Exhibit 10.8
Execution Copy
CREDIT
AGREEMENT,
dated as of April 9, 2002,
among
PC-EPHONE, INC.,
as the Borrower,
PC-EPHONE LTD.,
PC-EPHONE CANADA ENTERPRISES, INC.
and
PC-ESOLUTIONS, INC.
as Guarantors
and
PROCESS CONTROL (HOLDINGS) LIMITED
as the Lender
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1
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 9, 2002, among PC-EPHONE, INC., a
Nevada corporation (the "Borrower"), PC-EPHONE LTD., a company organized under
the laws of Bermuda and a wholly-owned subsidiary of the Borrower, PC-EPHONE
CANADA ENTERPRISES INC., a company organized under the laws of British Columbia,
Canada and a wholly-owned subsidiary of the Borrower, PC-ESOLUTIONS, INC., a
Delaware Corporation and a wholly-owned subsidiary of the Borrower (collectively
with PC-Ephone Ltd. and PC-Ephone Canada Enterprises, Inc., the "Guarantors")
and PROCESS CONTROL (HOLDINGS) LIMITED, a company organized under the laws of
the Republic of Ireland (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the Lender extend Loans in an
aggregate principal amount not to exceed $480,000.00;
WHEREAS, the Lender is willing, on the terms and subject to the conditions
hereinafter set forth, to make Loans to the Borrower;
WHEREAS, the Guarantors expect to receive substantial direct and indirect
benefits from the Loans to be made to the Borrower by the Lender hereunder
(which benefits are hereby acknowledged);
WHEREAS, the proceeds of the Loans will be used by the Borrower for the
purposes set forth on Schedule A hereto; and
WHEREAS, the Borrower, Lender and Whitelite Communication Limited
("Whitelite") have entered into that certain Heads of Agreement letter, dated
March 27, 2002 (the "Heads of Agreement"), setting forth certain terms and
conditions upon which Lender and Borrower propose to enter into a joint venture
(the "Joint Venture"); and
WHEREAS, the Heads of Agreement contemplates that Borrower and Lender will
enter into this Agreement prior to entering into definitive documentation with
respect to the Joint Venture,
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Affiliate" of any Person means
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(a) any other Person which, directly or indirectly, controls or is
controlled by or is under common control with such other Person;
or
(b) any Person who is a director or officer of such Person or of any
Person described in the foregoing clause (a).
For purposes of this definition, control of a Person shall mean (x) the
power, direct or indirect, (i) to vote 5% or more of the securities having
ordinary voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of such Person,
whether by contract or otherwise, or (y) the ownership, direct or indirect, of
10% or more of any class of voting stock of such Person.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Closing Date and as thereafter from time to time amended,
supplemented, amended and restated or otherwise modified and in effect on such
date.
"Authorized Officer", with respect to the Borrower or any Guarantor,
means Xxxxx Xxxxxxx.
"Borrower" has the meaning assigned to such term in the preamble
hereof.
"Borrowing" means the Loans made pursuant to Section 2.1.
"Borrowing Request" has the meaning assigned to such term in Section
4.1(g) hereof.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in Xxx
Xxxx, Xxx Xxxx, xx Xxxxxx, Xxxxxxx.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means (a) the acquisition after the Closing Date by
any Person or Persons acting in concert of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission promulgated
under the Securities Exchange Act of 1934, as amended, or any successor,
replacement or analogous rule or provision of law) of 20% or more of the
outstanding shares of voting stock of the Borrower, other than through the
exercise of convertible securities of the Borrower issued and outstanding on the
date of this Agreement including the Note; or (b) a majority of the board of
directors of the Borrower shall consist of directors other than (i) directors
holding office as of the Closing Date or (ii) directors whose election was
recommended by such directors or subsequent directors so recommended.
"Closing Date" means April 9, 2002.
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"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Collateral Documents" means, collectively, the Security Agreement, the
Pledge Agreement, the Registration Rights Agreement and each instrument or
document executed and delivered pursuant to or in connection with the terms of
the Security Agreement or the Pledge Agreement or the Registration Rights
Agreement, as the case may be, or any other instrument that may be entered into
by or on behalf of any party hereto for the purpose of providing the Lender with
security for the Obligations hereunder.
"Default" means any Event of Default or any condition or event which,
after notice or lapse of time or both, would become an Event of Default.
"Dollar" and the sign "$" mean lawful money of the United States of
America.
"Environmental Laws" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public health and safety
and protection of the environment.
"Event of Default" has the meaning assigned to such term in Section
7.1.
"First Draw" means the Borrowings of up to $160,000 (less any amounts
previously advanced to the Borrower by the Lender) made on the Closing Date.
"Fiscal Quarter" means any three-month period ending on March 31,
June 30, September 30 or December 31 of any given fiscal year.
"Fiscal Year" means any one-year period ending on December 31st of each
calendar year; references to a Fiscal Year with a number corresponding to any
calendar year (e.g. the "2002 Fiscal Year") refer to the Fiscal Year ending on
December 31st occurring during such calendar year.
"GAAP" means U.S generally accepted accounting principles at the time
in effect, consistently applied in accordance with past practices of the
Borrower.
"Guarantor" has the meaning assigned to such term in the preamble
hereof.
"Guaranty" means any agreement, undertaking, or arrangement by which
any Person guarantees, endorses, or otherwise becomes or is contingently liable
upon (by direct or indirect agreement, contingent or otherwise, to provide funds
for payment, to "keep-well" or supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the debt, obligation, or
other liability of any other Person (other than by endorsements of instruments
in the ordinary course of collection), or guarantees the payment of dividends or
other distributions upon the shares of any other Person. The amount of the
obligor's obligation under any Guaranty shall (subject to any limitation set
forth therein) be deemed to be the amount of the debt, obligation, or other
liability guaranteed or supported thereby.
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"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any other
applicable federal, state or local law, regulation, ordinance or
requirement (including consent decrees and administrative orders)
relating to or imposing liability or standards of conduct concerning
any hazardous, toxic or dangerous waste, substance or material, all as
amended or hereafter amended.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement refer to this Agreement as a whole and not to any particular
Section or provision of this Agreement.
"Indebtedness" of any Person, at a particular time, means all
obligations for borrowed money or the deferred purchase price of assets or other
property (including, without limitation, all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced by bonds,
debentures, notes or other similar instruments but excluding trade payables
incurred in the ordinary course of business in individual amounts not in excess
of $5,000 and payable within ninety days of the date thereof), (b) obligations
with respect to any conditional sale agreement or title retention agreement, (c)
indebtedness arising under acceptance facilities, in connection with surety or
other similar bonds, and all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether drawn or not drawn, and
banker's acceptances for the account of such Person and, without duplication,
all drafts drawn thereunder, (d) all liabilities secured by any Security
Interest in any property owned by such Person even though it has not assumed or
otherwise become liable for the payment thereof, (e) obligations under
capitalized leases, (f) obligations with respect to rate swap, cap, interest
rate collar or similar agreements, (g) any Guaranties of such Person, (h) all
obligations evidenced by preferred stock (or securities convertible thereunto)
subject to mandatory sinking fund payments, redemption or other acceleration
rights, and (i) Synthetic Leases.
"Instrument" means any contract, agreement, indenture, mortgage or
other document or writing (whether by formal agreement, letter, or otherwise)
under which any obligation is evidenced, assumed, or undertaken, or any right to
any Security Interest is granted or perfected.
"Investment" means, when used with reference to any investment of the
Borrower or any of its Subsidiaries,
(a) any loan, advance or other extension of credit made by it
to any other Person (excluding commission, travel, salary, relocation
expenses, and similar advances to officers and employees made in the
ordinary course of business not to exceed $10,000 in the aggregate);
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(b) any Guaranty made by such Person; and
(c) any capital contribution by such Person to, or purchase of
stock or other securities or partnership interests by such Person in,
any other Person, or any other investment evidencing an ownership or
similar interest of such Person in any other Person.
"Lender" has the meaning assigned to such term in the preamble hereof.
"Loans" means all amounts funded pursuant to the First Draw, Second
Draw or Third Draw, together with all interest accrued thereon.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Collateral Documents and each other instrument or document executed and
delivered pursuant to or in connection with this Agreement or any thereof.
"Materially Adverse Effect" means, relative to any occurrence of
whatever nature (including, without limitation, any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), a
materially adverse effect on:
(a) the consolidated business, assets, revenues,
condition (financial or otherwise), operations, or prospects of the
Borrower and its Subsidiaries; or
(b) the ability of the Borrower to perform any of its payment
or other material obligations under this Agreement, the Notes, the
Collateral Documents or any other Loan Documents.
"Net Debt or Equity Proceeds" means (a) with respect to the sale by the
Borrower or any Subsidiary of any stock or warrants, options or other
convertible securities issued by the Borrower or any Subsidiary or from the
exercise of any warrants, options or other convertible securities (excluding, in
each case, proceeds received pursuant to employee stock purchase plans, director
or employee option plans or other employee benefit plans); and (b) with respect
to the sale, issuance or incurrence of Indebtedness by the Borrower or any
Subsidiary not otherwise permitted by Section 6.2(b) (whether or not the
Borrower has received the prior written consent of the Lender), in each case,
the excess of (i) the gross proceeds received by the Borrower or such Subsidiary
from such sale, exercise, issuance or incurrence over (ii) the sum of all
customary fees and expenses with respect to underwriting commissions and related
legal, investment banking and accounting fees and disbursements paid in
connection therewith.
