SENIOR CONVERTIBLE LOAN AND SECURITY AGREEMENT
This Senior Convertible Loan and Security Agreement
("Agreement") is entered into as of March __, 2001 by and between I-Link,
Incorporated, a Florida corporation ("Borrower") and Counsel Communications LLC,
a Delaware corporation ("Lender").
WHEREAS, Borrower and Lender desire to enter into this
Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, it is agreed as follows:
Section 1. PERIODIC LOANS. From and after the date hereof,
through and until the termination of the Term, Lender hereby agrees, subject to
the terms and conditions contained herein, to make periodic loans to the
Borrower in an aggregate principal amount at any one time outstanding, not to
exceed $10,000,000 plus the corresponding increase in principal amount of the
Note described in Section 2 below ("Maximum Amount"). During the term hereof,
from time to time, Borrower may notify the Lender of its need to borrow funds
pursuant to this Agreement. Within five business days of receipt of such notice
from the Borrower seeking to borrow funds, the Lender shall forward to the
Borrower the amount of funds requested by Borrower in such notice, up to, but
(together with other amounts outstanding hereunder) not in excess of, the
Maximum Amount. Lender hereby agrees to fund $3,000,000 hereunder immediately
upon execution of this Agreement.
Section 2. PERIODIC FINANCE CHARGES. All principal and
interest then outstanding shall bear interest at a rate of 9.0 % per annum
(based on a 360 day year), compounded quarterly and shall result in a
corresponding increase in the principal amount of the Note. All past due
principal and accrued interest on this Note shall bear interest from the
Maturity Date (whether at scheduled maturity, upon acceleration of maturity
following an Event of Default (as defined below) or otherwise) until paid at the
lesser of (i) the rate of 18% per annum or (ii) the highest rate for which
Borrower may legally contract under applicable law. All payments hereunder shall
be payable in lawful money of the United States of America which shall be legal
tender for public and private debts at the time of payments.
Section 3. PAYMENTS. Subject to Section 5 hereof, all
interest outstanding shall be due and payable by the Borrower at the Maturity
Date.
Section 4. TERM. This Agreement shall be effective from the
date hereof and shall terminate three (3) years from the date hereof, unless
terminated earlier pursuant to the default provisions of this Agreement (the
"Maturity Date").
Section 5. CONVERSION.
(a) The amounts loaned under this Agreement from time to time
until the
Maturity Date (including principal and accrued interest) (the "Outstanding
Debt") shall be convertible, in whole or in part, at the option of Lender, at
any time or from time to time prior to the automatic conversion described
below, into the number of fully paid and non-assessable shares of Borrower's
common stock ("Common Stock") which results from dividing, (x) the portion of
the Outstanding Debt that Lender desires to convert by (y) the Conversion
Price per share in effect at the time of conversion (which shall initially be
equal to $0.56, which represents 105% of the average closing transaction
price for the five consecutive trading days preceding the execution of the
binding term sheet related to this Agreement), subject to adjustment from
time to time as provided in Sections 5(c) and 5(d) below. Notwithstanding the
foregoing, at any time after eighteen (18) months subsequent to the execution
of the Note, the Outstanding Debt shall be automatically converted into
Common Stock using the same calculation set forth above for an optional
conversion, on first date that is the twentieth consecutive trading day that
the Common Stock has closed at a price per share that is equal to or greater
than $1.00 per share (the "Trigger Price").
(b) MECHANICS OF CONVERSION. When Lender desires to convert
all or part of the Outstanding Debt in accordance with paragraph (a), it shall
give notice to Borrower of the amount of Outstanding Debt that it desires to
convert. Borrower shall then promptly issue and deliver to Lender a certificate
or certificates for the number of shares of Common Stock to which Lender is
entitled upon conversion. Such conversion shall be deemed to have been made
immediately prior to the close of business on second business day following
Lender's sending of the required notice, and Lender shall be treated for all
purposes as the record holder of the Common Stock it is entitled to receive upon
conversion on such date.
(c) ADJUSTMENTS. The Conversion Price and the number of shares
of Common Stock issuable upon conversion of Outstanding Debt pursuant to Section
5(a) (as well as, in the case of paragraph (1) below, the Trigger Price) shall
be subject to adjustment as follows:
(1) ADJUSTMENT FOR DIVIDENDS, STOCK SPLITS AND
COMBINATIONS. If the Borrower (i) pays, issues or distributes to its
stockholders (A) a stock dividend, (B) debt securities of the Company, or (C)
assets (other than cash dividends payable out of earnings of surplus in the
ordinary course of business), or (ii) effects a split or subdivision of the
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the subdivision shall be proportionately decreased, and
conversely, if the Borrower combines the outstanding shares of Common Stock
into a smaller number of shares, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this subsection 5(c)(1) shall become effective at the close
of business on the date the subdivision or combination becomes effective.
