would otherwise have been entitled but for the provisions of this Section 6 shall have been applied, pursuant to the provisions of this Section 6, to the indefeasible payment in full of all amounts payable under the Senior Debt, then and in such case, the Holder shall be entitled to receive from the holders of such Senior Debt at the time outstanding any payments or distributions received by such holders of Senior Debt in excess of the amount sufficient to pay holders of Senior Debt all amounts payable under or in respect of the Senior Debt in full unless the holders of Senior Debt are otherwise directed by an unstayed, final, nonappealable order or decree made by any court of competent jurisdiction.

                                  (f)           Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt. The Company agrees that it will not make any payment of any Subordinated Debt, or take any other action, in contravention of the provisions of this Section, and no right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Agreement, regardless of any knowledge thereof which any such holder may have or be otherwise charged with.

                                  (g)           In Furtherance of Subordination.

                                                 (i)           All payments or distributions upon or with respect to the Subordinated Debt which are received by the Holder contrary to the provisions of this Section 6

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shall be received and held by such Holder, in trust for the benefit of, shall be segregated from other funds and property held by such Holder, and shall be paid immediately over and delivered to the Senior Creditors in the same form as so received (with any necessary endorsement), for application (in the case of cash) to, or as collateral (in the case of non-cash property or securities) for, the payment or prepayment in full of all Senior Debt of the Senior Creditors remaining unpaid, after giving effect to any concurrent payment or distribution (in the case of cash) to the holders of Senior Debt and shall be applied (A) first to the final and indefeasible payment in full of all Senior Debt, and (B) next to the final and indefeasible payment of any other Senior Debt on a pro rata basis or as otherwise directed by a court of competent jurisdiction.

                                                 (ii)          The Company shall give prompt written notice to the Holder of any Senior Default under any Senior Debt or under any agreement pursuant to which Senior Debt may have been issued of any dissolution, winding up, liquidation, reorganization or other event described in Section 6(d) relating to the Company; provided, that the failure to give any such notice shall in no way affect the obligations of the Holder under, or the terms of subordination set forth in, this Section 6.

                                                 (iii)          The Company and each of the Holders (to the extent the Holders have knowledge thereof and the notice address therefor) shall promptly notify the Lender or any Refinancing Lender and any Representative of the holders of other Senior Debt of the occurrence of any default under this Note or otherwise with respect to the Subordinated Debt.

                                                 (iv)          The Lender or any Refinancing Lender or the holders of Senior Debt, as the case may be, are hereby authorized to demand specific performance of the provisions of this Section 6, whether or not the Company shall have complied with any of the provisions hereof applicable to it, at any time when the Company or the Holder, as the case may be, shall have failed to comply with any of the provisions of this Section applicable to it. The Holder hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance. The Holder hereby acknowledges that the provisions of this Section 6 are intended to be enforceable at all times, whether before or after the commencement of a proceeding referred to in Section 6(d).

                                  (h)           Obligations of Company Unconditional. Nothing contained in this Section 6 is intended to or shall impair, as between the Company and the Holder, the obligations of the Company, which are absolute and unconditional, to pay to the Holder the principal of and interest on this Note as and when the same shall become due and payable in accordance with its terms or is intended to or shall affect the relative rights of the Holder and creditors of the Company other than the holders of the Senior Debt, and, except as otherwise expressly provided herein, nothing contained herein shall prevent the Holder from exercising all remedies otherwise permitted by applicable law upon Default (as hereinafter defined), subject to the rights, if any, under this Section 6 of the holders of such Senior Debt in respect of cash, property, security or securities of the Company received upon the exercise of any such remedy. Nothing contained in this Section 6 or in this Note shall, except during the pendency of any dissolution, winding-up, liquidation, reorganization, recapitalization or readjustment of the Company, affect the

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obligation of the Company to make, or prevent the Company from making, at any time (except under the circumstances described in Section 6(c)) payment of principal of or interest on this Note.

                   The failure to make a payment on account of principal of or interest on this Note by reason of any provision of this Section 6 shall not be construed as preventing the occurrence of an Event of Default under Section 5.

