Xxxxxxx Investors LLC
Attention: Xxxxx Xxxxxx
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxx
c/o 0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
March 18, 1999
x-XxxXxxx.xxx
Xxxx X. Xxxxxxx, President
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Sanga e-Health, LLC
Xxxx X. Xxxxxxx, President
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, XX 00000
Re: Loan and Security Agreement
Ladies and Gentlemen:
Pursuant to the terms and subject to the conditions set forth in this
letter agreement (this "Agreement"), Xxxxxxx Investors LLC and Xxxxxx X. Xxxxx
("Lenders") hereby agree to make a term loan to x-Xxxxxxx.xxx, a Nevada
corporation ("Borrower"), in the aggregate principal amount of One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000.00)(the "Loan"). The
breakdown of the Loan among Lenders is set forth in the signature block
hereof. All references to $ or Dollars herein shall mean United States
dollars. The terms and conditions of the Loan shall be as follows:
1. Advance of Loan Proceeds. Subject to Xxxxxxxx's fulfillment of each
of the conditions precedent set forth below, Lenders shall advance the
proceeds of the Loan (in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000.00)) to or for the benefit of Borrower precisely in the
manner set forth below; provided that the Lenders shall be jointly and
severally obligated to advance the full loan proceeds in the amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) hereunder. The Loan
shall be advanced by Lenders to permit the Borrower to purchase all of the
outstanding equity securities of the businesses in the United Kingdom referred
to as Palm Technologies Holdings Limited (and with it its wholly-owned
subsidiary, Relay Systems) on account of the purchase price under the Purchase
Agreement (as hereinafter defined) in one disbursement in the amount of One
Million Five Hundred Thousand Dollars ($1,500,000.00) Dollars by wire transfer
initiated before 10:05 A.M. Eastern Standard Time on March 19, 1999 (the
"Closing Date") to the following account:
Name: Firstar Bank Milwaukee, NA
Address: 000 Xxxx Xxxxxxxxx Xxx.
Milwaukee, WI
Routing Numbers: 000000000
For Further Credit To: Firstar Minnesota
ABA: 000000000
Beneficiary: Xxxxxxxxxxx, Xxxxx and Xxxxxxxx
Beneficiary Account: 0000000
The Lenders understand that time is of the essence regarding this advance as
Borrower will be unable to close the purchase of the aforesaid shares unless
Lenders initiate their $1.5 million wire transfer to the above account prior
to 10:05 A.M. Eastern Standard Time on March 19, 1999.
2. Financing Documents. The Loan shall be evidenced by two promissory
notes payable to the order of Lenders in the total principal sum of One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) (the "Notes"
appended hereto as Exhibit "A"). The principal amount of the Loan and
interest thereon, calculated as provided in the Notes, shall be payable as set
forth more particularly therein. The two Notes shall be in the amount of
$750,000.00 to Xxxxxx X. Xxxxx and $1,000,000 to Xxxxxxx Investors, LLC,
respectively. As an inducement to Lenders to make the Loan, Borrower shall
grant to Xxxxxxx Investors LLC and Xxxxxx X. Xxxxx each a warrant to purchase
an aggregate amount of two hundred fifty thousand (250,000) shares of
Borrower's common stock, $.001 par value per share ("Common Stock") pursuant
to the terms and subject to the conditions set forth in the Warrant Agreement
(the "Warrant") attached hereto as Exhibit "B". Borrower and Lenders shall
enter into Registration Rights Agreements in the form of Exhibit "C" attached
hereto (the "Registration Rights Agreements"). Borrower shall cause Sanga
e-Health, L.L.C. to transfer one million restricted shares of the Borrower's
common stock (the "Shares") each to Xxxxxxx Investors LLC and Xxxxxx X. Xxxxx
on the Closing. This Agreement, the Note, the Warrants, and the Registration
Rights Agreement and each other document executed in connection with the Loan
and/or contemplated hereby are hereinafter collectively referred to as the
"Financing Documents."
