TERM CREDIT AGREEMENT
THIS
TERM
CREDIT AGREEMENT (this “Agreement”) is made and entered into as of August
22,
2006, by
and between I-FIGHT, INC., a California corporation (“Borrower”), and The Hunter
Fund Limited (“Lender”), with reference to the following:
Lender
has agreed to make Borrower a term loan subject to and in accordance with
the
terms and conditions set forth below.
1. Certain
Defined Terms.
As used
in this Agreement, the following terms shall have the following
meanings:
“Business
Day”
means
a
day (a) other than Saturday or Sunday, and (b) on which commercial banks
are
open for business in New York, New York, and Los Angeles,
California.
“Closing
Date”
means
the date each of the conditions precedent set forth in Section
6
hereof
is fully satisfied.
“Event
of Default”
has
the
meaning set forth in Section
8.
“Interest
Rate”
has
the
meaning set forth in Section
2(c).
“Lien”
means
any mortgage, deed of trust, pledge, security interest, assignment, deposit
arrangement, charge or encumbrance, lien (statutory or other), or other
preferential arrangement (including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing or any agreement to give any security
interest).
“Maturity
Date”
has
the
meaning set forth in Section
2(b).
“Note”
has
the
meaning set forth in Section
2(d).
“Person”
means
an individual, corporation, limited liability company, partnership, joint
venture, trust, unincorporated organization or any other juridical
entity.
“Private
Placement”
means
the private placement of the securities of the Company pursuant to a placement
agreement between the Company and Hunter World Markets, Inc.
“Term
Loan”
has
the
meaning set forth in Section
2(a).
(a) Term
Loan Advance.
Subject
to the terms and conditions of this Agreement, Lender hereby agrees to make
a
loan to Borrower (the “Term Loan”) on the Closing Date in the amount of Three
Hundred Fifty Thousand Dollars ($350,000), which amount may be repaid at
any
time prior to the Maturity Date without premium or penalty, but may not be
reborrowed once repaid.
(b) Term.
All
principal and accrued but unpaid interest shall be payable in full on the
earlier to occur of the closing of the Private Placement or six months from
the
date hereof (the “Maturity Date”), provided, however, that if the Private
Placement is not closed, the Term Loan shall be extended to the closing of
a
financing of at least $1,500,000 but in no event more than six months after
the
Maturity Date.
(c) Bridge
Loan Fee.
Borrower shall pay to Lender a Bridge Loan Fee of $43,750 (the “Loan Fee”)
payable on the maturity date of the Bridge Loan as it may be
extended.
(d) Promissory
Note.
The
Term Loan shall be evidenced by a promissory note (the “Note”) in the form of
Exhibit “A-1” attached hereto, duly executed by Borrower.
(e) Interest
on Event of Default.
Upon
the occurrence and during the continuance of an Event of Default, Borrower
agrees to pay interest on the entire unpaid principal amount of the Term
Loan,
as well as the Loan Fee, from the date of such Event of Default until the
date
the same is cured in full, payable on demand, at a rate per annum of ten
percent
(10%).
(f) Manner
of Payment.
All
payments of principal or interest hereunder or under the Note shall be delivered
to Lender in immediately available funds on the date due at such place as
Lender
may from time to time designate.
(g) Limitation
on Interest Rate and Fees.
In no
contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder and charged or collected by Lender or any holder of the
Note
exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In
the
event that such a court determines that Lender has charged or received interest
hereunder or under the Note in excess of the highest applicable rate, the
rate
in effect hereunder and under the Note shall automatically be reduced to
the
maximum rate permitted by applicable law and Lender shall apply all interest
paid in excess of the maximum lawful rate to the principal balance of the
amount
outstanding hereunder and under the Note. It is the intent of the parties
hereto
that Borrower not pay or contract to pay, and that Lender not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower to Lender under applicable
law.
(h) Security
Interest.
To
secure Borrower’s obligations with respect to the Term Loan, Borrower hereby
grants to Lender a first priority security interest in all of its assets,
wherever located, it being understood, however, that the security interest
hereunder shall be on parity with loans to Borrower in the aggregate principal
amount of $250,000 being made concurrently with the Term Loan by shareholders
of
Borrower herein regardless of the order of filing of financing
statements.
3. Representations
and Warranties.
