Exhibit 4.6
SECURITY AGREEMENT
This Security Agreement is made as of March __, 2004 by and between
LAURUS MASTER FUND, LTD., a Cayman Islands corporation ("Laurus") and Global
Payment Technologies, Inc., a Delaware corporation (the "Company").
BACKGROUND
Company has requested that Laurus make advances available to Company;
and
Laurus has agreed to make such advances to Company on the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings and the terms and conditions contained herein, the parties hereto
agree as follows:
1. (a) General Definitions. Capitalized terms used in this Agreement
shall have the meanings assigned to them in Annex A.
(b) Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with GAAP and all financial computations shall be computed,
unless specifically provided herein, in accordance with GAAP consistently
applied.
(c) Other Terms. All other terms used in this Agreement and defined in
the UCC, shall have the meaning given therein unless otherwise defined herein.
(d) Rules of Construction. All Schedules, Addenda, Annexes and
Exhibits hereto or expressly identified to this Agreement are incorporated
herein by reference and taken together with this Agreement constitute but a
single agreement. The words "herein", hereof" and "hereunder" or other words of
similar import refer to this Agreement as a whole, including the Exhibits,
Addenda, Annexes and Schedules thereto, as the same may be from time to time
amended, modified, restated or supplemented, and not to any particular section,
subsection or clause contained in this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, the feminine and the
neuter. The term "or" is not exclusive. The term "including" (or any form
thereof) shall not be limiting or exclusive. All references to statutes and
related regulations shall include any amendments of same and any successor
statutes and regulations. All references in this Agreement or in the Schedules,
Addenda, Annexes and Exhibits to this Agreement to sections, schedules,
disclosure schedules, exhibits, and attachments shall refer to the corresponding
sections, schedules, disclosure schedules, exhibits, and attachments of or to
this Agreement. All references to any instruments or agreements, including
references to any of this Agreement or the Ancillary Agreements shall include
any and all modifications or amendments thereto and any and all extensions or
renewals thereof.
2. Loans. (a)(i) Subject to the terms and conditions set forth herein
and in the Ancillary Agreements, Laurus may make loans (the "Loans") to Company
from time to time during the Term which, in the aggregate at any time
outstanding, will not exceed the lesser of (x) (I) the Capital Availability
Amount minus (II) such reserves as Laurus may reasonably in its good faith
judgment deem proper and necessary from time to time (the "Reserves") or (y) an
amount equal to (I) the Accounts Availability plus (II) the Inventory
Availability minus (III) the Reserves. The amount derived at any time from
Section 2(a)(i)(y)(I) plus 2(a)(i)(y)(II) minus 2(a)(i)(y)(III) shall be
referred to as the "Formula Amount". Company shall execute and deliver to Laurus
on the Closing Date a Minimum Borrowing Note and a Secured Revolving Note
evidencing the Loans funded on the Closing Date. From time to time thereafter,
Company shall execute and deliver to Laurus immediately prior to the final
funding of each additional $750,000 tranche of Loans (calculated on a cumulative
basis for each such tranche) an additional Minimum Borrowing Note evidencing
such tranche, in the form of Note delivered by Company to Laurus on the Closing
Date, ) provided, however, that no more than two (2) Minimum Borrowing Notes in
the aggregate shall be issuable hereunder without the consent of the Borrower.
Notwithstanding anything herein to the contrary, whenever during the Term the
outstanding balance on the Revolving Note should equal or exceed $1,000,000, to
the extent that the outstanding balance on Minimum Borrowing Note shall be less
than $750,000 (the difference of $750,000 less the actual balance of the Minimum
Borrowing Note, the "Available Minimum Borrowing"), such portion of the balance
of the Revolving Note as shall equal the Available Minimum Borrowing shall be
deemed to be simultaneously extinguished on the Revolving Note and transferred
to, and evidenced by, the Minumum Borrowing Note (e.g., the Available Minimum
Borrowing shall be $0.
(ii) Notwithstanding the limitations set forth above, if requested
by the Company, Laurus retains the right to lend to Company from time to time
such amounts in excess of such limitations as Laurus may determine in its sole
discretion.
(iii) Company acknowledges that the exercise of Laurus'
discretionary rights, exercised reasonably, hereunder may result during the Term
in one or more increases or decreases in the advance percentages used in
determining Accounts Availability and Company hereby consents to any such
increases or decreases which may limit or restrict advances requested by
Company.
(iv) If Company does not pay any interest, fees, costs or charges
to Laurus when due, Company shall thereby be deemed to have requested, and
Laurus is hereby authorized at its discretion to make and charge to Company's
account, a Loan to Company as of such date in an amount equal to such unpaid
interest, fees, costs or charges.
(v) If Company at any time fails to perform or observe any of the
covenants contained in this Agreement or any Ancillary Agreement and the failure
to pay or perform shall mature into an Event of Default hereunder and continue
beyond any applicable grace period, Laurus may, but need not, perform or observe
such covenant on behalf and in the name, place and stead of Company (or, at
Laurus' option, in Laurus' name) and may, but need not, take any and all other
actions which Laurus may deem necessary to cure or correct such failure
(including the payment of taxes, the satisfaction of Liens, the performance of
obligations owed to Account Debtors, lessors or other obligors, the procurement
and maintenance of
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insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments). The amount of all monies
expended and all costs and expenses (including attorneys' fees and legal
expenses) incurred by Laurus in connection with or as a result of the
performance or observance of such agreements or the taking of such action by
Laurus shall be charged to Company's account as a Loan and added to the
Obligations. To facilitate Laurus' performance or observance of such covenants
of Company, and with effect solely upon the occurrence and continuance beyond
any applicable grace period of an Event of Default, the Company hereby
irrevocably appoints Laurus, or Laurus' delegate, acting alone, as Company's
attorney in fact (which appointment is coupled with an interest) with the right
(but not the duty) from time to time to create, prepare, complete, execute,
deliver, endorse or file in the name and on behalf of Company any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed delivered or endorsed by Company.
(vi) Laurus will account to Company monthly with a statement of
all Loans and other advances, charges and payments made pursuant to this
Agreement, and such account rendered by Laurus shall be deemed final, binding
and conclusive unless Laurus is notified by Company in writing to the contrary
within thirty (30) days of the date each account was rendered specifying the
item or items to which objection is made.
(vii) During the Term, Company may borrow and prepay Loans in
excess of the Minimum Borrowing Amount, all in accordance with the terms and
conditions hereof.
(viii) If any Eligible Account is not paid by the Account Debtor
within ninety (90) days after the date that such Eligible Account was invoiced
or if any Account Debtor asserts a deduction, dispute, contingency, set-off, or
counterclaim with respect to any Eligible Account, (a "Delinquent Account"), the
Company shall (i) reimburse Laurus for the amount of the Revolving Credit
Advance made with respect to such Delinquent Account plus an adjustment fee in
an amount equal to one quarter of one percent (0.25%) of the gross face amount
of such Eligible Account or (ii) immediately replace such Delinquent Account
with an otherwise Eligible Account.
(b) Following the occurrence of an Event of Default which continues to
exist, Laurus may, at its option, elect to convert the credit facility
contemplated hereby to an accounts receivable purchase facility. Upon such
election by Laurus (subsequent notice of which Laurus shall provide to Company),
Company shall be deemed to hereby have sold, assigned, transferred, conveyed and
delivered to Laurus, and Laurus shall be deemed to have purchased and received
from Company, all right, title and interest of Company in and to all Accounts
which shall at any time constitute Eligible Accounts (the "Receivables
Purchase"). All outstanding Loans hereunder shall be deemed obligations under
such accounts receivable purchase facility. The conversion to an accounts
receivable purchase facility in accordance with the terms hereof shall not be
deemed an exercise by Laurus of its secured creditor rights under Article 9 of
the UCC. Immediately following Laurus' request, Company shall execute all such
further documentation as may be required by Laurus to more fully set forth the
accounts receivable purchase facility herein contemplated, including, without
limitation, Laurus' standard form of accounts receivable purchase agreement and
account debtor notification letters, but Company's failure to enter into
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any such documentation shall not impair or affect the Receivables Purchase in
any manner whatsoever.
(c) Minimum Borrowing Amount. After a registration statement
registering the Registrable Securities has been declared effective by the SEC,
conversions of the Minimum Borrowing Amount into the Common Stock of the Company
may be initiated as set forth in the Note. From and after the date upon which
any outstanding principal of the Minimum Borrowing Amount (as evidenced by the
first Minimum Borrowing Note) is converted into Common Stock (the "First
Conversion Date"), (i) corresponding amounts of all outstanding Loans (not
attributable to the then outstanding Minimum Borrowing Amount) existing on or
made after the First Conversion Date will be aggregated until they reach the sum
of $750,000 and (ii) the Company will issue a new (serialized) Minimum Borrowing
Note to Laurus in respect of such $750,000 aggregation, and (iii) the Company
shall prepare and file a subsequent registration statement with the SEC to
register such subsequent Minimum Borrowing Note as set forth in the Registration
Rights Agreement) provided, however, that no more than two (2) Minimum Borrowing
Notes in the aggregate shall be issuable hereunder without the consent of the
Borrower.
3. Repayment of the Loans. Company (a) may prepay the Obligations in
excess of the Minimum Borrowing Amount from time to time in accordance with the
terms and provisions of the Notes (and Section 16 hereof if such prepayment is
due to a termination of this Agreement); and (b) shall repay on the expiration
of the Term (i) the then aggregate outstanding principal balance of the Loans
made by Laurus to Company hereunder together with accrued and unpaid interest,
fees and charges and (ii) all other amounts owed Laurus under this Agreement and
the Ancillary Agreements. Any payments of principal, interest, fees or any other
amounts payable hereunder or under any Ancillary Agreement shall be made prior
to 12:00 noon (New York time) on the due date thereof in immediately available
funds.
4. Procedure for Loans. Company may by written notice request a
borrowing of Loans prior to 12:00 p.m. (New York time) on the Business Day of
its request to incur, on the next business day, a Loan. Together with each
request for a Loan (or at such other intervals as Laurus may request), Company
shall deliver to Laurus a Borrowing Base Certificate in the form of Exhibit A,
which shall be certified as true and correct by the Chief Executive Officer or
Chief Financial Officer of Company together with all supporting documentation
relating thereto. All Loans shall be disbursed from whichever office or other
place Laurus may designate from time to time and shall be charged to Company's
account on Laurus' books. The proceeds of each Loan made by Laurus shall be made
available to Company on the Business Day following the Business Day so requested
in accordance with the terms of this Section 4 by way of credit to Company's
operating account maintained with such bank as Company designated to Laurus. Any
and all Obligations due and owing hereunder may be charged to Company's account
and shall constitute Loans.
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5. Interest and Payments.
(a) Interest.
(i) Except as modified by Section 5(a)(iii) below, Company shall
pay interest at the Contract Rate on the unpaid principal balance of each Loan
until such time as such Loan is collected in full in good funds in dollars of
the United States of America.
(ii) Interest and payments shall be computed on the basis of
actual days elapsed in a year of 360 days. At Laurus' option, Laurus may charge
Company account for said interest.
(iii) Effective upon the occurrence of any Event of Default and
for so long as any Event of Default shall be continuing, the Contract Rate shall
automatically be increased as set forth in each of the Notes, respectively (such
increased rate, the "Default Rate"), and all outstanding Obligations, including
unpaid interest, shall continue to accrue interest from the date of such Event
of Default at the Default Rate applicable to such Obligations.
