EXHIBIT 10.21
SECURED LOAN AGREEMENT
THIS SECURED LOAN AGREEMENT ("Loan Agreement") is made and entered into
effective as of the 11th day of May 2006 (the "Effective Date"), by and between
DynaSig Corporation, an Arizona corporation, with a place of business at 0000 X.
Xxxxxxxxx Xx., Xxxxx 000, Xxxxx, XX 00000 ("Maker") and Visitalk Capital
Corporation, an Nevada corporation, with a place of business at 00000 X. 00xx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000 ("Lender").
RECITALS
A. Maker desires to obtain working capital funding in anticipation of
additional equity funding.
B. Maker is a wholly owned subsidiary of Dynamic Biometric Systems,
Inc. which in accordance with certain of the Loan and Security Documents, as
defined below, has agreed to guarantee the Secured Promissory Notes issued under
this Loan Agreement and pledge its assets to support such guarantee ("Guarantor"
as defined below).
C. Lender may be willing to provide the additional financing needed by
Maker up to the Maximum Loan Amount, as defined below, on a secured basis,
pursuant to the terms and conditions of this Loan Agreement.
D. As a necessary precondition for Lender to enter into this Loan
Agreement, the Maker must execute this Loan Agreement and other agreements as
specified below as the "Loan and Security Documents," as defined below,
including an agreement granting security interests in favor of the Lender in all
personal property and select other property owned by Maker or the Guarantor.
AGREEMENTS
In consideration of the above recitals, the following representations,
warranties, covenants and conditions, and other good and valuable consideration,
the receipt of which is acknowledged, the parties agree as follows:
ARTICLE I
---------
DEFINITIONS
Unless otherwise defined, the capitalized terms throughout this Loan
Agreement and in any of the Loan and Security Documents have the specified
meanings in the Article.
1.1 "Additional Sums" means all fees, additional interest, charges, points,
loan origination fees, goods, things in action or any other sums or things of
value, including any compensating balance requirements or other contractual
obligations.
Page 1 of 17
1.2 "Arizona Courts" means the Superior Court of Maricopa County, State of
Arizona, or any successor to said court, and the United States District Court
for the District of Arizona, or any successor to said court.
1.3 "Authorized Option Pool" means incentive or non-statutory options either
issued at the Effective Date of this Loan Agreement or agreed by the Parties to
be set aside for future issuance under the Guarantor's Qualified Stock Option
Plan.
1.4 "Collateral" means any and all property pledged under the Loan and
Security Documents which shall serve as security for all Secured Promissory
Notes or Other Lender Liabilities.
1.5 "Common Stock" means the common stock, $.001 par value per share, of the
Issuer.
1.6 "Conversion Price" means that the price of the Securities established
herein, and as may be adjusted form time to time in accordance with the Loan
Agreement or the documents authorizing the Securities, as such price is used to
determine the number of units of Securities to be issued to a Note Holder upon
conversion of any Secured Promissory Note or any accrued interest there under.
1.7 "Default Rate" means the annual interest rate to be applied to the
principal balance of Secured Promissory Notes that are in default. Such rate
shall be eight percent (8%) above the Stated Rate.
1.8 "Equipment" means that term as defined in the Security Agreement.
1.9 "Excluded Warrants" means those certain Series A through F warrants of
the Issuer originally distributed under the Xxxxxxxx.xxx, Inc. Reorganization
Plan.
1.10 "Excluded Securities" means (i) a firmly underwritten stock offering
with proceeds exceeding $10,000,000; or (ii) the issuance of shares of Common
Stock upon the exercise of the Excluded Warrants; or (iii) shares issued from
the Authorized Option Pool.
1.11 "Final Maturity Date" means October 30, 2006 unless extended in a
written agreement between the Lender and, if applicable, any Note Holders and
the Maker.
1.12 "Funding Date" means the day funds are advanced and the date a Secured
Promissory Note is dated.
1.13 "Lender" means Visitalk Capital Corporation, a Nevada corporation,
d/b/a Aztore Capital.
1.14 "General Intangibles" means that term as defined in the Security
Agreement.
1.15 "GAAP" means generally accepted accounting principals consistently
applied.
Page 2 of 17
1.16 "Guarantor" means Dynamic Biometric Systems, Inc., a Nevada
corporation, with the same address as Maker and Guarantor's signature on this
Loan Agreement acknowledges all the terms hereunder.
1.17 "Inventory" means that term as defined in the Security Agreement.
1.18 "Issuer" means Dynamic Biometric Systems, Inc., a Nevada corporation,
with the same address as Maker.
1.19 "Loan Agreement" means this Loan Agreement.
1.20 "Loan and Security Documents" means some or all of the following
documents as may be executed pursuant to this Loan Agreement and, if executed,
attached as Exhibits hereto:
(a) Security Agreement;
(b) Secured Promissory Note(s);
(c) UCC filing(s):
(d) Guarantee(s);
(e) Stock Pledge Agreement(s) and stock powers;
(f) Life Insurance Pledge and assignment agreements;
(g) Any warrants or common stock equivalent agreements or rights
regarding such securities; and
(h) any other documents executed between the parties or any information
supplied to the Lender.
1.21 "Maker" means DynaSig Corporation, an Arizona corporation which is
a wholly owned subsidiary of Guarantor.