"Note" means a convertible promissory note of the Borrower payable to
the Lender, in substantially the form of Exhibit A hereto (as such promissory
note may be amended, endorsed or otherwise modified from time to time),
evidencing the aggregate Indebtedness of the Borrower to the Lender resulting
from outstanding Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
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"Obligations" means all obligations (monetary or otherwise whether
absolute or contingent matured or unmatured) of the Borrower and the Guarantors
to the Lender arising under or in connection with this Agreement and the Note
and all obligations (monetary or otherwise whether absolute or contingent
matured or unmatured) of the Borrower and its Subsidiaries arising under or in
connection with the Collateral Documents or the other Loan Documents, including
in each case, the principal of and premium, if any, and interest (including
interest accruing during, or which would have occurred but for the pendency of
any proceeding pursuant to Section 7.1(c), whether allowed or not allowed on any
Loans.
"Person" means any natural person, corporation, firm, trust,
partnership, business trust, joint venture, association, government,
governmental agency or authority, or any other entity, whether acting in an
individual, fiduciary, or other capacity.
"Pledge Agreement" means that certain Stock Pledge Agreement by and
among the Borrower and the Lender substantially in the form attached hereto as
Exhibit B.
"Release" means a "release", as such term is defined in CERCLA.
"Registration Rights Agreement" means that certain Registration Rights
Agreement by and among the Borrower and the Lender substantially in the form
attached hereto as Exhibit C.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Responsible Officer" means, at the time any determination thereof is
to be made, each of those persons who are the Chairman of the Board (if at the
time an officer), President, chief financial officer (regardless of the title),
Treasurer, corporate controller (regardless of the title), or Secretary of the
Borrower.
"Schedule" means any of the disclosure schedules delivered to the
Lender by the Borrower and Guarantors on the date hereof as required by any
Section of this Agreement.
"Second Draw" means the Loan of up to $160,000 contemplated to be made
on May 9, 2002 in accordance with Section 2.1 of this Agreement.
"Security Agreement" means that certain Security Agreement by and among
the Borrower, Guarantors and Lender, substantially in the form attached as
Exhibit D hereto.
"Security Instrument" means the Security Agreement, the Pledge
Agreement or any security agreement, chattel mortgage, assignment, financing or
similar statement or notice, continuation statement, other agreement or
Instrument, or amendment or supplement to any thereof, providing for, evidencing
or perfecting any Security Interest or other lien.
"Security Interest" means any interest in any real or personal property
or fixture which secures payment or performance of any obligation and shall
include any mortgage, lien, encumbrance, charge or other security interest of
any kind, whether arising under a Security Instrument or as a matter of law,
judicial process or otherwise.
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"Stated Maturity Date" has the meaning assigned to such term in
Section 3.1
"Subsidiary" means, when used with respect to any Person, any other
Person more than 50% of the outstanding shares of capital stock of which having
ordinary voting power for the election of directors is owned or controlled
directly or indirectly by such Person, and, except as otherwise indicated
herein, references to Subsidiaries shall refer to Subsidiaries of the Borrower,
including the Guarantors.
"Synthetic Lease" means, as applied to any Person, any lease (a) that
is not a capital lease in accordance with GAAP and (b) in respect of which, the
lessee retains or obtains ownership of the property for federal income tax
purposes.
"Taxes" has the meaning assigned to such term in Section 3.6.
"Third Draw" means the Loan of up to $160,000 contemplated to be made
on June 9, 2002 in accordance with Section 2.1 of this Agreement.
"United States" or "U.S." means the United States of America, its fifty
States, and the District of Columbia.
ARTICLE II
BORROWING PROCEDURES AND NOTES
Section 2.1. Loans. On the terms and subject to the conditions of this
Agreement, including without limitation the conditions set forth in Article IV
hereof, the Lender agrees to make a Loan with respect to the First Draw, on the
Closing Date, in a principal amount equal to $160,000 (less any amounts
previously advanced to the Borrower by the Lender). On each of May 9, 2002 and
June 9, 2002, the Lender shall make additional Loans representing the Second
Draw and Third Draw, respectively, each in a principal amount of not more than
$160,000 (or such lesser amount as the Borrower may request), provided, that all
conditions to the making of such Loans, as set forth in Article IV hereof, shall
have been satisfied. Notwithstanding anything to the contrary contained in this
Agreement, if at any time the Heads of Agreement shall be terminated in writing
by any party thereto, the Lender shall be under no obligation to fund any
further Loans from and after the date of such termination.
Section 2.2. Notes. The Loans shall be evidenced by a Note payable to the
order of the Lender in a maximum principal amount of $480,000.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
Section 3.1. Stated Maturity Date. The Borrower shall repay all outstanding
principal of, and accrued and unpaid interest on, the Loans, together with all
other monetary Obligations of the Borrower: (i) within 90 days of the date that
the Heads of Agreement is terminated in writing by any party thereto, (ii) if
the Heads of Agreement is superseded by definitive documentation with regard to
the Joint Venture, then within 90 days after the date that such definitive
documentation is executed and delivered by all parties thereto and (iii)
pursuant to Sections 7.2 and 7.3. Any such repayment date under this Section 3.1
is referred to as the "Stated Maturity Date".
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Section 3.2. Voluntary Prepayments. Prior to the Stated Maturity Date, the
Borrower may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans. Each prepayment of any Loans made pursuant to this Section shall be
without premium or penalty.
Section 3.3. Mandatory Prepayments. Prior to the Stated Maturity Date, on
the date of the receipt by the Borrower or any Subsidiary of Net Debt or Equity
Proceeds, or any proceeds from any sale of assets other than inventory sold in
the ordinary course of business, the Loans, together with all other monetary
Obligations of the Borrower, shall be immediately repaid. If the amount of Net
Debt or Equity Proceeds is insufficient to repay the full amount of all
outstanding principal and accrued interest on the Loans, and all other monetary
Obligations of the Borrower, such Net Debt or Equity Proceeds shall be applied
first to the reduction of accrued and unpaid interest, and then to the reduction
of outstanding principal, and then to the satisfaction of any other monetary
Obligations of the Borrower.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except to the extent that overdue interest shall accrue as
provided in Section 3.4
Section 3.4. Interest. Interest on the outstanding principal amount of
Loans shall accrue at the rate of seven percent (7%) per annum (the "Base
Rate"), based on a 360 day year. After the date any principal amount of any Loan
is due and payable (whether on the Stated Maturity Date, upon acceleration or
otherwise), after the Borrower has defaulted in the payment of any other
monetary Obligation which has become due and payable, and after the date any
other Event of Default shall have occurred (and so long as such Event of Default
shall be continuing), the Borrower shall pay interest (after as well as before
judgment) on all amounts payable hereunder at a rate per annum equal to the Base
Rate plus two percent (2%). If any interest payable under this Agreement exceeds
the maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount
Section 3.5. Payment Dates. Interest then accrued on each Loan shall be
payable
(a) on the Stated Maturity Date therefor;
(b) on the date of any payment or prepayment, in whole or in part, of
principal outstanding on such Loan; and
(c) on that portion of any Loans the Stated Maturity Date of which is
accelerated pursuant to Section 7.2 or Section 7.3, immediately
upon such acceleration.
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Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
Section 3.6. Taxes. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise, stamp
or other taxes, fees, duties, withholdings or other charges of any nature
whatsoever imposed by any taxing authority, other than income and franchise
taxes (such non-excluded items being called "Taxes"). In the event that any
withholding or deduction from any payment to be made by the Borrower hereunder
is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, as notified by the Lender to the Borrower, then the Borrower will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment
to such authority; and
(c) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by each
Lender will equal the full amount such Lender would have received
had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower upon written notice will promptly pay such additional amounts
(including any penalties, interest or expenses) as are necessary in order that
the net amount received by the Lender after the payment of such Taxes (including
any Taxes on such additional amount) shall equal the amount the Lender would
have received had not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes, interest or penalties that may become payable by the Lender
as a result of any such failure.
Section 3.7. Cash Payments. All payments by the Borrower contemplated by
this Agreement shall be made solely in cash, in lawful currency of the United
States, by wire transfer of immediately available funds at the direction of the
Lender.
