BRIDGE LOAN AGREEMENT
EXHIBIT
10.1
THIS
BRIDGE LOAN AGREEMENT (this “Agreement”) is made this 31st
day of
March, 2008, by and among Single Touch Interactive, Inc., a Nevada corporation
(“Borrower”), and Hosting Site Network, Inc., a Delaware corporation
(“Lender”).
W
I T N E
S S E T H:
WHEREAS,
Lender and Borrower have agreed upon certain of the terms and conditions of
a
merger (the “Merger”) and related transactions (collectively, the
“Transactions”) which is expected to be completed and closed upon no later than
May 31, 2008 (the “Completion Date”);
WHEREAS,
simultaneously herewith Lender is engaged in an offering (the “Note Offering”)
of its 12% Convertible Promissory Notes, which offering is being conducted
pursuant to the exemption from registration provided by Rule 506 of Regulation
D, Regulation S and/or Section 4(2) under the Securities Act of 1933, as amended
(the “Securities Act”); and
WHEREAS,
to provide Borrower with additional working capital to enable Borrower to
fulfill certain obligations incident to its business while Lender and Borrower
prepare the documentation necessary and appropriate to consummate the
Transactions and obtain all necessary approvals from stockholders and third
parties, Lender has agreed to utilize the net proceeds of the Note Offering
to
provide Borrower with a temporary loan in the principal amount equal to the
net
proceeds of the Note Offering.
NOW,
THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower and Lender, intending to be legally bound, agree as
follows:
ARTICLE
I
- LOAN
1.1. Loan.
Lender
agrees, on the terms and conditions of this Agreement, to make periodic loans
to
Borrower in the amount of up to Three Million Dollars Three Hundred Thousand
($3,300,000) (the “Loans”) commensurate with the net proceeds received by Lender
in the Note Offering.
1.2. The
Note.
Borrower has authorized the issuance of promissory notes (each, a “Note” and
collectively the “Notes”) made in favor of Lender by Borrower, which shall be in
the form set forth in Exhibit
A
attached
hereto. Each disbursement of the Loan shall bear interest at the rate of 12
percent (12%) per annum, and shall be due and payable to the order of Lender
on
the Completion Date, unless extended by Lender and Borrower in writing;
provided, however, that from and after an Event of Default, as defined in
Article IV hereof, such interest rate shall increase to eighteen percent (18%)
per annum.
1.3. Payments.
Principal and accrued interest payable on the Notes is due on the Completion
Date; provided, however, that upon the closing of the Merger on or prior to
the
Completion Date, all amounts outstanding under the Loans shall be forgiven,
and
the Notes shall be cancelled and deemed repaid in full.
In
the
event the Merger is not completed by the Completion Date due to the actions
of
Borrower acting without cause, the Lender shall have the right, at its sole
discretion, to cause Borrower to convert the amount of principal and interest
then due under the Notes, in whole or in part, into units of Borrower at a
price
of $1.25 per unit, each unit consisting of one share of Borrower’s common stock,
one Class A Warrant to purchase one share of Borrower’s common stock at a price
of $1.60 per share at any time during a period of 18 months from issuance,
and
one Class B Warrant to purchase one share of Borrower’s common stock at a price
of $2.05 per share at any time during a period of 36 months from
issuance.
In
the
event the Merger is not completed by the Completion Date due to the actions
of
Lender acting without cause (the “Lender Action”), the Borrower shall have the
right to seek appropriate legal remedies against Lender. These remedies will
not
relieve Borrower of its obligations under the Notes. Notwithstanding the
foregoing and any other provisions of this Agreement, in such event, Borrower
will be relieved of its obligation to pay interest under the Notes but must
pay
back all principal due under the Notes within sixty (60) days of the Completion
Date.
1.4. Security
for Loan.
The
Loan will be secured by Borrower’s assets as set forth in the Security Agreement
among Borrower and Lender in the form attached hereto as Exhibit B.
ARTICLE
II - REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower
represents and warrants to Lender as follows:
2.1. Organization.
Borrower is a corporation duly existing under the laws of its jurisdiction
of
incorporation and qualified and licensed to do business in any jurisdiction
in
which the conduct of its business or its ownership of property requires that
it
be so qualified, except where the failure to be so qualified would not have
a
material adverse effect on the business, operations, condition (financial or
otherwise), property or prospects of Borrower (as defined below), or the ability
of Borrower to carry out its obligations under the Loan Documents (as defined
in
Section 2.3 below) (a “Company Material Adverse Effect”).
