THIS NOTE
WAS ISSUED WITH “ORIGINAL ISSUE
DISCOUNT” FOR U.S. FEDERAL INCOME
TAX PURPOSES. CORNERSTONE ONDEMAND, INC. WILL PROMPTLY MAKE AVAILABLE TO THE
HOLDER HEREOF INFORMATION REGARDING THE ISSUE DATE, ISSUE PRICE, YIELD TO
MATURITY, AMOUNT OF ORIGINAL ISSUE DISCOUNT AND, AS APPROPRIATE, THE COMPARABLE
YIELD AND PROJECTED PAYMENT SCHEDULE OF THIS NOTE, UPON THE WRITTEN REQUEST OF
SUCH HOLDER DIRECTED TO CORNERSTONE ONDEMAND, INC. AT 1601 CLOVERFIELD BLVD.,
SUITE 620, SANTA MONICA, CA 90404.
SENIOR SUBORDINATED
PROMISSORY NOTE
THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
THIS NOTE
AND THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATED IN THE MANNER AND TO THE
EXTENT SET FORTH IN THAT CERTAIN INTERCREDITOR AGREEMENT (THE “SUBORDINATION
AGREEMENT”) DATED AS OF MARCH 31, 2009 (AS THE
SAME MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED AFTER THE DATE HEREOF) AMONG
IRONWOOD EQUITY FUND LP, CORNERSTONE ONDEMAND, INC. AND COMERICA BANK, AND EACH
HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS
OF THE SUBORDINATION AGREEMENT.
CORNERSTONE
ONDEMAND, INC.
11.25%
SENIOR SUBORDINATED PROMISSORY NOTE
FOR VALUE RECEIVED, the
undersigned, CORNERSTONE
ONDEMAND, INC. (the “Company”), a Delaware corporation, hereby
promises to pay to the order of IRONWOOD EQUITY FUND LP (“IEF”), a Delaware limited partnership, or
its registered assigns (the “Holder”),
the principal sum of FOUR MILLION AND NO/100 DOLLARS
($4,000,000.00) (or such lesser amount as may then be outstanding) on
March 30, 2014 (the “Maturity Date”), with interest thereon from time to
time as provided herein.
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1.
Purchase
Agreement. This
Senior Subordinated Promissory Note (individually and collectively with each
other Senior Subordination Promissory Note that may be issued pursuant to this
Note, the “Note”) is issued by the Company, on the date
hereof, pursuant to the Securities Purchase Agreement (the “Purchase
Agreement”), dated as of the date hereof by and
between the Company and IEF, and is subject to the terms thereof. The Holder is
entitled to the benefits of this Note and the Purchase Agreement, as it relates
to this Note, and may enforce the agreements of the Obligors contained herein
and therein and exercise the remedies provided for hereby and thereby or
otherwise available in respect hereto and thereto. Capitalized terms used herein
without being defined herein are used herein with the meanings ascribed to such
terms in the Purchase Agreement.
2.
Interest. The Company promises to pay
interest (“Interest”) on the outstanding principal amount
of this Note at the rate of 11.25% per annum (the “Interest
Rate”), payable as specified below. Interest
on this Note shall accrue from and including the date of issuance through and
until repayment of the principal amount of this Note and payment of all Interest
in full, and shall be computed on the basis of a 360-day year of twelve (12)
30-day months. Interest shall be paid as follows:
(a) Payment. The Company
shall pay Interest in cash on the outstanding principal amount of this Note at
the Interest Rate, monthly in arrears on the last day of each calendar month or,
if any such date shall not be a Business Day, on the next succeeding Business
Day to occur after such date (each date upon which interest shall be so payable,
an “Interest Payment
Date”), beginning on April 30, 2009, by wire
transfer of immediately available funds to an account at a bank designated in
writing by the Holder. In the absence of any such written designation, any such
Interest payment shall be deemed made on the date a check in the applicable
amount payable to the order of Holder is received by the Holder at its last
address as reflected in the Note Register (as defined in Section 11(b) below);
if no such address appears in the Note Register, then to such Holder in care of
the last address in the Note Register of any predecessor holder of this Note (or
its predecessor). Each Interest Payment Date shall be considered the last day of
an accrual period with respect to the Company for U.S. Federal income tax
purposes.