ARTICLE IV
CONDITIONS TO BORROWINGS
Section 4.1. Effectiveness and Initial Loan. This Agreement shall become
effective on the Closing Date if each of the following conditions precedent in
this Section 4.1 shall be fulfilled to the satisfaction of the Lender. The
obligations of the Lender to fund any Loan comprising the First Draw, Second
Draw or Third Draw shall be subject to the prior or concurrent satisfaction of
each of such conditions:
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(a) Secretary Certificate. The Lender shall have received from the
Borrower and each Guarantor, a certificate, dated the date of
this Agreement, of its respective Secretary or any Assistant
Secretary as to
(i) resolutions of its Board of Directors or comparable
governance body then in full force and effect authorizing
the execution, delivery, and performance of this Agreement,
the Notes, each Collateral Document and each other Loan
Document to be executed by it, including, without
limitation, such resolutions as may be required in order to
satisfy the requirements of Section 78.438 of the Nevada
General Corporation Law;
(ii) the incumbency and signatures of its Authorized Officers
with respect to this Agreement, the Notes, each Collateral
Document and each other Loan Document to be executed by it
(upon which certificate the Lender may conclusively rely
until the Lender shall have received a further certificate
of the Secretary of the Borrower or the Guarantor, as
applicable, canceling or amending such prior certificate,
which further certificate shall be reasonably satisfactory
to the Lender);
(iii) its certificate of incorporation or comparable
organizational document; and
(iv) its by-laws or comparable corporate governance document;
and
(v) such other documents (certified if requested) as the Lender
may reasonably request with respect to any matter relevant
to this Agreement or the transactions contemplated hereby.
(b) Delivery of Notes. The Lender shall have received a Note, duly
executed and delivered by the Borrower and containing appropriate
insertions and conforming to the requirements of Section 2.2.
(c) Consents, Approvals, etc. The Lender shall have received copies
of all consents, waivers, amendments and other approvals of each
Person necessary for the performance of the other transactions
contemplated hereby, including, without limitation, any consents
required in order to permit the Borrower and its Subsidiaries to
convey to the Lender a first priority, perfected security
interest in any asset of the Borrower or any Subsidiary. Each
such consent, waiver, amendment and other approval shall be in
full force and effect and in form and substance satisfactory to
the Lender.
(d) Security Agreement; Pledge Agreement; Registration Rights
Agreement. The Security Agreement, the Pledge Agreement, the
Registration Rights Agreement and any perfection certificate or
other instrument contemplated thereby as requested by the Lender
shall have been duly executed and delivered by the Borrower, each
Guarantor and any required third parties, and shall be in full
force and effect.
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(e) No Materially Adverse Effect. Except as set forth on Schedule 5.5
hereto, no events shall have occurred which, individually or in
the aggregate, comprise a Materially Adverse Effect with respect
to the Borrower or any of its Subsidiaries since December 31,
2000.
(f) Compliance with Warranties, No Default, etc. Both before and
after giving effect to any Borrowing the following statements
shall be true and correct:
(i) the representations and warranties of the Borrower and its
Subsidiaries set forth in this Agreement and in each other
Loan Document shall be true and correct with the same
effect as if then made, and
(ii) no Default shall have then occurred and be continuing, and
neither the Borrower nor any of its Subsidiaries shall be
in material violation of any law or governmental regulation
or court order or decree.
(g) Borrowing Request. The Lender shall have received a written
request (a "Borrowing Request") from the Borrower for each such
Loan, dated the date of the First Draw, Second Draw or Third
Draw, as applicable, duly executed by the Authorized Officer of
the Borrower. Such written request shall contain representations
and warranties by the Borrower (i) that on the date of such Loan
(both immediately before and after giving effect to such Loan and
the application of the proceeds thereof), the statements set
forth in Section 4.1(f) are true and correct, (ii) that the
documents delivered to the Lender pursuant to the Secretary
Certificate on the date of this Agreement have not been amended,
modified or rescinded and remain in full force and effect as of
the date of such Loan, and (iii) that all other conditions
precedent to the making of such Loan have been satisfied.
(h) Satisfactory Legal Form, etc. All documents executed or submitted
pursuant hereto by or on behalf of the Borrower or any Subsidiary
shall be satisfactory in form and substance to the Lender and its
counsel; the Lender and its counsel shall have received all
information, and such counterpart originals or such certified or
other copies of such materials, including good standing
certificates, as the Lender or its counsel may request; and all
legal matters incident to the transactions contemplated by this
Agreement shall be satisfactory to counsel to the Lender.
(i) Heads of Agreement. The Heads of Agreement shall not have been
terminated in writing by any party thereto, unless the Heads of
Agreement shall have been superseded by definitive documentation
with respect to the Joint Venture.
(j) Lender shall have received a written opinion of Xxxx, Forward,
Xxxxxxxx & Scripps LLP, in form and substance satisfactory to the
Lender.
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(k) Lender shall have received an executed copy of a letter from
Xxxxxx Xxx, in the form attached as Exhibit E hereto.
ARTICLE V
WARRANTIES, ETC.
In order to induce the Lender to enter into this Agreement and to make
Loans hereunder, the Borrower represents and warrants unto the Lender as set
forth below.
Section 5.1. Organization, etc. Except as set forth in Schedule 5.1, each
of the Borrower and each Subsidiary is a corporation validly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the nature of its business makes
such qualification necessary and where the failure to so qualify might have a
Materially Adverse Effect, and has full power and authority to own or hold under
lease its property and to conduct its business substantially as currently
conducted by it. The Borrower and each Subsidiary that is a party to any Loan
Document has full corporate power and authority (a) to enter into and perform
its obligations under this Agreement, the Notes, the Collateral Documents and
the other Loan Documents, in each case, to which it is or is to be a party, (b)
to obtain Loans hereunder, and (c) to grant the Security Interests provided in
the Collateral Documents to which it is or is to be a party.
Section 5.2. Due Authorization. The execution and delivery by the Borrower
and each Guarantor of this Agreement and the Notes, the execution and delivery
by each of the Borrower and, if applicable, its Subsidiaries of the Collateral
Documents and the other Loan Documents, in each case, to which it is or is to be
a party, the performance by each of the Borrower and each of its Subsidiaries of
its obligations hereunder and thereunder, the granting of the Security Interests
provided for in the Collateral Documents and all Loans obtained hereunder by the
Borrower and its Subsidiaries, and the other Indebtedness hereunder have been
duly authorized by all necessary corporate action, do not (except for a report
on Form 8-K or similar report by the Borrower, any necessary blue sky filings,
and other filings, recordings, registrations, approvals and consents which have
been already made or obtained) require any filing or registration with or
approval or consent of any governmental agency or authority, any creditor or any
stockholder, do not and will not conflict with, result in any violation of, or
constitute any default under (a) any provision of the certificate of
incorporation, by-laws or similar organizational or governance document of the
Borrower or any of its Subsidiaries, (b) any material agreement or other
material Instrument binding upon or applicable to the Borrower or any of its
Subsidiaries or the property of the Borrower or any of its Subsidiaries or (c)
any present law or governmental regulation or court decree or order applicable
to the Borrower or any of its Subsidiaries or the property of the Borrower or
any of its Subsidiaries, and will not result in or require the creation or
imposition of any Security Interest in any of their respective properties
pursuant to the provisions of any agreement (excluding, however, the Security
Interests created or to be created by the Collateral Documents) or other
Instrument binding upon or applicable to the Borrower or any of its Subsidiaries
or the property of the Borrower or any of its Subsidiaries.
NYDOCS:1038799.10
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Section 5.3. Validity, etc. This Agreement has been duly executed and
delivered by the Borrower and each Guarantor and is, and each of the Notes and
each of the Collateral Documents and other Loan Documents to which the Borrower
or any of its Subsidiaries is or is to be a party constitutes or will
constitute, on the due execution and delivery thereof, the legal, valid, and
binding obligation of the Borrower or such Subsidiary, as the case may be,
enforceable in accordance with its terms, subject, as to enforcement, only to
bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time
in effect affecting the enforceability of the rights of creditors generally.
Section 5.4. Financial Information. All balance sheets, all statements of
income, shareholders' equity, and cash flows (including, without limitation,
such balance sheets and statements for the Fiscal Year ended December 31, 2000
and for the Fiscal Quarter ended September 30, 2001 and all other financial
statements which have been delivered hereto or shall hereafter be furnished by
or on behalf of the Borrower to the Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby, have been or will be
prepared in accordance with GAAP (except to the extent otherwise indicated on
Schedule 5.4 hereto) consistently applied throughout the periods involved and do
or will present fairly (subject, in the case of the interim unaudited financial
statements, to customary year-end adjustments) the consolidated financial
condition of the corporations covered thereby as at the dates thereof and the
results of their operations for the periods then ended. Neither the Borrower nor
any Subsidiary has on the date hereof any material contingent liability or
liabilities for taxes, long-term leases or unusual forward or long-term
commitments which are not reflected in the financial statements described above
or in the notes thereto. Schedule 5.4 sets forth all Indebtedness of the
Borrower and its Subsidiaries, and all Security Interests granted to any Person
by the Borrower or any of its Subsidiaries.
Section 5.5. Materially Adverse Effect. Except as set forth on Schedule 5.5
hereto since December 31, 2000, no events have occurred which, individually or
in the aggregate, comprise a Materially Adverse Effect on the Borrower.
Section 5.6. Absence of Default. Except as set forth on Schedule 5.6
hereto, neither the Borrower nor any Subsidiary is in default in the payment of
(or in the performance of any obligation applicable to) any Indebtedness, or in
violation of any law or governmental regulation or court decree or order, in any
such case, which could result in a Materially Adverse Effect.
