EXHIBIT 10.3
CREDIT AGREEMENT
This Loan Agreement is entered into as of March 15, 2003 by and between
the Xxxxxx xxx Xxxxx Revocable Trust ("Lender") and Prism Software Corporation,
a Delaware corporation (the "Company");
RECITALS:
A. Lender has made certain advances to the Company, represented by
promissory notes;
B. The parties desire to provide for future advances by the Lender to
the Company;
NOW THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. PROCEDURE FOR BORROWING. Lender may advance additional funds, from
time to time, to meet the Company's capital needs, as such needs are determined
by Lender (the "Additional Advances"). Such advances shall be made upon written
or verbal requests by the Company, which requests shall include such supporting
documentation of the Company's capital needs as Lender may reasonably request.
The amounts borrowed shall be reflected on the books and records of Lender and
the Company; provided, however, that at Lender's request, the Company shall
execute a promissory note or notes evidencing the borrowings.
2. TERMS OF BORROWINGS. The borrowings (the "Obligations") shall be on
the following terms and conditions
2.1 INTEREST RATE. The Obligations shall bear interest at a
rate equal to eight percent per annum. Interest not paid when due shall
thereafter bear like interest as the principal, but unpaid interest so
compounded shall not exceed the maximum rate permitted by law.
2.2 TERMS OF PAYMENT. Amounts due under the Obligations shall
be paid within three days after receipt of written demand for such amounts from
Lender. The Company may, at its option, prepay all or any amount owed prior to
such date. Unless otherwise specified by Lender, any such payment shall be
credited first to interest then due and the remainder to principal. To the
extent that the Company receives funding from other parties and there are excess
funds available, the Company will make a good faith effort to prepay all or a
portion of the Obligations.
2.3. USURY LIMITATION. In no event shall the interest rate
payable pursuant to this Agreement be higher than permitted by applicable law.
2.4 DEFAULT AND ACCELERATION. Upon the occurrence of any Event
of Default (as defined below), the Obligations shall be in default and Lender
shall have the right, at Lender's sole option, to declare all amounts owed under
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the Obligations immediately due and payable. Each of the following is an "Event
of Default": (a) the failure of the Company to pay any portion of principal or
interest when due, which failure is not cured within three calendar days after
written notice, (b) the entry of a decree or order for relief in respect of the
Company under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable Federal or state bankruptcy,
insolvency or similar law, or appointing a receiver, trustee, or custodian of
the Company or for any substantial part of the Company's property, which decree
or order is not stayed or set aside within 60 days thereafter, or (c) the filing
by the Company of a petition, answer or consent seeking relief under Title 11 of
the United States Code, as now constituted or hereafter amended, or the consent
by the Company to the institution of proceedings thereunder or to the
appointment of a receiver, trustee or custodian.
3. CONVERSION
3.1 RIGHT TO CONVERT. Lender may, from time to time, convert
all or any portion of the unpaid principal balance of the Obligations, and any
accrued interest, into shares of the Company's common stock ("Common Stock") at
a price of $ .05 per share (the "Conversion Price"). The Conversion Price is
subject to adjustment as set forth below.
3.2 MECHANICS OF CONVERSION. Conversion shall be effected by
giving the Company written notice at its principal executive office of the
election to convert (the "Conversion Notice") and by delivering any Promissory
Notes issued under this Agreement to such office for endorsement by the Company
to reflect the principal amount converted to shares of Common Stock. The
Conversion Notice shall state the name or names of the parties to whom the
certificate or certificates for shares of common stock should be issued and the
address to which the certificates are to be sent. As soon as practicable
thereafter, the Company shall issue and deliver to Lender at the address or
addresses designated in the Conversion Notice the certificate or certificates
for the number of shares of common stock to which such parties are entitled. At
its election, the Company may issue fractional shares or, in lieu thereof, make
a cash payment to Lender in an amount equal to the number of fractional shares
to be issued multiplied by the then fair market value of one share of the
Company's Common Stock as determined in good faith by the Company's Board of
Directors. Conversion shall be deemed to have occurred on the close of business
on the date the Conversion Notice is received by the Company.
3.3 CONVERSION PRICE. In order to prevent dilution of the
conversion rights granted under this Agreement, the Conversion Price will be
subject to adjustment from time to time as follows:
(i) If the Company at any time subdivides (by any
stock split, stock dividend or otherwise) its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price will be proportionately
reduced, and if the Company at any time combines (by reverse stock split, or
otherwise) its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price will be proportionately increased.
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(ii) If any capital reorganization, reclassification,
consolidation or merger or any sale of substantially all of the Company's assets
(collectively, the "Corporate Transactions") is effected in such a way that the
holders of Common Stock become entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition to such
Corporate Transaction, lawful and adequate provision will be made whereby the
Lender will thereafter have the right to acquire and receive in lieu in shares
of Common Stock, such shares, securities or assets as would have been issuable
to the Lender if it had converted the principal amount of this Note immediately
prior to such Corporate Transaction.
(iii) In the event the Company issues additional
shares of Common Stock for a purchase price of less that $.05 per share, or
issues securities convertible or exercisable into Common Stock at a price of
less than $.05 per share, then the conversion price shall be automatically
adjusted to such lower conversion price unless waived in writing for a
particular case.
4. ISSUANCE OF WARRANT ON CONVERSION. Upon the conversion of all or
part of the Obligations into Common Stock, the Company shall issue to Lender a
Warrant to purchase additional shares of Common Stock of the Company (equal to
the number of shares of Common Stock issued upon such conversion), at an
exercise price of $ .12 per share, in the form of Exhibit A hereto.
5. ATTORNEYS' FEES. In the event any judicial proceedings are
instituted to enforce or interpret the rights and obligations of the Company and
the Lender under this Agreement, the prevailing party in such proceeding shall
be entitled to reasonable attorneys' fees and costs, as well as related costs of
collection and appeal.
6. GOVERNING LAW. This Agreement and all transactions hereunder and/or
evidenced hereby shall be governed by, construed under, and enforced in
accordance with the laws of the State of California, without regard to any
choice of law or conflict of law provisions thereof.
7. SEVERABILITY. Should any provision of this Agreement be declared or
be determined by any court to be invalid, illegal or unenforceable, such
provision shall be severable from the remainder of this Agreement, and the
legality, validity and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
Prism Software Corporation
By: /S/ E. XXX XXXXXXX
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E. Xxx Xxxxxxx, Chief Executive Officer
/S/ XXXXXX XXX XXXXX
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Xxxxxx xxx Xxxxx, trustee for
the Xxxxxx xxx Xxxxx Revocable Trust
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