1.22 "Maximum Loan Amount" means the maximum aggregate amount of the Secured
Promissory Notes issued under this Loan Agreement, excluding any accrued
interest. Such amount shall not be greater than $500,000.
1.23 "Note Holders" means Lender or subsequent assignee of any Secured
Promissory Note.
1.24 "Note Maturity Date(s)" means be the date of the Secured Promissory
Note(s) but in no event shall such date be beyond October 30, 2006.
1.25 "Other Lender Liabilities" means any and all advances made by the
Lender or any of Lender's affiliates to the Maker or to the Guarantor under any
other agreements with such parties.
1.26 "Party or Parties" means Lender and Maker.
1.27 "Receivables" means that term as defined in the Security Agreement.
Page 3 of 17
1.28 "Secured Assets" means and includes but is not limited to Receivables,
Inventory, Equipment and any other personal or other property pledged under the
Loan and Security Documents.
1.29 "Secured Promissory Note(s)" means the Secured Promissory Notes in the
form of Exhibit A attached and made part hereto.
1.30 "Securities" means shares of the Series A Preferred stock of the Issuer
initially priced at $1.00 per share but subject to adjustment hereunder. Such
Securities are convertible into Common Stock in accordance with the terms of the
Certificate of Designation filed by the Issuer with the state of Nevada and
attached hereto as Exhibit B.
1.31 "Stated Rate" means the per annum interest rate that the parties
mutually agree for each Secured Promissory Note.
ARTICLE II
----------
REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
Maker represents, warrants, and covenants that:
2.1 The Maker has been duly incorporated and organized and is existing
as a corporation in good standing under the laws of its jurisdiction of
incorporation and is duly qualified and in good standing as a foreign
corporation in those jurisdictions where the conduct of its business or the
ownership of its properties requires qualification. The Maker has the power and
authority to (a) own the Collateral; (b) to enter into and perform this Loan
Agreement; and (c) to enter into and perform any other document or instrument
delivered in connection herewith including all of the Loan and Security
Documents.
2.2 The Maker has good title to the Collateral and is the legal and
beneficial owner thereof. The Maker warrants and will, at its own expense,
defend Lender's security interest in and to the Collateral against the claims of
any other person. The Maker has not otherwise assigned, transferred or granted
a security interest in any of the Collateral or any other right or interest
therein and has not executed any other instrument, and is not subject to any
restriction, which might prevent or limit Lender from enjoying the benefits of
this Loan Agreement.
2.3 The Maker will not further assign, transfer or grant or suffer to
exist a security interest in the Collateral or any other right, encumbrance,
charge or other interest therein, except to Lender or an affiliate thereof or in
connection with a transaction as a result of which all the Secured Promissory
Notes, the interest thereon and any other amounts and Other Lender Liabilities
are repaid in full and this Loan Agreement terminated.
2.4 This Loan Agreement has been duly authorized, executed and
delivered, constitutes the valid and binding obligation of Maker and is
enforceable in accordance with its terms.
2.5 The Maker will promptly (but not later than three days after
Page 4 of 17
receipt thereof) deliver to Lender copies of all written notices received with
respect to the Collateral.
2.6 The Maker shall execute, acknowledge, deliver, record and file such
further instruments and do such further acts (including delivery of financing
statements) as Lender in its sole and absolute judgment deems necessary,
desirable or proper to carry out the purposes of this Loan Agreement and to
create any of the security interests created hereby and subject any property
intended to be covered hereby.
2.7 The Maker shall insure for loss or damage all the Secured Assets to
the extent of their replacement cost and list the Lender as a loss payee on any
policy.
2.8 The Maker will obtain a key man life insurance policy for at least
the period until the Final Maturity Date and pledge and assign the proceeds of
such policy to the Lender.
2.9 No event has occurred (including, specifically, Maker's execution,
delivery of and performance under this Loan Agreement) which will violate,
constitute (with notice and/or lapse of time) a default under, or result in the
imposition of any lien or other encumbrance upon, the Collateral pursuant to the
terms of (a) any judgment, decree, order, statute, ordinance, or regulation
applicable to Maker or any of the Collateral or (b) any other contract or
agreement to which Maker is a party or by which its assets are bound.
2.10 The Maker is fully familiar with all the terms and conditions of
this Loan Agreement.
2.11 The Maker has not changed its name or the location of its chief
place of business or chief executive office disclosed herein as Maker's Address
or the location of its records with respect to Receivables, the location of any
Inventory or returns of Inventory, the location of the Equipment, or the
location of any records and documents regarding the General Intangibles or the
location of any other Collateral.
2.12 The Maker will permit Lender, through its authorized attorneys,
accountants and representatives, access to all of its business premises and
offices to inspect and examine the Collateral and the books, accounts, records,
ledgers and assets of every kind and description of Maker with respect thereto
at all reasonable times.
2.13 The Maker has not filed and has not had filed against it a
petition for relief under Title 11 of the United States Bankruptcy Code.
2.14 The Maker has paid and is current on all payroll taxes and all
other taxes or assessments levied and assessed or imposed upon its property or
income as well as all claims which, if unpaid, might by law become a lien or
charge upon its property or income.
