Document:

Edgewater/Epic- Substitute Bridge Loan Note 3/02

Exhibit

4.21

 

THIS SUBSTITUTE SECURED

PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS

AMENDED, OR APPLICABLE STATE SECURITIES LAWS. 

THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED

IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER

SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL

REASONABLY SATISFACTORY TO EPICEDGE, INC. THAT SUCH REGISTRATION IS NOT

REQUIRED.

 

SUBSTITUTE SECURED PROMISSORY NOTE

 

	

  $860,000

  	

   

  	

  Chicago,

  Illinois 

  March      , 2002

  

 

FOR VALUE RECEIVED, EpicEdge, Inc., a Texas corporation (the “Company”),

promises to pay to the order of Edgewater Private Equity Fund III, L.P., a

Delaware limited partnership (“Holder”), the principal sum of Eight

Hundred Sixty Thousand Dollars ($860,000), and to pay interest on the

outstanding principal balance of this Substitute Secured Promissory Note (this

“Note”) in accordance with Section 2 of this Note.

 

1.                                       Maturity.  The Company shall repay (a) the portion of

the outstanding principal balance of this Note equal to Six Hundred Ten

Thousand Dollars ($610,000) and interest accrued thereon in full on February

28, 2003, and (b) the portion of the outstanding principal balance of this Note

equal to Two Hundred Fifty Thousand Dollars ($250,000) and interest accrued

thereon in full on March 9, 2002.  All

payments received shall be applied first against costs of collection (if any),

then against accrued and unpaid interest on this Note, then against the

outstanding principal balance of this Note.

 

2.                                       Interest.  Interest shall begin to accrue on the

outstanding principal balance of this Note commencing on the date hereof and

continuing until repayment of this Note in full at the rate of ten percent

(10%) per annum calculated on the basis of a 360 day year and actual days

elapsed.  However, upon the occurrence

of a Default (as defined herein) the interest on the outstanding principal

balance of this Note will accrue from the date of such Default until such time

as such Default is cured in a manner that is acceptable to Holder at a rate per

annum equal to three percent (3%) plus

the interest rate then in effect.

 

3.                                       Prepayment.  The outstanding principal balance and all

accrued interest payable to Holder hereunder (the “Outstanding Balance”)

may not be prepaid without the consent of Holder in its sole and absolute

discretion.  All prepayments so

permitted by Holder shall be applied in the order provided in Section 1.

 

4.                                       Collateral.  As a condition to the advance of funds under

this Note and as collateral security therefor, the Company shall have entered

into and delivered to Holder (a) that certain Security Agreement dated as of

February 19, 2002, as amended by that certain 

 

 

First Amendment to Security

Agreement of even date herewith (as may be further amended, restated,

supplemented or otherwise modified from time to time, the “Security

Agreement”), and (ii) that certain Trademark and License Security

Agreement dated as of February 19, 2002, as amended by that certain First Amendment

to Trademark and License Security Agreement of even date herewith  (as may be further amended, restated,

supplemented or otherwise modified from time to time, the “Trademark

Agreement”; and, together with the Security Agreement and this Note, the “Loan

Documents”).  The Security Agreement

and Trademark Agreement shall grant a security interest in substantially all of

the assets of the Company (the “Collateral”).

 

