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EXHIBIT 1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Loan Agreement") is made as of
August 16, 2000 (the "Effective Date"), by XxxxXxxxxx.Xxx Corp., a Florida
corporation, and its wholly-owned subsidiaries Xceedx Technologies Inc. and
WelcomeTo Search Engine Inc., corporations organized under the laws of the
province of British Columbia, Canada, (the "Borrowers"), in favor of Xxx
Enterprises, Incorporated, a Delaware corporation (the "Lender").
RECITALS:
A. Borrowers and Lender desire to enter into a financing arrangement
with Lender in which Lender will make available to Borrower short-term
financing in the amount of Two Hundred and Fifty Thousand Dollars ($250,000.00)
for working capital and other authorized general corporate purposes pursuant to
the terms of this Loan Agreement and Promissory Notes attached hereto as
Exhibits 1 and 2 (the "Notes"). In order to induce Lender to enter into the Loan
and General Security Agreement with Borrowers, Lender shall be entitled to
subscribe for and purchase from XxxxXxxxxx.xxx Corp. 2,223,285 shares of
XxxxXxxxxx.xxx Corp's Common Stock, par value $0.001 per share, all in
accordance with the terms of the Common Stock Subscription Warrant attached
hereto as Exhibit 3.
B. Borrowers desire to mortgage, pledge and grant to Lender, for the
benefit of Lender, a security interest in any and all present and
after-acquired versions of the computer software listed in Schedule A hereto
and the Intellectual Property therein (hereinafter, collectively, the
"Collateral"), and all Proceeds (as hereinafter defined) thereof, to secure
the payment of the Obligations (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and to induce Lender
to enter into the Loan Agreement and to induce Lender to make the loans to
Borrowers under the Loan Agreement, Borrowers hereby agrees with Lender, as
follows:
SECTION 1
DEFINED TERMS
The following terms shall have the following meanings:
1.1 "INTELLECTUAL PROPERTY" means any and all intellectual property rights
in the Collateral, including, without limitation, the following:
1.1.1 "COPYRIGHTS", which shall refer to all types of protective
rights granted (or applications therefor) for any work that
constitutes copyrightable subject matter, including without
limitation, literary works, musical works, dramatic works, pictorial,
graphic and sculptural works, motion pictures and other audiovisual
works, sound recordings, architectural works, recognized under U.S. or
Canadian law and all comparable rights recognized in foreign
jurisdictions or conventions or by treaty and including, without
limitation, those works listed on Schedule A hereto. Schedule A
indicates in each case whether the applicable Copyright is registered
or the subject of a pending registration in the U.S. or Canadian
Copyright Office and any foreign jurisdictions. Schedule A also
indicates whether the Copyright is the subject of any claim of
co-ownership (including any claim of ownership applicable to separate
or preexisting works included in any derivative or collective work),
and, if so, whether the exercise of Borrowers' rights therein are
subject to (A) royalty obligations due such co-owner, its successors
or assigns, (B) restrictions on exercise, assignment or sublicensing,
or (C) revocation or termination. Unless otherwise expressly noted,
the listing of any work shall be construed to include any separate or
preexisting work included in a derivative or collective work, and
shall also be construed to include preliminary drafts or versions and
revisions thereof that are not separately registered by Borrowers.
1.1.2 "PATENTS", which shall refer to all types of exclusionary or
protective rights granted (or applications therefor) for inventions
(including, without limitation, letters patent, plant patents, utility
models, inventor's certificates and the like), and all reissues and
extensions thereof and all renewals, divisions, continuations and
continuations-in-part thereof, recognized under U.S. or Canadian law
and all comparable rights recognized in foreign jurisdictions or
conventions or by treaty, including, without limitation, all such
rights listed in Schedule A hereto. Schedule A indicates in each case
whether the applicable Patent is issued or the subject of a pending
application in the U.S. or Canadian Patent Office and any foreign
jurisdictions. Schedule A also indicates whether the Patent is the
subject to any claim of co-ownership, and, if so, whether the exercise
of Borrowers' rights therein are subject to (A) royalty obligations
due such co-owner, its successors or assigns, (B) restrictions on
exercise, assignment or sublicensing, or (C) revocation or termination.
1.1.3 "OTHER INTELLECTUAL PROPERTY", which shall refer to (1)
Know-How, (2) Inventions, and (3) Trade Secrets, as defined below.
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(.1) "KNOW-HOW" means any knowledge or information relating to a
Patent or Copyright that is material to Borrowers' business
and that enables Borrowers to operate their business with the
accuracy, efficiency or precision necessary for commercial
success, or otherwise affords Borrowers a commercial advantage
for the possession or knowledge thereof, whether or not
currently constituting Trade Secret(s) or Invention(s).
(.2) "INVENTION" means any new and useful process, machine,
manufacture, or composition of matter, or any new and useful
improvement thereof which is material to the operation of
Borrowers' businesses and developed by Borrowers, their
employees or agents, which could potentially be eligible for
protection as Patent(s), but whether or not currently the
subject of Patent(s).
(.3) "TRADE SECRET" means all information or other items recognized
as "trade secrets" under U.S. or Canadian law and all
comparable rights recognized in foreign jurisdictions or
conventions or by treaty.