3. Collateral. As security for the performance of the Borrower's
obligations under this Agreement and/or any of the other Financing Documents,
the payment of principal and interest under the Loan and the payment of all
other liabilities of Borrower to Lenders arising hereunder, under any of the
other Financing Documents, or in connection with any of the transactions
described herein or therein, whether absolute or contingent, matured or
unmatured, direct or indirect, similar or dissimilar, due to become due or
heretofore or hereafter, contracted or acquired (collectively, the
"Obligations"), Borrower hereby grants, pledges and assigns to Lenders a
security interest in all of Borrower's now owned or hereafter acquired
accounts, inventory, equipment, general intangibles, documents, instruments,
chattel paper and all other personal property of Borrower, in whatever
capacity owned by Borrower, and all proceeds and products of the foregoing
including proceeds of proceeds (collectively, the "Collateral"). Borrower
will also take such commercially reasonable steps either Lender determines are
necessary to perfect and protect such Xxxxxx's rights in and to the Collateral
including, without limitation, executing and delivering to Lender UCC-1
financing statements and UCC-3 continuation statements and assignments and
shall pay the reasonable costs and expenses thereof.
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4. Surety. As an additional inducement to the Lenders to make the Loan
to Borrower, Surety shall execute and deliver to Lenders the Surety Agreement,
a copy of which is attached hereto as Exhibit D.
5. Fees and other Compensation to Lenders.
(a) As an inducement to Lenders to make the Loan, Borrower shall pay
to Lenders the following fees (the "Origination Fees"):
Xxxxxxx Investors LLC $150,000
Xxxxxx X. Xxxxx $112,500
which fees shall be deemed fully earned upon the closing and nonrefundable
when paid, and issue to Lenders warrants in the form of Exhibit "B" hereto to
purchase an aggregate of five hundred thousand (500,000) shares of Common
Stock (the "Origination Warrant"). The Origination Fee shall be paid to each
Lender in 15 equal payments over the next fifteen months with the first
payment due April 19, 1999. In addition, Sanga e-Health LLC shall transfer
one million (1,000,000) restricted shares of the Borrower's common stock each
to Xxxxxxx Investors LLC and Xxxxxx X. Xxxxx on the Closing.
(b) Borrower represents that other than the fees expressly payable
pursuant to this Agreement, no party is entitled to any finders, brokers or
similar fees or commissions as a result of the transactions contemplated
hereby.
6. Conditions Precedent. The obligation of Lenders to make the Loan is
subject to (a) Xxxxxxxx's duly executing and/or delivering (or causing to be
executed and/or delivered) each of the following (all documents to be in form
and substance satisfactory to Lenders and its counsel):
(i) This Agreement,
(ii) the Note,
(iii) the Warrant,
(iv) the Registration Rights Agreement,
(v) the Surety Agreement
(vi) A certified copy of the resolutions of the board of directors
of each of Xxxxxxxx and Xxxxxx, dated as of the Closing Date, authorizing the
execution, delivery and performance of this Agreement (in the case of
Xxxxxxxx) and the other Financing Documents to which it is a party;
(vii) The written opinion of Xxxxxxxx's and Xxxxxx's counsel dated
as of the Closing Date covering the matters listed on Exhibit "E" attached
hereto; and
(viii) each other instrument, agreement and document to be executed
and/or delivered pursuant to this Agreement and/or the instruments, agreements
and documents referred to in this Agreement; and
7. Conditions Subsequent. Within fifteen (15) days after the Closing
Date, Borrower shall deliver to Lender each of the following (all documents to
be in form and substance satisfactory to Lender and its counselor).
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(a) Certified copies of the Articles or Certificate of Incorporation
and Bylaws of each of Borrower and Surety, in each case with all amendments
thereto;
(b) The certificate of the corporate secretary of each of Borrower
and Xxxxxx as to the incumbency and specimen signatures of the officers of
Xxxxxxxx and Surety executing this Agreement (in the case of Borrower) and the
other Financing Documents to which it is a party;
(c) A certificate, as of the most recent date practicable, of the
Secretary of State of each of Xxxxxxxx's and Surety's state of formation as to
the good standing or subsistence (as applicable) of Borrower and Surety in
such state; and
(d) Such other instruments, documents and agreements as Lender may
reasonably request.
(e) The written opinion of Xxxxxxxx's and Xxxxxx's counsel dated as
of the Closing Date covering such matters as are normally covered in such
opinions, including, without limitation, due authorization, corporate good
standing, execution and delivery, legal, valid and binding opinion. Such
opinion shall be in a form satisfactory to the Lender and if such is not
completed within the period set out herein Borrower shall be immediately
deemed in default hereunder.
