Exhibit 4.2
This Promissory Note (this "Note") and any securities acquired upon the
conversion of this Note have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or the securities laws of any state.
None of this Note, such securities or any interest therein may be sold,
transferred, pledged or hypothecated except pursuant to an effective
registration statement under the Securities Act and such registration or
qualification as may be necessary under the securities laws of any jurisdiction
or pursuant to a written opinion of counsel (which counsel and opinion shall be
reasonably satisfactory to the Company) that such registration or qualification
is not required.
GRACE DEVELOPMENT INC.
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12% SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
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[Date] Note No ____________
GRACE DEVELOPMENT INC., a Colorado corporation ("Issuer" or the "Company"),
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for value received, hereby promises to pay in accordance with the provisions
hereof to [Purchaser] (the "Holder") or its permitted assigns the principal
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amount of _____ MILLION _____________ THOUSAND DOLLARS ($___________) on the
dates specified herein, with interest as specified herein.
This Note is subject to the following additional provisions, terms and
conditions:
ARTICLE 1. DEFINITIONS.
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1.1 Certain Definitions.
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"Applicable Rate" means 12% per annum.
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"Default Rate" means 16% per annum.
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"Guarantee Agreement" means that certain Guarantee Agreement, dated as of
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April __, 2000, by and among the Subsidiary Guarantors in favor of Greenlight
Capital, L.P., Greenlight Capital Qualified, L.P. and Greenlight Capital
Offshore, Ltd., as such may be amended, supplemented, restated or otherwise
modified from time to time.
"Holder" has the meaning given to such term in the first paragraph of this
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Note.
"Interest Payment Date" means April 14, 2001 and April 14, 2002.
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"Maturity Date" means April 14, 2002.
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"Maximum Rate" means the maximum nonusurious interest rate permitted under
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applicable law.
"Note" and "Notes" means this Senior Secured Convertible Promissory Note
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made by the Company payable to the Holder, together with all amendments and
supplements hereto, all substitutions and replacements herefor, and all
renewals, extensions, increases, restatements, modifications, rearrangements and
waivers hereof from time to time.
"Pledge Agreement" means that certain Pledge Agreement, dated as of April
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14, 2000, by and among the Company and Greenlight Capital, L.P., Greenlight
Capital Qualified, L.P., and Greenlight Capital Offshore, Ltd., as such may be
amended, supplemented, restated or otherwise modified from time to time.
"Securities Purchase Agreement" means that certain Securities Purchase
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Agreement, dated as of April 14, 2000, by and among the Company and Greenlight
Capital, L.P., Greenlight Capital Qualified, L.P., and Greenlight Capital
Offshore, Ltd., as such may be amended, supplemented, restated or otherwise
modified from time to time.
1.2 Incorporated Definitions. Capitalized terms used in this Note and not
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otherwise defined herein shall have the meanings set forth in the Securities
Purchase Agreement.
ARTICLE 2. BASIC TERMS.
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2.1 Identification. This Note is one of the Convertible Notes referred to
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in the Securities Purchase Agreement and is entitled to the benefits thereof,
including, but not limited to, Article 8 thereof, which sets forth certain
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Events of Default and remedies.
2.2 Principal.
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(a) Scheduled Repayment. The principal of this Note shall be due and
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payable on the Maturity Date.
(b) Right to Prepay. The Company shall have the right to prepay this
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Note in full or in part without penalty subject to the Holder's right to convert
amounts payable hereunder to shares of Common Stock of the Company as described
in the Securities Purchase Agreement.
(c) Mechanics of Prepayment. The Company shall effect the prepayment
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at Company's election under this Section 2.2 by giving prior written notice (the
"Option Prepayment Notice"), which notice may only be delivered on a Business
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Day, and at least 10 Business Days prior to the date on which such prepayment is
to become effective (the "Effective Time of Prepayment") to the holder of this
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Note at the address and facsimile number of such holder appearing in the
Securities Purchase Agreement. The Option Prepayment Notice shall indicate the
prepayment amount and Effective Time of Prepayment.