1.2 "OBLIGATIONS" means (a) loans to be made concurrently or in connection
with this Agreement as evidenced by the Notes payable to the order of Lender
that shall be due and payable as set forth in such Notes, and any renewals or
extensions thereof, (b) the full and prompt payment and performance of any and
all other indebtedness and other obligations of Borrowers to Lender, direct or
contingent (including but not limited to obligations incurred as endorser,
guarantor or surety), however evidenced or denominated, and however and
whenever incurred, including but not limited to indebtedness incurred pursuant
to any present or future commitment of Lender to Borrowers, and (c) all future
advances made by Lender for taxes, levies, insurance and preservation of the
Collateral and all attorney's fees, court costs and expenses of whatever kind
incident to the collection of any of said indebtedness or other obligations and
agreements contained herein, including, without limitation, the expenses of
Lender and Interest provided in Section 7, and the enforcement and protection
of the security interest created under this General Security Agreement.
1.3 "PROCEEDS" means, without limitation, (a) all income, royalties, damages
and payments now and hereafter due and/or payable under or with respect to the
Intellectual Property, including (without limitation) damages and payments for
past or future infringements thereof, (b) the right to xxx and recover for
past, present, and future infringements of the Intellectual Property, including
all judgments and settlements in favor of Borrowers in respect thereof, (c) any
and all proceeds of any Insurance, Indemnity, warranty, guaranty or letter of
credit payable to Borrowers, from time to time with respect to any of the
Collateral, (d) all payments (in any form whatsoever) paid or payable to
Borrowers from time to time in connection with any taking of all or any part of
the Collateral by any governmental authority or any Person acting under color
of government authority), and (e) all other amounts from time to time paid or
payable or received or receivable under or in connection with any of the
Collateral.
SECTION 2
THE LOANS
2.1 TERMS. Lender shall advance to Borrowers two separate advances each in the
amount of $125,000 (the "Loans"), the first of which shall be advanced on the
date hereof and the second advance to be made on August 28, 2000, each
according to the terms and evidenced by the Notes.
2.2 PERFECTION OF SECURITY INTERESTS IN COLLATERAL. Borrowers or any of them
shall execute and deliver to Lender, concurrently with the execution of this
Agreement and at any time or times hereafter, at the request of Lender or any
of them, and whether before or after the occurrence of an Event of Default as
hereinafter defined, such financing statements or other documents as Lender may
request, in form and substance satisfactory to Lender, and Borrowers or any of
them shall do such other acts and things as Lender shall deem necessary or
desirable, in order to create, perfect, continue and preserve Lender's security
interests in the Collateral and to preserve the priority thereof. Borrowers
hereby authorize Lender, at any time and from time to time, to file and/or
record any such financing statements or other documents with such authorities
and in such jurisdictions as may be necessary to create, perfect, continue and
preserve Lender's security interests in the Collateral. Borrowers further
agrees that a photographic, photostatic or other reproduction of this
Agreement, a financing statement or other such document is sufficient as a
financing statement.
2.3 SALE OR HYPOTHECATION OF COLLATERAL. Borrowers shall not, at any time
following the Effective Date, directly or indirectly, whether voluntarily or
involuntarily, by operation of law or otherwise: (i) sell, assign, transfer,
exchange, lease, lend or dispose of any of the Collateral, or any of any
Borrowers' rights therein; nor (ii) cause, suffer or permit any of the
Collateral to be affected by any encumbrance, security interest or adverse
claim of any kind or nature whatsoever.
2.4 MAINTENANCE OF COLLATERAL, AFTER-ACQUIRED COLLATERAL. During the term of
this Agreement Borrowers shall make and maintain in full force and effect any
and all registrations of copyright and letters patent issued with
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respect to the Collateral, and further covenant and agree that they shall,
concurrently with the registration of any claim to copyright in or issuance of
any letters patent with respect to any Collateral as described in paragraphs
1.1.1 and 1.1.2 in which Borrowers or any of them acquire an interest after the
Effective Date, provide notice to Lender of such acquisition together with a
copy of any written evidence thereof sufficient to permit Lender to take such
steps, pursuant to paragraph 2.2 hereof, as may be necessary by Lender to
perfect their security interests in the Collateral to which such registration or
letters pertain. Borrowers or any of them shall not pledge, hypothecate or grant
a security interest in or to any intellectual property in which it acquires an
interest following the Effective Date hereof without first notifying Lender of
any Borrower's acquisition thereof and affording Lender a reasonable opportunity
to perfect its security interest therein, nor shall any Borrower enter into any
agreement with respect to any after-acquired Collateral which has the effect of
precluding Lender from obtaining a security interest therein which shall be
prior to that of any security interest acquired therein by a security agreement
entered into after the Effective Date hereof.
SECTION 3
GRANT OF SECURITY INTEREST
As collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations, Borrowers hereby assign and grant to Lender for the benefit of
Lender a security interest in all of Borrowers' right, title and interest in
and to the Collateral, including the Intellectual Property, now owned or held,
in whole or in part, or at any time hereafter acquired by Borrowers or in which
Borrowers now have or at any time in the future may acquire any right, title or
interest, including all Proceeds and products thereof.