(iv) In no event shall the aggregate interest payable hereunder
exceed the maximum rate permitted under any applicable law or regulation, as in
effect from time to time (the "Maximum Legal Rate") and if any provision of this
Agreement or any Ancillary Agreement is in contravention of any such law or
regulation, interest payable under this Agreement and each Ancillary Agreement
shall be computed on the basis of the Maximum Legal Rate (so that such interest
will not exceed the Maximum Legal Rate).
(v) Company shall pay principal, interest and all other amounts
payable hereunder, or under any Ancillary Agreement, without any deduction
whatsoever, including any deduction for any set-off or counterclaim.
(b) Payments.
(i) Closing/Annual Payments. Upon execution of this Agreement by
Company and Laurus, Company shall pay to Laurus Capital Management, LLC a
closing payment in an amount equal to three and one half percent (3.50%) of the
Capital Availability Amount. Such payment shall be deemed fully earned on the
Closing Date and shall not be subject to rebate or proration for any reason.
(ii) Unused Line Payment. If, for any month, the average
outstanding Loans (the "Average Loan Amount") do not equal the Capital
Availability Amount, Company shall pay to Laurus at the end of such month a
payment (calculated on a per annum basis) in an amount equal to three hundred
and seventy five one hundredths of one percent (0.375%) of the amount by which
the Capital Availability Amount exceeds the Average Loan Amount. Notwithstanding
the foregoing, any unpaid fee shall be immediately due and payable upon
termination of this Agreement.
(iii) Overadvance Payment. Without affecting Laurus' rights
hereunder in the event the Loans exceed the amounts permitted by Section 2
("Overadvances"), in the event an Overadvance occurs or is made by Laurus, all
such Overadvances shall bear interest at an
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annual rate equal to two percent (2%) of the amount of such Overadvances for
each month or portion thereof as such amounts shall be outstanding.
(iv) Financial Information Default. Without affecting Laurus'
other rights and remedies, in the event Company fails to deliver or make
available in its SEC filings the financial information required by Section 11 on
or before the date required by this Agreement, Company shall pay Laurus a fee in
the amount of $500.00 per week (or portion thereof) for each such failure until
such failure is cured to Laurus' satisfaction or waived in writing by Laurus
provided, however, that filing such financial information by the Company with
the SEC shall de deemed to constitute simultaneous delivery of such information
to Laurus. Such fee shall be charged to Company's account upon the occurrence of
each such failure.
6. Security Interest.
(a) To secure the prompt payment to Laurus of the Obligations, Company
hereby assigns, pledges and grants to Laurus a continuing security interest in
and Lien upon all of the Collateral. All of Company's Books and Records relating
to the Collateral shall, until delivered to or removed by Laurus, be kept by
Company in trust for Laurus until all Obligations have been paid in full. Each
confirmatory assignment schedule or other form of assignment hereafter executed
by Company shall be deemed to include the foregoing grant, whether or not the
same appears therein.
(b) Company hereby (i) authorizes Laurus to file any financing
statements, continuation statements or amendments thereto that (x) indicate the
Collateral (1) as all assets of Company or words of similar effect, regardless
of whether any particular asset comprised in the Collateral falls within the
scope of Article 9 of the UCC of such jurisdiction, or (2) as being of an equal
or lesser scope or with greater detail, and (y) contain any other information
required by Part 5 of Article 9 of the UCC for the sufficiency or filing office
acceptance of any financing statement, continuation statement or amendment and
(ii) ratifies its authorization for Laurus to have filed any initial financing
statements, or amendments thereto if filed prior to the date hereof. Company
acknowledges that it is not authorized to file any financing statement or
amendment or termination statement with respect to any financing statement
without the prior written consent of Laurus and agrees that it will not do so
without the prior written consent of Laurus, subject to Company's rights under
Section 9-509(d)(2) of the UCC.
(c) Company hereby grants to Laurus an irrevocable, non-exclusive
license (exercisable upon the termination of this Agreement due to an occurrence
and during the continuance of an Event of Default without payment of royalty or
other compensation to Company) to use, transfer, license or sublicense any
Intellectual Property now owned, licensed to, or hereafter acquired by Company,
and wherever the same may be located, and including in such license access to
all media in which any of the licensed items may be recorded or stored and to
all computer and automatic machinery software and programs used for the
compilation or printout thereof, and represents, promises and agrees that any
such license or sublicense is not and will not be in conflict with the
contractual or commercial rights of any third Person; provided, that such
license will terminate on the termination of this Agreement and the payment in
full of all Obligations; and further provided that such license is used
exclusively for the purpose of: (a) completing the manufacture of any in-process
materials during any Default
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Period so that such materials become saleable Inventory, all in accordance with
the same quality standards or substantially similar industry acceptable
standards previously adopted by the Borrower for its own manufacturing and
subject to the Borrower's reasonable exercise of quality control; and (b)
selling leasing or otherwise disposing of any or all Collateral during any
Default Period.
7. Representations, Warranties and Covenants Concerning the
Collateral. Company represents, warrants (each of which such representations and
warranties shall be deemed repeated upon the making of each request for a Loan
and made as of the time of each and every Loan hereunder) and covenants as
follows:
(a) all of the Collateral (i) is owned by Company free and clear of
all Liens (including any claims of infringement) except those in Laurus' favor
and Permitted Liens and (ii) is not subject to any agreement prohibiting the
granting of a Lien or requiring notice of or consent to the granting of a Lien.
(b) Company shall not encumber, mortgage, pledge, assign or grant any
Lien in any Collateral of Company or any of Company's other assets to anyone
other than Laurus and except for Permitted Liens.
(c) The Liens granted pursuant to this Agreement, upon completion of
the filings and other actions listed on Exhibit 7(c) (which, in the case of all
filings and other documents referred to in said Exhibit, have been delivered to
Laurus in duly executed form) constitute valid perfected security interests in
all of the Collateral in favor of Laurus as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and any purchasers from Company
and such security interest is prior to all other Liens in existence on the date
hereof.
(d) No effective security agreement, mortgage, deed of trust,
financing statement, equivalent security or Lien instrument or continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those relating to Permitted Liens.
(e) Company shall not dispose of any of the Collateral whether by
sale, lease or otherwise except for the sale of Inventory in the ordinary course
of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out Equipment having an
aggregate fair market value of not more than $75,000 and only to the extent that
(i) the proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Laurus' first priority security interest or are
used to repay Loans or to pay general corporate expenses, (ii) following the
occurrence of an Event of Default which continues to exist the proceeds of which
are remitted to Laurus to be held as cash collateral for the Obligations or
(iii) with the prior written consent of Laurus.
(f) Company shall defend the right, title and interest of Laurus in
and to the Collateral against the claims and demands of all Persons whomsoever,
and take such actions, including (i) all actions necessary to grant Laurus
"control" of any Investment Property, Deposit Accounts, Letter-of-Credit Rights
or electronic Chattel Paper owned by Company, with any
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agreements establishing control to be in form and substance satisfactory to
Laurus, (ii) the prompt (but in no event later than five (5) Business Days
following Laurus' request therefor) delivery to Laurus of all original
Instruments, Chattel Paper, negotiable Documents and certificated Stock owned by
the Company (in each case, accompanied by stock powers, allonges or other
instruments of transfer executed in blank), (iii) notification of Laurus'
interest in Collateral at Laurus' request, and (iv) the institution of
litigation against third parties as shall be prudent in order to protect and
preserve Company's and Laurus' respective and several interests in the
Collateral.
(g) Company shall promptly, and in any event within five (5) Business
Days after the same is acquired by it, notify Laurus of any commercial tort
claim (as defined in the UCC) acquired by it and unless otherwise consented by
Laurus, Company shall enter into a supplement to this Agreement granting to
Laurus a Lien in such commercial tort claim.
(h) Company shall place notations upon its Books and Records and any
financial statement of Company to disclose Laurus' Lien in the Collateral.
(i) If Company retains possession of any Chattel Paper or Instrument
with Laurus' consent, upon Laurus' request such Chattel Paper and Instruments
shall be marked with the following legend: "This writing and obligations
evidenced or secured hereby are subject to the security interest of Laurus
Master Fund, Ltd."
(j) Company shall perform in a reasonable time all other steps
requested by Laurus to create and maintain in Laurus' favor a valid perfected
first Lien in all Collateral subject only to Permitted Liens.
(k) Subject to Section 2(a) (viii), the Company shall notify Laurus
promptly and in any event within three (3) Business Days after obtaining
knowledge thereof (i) of any event or circumstance that to Company's knowledge
would cause Laurus to consider any then existing Account as no longer
constituting an Eligible Account; (ii) of any material delay in Company's
performance of any of its obligations to any Account Debtor; (iii) of any
assertion by any Account Debtor of any material claims, offsets or
counterclaims; (iv) of any allowances, credits and/or monies granted by Company
to any Account Debtor; (v) of all material adverse information relating to the
financial condition of an Account Debtor; (vi) of any material return of goods;
and (vii) of any loss, damage or destruction of any of the Collateral; provided,
however, that no notification shall be required under this Section 6(k) unless
the outstanding balances of the Loans exceeds the Formula Amount.
(l) All Eligible Accounts (i) which are billed on a construction
completion basis but not payable until the project is completed, represent
complete bona fide transactions which require no further act under any
circumstances on Company's part to make such Accounts payable by the Account
Debtors, (ii) are not subject to any present, future contingent offsets or
counterclaims, and (iii) do not represent xxxx and hold sales, consignment
sales, guaranteed sales, sale or return or other similar understandings or
obligations of any Affiliate or Subsidiary of Company. Company has not made, and
will not make any agreement with any Account Debtor for any extension of time
for the payment of any Account, any compromise or settlement for less than the
full amount thereof, any release of any Account Debtor from liability therefor,
or any
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deduction therefrom except a discount or allowance for prompt or early payment
allowed by Company in the ordinary course of its business consistent with
historical practice and as previously disclosed to Laurus in writing provided,
however, that no notification shall be required under this Section 6(l) unless
the outstanding balances of the Loans exceeds the Formula Amount.
(m) Company shall keep and maintain its Equipment in good operating
condition, except for ordinary wear and tear, and shall make all necessary
repairs and replacements thereof so that the value and operating efficiency
shall at all times be maintained and preserved. Company shall not permit any
such items to become a Fixture to real estate or accessions to other personal
property.
(n) Company shall maintain and keep all of its Books and Records
concerning the Collateral at Company's executive offices listed in Exhibit
12(d).
(o) Company shall maintain and keep the tangible Collateral at the
addresses listed in Exhibit 12(d), provided, that Company may change such
locations or open a new location, provided that Company provides Laurus at least
ten (10) days prior written notice of such changes or new location and (ii)
prior to such change or opening of a new location where Collateral having a
value of more than $250,000 will be located, Company executes and delivers to
Laurus such agreements as Laurus may request, including landlord agreements,
mortgagee agreements and warehouse agreements, each in form and substance
satisfactory to Laurus.
(p) Exhibit 7(p) lists all banks and other financial institutions at
which Company maintains deposits and/or other accounts, and such Exhibit
correctly identifies the name, address and telephone number of each such
depository, the name in which the account is held, a description of the purpose
of the account, and the complete account number. The Company shall not establish
any depository or other bank account of any with any financial institution
(other than the accounts set forth on Exhibit 7(p)) without Laurus' prior
written consent.