(2) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. In the event the Common Stock is changed into the same or a
different number of shares of any class or classes of capital stock, whether
by recapitalization, reclassification or otherwise (other than a subdivision
or combination of shares or a reorganization, merger, consolidation or sale
of assets provided for elsewhere in this Section 5), then and in any such
event Lender shall have the right thereafter to receive, upon the conversion
of the Outstanding Debt, the kind and amount of capital stock and other
securities and property receivable upon such recapitalization,
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reclassification or other change by holders of the number of shares of
Common Stock into which such Outstanding Debt shall be convertible, all
subject to further adjustment as provided herein.
(3) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If there is a capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 5) or a merger or consolidation of
the Borrower with or into another corporation, or the sale of all or
substantially all of the Borrower's properties and assets to any other entity,
then, as a part of such reorganization, merger, consolidation or sale, provision
shall be made so that Lender shall thereafter be entitled to receive, upon the
conversion of the Outstanding Debt, the number of shares of capital stock or
other securities or property to which a holder of the number of shares of Common
Stock issuable upon such conversion would have been entitled to receive on such
capital reorganization, merger, consolidation or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 5 with respect to the rights of Lender after the reorganization,
merger, consolidation or sale to the end that the provisions of this Section 5
(including adjustment of the Conversion Price then in effect and the number of
shares issuable upon conversion of the Outstanding Debt) shall be applicable
after that event and be as nearly equivalent as may be practicable.
(4) CERTAIN EVENTS. If an event not specifically
enumerated in this Section 5 occurs that has substantially the same economic
effect on the Outstanding Debt as those specifically enumerated shall occur,
then this Section 5 shall be construed liberally in order to give the
Outstanding Debt the benefit of the protections provided under this Section
5. The Borrower's Board of Directors shall make an appropriate adjustment to
the Conversion Price so as to protect the rights of Lender or to avoid the
recognition by the holders of Common Stock of income subject to federal
income tax; provided that no such adjustment shall decrease the number of
shares of Common Stock then issuable upon conversion of the Outstanding Debt.
(d) SALE OF STOCK BELOW CONVERSION PRICE. The Conversion Price
and the number of shares of Common Stock issuable upon conversion of the
Outstanding Debt pursuant to Section 5(a) shall be subject to adjustment, in
addition to any adjustments pursuant to Section 5(c) above, as follows:
(1) ADJUSTMENT TO CONVERSION PRICE. If the Borrower issues
or sells, or is deemed by the express provisions of this Section 5(d) to have
issued or sold, additional Common Stock (including securities convertible into
Common Stock) (the "Additional Common Stock"), other than as a dividend on or
other distribution in respect of any class of shares in the form of cash or
other property and other than upon a subdivision or combination of the Common
Stock as provided in Section 5(a)(1) above, for a price (including the exercise
price of any convertible securities) which is less than the then existing
Conversion Price for the Outstanding Debt, then and in each such case such
Conversion Price then in effect shall be reduced, as of the opening of business
on the date of each such issue or sale, to the price (calculated to the nearest
cent) determined by multiplying the Conversion Price in effect immediately prior
to the dilutive issuance by a fraction, the numerator of which is (A) an amount
equal to the sum of (i) the total number of shares of Common Stock issued and
outstanding, on a fully-diluted, fully converted basis, immediately prior to the
time of such dilutive issuance or sale of Additional Common Stock, multiplied by
the greater of the then existing Conversion Price for the Outstanding Debt
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or the Fair Market Value of the Additional Common Stock in effect, plus (ii)
the amount of consideration, if any, received by the Borrower upon such
issuance or sale of Additional Common Stock and the denominator of which is
(B) the product of (i) the greater of the then existing Conversion Price for
the Outstanding Debt or the Fair Market Value of the Additional Common Stock,
multiplied by (ii) an amount equal to the sum of the total number of shares
of Common Stock issued and outstanding, on a fully-diluted, fully converted
basis, immediately prior to the time of such dilutive issuance plus the
number of shares of Additional Common Stock issued, on a fully-diluted,
full-converted basis in connection with such dilutive issuance.
(2) CONSIDERATION RECEIVED BY THE BORROWER. For the
purpose of making any adjustment required under this Section 5(d), the
consideration received by the Borrower for any issue or sale of securities
shall (A) to the extent it consists of cash, be computed at the gross amount
of cash received by the Borrower in consideration for such issuance or sale,
(B) to the extent it consists of property other than cash, be computed at the
fair value of that property as reasonably determined in good faith by the
Board of Directors of the Borrower, and (C) if Additional Common Stock or
rights or options to purchase either Additional Common Stock are issued or
sold together with other shares or securities or other assets of the Borrower
for a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by
the Board of Directors of the Borrower to be allocable to such Additional
Common Stock.