(b) Default Rate of
Interest. Notwithstanding the foregoing provisions of this Section 2, but subject to applicable
law, any overdue principal of and overdue Interest on this Note shall bear
interest, payable on demand in immediately available funds, for each day from
the date payment thereof was due to the date of actual payment, at a rate equal
to the sum of (i) the Interest Rate, and (ii) an additional 2.75% per annum (the
“Default
Rate”), and, upon and during the occurrence
of an Event of Default, this Note shall bear interest, from the date of the
occurrence of such Event of Default until such Event of Default is cured or
waived, payable on demand in immediately available funds, at a rate equal to the
Default Rate. Subject to applicable law, any interest that shall accrue on
overdue interest on this Note as provided in the preceding sentence and shall
not have been paid in full on or before the next Interest Payment Date to occur
after the date on which the overdue interest became due and payable shall itself
be deemed to be overdue interest on this Note to which the preceding sentence
shall apply.
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(c) No Usurious Interest.
The rate of interest payable on this Note or other amount shall in no event
exceed the maximum rate permissible under Requirements of Law. If the rate of
interest payable on this Note or other amount is ever reduced as a result of
this Section 2(c) and at any time thereafter the maximum rate permitted by
Requirements of Law shall exceed the rate of interest provided for in this Note,
then the rate provided for in this Note shall be increased to the maximum rate
provided by Requirements of Law for such period as is required so that the total
amount of interest received by the Holder is that which would have been received
by the Holder but for the operation of the first sentence of this Section 2(c).
Any payment by the Company of any interest amount in excess of that permitted by
law shall be considered a mistake, with the excess being applied to the
principal amount of this Note without prepayment premium or penalty; if no such
principal amount is outstanding, such excess shall be returned to
Company.
3.
Mandatory
Prepayment/Redemption.
(a) Initial Public
Offering/Change of Control. Subject to the rights of the Senior Lender
under the Senior Loan Documents and the terms and conditions of the Senior Loan
Subordination Agreement, including any consents required thereby, upon the
consummation of an Initial Public Offering (as defined below) or the occurrence
of a Change of Control, the Company shall, at the election of the Holder, redeem
this Note at the applicable redemption price set forth below for the period in
which such Initial Public Offering consummates or Change of Control occurs (the
“Mandatory
Redemption Prices”), which Mandatory Redemption Prices
are expressed as a percentage of the then outstanding principal amount of this
Note; together with Interest accrued on the then outstanding principal amount of
this Note through the date of such redemption, and reasonable out-of-pocket
costs and expenses (including, reasonable fees, charges and disbursements of
counsel), if any, associated with such redemption.
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Period
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Mandatory Redemption
Price
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105%
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103%
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100%
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The
Company shall pay the Mandatory Redemption Price, together with Interest accrued
thereon, upon receipt by the Company or any of its Subsidiaries or any of its
Holding Companies of the proceeds of such Initial Public Offering or upon the
occurrence of such Change of Control (as applicable). As used herein, “Initial Public
Offering” means the underwritten
public offering by either the Company, any of its Subsidiaries or any of its
Holding Companies of its Capital Securities pursuant to a registration statement
(other than a registration statement on Form S-8 or S-4 or any successor form
thereto) that has been filed under the Securities Act and declared effective by
the Commission; provided, however, that, for
this purpose, any offering under Rule 144A under the Securities Act or any
similar rule or regulation promulgated under the Securities Act shall not be
deemed to be an Initial Public Offering.
-4-
(b) Notice. The Company
shall give written notice to the Holder of any mandatory prepayment pursuant to
this Section 3 at least five (5) Business Days prior to the date of such
prepayment. Such notice shall be given in the manner specified in Section 14.03
of the Purchase Agreement.
4.
Optional
Prepayment/Redemption.
(a) Upon
notice given to the Holder as provided in Section 4(b), the Company, at its
option, may prepay all (but not less than all) of the then outstanding principal
amount of this Note at any time, by paying to the Holder an amount equal to the
applicable redemption price set forth below for the period in which such
prepayment occurs (the “Optional
Redemption Prices”), which Optional Redemption Prices are
expressed as a percentage of the then outstanding principal amount; together
with Interest accrued and unpaid thereon to the date fixed for such prepayment,
and reasonable out-of-pocket costs and expenses (including, reasonable fees,
charges and disbursements of counsel), if any, associated with such
prepayment.