SECTION 4
REPRESENTATIONS AND WARRANTIES CONCERNING THE INTELLECTUAL PROPERTY
Borrowers represent and warrant that:
4.1 CORPORATE EXISTENCE. Borrowers are corporations duly organized in good
standing and are duly qualified as foreign corporations in good standing in all
jurisdictions where the nature of the business transacted by them or the
ownership of their assets makes such qualification necessary.
4.2 CORPORATE POWER. The execution and delivery by Borrowers of this Agreement
and all other related agreements necessary to perform any Borrower's
obligations hereunder and the performance of this Agreement and such other
related agreements: (i) are within such Borrower's corporate powers; (ii) are
duly authorized by such Borrower's Board of Directors and, if necessary, such
Borrower's stockholders; (iii) do not contravene such Borrower's Articles of
Incorporation, or Bylaws, or any indenture, agreement or understanding to which
any Borrower is a party or by which any Borrower or any of its properties is
bound; (iv) do not, as of the Effective Date, require any governmental consent,
registration or approval; (v) do not contravene any contractual or government
restriction binding upon Borrowers or any of them; and (vi) will not result in
the imposition of any lien, charge, security interest or encumbrance upon any
property of Borrowers or any of them under any existing indenture, mortgage,
deed of trust, loan or credit agreement or other material agreement or
instrument to which a Borrower is a party or by which it or any of its
property may be bound or affected.
4.3 FINANCIAL STATEMENTS. Attached as Exhibit 4 hereto are true and complete
copies of the consolidated unaudited balance sheets of the Borrowers as of the
most recent date available and consolidated unaudited statements of income of
the Borrowers as of the most recent available date (the aforementioned
financial statements referred to as the "Financial Statements"). The Financial
Statements have been prepared from the books and records of the Borrowers in a
manner consistent with the audited financial statements of the Borrowers and
present fairly the financial position and results of operations of the
Borrowers as of the date and for the period indicated, in each case in
conformity with U.S. generally accepted accounting principles ("GAAP"), except
that the Financial Statements are summary in nature and do not include the
statement of stockholders' equity and cash flows or notes and related
disclosures required by GAAP.
4.4 OTHER FINANCIAL INFORMATION. Any and all financial information previously
furnished to Lender in connection herewith pertaining to the financial
condition, assets, liabilities, business or prospects of Borrowers or any of
them or the value or condition of the Collateral is materially true and
correct, and such information hereafter furnished to Lender will be materially
true and correct when furnished.
4.5 PRIORITY. Upon the execution and delivery of this Agreement by Borrowers
and the filing of appropriate financing statements with the proper governmental
agencies, or, if applicable, upon Lender's taking possession of the Collateral,
Lender shall have a perfected security interest in and to the Collateral and
shall have first priority for the full amount of all the obligations secured
hereunder except as disclosed in Schedule B.
4.6 PAYMENT OF TAXES. Borrowers have duly paid all franchise and annual
corporation taxes, impost, duties, or charges, levied, assessed or imposed upon
them, or upon any of their property, of whatsoever kind or description.
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4.7 CORPORATE OFFICE. The principal place of business of Borrowers and the
place where Borrowers keep their books and records concerning the Collateral is
and will remain 000 - 0000 Xxxx Xxxxxxxx, Xxxxxxxxx, X.X. X0X0X0, or such other
address as Borrowers or any of them may designate in writing to Lender in
writing.
4.8 INTELLECTUAL PROPERTY RIGHTS. Schedule A lists all Intellectual Property in
the Collateral which Borrowers have or claim a partial or entire ownership
interest and that is material to the operation of the present or planned
business of Borrowers. Schedule A is complete, correct and current as of the
date of execution of this Agreement and contains all information required to be
listed or described therein. Except as otherwise indicated in Schedule A,
Borrowers are the sole legal and beneficial owner of all the Owned Intellectual
Property listed in Schedule A. Borrowers have taken reasonable and prudent
action to protect, preserve and enforce their rights under the Intellectual
Property. The scope and extent of Borrowers' Interests in the Intellectual
Property and all applicable registrations thereof are truly and accurately set
forth on Schedule A.
4.9 ENCUMBRANCES. Schedule B lists or describes all liens, security interests,
pledges, assignments, and encumbrances with respect to the Collateral. Schedule
B is complete, correct and current as of the date of execution of this Agreement
and contains all information required to be listed or described therein.
4.10 THIRD PARTY RIGHTS. Schedule C lists or describes all contracts pursuant
to which Borrowers have granted any right or interest in the Collateral to any
third party, or have received any such interest from any third party, with the
exception of license agreements made with end users or customers in the
ordinary course of business. Schedule C is complete, correct and current as of
the date of execution of this Agreement and contains all information required
to be listed or described therein.
4.11 ABSENCE OF ENCUMBRANCES. Except for ownership claims, restrictions and
other terms listed or disclosed in Schedule A, B, and C, Borrowers' right, title
and interest in and to the Collateral are free and clear of any and all liens,
security interests, options, licenses, pledges, assignments, encumbrances and/or
agreements of any kind. To the best of Borrowers' knowledge, Borrowers' right,
title and interest in and to the Intellectual Property are sufficient to enable
Borrowers to operate their business as present and as planned without serious
risk of infringement or liability that has not been fully accrued or reserved.
