EXHIBIT 10.14
(To Common Stock Purchase Agreement)
PROMISSORY NOTE
$1,300,000 April 7, 2004
FOR VALUE RECEIVED, Distributed Delivery Networks Corporation, a Delaware
corporation ("MAKER"), hereby unconditionally promises to pay to the order of
Amistar Corporation, a California corporation ("LENDER"), in lawful money of the
United States of America and in immediately available funds, the principal sum
of One Million Three Hundred Thousand Dollars ($1,300,000) (the "PRINCIPAL
AMOUNT"), together with accrued and unpaid interest thereon, each due and
payable on the dates and in the manner set forth below. This Note is made in
connection with that certain Common Stock Purchase Agreement, dated as of April
7, 2004 (the "PURCHASE AGREEMENT"), between Maker and Lender. All capitalized
terms used herein that are not otherwise defined shall have such meanings as
ascribed to them in the Purchase Agreement.
1. INTEREST RATE. Subject to the terms hereof, the rate of interest
prior to the maturity of the indebtedness evidenced hereby, whether by
acceleration or otherwise, shall be four and 61/100 percent (4.61%) per annum
(the "INTEREST RATE"). Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed.
2. PAYMENT SCHEDULE. Subject to Sections 3 and 6 below, Maker shall pay
monthly installments of principal and interest in accordance with the payment
schedule set forth below. All payments shall be applied first to any charges due
hereunder, then to accrued interest, and then to the principal balance.
(a) No amounts shall be due or payable prior to April 7, 2008.
On April 7, 2008, all accrued interest shall be added to the Principal Amount
and the resulting amount shall be amortized and repaid in seventy-two (72)
substantially equal monthly installments, each such payment to be due and
payable in arrears on the first (1st) day of each calendar month, commencing on
April 7, 2008 and continuing until the Maturity Date (as defined below).
(b) The entire outstanding Principal Amount and all accrued
interest shall be due and payable in full on April 7, 2014 (the "MATURITY
DATE").
3. PREPAYMENTS.
(a) This Note may be prepaid in whole or in part at any time
without premium or penalty.
(b) All amounts outstanding under this Note shall be prepaid
in full immediately prior to (i) Maker's dissolution or liquidation, or (ii) the
acquisition by a third party of all or substantially all of Maker's capital
stock, equity interests or assets.
(c) (i) In addition, Lender shall have the option, at any time
(not more than once) on or prior to October 7, 2004, to require Maker to prepay
all amounts outstanding under this Note; PROVIDED that this right, which is
hereinafter referred to as the "PREPAYMENT," shall be exercisable by Lender if,
and only if, Maker's management has failed to provide evidence, satisfactory to
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Lender in its reasonable good faith determination, of interest by a top 10
pharmacy retail chain in the purchase of an automated dispensing machine from
Maker for retail pharmacy prescriptions.
(ii) The Prepayment shall be subject to Maker's
receipt of requisite consents and compliance with applicable law. In the event
Maker is unable to effect the Prepayment due to the foregoing, Maker shall use
commercially reasonable efforts to obtain such consents and/or comply with such
law (as applicable) in order to effect the Prepayment as soon as reasonably
practicable. In addition, the Prepayment shall be subject to and occur
concurrently with Maker's (A) redemption (the "REDEMPTION") of Lender's shares
of Maker's Common Stock ("COMMON STOCK") under Section 9 of that certain
Investor Rights Agreement dated as of the date hereof among Maker, Lender and
William Holmes and David Blackburn (President, Harbour Ventures) (the
"FOUNDERS") and (B) payment of any bonus to William Holmes that is required
under the Employment Agreement between the Maker and William Holmes of even date
herewith in accordance with Section 2(ii) thereof ("BONUS").
(iii) The Prepayment shall be exercised by written
notice signed by Lender and delivered to Maker as provided in Section 7.4 of the
Purchase Agreement. Such notice shall identify the Principal Amount ("PREPAYMENT
PRINCIPAL") and the interest ("PREPAYMENT INTEREST" and, together with the
Prepayment Principal, the "PREPAYMENT AMOUNT") outstanding under this Note, the
number of shares of Common Stock to be sold to Maker in the Redemption and shall
notify Maker of the time, place and date for settlement of such repayment and
sale, which shall be scheduled by Lender within ninety (90) days following the
date of such notice. Subject to Section 3(c)(ii), Maker shall pay, on the date
of settlement specified in such notice, the Prepayment Amount, at Lender's
option, in cash or by offset against any indebtedness owing to Maker by Lender,
or by a combination of both.