Section 5.7. Litigation, etc. Except as set forth on Schedule 5.7 hereto,
there is no pending or, to the knowledge of the Borrower, threatened,
litigation, arbitration, labor controversy or governmental investigation or
proceeding against the Borrower or any Subsidiary or to which any of the
properties of any thereof is subject which
(a) if adversely determined, might have a Materially Adverse Effect;
(b) relates to this Agreement, the Notes, the Collateral Documents,
or the other Loan Documents; or
NYDOCS:1038799.10
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(c) is pending or threatened as of the date of this Agreement and
relates to any transaction to be financed in whole or in part
directly or indirectly with the proceeds of any Loan.
Section 5.8. Burdensome Agreements. Except as set forth on Schedule 5.8,
neither the Borrower nor any Subsidiary is or will be a party to any Instrument
or subject to any charter or other corporate restriction which could have a
Materially Adverse Effect.
Section 5.9. Taxes. Each of the Borrower and all of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes or charges which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books. No tax liens have been filed with respect to the
Borrower or any Subsidiary and, to the knowledge of the Borrower, no claims are
being asserted with respect to any such taxes or charges.
Section 5.10. Subsidiaries. The Borrower has no Subsidiaries other than the
Guarantors. No Guarantor has any Subsidiaries.
Section 5.11. Ownership of Properties, Licenses and Permits; Liens. Each of the
Borrower and each of its Subsidiaries has valid fee or leasehold interests in
all material real property, and good and marketable title to all of its
respective material properties and assets, real and personal, of any nature
whatsoever, and none of such property is subject to any Security Interest except
as set forth on Schedule 5.4. Each of the Borrower and each of its Subsidiaries
owns or holds all such licenses or permits as are necessary or desirable in the
conduct of its business, except to the extent that the failure to own or hold
the same could not have a Materially Adverse Effect.
Section 5.12. Patents, Trademarks, etc. Each of the Borrower and each of
its Subsidiaries owns (or is licensed to use) and possesses all such patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service xxxx rights, and copyrights (each, an "Intellectual
Property Right") as the Borrower considers necessary for the conduct of the
businesses of the Borrower and its Subsidiaries as now conducted without,
individually or in the aggregate, any infringement upon rights of, or (to the
Borrower's knowledge) by, other Persons which could have a Materially Adverse
Effect. There is no individual Intellectual Property Right the loss of which
could have a Materially Adverse Effect.
Section 5.13. Accuracy of Information. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries in writing to the Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Borrower or any of its
Subsidiaries to the Lender will be, true and accurate in every material respect
on the date as of which such information is dated or certified and as of the
date of execution and delivery of this Agreement by the Lender and not
incomplete by omitting to state any material fact necessary to make such
information not misleading. All projections delivered to Lender by Borrower have
been prepared in good faith by the Borrower and represent the Borrower's best
estimates, as of the date thereof, of the Borrower's and its Subsidiaries'
reasonably expected future performance.
NYDOCS:1038799.10
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Section 5.14. The Collateral Documents. The provisions of the Collateral
Documents executed by the Borrower and its Subsidiaries in favor of the Lender
are effective to create, in favor of the Lender, legal, valid and enforceable
first priority Security Interests in all right, title and interest of the
Borrower and its Subsidiaries in any and all of the collateral described
therein, securing the Notes and all other Obligations from time to time
outstanding. Neither the Borrower nor any of its Subsidiaries has granted any
Security Interest to any Person other than the Lender or taken any other action
that could prevent the Lender from holding a fully perfected Security Interest
in all right, title and interest of the Borrower and its Subsidiaries in such
collateral, superior in right to any liens, existing or future, which the
Borrower or any creditors of or purchasers from, or any other Person, may have
against such collateral or interests therein, except to the extent, if any,
otherwise provided in such Collateral Documents.
Section 5.15. Environmental Warranties. Except as set forth in Schedule
5.15 ("Environmental Matters"):
(a) all facilities and property (including underlying groundwater) owned or
leased by the Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by the Borrower and its Subsidiaries in
compliance with all Environmental Laws, except where noncompliance
would not reasonably be expected to have a Materially Adverse Effect;
(b) there are no pending or threatened
(i) material claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, or
(ii) material complaints, notices or inquiries to the Borrower or
any of its Subsidiaries regarding potential liability under
any Environmental Law;
(c) there have been no Releases of Hazardous Materials at, on or under any
property now or, until transferred, previously owned or leased by the
Borrower or any of its Subsidiaries that, singly or in the aggregate,
have, or may reasonably be expected to have, a Materially Adverse
Effect;
(d) the Borrower and its Subsidiaries have been issued and are in
compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary or
desirable for their businesses, except where such failure to have any
such permit, certificate, approval, license or other authorization
would not reasonably be expected to have a Materially Adversely Effect;
(e) no property now or, previously owned or leased by the Borrower or any
Subsidiary is or was listed or proposed for listing (with respect to
owned property only) on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
NYDOCS:1038799.10
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(f) there are no underground storage tanks, active or abandoned, including
petroleum storage tanks, on or under any property now or previously
owned or leased by the Borrower or any Subsidiary that, singly or in
the aggregate, have, or may reasonably be expected to have, a
Materially Adverse Effect;
(g) neither the Borrower nor any Subsidiary has directly transported or
directly arranged for the transportation of any Hazardous Material to
any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any similar
state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material
claims against the Borrower or such Subsidiary thereof for any remedial
work, damage to natural resources or personal injury, including claims
under CERCLA;
(h) there are no polychlorinated biphenyls or friable asbestos present at
any property now or previously owned or leased by the Borrower or any
Subsidiary that, singly or in the aggregate, have, or may reasonably be
expected to have, a Materially Adverse Effect; and
(i) no conditions exist at, on or under any property now or previously
owned or leased by the Borrower or any Subsidiary which, with the
passage of time, or the giving of notice or both, would give rise to
any material liability under any Environmental Law.
Section 5.16. Capitalization. The authorized capital of the Borrower
consists of 50,000,000 shares of common stock, par value $.001 per share,
16,672,039 shares of which are issued and outstanding on the date hereof, and
1,000,000 shares of preferred stock, par value $.01 per share, no shares of
which are issued and outstanding on the date hereof. All such outstanding
capital stock of the Borrower is validly issued and outstanding, fully paid and
non-assessable. There are no commitments for the purchase or sale of, and no
options, warrants, convertible debentures or other rights to subscribe for or
purchase, any securities of the Borrower, except as set forth on Schedule 5.16
hereto. The Borrower has duly authorized and reserved for issuance upon
conversion of the Note 3,000,000 shares of common stock.
ARTICLE VI
COVENANTS
Section 6.1. Certain Affirmative Covenants Applicable to the Obligations.
The Borrower agrees with the Lender that, until all Obligations have been paid
and performed in full:
(a) Financial Information, etc. The Borrower will furnish or will cause to
be furnished to the Lender, promptly upon any filing thereof by the
Borrower with the Securities and Exchange Commission copies of any
annual, periodic or special report, proxy statement, registration
statement or other filing (including exhibits); and promptly, such
additional financial and other information with respect to the Borrower
and its Subsidiaries as the Lender may from time to time reasonably
request.
NYDOCS:1038799.10
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(b) Maintenance of Corporate Existences, etc. The Borrower will cause to be
done at all times all things necessary to maintain and preserve the
corporate existences, rights (charter and statutory, except for changes
in statutory rights effected by legislation passed or court decisions
rendered after the date hereof) and franchises of the Borrower and each
of its Subsidiaries, and the Borrower will continue to own and hold,
directly or indirectly, free and clear of all Security Interests (other
than those created in favor of the Lender pursuant to the Security
Agreement and the Pledge Agreement) all of the outstanding shares of
capital stock (excluding directors' qualifying shares, if any) of each
such Subsidiary.
(c) Foreign Qualification. The Borrower will, and will cause each of its
Subsidiaries to, cause to be done at all times all things necessary to
be duly qualified to do business and be in good standing as a foreign
corporation in each jurisdiction where the nature of its business makes
such qualification necessary and where the failure to so qualify might
have a Materially Adverse Effect.
(d) Payment of Taxes, etc. The Borrower will, and will cause each of its
Subsidiaries to, pay and discharge, as the same may become due and
payable, all federal, state, and local taxes, assessments, and other
governmental charges or levies against or on any of its income, profits
or property, as well as claims of any kind which, if unpaid, might
become a lien upon any one of its properties, and will pay (before they
become delinquent) all other material obligations and liabilities;
provided, however, that the foregoing shall not require the Borrower or
any Subsidiary to pay or discharge any such tax, assessment, charge,
levy, lien, obligation or liability so long as it shall contest the
validity thereof in good faith by appropriate proceedings and shall set
aside on its books adequate reserves in accordance with GAAP with
respect thereto.
(e) Maintenance of Property; Insurance. The Borrower will, and will cause
each of its Subsidiaries to, keep all of its material property that is
useful and necessary in its business in good working order and
condition (ordinary wear and tear excepted) and will obtain, as quickly
as practicable, at the Borrower's expense, with insurance companies
reasonably acceptable to the Lender, insurance with respect to its
properties and businesses against such casualties and contingencies and
of such types, and in such amounts as is customary in the case of
similar businesses and will, upon request of the Lender, furnish to the
Lender at reasonable intervals a certificate of an Authorized Officer
setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries in accordance with this Section 6.1(e).