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Period
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Optional Redemption
Price
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105%
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103%
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100%
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The
Company may prepay all accrued and unpaid Interest at anytime without penalty or
premium.
(b) The
Company shall give written notice of prepayment of this Note pursuant to this
Section 4 not less than 10 nor more than 60 days prior to the date fixed for
such prepayment. Such notice of prepayment pursuant to this Section 4 shall be
given in the manner specified in Section 14.03 of the Purchase Agreement. Upon
notice of prepayment pursuant to this Section 4 being given by the Company, the
Company covenants and agrees that it will prepay, on the date therein fixed for
prepayment, this Note at the applicable Optional Redemption Price set forth
above with respect to the then outstanding principal amount of this Note,
together with Interest accrued and unpaid thereon to the date fixed for such
prepayment, and the costs and expenses referred to in Section 4(a), unless such
notice of prepayment is revoked in writing at least three (3) days prior to the
date specified for prepayment.
(c) All
optional prepayments under this Section 4 shall include payment of accrued
Interest on the principal amount of this Note so prepaid and shall be applied
first to all costs, expenses and indemnities payable under the Purchase
Agreement, then to payment of default interest, if any, then to payment of
Interest, and thereafter to principal.
5.
Amendment. Amendments and modifications
of this Note may be made only in the manner provided in Section 14.05 of the
Purchase Agreement.
-5-
6.
Defaults
and Acceleration.
If an Event of Default occurs under Section 12.07 of the Purchase Agreement,
then the outstanding principal of and all accrued Interest on this Note shall
automatically become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived. If any
other Event of Default occurs and is continuing, the Holder, subject to the
rights of the Senior Lender under the Senior Loan Documents and the terms and
conditions of the Senior Loan Subordination Agreement, by written notice to the
Company, may declare the principal of and accrued Interest on this Note to be
immediately due and payable. Upon such declaration, such principal and Interest
shall become immediately due and payable. The Holder(s) may rescind an
acceleration and its consequences if all existing Events of Default have been
cured or waived, except nonpayment of principal or Interest that has become due
solely because of the acceleration, and if the rescission would not conflict
with any judgment or decree. Any notice or rescission shall be given in the
manner specified in Section 14.03 of the Purchase Agreement.
7.
Use of
Proceeds. The
Company shall use the principal amount of this Note in accordance with the
permitted uses described in Section 8.10 of the Purchase
Agreement.
8.
Suits for
Enforcement.
(a) Upon
the occurrence and during the continuance of an Event of Default, but subject to
the rights of the Senior Lender under the Senior Loan Documents and the terms
and conditions of the Senior Loan Subordination Agreement, any Holder of this
Note may proceed to protect and enforce its rights hereunder by suit in equity,
action at law or by other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in the Purchase Agreement or
this Note or in aid of the exercise of any power granted in the Purchase
Agreement or this Note, or may proceed to enforce the payment of this Note, or
to enforce any other legal or equitable right of the Holders of this
Note.
(b) In
case of any default under this Note, the Obligors will pay to the Holder such
amounts as shall be sufficient to cover the costs and expenses of such Holder
due to such default, as provided in Article 7 and Section 14.12 of the Purchase
Agreement.
9.
Remedies
Cumulative. No
remedy herein conferred upon the Holder, or conferred upon the Holder under the
Purchase Agreement, is intended to be exclusive of any other remedy and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
10. Remedies
Not Waived. No
course of dealing between the Company and the Holder or any delay on the part of
the Holder in exercising any rights hereunder shall operate as a waiver of any
right.
(a) The
term “Holder” as used herein shall
also include any transferee of all of this Note whose name has been recorded by
the Company in the Note Register (as defined in Section 11(b)
below). Each transferee of this Note acknowledges that this Note has
not been registered
-6-
under the
Securities Act, and may be transferred only pursuant to an effective
registration under the Securities Act or pursuant to an applicable exemption
from the registration requirements of the Securities Act.