(e) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of any Conversion Price or the number of shares of
Common Stock or other securities issuable upon conversion of the Outstanding
Debt, the Borrower, at its expense and upon the request of Lender, shall cause
independent certified public accountants of recognized standing selected by the
Borrower (who may be the independent public accountants then auditing the
financial statements of the Borrower) to compute such adjustment or readjustment
in accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to Lender. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement (as applicable) of
(i) the consideration received or deemed to be received by the Borrower for any
Additional Common Stock issued or sold or deemed to have been issued or sold,
(ii) the Conversion Price at the time in effect, (iii) the number of shares of
Common Stock issued and outstanding immediately prior to the issuance or sale,
or deemed issuance or sale, of such Additional Common Stock and the number of
Additional Common Stock, and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Outstanding Debt.
(f) NOTICES OF RECORD DATE. In the event of (i) any taking by the
Borrower of record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Borrower, any
reclassification or recapitalization of the capital stock of the Borrower, any
merger or consolidation of the Borrower with or into any other entity, or any
transfer of all or substantially all of the assets of the Borrower to any other
entity or any voluntary or involuntary dissolution, liquidation or winding up of
the Borrower, the Borrower shall mail to Lender, at least twenty (20) days prior
to the record date specified therein a notice specifying (A) the date
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on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become
effective, and (C) the date, if any, that is to be fixed, as of when the
holders of record of Common Stock, the Outstanding Debt or other securities
shall be entitled to exchange their debt or securities for securities or
other property deliverable upon such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation or winding up.
(g) FRACTIONAL STOCK. Fractional shares of Common Stock shall be
issued, if necessary, upon conversion of Outstanding Debt.
(h) RESERVATION OF COMMON STOCK ISSUABLE. The Borrower shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the
Outstanding Debt, such number of its shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all of the Outstanding Debt;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then Outstanding Debt,
the Borrower will use its best efforts to take such corporate action as may, in
the opinion of its counsel, be necessary to promptly increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
(i) PAYMENT OF TAXES. The Borrower will pay all transfer taxes imposed
on Lender and other transfer related governmental charges that may be imposed
with respect to the issue or delivery of Common Stock upon conversion of the
Outstanding Debt, except any tax or other charge imposed in connection with any
transfer involved in the issue and delivery of Common Stock in a name other than
that in which the Outstanding Debt so converted or redeemed were registered any
tax imposed on the Lender.
(j) NO DILUTION OR IMPAIRMENT. The Borrower shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Borrower, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of Lender Stock against dilution or other
impairment.
(k) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. Any provision of
this Section 5 to the contrary notwithstanding, no adjustment in the Conversion
Price shall be made if the amount of such adjustment would be less than $0.01,
but any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any such subsequent
adjustment which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.01 or more.
Section 6. CREATION OF SECURITY INTEREST. In order to secure the
payment of all obligations of Borrower to Lender whether now or hereafter
arising, including all obligations under this Agreement, that certain Loan Note
entered into by and between Lender and Borrower of even
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date herewith, and any and all amendments, modifications, renewals or
restatements hereof (the "Secured Obligations"). The Borrower hereby grants
to the Lender (or its designee) (the "Secured Parties") a first priority
security interest in all of Borrower's assets, now owned or hereinafter
acquired, now in existence or hereafter arising, wherever located (the
"Collateral"), including, without limitation the property described below on
the terms and conditions set forth in this Agreement:
(a) presently existing and hereafter arising accounts, contract
rights, and all other forms of obligations owing to Borrower arising out of the
sale or lease of goods or the rendition of services by Borrower, whether or not
earned by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing (collectively,
"Accounts");
(b) present and future general intangibles and other personal property
(including choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
monies due under any royalty or licensing agreements, infringement claims,
computer programs, computer discs, computer tapes, literature, reports, catalogs
deposit accounts, insurance premium rebates, tax refunds, and tax refund claims)
other than goods and Accounts, and Borrower's Books relating to any of the
foregoing (collectively, "General Intangibles");
(c) present and future letters of credit, notes, drafts, instruments,
certificated and uncertificated securities, documents, leases, and chattel
paper, and Borrower's Books relating to any of the foregoing (collectively,
"Negotiable Collateral");
(d) present and future inventory in which Borrower has any interest,
including goods held for sale or lease or to be furnished under a contract of
service and all of Borrower's present and future raw materials, work in process,
finished goods, and packing and shipping materials, wherever located, and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing (collectively, "Inventory");
(e) present and hereafter acquired computers, communications
equipment, software code, network servers, switches and other related equipment,
and any interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing, wherever located (collectively, "Equipment");
(f) books and records including: ledgers; records indicating,
summarizing, or evidencing Borrower's assets or liabilities, or the collateral;
all information relating to Borrower's business operations or financial
condition; and all computer programs, disc or tape files, printouts, funds or
other computer prepared information, and the equipment containing such
information (collectively, "Borrower's Books"); and
(g) substitutions, replacements, additions, accessions, proceeds,
products to or of any of the foregoing, including, but not limited to, proceeds
of insurance covering any of the foregoing, or any portion thereof, and any and
all Accounts, General Intangibles, Negotiables,
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Collateral, Inventory, Equipment, money, deposits, accounts, or other
tangible or intangible property resulting from the sale or other disposition
of the accounts, general Intangibles, Negotiable Collateral, Inventory,
Equipment, or any portion thereof or interest therein and the proceeds
thereof.