2.2. Subsidiaries.
Borrower has no subsidiaries. For purposes of this Agreement, a “Subsidiary”
means any corporation, partnership, joint venture or other entity in which
Borrower has, directly or indirectly, an equity interest representing 50% or
more of the capital stock thereof or other equity interests
therein.
2.3. Authorization.
All
corporate action on the part of Borrower and its officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of all obligations of Borrower under this Agreement, the Note,
the
Security Agreement and all other documents executed in connection with the
Loan
(collectively, the “Loan Documents”) to which any of them may be a party have
been taken. This Agreement, the Note, the Security Agreement and the other
Loan
Documents, when executed and delivered by Borrower, shall constitute legal,
valid and binding obligations of Borrower, enforceable against Borrower in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors’ rights and the enforcement of debtors’ obligations generally and by
general principles of equity, regardless of whether enforcement is pursuant
to a
proceeding in equity or at law.
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2.4. Absence
of Conflicts.
The
execution, delivery and performance of this Agreement and each of the other
Loan
Documents is not in conflict with nor does it constitute a breach of any
provision contained in Borrower’s organizational documents, nor will it
constitute an event of default under any material agreement to which Borrower
is
a party or by which Borrower is bound.
2.5. Consents
and Approvals. Borrower has obtained all consents, approvals and authorizations
of, made all declarations or filings with, and given all notices to, all
governmental authorities and agencies that are necessary for the continued
operation of Borrower’s business as currently conducted, or are required by
law.
2.6. Capitalization.
The
authorized and outstanding capital stock of Borrower is described in the
Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) among
Lender, Borrower and Single Touch Acquisition Corp. dated as of March 20, 2008.
Except as set forth in the Merger Agreement or as contemplated by the
Transactions, there are no subscriptions, convertible securities, options,
warrants or other rights (contingent or otherwise) currently outstanding to
purchase any of the authorized but unissued capital stock of Borrower. Except
as
set forth in the Merger Agreement or as contemplated by the Transactions,
Borrower has no obligation to issue shares of its capital stock, or
subscriptions, convertible securities, options, warrants, or other rights
(contingent or otherwise) to purchase any shares of its capital stock or to
distribute to holders of any of its equity securities, any evidence of
indebtedness or asset. No shares of Borrower capital stock are subject to a
right of withdrawal or a right of rescission under any applicable securities
law. Except as set forth in the Merger Agreement, there are no outstanding
or
authorized stock appreciations, phantom stock or similar rights with respect
to
Borrower. To the Knowledge (as defined below) of Borrower, except as described
in the Merger Agreement or otherwise contemplated by this Agreement, there
are
no agreements to which Borrower is a party or by which it is bound with respect
to the voting (including without limitation voting trusts or proxies),
registration under any applicable securities laws, or sale or transfer
(including without limitation agreements relating to pre-emptive rights, rights
of first refusal, co-sale rights or “drag-along” rights) of any securities of
Borrower. Except as provided in the Merger Agreement, to the Knowledge of
Borrower, there are no agreements among other parties, to which Borrower is
not
a party and by which it is not bound, with respect to the voting (including
without limitation voting trusts or proxies) or sale or transfer (including
without limitation agreements relating to rights of first refusal, co-sale
rights or “drag-along” rights) of any securities of Borrower.
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2.7. Litigation.
There
are no actions, suits, claims, investigations, arbitrations or other legal
or
administrative proceedings, to the Knowledge of Borrower, threatened against
Borrower at law or in equity, and to Borrower’s Knowledge, there is no basis for
any of the foregoing. There are no unsatisfied judgments, penalties or awards
against or affecting Borrower or its businesses, properties or assets. Borrower
is not in default, and no event has occurred which with the passage of time
or
giving of notice or both would constitute a default by Borrower with respect
to
any order, writ, injunction or decree known to or served upon Borrower of any
court or of any foreign, federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic
or
foreign. There is no action or suit by Borrower pending or threatened against
others. Borrower has complied with all laws, rules, regulations and orders
applicable to its current business, operations, properties, assets, products
and
services the violation of which would have a Company Material Adverse Effect.
There is no existing law, rule, regulation or order, and Borrower has no
Knowledge of any proposed law, rule, regulation or order, whether foreign,
federal or state, that would prohibit or materially restrict Borrower from,
or
otherwise materially adversely affect Borrower in, conducting its businesses
in
any jurisdiction in which it is now conducting business.
As
defined in this Agreement, “Knowledge” of Borrower means the actual knowledge by
a director or officer of Borrower of a particular fact or circumstance or such
knowledge as may reasonably be imputed to such person as a result of such
person’s actual knowledge of other facts or circumstances as well as any other
knowledge which such person would have possessed had such person made reasonable
inquiry of appropriate employees and agents of Borrower with respect to the
matter in question.
