EXHIBIT 2.3
Dated: January 24, 2003 US$2,600,000
HEI, INC.
SUBORDINATED PROMISSORY NOTE
For value received, the undersigned HEI, INC., a Minnesota corporation
(the "Maker"), promises to pay to the order of COLORADO MEDTECH, INC., a
Colorado corporation (the "Holder"), the principal sum of Two Million Six
Hundred Thousand and 00/100 U.S. Dollars (US$2,600,000) together with interest
at the rate of ten percent (10%) per annum, subject to adjustment pursuant to
Section II below, compounded quarterly. Except as specifically otherwise
provided, payment of principal and interest shall be made in lawful money of the
United States of America at the principal place of business of the Holder or at
such other places the Holder shall designate. Interest shall be payable at
maturity or upon earlier prepayment of this Note. The full amount of the unpaid
and outstanding principal and interest balance of this Note shall be due and
payable on September 30, 2004.
I. SUBORDINATION OF NOTE. This Note shall be subordinated to all existing and
future secured indebtedness of the Maker. Notwithstanding the foregoing, this
Note shall not be subordinated to future indebtedness of the Maker, whether
secured or unsecured, incurred in connection with any financing to acquire the
operating assets of or any equity interest in a third party.
II. INTEREST. The rate of interest payable by the Maker on the outstanding
interest and principal of this Note shall increase by two (2) percentage points
on each of July __, 2003 and January __, 2004, from that date forward, until
fully paid, provided that the interest rate shall in no event increase to a
level above the highest rate permitted by law. Interest due hereunder shall
accrue daily and any repayment shall take into account interest up to the date
of repayment.
III. PREPAYMENT. The Maker may make a partial or full prepayment under this Note
at any time without paying any penalty or premium, provided that each partial
prepayment shall be applied first to accrued interest to the date of payment.
IV. ASSIGNMENT. This Note may be sold, transferred or assigned by the Holder
without the prior written consent of the Maker. This Note shall be binding upon
and inure to the benefit of the successors and assigns of the Maker and the
Holder.
V. EVENTS OF DEFAULT.
5.1 Events of Default. The occurrence of any or all of the following
events shall constitute an event of default (each, an "Event of Default") by the
Maker under this Note:
a. any default by the Maker in any payment on this Note for a period of
thirty (30) days after any such payment becomes due and payable;
b. the Maker shall file a voluntary petition in bankruptcy or any
petition or answer seeking for itself any reorganization, readjustment,
arrangement, composition or similar relief; or shall commence a voluntary case
under the federal bankruptcy laws; or shall admit in writing its insolvency or
its inability to pay its debts as they become due; or shall make an assignment
for the benefit of creditors; or shall apply for, consent to, or acquiesce in
the appointment of, or the taking of possession by, a trustee, receiver,
custodian or similar official or agent of the Maker or of substantially all of
its property and shall not be discharged within sixty (60) days; or a petition
seeking reorganization, readjustment, arrangement, composition or other similar
relief as to the Maker under the federal bankruptcy laws or any similar law for
the relief of debtors shall be brought against the Maker and shall be consented
to by it or shall remain undismissed for sixty (60) days; or
c. any default in the performance or breach of any covenant or warranty
of the Maker hereunder (other than a covenant or warranty, a default in whose
performance or whose breach is elsewhere in this Section specifically dealt
with), and continuance of such default or breach for a period of thirty (30)
days after there has been delivered to the Maker by the Holder a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder.
5.2 Consequence of Default. Upon the occurrence of any Event of
Default, this Note shall immediately become due and payable upon written notice
from the Holder, and, from the time of the Maker's receipt of such written
notice (the "Notice") until this Note shall be paid in full, the unpaid
outstanding principal balance of this Note shall bear interest at a rate equal
to the rate in effect upon the date of the Notice, plus three (3) percentage
points, per annum (calculated on the basis of a three hundred sixty-five (365)
day year for the actual number of days elapsed) or the maximum rate permissible
by law (which under the laws of the State of Colorado shall be deemed to be the
laws relating to permissible rates of interest on commercial loans), whichever
is less, (the "Default Rate"). Moreover, after the occurrence of any such Event
of Default, the Holder may proceed to protect and enforce its rights, at law, in
equity or otherwise, against the Maker.
5.3 Payment of Costs and Expenses. In the event that this Note is
placed in the hands of any attorney for collection, or any suit or proceeding is
brought for the recovery or protection of the indebtedness hereunder, then and
in any such events, the Maker shall pay on demand all costs and expenses of such
suit or proceedings incurred by the Holder, including reasonable attorneys'
fees.
VI. MISCELLANEOUS
6.1 Dividends and Distributions. The Maker shall not, for so long as
any principal or interest remains outstanding under this Note, declare or
distribute any dividends or distributions on its capital stock.
6.2 Corporate Event. In the event the Maker closes any merger,
consolidation, business combination, reorganization or recapitalization in which
the owners of the Maker immediately prior to such transaction own less than
fifty percent (50%) of the Maker's voting power immediately after such
transaction, or any transaction or series of related transactions in which
equity representing in excess of fifty percent (50%) of the Maker's voting power
is transferred, or sale of all or substantially all of the assets of the Maker,
all amounts due hereunder shall become immediately due and payable without
notice or demand.
6.3 Notices. All notices, requests, permissions, waivers, and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) five (5) Business Days following sending by registered or
certified mail, postage prepaid, (b) when sent, if sent by facsimile; provided
that the facsimile transmission is promptly confirmed by telephone, (c) when
delivered, if delivered personally to the intended recipient and (d) one (1)
Business Day following sending by overnight delivery via a national courier
service and, in each case, addressed to a party at the following address for
such party:
(a) if to the Maker, to:
HEI, Inc.
6385 Old Shady Oak Road
Suite 280
Eden Prairie, MN 55344
Attention: Chief Executive Officer
Telecopy: (952) 443-7000
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Michael King, Esq.
Telecopy: (212) 310-8007
(b) if to the Holder, to:
Colorado MEDtech, Inc.
4801 North 63rd Street,
Boulder, Colorado 80301
Attention: Chief Executive Officer
Telecopy: (303) 581-1010
with a copy to:
Colorado MEDtech, Inc.
4801 North 63rd Street,
Boulder, Colorado 80301
Attention: General Counsel
Telecopy: (303) 581-1010
Faegre & Benson LLP
1900 15th Street
Boulder, Colorado 80302
Attention: Christopher M. Hazlitt, Esq.
Telecopy: (303) 449-5426
6.4 Waiver; Governing Law. No delay or omission on the part of the
Holder in exercising any right hereunder shall operate as a waiver of such right
or of any other right of the Holder, nor shall any delay, omission or waiver on
any occasion be deemed a bar to or waiver of the same or any other right on any
future occasion. This Note shall be governed by and construed in accordance with
the laws of the State of New York without regard to the choice of law principles
thereof.
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IN WITNESS WHEREOF, the Maker has caused this Subordinated Promissory
Note to be duly executed by its officers, thereunto duly authorized as of this
24th day of January, 2003.
HEI, INC.
By: /s/ Anthony J. Fant
-------------------------------
Name: Anthony J. Fant
Title: Chairman, Chief Executive
Officer and President
ACCEPTED AND AGREED:
COLORADO MEDTECH, INC.
By:/s/ Stephen K. Onody
---------------------------------
Stephen K. Onody, President and
Chief Executive Officer