                   Upon any payment or distribution of assets of the Company referred to in this Section 6, the Holder shall be entitled to rely upon any unstayed, final, nonappealable order or decree made by any court of competent jurisdiction or upon any certificate of any agent or other person for the purpose of ascertaining the persons entitled to participate in any distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 6.

                                  (i)           Holder Entitled to Assume Payments Not Prohibited in Absence of Notice. The Holder shall not at any time be charged with the knowledge of the existence of any facts which would prohibit the making of any payment to such Holder, unless and until the Holder shall have received written notice thereof from the Company or one or more holders of Senior Debt or a Representative therefor; and, prior to the receipt of any such written notice, the Holder shall be entitled to assume conclusively that no such facts exist. Nothing contained in this Section 6 shall limit the right of the holders of Senior Debt to recover payments as contemplated elsewhere in this Section 6. The Holder shall be entitled to rely on the delivery to it of a written notice by a person representing himself or itself to be a holder of such Senior Debt (or a trustee on behalf of, or other representative of, such holder) to establish that such notice has been given by a holder of such Senior Debt or a trustee on behalf of any such holder.

                                  (j)           Rights to Insolvency Proceedings. The Holder irrevocably authorizes and empowers the Lender or any Refinancing Lender (or if the Senior Debt shall have been finally and indefeasibly paid in full, the Representative) in any proceeding defined in Section 5(a)(2) (an “Insolvency Proceeding”) involving or relating to the Subordinated Debt to file a proof of claim on behalf of the Holder with respect to the Subordinated Debt if the Holder fails to file proof of its claims prior to 10 days before the expiration of the time period during which such claims must be submitted, to accept and receive any payment or distribution which may be payable or deliverable at any time upon or in respect of the Subordinated Debt in an amount not in excess of the Lender or any Refinancing Lender’s or if the Senior Debt has been indefeasibly paid in full or any other holder of Senior Debt’s portion of the Senior Debt then outstanding and to take such other action as may be reasonably necessary to effectuate the foregoing. The Holder shall provide to the Lender or any Refinancing Lender or any applicable Representative all information and documents reasonably necessary to present claims or seek enforcement as aforesaid. The Holder agrees that even though it shall retain the right to vote its claims and otherwise act in any such Insolvency Proceedings relative to the Company (including, without limitation, the right to vote to accept or reject any plan of partial or complete liquidation,

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reorganization, arrangement, composition or extension), the Holder shall not take any action or vote in any way so as to contest (i) the validity or the enforceability of the Credit Agreement, the Senior Loan Documents or the liens and security interests to the extent granted to the Lender or any Refinancing Lender by the Company with respect to the Senior Debt or any indebtedness held by a Refinancing Lender or any other Senior Debt, (ii) the rights of the Lender or any Refinancing Lender established in the Credit Agreement, the Senior Loan Documents or any security documents with respect to such liens and security interests, or (iii) the validity or enforceability of terms of subordination set forth herein or any agreement or instrument to the extent evidencing or relating to the Senior Debt or any indebtedness held by a Refinancing Lender or any other Senior Debt. The Lender, any Refinancing Lender or other holder of Senior Debt agrees that as a condition to Holder’s obligations in this paragraph while they shall retain the right to vote such Indebtedness and otherwise act in any such reorganization proceeding relative to the Company (including, without limitation, the right to vote or accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension), it shall not take any action or vote in any way so as to contest the enforceability of this Note or any other agreement or instrument to the extent evidencing or relating to the Subordinated Debt.

                                  (k)           Waiver of Consolidation. The Holder agrees that it will not at any time insist upon, plead, or in any manner whatsoever, seek the entry of any order or judgment, any substantive consolidation, piercing of the corporate veil or any other order or judgment that causes an effective combination of the assets and liabilities of the Company and any other individual, Company, partnership or joint venture in any Insolvency Proceeding.