2.8. Absence
of Certain Events.
To
Borrower’s Knowledge, there is no existing condition, event or series of events
which reasonably would be expected to have a Company Material Adverse
Effect.
2.9. Title
to Property and Assets.
Borrower does not own any real property. Borrower has good and marketable title
to all of its personal property and assets free and clear of any material
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance which would have a Company Material Adverse Effect.
With respect to properties and assets it leases, Borrower is in material
compliance with such leases and holds a valid leasehold interest free of any
liens, claims or encumbrances which would have a Company Material Adverse
Effect.
2.10. Governmental
Permits.
Borrower holds all licenses, franchises, permits and other governmental
authorizations which are required for the conduct of any aspect of Borrower’s
business, as presently conducted and as presently contemplated to be conducted,
including, but not limited to, all such business operations contemplated by,
or
incident to, the Transactions. All such licenses, franchises, permits and other
governmental authorizations are valid and current, and Borrower has not received
any notice that any governmental authority intends to cancel, terminate or
not
renew any such license, franchise, permit or other governmental authorization.
Borrower has conducted and is conducting its business in material compliance
with the requirements, standards, criteria and conditions set forth in such
licenses, franchises, permits and other governmental authorizations, and all
laws and regulations applicable thereto, and is not in violation of any of
the
foregoing. The consummation of the transactions contemplated hereunder will
not
alter or impair or require changes to any such license, franchise, permit or
other governmental authorization.
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ARTICLE
III - COVENANTS OF BORROWER
So
long
as the Note is outstanding, Borrower agrees that, unless Lender shall give
its
prior consent in writing:
3.1. Ordinary
Course.
Borrower shall carry on its business in the ordinary course substantially as
conducted heretofore, and shall not engage in any transaction outside of the
ordinary course of business.
3.2. Maintain
Properties.
Borrower shall maintain its properties and facilities in good working order
and
condition, reasonable wear and tear excepted.
3.3. Performance
under Agreements.
Borrower shall perform all of its material obligations under agreements relating
to or affecting its assets, properties or rights.
3.4. Cooperation
with Lender.
Borrower shall cooperate with Lender and shall use its reasonable best efforts
to complete and sign the merger agreement contemplated by the Merger and shall
use its reasonable best efforts to consummate the Transactions contemplated
thereby.
3.5. Financial
Statements.
Borrower shall provide to Lender prior to the Due Date any such audited or
unaudited financial statements as may be required under applicable U.S.
Securities Exchange Commission (“SEC”) regulations for inclusion of such
statements in Lender’s SEC and other regulatory filings upon and following the
closing of the Merger.
3.6. Maintenance
of Business Organization.
Borrower shall maintain and preserve its business organization intact and use
its reasonable best efforts to retain its present key employees and
relationships with suppliers, customers and others having business relationships
with Borrower.
3.7. Compliance
with Permits.
Borrower shall maintain material compliance with all permits, laws, rules and
regulations, consent orders and all other orders of applicable courts,
regulatory agencies, and similar governmental authorities.
3.8. Leases.
Borrower shall maintain its present leases in accordance with their respective
terms, and shall not enter into new or amended lease instruments.
3.9. Loan
Documents.
Borrower shall comply in all respects with the terms of the Loan Documents.
3.10. Mergers.
Except
as contemplated by the Transactions, Borrower shall not merge or consolidate
with or into any other corporation, or sell, assign, lease or otherwise dispose
of or voluntarily part with the control (whether in one transaction or in a
series of related transactions) of assets (whether now owned or hereafter
acquired) having a fair market value of more than $1,000,000 at the time(s)
of
transfer, or sell, assign or otherwise dispose of (whether in one transaction
or
in a series of transactions) any of its accounts receivable (whether now in
existence or hereafter created) at a discount or with recourse, to any person,
except sales or other dispositions of assets in the ordinary course of business.
8
3.11. Charter
Documents.
Borrower shall not make any amendment to its Certificate of Incorporation or
its
By-Laws.
3.12. Senior
or Pari Passu Indebtedness.
Borrower shall not incur, create, assume, guaranty or permit to exist any
indebtedness in an amount equal to or greater than $100,000 that ranks senior
in
priority to, or pari passu with, the obligations under the Note and the other
Loan Documents, except for indebtedness existing or contemplated on the date
hereof.