Section 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.
The Borrower agrees and covenants as follows:
(a) PAYMENT OF PRINCIPAL AND INTEREST. The Borrower shall
promptly pay when due the principal of and interest on the indebtedness
evidenced by the Note issued under this Agreement, and all other sums secured by
this Agreement.
(b) CORPORATE EXISTENCE. The Borrower is a corporation duly
organized and existing under the laws of the state of Florida and is duly
qualified in every other state in which it is doing business.
(c) CORPORATE AUTHORITY. The execution, delivery, and performance
of this Agreement, and the execution and payment of the Notes issued pursuant to
the terms hereof are within Borrower's corporate powers, have been duly
authorized, and are not in contravention of law or the terms of the Borrower's
articles of incorporation and bylaws, or of any indenture, agreement, or
undertaking to which the Borrower is a party or by which it is bound.
(d) OWNERSHIP OF COLLATERAL. The Borrower is the sole owner of
the Collateral and will defend the Collateral against the claims and demands of
all other persons at any time claiming the same or any interest therein.
(e) INFORMATION RIGHTS. Borrower shall promptly furnish Lender
with any information that Lender may reasonably request, including but not
limited to: (i) monthly financial statements, including a comparison of actual
results to budget, in the form customarily prepared; (ii) notification of
defaults under material agreements; (iii) notification of and status reports
regarding material litigation; and (iv) copies of all filings made with the
Securities and Exchange Commission.
(f) MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Without the
prior written consent of Lender, such Borrower shall not (a) be a party to any
merger, consolidation or corporate reorganization, except any wholly owned
subsidiary of Borrower may merge or consolidate with such Borrower (provided
that such Borrower shall be the continuing or surviving corporation) or with any
one or more other wholly owned subsidiaries of Borrower, nor (b) purchase or
otherwise acquire all or substantially all of the assets or stock of, or any
partnership or joint venture interest in, any other person, firm or entity,
except any wholly owned subsidiary of Borrower may sell, lease, transfer or
otherwise dispose of all or any substantial part of its assets to such Borrower
or another wholly owned subsidiary of Borrower, nor (c) sell, transfer, convey,
grant a security interest in or lease all or any substantial part of its assets,
except any wholly owned subsidiary of Borrower may sell, lease, transfer or
otherwise dispose of all or any substantial part of its assets to such Borrower
or another Subsidiary.
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(g) DEBT. Without the express prior written consent of Lender,
Borrower shall not create, incur, assume or suffer to exist indebtedness of any
description whatsoever, excluding:
(i) the indebtedness evidenced by the Note;
(ii) the endorsement of negotiable instruments payable to
such Borrower for deposit or collection in the ordinary course of
business;
(iii) the debt set forth on Schedule 6(g) hereto; and
(iv) any other debt incurred in the ordinary course of
business
(h) NO LIENS. Borrower shall not create, incur, assume or suffer
to exist any lien, security interest, security title, mortgage, deed of trust or
other encumbrance upon or with respect to any of its properties, now owned or
hereafter acquired, except the following permitted liens (the "Permitted
Liens"):
(i) liens in favor of Lender;
(ii) liens for taxes or assessments or other governmental
charges or levies if not yet due and payable;
(iii) liens in connection with the leasing of equipment in
favor of the lessor of such equipment;
(iv) liens incurred or deposits made in the ordinary course
of business in connection with worker's compensation,
unemployment insurance, social security and other like laws;
(v) attachment, judgment and other similar non-tax liens
arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such liens is
and continues to be effectively stayed and bonded on appeal in a
manner satisfactory to Lender for the full amount thereof;
(vi) purchase money liens securing indebtedness permitted
hereunder; or
(vii) reservations, exceptions, easements, rights of way,
and other similar encumbrances affecting real property.
(i) DIVIDENDS, DISTRIBUTIONS, STOCK RIGHTS, ETC. Borrower shall
not declare or pay any dividend of any kind (other than stock dividends payable
to all holders of any class of capital stock), in cash or in property, on any
class of the capital stock of such Borrower, or purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in cash or property in respect thereof, nor make any return of
capital of shareholders, nor make any payments in cash or property in respect of
any stock options, stock bonus or
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similar plan (except as required or permitted hereunder), nor grant any
preemptive rights with respect to the capital stock of such Borrower, without
the prior written consent of Lender.