In
order to induce Lender to enter into this Agreement and to make the Term
Loan
contemplated hereunder, Borrower hereby represents and warrants to Lender
as
follows:
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(a) Legal
Status.
Borrower is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Delaware. Borrower is qualified or
licensed to do business, and is in good standing as a foreign corporation
in all
jurisdictions in which such qualification or licensing is required or in
which
the failure to so qualify or to be so licensed could have a material adverse
effect on Borrower.
(b) Authorization
and Validity.
This
Agreement and the Note have been duly authorized, and upon their execution
and
delivery in accordance with the provisions hereof will constitute legal,
valid
and binding agreements and obligations of Borrower, enforceable in accordance
with their respective terms.
(c) No
Conflict.
The
execution, delivery, and performance by Borrower of this Agreement and the
Note
do not and will not conflict with the terms of the Articles of Incorporation
or
Bylaws of Borrower, violate any provision of any judgment, decree or order
of
any court or governmental authority by which Borrower is bound, or any provision
of any law or regulation applicable to Borrower, or result in a breach of
or
constitute a default under any contract, obligation, indenture, or other
instrument to which Borrower is a party or by which Borrower may be
bound.
(d) No
Consents.
The
execution, delivery, and performance by Borrower of this Agreement and the
Note
do not and will not require any authorization, approval, or other action
by, or
notice to or filing with, any governmental authority, regulatory body, or
any
other person or entity.
(e) Use
of
Proceeds.
The net
proceeds of the Term Loan will be used $10,000 for Lender’s legal costs and the
remainder for general working capital purposes.
(f) Margin
Stock.
Borrower is not engaged in the business of extending credit for the purpose
of
purchasing or carrying margin stock (within the meaning of Regulation G or
U
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of any Revolving Loan will be used to purchase or carry any margin stock
or
extend credit to others for the purpose of purchasing or carrying any margin
stock, or be used for any purpose which violates or is inconsistent with
the
provisions of Regulation X of said Board of Governors.
4. Covenants.
Borrower hereby covenants that until all amounts outstanding hereunder and
under
the Notes have been indefeasibly paid in full, it shall:
(a) Punctual
Payments.
Punctually pay the Loan Fee and principal with respect to the Term Loan as
provided herein and in the Note.
(b) Existence.
Do or
cause to be done all things necessary to preserve, renew and keep in full
force
and effect its existence and comply with the provisions of all documents
pursuant to which it is organized and/or which govern its continued existence;
maintain all licenses, permits, governmental approvals, rights, privileges,
and
franchises necessary for the conduct of its business; and conduct its business
in an orderly and regular manner and in accordance with all laws, rules,
regulations, and orders of any governmental authority having jurisdiction
over
it or its business.
3
(c) Books
and Records.
Maintain adequate books and records in accordance with generally accepted
accounting principles consistently applied, and permit any representative
of
Lender, at any reasonable time, to inspect, audit and examine such books
and
records, to make copies of the same, and to inspect its assets and
properties
at their
expense.
5. Conditions
Precedent to Term Loan.
The
obligation of Lender to make the Term Loan shall be subject to the condition
precedent that Agent shall have received each of the following, each in form
and
substance satisfactory to Agent:
(a) This
Agreement duly executed by all of the parties hereto;
(b) The
Note
duly executed by Borrower;
(c) Such
additional supporting documents as Lender or its counsel may reasonably request;
and
(d) Borrower’s
shareholders shall have loaned Borrower $250,000 on the same terms as set
forth
herein (the “Shareholders’ Loan”).
6. Survival
of Representations and Warranties.
Borrower covenants, warrants and represents to Lender that all representations
and warranties of Borrower contained in this Agreement or the Note shall
be true
at the time of Borrower’s execution of this Agreement and the Note, and shall
survive the execution, delivery and acceptance thereof by the parties thereto
and the closing of the transactions described therein or related
thereto.
7. Events
of Default.
The
occurrence of any of the following shall constitute an “Event of Default” and
shall, at the option of Lender, require immediate payment in full of all
sums
then remaining unpaid hereunder and under the Note:
(a) Failure
to Pay Note.
The
failure of Borrower to pay any principal or other amount due under the Note
when
due and payable.
(b) Breach
of Covenant, Representation or Warranty.
The
failure of Borrower to perform or observe any covenant, condition or agreement
contained in this Agreement (other than the payment obligations, the breach
of
which shall be governed by subsection (a) above) where such failure is not
cured
within five (5) business days, or any representation or warranty made or
deemed
made by any of them under or in connection with this Agreement, shall prove
to
have been false or misleading in any material respect when made.