5.                                       Representations

and Warranties.  Except as

set forth on Schedule 3 attached hereto, the Company represents and

warrants to Holder that:  (a) the

Company has the legal capacity, power and authority to enter into, deliver and

be bound by the Loan Documents and has duly executed and delivered the Loan

Documents; (b) the execution and delivery by the Company of the Loan

Documents and the Company’s performance of all its obligations under and the

consummation of the transactions contemplated by the Loan Documents do not

conflict with or violate any applicable law or any ruling, judgment or order of

any court or other governmental authority, and do not conflict with or result

in or constitute any breach or default under or result in the creation or

imposition of any lien, charge or encumbrance under any material agreement,

indenture or undertaking concerning the Collateral except with respect to which

appropriate waivers or consents have been obtained; (c) no approval,

consent or authorization of any governmental authority is required in

connection with the Company’s entering into or performing its obligations under

the Loan Documents; (d) the Loan Documents constitutes the legal, valid

and binding obligation of the Company, enforceable against the Company in

accordance with its terms except as may be limited by bankruptcy, insolvency,

reorganization, moratorium, fraudulent conveyance, or other similar laws

affecting enforcement of creditors’ rights generally, and by general principles

of equity; (e) there is no pending or, to the best knowledge of the

Company, threatened action, suit, inquiry, investigation, or proceeding against

the Company, before any court, governmental agency or arbitrator, which, in any

case, may (i) if adversely determined, materially and adversely affect the

financial condition of the Company, (ii) seek to restrain or otherwise

have a material adverse affect on the transactions contemplated herein, or

(iii) affect the validity or enforceability of the Loan Documents; and

(f) the proceeds of all loans under this Note will be used solely for

working capital requirements and for the payment of ordinary course trade

payables and not to further reduce the principal portion of any indebtedness or

to make any payments to any shareholders or affiliates of the Company.  Holder, in extending financial

accommodations to the Company, is expressly acting and relying upon the

aforesaid representations and warranties.

 

6.                                       Default.  The Company, without notice or demand of any

kind, shall be in default (a “Default”) hereunder upon the occurrence of

any of the following:

 

(a)                                  The Company fails to pay any amounts

payable to Holder hereunder when due;

 

(b)                                 A material breach by the Company of any

other term or provision of the Loan Documents;

 

2

 

(c)                                  Any of the Company’s indebtedness for

borrowed money is accelerated as a result of a default or breach of or under

any agreement for such borrowed money, including, but not limited to, loan

agreements, or a material breach under any real property lease agreements or

capital equipment lease agreements, by which the Company is bound or obligated;

 

(d)                                 The filing of a petition in bankruptcy or

under any similar insolvency law by the Company, the making of an assignment

for the benefit of creditors by the Company, or if any voluntary petition in

bankruptcy or under any similar insolvency law is filed against the Company and

such petition is not dismissed within sixty (60) days after the filing thereof;

and

 

(e)                                  The transactions contemplated by that

certain Memorandum of Terms dated as of February 6, 2002, by and among the

Company, Holder and certain other parties named therein, have not been

consummated on or before March 31, 2002.

 

Except for a Default pursuant to Sections 6(a), 6(d)

or 6(e), upon each such Default, the Company shall have five (5) days to

cure such Default after the Company becomes aware of the occurrence

thereof.  If the Default is pursuant to Sections 6(a),

6(d) or 6(e) or if the Company is unable to cure its default

under Sections 6(b) or 6(c) within such five (5) day period,

Holder may, at its option, accelerate repayment of the Outstanding Balance

under this Note, in which case such Outstanding Balance shall be due and

payable immediately.  Upon any Default

of the Company hereunder, Holder may pursue any legal or equitable remedies

that are available to Holder.

 

7.                                       Miscellaneous.

 

(a)                                  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, or other cause of release or discharge other than actual payment in full

hereof.

 

(b)                                 Holder shall not be deemed, by any act or

omission, to have waived any of its rights or remedies hereunder unless such

waiver is in writing and signed by Holder 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 Holder

to exercise any right, whether before or after a Default hereunder, 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 Holder of any past–due amount shall

not be deemed to be a waiver of the right to require prompt payment when due of

any other amounts then or thereafter due and payable.

 

(c)                                  Time is of the essence hereof.  Upon any Default hereunder, Holder may

exercise all rights and remedies provided for herein or in the other Loan

Documents and by law or equity, including, but not limited to, the right to

immediate payment in full of this Note.

 

3

 

(d)                                 The remedies of Holder as provided herein

or in the other Loan Documents, or any one or more of them, in law or at

equity, shall be cumulative and concurrent, and may be pursued singularly,

successively or together at Holder’s sole discretion, and may be exercised as

often as occasion therefor shall occur.

