LOAN AGREEMENT
This Loan Agreement (the "Agreement") is entered into as of December
21, 2005, by and between SiriCOMM, Inc., a Delaware corporation (the "Company")
and Sunflower Capital, LLC, a Missouri limited liability company ("Sunflower").
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is issuing that certain Convertible Promissory Note (the
"Note") attached hereto as Exhibit A to Sunflower in the principal amount of
$500,000, payable to Sunflower in cash or convertible into equity of the Company
in the manner and under the terms set forth therein and Sunflower is loaning the
Company $500,000; and
WHEREAS, as consideration for Sunflower making the loan to the Company,
the Company has agreed to contemporaneously with the execution and delivery of
this Agreement issue to Sunflower a warrant to purchase 200,000 shares of the
Company's common stock (the "Warrant").
WHEREAS, the Company and Sunflower wish to set forth the nature of the
consideration Sunflower is providing to the Company in exchange for the Note and
Warrant and to acknowledge delivery and receipt thereof.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Sunflower hereby agree as follows:
1. Purchase and Sale of Note. Subject to all of the terms and conditions of this
Agreement and in reliance on the representations and warranties set forth
herein, the Company proposes to borrow from Sunflower $500,000 pursuant to the
terms of the Note and issue the Warrant in exchange for the consideration
described in Section 2 hereof.
2. Consideration for Loan. Upon and in exchange for the Company's issuance of
the Note and Warrant to Sunflower, Sunflower shall loan and deliver to the
Company, and by signing below, the Company hereby accepts and acknowledges
receipt of, immediately available funds in the amount of $500,000.
3. Representations and Warranties.
(a) Company. The Company represents and warrants to Sunflower as
follows:
(i) Organization. The Company and each of its
Subsidiaries, if any, are duly organized and validly
existing corporations in good standing under the laws
of the jurisdiction of incorporation. The Company and
each of its Subsidiaries, if any, is duly qualified
to do business as a foreign corporation and is in
good standing in each jurisdiction in which it does
business, except where the failure to so qualify
would not have a material adverse effect. For the
purposes of this Agreement, the term "Subsidiary"
shall mean with respect to any person, any
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corporation, limited liability company, partnership,
joint venture, trust or estate of which, or in which,
more than 50% of (i) the issued and outstanding
capital stock having ordinary voting power to elect a
majority of the Board of Directors of such
corporation, (ii) the interest in capital or profits
of such limited liability company, partnership or
joint venture, or (iii) the beneficial interest in
such trust or estate, is at the time directly or
indirectly owned or controlled by such person, by
such person and one or more of its subsidiaries, or
by one or more of such person's other subsidiaries.
(ii) Corporate Power, Authorization. The Company has all
necessary corporate power and authority to enter into
and perform this Agreement and its obligations under
the Warrant and Note, and to carry on the business
now conducted or presently proposed to be conducted
by it. All corporate actions on the part of the
Company necessary for the due authorization,
execution and delivery of this Agreement and the
consummation of the transactions contemplated herein,
and for the due authorization and issuance of the
Warrant and Note have been taken. This Agreement, the
Note and Warrant are legally binding on the Company,
enforceable in accordance with their terms. The
execution, delivery and performance by the Company of
this Agreement, the borrowing contemplated hereby and
the issuance of the Note and Warrant will not result
in any violation of or be in conflict with, or result
in a breach of or constitute a default under, any
term or provision of the Company's certificate of
incorporation, by-laws or any contract to which the
Company is a party or by which it is bound, except
where such violation, conflict, breach or default
would not have a material adverse effect on the
Company.
(iii) No Insolvency. The Company is not insolvent.
Insolvent means any of the following:
A. the Company shall have (a) applied for or
consented to the appointment of a receiver,
trustee, liquidator or custodian of itself
or of all or a substantial part of its
property, (b) made a general assignment for
the benefit of its creditors, (c) been
dissolved or liquidated in full or in part,
or (d) commenced a voluntary case or other
proceeding seeking liquidation,
reorganization or other relief with respect
to itself or its debts under any bankruptcy,
insolvency or other similar law now or
hereafter in effect or consent to any such
relief or to the appointment of or taking
possession of its property by any official
in an involuntary case or other proceeding
commenced against it;
B. proceedings for the appointment of a
receiver, trustee, liquidator or custodian
of the Company or all or a substantial part
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of the property thereof, or an involuntary
case or other proceedings seeking
liquidation, reorganization or other relief
with respect to Company or the debts thereof
under any bankruptcy, insolvency or other
similar law now or hereafter in effect shall
have been commenced and such proceeding
shall not have been dismissed, discharged or
stayed; or
C. the Company is unable to pay in full and in
a timely manner its debts due and payable in
the ordinary course of business.