(c) Liens.
Except
for the security interest granted hereunder or pursuant to the Shareholders’
Loan Borrower creates, incurs, assumes or suffers to exist any Lien upon
or with
respect to any of its properties or assets whether now owned or hereafter
acquired, including, without limitation, any governmental, tax, or judgment
Lien, and fails to have the same removed or released within two Business
Days
after the creation thereof.
(d) Insolvency.
Borrower shall become insolvent; admit in writing its inability to pay its
debts
as they mature; make an assignment for the benefit of creditors; or if
bankruptcy proceedings or other proceedings for relief under any bankruptcy
law
or any law for the relief of debtors shall be instituted by or against it
and,
if instituted against it, the same is not dismissed within thirty (30) days
of
the filing thereof.
4
(e) Dissolution.
Any
order, judgment, or decree shall be entered against Borrower decreeing its
involuntary dissolution or split up and such order shall remain undischarged
and
unstayed for a period in excess of thirty (30) days; or Borrower shall otherwise
dissolve or cease to exist.
8. Remedies.
If an
Event of Default shall occur, (a) all amounts outstanding hereunder or under
the
Note, notwithstanding any term of this Agreement, or the Note to the contrary,
shall at Lender’s option and without notice become immediately due and payable,
without presentment, demand, protest or notice of dishonor, all of which
are
hereby expressly waived by Borrower, and (b) Lender shall have all rights,
powers and remedies available hereunder, or accorded by law. All rights,
powers
and remedies of Lender in connection with this Agreement and the Note may
be
exercised at any time by Lender and from time to time after the occurrence
of an
Event of Default, are cumulative and not exclusive, and shall be in addition
to
any other rights, powers or remedies provided by law or equity.
9. Warrant.
In
consideration of Lender making the Term Loan, Borrower shall issue to Lender
a
three-year warrant to purchase such number of shares of Borrower’s Common Stock
equal to the principal amount of this Note divided by the Per Share Purchase
Price in the Private Placement. The exercise price of the Warrant shall be
60%
of the Per Share Purchase Price in the Private Placement. The Warrant shall
be
in form and substance satisfactory to the Lender and shall be delivered at
the
closing of the Private Placement.
10. Miscellaneous.
(a) Failure
or Indulgence Not Waiver.
No
failure or delay on the part of Lender, or any holder of a Note in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof or of any other right, power
or
privilege.
(b) Modification.
No
modification, amendment or waiver of any provision of this Agreement, or
the
Note, nor the consent to any departure by Borrower therefrom, shall in any
event
be effective unless the same shall have been approved by Lender and Borrower
and
shall be in writing signed by Lender and Borrower. Such waiver or consent
shall
then be effective only in the specific instance and for the purpose for which
given. No notice to or demand on Borrower in any case shall entitle Borrower
to
any other or further notice or demand in the same, similar or other
circumstances.
(c) Notices.
Except
as otherwise expressly provided herein, any notice herein required or permitted
to be given shall be in writing and shall be deemed effective when personally
delivered, mailed, telecopied (with a confirming copy sent by mail) or delivered
by telex to the appropriate party at the address set forth below (or at such
other address as may be designated by either party in a written notice sent
in
accordance with this Section):
5
|
If
to Borrower:
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I-Fight,
Inc.
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxx Xxxxxxxx
Telecopy
No.:
|
|
|
with
a copy to:
|
Xxxxx
X. Xxxxxxxx, Esq.
Xxxx
& Xxxxx
0000
Xxxxxxx Xxxx Xxxx, 00xx
Xxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
Telecopy
No.: (000) 000-0000
|
|
|
If
to Lender
|
Hunter
World Markets, Inc.
Penthouse
Suite
0000
Xxxxxxxx Xxxxxxxxx
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attn:
Xxxx Xxxxxx
Telecopy
No.: (000) 000-0000
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|
(d) Severability.
In case
any provision in this Agreement or the Note shall be invalid, illegal or
unenforceable, such provision shall be severable from the remainder of such
contract and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
(e) Applicable
Law.
This
Agreement and the Note, and the rights and obligations of the parties thereto,
shall be governed by the laws of the State of California.
(f) Assignability.