2.15 The Maker will furnish to Lender a consolidated and consolidating
profit and loss statements and statements of shareholders' equity of the Maker
and any subsidiaries, all in conformance with GAAP, for each year of Maker's
operations and for each month that this Loan Agreement is in force and a
Page 5 of 17
consolidated balance sheet for the Maker and any subsidiaries, all in
conformance with GAAP, as of the last day of each fiscal year of its operations
and as of the last day of each month that this Loan Agreement is in force. All
such financial statements and balance sheets shall be properly footnoted to the
satisfaction of Lender and each such financial statement shall be certified as
being true and correct by the Chief Accounting Officer and Chief Executive
Officer of Maker. Maker shall furnish monthly statements, including the last
month of each year, within 15 days of the end of the month and annual statements
within 45 days of the end of the year.
2.16 The Maker will furnish to Lender such additional financial
statements and such data and information concerning the financial condition of
Maker as may reasonably be requested by Lender, including but not limited to a
detailed monthly listing of Inventory, accounts payable, a detailed check and
deposit register and Receivables.
ARTICLE III
-----------
MAXIMUM AMOUNT OF NOTES
Until further notice, and on the condition that Maker not be in default
with respect to any of the terms of this Loan Agreement, or with respect to any
outstanding Secured Promissory Note evidencing any advance made under this Loan
Agreement, Lender, in its sole discretion, may advance amounts to Maker up to
the Maximum Loan Amount specified by this Loan Agreement.
ARTICLE IV
----------
TERMS OF NOTES
The Maker may, from time to time, request Lender to loan or advance amounts
to Maker and Lender may make such loan or advance using a Secured Promissory
Notes up to the Maximum Loan Amount of this Loan Agreement, specifically
provided that Maker has complied with all parts of Article Five below. Lender
may waive any of the conditions in Article Five in its sole discretion. Lender
is not required, but may decide at its discretion, to make such loan or advance
to Maker. In the event that Lender elects to make such loan or advance, at the
time of each such borrowing Maker shall execute and deliver to Lender a new
Secured Promissory Note payable to Lender in order to evidence each such new
loan or advance. Each Secured Promissory Note shall be in the form of Exhibit A
hereto, with blanks suitably filled, shall be dated on the Funding Date and
shall mature on or before the Note Maturity Date. Such note may be extended as
provided below. All amounts advanced or loaned by Lender hereunder and under
each Secured Promissory Note shall bear interest from the Funding Date until
paid at the Stated Rate, however, in the event that applicable law may limit the
amount of interest that may be charged under this Loan Agreement and the Secured
Promissory Notes, the Stated Rate shall be at the highest rate allowed by
applicable law. All amounts are payable in lawful money of the United States.
Interest under each Secured Promissory Note shall accrue at the Stated Rate
beginning on the Funding Date. Interest shall be due on the first of each month
after the Secured Promissory Note is issued and the failure to pay such interest
when due shall be an event of default as defined in Article IX without the
requirement of notice. All unpaid principal, interest and other amounts payable
in connection with the Secured Promissory Notes shall be due and payable on the
Note Maturity Date but in no event after the Final Maturity Date.
Page 6 of 17
ARTICLE V
---------
TERMINATION OF AGREEMENT
This Loan Agreement, each of the Loan and Security Documents and each of
the other related agreements, documents and instruments executed or entered into
in connection herewith or therewith, and the rights and obligations of each of
the parties hereunder and thereunder shall terminate and be of no further force
or effect, with the exception of any rights granted to Lender pursuant to the
terms of any of the Loan and Security Documents pertaining to warrants or other
rights, on the earlier of (a) the date that all amounts due and owing under this
Loan Agreement and/or each of the executed Secured Promissory Notes or any of
the other Loan and Security Documents, including but limited to principal,
interest, late charges, fees, costs or penalties have been paid in full to
Lender. Upon such termination, Lender shall (and Lender shall cause its
nominees, other loan participants and any affiliates that have any rights under
this Loan Agreement or any of the Loan and Security Documents to) execute,
acknowledge, deliver, record and/or file any and documents, releases,
termination of security interest statements and the like, execute, deliver,
record and/or file such documents of reassignment, reconveyance and the like,
and take any and all actions reasonably requested by Maker as may be necessary
or advisable to release all security interests, liens, charges and the like on
the assets of Maker, any securities of Maker or which otherwise arise under or
with respect to this Loan Agreement, the Loan and Security Documents or any such
related agreements, documents or instruments.
ARTICLE VI
----------
CONDITIONS FOR LOANS AND ADVANCES
AND USE OF PROCEEDS
It is specifically understood and agreed that not only does the Lender have
total and sole discretion in making and loans or advances under this Loan
Agreement but that Lender will only make loans and advance funds to Maker if
Maker satisfies the following conditions and meets the following benchmarks:
6.1 The Maker is not in default under the terms and conditions of this
Loan Agreement or any of the other Loan and Security Documents.
6.2 No condition exists which, but for the giving of notice or the
lapse of time or both, would constitute a default under the terms and conditions
of this Loan Agreement or any of the other Loan and Security Documents as
defined above.
6.3 The Maker has not filed and has not had filed against it a petition
for relief under Title 11 of the United States Bankruptcy Code.
6.4 The Maker utilized all funds from prior advances or loans made by
Lender in the manner presented to Lender at the time of the request for an
advance.