(iv) Capitalization. The Company has delivered to
Sunflower a schedule (the "Capitalization Schedule")
detailing the capitalization of the Company as of the
date hereof. On the date hereof, the Company has no
outstanding capital stock except as listed on the
Capitalization Schedule. All of the outstanding
shares of capital stock have been offered and sold in
compliance with applicable federal and state
securities laws. No Subsidiary has any outstanding
capital stock except for shares of capital stock
owned beneficially and of record by the Company, all
of which are duly authorized, validly issued, fully
paid and non-assessable. Other than as set forth on
the Capitalization Schedule, neither the Company nor
any Subsidiary has outstanding (a) any rights (either
preemptive or otherwise) or options to subscribe for
or purchase, or any warrants or other agreements
providing for or requiring the issuance of, any
capital stock or any securities convertible into or
exchangeable for its capital stock, (b) any
obligation to repurchase or otherwise acquire or
retire any of its capital stock, any securities
convertible into or exchangeable for its capital
stock or any rights, options or warrants with respect
thereto, (c) any rights that require it to register
the offering of any of its securities under the
Securities Act of 1933, as amended or (d) any
restrictions on voting any of its securities.
(v) SEC Documents; Financial Statements. Since June 30,
2005 the Company has timely filed all reports,
schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all
exhibits included therein and financial statements
and schedules thereto and documents (other than
exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the
"SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC,
contained any untrue statement of any material fact
or omitted to state any material fact required to be
stated therein or necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. As of
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their respective dates, the financial statements of
the Company included in the SEC Documents complied as
to form in all material respects with applicable
accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance
with United States generally accepted accounting
principles, consistently applied, 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 extent they may not include footnotes or may be
condensed or summary statements) and fairly present
in all material respects the consolidated financial
position of the Company and its consolidated
Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash
flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the
financial statements of the Company included in the
SEC Documents, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business
subsequent to June 30, 2005 and (ii) obligations
under contracts and commitments incurred in the
ordinary course of business and not required under
generally accepted accounting principles to be
reflected in such financial statements, which,
individually or in the aggregate, are not material to
the financial condition or operating results of the
Company.
(vi) Legal Proceedings. Except as set forth in the
Company's SEC Documents, there is no action, suit or
proceeding pending or to the Company's knowledge
currently threatened against the Company or any of
subsidiaries. Neither the Company nor any of its
subsidiaries is a party or subject to the provisions
of any order, writ, injunction, judgment or decree of
any court or governmental agency or instrumentality.
There is no action suit or proceeding by the Company
or any of its subsidiaries currently pending or which
the Company or its subsidiaries intend to initiate.
(vii) Proprietary Rights. To its knowledge, the Company
owns all patents trademarks, service marks,
tradenames, copyrights trade secrets, licenses,
information and proprietary rights and processes
which it currently uses or are necessary for its
business without any conflict with, or infringement
of the rights of others. The Company has not received
any communication alleging that the Company has
violated or, by conducting its business, would
violate any of the patents trademarks service marks
tradenames copyrights, trade secrets or other
proprietary rights or processes of any other person
or entity.
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(viii) Compliance with Other Instruments. (a) To the actual
knowledge of the President of the Company, the
Company is not in any material violation or default
of any provisions of its Articles of Incorporation,
as amended, or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a
party or by which it is bound or, to the actual
knowledge of the President of the Company, of any
material provision of federal or state statute, rule
or regulation applicable to the Company. The
execution, delivery and performance of the Agreements
and the consummation of the transactions contemplated
hereby or thereby will not result in any such
material violation or materially conflict with or
constitute, with or without the passage of time and
giving of notice, either a material default under any
such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the
creation of any material lien, charge or encumbrance
upon any assets of the Company other than (i)
carriers', warehousemen's, mechanics', materialmen's
and repairmen's liens, and other like encumbrances
imposed by applicable law, arising in the ordinary
course of business in connection with activities
properly undertaken in the Company's business; (ii)
easements, zoning restrictions, rights-of-way,
reservations, restrictions and other similar
encumbrances on real property imposed by law that do
not secure any monetary obligations and do not
materially detract from the value of the affected
property or interfere with the ordinary conduct of
business, (iii) liens, charges or encumbrances for
taxes, assessments or governmental charges not yet
due and payable, (iv) inchoate statutory and common
law liens, charges or encumbrances for which payment
is not delinquent, and (v) minor defects,
irregularities, liens, and clouds on title which do
not materially impair or materially adversely affect
the value of the assets, financial condition,
operating results, or business of the Company
(collectively, "Permitted Encumbrances").