4.12 TRANSFERS. All prior transfers and assignments by or to Borrowers,
directly or indirectly, of Intellectual Property have been duly and validly
recorded or registered as necessary to reflect the accurate state of ownership
thereof and vest indefeasibly in each Borrower the ownership it holds or claims
therein. For this purpose, the grant to or by Borrowers of any exclusive right
or license in Intellectual Property shall be considered a transfer or assignment
appropriate for recording or registration unless Borrowers' counsel specifically
advises Borrowers such action is unnecessary. Except as set forth in Schedule D,
Borrowers have not, within the three (3) months prior to the date of execution
of this Agreement, executed and/or delivered any transfer or assignment of any
of the Intellectual Property, recorded or unrecorded.
4.13 SUITS. No actions or proceedings have been instituted or are pending or,
to Borrowers' knowledge, threatened against Borrowers or Borrowers' licensees,
sublicensees, agents, dealers, distributors or customers that challenge
Borrowers' claimed ownership status or rights in any Intellectual Property or
Borrowers' right to use or otherwise exploit the Intellectual Property in their
present or planned business. No holding, decision or judgment has been rendered
by any governmental authority which would limit, cancel or question the validity
of any of the Intellectual Property in any respect that would conflict or
interfere with the operation of Borrowers' present or planned business or
diminish the value of the Intellectual Property as claimed by Borrowers.
4.14 INFRINGEMENTS BY THIRD PARTIES. To the best of Borrowers' knowledge (but
without prejudice to Borrowers' rights with respect thereto), no third party is
infringing or violating Borrowers' rights in Intellectual Property or exceeding
the scope of authorization or license under any contracts made by Borrowers with
third parties relating to such Intellectual Property (to the extent granted to
such third parties by Borrowers).
4.15 NON-INFRINGEMENT. The Intellectual Property does not infringe any
intellectual property right of any third person or entity.
4.16 BREACH OF THIRD PARTY AGREEMENTS. The transactions and other undertakings
by Borrowers contemplated by this Agreement do not constitute transactions
occurring outside the ordinary course of business with respect to pre-existing
contracts between Borrowers and any of their other creditors, nor would they
cause any Borrower to be deemed in default of any other agreement with a third
party.
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SECTION 5
COVENANTS
Borrowers covenant and agree with Lender that, from and after the date of this
Loan Agreement until the Obligations are paid in full:
5.1 FINANCIAL STATEMENTS. Borrowers shall keep proper books and records in
which full and true entries will be made of all dealings and transactions of
the business and affairs of Borrowers or any of them, in accordance with GAAP,
and shall deliver to Lender within twenty (20) days following the end of each
monthly, quarterly and annual accounting period, such financial statements as
Lender may reasonably require, which shall be prepared in accordance with the
requirements and representations of Section 4.3.
5.2 MAINTENANCE OF CORPORATE EXISTENCE. Borrowers will maintain their corporate
existences and their right to carry on business and will continually operate
their business except for periodic shutdowns in the ordinary course of business
and interruptions caused by strike, labor dispute, lack of materials or labor,
catastrophe, or any other events over which they have no control.
5.3 COMPLIANCE WITH LAWS: PAYMENT OF TAXES. Borrowers shall comply with all
laws, statutes and regulations pertaining to their business and to their
ownership of the Collateral. Borrowers or any of them shall pay or cause to be
paid all taxes and other levies with respect to their business when the same
become due and payable, except such as are being contested in good faith by
appropriate proceedings, where the effect of such proceedings is to stay any
enforcement in respect of such unpaid taxes, and provided that, in any such
case, Borrowers or any of them shall set aside on their books reserves deemed by
Lender to be adequate to protect against liability for such taxes.
5.4 OWNERSHIP RIGHTS IN COLLATERAL. Borrowers shall, at all times, continue and
maintain their ownership of the Collateral, and shall do all things necessary to
maintain and keep their rights in the Collateral current pursuant to any
statutes, including but not limited to all applicable patent, copyright and
other intellectual property laws.
5.5 NOTIFICATIONS WITH REFERENCE TO COLLATERAL. Borrowers shall promptly notify
Lender in writing of any event which affects the value of the Collateral, the
ability of Borrowers or any of them or Lender to dispose of the Collateral, or
the rights and remedies of Lender in relation thereto, including, but not
limited to, the levy of any legal process against the Collateral and the
adoption of any order, arrangement or procedure affecting the Collateral,
whether governmental or otherwise. Borrowers shall also promptly notify Lender
in writing of any event which adversely affects the financial condition, assets,
liabilities, business, operations or prospects of Borrowers or any of them in
any material respect.
5.6 OTHER DOCUMENTS. Borrowers shall promptly deliver to Lender such documents
and information pertaining to the status or condition of Borrowers, the
collateral, and Lender's security interest therein as Lender may request from
time to time.
5.7 NEGATIVE COVENANTS. For so long as any unpaid balance of any loan made
pursuant hereto is outstanding:
5.7.1 MERGER. No Borrower may be a party to any consolidation or
merger.