6.5 The Maker has furnished to Lender any and all financial statements,
data and other financial and operating information requested by the Lender, all
properly certified as being true and correct by the Chief Accounting Officer and
the Chief Executive Officer.
Page 7 of 17
6.6 The Maker has paid and is current on all payroll taxes and is
current on all other taxes or assessments levied and assessed or imposed upon
its property or income as well as all claims which, if unpaid, might by law
become a lien or charge upon its property or income.
6.7 The Maker has permitted Lender, through its authorized attorneys,
accountants and representatives, reasonable access to all of its business
premises and offices to inspect and examine the Collateral and the books,
accounts, records, ledgers and assets of every kind and description of Maker.
ARTICLE VII
-----------
SECURITY FOR LOANS
All funds advanced or loaned to Maker by Lender, including all amounts
evidenced by any and all Secured Promissory Notes or Other Lender Liabilities,
are secured by the Collateral pursuant to the Loan and Security Documents. In
the event of any inconsistency between the terms of this Loan Agreement, any
Secured Promissory Note and any of the other Loan and Security Documents, the
terms of this Loan Agreement shall control; however, this provision shall not be
deemed to limit, abrogate, restrict or impair any provision in any one or more
of the Loan and Security Documents which provides for more extensive or
expansive obligations, requirements or restrictions by or upon Maker or more
extensive or expansive rights or remedies of Lender, than are contained in this
Loan Agreement.
ARTICLE VIII
------------
CONVERSION AND EQUITY RIGHTS
8.1 Voluntary Conversion. At any time prior to a Note Maturity Date,
but not thereafter unless the Secured Promissory Notes are unpaid, Note
Holder(s) shall have the right to convert the principal and outstanding interest
on any of the Secured Promissory Notes into the Securities in accordance with
the following sections of this Article VIII. Maker will give Lender the (10)
business days notice of intent to pay the Secured Promissory Notes. In the
event that Lender does not get such notice, the conversion rights hereunder
continue for ten (10) business days after the Secured Promissory Notes are paid.
8.2 Conversion Ratio. Upon conversion of the Secured Promissory Notes,
Note Holders shall receive the number of Securities equal to the amount of each
Secured Promissory Note outstanding, including any accrued and unpaid interest,
the sum divided by the Conversion Price of the Securities as the same may be
adjusted from time to time. Any fractional amount number of Securities which
result from this calculation will be rounded up to the next whole number.
8.3 Mechanics of Conversion. Each Note Holder who converts a Secured
Promissory Note into Securities shall surrender such Secured Promissory Note
along with a conversion request. Thereupon, the Issuer shall promptly issue and
deliver by overnight delivery to such Note Holder a certificate or certificates
for the number of Securities to which such Note Holder is entitled in accordance
with the Conversion Price then in effect. Upon the surrender of any Secured
Promissory Note, the Note Holder may elect through its conversion notice to have
Page 8 of 17
any unpaid interest paid in cash within 5 days of surrender of such Secured
Promissory Note.
8.4 Anti-Dilution Adjustments if Securities are other than Common
Stock. If the Securities are not Common Stock but convertible into Common
Stock, any conversion price into common stock and attendant anti-dilution
protection is specified in the documents creating such Securities.
(A) Adjustment rights. In the event the Guarantor at any time or from
time to time prior to the exercise of the conversion rights of all the Secured
Promissory Notes makes, or fixes a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in
capital stock of the Issuer other than shares of Common Stock or Common Stock
Equivalents, then and in each such event provision shall be made so that the
Note Holders shall receive upon exercise of their conversion rights, in addition
to the number of Securities, shares of Common Stock receivable thereupon, the
amount of securities which such Holders would have received had they exercised
their conversion rights prior to such effective record date.
(B) Notices of Adjustment. Whenever the number of shares of Common
Stock or the Conversion Price is adjusted as herein provided, the Issuer shall
prepare and deliver forthwith to the Note Holders a certificate signed by (i)
its Chief Executive Officer or President; and (ii) any Vice President, Treasurer
or Secretary. Such certificate shall set forth the adjusted number of Common
Shares purchasable upon the conversion of the Securities and the Conversion
Price of such Securities after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.
(C) Cash Dividends. No adjustment in respect of any cash dividends
paid shall be made while the Secured Promissory Notes are outstanding. However,
the Note Holder's shall receive a written notice of such declaration of such
dividend payable at least 20 days prior to the Record Date. The Note Holders
have the right to elect to convert before the Record Date and thereby receive
such Cash Dividend.
(D) Preservation of Purchase Rights in Certain Transactions. In case
of any reclassification, capital reorganization or other change of outstanding
shares of the Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the Common
Stock) or in case of any consolidation or merger of the Issuer with or into
another corporation (other than merger with a subsidiary in which the Issuer is
the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon the conversion of the Securities) or in the case of any
sale, lease, transfer or conveyance to another corporation of the property and
assets of the Issuer as an entirety or substantially as an entirety, the Issuer
shall, as a condition precedent to such transaction, cause such successor or
purchasing corporation, as the case may be, to execute an agreement granting all
Note Holders the right thereafter to convert the Secured Promissory Notes into
the kind and amount of shares, and other securities and property which the Note
Holder would have owned or have been entitled to receive after the happening of
such reclassification, change, consolidation, merger, sale or conveyance had the
Page 9 of 17
conversion right been exercised immediately prior to such action. Such
agreement shall provide for adjustments in respect of such shares of stock, and
other securities and property, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. In the event that
in connection with any such reclassification, capital reorganization, change,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole or in
part, for, or of, a security of the Issuer other than Common Stock, any such
issue shall be treated as an issue of Common Stock covered by the provisions of
Article. The provisions of this Article shall similarly apply to successive
reclassifications, capital reorganizations, consolidations, mergers, sales or
conveyances.