8. Payment of Accounts.
(a) Until all of the Obligations are irrevocably paid in full, the
Company will irrevocably direct all of its present and future Account Debtors
and other Persons obligated to make payments constituting Collateral to make
such payments directly to the lockbox maintained by Company (the "Lockbox") with
North ForkBank (the "Lockbox Bank") pursuant to the terms of the Clearing
Account Agreement dated March __, 2004 or such other financial institution
accepted by Laurus in writing as may be selected by Company. On or prior to the
Closing Date, Company shall and shall cause the Lockbox Bank to enter into all
such documentation acceptable to Laurus pursuant to which, among other things,
the Lockbox Bank agrees to: (a) sweep the Lockbox on a daily basis and deposit
all checks received therein to an account designated by Laurus in writing and
(b) comply only with the instructions or other directions of Laurus concerning
the Lockbox. All of Company's invoices, account statements and other written or
oral communications directing, instructing, demanding or requesting payment of
any Account of Company or any other amount constituting Collateral shall
conspicuously direct that all payments be made to the Lockbox or such other
address as Laurus may direct in writing. If, notwithstanding the instructions to
Account Debtors, Company receives any payments, Company
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shall immediately remit such payments to Laurus in their original form with all
necessary endorsements. Until so remitted, Company shall hold all such payments
in trust for and as the property of Laurus and shall not commingle such payments
with any of its other funds or property.
(b) At Laurus' election, following the occurrence of an Event of
Default which is continuing, Laurus may, upon written notice to the Company,
notify Company's Account Debtors of Laurus' security interest in the Accounts,
collect them directly and charge the collection costs and expenses thereof to
Company's account until the Obligations are irrevocably paid in full.
9. Collection and Maintenance of Collateral.
(a) Laurus may verify Company's Accounts from time to time, but not
more often than once every three (3) months unless an Event of Default has
occurred and is continuing, utilizing an audit control company or any other
agent of Laurus.
(b) Proceeds of Accounts received by Laurus will be deemed received on
the Business Day after Laurus' receipt of such proceeds in good funds in dollars
of the United States of America in Laurus' account. Any amount received by
Laurus after 12:00 noon (New York time) on any Business Day shall be deemed
received on the next Business Day.
(c) As Laurus receives the proceeds of Accounts, it shall remit all
such proceeds (net of interest, fees and other amounts then due and owing to
Laurus hereunder) to Company upon request (but no more often than twice a week).
Notwithstanding the foregoing, following the occurrence and during the
continuance of an Event of Default, Laurus, at its option, may (a) apply such
proceeds to the Obligations in such order as Laurus shall elect, (b) hold such
proceeds as cash collateral for the Obligations and Company hereby grants to
Laurus a security interest in such cash collateral amounts as security for the
Obligations and/or (c) do any combination of the foregoing.
10. Inspections and Appraisals. At all times during normal business
hours, Laurus, and/or any agent of Laurus shall have the right to (a) have
access to, visit, inspect, review, evaluate and make physical verification and
appraisals of Company's properties and the Collateral, (b) inspect, audit and
copy (or take originals if necessary) and make extracts from Company's Books and
Records, including management letters prepared by independent accountants, and
(c) discuss with Company's principal officers, and independent accountants,
Company's business, assets, liabilities, financial condition, results of
operations and business prospects. Company will deliver to Laurus any instrument
necessary for Laurus to obtain records from any service bureau maintaining
records for Company. If any internally prepared financial information, including
that required under this Section is unsatisfactory in any manner to Laurus,
Laurus may request that the Accountants review the same.
11. Financial Reporting. Company will deliver, or cause to be
delivered, to Laurus (provided, however, that filing such financial information
by the Company with the SEC shall de deemed to constitute simultaneous delivery
of such information to Laurus) each of the following, which shall be in form and
detail acceptable to Laurus:
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(a) As soon as available, and in any event within one hundred five
(105) days after the end of each fiscal year of Company, Company's audited
financial statements with a report of independent certified public accountants
of recognized standing selected by Company and acceptable to Laurus (the
"Accountants"), which annual financial statements shall include Company's
balance sheet as at the end of such fiscal year and the related statements of
Company's income, retained earnings and cash flows for the fiscal year then
ended, prepared, on a consolidated basis to include all Subsidiaries and
Affiliates (if required by GAAP), all in reasonable detail and prepared in
accordance with GAAP, together with (i) if and when available, copies of any
management letters prepared by such accountants; and (ii) a certificate of
Company's President, Chief Executive Officer or Chief Financial Officer stating
that such financial statements have been prepared in accordance with GAAP and
whether or not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) As soon as available and in any event within sixty (60) days after
the end of each quarter, an unaudited/internal balance sheet and statements of
income, retained earnings and cash flows of Company as at the end of and for
such quarter and for the year to date period then ended, prepared, if Laurus so
requests, on a consolidated basis to include all Subsidiaries and Affiliates (if
required by GAAP), in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year, all
prepared in accordance with GAAP, subject to year-end adjustments and
accompanied by a certificate of Company's President, Chief Executive Officer or
Chief Financial Officer, stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit adjustments, and
(ii) whether or not such officer has knowledge of the occurrence of any Default
or Event of Default hereunder not theretofore reported and remedied and, if so,
stating in reasonable detail the facts with respect thereto;
(c) Within thirty (30) days after the end of each month (or more
frequently if Laurus so requests), agings of Company's Accounts, unaudited trial
balances and their accounts payable and a calculation of Company's Accounts,
Eligible Accounts and thirty (30) days after the end of each fiscal quarter for
Inventory ledger as at the end of such month or shorter time period, provided,
however, that if Laurus shall request the foregoing information more often than
as set forth in the immediately preceding clause, the Company shall have thirty
(30) days from each such request to comply with Laurus' demand; and
(d) Promptly upon Laurus' request after (i) the filing thereof, copies
of Company's most recent registration statements and annual, quarterly, monthly
or other regular reports which Company files with the Securities and Exchange
Commission (the "SEC"), and (ii) the issuance thereof, copies of such financial
statements, reports and proxy statements as Company shall send to its
stockholders.
12. Additional Representations and Warranties. Company represents and
warrants (each of which such representations and warranties shall be deemed
repeated upon the making of a request for a Loan and made as of the time of each
Loan made hereunder), as follows:
11
(a) Company is a corporation duly incorporated and validly existing
under the laws of the jurisdiction of its incorporation and duly qualified and
in good standing in every other state or jurisdiction in which the nature of
Company's business requires such qualification, except where failure to so
qualify would not be reasonably likely to have Material Adverse Effect.
(b) The execution, delivery and performance of this Agreement and the
Ancillary Agreements (i) have been duly authorized, (ii) are not in
contravention of Company's certificate of incorporation, by-laws or of any
indenture, agreement or undertaking to which Company is a party or by which
Company is bound the noncompliance with which would not be reasonably likely to
have Material Adverse Effect and (iii) are within Company's corporate powers.
(c) This Agreement and the Ancillary Agreements executed and delivered
by Company are Company's legal, valid and binding obligations, enforceable in
accordance with their terms except (a) as limited by applicable bankruptcy,
insolvency, reorganization moratorium or other laws of general application
affecting the enforcement of creditor's rights and (b) as limited by general
principles that restrict the availability of equitable and legal remedies.
(d) Exhibit 12(d) sets forth Company's name as it appears in official
filing in the state of its incorporation, the type of entity of Company, the
organizational identification number issued by Company's state of incorporation
or a statement that no such number has been issued, Company's state of
incorporation, and the location of Company's chief executive office, corporate
offices, warehouses, other locations of Collateral and locations where records
with respect to Collateral are kept (including in each case the county of such
locations) and, except as set forth in such Exhibit 12(d), such locations have
not changed during the preceding twelve months. As of the Closing Date, during
the prior five years, except as set forth in Exhibit 12(d), Company has not been
known as or conducted business in any other name (including trade names).
Company has only one state of incorporation.
(e) Based upon the Employee Retirement Income Security Act of 1974
("ERISA"), and the regulations and published interpretations thereunder: (i)
Company has not engaged in any Prohibited Transactions as defined in Section 406
of ERISA and Section 4975 of the Internal Revenue Code, as amended; (ii) Company
has met all applicable minimum funding requirements under Section 302 of ERISA
in respect of its plans; (iii) Company has no knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any employee benefit
plan(s); (iv) Company has no fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than Company's
employees; and (v) except as disclosed in Exhibit 12(e) attached hereto, Company
has not withdrawn, completely or partially, from any multi-employer pension plan
so as to incur liability under the Multiemployer Pension Plan Amendments Act of
1980.
(f) There is no pending or threatened litigation, court order,
judgment, writ, suit, action or proceeding which could reasonably be expected to
have a Material Adverse Effect.
12
(g) All balance sheets and income statements which have been delivered
to Laurus fairly, accurately and properly state Company's financial condition on
a basis consistent with that of previous financial statements and except as
reflected in such financial statements there has been no material adverse change
in Company's financial condition as reflected in such statements since the
balance sheet date of the statements last delivered to Laurus and such
statements do not fail to disclose any fact or facts which might have a Material
Adverse Effect on Company's financial condition.
(h) Company possesses or has licenses to use all of the Intellectual
Property necessary to conduct its business, except where failure to possess such
license would not be reasonably likely to have Material Adverse Effect. There
has been no assertion or claim of violation or infringement with respect to any
Intellectual Property. Exhibit 12(i) describes all Intellectual Property of
Company.
(i) Neither this Agreement, the exhibits and schedules hereto, the
Ancillary Agreements nor any other document delivered by Company to Laurus or
its attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby, contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading. The issuance of the Notes and the Warrants and
the shares of common stock issued upon conversion of the Notes and exercise of
the Warrants will be exempt from the registration requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and if required by applicable
securities law, will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither Company nor any of
its Affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale of
the Securities.
(j) The common stock of the Company is registered pursuant to Section
12(b) or 12(g) of the Exchange Act and, except with respect to certain matters
set forth on Exhibit 12(j) attached hereto, the Company has timely filed all
proxy statements, reports, schedules, forms, statements and other documents
required to be filed by it under the Exchange Act. The Company has filed (i) its
Annual Report on Form 10-K for the fiscal year ended September 30, 2003 and (ii)
its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2003
(collectively, the "SEC Reports"). Each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the
13
extent they may not include footnotes or may be condensed) and fairly present in
all material respects the financial condition, the results of operations and the
cash flows of the Company and its subsidiaries, on a consolidated basis, as of,
and for, the periods presented in each such SEC Report.
(k) The common stock of the Company is traded on the Nasdaq National
Market ("Nasdaq")and satisfies all requirements for the continuation of such
trading. The Company has not received any notice that its common stock will be
ineligible to be traded on the Nasdaq or that the common stock does not meet all
requirements for the continuation of such trading.
(l) Neither the Company, nor any of its Affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales of any security or solicited any offers to buy any security (other than a
concurrent offering to Laurus under a Securities Purchase Agreement between the
Company and Laurus dated as of March __, 2004) under circumstances that would
cause the offering of the Securities pursuant to this Agreement and the
Ancillary Agreements to be integrated with prior offerings by the Company for
purposes of the Securities Act which would prevent the Company from selling the
Securities pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its Affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings (other than
such concurrent offering to Laurus).
(m) The Securities are all restricted securities under the Securities
Act as of the date of this Agreement. The Company will not issue any stop
transfer order or other order impeding the sale and delivery of any of the
Securities at such time as such Securities are registered for public sale or an
exemption from registration is available, except as required by federal or state
securities laws.