5.7.2 NATURE OF BUSINESS. No Borrower may change the general character
of its business as conducted at the Effective Date, or engage in any
type of business not reasonably related to their business as normally
conducted.
5.7.3 EXPENSE REIMBURSEMENT. Borrowers may not reimburse any expenses
to their directors, officers, or employees which shall not have been
incurred for ordinary and necessary business purposes and which shall
not have been properly documented in accord with sound business
practices.
5.7.4 DIVIDENDS AND STOCK REDEMPTION. Borrowers shall not directly or
indirectly (i) redeem, purchase or otherwise retire any of their shares
of capital stock, (ii) declare or pay any dividends in any fiscal year
on any class or classes of stock, (iii) return capital of Borrowers or
any of them to their stockholders, or (iv) make any other distribution
on or with respect to any shares or class or classes of stock.
5.7.5 NAME. No Borrower may not change its corporate name.
5.8 UPDATES TO SCHEDULE A. At least once every three (3) months, commencing on
November 15, 2000, Borrowers will, at their sole expense, execute and deliver an
updated version of Schedule A. Such Schedule as updated shall be complete,
correct and current as of the date of delivery thereof and shall contain all
information required to be listed or described therein in order to be in
compliance with the provisions of Section 4 hereof (which, for such purpose,
shall apply as of the date of each such further delivery).
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5.9 ASSIGNMENTS AND OTHER TRANSFERS. Borrowers will not transfer or assign, or
grant any exclusive license to, any of the Intellectual Property of material
value. Borrowers will not license, sublicense, waive, surrender or abandon any
of their Intellectual Property rights except in the ordinary course of business.
Notwithstanding such transfer, assignment, license, sublicense, waiver,
surrender or abandonment, the Collateral shall remain subject to the security
interest granted hereunder, except as released by Lender in writing in reference
thereto.
5.10 CLAIMS OF INFRINGEMENT OR OWNERSHIP. Borrowers will, at their sole
expense, promptly notify Lender in the event that any third party threatens or
asserts any action or proceedings against Borrowers or Borrowers' licensees,
sublicensees, agents, dealers, distributors or customers that challenge
Borrowers' claimed ownership status or rights in any Intellectual Property or
Borrowers' right to use or otherwise exploit the Intellectual Property in their
present or planned business.
5.11 TIMELY PAYMENT OF LICENSE FEES. Borrowers agree to pay or cause to be paid
all royalties, fees and other amounts due from Borrowers under all contracts
with third parities relating to the Intellectual Property, except to the extent
that such payments are not material to the present and planned business of
Borrowers and lapse or delay in payments is otherwise not prejudicial to
Borrowers.
5.12 PRESERVATION OF RIGHTS. Borrowers will, at their sole expense, follow good
practices in an ordinary and prudent manner to protect, preserve and enforce
their rights in Intellectual Property, including but not limited to registration
of all claims of ownership thereof with the appropriate governmental
authorities. Upon Lender's request, Borrowers will furnish Lender with such
information as Lender may require with regard to Borrowers' practices in such
regard.
5.13 MAINTENANCE OF RECORDS. Borrowers will maintain accurate and complete
records of their Intellectual Property. With regard to computer programs and
related technology included in such Intellectual Property, Borrowers will,
pursuant to an Escrow Agreement, the form of which is attached hereto as Exhibit
5, retain in at least one off-site repository identified to Lender current
copies of all source code, system documentation, statements of principles of
operation, and schematics, as well as pertinent commentary or explanation, that
may be necessary to render such materials understandable and usable by a trained
computer programmer, including but not limited to any proprietary languages,
workbenches tools or compilers. Also included with such materials shall be a
list of any third party programs (including compilers), "workbenches," tools,
and higher level languages used for the development, maintenance and
implementation of such computer programs and related technology.
5.14 ATTACHMENT OF SECURITY INTERESTS. Whenever Borrowers, either by themselves
or through any agent, employee, licensee or designee, shall file a patent
application or for the registration of any Copyright with the Canadian or United
States patent and/or trademark offices, the Canadian or United States Copyright
Offices, or any similar office or agency in any other country or any political
subdivision thereof, Borrowers shall (A) simultaneously file or record evidence
of Lender's security interest in the Collateral sufficient to meet the
requirements for Lender's security interest therein to be recognized, protected
and perfected and (B) report such filing to Lender within five (5) business days
after the last day of the fiscal quarter in which such filing occurs.
5.15 GOVERNMENTAL OBLIGATIONS. Borrowers will, at their sole expense, pay
promptly when due all taxes, assessments and governmental charges, if any, upon
or against the Borrowers or their property or operations, including (without
limitation) fees due to protect, preserve or enforce their Intellectual
Property, in each case before the same become delinquent and before penalties
accrue thereon or Borrowers' rights therein lapse or are prejudiced, unless and
to the extent that the same are being contested in good faith by appropriate
proceedings.