8.5 Right of First Refusal
(A) Rights. Excluding the Excluded Securities, each Note Holder shall
be given the right to purchase such Note Holder's pro rata portion of any equity
securities offered by the Issuer other than Common Stock shares issued in a
merger or in connection with obtaining a lease line, line of credit or a similar
financing transaction) on the same terms and conditions as the Issuer offers
such securities to other potential investors. The pro rata portion to which
each Note Holder is entitled shall be calculated based upon such Note Holder's
percentage of ownership of the Issuer's outstanding Common Stock assuming
conversion of all outstanding convertible securities and of the Secured
Promissory Note(s) of such note Holder. In the event the Issuer voluntarily
reduces the Exercise Price of any of the Excluded Securities, then, upon any
exercise of such Excluded Securities, the Note Holder(s) shall have the right to
acquire Common Shares at an identical price. Such Common Shares will not be
registered unless provided for otherwise in the Loan and Security Documents.
(B) Notice and Exercise of Rights. Holders shall receive written
notice upon the actual issuance of the shares issued giving rise to the rights
in this Article. Holders shall have 20 days after the date of such notice to
notify the Issuer of their election to acquire the Note Holders' pro rata
portion of any such equity securities and pay any required purchase amount.
ARTICLE IX
----------
EVENTS OF DEFAULT AND LENDER'S RIGHTS AND REMEDIES
9.1 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall constitute
an "Event of Default" hereunder:
(A) the nonpayment of principal, interest or any other amount when due
under this Loan Agreement or any of the Secured Promissory Notes;
(B) the failure to perform any duty or obligation of Maker under this
Loan Agreement or to pay any sum due or otherwise advanced under this Loan
Agreement, any of the Secured Promissory Notes, any Loan and Security Document
or any other default by Maker thereunder;
Page 10 of 17
(C) the adjudication of the Maker as a bankrupt or insolvent, or entry
of any order appointing a receiver or trustee for the Maker or for all or any of
their property, or the vote or the decision by the Maker's Board of Directors,
shareholders or officers or the entry of an order approving a petition seeking
relief for Maker or other similar relief under Title 11 of the United States
Bankruptcy Code or other similar laws of the United States of America or any
other competent jurisdiction, or the filing by or against Maker of a petition
seeking any of the foregoing or consenting to any of the foregoing, or the
filing of a petition to take advantage of any Maker's act, or making a general
assignment for the benefit of creditors, or the admission in writing by Maker of
its inability to pay its debts as they become due;
(D) if the Lender determines that any material representation or
warranty made by Maker to Lender in connection with or pursuant to this Loan
Agreement was or is false in any material respect on the date as of which it was
made or becomes false in any material respect;
(E) if the Maker defaults in the performance or observance of any of
the other Loan and Security Documents;
(F) the failure of Maker to pay any taxes, including payroll taxes,
when due to any governmental entity; or
(G) the occurrence of any of the Events of Default as defined and set
forth in the Loan and Security Documents or any of the Secured Promissory Notes.
9.2 UNDERTAKINGS IN THE EVENT OF DEFAULT.
(A) Upon the occurrence of an Event of Default or if Maker otherwise
fails to perform any of its duties, covenants, undertakings and responsibilities
contained herein or in any of the other Loan and Security Documents, Lender
shall provide to Maker a written Notice of Default at the address set forth
herein and provide to Maker a period of seven (7) business days from the date of
the Notice of Default to cure all defaults under this Loan Agreement and/or any
of the other Loan and Security Documents. If any such defaults remain uncured
as of the close of business on the seventh business day following the date of
the Notice of Default: (i) the unpaid principal balance, and accrued unpaid
interest and all other amounts due or otherwise advanced under this Loan
Agreement, all of the Secured Promissory Notes and/or the Loan and Security
Documents shall automatically without notice bear interest at the Default Rate,
however, in the event that applicable law may limit the amount of interest that
may be charged under this Loan Agreement and the Secured Promissory Notes, such
Default Rate shall be at the highest rate allowed by applicable law, until the
default has been cured, at which time interest shall again accrue at the Stated
Rate; (ii) the whole sum of principal, accrued interest and all other amounts
due under this Loan Agreement, the Secured Promissory Notes and/or the Loan and
Security Documents may, at the option of the Lender, its nominee and any Note
Holder of any of the Secured Promissory Notes, be declared due and payable, with
interest thereon to accrue at the Default Rate from the date of the Event of
Default until the Event of Default has been cured at which time interest shall
again accrue at the Stated Rate; and (iii) the Lender may exercise any of the
rights and remedies contained herein, in any of the Secured Promissory Notes,
in the Security Agreement or in any of the other Loan and Security Documents.