(j) GUARANTIES; LOANS; PAYMENT OF DEBT. Without Lender's prior
express written consent, such Borrower shall not guarantee nor be liable in any
manner, whether directly or indirectly, or become contingently liable after the
date of this Agreement in connection with the obligations or indebtedness of any
person or entity whatsoever, except for the endorsement of negotiable
instruments payable to such Borrower for deposit or collection in the ordinary
course of business. Without Lender's prior express written consent, which shall
not unreasonably be conditioned, withheld or delayed, such Borrower shall not
(i) make any loan, advance or extension of credit to any person other than in
the normal course of its business, or (ii) make any payment on any subordinated
debt.
(k) CONDUCT OF BUSINESS. Borrower will continue to engage in a
business of the same general type and manner as conducted by it on the date of
this Agreement.
(l) COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Except where the
failure to do so would not materially adversely affect such Borrower's
operations or its ability to fulfill its obligations under the Loan Documents,
such Borrower shall maintain its business operations and property owned or used
in connection therewith in compliance with (i) all applicable federal, state and
local laws, regulations and ordinances governing such business operations and
the use and ownership of such property, and (ii) all agreements, licenses,
franchises, indentures and mortgages to which such Borrower is a party or by
which such Borrower or any of its properties is bound. Without limiting the
foregoing, such Borrower shall pay all of its indebtedness promptly in
accordance with the terms thereof.
(m) TAXES AND ASSESSMENTS. Borrower shall (i) file all tax
returns and appropriate schedules thereto that are required to be filed under
applicable law, prior to the date of delinquency, (ii) pay and discharge all
taxes, assessments and governmental charges or levies imposed upon such Borrower
upon its income and profits or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that such Borrower in good faith
may contest any such tax, assessment, governmental charge or levy described in
the foregoing clauses (ii) and (iii) so long as appropriate reserves are
maintained with respect thereto.
(n) STATEMENTS NOT FALSE OR MISLEADING. No representation or
warranty given as of the date hereof by Borrower contained in this Agreement or
any materials furnished by Borrower to Lender in connection with its due
diligence relating to this Agreement, taken as a whole, contains or will (as of
the time so furnished) contain any untrue statement of a material fact, or omits
or will (as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
Section 8. SALE OR REMOVAL OF COLLATERAL PROHIBITED. Except for
the sale of inventory in the ordinary course of Borrower's business, the
Borrower shall not sell, lease, encumber, pledge, mortgage, assign, grant a
security interest in, or otherwise transfer the Collateral.
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Section 9. PERFECTION OF SECURITY INTEREST. From the date hereof,
Borrower agrees to execute and file financing statements, and do whatever may be
necessary under the applicable Uniform Commercial Code in the state where the
Collateral is located, to perfect and continue the Lender's interest in the
Collateral, all at the Borrower's expense.
Section 10. TAXES AND ASSESSMENTS. The Borrower will pay or cause
to be paid promptly when due all taxes and assessments on the Collateral, this
Agreement and the Notes. The Borrower may, however, withhold payment of any tax
assessment or claim if a good faith dispute exists as to the obligation to pay.
Section 11. INSURANCE. The Borrower shall have and maintain, or
cause to be maintained, insurance at all times with respect to all Collateral
except accounts receivable, against such risks as the Lender may reasonably
require, in such form, for such periods, and written by such companies as may be
satisfactory to the Lender. All policies of insurance shall have endorsed a loss
payable clause acceptable to the Lender and/or such other endorsements as the
Lender may from time to time request, and the Borrower will promptly provide the
Lender with the original policies or certificates of such insurance. The
Borrower shall promptly notify the Lender of any loss or damage that may occur
to the Collateral. The Lender is hereby authorized to make proof of loss if it
is not made promptly by the Borrower. All proceeds of any insurance on the
Collateral shall be held by the Lender as a part of the Collateral and at
Lender's option be applied to repay the indebtedness hereunder or to repair or
restore property damage. If Lender agrees to use the funds to repair or restore
the property, such proceeds shall be paid out from time to time upon order of
the Borrower for the purpose of paying the reasonable cost of repairing or
restoring the property damaged. In the event of failure to provide insurance as
herein provided, the Lender may, at the Lender's option, provide such insurance
at the Borrower's expense.
Section 12. APPLICATION OF PAYMENTS. Unless applicable law
provides otherwise, all payments received by the Lender from the Borrower under
the Notes and this Agreement shall be applied by the Lender in the following
order of priority: (i) interest payable on the Note in the manner provided
therein; (ii) principal of the Note in the manner provided therein; and (iii)
any other sums secured by this Agreement in such order as the Lender, at the
Lender's option, may determine.