5.16 FURTHER ASSURANCES. When and as requested by Lender, Borrowers will, at
their sole expense, execute, deliver, and record, in such manner as Lender may
require, such further instruments and documents and take such further action as
Lender may reasonably request for the purpose of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the UCC in effect in any United States jurisdiction with
respect to the liens created hereby, and the recording of instruments confirming
Lender's security interest therein with applicable U.S., Canadian or foreign
authorities and agencies. Borrowers hereby authorize Lender to file any such
financing or continuation statement or other instrument without the signature of
Borrowers or, if applicable, by affixing the signature of Borrowers on
Borrowers' behalf, to the extent permitted by applicable law. A carbon,
photographic or other reproduction of this Loan Agreement shall be sufficient as
a financing statement for filing in any jurisdiction.
5.17 AVOIDANCE OF LIENS. Borrowers will not create, incur or permit to exist,
will take all commercially reasonable actions to defend the Collateral against,
and will take such other commercially reasonable action as is necessary to
remove, any lien or claim on or to the Collateral, other than the liens created
hereby, and other than as pursuant hereto or disclosed in Schedules A or B, and
will take all commercially reasonable actions to defend the right, title and
interest of Lender in and to any of the Collateral against the claims and
demands of all persons whomsoever. Borrowers will advise Lender promptly, in
reasonable detail, at Lender's address as set forth in the Loan Agreement, (i)
of any lien (other than liens created hereby or permitted under the Loan
Agreement) on, or claim asserted against, Collateral and (ii) of the occurrence
of any other event which could reasonably be expected to have a material
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adverse effect on the aggregate value of the Collateral or on the liens created
hereunder.
SECTION 6
LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT
6.1 APPOINTMENT. Borrowers hereby irrevocably constitute and appoint Lender
and any officer or agent thereof, with full power of substitution, as their true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Borrowers and in the name of Borrowers or in its own name,
from time to time after the occurrence, and during the continuation of, an Event
of Default in Lender's discretion, for the purpose of carrying out the terms of
this Loan Agreement, to take any and all appropriate action and to execute any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Loan Agreement, and, without limiting the
generality of the foregoing, Borrowers hereby grant Lender the power and right,
on behalf of Borrowers without notice to or assent by Borrowers, to do the
following:
(I) at any time when any Event of Default shall have occurred and
is continuing in the name of Borrowers or its own name, or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under, or with respect to, any
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by Lender for the purpose of collecting any
and all such moneys due with respect to such Collateral
whenever payable;
(II) to pay or discharge taxes and liens levied or placed on or
threatened against the Collateral, to effect any repairs or
any insurance called for by the terms of this Loan Agreement
and to pay all or part of the premiums therefor and the costs
thereof; and
(III) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to
become due thereunder directly to Lender or as Lender shall
direct, (B) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts
due or to become due at any time in respect of or arising out
of any Collateral, (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with
any of the Collateral, (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Collateral or any
portion thereof and to enforce any other right in respect of
any Collateral, (E) to defend any suit, action or proceeding
brought against Borrowers with respect to any Collateral, (F)
to settle, compromise or adjust any suit, action or proceeding
described in the preceding clause and, in connection
therewith, to give such discharges or releases as Lender may
deem appropriate, (G) to transfer, assign, licensor or
sublicense any Intellectual Property, throughout the world for
such term or terms, on such conditions, and in such manner, as
Lender shall in its sole discretion determine, and (H)
generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral
as fully and completely as though Lender were the absolute
owner thereof for all purposes, and to do, at Lender's option
and Borrowers' expense, at any time, or from time to time, all
acts and things which Lender deems necessary to protect,
preserve or realize upon the Collateral and the liens of
Lender thereon and to effect the intent of this Loan
Agreement, all as fully and effectively as Borrowers might do.
Borrowers hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power
of attorney is a power coupled with an interest and shall be
irrevocable.
6.2 EXECUTION OF INSTRUMENTS. Borrowers also authorizes Lender, at any
time and from time to time, to execute, in connection with the sale provided
for in Section 10 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
6.3 LENDER NOT REQUIRED TO EXERCISE POWERS. The powers conferred on Lender
hereunder are solely to protect the interests of Lender in the Collateral and
shall not impose any duty upon Lender to exercise any such powers. Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its partners, officers,
directors, employees or agents shall be responsible to Borrowers for any act or
failure to act hereunder, except for their own gross negligence or willful
misconduct or failure to comply with mandatory provisions or applicable law.
SECTION 7
PERFORMANCE BY LENDER OF BORROWERS' OBLIGATIONS
If Borrowers fail to perform or comply with any of their agreements contained
herein and Lender, as provided for by the terms of this Loan Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, then the expenses of Lender incurred in connection with such
performance or compliance, including all attorney's fees and court costs
related thereto, together with interest thereon at the highest default rate
provided in the Note, shall be payable by Borrowers to Lender or demand shall
constitute Obligations secured hereby.
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SECTION 8
PROCEEDS
It is agreed that if an Event of Default shall occur and be continuing, then
(a) all Proceeds received by Borrowers consisting of cash, checks and other
cash equivalents shall be held by Borrowers in trust for Lender, segregated
from other funds of Borrowers, and shall, forthwith upon receipt by Borrowers,
be turned over to Lender in the exact form received by Borrowers (duly endorsed
by Borrowers to Lender, if required), and (b) any and all such Proceeds
received by Lender (whether from Borrowers or otherwise) shall promptly be
applied by Lender against, the Obligations (whether matured or unmatured), such
application to be in such order as set forth in the Loan Agreement.