3.13. Liens.
Borrower shall not create, incur, assume or permit to exist any lien on any
property or assets (including stock or other securities of Borrower) now owned
or hereafter acquired by it or on any income or revenues or rights in respect
of
any thereof, except:
(a) liens
on
property or assets of Borrower existing on the date hereof, provided that such
liens shall secure only those obligations which they secure on the date
hereof;
(b) any
lien
created under the Loan Documents;
(c) any
lien
existing on any property or asset prior to the acquisition thereof by Borrower,
provided that
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1.
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such
lien is not created in contemplation of or in connection with such
acquisition and
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2.
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such
lien does not apply to any other property or assets of
Borrower;
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(d) liens
for
taxes, assessments and governmental charges;
(e) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s, landlord’s or other like
liens arising in the ordinary course of business and securing obligations that
are not due and payable;
(f) pledges
and deposits made in the ordinary course of business in compliance with
workmen’s compensation, unemployment insurance and other social security laws or
regulations;
(g) deposits
to secure the performance of bids, trade contracts (other than for
indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(h) zoning
restrictions, easements, licenses, covenants, conditions, rights-of-way,
restrictions on use of real property and other similar encumbrances incurred
in
the ordinary course of business and minor irregularities of title that, in
the
aggregate, are not substantial in amount and do not materially detract from
the
value of the property subject thereto or interfere with the ordinary conduct
of
the business of Borrower;
9
(i) purchase
money security interests in real property, improvements thereto or equipment
hereafter acquired (or, in the case of improvements, constructed) by Borrower,
provided that
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1.
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such
security interests secure indebtedness permitted by this Agreement,
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2.
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such
security interests are incurred, and the indebtedness secured thereby
is
created, within 90 days after such acquisition (or
construction),
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3.
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the
indebtedness secured thereby does not exceed 85% of the lesser of
the cost
or the fair market value of such real property, improvements or equipment
at the time of such acquisition (or construction) and
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4.
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such
security interests do not apply to any other property or assets of
Borrower;
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(j) liens
arising out of judgments or awards (other than any judgment that constitutes
an
Event of Default hereunder) in respect of which Borrower shall in good faith
be
prosecuting an appeal or proceedings for review and in respect of which it
shall
have secured a subsisting stay of execution pending such appeal or proceedings
for review, provided Borrower shall have set aside on its books adequate
reserves with respect to such judgment or award; and
(k) deposits,
liens or pledges to secure payments of workmen’s compensation and other
payments, public liability, unemployment and other insurance, old-age pensions
or other social security obligations, or the performance of bids, tenders,
leases, contracts (other than contracts for the payment of money), public or
statutory obligations, surety, stay or appeal bonds, or other similar
obligations arising in the ordinary course of business.
Within
three (3) business days following Borrower’s request for a waiver of any
provision of this Article III, Lender shall provide Borrower with their response
to such request.
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ARTICLE
IV - DEFAULTS AND REMEDIES
4.1. An
“Event
of Default” occurs if:
(a) Borrower
defaults in the payment of any principal or interest of the Note when the same
shall become due, either by the terms thereof or otherwise as herein provided
and such default shall not have been cured within sixty (60) days thereof;
or
(b) Borrower
defaults, in whole or in part, in the performance or observance of any other
material agreement, term or condition contained in the Note or the other Loan
Documents, and such breach shall not have been cured within sixty (60) days
thereof; or
(c) Borrower
shall default in the payment of any principal of, or premium, if any, or
interest on, any other indebtedness in excess of $250,000 or obligation with
respect to borrowed money after expiration of any grace or cure period or shall
default in the performance of any material term of any instrument evidencing
such indebtedness or of any mortgage, indenture or agreement relating thereto
after expiration of any grace or cure period, and the effect of such default
is
to cause or to permit the holder or holders of such obligation to cause, such
indebtedness or obligation to become due and payable prior to its stated
maturity; or
(d) Borrower
pursuant to or within the meaning of any Bankruptcy Law (as defined
below):
(i)
commences a voluntary case,
(ii)
consents to the entry of an order for relief against it in an involuntary
case,
(iii)
consents to the appointment of a Custodian (as defined below) of it or for
all
or substantially all of its property,
(iv)
makes a general assignment for the benefit of its creditors, or
(v)
is
the debtor in an involuntary case which is not dismissed within thirty (30)
days
of the commencement thereof, or
(e) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that:
(i)
provides for relief against Borrower in an involuntary case,
(ii)
appoints a Custodian of Borrower for all or substantially all of its property,
or
11
(iii)
orders the liquidation of Borrower, or
(f) a
final
judgment for the payment of money in an amount in excess of $100,000 shall
be
rendered against Borrower (other than any judgment as to which a reputable
insurance company shall have accepted full liability in writing) and shall
remain undischarged for a period (during which execution shall not be
effectively stayed) of 20 days after the date on which the right to appeal
has
expired; or
then
and
in any such case (x) upon the occurrence of any Event of Default described
in
paragraphs (d) or (e), the unpaid principal amount of and accrued interest
on
the Notes shall automatically become due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by
Borrower, and (y) upon the occurrence of any other Event of Default, in addition
to any other rights, powers and remedies permitted by law or in equity, Lender
may, at its option, by notice in writing to Borrower, declare the Notes to
be,
and the Notes shall thereupon be and become, immediately due and payable,
together with interest accrued thereon and all other sums due hereunder, without
presentment, demand, protest or other notice of any kind, all of which are
waived by Borrower.