(n) The Company understands the nature of the Securities issuable
under the Ancillary Agreements and recognizes that the issuance of such
Securities may have a potential dilutive effect. The Company specifically
acknowledges that its obligation to issue the Securities is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
(o) Except for agreements made in the ordinary course of business,
there is no agreement that has not been filed with the Commission as an exhibit
to a registration statement or to a form required to be filed by the Company
under the Exchange Act, the breach of which could reasonably be expected to have
a Material Adverse Effect or would prohibit or otherwise interfere with the
ability of the Company to enter into and perform any of its obligations under
this Agreement the Registration Rights Agreement executed by Company in favor of
Laurus in any material respect.
(p) Patriot Act. If the Company is a corporation, trust, partnership,
limited liability Purchaser or other organization, the Company certifies that,
to the best of Company's knowledge, the Company has not been designated, and is
not owned or controlled, by a "suspected terrorist" as defined in Executive
Order 13224. The Company hereby acknowledges that the Purchaser seeks to comply
with all applicable laws concerning money laundering and
14
related activities. In furtherance of those efforts, the Company hereby
represents, warrants and agrees that: (i) none of the cash or property that the
Company will pay or will contribute to the Purchaser has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Company to the Purchaser,
to the extent that they are within the Company's control shall cause the
Purchaser to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Company shall promptly notify the Purchaser if any of these
representations ceases to be true and accurate regarding the Company. The
Company agrees to provide the Purchaser any additional information regarding the
Company that the Purchaser deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Company understands and agrees that if at any time it is discovered that any of
the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Purchaser may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Company's investment in the Purchaser. The Company further understands that
the Purchaser may release confidential information about the Company and, if
applicable, any underlying beneficial owners, to proper authorities if the
Purchaser, in its sole discretion, determines that it is in the best interests
of the Purchaser in light of relevant rules and regulations under the laws set
forth in subsection (ii) above.
13. Covenants. Company covenants as follows:
(a) Company will not, without the prior written consent of Laurus,
change (i) its name as it appears in the official filings in the state of its
incorporation or formation, (ii) the type of legal entity it is, (iii) its
organization identification number, if any, issued by its state of
incorporation, (iv) its state of incorporation or (v) amend its certificate of
incorporation, by-laws or other organizational document.
(b) Except where such noncompliance would not be reasonably likely to
have Material Adverse Effect, the operation of Company's business is and will
continue to be in compliance in all material respects with all applicable
federal, state and local laws, rules and ordinances, including to all laws,
rules, regulations and orders relating to taxes, payment and withholding of
payroll taxes, employer and employee contributions and similar items,
securities, employee retirement and welfare benefits, employee health safety and
environmental matters.
(c) Company will pay or discharge when due all taxes, assessments and
governmental charges or levies imposed upon Company or any of the Collateral
unless such amounts are being diligently contested in good faith by appropriate
proceedings provided that (i) adequate reserves with respect thereto are
maintained on the books of Company in conformity with GAAP and (ii) the related
Lien shall have no effect on the priority of the Liens in favor of Laurus or the
value of the assets in which Laurus has a Lien.
(d) Company will promptly inform Laurus in writing of: (i) the
commencement of all proceedings and investigations by or before and/or the
receipt of any notices from, any governmental or nongovernmental body and all
actions and proceedings in any court or before
15
any arbitrator against or in any way concerning any event which could reasonable
be expected to have singly or in the aggregate, a Material Adverse Effect; (ii)
any amendment of Company's certificate of incorporation, by-laws or other
organizational document; (iii) any change which has had or could reasonably be
expected to have a Material Adverse Effect; (iv) any Event of Default or
Default; (v) any default or any event which with the passage of time or giving
of notice or both would constitute a default under any agreement for the payment
of money to which Company is a party or by which Company or any of Company's
properties may be bound the breach of which would have a Material Adverse Effect
and (vi) any change in Company's name or any other name used in its business.
(e) The Company will not (i) create, incur, assume or suffer to exist
any indebtedness (exclusive of trade debt) whether secured or unsecured other
than Company's indebtedness to Laurus and as set forth on Exhibit 13(e)(i)
attached hereto and made a part hereof; (ii) cancel any debt owing to it in
excess of $50,000 in the aggregate during any 12 month period; (iii) assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except the endorsement of
negotiable instruments by a Company for deposit or collection or similar
transactions in the ordinary course of business; (iv) directly or indirectly
declare, pay or make any dividend or distribution on any class of its Stock or
apply any of its funds, property or assets to the purchase, redemption or other
retirement of any Stock of the Company; (v) purchase or hold beneficially any
Stock or other securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including any partnership or joint venture,
except (x) travel advances, (y) loans to Company's officers and employees not
exceeding at any one time an aggregate of $10,000, and (z) existing Subsidiaries
of the Company; (vi) create or permit to exist any Subsidiary, other than any
Subsidiary in existence on the date hereof and listed in Exhibit 13(e)(ii)
unless such new Subsidiary is designated by Laurus as either a co-borrower or
guarantor hereunder and such Subsidiary shall have entered into all such
documentation required by Laurus to grant to Laurus a first priority perfected
security interest in such Subsidiary's assets to secure the Obligations, or
requires an investment of less than $250,000 individually and up to an aggregate
of $500,000 at any time; (vii) directly or indirectly, prepay any indebtedness
(other than to Laurus and in the ordinary course of business), or repurchase,
redeem, retire or otherwise acquire any indebtedness (other than to Laurus and
in the ordinary course of business) except to make scheduled payments of
principal and interest thereof in excess of $100,000 in any calendar year;
(viii) enter into any merger, consolidation or other reorganization with or into
any other Person or acquire all or a portion of the assets or Stock of any
Person or permit any other Person to consolidate with or merge with it, unless
(1) Company is the surviving entity of such merger or consolidation, (2) no
Event of Default shall exist immediately prior to and after giving effect to
such merger or consolidation, (3) Company shall have provided Laurus copies of
all documentation relating to such merger or consolidation and (4) Company shall
have provided Laurus with at least thirty (30) days' prior written notice of
such merger or consolidation; (ix) materially change the nature of the business
in which it is presently engaged; (x) change its fiscal year or make any changes
in accounting treatment and reporting practices without prior written notice to
Laurus except as required by GAAP or in the tax reporting treatment or except as
required by law; (xi) enter into any transaction with any employee, director or
Affiliate, except in the ordinary course on arms-length terms; or (xii) xxxx
Accounts under any name except the present name of Company or its existing
Subsidiaries.
16
(f) None of the proceeds of the Loans hereunder will be used directly
or indirectly to "purchase" or "carry" "margin stock" or to repay indebtedness
incurred to "purchase" or "carry" "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect.
(g) Company will bear the full risk of loss from any loss of any
nature whatsoever with respect to the Collateral. At Company's own cost and
expense in amounts and with carriers acceptable to Laurus, Company shall (i)
keep all its insurable properties and properties in which it has an interest
insured against the hazards of fire, sprinkler leakage, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is
customary in the case of companies engaged in businesses similar to Company's
including business interruption insurance; (ii) maintain a bond in such amounts
as is customary in the case of companies engaged in businesses similar to
Company's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Company
either directly or through Governmental Authority to draw upon such funds or to
direct generally the disposition of such assets; (iii) maintain public and
product liability insurance against claims for personal injury, death or
property damage suffered by others; (iv) maintain all such worker's compensation
or similar insurance as may be required under the laws of any state or
jurisdiction in which Company is engaged in business; and (v) furnish Laurus
with (x) certificates as to all such insurance coverages and evidence of the
maintenance of such policies at least thirty (30) days before any expiration
date, (y) endorsements to such policies naming Laurus as "co-insured" or
"additional insured" and appropriate loss payable endorsements in form and
substance satisfactory to Laurus, naming Laurus as loss payee, and (z) evidence
that as to Laurus the insurance coverage shall not be impaired or invalidated by
any act or neglect of Company and the insurer will provide Laurus with at least
thirty (30) days notice prior to cancellation or expiration thereof. Company
shall instruct the insurance carriers that in the event of any loss thereunder,
the carriers shall make payment for such loss to Laurus and not to Company and
Laurus jointly. If any insurance losses are paid by check, draft or other
instrument payable to Company and Laurus jointly, Laurus may endorse Company's
name thereon and do such other things as Laurus may deem advisable to reduce the
same to cash. Laurus is hereby authorized to adjust and compromise claims. All
loss recoveries received by Laurus upon any such insurance may be applied to the
Obligations, in such order as Laurus in its sole discretion shall determine or
shall otherwise be delivered to the Company. Any surplus shall be paid by Laurus
to Company or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by Company to Laurus, on demand.
(h) Company will at all times have authorized and reserved a
sufficient number of shares of Common Stock to provide for the conversion of the
Notes.
14. Further Assurances. At any time and from time to time, upon the
written request of Laurus and at the sole expense of Company, Company shall
promptly and duly execute and deliver any and all such further instruments and
documents and take such further action as Laurus may request (a) to obtain the
full benefits of this Agreement and the Ancillary Agreements, (b) to protect,
preserve and maintain Laurus' rights in the Collateral and under this
17
Agreement or any Ancillary Agreement, or (c) to enable Laurus to exercise all or
any of the rights and powers herein granted or any Ancillary Agreement.
15. Representations and Warranties of Laurus.
Laurus hereby represents and warrants to the Company as follows:
(a) Requisite Power and Authority. Laurus has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Ancillary Agreements and to carry out their provisions. All
corporate action on Laurus' part required for the lawful execution and delivery
of this Agreement and the Ancillary Agreements have been or will be effectively
taken prior to the Closing Date. Upon their execution and delivery, this
Agreement and the Ancillary Agreements will be valid and binding obligations of
Laurus, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights, and (b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
(b) Investment Representations. Laurus understands that the Securities
are being offered and sold pursuant to an exemption from registration contained
in the Securities Act based in part upon Laurus' representations contained in
this Agreement, including, without limitation, that Laurus is an "accredited
investor" within the meaning of Regulation D under the Securities Act. Laurus
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Note to be purchased by it under this Agreement and the Securities acquired
by it upon the conversion of the Note.
(c) Laurus Bears Economic Risk. Laurus has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Laurus must bear the economic risk of this investment until the
Securities are sold pursuant to (i) an effective registration statement under
the Securities Act, or (ii) an exemption from registration is available.
(d) Acquisition for Own Account. Laurus is acquiring the Securities
for its own account for investment only, and not as a nominee or agent and not
with a view towards or for resale in connection with their distribution.
(e) Laurus Can Protect Its Interest. Laurus represents that by reason
of its, or of its management's, business and financial experience, Laurus has
the capacity to evaluate the merits and risks of its investment in the Note, and
the Securities and to protect its own interests in connection with the
transactions contemplated in this Agreement, and the Ancillary Agreements.
Further, Laurus is aware of no publication of any advertisement in connection
with the transactions contemplated in the Agreement or the Ancillary Agreements.
(f) Accredited Investor. Laurus represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
18
(g) Shorting. Neither Laurus nor any of its Affiliates or investment
partners has, will, or will cause any person or entity, directly or indirectly
to, engage in "short sales" of Company's common stock or any other hedging
strategies directly related to Company's Common Stock as long as any Minimum
Borrowing Note shall be outstanding.