Section 13. PROTECTION OF LENDER'S SECURITY. If the Borrower
fails to perform the covenants and agreements contained or incorporated in this
Agreement, or if any action or proceeding is commenced which affects the
Collateral or title thereto or the interest of the Lender therein, including,
but not limited to , insolvency, , or arrangements or proceedings involving a
bankrupt or decedent, then the Lender, at the Lender's option, may make such
appearance, disburse such sums, and take such action as the Lender deems
necessary, in its sole discretion, to protect the Lender's interest, including
but not limited to (i) disbursement of attorneys' fees, (ii) entry upon the
Borrower's property to make repairs to the Collateral, and (iii) procurement of
satisfactory insurance. Any amounts disbursed by Lender pursuant to this
Section, with interest thereon, shall become additional indebtedness of the
Borrower secured by this Agreement. Unless the Borrower and the Lender agree to
other terms of payment, such amounts shall be immediately due and payable and
shall bear interest from the date of disbursement at the rate stated in the
Notes.
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Nothing contained in this Section shall require the Lender to incur any
expense or take any action.
Section 14. INSPECTION. The Lender may make or cause to be made
reasonable entries upon and inspections of the Borrower's premises to inspect
the Collateral.
Section 15. BORROWER AND LIEN NOT RELEASED. From time to time,
the Lender may, at the Lender's option, without giving notice to or obtaining
the consent of the Borrower, the Borrower's successors or assigns or of any
other lienholder or guarantors, without liability on the Lender's part, and
notwithstanding the Borrower's breach of any covenant or agreement of the
Borrower in this Agreement, extend the time for payment of said indebtedness or
any part thereof, reduce the payments thereon, release anyone liable on any of
said indebtedness, accept a renewal note or notes therefor, modify the terms and
the time of payment of said indebtedness, release from the lien of this
Agreement any part of the Collateral, take or release other or additional
security, reconvey any part of the Collateral, consent to any map or plan of the
Collateral, consent to the granting of any easement, join in any extension or
subordination agreement, and agree in writing with the Borrower to modify the
rate of interest or period of amortization of the Notes or change the amount of
any installments payable thereunder. Any actions taken by the Lender pursuant to
the terms of this Section shall not affect the obligation of the Borrower or the
Borrower's successors or assigns to pay the sums secured by this Agreement and
to observe the covenants of the Borrower contained herein, shall not affect the
guaranty of any person, corporation, partnership, or other entity for payment of
the indebtedness secured hereby, and shall not affect the lien or priority of
lien hereof on the Collateral. The Borrower shall pay the Lender a reasonable
service charge, together with attorneys' fees as may be incurred at the Lender's
option for any such action if taken at the Borrower's request.
Section 16. FORBEARANCE BY LENDER NOT A WAIVER. Any forbearance
by the Lender in exercising any right or remedy hereunder, or otherwise afforded
by applicable law, shall not be a waiver of or preclude the exercise of any
right or remedy. The acceptance by the Lender of payment of any sum secured by
this Agreement after the due date of such payment shall not be a waiver of the
Lender's right to either require prompt payment when due of all other sums so
secured or to declare a default for failure to make prompt payment. The
procurement of insurance or the payment of taxes, rents or other liens or
charges by the Lender shall not be a waiver of the Lender's right to accelerate
the maturity of the indebtedness secured by this Agreement, nor shall the
Lender's receipt of any awards, proceeds or damages as provided in this
Agreement operate to cure or waive the Borrower's default in payment of sums
secured by this Agreement.
Section 17. UNIFORM COMMERCIAL CODE SECURITY AGREEMENT. This
Agreement is intended to be a security agreement pursuant to the Uniform
Commercial Code for any of the items specified above as part of the Collateral
which, under applicable law, may be subject to a security interest pursuant to
the Uniform Commercial Code, and the Borrower hereby grants the Lender a
security interest in said items. The Borrower agrees that the Lender may file
any appropriate document in the appropriate index as a financing statement for
any of the items specified above as part of the Collateral. In addition, the
Borrower agrees to execute and deliver to the Lender, upon the Lender's request,
any financing statements, as well as extensions, renewals and amendments
thereof, and reproductions of this Agreement in such form as the Lender may
reasonably require to perfect a security interest with respect to said items.