                                  (l)            Waiver. The making of loans, advances and extensions of credit or other financial accommodations to, and the incurring of any expenses by or in respect of the Company by the Lender, any Refinancing Lender or any other holder of Senior Debt, and presentment, demand, protest, notice of protest, notice of nonpayment or default and all other notices to which Holder and the Company are or may be entitled are hereby waived (except as expressly provided for herein or as to the Company, in the Senior Loan Documents). Holder also waives notice of, and hereby consents to, any amendment, modification, supplement, renewal, restatement or extensions of time of payment of or increase or decrease in the amount of any of the Senior Debt or to the Senior Loan Documents or any collateral therefor, the taking, exchange, surrender and releasing of collateral therefor or guarantees now or at any time held by or available to Lender, any Refinancing Lender or any other holder of Senior Debt for the Senior Debt or any other person at any time liable for or in respect of the Senior Debt, the exercise of, or refraining from the exercise of any rights against the Company or any other obligor or any collateral therefor, the settlement, compromise or release of, or the waiver of any default with respect to, any of the Senior Debt, and/or the Lender’s, any Refinancing Lender’s or any other holder of Senior Debt’s election, in any proceeding instituted under the U.S. Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy Code. Any of the foregoing shall not, in any manner, affect the terms hereof or impair the obligations of Holder hereunder. All of the Senior Debt shall be deemed to have been made or incurred in reliance upon this Section 6 of this Note.

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                                  (m)           Insolvency. The provisions of this Section 6 shall be applicable both before and after the filing of any petition by or against any Loan Party under the U.S. Bankruptcy Code and all converted or succeeding cases in respect thereof, and all references herein to the Company shall be deemed to apply to a trustee for such Loan Party and such Loan Party as the debtor-in-possession. The relative rights of the Lender, the Refinancing Lender or any other holder of Senior Debt and the Holder to repayment of the Senior Debt and Subordinated Debt, respectively, and in or to any distributions from or in respect of such Loan Party or any collateral or proceeds of collateral, shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, such Loan Party as debtor-in-possession.

                                  (n)           Bankruptcy Financing. If any Loan Party shall become subject to a proceeding under the U.S. Bankruptcy Code and if Lender, the Refinancing Lender or any other holder of Senior Debt desires to permit the use of cash collateral or to provide financing to such Loan Party under either Section 363 or Section 364 of the U.S. Bankruptcy Code, the Holder agrees that it will not contest the entry of the order approving such financing or use of cash collateral.

                                  (o)           Miscellaneous.

                                                 (i)           The Holder and the Company each will, at the Company’s expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action that may be reasonably necessary or desirable, or that the Lender or any Refinancing Lender or any Representative of the Senior Creditors may reasonably request, in order to protect any right or interest granted or purported to be granted by the provisions of this Section 6 or to enable the Lender or any Refinancing Lender to exercise and enforce its rights and remedies hereunder.

                                                 (ii)          All rights and interests under this Section 6 of the holders of the Senior Debt, the Lender or any Refinancing Lender or any other holder of Senior Debt, and all agreements and obligations of the Holder and the Company under this Section 6, shall remain in full force and effect irrespective of:

                                                              (a)           any lack of validity or enforceability of any Senior Loan Document or any other agreement or instrument relating thereto or to any Senior Debt;

                                                              (b)           any extension, renewal, increase, supplement, refinancing or other change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Debt or any other Senior Debt, or any other extension, renewal or other amendment or waiver of or any consent to any departure from any Senior Loan Document or any other agreement or instrument relating thereto or to any other Senior Debt, including, without limitation, any increase in obligations resulting from the extension of additional credit to any Loan Party or any of its subsidiaries or otherwise;

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                                                              (c)           any taking, exchange, release or non-perfection of any other collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Senior Debt or any other Senior Debt;

                                                              (d)           any manner of application of collateral, or proceeds thereof, to all or any of the Senior Debt or any other Senior Debt, or any manner of sale or other disposition of any collateral for all or any of the Senior Debt or any other Senior Debt, or any other assets of any Loan Party or any of its subsidiaries;

                                                              (e)           any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its subsidiaries; or

                                                              (f)            any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Loan Party or a subordinated creditor.

                                                 (iii)         The provisions of this Section 6 shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Senior Debt is rescinded or must otherwise be returned by the Lender or any Refinancing Lender or any other holder of Senior Debt upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, all as though such payment had not been made.