(h) Patriot Act. If the Purchaser is a corporation, trust,
partnership, limited liability company or other organization, the Purchaser
certifies that, to the best of Purchaser's knowledge, the Purchaser has not been
designated, and is not owned or controlled, by a "suspected terrorist" as
defined in Executive Order 13224. The Purchaser hereby acknowledges that the
Company seeks to comply with all applicable laws concerning money laundering and
related activities. In furtherance of those efforts, the Purchaser hereby
represents, warrants and agrees that: (i) none of the cash or property that the
Purchaser will pay or will contribute to the Company has been or shall be
derived from, or related to, any activity that is deemed criminal under United
States law; and (ii) no contribution or payment by the Purchaser to the Company,
to the extent that they are within the Purchaser's control shall cause the
Company to be in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the United States
International Money Laundering Abatement and Anti-Terrorist Financing Act of
2001. The Purchaser shall promptly notify the Company if any of these
representations ceases to be true and accurate regarding the Purchaser. The
Purchaser agrees to provide the Company any additional information regarding the
Purchaser that the Company deems necessary or convenient to ensure compliance
with all applicable laws concerning money laundering and similar activities. The
Purchaser understands and agrees that if at any time it is discovered that any
of the foregoing representations are incorrect, or if otherwise required by
applicable law or regulation related to money laundering similar activities, the
Company may undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or redemption of
the Purchaser's investment in the Company. The Purchaser further understands
that the Company may release confidential information about the Purchaser and,
if applicable, any underlying beneficial owners, to proper authorities if the
Company, in its sole discretion, determines that it is in the best interests of
the Company in light of relevant rules and regulations under the laws set forth
in subsection (ii) above.
(i) Reoffers and Resales. Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
unless registered under the Securities Act or pursuant to an exemption from
registration under the Securities Act.
(j) No Advertisement, Etc. Purchaser is not subscribing for the
Securities as a result of, or pursuant to, any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or meeting.
Purchaser understands that no United States federal or state agency, or similar
agency of any other country, has passed upon or made any recommendation or
endorsement of the Company, this transaction or the purchase of the Securities.
(k) Company Reliance. Purchaser understands that the Securities are
being offered and sold to the Purchaser by the Company in reliance upon the
truth and accuracy of, and the Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments
19
and understandings of the Purchaser set forth herein and in the documents
contemplated in connection herewith in order to determine the eligibility of the
Purchaser to acquire or receive an offer to acquire the Securities; and the
information with respect to the Purchaser provided to the Company by the
Purchaser is accurate and complete in all material respects
16. Power of Attorney. Company hereby appoints Laurus, or any other
Person whom Laurus may designate as Company's attorney, with power to: (i)
endorse Company's name on any checks, notes, acceptances, money orders, drafts
or other forms of payment or security that may come into Laurus' possession;
(ii) sign Company's name on any invoice or xxxx of lading relating to any
Accounts, drafts against Account Debtors, schedules and assignments of Accounts,
notices of assignment, financing statements and other public records,
verifications of Account and notices to or from Account Debtors; (iii) verify
the validity, amount or any other matter relating to any Account by mail,
telephone, telegraph or otherwise with Account Debtors; (iv) do all things
necessary to carry out this Agreement, any Ancillary Agreement and all related
documents; and (v) on or after the occurrence and continuation of an Event of
Default, notify the post office authorities to change the address for delivery
of Company's mail to an address designated by Laurus, and to receive, open and
dispose of all mail addressed to Company. Company hereby ratifies and approves
all acts of the attorney. Neither Laurus, nor the attorney will be liable for
any acts or omissions or for any error of judgment or mistake of fact or law,
except for gross negligence or willful misconduct. This power, being coupled
with an interest, is irrevocable so long as Laurus has a security interest and
until the Obligations have been fully satisfied.
17. Term of Agreement. Laurus' agreement to make Loans and extend
financial accommodations under and in accordance with the terms of this
Agreement or any Ancillary Agreement shall continue in full force and effect
until the expiration of the Initial Term. At Laurus' election following the
occurrence of an Event of Default, Laurus may terminate this Agreement. The
termination of the Agreement shall not affect any of Laurus' rights hereunder or
any Ancillary Agreement and the provisions hereof and thereof shall continue to
be fully operative until all transactions entered into, rights or interests
created and the Obligations have been disposed of, concluded or liquidated.
Notwithstanding the foregoing, Laurus shall release its security interests at
any time after thirty (30) days notice upon payment to it of all Obligations if
Company shall have (i) provided Laurus with an executed release of any and all
claims which Company may have or thereafter have under this Agreement and all
Ancillary Agreements and (ii) paid to Laurus an early payment fee in an amount
equal to (1) four percent (4.0%) of the Capital Availability Amount if such
payment occurs prior to the first anniversary of the Initial Term or any
applicable renewal term, and (2) three percent (3.0%) of the Capital
Availability Amount if such payment occurs on or after the first anniversary and
prior to the second anniversary of the Initial Term or any applicable renewal
term and two percent (2.0%) if such termination occurs thereafter during the
Initial Term; such fee being intended to compensate Laurus for its costs and
expenses incurred in initially approving this Agreement or extending same. Such
early payment fee shall be due and payable by Company to Laurus upon termination
by acceleration of this Agreement by Laurus due to the occurrence and
continuance of an Event of Default.
18. Termination of Lien. The Liens and rights granted to Laurus
hereunder and any Ancillary Agreements and the financing statements filed in
connection herewith or therewith
20
shall continue in full force and effect, notwithstanding the termination of this
Agreement or the fact that Company's account may from time to time be
temporarily in a zero or credit position, until (a) all of the Obligations of
Company have been paid or performed in full after the termination of this
Agreement. Laurus shall not be required to send termination statements to
Company, or to file them with any filing office, unless and until this Agreement
and the Ancillary Agreements shall have been terminated in accordance with their
terms and all Obligations paid in full in immediately available funds. 19.
Events of Default. The occurrence of any of the following shall constitute an
Event of Default:
(a) failure to make payment of any of the Obligations when required
hereunder and such failure shall not be cured within three (3) business days;
(b) failure to pay any taxes when due unless such taxes are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been provided on Company's books;
(c) failure to perform under and/or committing any breach of this
Agreement or any Ancillary Agreement or any other agreement between Company and
Laurus which shall continue for a period of fifteen (15) days after the
occurrence thereof;
(d) the occurrence and continuance beyond any applicable grace period
of a default under any agreement to which Company is a party with third parties
which has a Material Adverse Effect;
(e) any representation, warranty or statement made by Company
hereunder, in any Ancillary Agreement, any certificate, statement or document
delivered pursuant to the terms hereof, or in connection with the transactions
contemplated by this Agreement should at any time be false or misleading in any
material respect and shall not be cured for a period of ten (10) days after the
occurrence thereof;
(f) an attachment or levy is made upon Company's assets having an
aggregate value in excess of $100,000 or a judgment is rendered against Company
or Company's property involving a liability of more than $100,000 which shall
not have been vacated, discharged, stayed or bonded pending appeal within thirty
(30) days from the entry thereof;
(g) any change in Company's condition or affairs (financial or
otherwise) which in Laurus' reasonable, good faith opinion, could reasonably be
expected to have a Material Adverse Effect;
(h) any Lien created hereunder or under any Ancillary Agreement for
any reason (other than the irrevocable payment in full of the Obligations)
ceases to be or is not a valid and perfected Lien having a first priority
interest;
(i) if Company shall (i) apply for, consent to or suffer to exist the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii)
21
commence a voluntary case under the federal bankruptcy laws (as now or hereafter
in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within forty five (45) , any
petition filed against it in any involuntary case under such bankruptcy laws, or
(vii) take any action for the purpose of effecting any of the foregoing;
(j) Company shall admit in writing its inability, or be generally
unable to pay its debts as they become due or cease operations of its present
business;
(k) any wholly owned Subsidiary of the Company (if the Company shall
have guaranteed the debt of such Subsidiary) or if any of the following events
could reasonably be expected to have a Material Adverse Effect) shall (i) apply
for, consent to or suffer to exist the appointment of, or the taking possession
by, a receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vii) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy laws
or (viii) take any action for the purpose of effecting any of the foregoing;
(l) Company directly or indirectly sells, assigns, transfers, conveys,
or suffers or permits to occur any sale, assignment, transfer or conveyance of
any assets of Company or any interest therein, except as permitted herein;
(m) the occurrence of a change in the controlling ownership of the
Company;
(n) a default by Company in the payment, when due, of any principal of
or interest on any other indebtedness for money borrowed in an amount greater
than $25,000, which is not cured within any applicable cure or grace period;
(o) the indictment or threatened indictment of Company or any
executive officer of Company under any criminal statute, or commencement or
threatened commencement of criminal or civil proceeding against Company or any
executive officer of Company pursuant to which statute or proceeding penalties
or remedies sought or available include forfeiture of any of the property of
Company;
(p) if an Event of Default shall occur under and as defined in any
Note; or
20. Remedies. Following the occurrence and during the continuance of
an Event of Default, Laurus shall have the right to demand repayment in full of
all Obligations, whether or not otherwise due. Until all Obligations have been
fully satisfied, Laurus shall retain its Lien in all Collateral. Laurus shall
have, in addition to all other rights provided herein and in each Ancillary
Agreement, the rights and remedies of a secured party under the UCC, and under
other applicable law, all other legal and equitable rights to which Laurus may
be entitled, including the
22
right to take immediate possession of the Collateral, to require Company to
assemble the Collateral, at Company's expense, and to make it available to
Laurus at a place designated by Laurus which is reasonably convenient to both
parties and to enter any of the premises of Company or wherever the Collateral
shall be located, with or without force or process of law, and to keep and store
the same on said premises until sold (and if said premises be the property of
Company, Company agrees not to charge Laurus for storage thereof), and the right
to apply for the appointment of a receiver for Company's property. Further,
Laurus may, at any time or times after the occurrence of an Event of Default,
sell and deliver all Collateral held by or for Laurus at public or private sale
for cash, upon credit or otherwise, at such prices and upon such terms as
Laurus, in Laurus' sole discretion, deems advisable or Laurus may otherwise
recover upon the Collateral in any commercially reasonable manner as Laurus, in
its sole discretion, deems advisable. The requirement of reasonable notice shall
be met if such notice is mailed postage prepaid to Company at Company's address
as shown in Laurus' records, at least ten (10) days before the time of the event
of which notice is being given. Laurus may be the purchaser at any sale, if it
is public. In connection with the exercise of the foregoing remedies, Laurus is
granted permission to use all of Company's trademarks, tradenames, tradestyles,
patents, patent applications, licenses, franchises and other proprietary rights.
The proceeds of sale shall be applied first to all costs and expenses of sale,
including attorneys' fees, and second to the payment (in whatever order Laurus
elects) of all Obligations. After the indefeasible payment and satisfaction in
full in cash of all of the Obligations, and after the payment by Laurus of any
other amount required by any provision of law, including Section 608(a)(1) of
the Code (but only after Laurus has received what Laurus considers reasonable
proof of a subordinate party's security interest), the surplus, if any, shall be
paid to Company or its representatives or to whosoever may be lawfully entitled
to receive the same, or as a court of competent jurisdiction may direct. Company
shall remain liable to Laurus for any deficiency. In addition, Company shall pay
Laurus a liquidation fee ("Liquidation Fee") in the amount of five percent (5%)
of the actual amount collected in respect of each Account outstanding at any
time during a "liquidation period". For purposes hereof, "liquidation period"
means a period: (i) beginning on the earliest date of (x) an event referred to
in Section 18(i) or 18(j), or (y) the cessation of Company's business; and (ii)
ending on the date on which Laurus has actually received all Obligations due and
owing it under this Agreement and the Ancillary Agreements. The Liquidation Fee
shall be paid on the date on which Laurus collects the applicable Account by
deduction from the proceeds thereof.. Company and Laurus acknowledge that the
actual damages that would be incurred by Laurus after the occurrence of an Event
of Default would be difficult to quantify and that Company and Laurus have
agreed that the fees and obligations set forth in this Section and in this
Agreement would constitute fair and appropriate liquidated damages in the event
of any such termination.