(d) Restriction on Prepayment. The Company may not deliver an Optional
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Prepayment Notice or effect a prepayment unless on or prior to the date of
delivery of such Optional Prepayment Notice, the Company shall have deposited
with an escrow agent reasonably satisfactory to Holder, as a trust fund, cash
sufficient in amount to pay all amounts to which holders are entitled upon such
prepayment pursuant to this Section 2.2, with irrevocable
instructions and authority to such escrow agent to complete the prepayment
thereof in accordance with this Section 2.2.
(e) Officer Certification. Any optional Prepayment Notice delivered in
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accordance with this Section 2.2 shall be accompanied by a statement executed by
a duly authorized officer of its transfer agent or escrow agent, certifying the
amount of funds which have been deposited with such transfer agent or escrow
agent and that the transfer agent or escrow agent has been instructed and agrees
to act as prepayment agent hereunder.
2.3 Interest.
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(a) Interest will accrue on the Notes from the date hereof (the "Issue
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Date") and will be payable in either cash or additional Notes of like tenor, at
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the election of the Company. The Company will deliver notice of its election to
the Holder at least five Business Days prior to each Interest Payment Date. The
Issuer agrees to pay interest in respect of the unpaid principal amount of this
Note at a rate per annum equal to the lesser of the Applicable Rate and the
Maximum Rate. Notwithstanding the preceding sentence, the Company agrees to pay
interest in respect of overdue principal, and, to the extent permitted by law,
overdue interest, at a rate per annum equal to the lesser of the Default Rate
and the Maximum Rate. The Company shall also pay interest at the lesser of the
Default Rate and the Maximum Rate if an Event of Default has occurred and is
continuing. No fractional shares of Common Stock shall be issued.
(b) Interest on the principal of this Note shall be due and payable
(i) on each Interest Payment Date and the Maturity Date, (ii) upon the optional
redemption or the payment or prepayment, in full, of the principal of this Note,
(iii) at the maturity of this Note (whether by acceleration or otherwise), and
(iv) after maturity (whether by acceleration or otherwise), on demand.
(c) All computations of interest, both before and after maturity,
shall be made on the basis of a year of 365 days (or 366 days, as applicable)
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest is payable.
(d) Additional Interest may accrue as described in Section 2.11 of
this Note.
2.4 Conversion. Subject to the provisions of Article 9 of the Securities
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Purchase Agreement, the Holder may, at the Holder's option, from time to time,
convert any or all of the principal of and/or accrued but unpaid interest on
this Note into Common Stock at the Conversion Price. Reference is made to
Article 9 of the Securities Purchase Agreement for a complete statement of the
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rights and obligations of the Company and the Holder with respect to conversion
of this Note into Common Stock.
2.5 Payments in General. Whenever any payment to be made under this Note
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shall be stated to be due on a day that is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall
be payable at the Applicable Rate during such extension. Each payment received
by the Holder shall be applied first to late charges and collection expenses, if
any, then to the payment of accrued but unpaid interest hereunder, and then to
the reduction of the unpaid principal balance hereof.
2.6 Surrender of Note on Redemption, Prepayment or Conversion. Upon any
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conversion of any or all of this Note to Common Stock or any prepayment or
redemption of this Note, this Note may, at the option of the Holder or if
requested by the Company, and shall, as a condition to transfer, be surrendered
to the Company in exchange for a new Note in a principal amount equal to the
principal amount remaining unpaid on the surrendered Note, or made available to
the Company for notation thereon of the portion of the principal and interest so
redeemed, prepaid or converted. In case the entire principal amount of this Note
is redeemed, prepaid or converted, this Note shall be surrendered to the Company
for cancellation and shall not be reissued.
2.7 Guarantees. Subject to the provisions of the Guarantee Agreement, the
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principal of and interest on the Notes will be guaranteed jointly and severally
by the Subsidiary Guarantors on a senior basis (the "Guarantees"). The
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Guarantees of the Notes issued by any Subsidiary Guarantor will be senior to all
existing and future Indebtedness of such Subsidiary Guarantors which is not
expressly subordinate or junior in right of payment to the Guarantees.
2.8 Security/Ranking. The Notes will be secured by the Collateral and will
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be senior to any existing or future Indebtedness of the Company which is not
expressly subordinate or junior in right of payment to the Notes.
2.9 Use of Proceeds. The net proceeds from the Notes will be used to repay
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existing debt owing by the Company to C&S Private Equity Fund, L.P. and
prepayment penalties, if any, and fund working capital and expansion
requirements and to pay related fees and expenses.