(b) The
Company shall maintain a register (the “Note
Register”) in
its principal offices for the purpose of registering this Note and any transfer
hereof and thereof, which register shall reflect and identify, at all times, the
ownership of record of any interest in this Note. Upon the issuance of this
Note, the Company shall record the name and address of the initial purchaser of
this Note in the Note Register as the first Holder. Upon surrender for
registration of transfer or exchange of this Note at the principal offices of
the Company, the Company shall, at its expense, execute and deliver one Note of
like tenor and of a like aggregate principal amount, registered in the name of
the Holder or a transferee. Every Note surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by written instrument of
transfer duly executed by the Holder of such Note or such holder’s attorney duly
authorized in writing.
(c) This
Note may be transferred or assigned, in whole (but not in part), by the Holder
at any time; provided that the
Holder shall not transfer or assign this Note to a competitor of the Company or
any of its Subsidiaries without the prior written consent of the
Company.
12. Replacement
of Note. On
receipt by the Company of an affidavit of an authorized representative of the
Holder stating the circumstances of the loss, theft, destruction or mutilation
of this Note (and in the case of any such mutilation, on surrender and
cancellation of such Note), the Company, at the expense of the Holder, will
promptly execute and deliver, in lieu thereof, a new Note of like tenor. If
required by the Company, such Holder must provide indemnity sufficient in the
reasonable judgment of the Company to protect the Company from any loss which
they may suffer if a lost, stolen or destroyed Note is replaced and is
subsequently found or discovered.
13. Covenants
Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note made by or on behalf of the
Company shall bind its successors and assigns, whether so expressed or
not.
14. Notices. All notices, demands and
other communications provided for or permitted hereunder shall be made in
accordance with Section 14.03 of the Purchase Agreement.
15. GOVERNING
LAW. THIS NOTE
SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAWS
OF THE STATE OF CONNECTICUT, WITHOUT REGARD TO ANY CHOICE OF LAW PRINCIPLES THAT
WOULD REQUIRE THE APPLICATION OF ANY OTHER LAW.
16. WAIVERS. EACH OBLIGOR HEREBY
IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE PURCHASE AGREEMENT, THIS NOTE, THE WARRANT, ANY INVESTMENT
DOCUMENT OR ANY AGREEMENT(S) OR TRANSACTION(S) CONTEMPLATED HEREBY OR THEREBY
MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT OR OF THE UNITED STATES
OF AMERICA FOR THE DISTRICT OF CONNECTICUT AND HEREBY EXPRESSLY SUBMITS TO THE
PERSONAL JURISDICTION AND VENUE OF
-7-
SUCH
COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE
AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM. EACH OBLIGOR HEREBY
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SECTION 14.03 OF THE PURCHASE AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE 10
DAYS AFTER SUCH MAILING.
EACH
OBLIGOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THE PURCHASE AGREEMENT, THIS
NOTE, THE WARRANT OR ANY OF THE OTHER INVESTMENT DOCUMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EACH OBLIGOR AND ITS SUBSIDIARIES (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVERS, AND (II) ACKNOWLEDGES THAT THE HOLDER HAS BEEN
INDUCED TO ENTER INTO THE PURCHASE AGREEMENT, AND THE OTHER INVESTMENT DOCUMENTS
TO WHICH IT IS PARTY, BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS
CONTAINED HEREIN.
17. Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
18. Rules of
Construction.
Unless the context otherwise requires, “or” is not exclusive, “including” is not limiting,
and references to sections or subsections refer to sections or subsections of
this Note. References to any section include all subsections, unless otherwise
expressly stated. References in this Note to any agreement, other document or
law “as amended” or “as amended from time to time,”
or to amendments of any document or law, shall include any amendments,
supplements, replacements, renewals, waivers or other modifications. References
in this Note to any law (or any part thereof) include any successor law and any
rules and regulations promulgated thereunder (or with respect to such part) by
the relevant Governmental Authority, as amended from time to time. The meanings
of defined terms are equally applicable to the singular and plural forms of the
defined terms. Whenever the context so requires, the neuter gender includes the
masculine and feminine, the single number includes the plural, and vice versa.
The words “hereof”, “herein”
and “hereunder”
and words of similar import when used in this Note shall refer to this
Note as a whole and not to any particular provision of this
Note.
19. Headings. The headings in this Note
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
[Signature
Page to Senior Subordinated Note]
IN
WITNESS WHEREOF, the undersigned has executed this Note as of the date first set
forth above.
CORNERSTONE
ONDEMAND, INC.