Borrower shall not assign its rights or obligations hereunder, or under the
Note
to any other Person without the prior written consent of Lender, and any
attempted assignment in violation hereof shall be null and void ab initio.
Lender shall have the right to assign its rights and obligations hereunder
and
no consent or approval from Borrower is required in connection with any such
assignment.
(g) Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the
same
instrument.
(h) Section
Headings.
The
various headings used in this Agreement are inserted for convenience only
and
shall not affect the meaning or interpretations of this Agreement or any
provision hereof.
(i) Attorneys’
Fees.
In the
event any party institutes any action or proceeding to enforce the terms
and
conditions of this Agreement, or the Note, the prevailing party shall be
entitled to reasonable attorneys’ fees and costs.
6
(j) TRIAL
BY JURY.
BORROWER HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM
IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT
OF OR
BASED UPON THIS AGREEMENT OR THE NOTE, THE SUBJECT MATTER HEREOF AND THEREOF
OR
ANY DOCUMENT RELATING HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR
HEREAFTER ARISING OR WHETHER IN CONTRACT OR IN TORT OR OTHERWISE.
(k) Integration.
This
Agreement, and the Note reflect the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be contradicted
or
qualified by any other agreement, oral or written, whether before or after
the
date hereof.
IN
WITNESS WHEREOF, the parties hereto do execute this Agreement as of the date
first above written.
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“BORROWER”
I-FIGHT,
INC.
a
California corporation
By:
_______________________________
Name:
_____________________________
Its:
_______________________________
|
|
|
“LENDER”
THE
HUNTER FUND LIMITED
By:
_______________________________
Name:
_____________________________
Its:
_______________________________
|
7
EXHIBIT
Exhibit
“A” - Term Note
8
TERM
NOTE
|
Los
Angeles, California
|
|
| $350,000 |
August
22,
2006
|
FOR
VALUE
RECEIVED, the undersigned, I-FIGHT, INC., a California corporation (the
“Borrower”), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of The Hunter
Fund Limited (the “Lender”), without offset or counterclaim, the principal sum
of THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000) on the Maturity Date (as
such
term is defined in the Credit Agreement referred to below) as such Date may
be
extended pursuant to the Credit Agreement. Borrower further promises to pay
a
bridge loan fee (the “Loan Fee”) on the Term Loan in the amount and payable on
the date set forth in the Credit Agreement referred to below. This Term Note
(“Term Note”) may be prepaid at any time prior to the Maturity Date without
premium or penalty.
1. Payment.
Both
principal and the Loan Fee are payable in lawful money of the United States
of
America and in immediately available funds to Lender at Beverly Hills,
California, or such other place as Lender may designate in writing to Borrower
from time to time. This Note may be prepaid at any time or from time to time
without premium or penalty.
2. Credit
Agreement.
This
Term Note is the Note referred to in, and is subject to and entitled to the
benefits of, the Term Credit Agreement, dated as of August 22, 2006 (as amended,
modified, renewed or extended from time to time, the “Credit Agreement”) between
Borrower and Lender. Capitalized terms used herein shall have the respective
meanings assigned to them in the Credit Agreement. The Credit Agreement
provides, among other things, for acceleration (which in certain cases shall
be
automatic) of the maturity hereof upon the occurrence of certain stated events,
in each case without presentment, demand, protest or further notice of any
kind,
all of which are hereby expressly waived.
3. Limitation
on Interest Rate and Fees.
In no
contingency or event whatsoever shall the aggregate of all amounts deemed
interest hereunder or under the Credit Agreement and charged or collected
by
Lender or any holder of this Term Note exceed the highest rate permissible
under
any law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that such a court determines that Lender
has charged or received interest hereunder or under the Credit Agreement
in
excess of the highest applicable rate, the rate in effect hereunder and under
the Credit Agreement shall automatically be reduced to the maximum rate
permitted by applicable law and Lender shall apply all interest paid in excess
of the maximum lawful rate to the principal balance of the amounts outstanding
hereunder and under the Credit Agreement. It is the intent of the parties
hereto
that Borrower not pay or contract to pay, and that Lender not receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by Borrower to Lender under applicable
law.
9
4. Governing
Law.
THIS
TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF
THE STATE OF CALIFORNIA.
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I-FIGHT,
INC.,
a
California corporation
By:
_______________________________
Name:
_____________________________
Its:
_______________________________
|
10