2.10 Certain Covenants. The Securities Purchase Agreement contains certain
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covenants as set forth therein and such covenants are herein incorporated by
reference.
2.11 Registration Rights. Shares of Common Stock issuable under the terms
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of this Note shall have registration rights as described in the Registration
Rights Agreement. Among other provisions, in the event of a default by the
Company in its obligations to register shares under the Registration Rights
Agreement or any other material default under the Registration Rights Agreement,
which material default is not cured within 10 days after the occurrence thereof
(a "Registration Default"), the Note will accrue additional interest
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("Additional Interest") as follows: the per annum interest rate on the Note will
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increase by an additional 500 basis points from the date of the Registration
Default and for 90 days thereafter, and then the per annum interest rate will
increase by an additional 25 basis points for each subsequent 90-day period
during which the Registration Default remains uncured. All Additional Interest
will be payable in cash monthly on the first of each month, commencing with the
first such date occurring after any such Additional Interest commences to
accrue, until such Registration Default is cured. After the date on which such
Registration Default is cured, the interest rate on the Note will revert to the
interest rate in effect prior to the Registration Default.
2.12 Event of Default. Upon the occurrence of an Event of Default, the
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unpaid balance of the principal amount of this Note, together with all accrued
and unpaid interest thereon, may become, or may be declared to be, due and
payable in the manner, upon the conditions and with the effect provided in
Section 8.2 of the Securities Purchase Agreement.
ARTICLE 3. COLLATERAL.
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3.1 Generally.Section 3.1. Generally. As security for the payment of all
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liabilities of Issuer to Holder, including without limitation: (i) indebtedness
evidenced under the Notes, advances and other extensions of credit, all fees and
charges owing by Issuer, and all other liabilities and obligations of every kind
or nature whatsoever of Issuer to Holder, whether now existing or hereafter
incurred, joint or several, matured or unmatured, direct or indirect, primary or
secondary, related or unrelated, due or to become due, including but not limited
to any extensions, modifications, substitutions, increases and renewals thereof,
(ii) the payment of all amounts advanced by Holder to preserve, protect, defend,
and enforce its rights hereunder and in the following property in accordance
with the terms of the Notes and Securities Purchase Agreement, and (iii) the
payment of all expenses incurred by Holder in connection therewith
(collectively, the "Obligations"). Issuer hereby assigns and grants to Holder,
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to the extent permitted by applicable law, a continuing first priority lien on
and security interest in, upon, and to the Collateral.
3.2 Lien Documents. At Closing and thereafter as Holder deems necessary in
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its sole discretion, Issuer shall execute and
deliver to Holder, or have executed and delivered (all in form and substance
satisfactory to Holder in its sole discretion):
(a) the Pledge Agreement;
(b) the Guarantee Agreement;
(c) UCC-1 Financing statements pursuant to the Uniform Commercial Code
in effect in the jurisdiction(s) in which Issuer operates, which Holder may file
in any jurisdiction where any Collateral is or may be located and in any other
jurisdiction that Holder deems appropriate; provided that a carbon,
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photographic, or other reproduction or other copy of the Securities Purchase
Agreement or of a financing statement is sufficient as and may be filed in lieu
of a financing statement; and
(d) any other agreements, documents, instruments, and writings deemed
necessary by Holder or as Holder may otherwise request from time to time in its
reasonable discretion to evidence, perfect, or protect Holder's lien and
security interest in the Collateral required hereunder.
3.3 Other Actions. In addition to the foregoing, Issuer (i) shall do
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anything further that may be lawfully required by Holder to secure Holder and
effectuate the intentions and objects of the Notes, Pledge Agreement, and the
Securities Purchase Agreement, including but not limited to the execution and
delivery of continuation statements, amendments to financing statements, and
any other documents required hereunder. At Holder's
request, Issuer shall also immediately deliver to Holder all items for which
Holder must receive possession to obtain a perfected security interest. Issuer
shall, on Holder's demand, deliver to Holder all notes, certificates, and
documents of title, instruments, and any other similar instruments constituting
Collateral.