Upon
the
occurrence of any Event of Default, the holder of the Notes may proceed to
protect and enforce its rights by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in the Notes held by it, for an injunction against a
violation of any of the terms hereof or thereof, or for the pursuit of any
other
remedy which it may have by virtue of this Agreement or pursuant to applicable
law. Borrower shall pay to the holder of the Notes upon demand the reasonable
costs and expenses of collection and of any other actions referred to in this
Article, including without limitation reasonable attorneys’ fees, expenses and
disbursements.
No
course
of dealing and no delay on the part of the holder of the Notes in exercising
any
of its rights shall operate as a waiver thereof or otherwise prejudice the
rights of such holders, nor shall any single or partial exercise of any right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. No right, power or remedy
conferred hereby or by the Notes on the holder thereof shall be exclusive of
any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.
4.2. For
purposes of this Article, the following definitions shall apply:
“Bankruptcy
Law” means Title 11, U.S. Code or any similar federal or state law for the
relief of debtors, or equivalent law of a non-U.S. jurisdiction.
“Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
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ARTICLE
V
- NOTICES
All
notices, requests and demands shall be given to or made upon the respective
parties hereto in writing, at such address as may be designated by it in a
written notice to the other party. All notices, requests, consents and demands
hereunder shall be effective when duly deposited in the mails (by overnight
delivery by a nationally-recognized overnight courier service or by United
States registered or certified mail, postage prepaid, return receipt requested)
with a copy via facsimile. Unless the parties designate otherwise, notices
should be addressed as follows:
If
to
Borrower:
Single
Touch Interactive, Inc.
0000
Xxxxxxxxx Xxxx. Xxxxx 000
Xxxxxxxxx,
XX 00000
Attn: Xxxxxxx
X. Xxxxxx, General Counsel
Facsimile: 760.438.1793
If
to
Lender:
Hosting
Site Network, Inc.
00
Xxxxxx
Xxxxx
Xxxxxxx,
XX 00000
Attn: Xxxxx
Xxxxxx, President
with
a
copy to:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn: Xxxxx
Xxxxxxxx, Esq.
Facsimile:
212.400.6901
ARTICLE
VI - MISCELLANEOUS
6.1. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to conflicts of laws principles thereof.
6.2. Amendment.
This
Agreement may be amended, modified or terminated only by an instrument in
writing signed by all parties.
6.3. No
Assignment.
Neither
this Agreement nor any right or obligation provided for herein may be assigned
by any party without the prior written consent of the other
parties.
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6.4. Successors.
The
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of, and be enforceable by, the respective successors and assigns of
the
parties hereto.
6.5. Counterparts.
This
Agreement may be executed in any number of counterparts, with the same effect
as
if all parties had signed the same document. All such counterparts shall be
deemed an original, shall be construed together and shall constitute one and
the
same instrument. This Agreement may be executed by facsimile
signature.
6.6. Construction.
The
language used in this Agreement shall be deemed to be the language chosen by
the
parties to express their mutual intent, and no rule of strict construction
shall
be applied against any party.
6.7. Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
6.8. Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or unenforceable, the
parties agree that the court making the determination of invalidity or
unenforceability shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified.
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IN
WITNESS WHEREOF, the parties hereto have caused this Bridge Loan Agreement
to be
duly executed as of the day and year first above written.
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LENDER:
HOSTING
SITE NETWORK, INC.
By: /s/
Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: President
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BORROWER:
SINGLE
TOUCH INTERACTIVE INC.
By: /s/
Xxxxxxx Xxxxxxxx
Name:
Xxxxxxx Xxxxxxxx
Title: Chief
Executive Officer
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EXHIBIT
A
Promissory
Note
EXHIBIT
B
Security
Agreement