Page 11 of 17
(B) The rights or remedies of Lender as provided in this Loan
Agreement, the Secured Promissory Notes and the Loan and Security Documents
shall be cumulative and concurrent, and may be pursued singly, successively, or
together against Maker, any other funds, property or security held by Lender for
payment hereof or otherwise at the sole, absolute and uncontrolled discretion of
Lender. No single or partial exercise of any power hereunder or under any of the
Loan and Security Documents securing this Loan Agreement and the Secured
Promissory Notes or any guaranty shall preclude other or further exercise of
such power or the exercise of any other right, remedy or power. The Lender, its
nominee and/or the Note Holder of any of the Secured Promissory Notes shall at
all times have the right to proceed against any portion of the security in such
order and in such manner as the Note Holder may elect, without waiving any
rights with respect to any other security. Neither (i) the acceptance by Lender,
its nominee or the Note Holder of any of the Secured Promissory Notes of any
payment in an amount less than payment in full of the amount due and payable at
the time of such payment, nor (ii) any delay or omission on the part of the Note
Holder or Lender hereof in exercising any right, remedy or power hereunder,
shall operate as a waiver by the Note Holder or Lender of the right to exercise
any right, remedy or power at the time or at any subsequent time, or nullify any
prior exercise of a right, remedy or power.
(C) Maker acknowledges and agrees that it is impractical and extremely
difficult to fix in advance the actual damages incurred by Lender, its nominee
and/or the Note Holder of any of the Secured Promissory Notes if the required
payments are not made at Final Maturity Date, due to the fact that (i) interest
rates and administrative costs fluctuate, (ii) it is impossible to predict how
long a default will continue, and (iii) the economic cost of ascertaining actual
damages in each instance of default would be excessive in relation to the actual
damages sustained. Therefore, Maker agrees to pay to Lender, its nominee and/or
the Note Holder of any of the Secured Promissory Notes a late charge equal to
eight percent (8%) of the aggregate amount of principal plus interest due and
owing at Loan Maturity on the date that is thirty days after Loan Maturity if
all amounts due and owing to Lender, its nominee and/or any Note Holder of any
Secured Promissory Note under this Loan Agreement and all of the Secured
Promissory Notes are not paid in full at Loan Maturity. Maker further agrees to
pay to Lender, its nominee and/or the Note Holder of any of the Secured
Promissory Notes an additional late charge equal to five percent (5%) of the
aggregate amount of principal plus interest due and owing at Loan Maturity on
each successive thirtieth day following Loan Maturity if all amounts due and
owing to Lender under this Loan Agreement and all of the Secured Promissory
Notes are not paid in full prior to that date. Said late charges are intended
as liquidated damages in lieu of actual damages and not as interest or as a
penalty. Maker agrees that said late charge represents a fair and reasonable
estimate of the average compensation for the actual economic loss sustained
because of a default in payment. All late charges shall be due and payable,
without further notice, on each successive thirty day anniversary of the Loan
Maturity. Late charges are in addition to any interest charged at the Default
Rate. However, in the event that applicable law may limit the amount of late
charges or the aggregate amount of late charges plus interest that may be
charged under this Loan Agreement and the Secured Promissory Notes, such late
charges shall be at the highest rate allowed by applicable law.
(D) Notwithstanding the foregoing, the Lender, its nominee and/or any
Note Holder of any Secured Promissory Note shall not be obligated to accept any
Page 12 of 17
delinquent payment, nor shall acceptance of any delinquent payment or any late
charges prejudice Lender's, its nominee's or any Note Holder's right to collect
any other amounts under this Loan Agreement or any Secured Promissory Note, to
declare a default under or to accelerate this Loan Agreement or any of the
Secured Promissory Note in the event of any subsequent Event of Default or to
exercise any other rights or remedies provided herein or by law. Acceptance of
any delinquent payment without the applicable late charge shall not be deemed a
waiver of the right to collect that or any subsequent late charge. Acceptance
of late charge and/or default interest payments will be made "without prejudice"
and with explicit reservation of all rights regardless of notification, intended
in lieu of specific notification, being set out on a check or other instrument
by which a payment may be tendered and regardless of what notations on Maker's
part may accompany any tendered payment. Specifically this means that partial
payment of amounts due and payable does not, and will not, accomplish a
reinstatement of this Loan Agreement or any Secured Promissory Note, unless
Maker and Lender have a specific written understanding to allow reinstatement on
that basis. Such payments will simply reduce the accelerated balance owing.
Any such payment, if accepted, will be retained without prejudice to Maker's
right to proceed.
(E) All payments on this Loan Agreement and any of the Secured
Promissory Notes shall be applied first to late charges and any costs, added
charges or advances made by Lender, its nominee or any Note Holder of any of the
Secured Promissory Notes under the terms of any of the Loan and Security
Documents, then to discharge all interest including Default Interest due on the
unpaid principal balance hereof, and the remainder shall be applied to the
reduction of the principal balance and any Other Lender Liabilities.
(F) Maker (i) waives all applicable exemption rights, whether under the
state constitution, homestead laws or otherwise, (ii) waives diligence,
presentment, protest and demand and also notice of protest of demand, of
nonpayment, of dishonor and of maturity and also recourse to suretyship defenses
generally, marshaling of assets, laches, estoppel and equitable defenses
generally, and (iii) waives offset rights against the debt evidenced by this
Loan Agreement, the Loan and Security Documents and any Secured Promissory
Note(s).