(f) Notice of Default, Litigation, etc. The Borrower will, upon obtaining
knowledge thereof, give notice (accompanied by a reasonably detailed
explanation with respect thereto) immediately to the Lender of:
(i) the occurrence of any Default;
NYDOCS:1038799.10
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(ii) any litigation, arbitration, labor controversy or governmental
investigation or proceeding not previously disclosed by the
Borrower to the Lender which has been instituted or, to the
knowledge of the Borrower, is threatened against, the Borrower
or any of its Subsidiaries or to which any of their respective
properties is subject which
(A) involves a damage claim of $10,000 or more,
individually, or $25,000 or more, in the aggregate, or
(B) relates to this Agreement, any Collateral Document,
any other Loan Document or any specific transaction
financed or to be financed in whole or in part
directly or indirectly with the proceeds of any Loan;
(iii) any material adverse development which shall occur in any
litigation, labor controversy, arbitration, or governmental
investigation or proceeding previously disclosed by the
Borrower to the Lender; and
(iv) any development which might result in a Materially Adverse
Effect;
(g) Performance of Instruments. The Borrower will, and will cause each of
its Subsidiaries to, promptly and faithfully perform all of its Obligations
hereunder, under the Notes, under each Collateral Document and under each other
Loan Document.
(h) Access. The Borrower will, and will cause each of its Subsidiaries to,
permit the Lender or any of its respective representatives, at reasonable times
and intervals during ordinary business hours, to visit all of its offices,
discuss its financial matters with its officers and independent accountants (and
hereby authorizes such independent accountants to discuss its financial matters
with the Lender or its representatives) and examine and make abstracts or
photocopies from any of its books or other corporate records, all at its own
expense for any charges imposed by such accountants or for making such abstracts
or photocopies. Notwithstanding the foregoing, upon the occurrence and during
the continuation of any Event of Default, such reasonable costs shall be at the
Borrower's expense.
(i) Compliance with Laws, etc. The Borrower will, and will cause each of
its Subsidiaries to, exercise all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which might have a Materially Adverse
Effect.
(j) Additional Subsidiaries and Assets. The Borrower will cause any newly
acquired or newly formed Subsidiary (whether or not the acquisition or formation
thereof is permitted by the terms of this Agreement) to become a Guarantor
hereunder immediately upon acquisition or formation thereof, by causing such
Subsidiary to execute such joinder agreements and other instruments as the
Lender may require for purposes of the foregoing. Simultaneously upon the
Borrower or any Subsidiary entering into any new distribution agreements or
other contracts with any Person (whether or not permitted by the terms of this
Agreement, the Borrower shall, or shall cause each applicable Subsidiary to, (i)
enter into such collateral assignment agreements or similar instruments as the
Lender may require for the purpose of conveying to the Lender a perfected, first
priority Security Interest therein, and (ii) obtain all third party consents
required in connection with the grant of such Security Interest to the Lender.
NYDOCS:1038799.10
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(k) Use of Proceeds. The Borrower shall apply the proceeds of the Loans as
set forth on Schedule A hereto.
Section 6.2. Certain Negative Covenants. The Borrower agrees with the
Lender that, until the Obligations have been paid and performed in full in cash:
(a) Business Activities. The Borrower will not, and will not permit any
Subsidiary to, engage in any business activity except the invention,
development, manufacturing, distribution, provision, sales and marketing of (i)
convergent devices, accessories, services and (ii) other related products,
services and technologies, and such activities as its Board of Directors
reasonably determines are incidental or related thereto.
(b) Indebtedness and other Liabilities. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume, or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, or in any other
liabilities, other than:
(i) Indebtedness of the Borrower in respect of the Loans and the
other Obligation and Indebtedness existing on the date of this
Agreement and set forth on Schedule 5.4 hereto; and
(ii) Indebtedness or other liabilities of the Borrower arising in the
ordinary course of business and not to exceed $10,000 in any one
instance or to any single creditor or supplier;
provided that no Indebtedness or other liability otherwise permitted to be
incurred shall be permitted to be incurred if, after giving effect to the
incurrence thereof, any Default shall have occurred and be continuing.
(c) Security Interests. The Borrower will not, and will not permit any of
its Subsidiaries to, create, incur, assume, or suffer to exist any Security
Interest upon any of its revenues, property (including without limitation fixed
assets, inventory, real property, intangible rights and stock) or other assets,
whether now owned or hereafter acquired, except:
(i) Security Interests in favor of the Lender under the Collateral
Documents to secure the Loans and other Obligations;
(ii) liens for taxes, assessments, or other governmental charges or
levies to the extent that payment thereof shall not at the time
be required to be made in accordance with the provisions of
Section 6.1(d);
NYDOCS:1038799.10
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(iii) liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith by appropriate
proceedings and for which appropriate reserves with respect
thereto have been established and maintained on the consolidated
books of the Borrower in accordance with GAAP to the extent
required under such principles;
(iv) liens incurred in the ordinary course of business in connection
with worker's compensation, unemployment insurance, or other
forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases, and
contracts (other than for borrowed money) entered into in the
ordinary course of business or to secure obligations on surety or
appeal bonds;
(v) easements, rights-of-way, zoning and similar restrictions and
other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of
the Borrower or its Subsidiaries;
(d) Investments. The Borrower will not, and will not permit any of its
Subsidiaries to, make, incur, assume, or suffer to exist any Investment in any
other Person, except the Guaranty made by the Guarantors in favor of the Lender
hereunder.
(e) Restricted Payments, etc.
(i) The Borrower will not , and will not permit any of its
Subsidiaries to, declare, pay, or make any dividend or
distribution (in cash, property, or obligations) on any shares of
any class of capital stock (now or hereafter outstanding) of the
Borrower or any Subsidiary or on any warrants, options, or other
rights with respect to any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower or any Subsidiary
or apply, or permit any of its Subsidiaries to apply, any of its
funds, property, or assets to the purchase, redemption, sinking
fund, or other retirement of any shares of any class of capital
stock (now or hereafter outstanding) of the Borrower or any
Subsidiary or of any warrants, options or other rights to acquire
shares of any class of capital stock of the Borrower or any
Subsidiary;
(ii) the Borrower will not, and will not permit any of its
Subsidiaries to, pay, prepay or repay any principal of, or make
any payment of interest on, or redeem, purchase, set aside any
funds for or defease, or give any notice of redemption for, or
purchase or otherwise acquire, any Indebtedness which, by its
terms, is subordinated in right of payment to the Loans, except
for scheduled interest payments as set forth on Schedule 5.4
hereto;
(iii) the Borrower will not, and will not permit any of its
Subsidiaries to, make any deposit for any of the foregoing
purposes; and
NYDOCS:1038799.10
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(iv) the Borrower will not pay, contribute, transfer, or capitalize
any Subsidiary with any cash or other assets, nor shall Borrower
permit any Subsidiary to create or acquire any assets or enter
into any contract, agreement or other instrument except as
required by this Agreement or any other Loan Document.
(f) Consolidation, Merger, Sale of Assets, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, wind-up, liquidate or dissolve
itself (or suffer any thereof), consolidate or amalgamate with or merge into or
with any other corporation or any other Person, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) or convey, sell, transfer, lease or otherwise dispose of all or any
part of its assets (including, without limitation, any stock or receivables), in
one transaction or a series of transactions, to any Person or Persons except:
(i) the sale of inventory in the ordinary course of business; and
(ii) the Joint Venture, as contemplated by, the Heads of Agreement.
(g) Modification, etc. of Existing Indebtedness. Without the prior written
consent of the Lender, not to be unreasonably withheld, the Borrower will not,
nor permit any of its Subsidiaries to, consent to or enter into any amendment,
supplement or other modification of any provision contained in any agreement or
instrument evidencing or governing any item of existing Indebtedness of the
Borrower or any of its Subsidiaries.
(h) Transactions with Affiliates. Except as set forth on Schedule 6.2(h),
the Borrower will not, and will not permit any of its Subsidiaries to, enter
into, or cause, suffer, or permit to exist:
(i) any arrangement or contract with any of its Affiliates requiring
any payments to be made by the Borrower or any of its
Subsidiaries to any Affiliate; or
(ii) any other transaction, arrangement, or contract with any of its
Affiliates which would not be entered into by a prudent Person in
the position of the Borrower or such Subsidiary with, or which is
on terms which are less favorable than are obtainable from, any
Person which is not one of its Affiliates.
(i) Negative Pledges; Subsidiary Payments; Modification of Documents. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement (a) (excluding this Agreement, and the other Loan Documents),
prohibiting the creation or assumption of any Security Interest upon its
properties, revenues, or assets, whether now owned or hereafter acquired, (b)
which would restrict the ability of any Subsidiary of the Borrower to pay or
make dividends or distributions in cash or kind, to make loans, advances or
other payments of whatsoever nature, or to make transfers or distributions of
all or any part of its assets, in each case to the Borrower or to any
corporation as to which such Subsidiary is a Subsidiary or (c) which restricts
or limits the ability of the Borrower to amend, supplement or otherwise modify
any of the Loan Documents.