The Borrower shall pay all costs of filing such
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financing statements and any extensions, renewals, amendments, and releases
thereof, and shall pay all reasonable costs and expenses of any record
searches for financing statements the Lender may reasonably require. The
Borrower shall not create or suffer to be created pursuant to the Uniform
Commercial Code any other security interest in the Collateral, other than the
Security Interests of the Secured Parties, including replacements and
additions thereto. Upon the occurrence of an event of default, each Secured
Party shall have the remedies of a Lender under the Uniform Commercial Code
and, at the Secured Party's option, may also invoke the other remedies
provided in this Agreement as to such items. In exercising any of said
remedies, the Secured Parties may proceed against the items of real property
and any items of personal property specified above as part of the Collateral
separately or together and in any order whatsoever, without in any way
affecting the availability of the Secured Party's remedies under the Uniform
Commercial Code or of the other remedies provided in this Agreement.
Section 18. ORDER OF PAYMENTS. Any and all amounts actually
received by the Lender in connection with the enforcement of this Agreement,
including the proceeds of any collection, sale or other disposition of all or
any part of the Collateral (collectively, the "Proceeds"), shall, promptly upon
receipt by the Lender, be applied:
(i) first, to the payment in full of the Secured Obligations, or
in the event that such Proceeds are insufficient to pay in full the Secured
Obligations, to the Secured Obligations of the Secured Parties in the following
order of priority:
(A) to all interest (including default interest) owing to
the Secured Parties on Secured Obligations, such amounts to be allocated to each
Secured Party in accordance with its pro rata share of loans outstanding to
Borrower at such time; then
(B) to principal amounts owing to the Secured Parties on
Secured Obligations, such amounts to be allocated to each Secured Party in
accordance with its pro rata share of loans outstanding to Borrower at such
time;
(C) any other fees or expenses incurred hereunder; and
(ii) second, to the Borrower or in the manner that a court of
competent jurisdiction shall direct.
Section 19. EVENTS OF DEFAULT. The Borrower shall be in default
under this Agreement when any of the following events or conditions occurs (each
an "Event of Default"):
(a) The Borrower shall fail to pay any of the Secured Obligations
pursuant to terms of this Agreement;
(b) The Borrower fails to comply with any term, obligation,
covenant, or condition contained in this Agreement;
(c) Any warranty or representation made to the Lender by the
Borrower under this Agreement or the Ancillary Documents proves to have been
false when made or furnished;
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(d) If the Borrower voluntarily files a petition under the
federal Bankruptcy Act, as such Act may from time to time be amended, or under
any similar or successor federal statute relating to bankruptcy, insolvency,
arrangements or reorganizations, or under any state bankruptcy or insolvency
act, or files an answer in an involuntary proceeding admitting insolvency or
inability to pay debts, or if the Borrower is adjudged a bankrupt, or if a
trustee or receiver is appointed for the Borrower's property, or if the
Collateral becomes subject to the jurisdiction of a federal bankruptcy court or
similar state court, or if the Borrower makes an assignment for the benefit of
its creditors, or if there is an attachment, receivership, execution or other
judicial seizure, then the Lender may, at the Lender's option, declare all of
the sums secured by this Agreement to be immediately due and payable without
prior notice to the Borrower, and the Lender may invoke any remedies permitted
by this Agreement. Any attorneys' fees and other expenses incurred by the Lender
in connection with the Borrower's bankruptcy or any of the other events
described in this Section shall be additional indebtedness of the Borrower
secured by this Agreement.
(e) There exists a material breach by the Borrower under (or a
termination by any party of) a material contract of the Borrower with the
exception of that certain Cooperation and Framework Agreement with Red Cube
International AG (for purposes of this Section 19(e) a material contract shall
mean any contract resulting in revenues or in excess of $10,000 per annum);
(f) Borrower is in default under any funded indebtedness,
including but not limited to indebtedness evidenced by notes or capital leases,
of Borrower other than the amounts loaned pursuant to this Agreement;
(g) If Borrower beaches any material terms contained in any of
the Ancillary Documents, including, but not limited to, Borrower's obligation to
perform any of its covenants respecting board representation and corporate
governance;
(h) If Borrower's business undergoes a material adverse change in
Lender's reasonable opinion;
(i) Any levy, seizure, attachment, lien, or encumbrance of or on
the Collateral which is not discharged by the Borrower within 10 days or, any
sale, transfer, or disposition of any interest in the Collateral, other than in
the ordinary course of business, without the written consent of the Lender; or
(j) If at the end of any month (beginning with the calculation at
the end of April 2001), Cumulative Negative Cash Flow (as defined herein)
exceeds 120% of the forecasted amount for such month, as revised from time to
time to reflect events outside of the ordinary course of business;. For purposes
of this Agreement, Cumulative Negative Cash Flow means the cumulative negative
cash flow for such month as set forth in the base financial model made available
to Lender (such model to be amended from time to time hereafter upon mutual
agreement of Borrower and Lender).
Section 20. ACCELERATION. At the option of the Lender, upon an
Event of Default, all sums due hereunder shall become immediately due and
payable.
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Section 21. RIGHTS OF SECURED PARTIES.