 

(e)                                  It is expressly agreed that if this Note

is referred to any attorney or if suit is brought to collect or interpret this

Note or any part hereof or to enforce or protect any rights conferred upon

Holder by this Note or any of the other Loan Documents, then the Company

covenants and agrees to pay all reasonable costs, including attorneys’ fees,

incurred by Holder in connection therewith.

 

(f)                                    If any provisions of this Note would

require the Company to pay interest hereon at a rate exceeding the highest rate

allowed by applicable law, the Company shall instead pay interest under this

Note at the highest rate permitted by applicable law.

 

(g)                                 This Note shall be governed by and

construed in accordance with the laws of the State of Illinois without giving

effect to any choice or conflict of law provision or law that would cause the

application of the laws of any other jurisdiction other than the State of

Illinois.

 

(h)                                 Any and all notices or other

communications required or permitted to be delivered hereunder shall be deemed

properly delivered if (i) delivered personally, (ii) mailed by first

class, registered or certified mail, return receipt requested, postage prepaid,

(iii) sent by next–day or overnight mail or delivery or (iv) sent by

telecopy or telegram, to the parties as set forth below:

 

	

  If to Holder:

  	

   

  	

  If to the Company:

  
	

   

  	

   

  	

   

  
	

  Edgewater Private Equity Fund III, L.P.

  	

   

  	

  EpicEdge, Inc. 

  
	

  900 North Michigan Avenue

  	

   

  	

  5508 Hwy. 290 West

  
	

  14th Floor 

  	

   

  	

  Suite 300 

  
	

  Chicago, Illinois  60611 

  	

   

  	

  Austin, Texas 78735 

  
	

  Attn:  Ryan Satterfield 

  	

   

  	

  Attn:  Richard Carter,

  President 

  
	

  Telecopy:  (312) 649-8649  

  	

   

  	

  Telecopy:  (          )                           

  
	

   

  	

   

  	

   

  
	

  With a copy to:

  	

   

  	

  With a copy to:

  
	

   

  	

   

  	

   

  
	

  Michael A. Nemeroff, Esq.

  	

   

  	

  Paul E. Hurdlow, Esq.

  
	

  Vedder, Price, Kaufman & Kammholz 

  	

   

  	

  Gray Cary Ware & Freidenrich, LLP

  
	

  222 North LaSalle Street, Suite 2600 

  	

   

  	

  1221 S. Mopac Expressway, Suite 400 

  
	

  Chicago, Illinois  60601-1003 

  	

   

  	

  Austin, Texas 78746 

  
	

  Telecopy:  (312) 609-5005

  	

   

  	

  Telecopy:  (512) 457-7001

  

 

4

 

Any party may change the name and address of the designee to whom

notice shall be sent by giving written notice of such change to the other

party.

 

5

 

(i)                                     The Company shall on the date hereof or

upon demand by Holder, reimburse costs and expenses to Holder for past and

current reasonable fees and expenses including, without limitation, legal fees

and expenses, incurred in connection with all current and past financings by

Holder to the Company.

 

(j)                                     This Note is issued in substitution for

but not in payment of that certain Secured Promissory Note dated as of February

19, 2002 (the “Prior Note”), in the original principal amount of $610,000 and

does not and shall not be deemed to constitute a novation thereof.  Such Prior Note shall be of no further force

and effect upon the execution of this Note; provided, however, that the

outstanding amount of principal and interest under the Prior Note as of the

date of this Note is hereby deemed indebtedness evidenced by this Note and

incorporated herein by this reference.

 

IN WITNESS WHEREOF, the Company has executed this Substitute Secured

Promissory Note as of the date first above written.

 

	

   

  	

  EPICEDGE, INC., a Texas corporation:

  
	

   

  	

   

  
	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
	

   

  	

   

  	

   

  
						

 

6EXHIBIT 4

EXHIBIT 4.22

 

FIRST

AMENDMENT TO SECURITY AGREEMENT

 

THIS FIRST AMENDMENT TO SECURITY AGREEMENT (this “Amendment”) is entered into as of

the          day of March, 2002, by and

between EPICEDGE, INC., a Texas corporation (the “Company”), and EDGEWATER PRIVATE

EQUITY FUND III, L.P., a Delaware limited partnership (the “Lender”).