8. Representations. To induce Xxxxxxx to make the Loan, Borrower hereby
represents and warrants to the Lenders that at and as of the date hereof:
(a) Borrower is a corporation duly organized under laws of Nevada
and Borrower is qualified to do business and in good standing in each
jurisdiction where the nature of its business or the ownership of its
properties requires that it be so qualified, except where the failure so to
qualify would not have a material adverse effect on the business, assets or
financial condition of the Borrower, as the case may be, and has complied in
all material respects with all laws applicable to the conduct of its business
as presently conducted;
(b) Each of Borrower and Surety has organizational authority, and
has completed all proceedings and obtained all approvals and consents
necessary, to execute, deliver, and perform this Agreement and the other
Financing Documents to which it is a party and the transactions contemplated
hereby and thereby;
(c) Such execution, delivery, and performance will not contravene,
or constitute a default under or result in a lien upon assets of Borrower or
Surety pursuant to, any applicable law or regulation, any charter document of
Borrower or Surety, or any contract, agreement or other instrument or any
judgment, order or decree, binding upon or affecting Borrower or Surety or
their respective properties which default or lien would have a material
adverse effect on Borrower's or Surety's business, assets or financial
condition;
(d) Each of the Financing Documents to which Borrower or Surety is a
party constitutes the legal, valid, and binding obligations of Borrower or
Surety, as the case may be, enforceable in accordance with their respective
terms, except to the extent the enforceability thereof may be limited by
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applicable bankruptcy, insolvency, moratorium, reorganization or other laws
affecting the enforcement of creditors' rights generally and by equitable
principles of general applicability, regardless of whether enforcement is
sought in an action at law or a proceeding in equity;
(e) Except as previously disclosed to Lenders in writing, there is
no action, suit, or proceeding pending or, to the knowledge of Borrower,
threatened against Borrower or Surety or their respective properties that
might adversely affect Borrower or Surety in any material respect;
(f) Neither Borrower nor Surety is in default, breach or violation
of any instrument, document or agreement to which Borrower is a party which
default, breach or violation could have a material adverse affect on
Borrower's or Surety's business, property, operations or prospects.
(g) Borrower has furnished Lenders with balance sheets and income
statements as requested by Xxxxxxx which fairly present the financial position
and results of operations of Borrower as of the dates and for the periods
covered thereby, subject, in the case of interim statements, to normal
year-end audit adjustments;
(h) Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940;
(i) The authorized capital stock of Borrower consists of one hundred
million (100,000,000) shares of Common Stock, of which fifty-one million seven
hundred seventy-one thousand four hundred seventy (51,771,470) shares are
issued and outstanding. All issued shares of Common Stock have been duly and
validly issued and are fully paid and nonassessable. Except for the warrants,
options and convertible securities set forth on Schedule 8(j), there are no
outstanding options, warrants, rights, puts, calls, commitments, conversion
rights, plans or other agreements of any character to which Borrower is a
party or by which it is otherwise bound which provide for the acquisition,
disposition or issuance of any issued but not outstanding, or authorized and
unissued of Borrower's Common Stock. All of such options, warrants, rights,
puts, calls, commitment, conversion rights, were duly authorized;
(j) All tax returns required to have been filed by Borrower have
been filed, there is no proposed material tax assessment or liability against
Borrower or its property, and no extension of time for the assessment of any
tax of Borrower is in effect or has been requested, except, in each case, as
disclosed in financial statements previously furnished to Lenders; and
(k) The proceeds of the Loan shall be used by Borrower solely for
the purpose of funding Borrower's purchase of all of the outstanding equity
securities of the businesses in the United Kingdom referred to as Palm
Technologies Holdings Limited and with it its wholly-owned subsidiary, Relay
Systems.
(l) Borrower represents and warrants that it has access to and
custody and control over the sum of at least $690,072 so that Borrower may and
shall initiate a wire transfer to the Account set out in Section 1 above at
the opening of business on March 19, 1999.
9. Affirmative Covenants. So long as any part of the indebtedness
contemplated hereby shall remain unpaid, Borrower will:
5
(a) Maintain accurate books and records in accordance with generally
accepted accounting principles ("GAAP"), and permit inspection of same and any
properties of Borrower by Lenders during normal business hours at Lenders'
request and permit Lenders to make abstracts and copies of Xxxxxxxx's books
and records;
(b) Furnish to Lenders such monthly financial statements and
information, in form satisfactory to Lenders, as Lenders may from time to time
reasonably request;
(c) Maintain in form, with companies reasonably acceptable to
Lenders and with Lenders named third loss payee, adequate fire with extended
coverage and public liability insurance in amounts customarily carried by
others engaged in a like or similar business and operating in similar markets
and similar geographic locations and such additional insurance as Lenders from
time to time may reasonably require, and upon demand, within a commercially
reasonable time deliver to Lenders the policies concerned or a schedule of all
insurance in force;
(d) Discharge all liens and pay all taxes, assessments, and other
governmental charges imposed on the assets of or assessed against Xxxxxxxx;
(e) Promptly notify Lenders of the occurrence of an Event of Default
or of any event which, with the giving of notice and/or the passage of time
would constitute an Event of Default; and
(f) Promptly reimburse Lenders for all reasonable expenses,
including the fees and expenses of legal counsel for Lenders, incurred in
connection with the preparation, negotiation, amendment, modification or
enforcement of this Agreement and the other Financing Documents and the Note.