SECTION 9
EVENTS OF DEFAULT
If any of the following events ("Events of Default") shall occur, then Lender
may at its option and without demand or notice of any kind declare the Loans or
any of them immediately due and payable.
9.1 DEFAULT, RIGHTS AND REMEDIES OF LENDER.
9.1.1 DEFAULTS. If any of the following events ("Events of Default")
shall occur, then Lender may at its option and without demand or notice
of any kind declare the Loans or any of them immediately due and
payable.
(a) Borrowers or any of them fail to pay the principal or any
interest or other fee due under the Loans;
(b) Borrowers or any of them fail or neglect to perform, keep
or observe any of their covenants, conditions or agreements contained
in any of the subsections of this Agreement;
(c) Any warranty or representation now or hereafter made by
Borrowers or any of them in connection with this Agreement is untrue or
incorrect at any material respect when made or any schedule,
certificate, statement, report, financial data, notice or writing
furnished at any time by Borrowers or any of them to Lender is untrue
or incorrect in any material respect, on the date as of which the facts
set forth herein are stated or certified;
(d) A judgment and order requiring payment in excess of
$25,000.00 shall be rendered against Borrowers or any of them and such
judgment or order shall remain unsatisfied or undischarged and in
effect for thirty (30) consecutive days without judicial enforcement or
execution, provided that this subsection (d) shall not apply to any
judgment for which Borrowers or any of them are fully insured and with
respect to which the insurer has admitted in writing its liability for
a full payment thereof;
(e) A notice of xxxx, xxxx or assessment is filed or recorded
with respect to all or substantial parts of the assets of Borrowers or
any of them by any governmental authority, or any taxes or debts owing
at any time or times hereafter to any one or more of them become a lien
on all or a substantial part of any Borrower's property, and such lien,
levy or assessment is not discharged or released within ten (10) days
of a notice or attachment thereof;
(f) All or any part of any Borrower's property is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or
comes within the possession of any receiver, trustee, custodian, or
assignee for the benefit of creditors and on or before the 60th day
thereafter such assets are not returned to Borrowers or any of them
and/or such writ, distress warrant or levy is not dismissed, stayed or
lifted;
(g) Any proceeding under the United States bankruptcy laws or
the laws of the Canada pertaining to insolvency or receivership is
filed by or against Borrowers or any of them;
(h) Any proceeding under a bankruptcy, reorganization,
arrangement of debt, insolvency, readjustment of debt or receivership
law or statute is filed by or against Borrowers or any of them or any
Borrower makes an assignment for the benefit or creditors or Borrowers
or any of them takes any corporate action to authorize any of the
foregoing;
(i) Borrowers or any of them are enjoined, restrained, or in
any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its
business affairs;
(j) Borrowers or any of them default in the
performance of or compliance with any term.
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condition or covenant deemed an "Event of Default" or words
of similar import under any credit or loan agreement or
facility with any third-party lender, and Lender, after
receipt of notice thereof from Borrowers, deems itself
insecure as a result thereof;
(k) Borrowers or any of them fail to comply with the
filing requirements of the Securities Exchange Act of 1934, as
amended; or
(l) Borrowers or any of them experience a change in
or disagreement with Ernst & Young, L.L.P., including but not
limited to a change in accountants, an adverse opinion, the
receipt of an opinion qualified or modified as to uncertainty,
audit scope or procedures, accounting principles or financial
statement disclosure, unless such change or disagreement shall
not represent or pertain to a material adverse change to
Borrowers' financial statements.
SECTION 10
REMEDIES UPON DEFAULT
Upon an Event of Default, Lender may pursue any or all of the following
remedies, without any notice to Borrowers except as required below:
10.1 NOTICE. If Lender shall give written notice of an Event of Default to
Borrowers, and Borrowers shall fail to cure such default within ten (10) days
following receipt of such notice, then and in that event Lender shall be
entitled to exercise the rights conferred in Paragraphs 10.2-10.5 of this
Section 10. During the ten-day cure period, Borrowers shall not dispose of,
conceal, transfer, sell or encumber any of the Collateral (including, but not
limited to, cash proceeds) without Lender's prior written consent, even if such
disposition is otherwise permitted hereunder in the ordinary course of
business. Any such disposition, concealment, transfer or sale after the giving
of such notice shall constitute a wrongful conversion of the Collateral. Lender
may obtain a temporary restraining order or other equitable relief to enforce
Borrowers' obligation to refrain from so impairing the Collateral.
10.2 POSSESSION OF COLLATERAL. Lender may take possession of any or all of the
Collateral, pursuant to the Escrow Agreement attached hereto as Exhibit 5. To
the extent Borrowers have failed to comply with the deposit requirements of
paragraph 5.13 of this Agreement or Borrowers have failed to comply with the
deposit requirements of the Escrow Agreement, Borrowers hereby agree to turn
over to Lender or its designee all property with respect to which such failure
of compliance has occurred. With respect to any such property, Borrowers hereby
consent to Lender's entry into any of Borrowers' premises to take possession of
such items, and specifically consent to Lender's forcible entry thereto as long
as Lender causes no significant damage to the premises in the process of entry
(drilling of locks, cutting of chains and the like do not in themselves cause
"significant" damage for the purposes hereof) and provided that Lender
accomplishes such entry without a breach of the peace.