(G) Maker agrees to pay all costs of collection, including reasonable
attorney's fees and all costs of suit, in the Event of Default hereunder.
ARTICLE X
---------
MISCELLANEOUS
10.1 Amendment and Modification. This Loan Agreement and the Secured
Promissory Notes may not be amended, modified or changed, nor shall any waiver
of any provision hereof be effective, except only by an instrument in writing
and signed by the party against whom enforcement of any waiver, amendment,
change, modification or discharge is sought; provided, however, that this
paragraph shall in no way be a limitation on the provisions of the consents and
waivers set forth above.
10.2 Severability, Enforceability And Construction. Each provision of this
Loan Agreement is intended to be severable. Maker and Lender further intend and
Page 13 of 17
believe that each provision in this Loan Agreement and each of the Secured
Promissory Notes complies with all applicable local, state and federal laws and
court decisions. However, if any provision or provisions in this Loan Agreement
or any of the Secured Promissory Notes is or are found by a court of law to be
in violation of an applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion or provision(s) of this Loan Agreement or any Secured
Promissory Note to be illegal, invalid, unlawful, void or unenforceable as
written, then it is the intent of Maker that such portion, provision(s) shall be
given full force and effect to the fullest possible extent that they are legal,
valid and enforceable, that the remainder of this Loan Agreement and such
Secured Promissory Notes shall be construed as if such illegal, invalid,
unlawful, void or unenforceable portion, provision(s) are not contained herein,
and that the rights, obligations and interests of the Maker and the Note Holder
or Lender hereof under the remainder of this Loan Agreement and such Secured
Promissory Notes shall continue in full force and effect.
10.3 Additional Sums. Any Additional Sums paid by Maker to Lender, whether
pursuant to this Loan Agreement, the Loan and Security Documents or any Secured
Promissory Note or otherwise with respect to the indebtedness evidenced hereby,
or with respect to the Security Agreement securing this Loan Agreement and the
Secured Promissory Notes, or any other Security Document, which, under the law
of the State of Arizona may be deemed to be interest with respect to such
indebtedness, shall, for the purpose of any laws of the State of Arizona which
may limit the maximum rate of interest to be charged with respect to such
indebtedness, be payable by Maker as, and shall be deemed to be, additional
interest, and for such purposes only, the agreed upon and contracted for rate of
interest shall be the sum of the Stated Rate or the Default Rate, as applicable,
plus the rate of interest resulting from the Additional Sums being considered as
interest. Maker understands and believes that all transactions contemplated
under this Loan Agreement and any of the Loan and Security Documents comply with
the usury laws of Arizona; however, if any interest or other charges are ever
deemed to exceed the maximum amount permitted by law, then: (i) the amount of
interest or charges payable hereunder by Maker shall be reduced to the maximum
amount permitted by law; and (ii) any excess amount previously collected from
Maker which exceeded the maximum amount permitted by law will be credited
against the outstanding principal indebtedness. If the principal indebtedness
has already been paid, the excess amount paid will be refunded to Maker. If
this paragraph becomes operative, the total unpaid balance shall, at the option
of Lender, become immediately due and payable and shall bear interest at a
maximum rate then permitted by the applicable usury laws until all the then
obligations of this Secured Promissory Note(s), as modified by this paragraph,
are paid and performed in full. The acceleration provided in this paragraph may
not be avoided by Maker and all parties liable to Lender on the Secured
Promissory Note(s), waiving any and all usury claims and defenses they then
have.
10.4 Time of the Essence. Time is of the essence of this Loan Agreement.
10.5 Governing Law, Jurisdiction And Venue. The enforcement, performance,
discharge, lack of performance and formation of this Loan Agreement shall be
governed by, and construed and enforced in accordance with, the law of the State
of Arizona, regardless of any applicable conflict-of-law rules to the contrary.
Maker and Lender also hereby:
Page 14 of 17
(A) irrevocably submit to the jurisdiction of the Arizona Courts for
purposes of any suit, action or other proceeding which relates to the
transactions contemplated in this Loan Agreement or any of the Loan and Security
Documents;
(B) to the extent permitted by applicable law, waive and agree not to
assert by way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that they are not personally subject to the jurisdiction
of the Arizona Courts; that the suit, action or proceeding is brought in an
inconvenient forum; that the venue of the suit, action or proceeding is
improper; or that this Loan Agreement or any transaction provided for herein or
any of the Loan and Security Documents may not be enforced in or by the Arizona
Courts; and
(C) agrees not to seek, and hereby waive, any collateral review by any
other court, which may be called upon to enforce the judgment or any of the
Arizona Courts, of the merits of any such suit, action or proceeding or the
jurisdiction of said Arizona Court.
10.6 Additional actions. Each party hereto agrees to do all acts and things
and to make, execute, and deliver such written instruments and documents as
shall from time to time be reasonably required to carry out the terms and
provisions of this Loan Agreement.
10.7 Construction. The parties hereto hereby acknowledge and agree that
each party has participated in the drafting of this Amendment and that this
Amendment has been, to the extent it was felt necessary, reviewed by the
respective legal counsel for the parties hereto and that the rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party will not be applied to the interpretation of this Amendment. No
inference in favor of, or against, any party will be drawn from the fact that
one party has drafted any portion hereof.