10. Negative Covenants. So long as any part of the indebtedness
contemplated hereby shall remain unpaid Borrower will not, directly or
indirectly, without the prior written consent of Lenders:
(a) Create or permit to exist against any of Borrower's assets, now
or hereafter acquired, any lien other than liens approved by in writing and
Permitted Liens. For the purposes of this Agreement and the other Financing
Documents, "Permitted Liens" means:
(i) liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without penalty or
being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on
Xxxxxxxx's books;
(ii) liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on Xxxxxxxx's books;
(iii) judgment liens in existence less than 30 days after the
entry thereof;
(iv) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of the Borrower taken as
a whole; and
6
(v) any interest or title of a lessor secured by a lessor's
interest under any lease.
(b) Sell, assign, transfer, or dispose of any of its accounts
receivable or any substantial portion of its other assets other than the
disposition in the ordinary course of business of assets which are obsolete or
have no remaining useful life;
(c) Become liable in any manner for the debts or obligations of
others, except in the ordinary course of business as currently conducted;
(d) Make loans or advances of credit to others;
(e) Engage in any business other than that in which it is currently
engaged and businesses related thereto;
(f) Repay the principal or interest on the Notes to the respective
Lenders in any fashion other than dollar for dollar, which means that for each
dollar that is paid pursuant to the Note to Xxxxxxx Investors LLC, the
Borrower shall pay the same amount pursuant to the Note to Xxxxxx X. Xxxxx
and, accordingly, all principal amounts owing under the Note to Xxxxxx X.
Xxxxx shall be paid in full before the final $250,000 in principal is paid on
the Note to Xxxxxxx Investors LLC; or
(g) Without limiting the restrictions set forth elsewhere herein,
receive debt or equity financing within one year after the Closing Date upon
terms and conditions that are more favorable to the lender or investor
providing such financing than the terms and conditions in favor of Lenders
hereunder.
11. Events of Default; Remedies. Upon the occurrence of any of the
following (each, an "Event of Default"):
(a) Failure by Borrower to make any payment of principal or interest
on the Note when due;
(b) Failure by Xxxxxxxx to observe or perform any covenant, other
term or provision of this Agreement, the Note or any other Financing Document
within five (5) business days of the earlier of Xxxxxxxx's knowledge of such
failure and receipt by Borrower of written notice from the Lenders of such
failure;
(c) Any representation made by or on behalf of Borrower or Surety in
this Agreement, the Note or any Financing Document shall be inaccurate in any
material respect;
(d) Borrower shall admit in writing its inability to pay its debts
as they become due or shall become insolvent (however evidenced) or there
shall be commenced any bankruptcy, insolvency, arrangement, reorganization, or
other debtor-relief proceedings by or against Borrower, and, if such case or
proceeding is not commenced by Borrower, or converted to a voluntary case,
such case or proceeding shall be consented to or acquiesced in by Borrower, or
shall result in the entry of an order for relief or shall remain for 60 days
undismissed, or Borrower shall dissolve or terminate its existence;
7
(e) The making of demand by any lender or other creditor of Borrower
for payment of any indebtedness of Borrower for borrowed money, which is
payable upon demand, or the acceleration of the maturity of any indebtedness
of Borrower for borrowed money upon default by Borrower, in each case in a
principal amount in excess of Twenty-Five Thousand ($25,000.00) Dollars; or
(f) Entry of any judgment against Borrower which, to the extent not
covered by insurance, equals or exceeds Twenty-Five Thousand ($25,000.00)
Dollars and within thirty (30) days from the date of entry, such judgment
shall not have been discharged or execution thereof stayed pending appeal, or,
within 30 days after the expiration of any such stay, such judgment shall not
have been discharged;
THEN,
Either Lender may, at its election and without demand or notice of
any kind, each of which are hereby waived by Xxxxxxxx, declare the unpaid
balance of their respective Note and the accrued interest thereon, immediately
due and payable, proceed to collect the same and exercise any and all other
rights, powers and remedies given it by this Agreement, the Note, the Surety
Agreement, or any other financing document or otherwise available at law or in
equity.