(b) To the actual knowledge of the Company's
President, the Company has not performed any act, the
occurrence of which would result in the Company's
loss of any material right granted under any license,
distribution agreement or other agreement.
(ix) No Conflict of Interest. Except as contemplated by
this loan, the Company is not indebted, directly or
indirectly, to any of its officers or directors or to
their respective spouses or children, in any amount
whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course
of business of the Company or relocation expenses of
employees. None of the Company's officers or
directors, or any members of their immediate
families, are, directly or indirectly, indebted to
the Company (other than in connection with purchases
of the Company's capital stock) or have any direct or
indirect ownership interest in any firm or
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corporation with which the Company is affiliated or
with which the Company has a business relationship,
or any firm or corporation which competes with the
Company except that officers, directors and/or
stockholders of the Company may own stock in (but not
exceeding five percent (5%) of the outstanding
capital stock of) any publicly traded companies that
are affiliated with the Company, with which the
Company has a business relationship, or which may
compete with the Company. To the actual knowledge of
the President of the Company none of the Company's
officers or directors or any members of their
immediate families are, directly or indirectly,
interested in any material contract or proposed
contract with the Company. The Company is not a
guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
(x) Title to Property and Assets. The Company owns its
property and assets free and clear of all
encumbrances, except for (1) encumbrances that may
appear in the Financial Statements, or (2) any
Permitted Encumbrances. With respect to the property
and assets it leases, the Company is in material
compliance with such leases and, to the actual
knowledge of the Company's President, such leases are
valid and effective in accordance with their
respective terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other laws and judicial
decisions of general application relating to or
affecting enforcement of creditors' rights generally,
by laws relating to the availability of specific
performance, injunctive relief, or other equitable
remedies and with respect to indemnification
provisions contained therein, or principles of public
policy.
(xi) Changes. Since June 30, 2005, there has not been:
(a) any material change in the assets,
liabilities, financial condition or
operating results of the Company from that
reflected in the Financial Statements,
except changes in the ordinary course of
business, that have not been material and
adverse;
(b) any damage, destruction or loss, whether or
not covered by insurance, materially and
adversely affecting the business,
properties, prospects, or financial
condition of the Company;
(c) any waiver or compromise by the Company of a
valuable right or of a material debt owed to
it that would have an adverse affect;
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(d) any satisfaction or discharge of any liens,
claim, or encumbrance of payment of any
obligation by the Company, except in the
ordinary course of business and that is not
material and adverse to the business,
properties, prospects or financial condition
of the Company;
(e) any material change to a material contract
or agreement by which the Company or any of
its assets is bound or subject;
(f) any material change in any compensation
arrangement or agreement with any employee,
officer, director or stockholder;
(g) any sale, assignment or transfer of any
patents, trademarks, copyrights, trade
secrets or other intangible assets other
than in the ordinary course of business;
(h) any resignation or termination of employment
of any officer or key employee of the
Company; and the President of the Company
has no actual knowledge of any impending
resignation or termination of employment of
any such officer or key employee;
(i) any mortgage, pledge, transfer of a security
interest in, or lien, created by the
Company, with respect to any of its material
properties or assets, except liens for taxes
not yet due or payable;
(j) any loans or guarantees made by the Company
to or for the benefit of its employees,
officers or directors, or any members of
their immediate families, other than travel
advances and other advances made in the
ordinary course of its business;
(k) any declaration, setting aside or payment or
other distribution in respect to any of the
Company's capital stock; or any direct or
indirect redemption, purchase, or other
acquisition of any such stock by the
Company;
(l) to the actual knowledge of the officers and
directors of the Company, any other event or
condition of any character that might
materially and adversely affect the
business, properties or financial condition
of the Company, except as disclosed; or
(m) any arrangement or commitment by the Company
to do any of the things described in this
Section 3(a)(xi).