NYDOCS:1038799.10
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(j) Inconsistent Agreements. The Borrower will not, and will not permit any
of its Subsidiaries to, enter into any agreement containing any provision which
would be violated or breached by any Loan or by the performance by the Borrower
of its obligations hereunder or under any Note or any other Loan Document.
(k) Compensation. The Borrower shall not make any changes to the
compensation, fringe benefits or other employment arrangements of any of its
employees.
(l) Environmental Liabilities. The Borrower will not, and will not permit
any of its Subsidiaries to:
(i) violate any requirement of law, rule, regulation or order
regarding Hazardous Material (including without limitation any
such law, rule, regulation or order regarding the generation,
accumulation, storage, transportation, treatment, recycling or
disposal of any Hazardous Material),
(ii) dispose of or, except in accordance with applicable law, store
any Hazardous Material in, on or at any real property owned or
operated by the Borrower or any of its Subsidiaries,
(iii) allow any lien imposed pursuant to any law, rule, regulation or
order relating to any Hazardous Material or the disposal thereof
to be imposed or to remain on such real property, except as
contested in good faith by appropriate proceedings for which
adequate reserves have been established and are being maintained
on its books, or
(iv) fail at any time to obtain or comply with any permit,
certificate, license, approval or other authorization relating to
environmental matters, or to file any notification or report
relating to chemical substances, air emissions, effluent
discharges or Hazardous Material waste storage, treatment or
disposal required in connection with the operation of their
businesses.
(m) Issuance of Equity. The Borrower shall not issue any equity, debt or
convertible securities, or any other shares, interest or participation in its
capital, except pursuant to (i) the option contemplated, under the terms of the
Heads of Agreement, to be granted to the Lender to permit the Lender to convert
its ownership interest in the Joint Venture into common stock of the Borrower,
(ii) the Note, (iii) convertible securities issued and outstanding as of the
date hereof and set forth on Schedule 5.16 hereto; (iv) for the purpose of
repaying the Obligations in full, or (v) a transaction to which the Lender has
granted its prior written consent.
(n) Publicity. The Borrower will consult with the Lender before issuing any
press release or other public statement with respect to this Agreement or the
transactions contemplated hereby and, unless required by applicable law in the
reasonable judgment of Borrower, will not issue any such press release or other
public statement without the prior written consent of the Lender, which consent
shall not be unreasonably withheld.
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(o) Additional Subsidiaries and Assets. The Borrower will not, and will
cause its Subsidiaries to not, form or organize any new Subsidiary.
(p) Sale and Leaseback. The Borrower will not, and will not permit any of
its Subsidiaries to, directly or indirectly enter into any agreement or
arrangement providing for the sale or transfer by it of any property (now owned
or hereafter acquired) to a Person and the subsequent lease or rental of such
property or other similar property from such Person.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1. Events of Default. The term "Event of Default" shall mean any
of the events set forth in Sections 7.1(a) through 7.1(h).
(a) Non-Payment of Obligations. The Borrower shall default in the
payment or prepayment when due of any principal of or interest on
any Loans, any Note, or any other monetary Obligation.
(b) Default on Other Indebtedness. (i) any default by the Borrower or
any of its Subsidiaries relating to the non-payment of any other
Indebtedness (provided, however, that defaults on other
Indebtedness existing on or prior to the date hereof and
disclosed on any Schedule ("Defaulted Existing Indebtedness")
shall not constitute a Default or Event of Default under this
Section 7.1(b)(i); and provided further, that trade payables
arising in the ordinary course of business after the date hereof
shall not give rise to a Default or Event of Default under this
Section 7.1(b)(i) so long as the amount of such trade payables
more than thirty (30) days past due, together with all increases
in the unpaid amount of Defaulted Existing Indebtedness, shall
not exceed $50,000 in the aggregate), or (ii) when thirty (30)
days have elapsed, without remedy, after any other default shall
have occurred with respect to other Indebtedness of the Borrower
or any Subsidiary or arising under any other material agreement
to which the Borrower or any subsidiary is a party.
(c) Bankruptcy, Insolvency, etc. The Borrower or any of its
Subsidiaries shall
(i) (A) become insolvent or generally fail to pay debts as they
become due, or (B) admit in writing its inability to pay
debts as they become due;
(ii) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator, or other custodian for
the Borrower or any Subsidiary or any property of any
thereof, or make a general assignment for the benefit of
creditors;
NYDOCS:1038799.10
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(iii) in the absence of such application, consent, or
acquiescence, permit or suffer to exist the appointment of
a trustee, receiver, sequestrator, or other custodian for
the Borrower or any Subsidiary or for a substantial part of
the property of any thereof, and such trustee, receiver,
sequestrator, or other custodian shall not be discharged
within thirty days;
(iv) permit or suffer to exist the commencement of, or commence,
any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law;
or any dissolution, winding up, or liquidation proceeding
(except for the voluntary dissolution, not under bankruptcy
or insolvency law, of any Subsidiary), shall be commenced
by or against the Borrower or any Subsidiary, and, if not
commenced by the Borrower or such Subsidiary, such
proceeding shall be consented to or acquiesced in by the
Borrower or such Subsidiary, or shall result in the entry
of an order for relief or shall remain for thirty days
undismissed; or
(v) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
(d) Breach of Warranty. Thirty (30) days have elapsed, without
remedy, after the Lender notifies the Borrower (or, if sooner,
the Borrower notifies the Lender) that any representation or
warranty of the Borrower or any of its Subsidiaries hereunder,
under any Collateral Document or other Loan Document, or under
any other writing furnished by or on behalf of the Borrower or
any of its Subsidiaries to the Lender for the purposes of or in
connection with this Agreement or any Collateral Document or
other Loan Document, is or shall be incorrect in any material
respect when made or deemed to be made.
(e) Non-Performance of Covenants and Other Obligations. The Borrower
or any of its Subsidiaries shall default in the due performance
and observance of (i) any covenant or agreement contained in
Sections 6.1(b), (g), (h), (i), (j) or (k) or in Section 6.2, or
(ii) or any other covenant or agreement contained herein or in
any Collateral Document or other Loan Document, and such default
under clause (ii) only, shall continue unremedied for fifteen
(15) days. The parties acknowledge that in the event that the
Lender converts any portion of the Loans to common stock in
accordance with the terms of the Note, then the timing of the
registration rights pertaining to such common stock shall be
governed by the provisions for such registration rights as set
forth in the Registration Rights Agreement.
(f) Judgments; Settlements. After the date hereof, a final judgment
or a settlement which, with other such outstanding final
judgments or settlements against the Borrower and each
Subsidiary, exceeds an aggregate of $10,000.
(g) Impairment of Security, etc. Any one of the Collateral Documents,
or any Security Interest granted thereunder, shall terminate,
cease to be effective, or cease to be the legally valid, binding,
and enforceable obligation of the Borrower thereunder with
respect to collateral security; the Borrower shall, directly or
indirectly, contest in any manner such effectiveness, validity,
binding nature, or enforceability; or any Security Interest
securing, in whole or in part, any Obligation shall cease to have
the priority purported to be given under the Collateral
Documents.
NYDOCS:1038799.10
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(h) Change of Control. Any Change of Control shall occur.
Section 7.2. Action if Bankruptcy. If any Event of Default described in
Section 7.1(c) shall occur, the outstanding principal amount of all outstanding
Loans and all other Obligations shall automatically be and become immediately
due and payable and all further obligations on the part of the Lender to provide
Loans shall terminate, all without notice, demand, presentment or other action
of any kind.
Section 7.3. Action if Other Event of Default. If any Event of Default
(other than an Event of Default described in Section 7.1(c) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Lender may,
upon notice or demand, declare all or any portion of the outstanding principal
amount of the Loans to be due and payable and any or all other monetary
Obligations to be due and payable, the full unpaid amount of such Loans and any
and all other monetary Obligations which shall be so declared due and payable
shall be and become immediately due and payable, in each case without further
notice, demand, presentment or other action of any kind.
Section 7.4. Termination of Non-Circumvent Agreement.
(a) If any Event of Default shall occur for any reason, the Lender
may, upon written notice to the Borrower, terminate certain
portions of that certain Non-Circumvent Agreement, dated January
4, 2002 but executed by PCAS Telecom Ltd. on February 3, 2002,
between the Borrower and PCAS Telecom Ltd., such termination to
take effect without the signature or consent of either such
party. Such termination shall only affect the restrictions
imposed on the "PCAS Group" (as defined in the Non-Circumvent
Agreement) with respect to contacting and conducting business
with Seoul Systems Co. Ltd.("SSC") and Cyberbank Corp.
("Cyberbank").
(b) With respect to SSC, such termination shall have the effect of
permitting the PCAS Group to market, sell and otherwise
distribute SSC products, specifically including the "Flexis
Keyboard", but only in Europe, the Middle East, Africa and China.
The PCAS group shall be permitted to contact SSC to the extent
necessary to obtain any required authorizations or consents to
market, sell and otherwise distribute SSC products as
contemplated hereby.
(c) With respect to Cyberbank, such termination shall remove all
restrictions imposed on the PCAS Group in respect of contacting
and conducting business with Cyberbank, but only in respect of
business activities conducted in Europe, the Middle East, Africa
and China.