21. Waivers. To the full extent permitted by applicable law, Company
waives (a) presentment, demand and protest, and notice of presentment, dishonor,
intent to accelerate, acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all of this
Agreement and the Ancillary Agreements or any other notes, commercial paper,
Accounts, contracts, Documents, Instruments, Chattel Paper and guaranties at any
time held by Laurus on which Company may in any way be liable, and hereby
ratifies and confirms whatever Laurus may do in this regard; (b) all rights to
notice and a hearing prior to Laurus' taking possession or control of, or to
Laurus' replevy, attachment or levy upon, any Collateral or any bond or security
that might be required by any court prior to allowing Laurus to
23
exercise any of its remedies; and (c) the benefit of all valuation, appraisal
and exemption laws. Company acknowledges that it has been advised by counsel of
its choices and decisions with respect to this Agreement, the Ancillary
Agreements and the transactions evidenced hereby and thereby.
22. Expenses. Each of the parties hereto shall pay their own
respective out-of-pocket costs and expenses, including reasonable fees and
disbursements of in-house or outside counsel and appraisers, in connection with
the preparation, execution and delivery of this Agreement and the Ancillary
Agreements as agreed on the date hereof, provided however, that in connection
with the prosecution or defense of any action, contest, dispute, suit or
proceeding concerning any matter in any way arising out of, related to or
connected with this Agreement or any Ancillary Agreement, Company shall pay all
of Laurus' reasonable fees, charges, out-of-pocket costs and expenses, including
fees and disbursements of counsel relating thereto. Company shall also pay all
of Laurus' reasonable fees, charges, out-of-pocket costs and expenses, including
fees and disbursements of counsel and appraisers, in connection with (a) the
preparation, execution and delivery of any waiver, any amendment thereto or
consent proposed or executed in connection with the transactions contemplated by
this Agreement or the Ancillary Agreements, (b) Laurus' obtaining performance of
the Obligations under this Agreement and any Ancillary Agreements, including,
but not limited to, the enforcement or defense of Laurus' security interests,
assignments of rights and Liens hereunder as valid perfected security interests,
(c) any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of any Collateral, (d) any appraisals or re-appraisals of any
property (real or personal) pledged to Laurus by Company as Collateral for, or
any other Person as security for, Company's Obligations hereunder and (e) any
consultations in connection with any of the foregoing. Company shall also pay
Laurus' customary bank charges for all bank services (including wire transfers)
performed or caused to be performed by Laurus for Company at Company's request
or in connection with Company's loan account with Laurus. All such costs and
expenses together with all filing, recording and search fees, taxes and interest
payable by Company to Laurus shall be payable on demand and shall be secured by
the Collateral. If any tax by any Governmental Authority is or may be imposed on
or as a result of any transaction between Company and Laurus which Laurus is or
may be required to withhold or pay, Company agrees to indemnify and hold Laurus
harmless in respect of such taxes, and Company will repay to Laurus the amount
of any such taxes which shall be charged to Company's account; and until Company
shall furnish Laurus with indemnity therefor (or supply Laurus with evidence
satisfactory to it that due provision for the payment thereof has been made),
Laurus may hold without interest any balance standing to Company's credit and
Laurus shall retain its Liens in any and all Collateral.
23. Assignment By Laurus. Laurus may assign any or all of the
Obligations together with any or all of the security therefor to any Person
which is not a competitor of the Company and any such transferee shall succeed
to all of Laurus' rights with respect thereto. Upon such transfer, Laurus shall
be released from all responsibility for the Collateral to the extent same is
assigned to any transferee. Laurus may from time to time sell or otherwise grant
participations in any of the Obligations and the holder of any such
participation shall, subject to the terms of any agreement between Laurus and
such holder, be entitled to the same benefits as Laurus with respect to any
security for the Obligations in which such holder is a participant. Company
agrees that each such holder may exercise any and all rights of banker's lien,
set-off
24
and counterclaim with respect to its participation in the Obligations as fully
as though Company were directly indebted to such holder in the amount of such
participation.
24. No Waiver; Cumulative Remedies. Failure by Laurus to exercise any
right, remedy or option under this Agreement, any Ancillary Agreement or any
supplement hereto or thereto or any other agreement between Company and Laurus
or delay by Laurus in exercising the same, will not operate as a waiver; no
waiver by Laurus will be effective unless it is in writing and then only to the
extent specifically stated. Laurus' rights and remedies under this Agreement and
the Ancillary Agreements will be cumulative and not exclusive of any other right
or remedy which Laurus may have.
25. Application of Payments. Company irrevocably waives the right to
direct the application of any and all payments at any time or times hereafter
received by Laurus from or on Company's behalf and Company hereby irrevocably
agrees that Laurus shall have the continuing exclusive right to apply and
reapply any and all payments received at any time or times hereafter against the
Obligations hereunder in such manner as Laurus may deem advisable
notwithstanding any entry by Laurus upon any of Laurus' books and records.
26. Indemnity. Company agrees to indemnify and hold Laurus, and its
respective affiliates, employees, attorneys and agents (each, an "Indemnified
Person"), harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses of any kind or nature
whatsoever (including attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement or any of the Ancillary Agreements or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement, the Ancillary Agreements or any
other documents or transactions contemplated by or referred to herein or therein
and any actions or failures to act with respect to any of the foregoing, except
to the extent that any such indemnified liability is finally determined by a
court of competent jurisdiction to have resulted solely from such Indemnified
Person's gross negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE
RESPONSIBLE OR LIABLE TO COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
27. Revival. Company further agrees that to the extent Company makes a
payment or payments to Laurus, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, then, to
the extent of such payment or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
said payment had not been made.
25
28. Notices. Any notice or request hereunder may be given to Company
or Laurus at the respective addresses set forth below or as may hereafter be
specified in a notice designated as a change of address under this Section. Any
notice or request hereunder shall be given by registered or certified mail,
return receipt requested, hand delivery, overnight mail or telecopy (confirmed
by mail). Notices and requests shall be, in the case of those by hand delivery,
deemed to have been given when delivered to any officer of the party to whom it
is addressed, in the case of those by mail or overnight mail, deemed to have
been given three (3) business days after the date when deposited in the mail or
with the overnight mail carrier, and, in the case of a telecopy, when confirmed.
Notices shall be provided as follows:
If to Laurus: Laurus Master Fund, Ltd.
c/o Laurus Capital Management, LLC
000 Xxxxx Xxxxxx 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
If to Company: Global Payment Technologies, Inc.
000-X Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or such other address as may be designated in writing hereafter in accordance
with this Section 27 by such Person.
29. Governing Law, Jurisdiction and Waiver of Jury Trial.
(a) THIS AGREEMENT AND THE ANCILLARY AGREEMENTS SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE.
(b) COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW
26
YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
DISPUTES BETWEEN COMPANY AND LAURUS PERTAINING TO THIS AGREEMENT OR ANY OF THE
ANCILLARY AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE ANCILLARY AGREEMENTS; PROVIDED, THAT LAURUS AND COMPANY
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
LAURUS FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LAURUS. COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION
IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND COMPANY HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS. COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY AT THE ADDRESS SET FORTH IN
SECTION 27 AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER
OF COMPANY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S.
MAILS, PROPER POSTAGE PREPAID.
(c) THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LAURUS AND
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT, ANY
ANCILLARY AGREEMENT OR THE TRANSACTIONS RELATED THERETO.
30. Limitation of Liability. Company acknowledges and understands that
in order to assure repayment of the Obligations hereunder Laurus may be required
to exercise any and all of Laurus' rights and remedies hereunder and agrees
that, except as limited by applicable law, neither Laurus nor any of Laurus'
agents shall be liable for acts taken or omissions made in connection herewith
or therewith except for actual bad faith.
31. Entire Understanding. This Agreement and the Ancillary Agreements
contain the entire understanding between Company and Laurus as to the subject
matter hereof and thereof and any promises, representations, warranties or
guarantees not herein contained shall have no force and effect unless in
writing, signed by Company's and Laurus' respective officers. Neither this
Agreement, the Ancillary Agreements, nor any portion or provisions thereof may
be
27
changed, modified, amended, waived, supplemented, discharged, cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged.
32. Severability. Wherever possible each provision of this Agreement
or the Ancillary Agreements shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or the Ancillary Agreements shall be prohibited by or invalid under applicable
law such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions thereof.
33. Captions. All captions are and shall be without substantive
meaning or content of any kind whatsoever.
34. Counterparts; Telecopier Signatures. This Agreement may be
executed in one or more counterparts, each of which shall constitute an original
and all of which taken together shall constitute one and the same agreement. Any
signature delivered by a party via telecopier transmission shall be deemed to be
any original signature hereto.
35. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
36. Publicity. Company hereby authorizes Laurus to make appropriate
announcements of the financial arrangement entered into by and between Company
and Laurus, including, without limitation, announcements which are commonly
known as tombstones, in such publications and to such selected parties as Laurus
shall in its sole and absolute discretion deem appropriate, or as required by
applicable law.
37. Legends. The Securities shall bear legends as follows;
(a) The Note shall bear substantially the following legend:
"THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES
LAWS. THIS NOTE AND THE COMMON STOCK ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS NOTE OR SUCH SHARES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO GLOBAL PAYMENT
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
28
(b) Any shares of Common Stock issued pursuant to conversion of the
Note, shall bear a legend which shall be in substantially the following form
until such shares are covered by an effective registration statement filed with
the SEC:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE, STATE SECURITIES LAWS. THESE SHARES MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
SECURITIES ACT AND APPLICABLE STATE LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO GLOBAL PAYMENT
TECHNOLOGIES, INC. THAT SUCH REGISTRATION IS NOT REQUIRED."
[Balance of page intentionally left blank; signature page follows.]
29
IN WITNESS WHEREOF, the parties have executed this Security Agreement
as of the date first written above.
GLOBAL PAYMENT TECHNOLOGIES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
LAURUS MASTER FUND, LTD.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
30
Annex A - Definitions
---------------------
"Account Debtor" means any Person who is or may be obligated with
respect to, or on account of, an Account.
"Accountants" has the meaning given to such term in Section 11(a).
"Accounts" means all "accounts", as such term is defined in the UCC,
now owned or hereafter acquired by any Person, including: (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments) (including
any such obligations that may be characterized as an account or contract right
under the UCC); (b) all of such Person's rights in, to and under all purchase
orders or receipts for goods or services; (c) all of such Person's rights to any
goods represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) all rights to payment due to such
Person for Goods or other property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Person or in connection with any other transaction (whether or
not yet earned by performance on the part of such Person); and (e) all
collateral security of any kind given by any Account Debtor or any other Person
with respect to any of the foregoing.
"Accounts Availability" means the amount of Loans against Eligible
Accounts and Eligible Foreign Accounts that Laurus may from time to time make
available to Company equal to the sum of up to eighty five percent (85%) of the
net face amount of Eligible Accounts and up to seventy percent (70%) of the net
face amount Eligible Foreign Accounts, each as based on Accounts of Company.
"Affiliate" of any Person means (a) any Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled by,
or is under common control with such Person, (b) any Person who is a director or
officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For the purposes of this definition,
control of a Person shall mean the power (direct or indirect) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.