10.3 SETOFF. Lender may exercise its lien upon and right of setoff against any
monies, items, credits, deposits or instruments that Lender may have in its
possession and that belong to Borrowers or to any other person or entity liable
for the payment of any or all of the Obligations.
10.4 EXERCISE COLLATERAL LICENSE RIGHTS. Lender may exercise the rights
granted pursuant to the Collateral License Agreement attached hereto as
Exhibit 6.
10.5 OTHER RIGHTS. Lender may exercise any right that it may have under any
other document evidencing or securing the Obligations or otherwise available to
Lender at law or equity.
SECTION 11
LIMITATION ON DUTIES REGARDING PRESERVATION OF COLLATERAL
Lender's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as Lender would deal with similar property for its own account. Neither
Lender nor any of its partners, directors, officers, employees or agents shall
be liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to
sell or otherwise dispose of any Collateral upon the request of Borrowers or
otherwise.
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SECTION 12
MISCELLANEOUS
12.1 POWERS COUPLED WITH AN INTEREST. All authorizations and agencies herein
contained with respect to the Collateral are irrevocable and powers coupled
with an interest.
12.2 SEVERABILITY. Any provision of this Loan Agreement 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 hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.3 SECTION HEADINGS. The section headings used in this Loan Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
12.4 NO WAIVER: CUMULATIVE REMEDIES. Lender shall not by any act (except by
a written instrument pursuant to Paragraph 12.5 hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any default or Event of Default or in any breach of any
of the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by
Lender of any right or remedy hereunder on any occasion shall not be construed
as a bar to any right or remedy, which Lender would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
12.5 WAIVERS AND AMENDMENTS: SUCCESSORS AND ASSIGNS. None of the terms or
provisions of this Loan Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by Borrowers and
Lender, provided that any provision of this Loan Agreement may be waived by
Lender in a written letter or agreement executed by Lender or by facsimile
transmission from Lender. This Loan Agreement shall be binding upon the
successors and assigns of Borrowers and shall inure to the benefit of Lender
and its successors and assigns.
12.6 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Loan Agreement shall be in writing, signed by
the party giving such notice, election or demand and shall be delivered
personally, telecopied, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Loan Agreement:
The Address of Lender is: Xxx Enterprises, Incorporated
400 Xxxxxx Building
000 X. Xxxx Xx.
Xxxxxxxxx, Xxxx 00000
The Address of Borrowers is: XxxxXxxxxx.Xxx Corp.
000 - 0000 Xxxx Xxxxxxxx
Xxxxxxxxx, X.X. X0X0X0
12.7 GOVERNING LAW. This Agreement shall be interpreted and construed
according to the laws of the State of Delaware, U.S.A., without regard to its
choice-of-law rules. As to substantive matters pertaining to intellectual
property, the applicable law of the situs of such property as determined by the
law of the State of Delaware shall control.
12.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
12.9 CONSENT TO JURISDICTION; EXCLUSIVE VENUE. Borrowers hereby irrevocably
consent to the Jurisdiction of the United States District Court for the Southern
District of Iowa and of all Iowa state courts sitting in Xxxxx County, Iowa, for
the purpose of any litigation to which Lender may be a party and which concerns
this Loan Agreement or the Obligations. It is further agreed that venue for any
such action shall lie exclusively with courts sitting in the United States
District Court for the Southern District of Iowa and of all Iowa state courts
sitting in Xxxxx County, Iowa unless Lender agrees to the contrary in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
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BORROWERS: LENDER:
XxxxXxxxxx.Xxx Corp. Xxx Enterprises, Incorporated
/s/ XXXX X. XXXXXX /s/
---------------------------------- ----------------------------------
By: Xxxx X. Xxxxxx By:
Title: President and CEO Title: Vice President
Xceedx Technologies Inc.
/s/ XXXX X. XXXXXX
----------------------------------
By: Xxxx X. Xxxxxx
------------------------------
Title: President
Welcome To Search Engine Inc.
/s/ XXXX X. XXXXXX
----------------------------------
By: Xxxx X. Xxxxxx
------------------------------
Title: President
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EXHIBIT 1
PROMISSORY NOTE
13
EXHIBIT 2
PROMISSORY NOTE
14
EXHIBIT 3
COMMON STOCK SUBSCRIPTION WARRANT
15
EXHIBIT 4
FINANCIAL STATEMENTS
15
16
EXHIBIT 5
ESCROW AGREEMENT
17
EXHIBIT 6
COLLATERAL LICENSE AGREEMENT
18
SCHEDULE A
COLLATERAL
DESCRIPTION REGISTRATION/CLAIM
----------- ------------------
1. ECommerce Tools for Business.............
2. [Proprietary] Search Engine..............
3. XpressDepartment Store...................
4. XpressStores Online......................
5. XpressStores Pro.........................
6. XpressStores Enterprise..................
7. Banners, etc.............................
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SCHEDULE B
ENCUMBRANCES
DESCRIPTION ENCUMBRANCE
----------- -----------
1.
2.
3.
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SCHEDULE C
THIRD PARTY CONTRACTS
20