NYDOCS:1038799.10
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ARTICLE VIII
GUARANTY
Section 8.1. Guaranty of Payment and Performance. Each Guarantor hereby
guarantees to the Lender the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), as well
as the performance, of all of the Obligations of the Borrower, including all
indemnity Obligations of the Borrower pursuant to Section 9.4 hereof, and
including all such Obligations which would become due but for the operation of
the automatic stay pursuant to ss.362(a) of the Federal Bankruptcy Code and the
operation of ss.ss.502(b) and 506(b) of the Federal Bankruptcy Code, provided,
however, that each Guarantor shall be liable under this Guaranty for the maximum
amount of such liability that can be incurred without rendering this Guaranty
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount. The Guaranty created by this Article
VIII is an absolute, unconditional and continuing guaranty of the full and
punctual payment and performance of all of the Obligations and not of their
collectibility only and is in no way conditioned upon any requirement that the
Lender first attempt to collect any of the Obligations from the Borrower or
resort to any collateral security or other means of obtaining payment. Should
the Borrower default in the payment or performance of any of the Obligations,
the obligations of each Guarantor hereunder with respect to such Obligations in
default shall become immediately due and payable to the Lender, without demand
or notice of any nature, all of which are expressly waived by each Guarantor.
Payments by any Guarantor hereunder may be required by the Lender on any number
of occasions.
Section 8.2. Subrogation; Subordination.
(a) Waiver of Rights Against Borrower. Until the final payment and
performance in full of all of the Obligations, no Guarantor shall
exercise any rights against the Borrower arising as a result of
payment by such Guarantor hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will
not prove any claim in competition with the Lender in respect of
any payment hereunder in any bankruptcy, insolvency or
reorganization case or proceedings of any nature; no Guarantor
will claim any setoff, recoupment or counterclaim against the
Borrower in respect of any liability of such Guarantor to the
Borrower; and each Guarantor waives any benefit of and any right
to participate in any collateral security which may be held by
the Lender.
(b) Subordination. The payment of any amounts due with respect to any
Indebtedness of the Borrower now or hereafter owed to any
Guarantor is hereby subordinated to the prior payment in full of
all of the Obligations. Each Guarantor agrees that, after the
occurrence of any default in the payment or performance of any of
the Obligations, such Guarantor will not demand, xxx for or
otherwise attempt to collect any such Indebtedness of the
Borrower to such Guarantor until all of the Obligations shall
have been paid in full. If, notwithstanding the foregoing
sentence, any Guarantor shall collect, enforce or receive any
amounts in respect of such Indebtedness, such amounts shall be
collected, enforced and received by such Guarantor as trustee for
the Lender and be paid over to the Lender on account of the
Obligations without affecting in any manner the liability of such
Guarantor under the other provisions of this Guaranty.
NYDOCS:1038799.10
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Section 8.3. Waivers by Guarantors; Lender's Freedom to Act. Each Guarantor
agrees that the Obligations will be paid and performed strictly in accordance
with their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lender with respect thereto. Each Guarantor waives promptness,
diligence, presentment, demand, protest, notice of acceptance, notice of any
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Borrower or any other entity or other person primarily or secondarily
liable with respect to any of the Obligations, and all suretyship defenses
generally. Without limiting the generality of the foregoing, each Guarantor
agrees to the provisions of any instrument evidencing, securing or otherwise
executed in connection with any Obligation and agrees that the obligations of
each Guarantor hereunder shall not be released or discharged, in whole or in
part, or otherwise affected by (i) the failure of the Lender to assert any claim
or demand or to enforce any right or remedy against the Borrower or any other
entity or other person primarily or secondarily liable with respect to any of
the Obligations; (ii) any extensions, compromise, refinancing, consolidation or
renewals of any Obligation; (iii) any change in the time, place or manner of
payment of any of the Obligations or any rescissions, waivers, compromise,
refinancing, consolidation, amendments or modifications of any of the terms or
provisions of this Agreement, the Note, the other Loan Documents or any other
agreement evidencing, securing or otherwise executed in connection with any of
the Obligations; (iv) the addition, substitution or release of any entity or
other person primarily or secondarily liable for any Obligation, (v) the
adequacy of any rights which the Lender may have against any collateral security
or other means of obtaining repayment of any of the Obligations; (vi) the
impairment of any collateral securing any of the Obligations, including without
limitation the failure to perfect or preserve any rights which the Lender might
have in such collateral security or the substitution, exchange, surrender,
release, loss or destruction of any such collateral security; or (vii) any other
act or omission which might in any manner or to any extent vary the risk of any
Guarantor or otherwise operate as a release or discharge of any Guarantor, all
of which may be done without notice to any Guarantor. To the fullest extent
permitted by law, each Guarantor hereby expressly waives any and all rights or
defenses arising by reason of (A) any "one action" or "anti-deficiency" law
which would otherwise prevent the Lender from bringing any action, including any
claim for a deficiency, or exercising any other right or remedy (including any
right of set-off), against any Guarantor before or after the Lender's
commencement or completion of any foreclosure action, whether judicially, by
exercise of power of sale or otherwise, or (B) any other law which in any other
way would otherwise require any election of remedies by the Lender.
Section 8.4. Unenforceability of Obligations Against Borrower. If for any
reason the Borrower has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Borrower by reason of the Borrower's insolvency,
bankruptcy or reorganization or by other operation of law or for any other
reason, the Guaranty created by this Article VIII shall nevertheless be binding
on each Guarantor to the same extent as if such Guarantor at all times had been
the principal obligor on all such Obligations. In the event that acceleration of
the time for payment of any of the Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, or for any other reason, all such
amounts otherwise subject to acceleration under the terms of this Agreement, the
Note, the other Loan Documents or any other agreement evidencing, securing or
otherwise executed in connection with any Obligation shall be immediately due
and payable by each Guarantor.
NYDOCS:1038799.10
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ARTICLE IX
MISCELLANEOUS
Section 9.1. Waivers, Amendments, Remedies, etc. The provisions of this
Agreement and of each Loan Document may from time to time be amended, modified,
or waived, if such amendment, modification or waiver is in writing and consented
to by the Borrower and the Lender. No failure or delay on the part of the Lender
in exercising any power or right under this Agreement, the Collateral Documents,
the Notes or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances, unless otherwise required by
the Loan Documents. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
No waiver or approval by the Lender under this Agreement, the
Collateral Documents, the Notes or any other Loan Document shall, except as may
be otherwise stated in such waiver or approval, be applicable to subsequent
transactions, events or Defaults. No waiver or approval hereunder shall require
any similar or dissimilar waiver or approval thereafter to be granted hereunder.
Section 9.2. Notices. All notices and other communications provided to any party
hereto under this Agreement, the Collateral Documents, the Notes or any other
Loan Document shall be in writing or by facsimile transmission and addressed or
delivered to it at its address designated for notices set forth below its
signature hereto or at such other address as may be designated by such party in
a notice to the other parties provided, that any notices or communications
intended to be given to any Guarantor shall be delivered to the Borrower. Any
notice, if mailed and properly addressed with postage prepaid, shall be deemed
given when received; any notice, if transmitted by facsimile transmission or
delivery, shall be deemed given when received.
Section 9.3. Costs and Expenses. Except as specifically set forth in this
Agreement, each party hereto shall bear its own costs and expenses in connection
with this Agreement and the other Loan Documents. The Borrower agrees to
reimburse each Lender upon demand for all stamp or other taxes (other than
income and franchise taxes) payable in connection with the execution, delivery
or enforcement of this Agreement or any Instrument related hereto and for all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
other charges) incurred by such Lender in enforcing the obligations of the
Borrower or any of its Subsidiaries under this Agreement, any Note or any other
Loan Document. The Borrower shall pay (or shall reimburse the Lender for) all
recording or filing fees in connection with any UCC-1 or similar financing
statements to be filed in connection with the Loan Documents, and the Borrower
shall pay (or shall reimburse the Lender for) the cost of lien, tax and judgment
searches in all appropriate jurisdictions. The obligations of the Borrower under
this Section 8.3 shall survive any termination of this Agreement.