12. Miscellaneous.
(a) The representations and warranties of Borrower contained herein
shall survive the making of the Loan and shall remain effective until all
indebtedness contemplated hereby shall have been paid by Borrower in full.
(b) This Agreement shall be governed and construed in accordance
with the laws of the State of Ohio applicable to contracts made and to be
performed in the State of Ohio. Borrower irrevocably consents to the
jurisdiction of the courts located in Columbus, Ohio, or Los Angeles,
California in any suit or proceeding based on or arising under this Agreement
and irrevocably agrees that all claims in respect of such suit or proceeding
may be determined in such courts. Borrower irrevocably waives the defense of
an inconvenient forum to the maintenance of such suit or proceeding. Xxxxxxxx
agrees that service of process upon Borrower mailed by first class mail shall
be deemed in every respect effective service of process upon Borrower in any
such suit or proceeding. Nothing herein shall affect the Lenders' right to
serve process in any other manner permitted by law. Xxxxxxxx agrees that a
final non-appealable judgment in any such suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on such judgment
or in any other lawful manner.
(c) Any forbearance, failure, or delay by Xxxxxxx in exercising any
right, power, or remedy on behalf of Lenders shall not preclude the further
exercise thereof, and all of Lenders' rights, powers, and remedies shall
continue in full force and effect until specifically waived by Xxxxxxx.
(d) This Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the other party.
(e) The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
8
(f) If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement
or the validity or enforceability of this Agreement in any other jurisdiction.
(g) Borrower shall reimburse Lenders, on demand, for all fees and
costs incurred by Xxxxxxx (including fees and costs of Lenders' counsel) in
connection with the drafting, negotiation and closing of the Financing
Documents and the enforcement of Lenders' rights and remedies thereunder.
(h) This Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters covered herein
and therein. There have been no oral agreements of any kind pertaining to the
topic herein set out. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
(i) Any notices, demands or waivers required or permitted to be
given under the terms of this Agreement shall be in writing and sent by mail
or delivered personally or by courier and shall be effective five business
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier, in each case addressed to a party. The addresses
for such communications shall be:
If to Borrower:
x-XxxXxxx.xxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, President
With a copy to:
Xxxx Xxxxx Xxxxxxxx & Xxxxxx, P.C.
Dominion Plaza, Suite 0000 Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxxxx, President
If to Lenders:
Xxxxxxx Investors LLC
0000 Xxxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Xxxxxx X. Xxxxx
c/o 0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
With a copy to:
Xxxxxxx & Xxxxx, X.X.X.
0000 Xxxxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
9
Each party shall provide notice to the other party of any change in address,
such notice to become effective upon receipt.
(j) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and assigns. Borrower shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Xxxxxxx. Notwithstanding the foregoing, Xxxxxxx and Xxxxxxx may
assign their respective rights hereunder to any other Lender, without the
consent of Xxxxxxxx, provided, however, nothing herein shall be construed to
limit Lenders' right to dispose of the Collateral upon the occurrence and
during the continuance of an Event of Default by way of assignment, sale or
other means of conveyance to a third party including, without limitation, a
competitor of Borrower.
(k) This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other person,
provided, however, notwithstanding the foregoing, ZSC shall be deemed a third
party beneficiary solely with respect to the Origination Fee and the
Origination Warrant.
Very truly yours,
XXXXXXX INVESTORS LLC XXXXXX X. XXXXX
$1,000,000 $750,000
By:/s/ Xxxxx Xxxxxxx /s/ Xxxxxx X. Xxxxx
Its: Manager
By executing the appropriate signature line below, Xxxxxxxx, intending to be
legally bound hereby, agrees to the terms and conditions of this Agreement as
of the date appearing opposite such party's signature.
BORROWER:
x-Xxxxxxx.xxx
Date: 3/18/99 By: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Chief Executive Officer
By its signature below, Sanga e-Health, L.L.C. agrees to transfer one million
restricted shares of the Borrower's common stock (the "Shares") each to
Xxxxxxx Investors LLC and Xxxxxx X. Xxxxx on the Closing, as described in
Sections 2 and 5(a) of the foregoing Agreement.
SANGA e-HEALTH, L.L.C.
By: /s/ Xxxxxxxx X. Xxxxx
Name: Xxxxxxxx X. Xxxxx
Title: Chairman
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