                                                 (iv)         The Holder and the Company each hereby waives (to the extent each may lawfully do so) promptness, diligence, notice of acceptance and any other notice with respect to any of the Senior Debt and this Section 6 and any requirement that the Lender or any Refinancing Lender or any other holder of Senior Debt protect, secure, perfect or insure any security interest or lien or any property subject thereto or exhaust any right or take any action against the Company or any other person or entity or any collateral.

                                                 (v)          No failure on the part of the Lender or any Refinancing Lender or any other holder of Senior Debt to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies hereunder provided are cumulative and not exclusive of any remedies provided by law.

                                                 (vi)          The provisions of this Section 6 constitute a continuing agreement and shall (A) remain in full force and effect, subject to the provisions and limitations contained in this Section 6, until all Senior Debt shall have been finally and indefeasibly paid in full and the Lender and any Refinancing Lender shall have no further obligation to lend or advance under the Senior Loan Documents, (B) be binding upon the Holder and the Company and their successors and assigns, and (C) inure to the benefit of and be enforceable by the Lender or any Refinancing Lender, any other holder of Senior Debt and their successors, and permitted transferees and assigns.

                    7.           Amendment and Waiver.

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                                  (a)           Consent Required. Any term, covenant, agreement or condition of this Note may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the Holder.

                                  (b)           Delay. No delay of the Company or the Holder, in exercising any right, power or privilege hereunder, shall affect such right, power or privilege, nor shall any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or privilege affect such a right, power or privilege.

                                  (c)           Effect of Amendment or Waiver. Any amendment or waiver of this Note shall apply to the Holder and shall be binding upon the Holder, upon each future holder of the Note and upon the Company, whether or not this Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon.

                    8.           Replacement Notes.

          If a mutilated Note is surrendered to the Company or if the Holder presents evidence to the reasonable satisfaction of the Company that this Note has been lost, destroyed or wrongfully taken, the Company shall issue a replacement Note of like tenor if the requirements of the Company for such transactions are met. An indemnity agreement may be required that is sufficient in the reasonable judgment of the Company to protect the Company from any loss which it may suffer. The Company may charge the Holder for its out-of-pocket expenses incurred in replacing this Note.

                    9.           No Recourse Against Others.

          No director, officer, employee or stockholder, as such, of the Company shall have any liability for any obligations of the Company under this Note or for any claim based on, in respect or by reason of, such obligations or their creation. The Holder by accepting this Note waives and releases all such liability. This waiver and release are part of the consideration for the issue of this Note.

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                    10.         Notices.

          All notices, requests, consents and demands shall be made in writing and shall be given by registered or certified mail postage prepaid to the following addresses: if to the Company, at Westwood Computer Corporation, 11 Diamond Road, Springfield, NJ 07081, with a copy to Scott K. Baker, Esq., Dechert LLP, Cira Centre, 2929 Arch Street, Philadelphia, PA 19104 or to such other address as may be furnished in writing to the Holder, and if to the Holder, to the address listed on the books of the Company or to such other address as may be furnished in writing to the Company at the Company’s address set forth above. Notices hereunder shall be effective when delivered, if delivered personally, or, if sent by mail, when sent.

                    11.         Governing Law. This Note shall be deemed a contract under, and shall be governed by and construed in accordance with, the laws of the State of Delaware without giving effect to principles of conflicts of laws.

                    12.         Successors; Entire Agreement; Assignment.

          This Note shall be binding upon and shall inure to the benefit of the Holder and the Company and their respective successors and permitted assigns. This Note constitutes the entire agreement between the parties hereto, superseding all prior understandings and writings, with respect to the indebtedness represented hereby. The Holder may not assign or transfer this Note without the prior written consent of the Company. Any such assignment shall be null and void.

                    13.         Severability.

          If any provision of this Note or application thereof is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall not be affected thereby, and each provision of this Note shall be valid and enforceable to the fullest extent permitted by law.

                    14.         Headings.

          The section headings of this Note are for convenience only and shall not affect the meaning or interpretation of this Note or any provision hereof.

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Exhibit 10.6

 

                    IN WITNESS WHEREOF, the Company has caused this Note to be executed by its duly authorized officer as of the date first written above.

WESTWOOD COMPUTER CORPORATION
 
 
By:      
/s/ BRIAM Mc ADAMS
  Name: BRIAN Mc ADAMS
  Title: VICE CHAIRMAN