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(xii) Tax Returns and Payments. The Company has filed all
tax returns and reports as required by applicable
law. These returns and reports are true and correct
in all material respects. The Company has paid all
taxes and other assessments due except those being
contested in good faith.
(xiii) Insurance. The Company and each of its Subsidiaries
are insured by insurers of recognized financial
responsibility against such losses and risks and in
such amounts as management of the Company believes to
be prudent and customary in the businesses in whch
the Company and its Subsidiaries are engaged. Neither
the Company nor any such Subsidiary has any reason to
believe that it will not be able to renew its
existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar
insureres as may be necessary to continue its
business at a cost that would not have a material
adverse effect.
(xiv) Permits. The Company has all franchises, permits,
licenses and any similar authority necessary for the
conduct of its business, the lack of which could
materially and adversely affect the business,
properties, prospects, or financial condition of the
Company. The Company is not in default in any
material respect under any of such franchises,
permits, licenses or other similar authority that
would materially and adversely affect the Company's
business.
(xv) Disclosure. It has been fully disclosed to the
Compnay that Xxxxxxx X. Xxxxx, who is a director of
the Company, is also a principal of Sunflower, and
that Xxxxxxx X. Xxxxx abstained from voting on the
approval of the transactions contemplated by this
Agreement.
(b) Sunflower.
(i) Sunflower represents and warrants to the Company that
Sunflower is making this loan and accepting the
Warrant, Note and the underlying securities for
Sunflower's own account for investment only and not
with a view to distribution or resale of the Warrant,
Note or underlying securities. Sunflower represents
that it is an "accredited investor" as such term is
defined in Rule 501 under the Act. Sunflower
understands that the Warrant, Note and the underlying
securities are being issued to Sunflower pursuant to
an exemption from the registration requirements of
the Act and, accordingly, must be held indefinitely
by Sunflower unless later transferred in transactions
that are either registered under the Act or exempt
from registration.
(ii) Sunflower represents and warrants to the Company that
Sunflower has such knowledge and experience in
financial and business matters as to be capable of
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evaluating the merits and risks of making the loan
under the Note and any investments in the underlying
securities and that Sunflower is able to incur a
complete loss of Sunflower's investment and to bear
the risk of such a loss for an indefinite period of
time. Sunflower understands that the Warrant, Note
and any securities acquired upon exercise or
conversion are a risky and speculative investment.
4. Covenants of the Company. The Company covenants that from and after the date
hereof and for so long as the Note remains outstanding:
(a) Penalty Warrants. In the event the private offering described
in the Note does not close on or prior to January 13, 2006,
the Company shall issue to Sunflower 25,000 Warrants identical
to the Warrants described herein for each month (prorated, if
necessary) the offering is delayed.
(b) Dividends and Distributions. The Company shall not, and shall
cause each of its Subsidiaries not to, directly or indirectly,
(i) declare or pay any dividend or (ii) make any distribution
in cash or property to holders of Capital Stock of the Company
or any Subsidiary of the Company.
(c) Compliance with Laws. The Company will, and will cause each of
its Subsidiaries to, comply with all applicable Laws with
respect to the conduct of its business and the ownership of
its properties, including without limitation, compliance with
the reporting requirements of all applicable securities Laws;
provided that the Company shall not be deemed to be in
violation of this Section 4(c) as a result of any failure to
comply with any provisions of any such Laws, the noncompliance
with which would not, individually or in the aggregate, have
or reasonably be expected to have a material adverse effect or
have a materially adverse effect on the ability of the holder
of any Securities to sell such Securities.
(d) Limitation of Agreements. The Company will not, and will not
permit any Subsidiary to, enter into any Contract, or any
amendment, modification, extension or supplement to any
existing Contract, which contractually prohibits the Company
from paying interest on, or principal of, the Note, effecting
the conversion of the Note or exercising the Warrant.
(e) Preservation of Franchises and Existence. The Company will
maintain and cause each Subsidiary to maintain its corporate
existence, rights and franchises in full force and effect,
provided that nothing in this Section 4(e) shall prevent the
Company or any Subsidiary from discontinuing its operations in
any particular state or at any particular location or
locations within a state.