"Ancillary Agreements" means, the Notes, Warrants, Registration Rights
Agreements, each Guaranty, each Guaranty Security Agreement and all other
agreements, instruments, documents, mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, trust agreements
and guarantees whether heretofore, concurrently, or hereafter executed by or on
behalf of Company or any other Person or delivered to Laurus, relating to this
Agreement or to the transactions contemplated by this Agreement or otherwise
relating to the relationship between the Company and Laurus.
"Books and Records" means all books, records, board minutes,
contracts, licenses, insurance policies, environmental audits, business plans,
files, computer files, computer
31
discs and other data and software storage and media devices, accounting books
and records, financial statements (actual and pro forma), filings with
Governmental Authorities and any and all records and instruments relating to the
Collateral or otherwise necessary or helpful in the collection thereof or the
realization thereupon.
"Business Day" means a day on which Laurus is open for business and
that is not a Saturday, a Sunday or other day on which banks are required or
permitted to be closed in the State of New York.
"Capital Availability Amount" means $2,500,000.
"Chattel Paper" means all "chattel paper," as such term is defined in
the UCC, including electronic chattel paper, now owned or hereafter acquired by
any Person.
"Closing Date" means the date on which Company shall first receive
proceeds of the initial Loans .
"Collateral" means all of Company's property and assets, whether real
or personal, tangible or intangible, and whether now owned or hereafter
acquired, or in which it now has or at any time in the future may acquire any
right, title or interests including all of the following property in which it
now has or at any time in the future may acquire any right, title or interest:
(a) all Inventory;
(b) all Equipment;
(c) all Fixtures;
(d) all General Intangibles;
(e) all Accounts;
(f) all Deposit Accounts, other bank accounts and all funds on deposit
therein;
(g) all Investment Property;
(h) all Stock;
(i) all Chattel Paper;
(j) all Letter-of-Credit Rights;
(k) all Instruments;
(l) all commercial tort claims set forth on Exhibit 1(A);
(m) all Books and Records;
32
(n) all Supporting Obligations including letters of credit and
guarantees issued in support of Accounts, Chattel Paper, General Intangibles and
Investment Property;
(o) (i) all money, cash and cash equivalents and (ii) all cash held as
cash collateral to the extent not otherwise constituting Collateral, all other
cash or property at any time on deposit with or held by Laurus for the account
of Company (whether for safekeeping, custody, pledge, transmission or
otherwise); and
(p) all products and Proceeds of all or any of the foregoing, tort
claims and all claims and other rights to payment including insurance claims
against third parties for loss of, damage to, or destruction of, and (ii)
payments due or to become due under leases, rentals and hires of any or all of
the foregoing and Proceeds payable under, or unearned premiums with respect to
policies of insurance in whatever form.
"Contract Rate" means an interest rate per annum equal to the Prime
Rate plus one and one half percent (1.50%).The Contract Rate shall not be less
than six percent (6.00 %).
"Default" means any act or event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" has the meaning given to such term in Section
5(a)(iii).
"Deposit Accounts" means all "deposit accounts" as such term is
defined in the UCC, now or hereafter held in the name of any Person, including,
without limitation, the Lockbox Account.
"Documents" means all "documents", as such term is defined in the UCC,
now owned or hereafter acquired by any Person, wherever located, including all
bills of lading, dock warrants, dock receipts, warehouse receipts, and other
documents of title, whether negotiable or non-negotiable.
"Eligible Accounts" means and includes each Account which conforms to
the following criteria: (a) shipment of the merchandise or the rendition of
services has been completed; (b) no return, rejection or repossession of the
merchandise has occurred; (c) merchandise or services shall not have been
rejected or disputed by the Account Debtor and there shall not have been
asserted any offset, defense or counterclaim; (d) continues to be in full
conformity with the representations and warranties made by Company to Laurus
with respect thereto; (e) Laurus is, and continues to be, satisfied with the
credit standing of the Account Debtor in relation to the amount of credit
extended; (f) there are no facts existing or threatened which are likely to
result in any adverse change in an Account Debtor's financial condition; (g) is
documented by an invoice in a form approved by Laurus and shall not be unpaid
more than ninety (90) days from invoice date; (h) not more than fifty percent
(50%) of the unpaid amount of invoices due from such Account Debtor remains
unpaid more than ninety (90) days from invoice date; (i) is not evidenced by
chattel paper or an instrument of any kind with respect to or in payment of the
Account unless such instrument is duly endorsed to and in possession of Laurus
or represents a check in payment of a Account; (j) the Account Debtor is located
in the United States; provided, however, Laurus may, from time to time, in the
exercise of its sole discretion and based upon satisfaction of certain
conditions to be determined at such time by
33
Laurus, deem certain Accounts as Eligible Accounts notwithstanding that such
Account is due from an Account Debtor located outside of the United States; (k)
Laurus has a first priority perfected Lien in such Account and such Account is
not subject to any Lien other than Permitted Liens; (l) does not arise out of
transactions with any employee, officer, director, stockholder or Affiliate of
Company; (m) is payable to Company; (n) does not arise out of a xxxx and hold
sale prior to shipment and does not arise out of a sale to any Person to which
Company is indebted; (o) is net of any returns, discounts, claims, credits and
allowances; (p) if the Account arises out of contracts between Company and the
United States, any state, or any department, agency or instrumentality of any of
them, Company has so notified Laurus, in writing, prior to the creation of such
Account, and there has been compliance with any governmental notice or approval
requirements, including compliance with the Federal Assignment of Claims Act;
(q) is a good and valid account representing an undisputed bona fide
indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale
and delivery upon the stated terms of goods sold by Company or work, labor
and/or services rendered by Company; (r) does not arise out of progress xxxxxxxx
prior to completion of the order; (s) the total unpaid Accounts from such
Account Debtor does not exceed twenty-five percent (25%) of all Eligible
Accounts, provided, however, that if the total unpaid Accounts from any such
Account Debtor do exceed twenty-five percent (25%) of all Eligible Accounts only
the unpaid Accounts of such Debtor that exceed the twenty five percent (25%)
limitation herein shall be excluded from Eligible Accounts; (t) Company's right
to payment is absolute and not contingent upon the fulfillment of any condition
whatsoever; (u) Company is able to bring suit and enforce its remedies against
the Account Debtor through judicial process; (v) does not represent interest
payments, late or finance charges owing to Company and (w) is otherwise
satisfactory to Laurus as determined by Laurus in the exercise of its sole
reasonable discretion. In the event Company requests that Laurus include within
Eligible Accounts certain Accounts of one or more of Company's acquisition
targets, Laurus shall at the time of such request consider such inclusion, but
any such inclusion shall be at the sole option of Laurus and shall at all times
be subject to the execution and delivery to Laurus of all such documentation
(including, without limitation, guaranty and security documentation) as Laurus
may require in its sole discretion.
"Eligible Foreign Accounts" means and includes each Account with
respect to which the Account Debtor is located in a country other than the
United States of America and which conforms to the following criteria: (a) is
deemed an "Eligible Account" hereunder and (b) (i) the goods which gave rise to
such Account were shipped after receipt by Laurus of an irrevocable letter of
credit naming Laurus as the beneficiary thereof issued and confirmed by a
financial institution acceptable in all respects to Laurus and otherwise in form
and substance acceptable to Laurus in the face amount covering the gross amount
of the Account and payable in United States dollars at a place of payment
located within the United States or (ii) such Account is covered by an insurance
policy issued by an insurance carrier acceptable to Laurus in all respects, the
proceeds under which shall be assigned to Laurus pursuant to such documentation
acceptable to Laurus in all respects and shall otherwise be satisfactory to
Laurus in all respects.
"Eligible Inventory" means Inventory owned by Company which Laurus, in
its sole and absolute discretion, determines: (a) is subject to a first priority
perfected Lien in favor of Laurus and is subject to no other Liens whatsoever
(other than Permitted Liens); (b) is located
34
on premises with respect to which Laurus has received a landlord or mortgagee
waiver acceptable in form and substance to Laurus; (c) is not in transit; (d) is
in good condition and meets all standards imposed by any governmental agency, or
department or division thereof having regulatory Governmental Authority over
such Inventory, its use or sale including the Federal Fair Labor Standards Act
of 1938 as amended, and all rules, regulations and orders thereunder; (e) is
currently either usable or salable in the normal course of Company's business;
(f) is not placed by Company on consignment or held by Company on consignment
from another Person; (g) is in conformity with the representations and
warranties made by Company to Laurus with respect thereto; (h) is not subject to
any licensing, patent, royalty, trademark, trade name or copyright agreement
with any third parties; (i) does not require the consent of any Person for the
completion of manufacture, sale or other disposition of such Inventory and such
completion, manufacture or sale does not constitute a breach or default under
any contract or agreement to which Company is a party or to which such Inventory
is or may be subject; (j) is covered by casualty insurance acceptable to Laurus;
and (k) not to be ineligible for any other reason.
"Equipment" means all "equipment" as such term is defined in the UCC,
now owned or hereafter acquired by any Person, wherever located, including any
and all machinery, apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal property (other than Inventory) of every
kind and description that may be now or hereafter used in such Person's
operations or that are owned by such Person or in which such Person may have an
interest, and all parts, accessories and accessions thereto and substitutions
and replacements therefor.
"ERISA" shall have the meaning given to such term in Section 12(g).
"Event of Default" means the occurrence of any of the events set forth
in Section 18.
"Fixed Conversion Price" has the meaning given such term in the
Minimum Borrowing Note.
"Fixtures" means all "fixtures" as such term is defined in the UCC,
now owned or hereafter acquired by any Person.
"Formula Amount" has the meaning set forth in Section 2(a)(i).
"GAAP" means generally accepted accounting principles, practices and
procedures in effect from time to time in the United States of America.
"General Intangibles" means all "general intangibles" as such term is
defined in the UCC, now owned or hereafter acquired by any Person including all
right, title and interest that such Person may now or hereafter have in or under
any contract, all Payment Intangibles, customer lists, Licenses, Intellectual
Property, interests in partnerships, joint ventures and other business
associations, permits, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, Software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials, Books and Records, Goodwill
(including the Goodwill associated with any Intellectual Property), all rights
and claims in or under insurance policies (including insurance for fire,
35
damage, loss, and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key-person, and
business interruption insurance, and all unearned premiums), uncertificated
securities, choses in action, deposit accounts, rights to receive tax refunds
and other payments, rights to received dividends, distributions, cash,
Instruments and other property in respect of or in exchange for pledged Stock
and Investment Property, and rights of indemnification.
"Goods" means all "goods", as such term is defined in the UCC, now
owned or hereafter acquired by any Person, wherever located, including embedded
software to the extent included in "goods" as defined in the UCC, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
"Goodwill" means all goodwill, trade secrets, proprietary or
confidential information, technical information, procedures, formulae, quality
control standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Guarantor" means and any Person who may guarantee payment of
performance of the whole or any part of the Obligations.
"Guarantor Security Agreements" means all security agreements,
mortgages, cash collateral deposit letters, pledges and other agreements which
are executed by any Guarantor in favor of Laurus.
"Guaranty" means all agreements to perform all or any portion of the
Obligations on behalf of Company.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Indemnified Person" shall have the meaning given to such term in
Section 25.
"Initial Term" means the Closing Date through the close of business on
the day immediately preceding the third anniversary of the Closing Date, subject
to acceleration at the option of Laurus upon the occurrence of an Event of
Default hereunder or other termination hereunder.
"Instruments" means all "instruments", as such term is defined in the
UCC, now owned or hereafter acquired by any Person, wherever located, including
all certificated securities and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"Intellectual Property" means any and all Licenses, patents, patent
registrations, copyrights, copyright registrations, trademarks, trademark
registrations, trade secrets and customer lists.