3.4 Power of Attorney. Upon the occurrence of an Event of Default and
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while an Event of Default is continuing, each of the officers of Holder is
hereby irrevocably made, constituted and appointed the true and lawful attorney
for Issuer (without requiring any of them to act as such) with full power of
substitution to do the following: (i) execute in the name of Issuer any
financing statements, schedules, assignments, instruments, documents, and
statements that Issuer is obligated to give Holder hereunder; and (ii) do such
other and further acts and deeds in the name of Issuer that may be reasonably
necessary or desirable to enforce any Collateral or perfect Holder's security
interest or lien in any Collateral.
ARTICLE 4. MISCELLANEOUS.
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4.1 Amendment. This Note may be amended, modified, superseded or canceled,
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and any of the terms, covenants, representations, warranties or conditions
hereof and thereof may be waived only by a written instrument that satisfies the
requirements of Section 10.2 of the Securities Purchase Agreement.
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4.2 Successors and Assigns.
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(a) The rights and obligations of the Company and the Holder under
this Note shall be binding upon, and inure to the benefit of, and be enforceable
by, the Company and the Holder, and their respective permitted successors and
assigns.
(b) The Holder may not sell, assign (by operation of law or
otherwise), transfer, pledge, grant a security interest in, or otherwise dispose
of this Note or any portion hereof or any rights or obligations hereunder except
in compliance with Section 10.5 of the Securities Purchase Agreement, which
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contains certain restrictions on the transferability hereof.
(c) The registered owner of this Note may be treated as the owner of
this Note for all purposes.
4.3 GOVERNING LAW. THIS NOTE AND THE VALIDITY AND ENFORCEABILITY HEREOF
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SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO CONFLICT OF LAWS RULES OR
CHOICE OF LAWS RULES THEREOF.
4.4 Waivers. Except as may be otherwise provided herein, the makers,
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signers, sure-ties, guarantors and endorsers of this Note severally waive
demand, presentment, notice of dishonor, notice of intent to demand or
accelerate payment hereof, notice of acceleration, diligence in collecting,
grace, notice, and protest, and agree to one or more extensions for any
period or periods of time and partial payments, before or after maturity,
without prejudice to the Holder.
4.5 No Waiver by Holder. No failure or delay on the part of the Holder in
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exercising any right, power or privilege hereunder and no course of dealing
between the Company and the Holder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.
4.6 Limitation on Interest. Notwithstanding any other provision of this
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Note, interest on the indebtedness evidenced by this Note is expressly limited
so that in no contingency or event whatsoever, whether by acceleration of the
maturity of this Note or otherwise, shall the interest contracted for, charged
or received by the Holder exceed the maximum amount permissible under applicable
law. If from any circumstances whatsoever fulfillment of any provisions of this
Note or of any other document evidencing, securing or pertaining to the
indebtedness evidenced hereby, at the time performance of such provision shall
be due, shall involve transcending the limit of validity prescribed by law,
then, ipso facto, the obligation to be fulfilled shall be reduced to the limit
of such validity, and if from any such circumstances the Holder shall ever
receive anything of value as interest or deemed interest by applicable law under
this Note or any other document evidencing, securing or pertaining to the
indebtedness evidenced hereby or otherwise an amount that would exceed the
highest lawful rate, such amount that would be excessive interest shall be
applied to the reduction of the principal amount owing under this Note or on
account of any other indebtedness of the Company to the Holder, and not to the
payment of interest, or if such excessive interest exceeds the unpaid balance of
principal of this Note and such other indebtedness, such excess shall be
refunded to the Company. In determining whether or not the interest paid or
payable with respect to any indebtedness of the Company to the Holder, under any
specific contingency, exceeds the highest lawful rate, the Company and the
Holder shall, to the maximum extent permitted by applicable law, (a)
characterize any non-principal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof, (c)
amortize, prorate, allocate and spread the total amount of interest throughout
the term of such indebtedness so that the actual rate of interest on account of
such indebtedness does not exceed the maximum amount permitted by applicable
law, and/or (d) allocate interest between portions of such indebtedness, to the
end that no such portion shall bear interest at a rate greater than that
permitted by applicable law. The terms and provisions of this paragraph shall
control and supersede every other conflicting provision of this Note and all
other agreements between the Company and the Holder.
EXECUTED as of the date first written above.
GRACE DEVELOPMENT INC.
By:_________________________________
Name:_______________________________
Title:______________________________