 

W I T N E S S E T H:

 

WHEREAS, pursuant to a certain Secured Promissory Note dated

as of February 19, 2002, in the original principal amount of $610,000 made by

the Company in favor of the Lender (the “Prior Note”), the Company and the

Lender entered into that certain Security Agreement of even date therewith (the

“Agreement”);

 

WHEREAS, in connection with an additional loan by the Lender

in the principal amount of $250,000, the Company entered into a certain

Substitute Secured Promissory Note of even date herewith, in the original

principal amount of $860,000, which note was made in substitution of and

replaced the Prior Note; and

 

WHEREAS, as a result of the substitution and replacement of

the Prior Note, the parties hereto now desire to amend the Agreement to reflect

the changes set forth below.

 

NOW, THEREFORE, for and in consideration of the premises and mutual

agreements herein contained and for the purposes of setting forth the terms and

conditions of this Amendment, the parties, intending to be bound, hereby agree

as follows:

 

1.             Incorporation of the Agreement.  All capitalized terms that are not defined

hereunder shall have the same meanings as set forth in the Agreement, and the

Agreement, to the extent not inconsistent with this Amendment, is incorporated

herein by this reference as though the same were set forth in its

entirety.  To the extent any terms and

provisions of the Agreement are inconsistent with the amendments set forth in Paragraph 2

below, such terms and provisions shall be deemed superseded hereby.  Except as specifically set forth herein, the

Agreement shall remain in full force and effect and its provisions shall be

binding on the parties hereto.

 

2.             Amendment of the Agreement.  The first recital of the Agreement and the

definition of “Note” set forth therein are hereby amended and restated in their

entirety as follows:

 

WHEREAS, the Lender has agreed to loan the Company an aggregate

principal amount of Eight Hundred Sixty Thousand Dollars ($860,000) pursuant to

that certain Substitute Secured Promissory Note dated as of March     , 2002 (the “Note”), made by the Company

in favor of the Lender; and

 

3.             Fees and Expenses.  The Company agrees to pay on demand all costs and expenses of or

incurred by the Lender (including, but not limited to, legal fees and expenses)

in 

 

 

connection with the evaluation, negotiation,

preparation, execution and delivery of this Amendment.

 

4.             Effectuation. 

The amendments to the Agreement contemplated by this Amendment shall be

deemed effective immediately upon the full execution of this Amendment and

without any further action required by the parties hereto.  There are no conditions precedent or

subsequent to the effectiveness of this Amendment.

 

5.             Continuing Effect.  Except as otherwise specifically set forth herein, the provisions

of the Agreement shall remain in full force and effect.  The Company hereby reaffirms its grant of

the security interest in the Collateral, as amended hereby.

 

6.             Counterparts. 

This Amendment may be executed in two or more counterparts, each of

which shall be deemed an original, and all of which together shall constitute

one and the same instrument.  A

signature page of this Amendment executed and transmitted via facsimile

shall be deemed an original for all purposes.

 

[SIGNATURE

PAGE FOLLOWS]

 

2

 

Amendment

to Security Agreement Signature Page

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment

to Security Agreement as of the date first above written.

 

	

   

  	

  EPICEDGE, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
	

   

  	

   

  
	

   

  	

  EDGEWATER PRIVATE EQUITY

  
	

   

  	

  FUND III, L.P.

  
	

   

  	

   

  
	

   

  	

  By: Edgewater III Management, L.P., its

  
	

   

  	

  General Partner

  
	

   

  	

   

  
	

   

  	

  By: Gordon Management, Inc., its General

  
	

   

  	

  Partner

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Name:

  	

   

  
	

   

  	

  Title:

  	

   

  
				

 

A-1

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