(f) Payment of Taxes and Other Charges. The Company will pay or
discharge, and will cause each Subsidiary to pay or discharge,
before the same shall become delinquent, (i) all Taxes imposed
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upon it or any of its properties or income, and (ii) all
claims of materialmen, mechanics, landlords and other like
Persons which, in the case of either clause (i) or clause
(ii), if unpaid, might result in the creation of a material
lien upon any of its properties, provided, however, that the
Company shall not be required to pay or discharge or cause to
be paid or discharged any such Tax or claim whose amount,
applicability or validity is being contested in good faith
pursuant to appropriate proceedings.
(g) Lost, Stolen, Damaged and Destroyed Securities. Upon receipt
of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any certificate
representing shares of Common Stock, the Warrant, the Note and
in the case of loss, theft or destruction, upon delivery of an
indemnity satisfactory to the Company (which, in the case of
Sunflower, may be an undertaking by Sunflower to so indemnify
the Company and which, in the case of any Person other than
Sunflower, shall be delivery of an indemnity bond), or, in the
case of mutilation, upon surrender and cancellation thereof,
the Company will issue a new share certificate of like tenor
for a number of shares of Common Stock equal to the number of
shares of such stock represented by the certificate lost,
stolen, destroyed or mutilated, or a new Note of like tenor in
an amount equal to the amount of such Note and Warrant lost,
stolen, destroyed or mutilated.
(h) Notice of Breach. As promptly as practicable, and in any event
not later than five Business Days after senior management of
the Company becomes aware thereof, the Company shall provide
Sunflower with written notice of any breach by the Company of
any provision of this Agreement, including, without
limitation, this Article 4, specifying the nature of such
breach and any actions proposed to be taken by the Company to
cure such breach.
5. Notices. Any notice, request or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
sent via facsimile or overnight or second day delivery service, to the
respective addresses and/or facsimile numbers of the parties as set forth below:
If to the Company: SiriCOMM, Inc.
0000 Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, President and CEO
Facsimile No: (000) 000-0000
With a copy to: Xxxxxx & Xxxxxxxxx LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxxx
Facsimile No: (000) 000-0000
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If to Sunflower: Sunflower Capital, LLC
00000 Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX
Attn: Xxxxxxx X. Xxxxx
Facsimile No: (___) __________
With a copy to: Husch & Eppenberger, LLC
0000 Xxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxx, Esq.
Facsimile No: (000) 000-0000
Any party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given upon confirmed
receipt of delivery.
6. Successors and Assigns; Assignment. The terms and conditions of the Note, the
Warrant and this Agreement shall inure to the benefit of and be binding upon the
respective executors, administrators, heirs, successors and permitted assigns of
the parties. Neither party hereto may assign any of its rights or obligations
hereunder without the prior written consent of the other party.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri without reference to conflict
of laws principles.
8. Headings. The headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
9. Further Assurances. The Company will take such further action, and will
execute and deliver to Sunflower all such further financing statements,
certificates, and other documents as Sunflower may reasonably request from time
to time in order to give full effect to this Agreement and to secure the rights
of Sunflower hereunder.
10. Entire Agreement. This Agreement and the Note of even date herewith, from
Sunflower and acknowledged by the Company constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous understandings, whether written or oral.
11. Media Releases. All media releases and public announcements or disclosures
by either party relating to this Agreement and the Note or the business
relationship between the parties contemplated by those documents shall be
coordinated with and approved by the other party in writing prior to the release
thereof.
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12. Jurisdiction. The Company consents to and agrees that it is subject to the
jurisdiction of the Courts in the State of Missouri with respect to any
litigation in connection with this Agreement. The Company will also reimburse
Sunflower for any legal fees it incurred in enforcing Sunflower's rights under
this Agreement.
IN WITNESS WHEREOF, the Company and Sunflower have caused this
Agreement to be executed as of the date first set forth above.
SIRICOMM, INC.
By: /s/ Xxxxx X. Xxxxxxx
------------------------
Xxxxx X. Xxxxxxx, CEO
SUNFLOWER CAPITAL, LLC
By: /s/ Xxxxxxx X. Xxxxx
------------------------
Xxxxxxx X. Xxxxx, Member
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