NYDOCS:1038799.10
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Section 9.4. Indemnification. In consideration of the execution and
delivery of this Agreement by the Lender and the making of the Loans, the
Borrower hereby indemnifies, exonerates and holds the Lender and each of its
Affiliates, officers, directors, employees, and agents (collectively the "Lender
Parties" and, individually, a "Lender Party") free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities,
damages, and expenses actually incurred in connection therewith (irrespective of
whether such Lender Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by the Lender Parties or any of them
as a result of, or arising out of, or relating to, or as a direct or indirect
result of:
(a) the transactions contemplated by the Loan Documents;
(b) except for expenses incurred in connection with the preparation,
review, execution and delivery of this Agreement and the other
Loan Documents (other than as set forth in Section 9.3), becoming
a party to and performance of this Agreement, the Collateral
Documents, the Notes and the other Loan Documents by any of the
Lender Parties; and
(c) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any
real property now or previously owned or operated by the Borrower
or any of its Subsidiaries or in which the Borrower or any of its
subsidiaries now or previously held any interest (pecuniary or
otherwise) of any Hazardous Material (including, without
limitation, any losses, liabilities, damages, injuries, costs,
expenses or claims asserted or arising under any Environmental
Law, or any other federal, state, local or other statute, law,
ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct
concerning, any Hazardous Material), regardless of whether or not
caused by, or within the control of, the Borrower or any of its
Subsidiaries;
except for any such Indemnified Liabilities arising for the account of a
particular Lender Party solely by reason of such Lender Party's gross negligence
or willful misconduct or breach by such Lender Party of its obligations under
the Loan Documents, and if and to the extent that the foregoing undertaking may
be unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
Section 9.5. Survival. The obligations of the Borrower and each Guarantor
under Sections 3.6, 9.3 and 9.4 and Article VIII shall in each case survive any
NYDOCS:1038799.10
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termination of this Agreement. The representations and warranties made by the
Borrower and its Subsidiaries in this Agreement and in each Loan Document, and
in any document, certificate or statement delivered pursuant hereto or thereto
or in connection herewith or therewith, shall survive the execution and delivery
of this Agreement and each Loan Document.
Section 9.6. Severability. Any provision of this Agreement, the Notes or
any Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement, the Notes or Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction. Section 9.7.
Headings. The various headings of this Agreement and of each Loan Document are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or such Loan Document or any provisions hereof or thereof.
Section 9.8. Counterparts, Entire Agreement, etc. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
executed by the Borrower and the Lender and be deemed to be an original and all
of which shall constitute together but one and the same agreement. The Notes,
the Heads of Agreement and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and thereof and supersede any prior agreements, written or oral, with respect
thereto. Sections 3, 5.1 and 5.2 of the Heads of Agreement are superseded
hereby.
Section 9.9. Governing Law. THIS AGREEMENT AND THE NOTES SHALL EACH BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
Section 9.10. Sale and Transfer of Loans, Note or Conversion Shares. The
Lender may assign, or sell participations in, its Loans and its rights under the
Loan Documents to one or more other Persons in its sole and absolute discretion;
provided, that any proposed transferee of a Note or any shares of common stock
of the Borrower issued upon conversion of the Note (unless such transfer is made
pursuant to an effective registration statement under the Securities Act of
1933, as amended, or pursuant to Rule 144 promulgated thereunder) shall first
execute and deliver to the Lender a certificate of representations substantially
in the form attached as Exhibit F hereto.
Section 9.11. Further Assurances. The Borrower hereby agrees that it will,
from time to time at its own expense, promptly execute and deliver all further
Instruments, and take all further action, that may be necessary or appropriate,
or that the Lender may request, in order to perfect or protect any Security
Interest granted under the Collateral Documents, to enable the Lender to
exercise and enforce its rights under this Agreement and the other Loan
Documents and otherwise to carry out the intent of this Agreement and the other
Loan Documents.
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Section 9.12. Forum Selection and Consent to Jurisdiction. ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE LENDER, THE BORROWER OR ANY
GUARANTOR SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE
TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 9.13. Waiver of Jury Trial. THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), OR ACTIONS OF THE LENDER, THE BORROWER OR ANY GUARANTOR.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER:
PC-EPHONE, INC.
By:/s/ Xxxxx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxx
Title: CEO, President
Address: 0000 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
-----------------------------------
Xxx Xxxxx, Xxxxxxxxxx 00000
-----------------------------------
Fax: (000) 000-0000
--------------------------------------
Attention:
---------------------------------
with a copy of any notice to:
-------------------------------------------
-------------------------------------------
Fax:
---------------------------------------
NYDOCS:1038799.10
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GUARANTORS:
PC-EPHONE LTD.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
Address: 000 Xxxxx Xxxxxx, Xxxxxxxx, XX 12
------------------------------------
Bermuda
------------------------------------
Fax: (000) 000-0000
-----------------------------------------
Attention:
----------------------------------
with a copy of any notice to:
--------------------------------------------
--------------------------------------------
Fax:
----------------------------------------
PC-EPHONE CANADA ENTERPRISES INC.
By: Xxxxxxx Xxx
----------------------------------------
Name: Xxxxxxx Xxx
Title: President & Director
Address:
-----------------------------------
Fax:
---------------------------------------
Attention:
---------------------------------
with a copy of any notice to:
-------------------------------------------
-------------------------------------------
Fax:
---------------------------------------
NYDOCS:1038799.10
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PC-ESOLUTIONS, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxx
Title: President, Secretary, Treasurer
Address: 0000 Xxxx Xxxxxxxx Xxxxx, Xxxxx 000
-----------------------------------
Xxx Xxxxx, Xxxxxxxxxx 00000
-----------------------------------
Fax: (000)000-0000
---------------------------------------
Attention:
---------------------------------
with a copy of any notice to:
-------------------------------------------
-------------------------------------------
Fax:
---------------------------------------
LENDER:
PROCESS CONTROL (HOLDINGS) LIMITED
By: /s/ Xxxxx Xxxxx
---------------------------------------
Name: Xxxxx Xxxxx
Title: Director
Address: Xxxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxxx
Xxxxxxx
Fax: +353 (503) 42620
Attention: Xxxx X. Xxxxxx
with a copy of any notice to:
Xxxxxxx X. Xxxxxxxx,
Address: Xxxxxxx X. Xxxxxxxx & Company
Xxxxxxxxx Xxxx
Xxxxx, Xxxxxx Xxxxx
Xxxxxxx
Fax: x000 (00) 000-0000
NYDOCS:1038799.10
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TABLE OF CONTENTS
-----------------
SECTION Page
------- ----
ARTICLE I DEFINITIONS 1
Section 1.1. Defined Terms......................................2
ARTICLE II BORROWING PROCEDURES AND NOTES.....................................2
Section 2.1. Loans..............................................8
Section 2.2. Notes..............................................8
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES........................8
Section 3.1. Stated Maturity Date...............................8
Section 3.2. Voluntary Prepayments..............................9
Section 3.3. Mandatory Prepayments..............................9
Section 3.4. Interest...........................................9
Section 3.5. Payment Dates......................................9
Section 3.6. Taxes.............................................10
Section 3.7. Cash Payments.....................................10
ARTICLE IV CONDITIONS TO BORROWINGS..........................................10
Section 4.1. Effectiveness and Initial Loan....................10
ARTICLE V WARRANTIES, ETC....................................................13
Section 5.1. Organization, etc.................................13
Section 5.2. Due Authorization.................................13
Section 5.3. Validity, etc.....................................14
Section 5.4. Financial Information.............................14
Section 5.5. Materially Adverse Effect.........................14
Section 5.6. Absence of Default................................14
Section 5.7. Litigation, etc...................................14
Section 5.8. Burdensome Agreements.............................15
Section 5.9. Taxes.............................................15
Section 5.10. Subsidiaries......................................15
Section 5.11. Ownership of Properties, Licenses and
Permits; Liens....................................15
Section 5.12. Patents, Trademarks, etc..........................15
Section 5.13. Accuracy of Information...........................15
Section 5.14. The Collateral Documents..........................16
Section 5.15. Environmental Warranties..........................16
Section 5.16. Capitalization....................................17
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ARTICLE VI COVENANTS ..................................................17
Section 6.1. Certain Affirmative Covenants Applicable
to the Obligations................................17
Section 6.2. Certain Negative Covenants........................20
ARTICLE VII EVENTS OF DEFAULT................................................24
Section 7.1. Events of Default.................................24
Section 7.2. Action if Bankruptcy..............................26
Section 7.3. Action if Other Event of Default..................26
Section 7.4. Termination of Non-Circumvent Agreement...........26
ARTICLE VIII GUARANTY ................................................. 27
Section 8.1. Guaranty of Payment and Performance...............27
Section 8.2. Subrogation; Subordination........................27
Section 8.3. Waivers by Guarantors; Lender's Freedom to Act....28
Section 8.4. Unenforceability of Obligations Against Borrower..29
ARTICLE IX MISCELLANEOUS.....................................................29
Section 9.1. Waivers, Amendments, Remedies, etc................29
Section 9.2. Notices...........................................29
Section 9.3. Costs and Expenses. Except as specifically
set forth in this Agreement, each party hereto
shall bear its own costs and expenses in
connection with this Agreement and the other loan
documents.........................................29
Section 9.4. Indemnification...................................30
Section 9.5. Survival..........................................30
Section 9.6. Severability......................................31
Section 9.7. Headings..........................................31
Section 9.8. Counterparts, Entire Agreement, etc...............31
Section 9.9. Governing Law.....................................31
Section 9.10. Sale and Transfer of Loans, Note or
Conversion Shares.................................31
Section 9.11. Further Assurances................................31
Section 9.12. Forum Selection and Consent to Jurisdiction.......31
Section 9.13. Waiver of Jury Trial..............................32
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SCHEDULE A: Use of Proceeds
EXHIBIT A: Form of Note
EXHIBIT B: Form of Pledge Agreement
EXHIBIT C: Form of Registration Rights Agreement
EXHIBIT D: Form of Security Agreement
EXHIBIT E: Form of Xxxxxx Xxx letter
EXHIBIT F: Form of Representations Certificate