10.8 Advice of Counsel. Each Party hereby acknowledges that they are
entitled to and have been afforded the opportunity to consult legal counsel of
their choice regarding the terms and conditions and legal effects of this
Amendment, as well as the advisability and propriety thereof. Each party hereby
further acknowledges that having so consulted with legal counsel of their
choosing or having chosen not to consult, hereby waives any right to such legal
representation or effective representation and any right to raise or rely upon
the lack of representation or effective representation in any future proceedings
or in connection with any future claim.
10.9 Attorneys' fees. All attorneys' fees and costs of Lender related to
the costs for the preparation of this Loan Agreement and any of the other Loan
and Security Documents shall be paid by the Lender. However, in the event of
any claim, controversy or dispute arising out of or relating to this Loan
Agreement, or the breach thereof, the prevailing party shall be entitled to
recover reasonable attorneys' fees incurred in connection with any court
proceeding set by a court sitting without a jury.
10.10 Remedies Cumulative. The remedies of the parties hereto under
this Loan Agreement are cumulative and shall not exclude any other remedies to
which any party may be lawfully entitled.
Page 15 of 17
10.11 Computation of Time. Whenever the last day for the exercise of
any privilege or discharge of any duty hereunder shall fall upon Saturday,
Sunday or any public or legal holiday, whether under federal or state law, the
party having such privilege or duty shall have until 5:00 p.m. in the state
where the Lender has its headquarters on the next succeeding regular business
day to exercise such right or to discharge such duty.
10.12 Authority. Any individual signing below on behalf of a
corporation, partnership or other entity hereby personally represents that he or
she has full authority to bind the party or parties on whose behalf he or she is
signing.
10.13 Entire Loan Agreement. This Loan Agreement, including the
exhibits and schedules hereto, and the Loan and Security Documents contain the
entire understanding and agreement among the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings,
express or implied, oral or written, among the parties with respect to such
subject matter. The express terms of this Loan Agreement shall control and
supersede any course of performance or usage of the trade inconsistent with any
of the terms hereof. Each of the exhibits and schedules hereto is incorporated
herein by this reference and constitutes a part of this Loan Agreement.
10.14 Terminology. All captions, headings or titles in the paragraphs
or sections of this Loan Agreement are inserted for convenience of reference
only and shall not constitute a part of this Loan Agreement or a limitation of
the scope of the particular paragraph or section to which they apply. All
personal pronouns used in this Loan Agreement, whether used in the masculine,
feminine, or neuter gender, shall, where appropriate, include all other genders
and the singular shall include the plural and vice versa.
10.15 Notices. All communications or notices required or permitted to
be given or served under this Loan Agreement shall be in writing and shall be
deemed to have been duly given or made if: (a) delivered in person or by courier
(e.g., Federal Express), (b) deposited in the United States mail, postage
prepaid, for mailing by certified or registered mail, return receipt requested,
or (c) sent by facsimile during regular business hours and addressed to the
intended recipient at the address and/or the facsimile number set forth below
such party's signature at the end of this Loan Agreement. All communications
and notices shall be effective upon delivery in person or by courier, three (3)
days after being deposited in the United States mail or two (2) business hours
after being sent by facsimile. Any party may change their address and/or
facsimile number by giving notice in writing, stating their new address and/or
facsimile number, to all of the other parties in the foregoing manner.
10.16 Successors and Assigns. This Loan Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
assigns, legal representatives, executors, heirs and successors, provided,
however, that no party hereto shall have the right to assign any right hereunder
or delegate any obligation hereunder, in whole or in part, without the prior
written consent of the other parties hereto, and any attempt to do so shall be
void, except as provided herein. Lender or any Note Holders may assign, in
whole or in part, without the express prior written consent of the Maker or the
Issuer, any Secured Promissory Note. Neither the Maker nor the Issuer may
assign their obligations hereunder without consent, except that this section is
Page 16 of 17
in no way intended to impede any merger or acquisition of either the Issuer or
the Maker.
10.17 Counterparts. This Loan Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which together shall
constitute one and the same agreement. This Loan Agreement shall become binding
when one or more counterparts have been signed by each of the parties hereto and
delivered to the other parties hereto.
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the date first
written above.
LENDER MAKER
Visitalk Capital Corporation DynaSig Corporation
/s/ Xxxxxxx X. Xxxxxxxx /s/ Xxxxxxx X. Xxx
By: Xxxxxxx X. Xxxxxxxx By: Xxxxxxx X. Xxx
Its: President Its: President
--------------- ----------------
00000 X. 00xx Xxxxxx, Xxxxx 000 0000 X. Xxxxxxxxx Xx., Xxxxx 000
Xxxxxxx, Xxxxxxx 00000 Xxxxx, XX 00000
Fax number (000) 000-0000 Fax number (000) 000-0000
GUARANTOR AND ISSUER
Dynamic Biometric Systems, Inc.
/s/ Xxxxxxx X. Xxx
By: Xxxxxxx X. Xxx
Its: President
----------------
Exhibits
A Form of Secured Promissory Note
B Certificate of Designation of the Series A Preferred stock of Dynamic
Biometric Systems, Inc.
C Loan and Security Documents as indexed
Page 17 of 17