(iv) In the event the Prepayment Principal being paid
plus the aggregate redemption price to be paid by Maker for the Common Stock
pursuant to the Redemption, less any portion of such amounts that are to be paid
by offset against any indebtedness owing to Maker by Lender, is greater than (A)
92.5% of (B) (1) the aggregate of Maker's then-current cash and cash equivalents
as reflected on its most recent regularly prepared financial statement prepared
in accordance with United States generally accepted accounting principles, less
(2) any outstanding liabilities of Maker (including the Prepayment Interest and
Bonus, but excluding the Prepayment Principal) (the amount, if any, by which (1)
exceeds (2), the "EXCESS CASH") (the product of (A) and (B), the "MAXIMUM CASH
AMOUNT"), then the Maximum Cash Amount shall be used to repay the Prepayment
Principal and redeem that number shares of Common Stock pursuant to the
Redemption so that the proportion that Principal Amount under this Note repaid
bears to the Prepayment Principal is equal to the proportion that the number of
shares of Common Stock redeemed bears to the total number of shares of Common
Stock then held by Lender. In addition, the amount, if any, by which the
then-current cash and cash equivalents as reflected on Maker's most recent
regularly prepared financial statement prepared in accordance with United States
generally accepted accounting principles exceed any outstanding liabilities of
Maker (excluding the Prepayment Interest, Bonus and Prepayment Principal), less
any Excess Cash, shall be used to pay any Prepayment Interest due Lender and
Bonus due William Holmes on a pro rata basis. The Maximum Cash Amount and any
additional amounts paid pursuant to the preceding sentence shall be paid on the
date of settlement as set forth above. Any Prepayment Amount not repaid in
accordance with this Section 3(c)(iv) shall be forgiven and this Note shall be
cancelled.
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4. PLACE OF PAYMENT. All amounts payable hereunder shall be payable in
immediately available funds at the office of Lender, 237 Via Vera Cruz, San
Marcos, CA 92069, unless another place of payment shall be specified in writing
by Lender.
5. DEFAULT. Each of the following events shall be an "EVENT OF DEFAULT"
hereunder:
(a) Maker fails to pay timely any of the principal, interest
or other amounts due under this Note on the date the same become due and
payable;
(b) Maker files any petition or commences any case or other
proceeding with respect thereto for relief under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, liquidation or moratorium law or
any other law for the relief of, or relating to, debtors, now or hereafter in
effect, or makes any assignment for the benefit of creditors, or admits in
writing its inability to pay or generally fails to pay its debts as they mature
or become due, or Maker dissolves or ceases to continue to exist, or takes any
corporate action in furtherance of any of the foregoing; or
(c) an involuntary petition is filed or any case or other
proceeding is commenced against Maker (unless such petition is dismissed or
discharged within sixty (60) days) under any bankruptcy, reorganization,
arrangement, insolvency, adjustment of debt, liquidation or moratorium statute
now or hereafter in effect, or a custodian, receiver, trustee, liquidator,
assignee for the benefit of creditors (or other similar official) is applied for
or appointed for Maker or is applied for or appointed to take possession,
custody or control of any property of Maker.
6. REMEDIES. Upon the occurrence and during the continuance of an Event
of Default hereunder:
(a) all unpaid principal, accrued interest and other amounts
owing hereunder shall, at the option of Lender (and, in the case of an Event of
Default pursuant to Section 5(b) or (c) above, automatically) be immediately
due, payable and collectible by Lender pursuant to applicable law; and
(b) Lender may exercise any and all rights and remedies it may
have under this Note and/or under applicable law.
All rights and remedies shall be cumulative and not exclusive. The
failure of Lender to exercise all or any of its rights, remedies, powers or
privileges hereunder or any other agreement or applicable law in any instance
shall not constitute a waiver thereof in that or any other instance.
7. EXPENSES. If any of the installment payments of principal or
interest of this Note is not paid when due, an Event of Default shall have
occurred, or Maker otherwise breaches its obligations under this Note, Maker
shall pay reasonable attorneys' fees to Lender together with reasonable costs
and expenses of collection, including, without limitation, any attorneys' fees,
costs and expenses relating to any proceedings with respect to the bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution or liquidation of
Maker or any party to any agreement or instrument securing this Note.
8. MAXIMUM RATE. All agreements which either are now or which shall
become agreements between Maker and the holder of this Note are hereby expressly
limited so that in no contingency or event whatever, whether by reason of
deferment or advancement of the indebtedness represented by this Note,
acceleration of the maturity date of this Note, or otherwise, shall the amount
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paid or agreed to be paid to the holder of this Note for the use, forbearance or
detention of the indebtedness evidenced hereby exceed the maximum amount of
interest permissible under applicable law. If at any time, from any circumstance
whatsoever, fulfillment of any provision of this Note or any other agreement
between Maker and the holder hereof, shall result in or involve payments or
performance which would exceed the maximum legal interest rate, then, ipso
facto, the obligation to be fulfilled shall be reduced so as not to exceed said
maximum legal interest rate.
9. WAIVER. Maker, for itself and its legal representatives, successors
and assigns, hereby expressly waives demand, presentment, notice of dishonor,
protest and notice of protest, and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and agrees that any extension, renewal or postponement of the time of payment or
any other indulgence to, or release of any person now or hereafter obligated for
the payment of this Note shall not affect Maker's liability hereunder.
10. MISCELLANEOUS. The provisions set forth in Section 7 of the
Purchase Agreement are incorporated herein by this reference to the maximum
extent applicable, with the Agreement therein referring instead to this Note.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Note has been duly executed as an instrument
under seal as of the date first set forth above.
MAKER:
Distributed Delivery Networks Corporation,
a Delaware corporation
By: /s/ William K. Holmes
-----------------------------------
Name: William K. Holmes
Title: President and CEO
ATTEST:
By: /s/ Gregory Leiser
----------------------------
Name: Gregory Leiser
Title: Executive VP and CFO
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