36
"Inventory" means all "inventory", as such term is defined in the UCC,
now owned or hereafter acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property that are held by or on
behalf of such Person for sale or lease or are furnished or are to be furnished
under a contract of service or that constitute raw materials, work in process,
finished goods, returned goods, or materials or supplies of any kind, nature or
description used or consumed or to be used or consumed in such Person's business
or in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.
"Inventory Availability" means the amount of Loans against Eligible
Inventory Laurus may from time to time make available to Company up to fifty
(50%) of the value of Company's Eligible Inventory (calculated on the basis of
the lower of cost or market, on a first-in first-out basis).
"Investment Property" means all "investment property", as such term is
defined in the UCC, now owned or hereafter acquired by any Person, wherever
located.
"Letter-of-Credit Rights" means "letter-of-credit rights" as such term
is defined in the UCC, now owned or hereafter acquired by any Person, including
rights to payment or performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand payment or
performance.
"License" means any rights under any written agreement now or
hereafter acquired by any Person to use any trademark, trademark registration,
copyright, copyright registration or invention for which a patent is in
existence or other license of rights or interests now held or hereafter acquired
by any Person.
"Lien" means any mortgage, security deed, deed of trust, pledge,
hypothecation, assignment, security interest, lien (whether statutory or
otherwise), charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including any conditional sale or
other title retention agreement, any lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the UCC or comparable law of any
jurisdiction.
"Loans" shall have the meaning set forth in Section 2(a)(i) and shall
include all other extensions of credit hereunder and under any Ancillary
Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
condition, operations, assets, business or prospects of Company, (b) Company's
ability to pay or perform the Obligations in accordance with the terms hereof or
any Ancillary Agreement, (c) the value of the Collateral, the Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Laurus' rights and remedies under this Agreement and the
Ancillary Agreements.
"Maximum Legal Rate" shall have the meaning given to such term in
Section 5(a)(iv).
37
"Minimum Borrowing Amount" means $750,000, which such aggregate amount
shall be evidenced by Minimum Borrowing Notes.
"Minimum Borrowing Notes" shall mean each Secured Convertible Note,
which shall be issued in a series, made by the Company in favor of Laurus to
evidence the Minimum Borrowing Amount.
"Notes" means each of the Minimum Borrowing Notes and the Revolving
Note made by Company in favor of Laurus in connection with the transactions
contemplated hereby, as the same may be amended, modified and supplemented from
time to time, as applicable.
"Obligations" means all Loans, all advances, debts, liabilities,
obligations, covenants and duties owing by Company to Laurus (or any corporation
that directly or indirectly controls or is controlled by or is under common
control with Laurus) of every kind and description (whether or not evidenced by
any note or other instrument and whether or not for the payment of money or the
performance or non-performance of any act), direct or indirect, absolute or
contingent, due or to become due, contractual or tortious, liquidated or
unliquidated, whether existing by operation of law or otherwise now existing or
hereafter arising including any debt, liability or obligation owing from Company
to others which Laurus may have obtained by assignment or otherwise and further
including all interest (including interest accruing at the then applicable rate
provided in this Agreement after the maturity of the Loans and interest accruing
at the then applicable rate provided in this Agreement after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), charges or any other payments Company
is required to make by law or otherwise arising under or as a result of this
Agreement and the Ancillary Agreements, together with all reasonable expenses
and reasonable attorneys' fees chargeable to Company's account or incurred by
Laurus in connection with Company's account whether provided for herein or in
any Ancillary Agreement.
"Payment Intangibles" means all "payment intangibles" as such term is
defined in the UCC, now owned or hereafter acquired by any Person, including, a
General Intangible under which the Account Debtor's principal obligation is a
monetary obligation.
"Permitted Liens" means (a) Liens of carriers, warehousemen, artisans,
bailees, mechanics and materialmen incurred in the ordinary course of business
securing sums not overdue; (b) Liens incurred in the ordinary course of business
in connection with workmen's compensation, unemployment insurance or other forms
of governmental insurance or benefits, relating to employees, securing sums (i)
not overdue or (ii) being diligently contested in good faith provided that
adequate reserves with respect thereto are maintained on the books of the
applicable Company in conformity with GAAP; (c) Liens in favor of Laurus; (d)
Liens for taxes (i) not yet due or (ii) being diligently contested in good faith
by appropriate proceedings, provided that adequate reserves with respect thereto
are maintained on the books of the applicable Company in conformity with GAAP
provided, that, the Lien shall have no effect on the priority of Liens in favor
of Laurus or the value of the assets in which Laurus has a Lien; (e) Purchase
Money Liens securing Purchase Money Indebtedness to the extent permitted in this
Agreement and (f) Liens specified on Exhibit 2 hereto.
38
"Person" means any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, entity or government (whether federal, state,
county, city, municipal or otherwise, including any instrumentality, division,
agency, body or department thereof), and shall include such Person's successors
and assigns.
"Prime Rate" means the "prime rate" published in The Wall Street
Journal from time to time. The Prime Rate shall be increased or decreased as the
case may be for each increase or decrease in the Prime Rate in an amount equal
to such increase or decrease in the Prime Rate; each change to be effective as
of the day of the change in such rate.
"Proceeds" means "proceeds", as such term is defined in the UCC and,
in any event, shall include: (a) any and all proceeds of any insurance,
indemnity, warranty or guaranty payable to Company or any other Person from time
to time with respect to any Collateral; (b) any and all payments (in any form
whatsoever) made or due and payable to Company from time to time in connection
with any requisition, confiscation, condemnation, seizure or forfeiture of any
Collateral by any governmental body, governmental authority, bureau or agency
(or any person acting under color of governmental authority); (c) any claim of
Company against third parties (i) for past, present or future infringement of
any Intellectual Property or (ii) for past, present or future infringement or
dilution of any trademark or trademark license or for injury to the goodwill
associated with any trademark, trademark registration or trademark licensed
under any trademark License; (d) any recoveries by Company against third parties
with respect to any litigation or dispute concerning any Collateral, including
claims arising out of the loss or nonconformity of, interference with the use
of, defects in, or infringement of rights in, or damage to, Collateral; (e) all
amounts collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock; and (f) any and all other amounts , rights to
payment or other property acquired upon the sale, lease, license, exchange or
other disposition of Collateral and all rights arising out of Collateral.
"Purchase Money Indebtedness" means (a) any indebtedness incurred for
the payment of all or any part of the purchase price of any fixed asset,
including indebtedness under capitalized leases, (b) any indebtedness incurred
for the sole purpose of financing or refinancing all or any part of the purchase
price of any fixed asset, and (c) any renewals, extensions or refinancings
thereof (but not any increases in the principal amounts thereof outstanding at
that time).
"Purchase Money Lien" means any Lien upon any fixed assets that
secures the Purchase Money Indebtedness related thereto but only if such Lien
shall at all times be confined solely to the asset the purchase price of which
was financed or refinanced through the incurrence of the Purchase Money
Indebtedness secured by such Lien and only if such Lien secures only such
Purchase Money Indebtedness.
"Registration Rights Agreements" means those registration rights
agreements from time to time entered into between Company and Laurus, as
amended, modified and supplemented from time to time.
39
"Revolving Note" means that secured revolving note made by the Company
in favor of Laurus in the aggregate principal amount of One Million Seven
Hundred Fifty Thousand Dollars ($1,750,000).
"Securities" means the Notes being issued by the Company to Laurus
pursuant to this Agreement and the Ancillary Agreements and the shares of the
common stock of the Company which may be issued pursuant to conversion of such
Notes in whole or in part.
"Software" means all "software" as such term is defined in the UCC,
now owned or hereafter acquired by any Person, including all computer programs
and all supporting information provided in connection with a transaction related
to any program.
"Stock" means all certificated and uncertificated shares, options,
warrants, membership interests, general or limited partnership interests,
participation or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the SEC under the Securities Exchange Act of
1934).
"Subsidiary" of any Person means a corporation or other entity whose
shares of stock or other ownership interests having ordinary voting power (other
than stock or other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors of such
corporation, or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.
"Supporting Obligations" means all "supporting obligations" as such
term is defined in the UCC.
"Term" means, as applicable, the Initial Term and any Renewal Term.
"UCC" means the Uniform Commercial Code as the same may, from time be
in effect in the State of New York; provided, that in the event that, by reason
of mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Laurus' Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection, priority or remedies and
for purposes of definitions related to such provisions; provided further, that
to the extent that UCC is used to define any term herein or in any Ancillary
Agreement and such term is defined differently in different Articles or
Divisions of the UCC, the definition of such term contained in Article or
Division 9 shall govern.
40
EXHIBITS
--------
Exhibit 1(A) - Commercial Tort Claims
Exhibit 2 - Permitted Liens
Exhibit 7(c) - Actions for Perfection
Exhibit 7(p) - Bank Accounts
Exhibit 12(d) - Corporate Information and Locations of Collateral
Exhibit 12(e) - ERISA
Exhibit 12(i) - Licenses, Patents, Trademarks and Copyrights
Exhibit 12(j) - Certain SEC matters
Exhibit 13(e)(i) - Permitted Indebtedness
Exhibit 13(e)(ii) - Existing Subsidiaries
Exhibit A - Form of Borrowing Base Certificate
LAURUS MASTER FUND, LTD.
and
GLOBAL PAYMENT TECHNOLOGIES, INC.,
Dated: March __, 2003
TABLE OF CONTENTS
1. (a) General Definitions
(b) Accounting Terms...............................................1
(c) Other Terms....................................................1
(d) Rules of Construction..........................................1
2. Loans.................................................................2
3. Repayment of the Loans................................................4
4. Procedure for Loans...................................................4
5. Interest and Payments.................................................5
(a) Interest.....................................................5
(b) Payments.....................................................5
6. Security Interest.....................................................6
7. Representations, Warranties and Covenants Concerning the Collateral...7
8. Payment of Accounts...................................................9
9. Collection and Maintenance of Collateral.............................10
10. Inspections and Appraisals...........................................10
11. Financial Reporting..................................................10
12. Additional Representations and Warranties............................11
13. Covenants. Company covenants as follows:............................15
14. Further Assurances...................................................17
15. Representations and Warranties of Laurus.............................18
(a) Requisite Power and Authority...............................18
(b) Investment Representations..................................18
(c) Laurus Bears Economic Risk..................................18
(d) Acquisition for Own Account.................................18
(e) Laurus Can Protect Its Interest.............................18
(f) Accredited Investor.........................................18
(g) Shorting....................................................19
(h) Patriot Act.................................................19
(i) Reoffers and Resales........................................19
(j) No Advertisement, Etc.......................................19
(k) Company Reliance............................................19
16. Power of Attorney....................................................20
17. Term of Agreement....................................................20
18. Termination of Lien..................................................20
19. Events of Default....................................................21
20. Remedies.............................................................22
21. Waivers..............................................................23
22. Expenses.............................................................24
23. Assignment By Laurus.................................................24
24. No Waiver; Cumulative Remedies.......................................25
25. Application of Payments..............................................25
26. Indemnity............................................................25
27. Revival..............................................................25
28. Notices..............................................................26
29. Governing Law, Jurisdiction and Waiver of Jury Trial.................27
30. Limitation of Liability..............................................27
31. Entire Understanding.................................................27
32. Severability.........................................................28
33. Captions.............................................................28
34. Counterparts; Telecopier Signatures..................................28
35. Construction.........................................................28
36. Publicity............................................................28
37. Legends..............................................................28