(a) Upon an Event of Default, the Secured Parties may require the
Borrower to assemble the Collateral and make it available to the Secured Parties
at the place to be designated by the Secured Parties which is reasonably
convenient to the parties. The Secured Parties may sell all or any part of the
Collateral as a whole or in parcels either by public auction, private sale, or
other method of disposition. The Secured Parties may bid at any public sale on
all or any portion of the Collateral. Unless the Collateral is perishable or
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, the Secured Parties shall give the Borrower reasonable notice
of the time and place of any public sale or of the time after which any private
sale or other disposition of the Collateral is to be made, and notice given at
least 10 days before the time of the sale or other disposition shall be
conclusively presumed to be reasonable. A public sale in the following fashion
shall be conclusively presumed to be reasonable:
(b) Notice shall be given at least 10 days before the date of
sale by publication once in a newspaper of general circulation published in the
county in which the sale is to be held;
(c) The sale shall be held in a county in which the Collateral or
any part is located or in a county in which the Borrower has a place of
business;
(d) Payment shall be in cash or by certified check immediately
following the close of the sale;
(e) The sale shall be by auction, but it need not be by a
professional auctioneer;
(f) The Collateral may be sold as is and without any preparation
for sale.
(g) Notwithstanding any provision of this Agreement, the Secured
Parties shall be under no obligation to offer to sell the Collateral. In the
event the Secured Parties offer to sell the Collateral, the Secured Parties will
be under no obligation to consummate a sale of the Collateral if, in their
reasonable business judgment, none of the offers received by them reasonably
approximates the fair value of the Collateral.
(h) In the event the Secured Parties elect not to sell the
Collateral, the Secured Parties may elect to follow the procedures set forth in
the Uniform Commercial Code for retaining the Collateral in satisfaction of the
Borrower's obligation, subject to the Borrower's rights under such procedures.
(i) In addition to the rights under this Agreement, in the event
of a default by the Borrower, the Secured Parties shall be entitled to the
appointment of a receiver for the Collateral as a matter of right whether or not
the apparent value of the Collateral exceeds the outstanding principal amount of
the Notes and any receiver appointed may serve without bond. Employment by the
Secured Parties shall not disqualify a person from serving as receiver.
Section 22. EXPENSES. Borrowers agree to pay all reasonable costs
and
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expenses incurred by Lender in connection with this Agreement, including but
not limited to filing fees, recording taxes and reasonable attorneys' fees
actually incurred, promptly upon demand of Lender.
Section 25. REMEDIES CUMULATIVE. Each remedy provided in this
Agreement is distinct and cumulative to all other rights or remedies under this
Agreement or afforded by law or equity, and may be exercised concurrently,
independently, or successively, in any order whatsoever.
Section 26. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by overnight courier or telecopied (with a confirmatory copy sent by
overnight courier) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Borrower , to:
I-Link, Incorporated
00000 X. Xxxxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
with a copy to:
De Xxxxxxx Xxxxxxxxxxx Xxxxx & Xxxxx
0000 X Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xx Xxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
If to Lender, to:
Counsel Corporation (US)
000 Xxxx Xxxxxx
Xxxx Xxxxxxxx, 00xx floor
New York, New York 10017
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
00
Xxxxxxx Xxxxxx Xxxx Xxxxxxx & Manner, P.C.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Manner
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
Section 27. INTERPRETATION. When a reference is made in this
Agreement of a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated, and the words "hereof," "herein" and "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement, unless the context otherwise requires. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 28. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 29. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, and the Notes, (i) constitute the entire agreement between the
parties hereto and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) are not intended to confer upon any person other than the parties any
rights or remedies hereunder.
Section 30. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
Section 31. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by operation of law
or otherwise by the Borrower without the prior written consent of the Lender in
its sole and absolute discretion, and any such purported assignment without the
express prior written consent of the Lender party shall be void ab initio; and
the Lender may assign any or all of the rights, interests or obligations
hereunder to any party. Subject to the preceding sentence, this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
Section 32. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other
16
provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect he
original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
Section 33. CONSENT TO JURISDICTION. In the event that any
legal proceedings are commenced in any court with respect to any matter arising
under this Agreement, the parties hereto specifically consent and agree that the
courts of the State of New York and/or the Federal Courts located in the State
of New York shall have jurisdiction over each of the parties hereto and over the
subject matter of any such proceedings, and the venue of any such action shall
be in New York County, New York and/or the U.S. District Court for the Southern
District of New York.
[Remainder of this page is intentionally blank.]
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IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement as of the date first written above.
BORROWER:
I-LINK, INCORPORATED
By:
--------------------------------
Name:
Title:
LENDER:
COUNSEL COMMUNICATIONS LLC
By:
--------------------------------
Name:
Title:
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