LOAN AGREEMENT
LOAN AGREEMENT (this "Agreement"), dated as of October ___, 2000, among
Fusion Networks Holdings, Inc., a Delaware corporation (the "Company"), and the
lenders signatory hereto (each such lender is a "Lender" and all such lenders
are, collectively, the "Lenders").
WHEREAS, the Company is presently engaged in efforts to raise $5,000,000 of
capital through the private placement (the "Private Placement") of common stock
(the "Common Stock") and warrants (the "Warrants");
WHEREAS, the Lenders have agreed to loan to the Company an aggregate of up
to $1,500,000 pending closing of the Private Placement, and, subject to the
terms and conditions set forth in this Agreement, the Company has agreed to
issue to the Lenders (1) an aggregate principal amount of $1,500,000 of 12%
Convertible Bridge Loan Notes due December 31, 2000, which shall be in the form
of Exhibit A (the "Notes"), and which are convertible into shares of the
Company's Common Stock and Warrants on terms substantially identical to the
terms of the Private Placement, and (2) a five year warrant (the "Bridge Loan
Warrants") to purchase shares of Common Stock for each $4.00 loaned, which shall
be in the form of Exhibit B attached hereto, and which is exercisable at a price
equal to 150% of the closing price of the Common Stock on the last trading day
prior to Closing (as defined below).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Lenders agree as follows:
ARTICLE I
LOAN
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set forth in this
Agreement, the Lender agrees to loan (the "Loan") to the Company the amount set
forth on the signature page hereof. The closing of the Loan (the "Closing")
shall take place at the offices of the Company at 0000 X.X. 00xx Xxxxxx, Xxxxx,
Xxxxxxx 00000, immediately following the execution hereof or such place and time
as the parties shall agree. The date of the Closing is hereinafter referred to
as the "Closing Date."
(ii) On the Closing Date, the parties shall deliver or shall cause to
be delivered the following: (A) the Company shall deliver to each Lender
(1) the Notes in the aggregate principal amount indicated below such
Lender's name on the signature page to this Agreement, (2) a Bridge Loan
Warrant to purchase the number of shares of Common Stock indicated below
such Lender's name on the signature page to this Agreement, and (3) an
executed Agreement, and; (B) each Lender shall deliver (1) the amount of
the Loan indicated below such Lender's name on the signature page to this
Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such
purpose, and (2) an executed Agreement.
1.2 Certain Defined Terms. For purposes of this Agreement, (a)
"Conversion Price," "Original Issue Date" and "Trading Day" shall have the
meanings set forth in the Notes; (b) "Business Day" shall mean any day
except Saturday, Sunday and any day which shall be a federal legal holiday
or a day on which banking institutions in the State of New York or the
State of Florida are authorized or required by law or other governmental
action to close; and (c) "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to the Lenders:
(a) Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company's subsidiaries (collectively the
"Subsidiaries") is an entity, duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as
defined below) or any of this Agreement, the Notes, the Warrants, (y) have
or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (z) adversely impair the Company's
ability to perform fully on a timely basis its obligations under any of the
Transaction Documents (any of (x), (y) or (z), a "Material Adverse
Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no
further action is required by the Company. Each of the Transaction
Documents has been duly executed by the Company and, when delivered (or
filed, as the case may be) in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational
or charter documents.
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(c) Issuance of the Notes and Bridge Loan Warrants. The Notes and
Bridge Loan Warrants are duly authorized and, when issued and paid for in
accordance with the terms hereof, will be duly and validly issued, free and
clear of all liens, encumbrances and rights of first refusal of any kind
(collectively, "Liens"). The Company has on the date hereof and will, at
all times while the Notes are outstanding, maintain an adequate reserve of
duly authorized shares of Common Stock, reserved for issuance to the
holders of the Notes and the Bridge Loan Warrants, to enable it to perform
its conversion, exercise and other obligations under this Agreement, the
Notes and the Bridge Loan Warrants, including the issuance of shares
pursuant to the conversion of the Notes and the exercise of the Warrants
issuable upon conversion of the Notes, including conversions of accrued
interest. All such authorized shares of Common Stock shall be duly reserved
for issuance to the holders of the Notes, the Bridge Loan Warrants and the
Warrants. The shares of Common Stock issuable upon conversion of the Notes
and upon exercise of the Warrants and the Bridge Loan Warrants are
collectively referred to herein as the "Underlying Shares." The Notes, the
Warrants, the Bridge Loan Warrants and the Underlying Shares are
collectively referred to herein as, the "Securities." When issued in
accordance with the Notes, the Warrants and the Bridge Loan Warrants, the
Underlying Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of all Liens.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other charter documents (each as
amended through the date hereof), or (ii) subject to obtaining the Required
Approvals (as defined below), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or
a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), as could not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect. The business of
the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not reasonably be expected to have
or result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than in all other cases
where the failure to obtain such consent, waiver, authorization or order,
or to give such notice or make such filing or registration could not
reasonably be expected to have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required
Approvals").
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(f) Litigation; Proceedings. There is no action, suit, inquiry, notice
of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action")
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, individually or in the aggregate, reasonably be expected to
have or result in a Material Adverse Effect.
(g) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which
has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
in each case of clauses (i), (ii) or (iii) above, except as could not
individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect.
(h) Private Offering. Assuming the accuracy of the representations and
warranties of the Lenders set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Lenders as contemplated hereby
are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"). Neither the Company nor any Person
acting on its behalf has taken or is, to the knowledge of the Company,
contemplating taking any action which could subject the offering, issuance
or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(i) SEC Documents; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), including pursuant to Section 13(a)
or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material)
(the foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Schedules to this Agreement, the
"Disclosure Materials") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Documents prior to the
expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Documents, when filed, contained any untrue
statement of a material fact or omitted to state a 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.
All material agreements to which the Company is a party or to which the
property or assets of the Company are subject have been filed as exhibits
to the SEC Documents as required. The financial statements of the Company
included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results
of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since June 30, 2000, except as specifically disclosed in the
SEC Documents, (a) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material
Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the
ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made
with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to
its stockholders or officers or directors (other than in compliance with
existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
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(j) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
(k) Certain Fees. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Lenders shall have no
obligation with respect to any fees or with respect to any claims made by
or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this Agreement. The Company shall indemnify and hold harmless the Lenders,
their employees, officers, directors, agents, and partners, and their
respective Affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees, as such fees and
expenses are incurred.
(l) Solicitation Materials. Neither the Company nor any Person acting
on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(m) Seniority. Except for the 6% Secured Convertible Debentures in the
aggregate amount of $3,000,000 (the "Debenture Placement"), no indebtedness
of the Company is senior to the Notes in right of payment, whether upon
liquidation or dissolution, or otherwise.
(n) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits could not, individually or in the
aggregate, reasonably be expected to have or result in a Material Adverse
Effect ("Material Permits"), and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
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(o) Title. Except for the pledge of stock of Marketing Services Group,
Inc. pursuant to the Debenture Placement, the Company and the Subsidiaries
have good and marketable title in fee simple to all real property owned by
them which is material to the business of the Company and its Subsidiaries
and good and marketable title in all personal property owned by them which
is material to the business of the Company and its Subsidiaries, in each
case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and its Subsidiaries are in
compliance and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
(p) Absence of Certain Proceedings. Except as described in the SEC
Documents, (i) there is no Action pending or, to the knowledge of the
Company, threatened against the Company, in any such case wherein an
unfavorable decision, ruling or finding could reasonably be expected to
have or result in a Material Adverse Effect; (ii) neither the Company nor
any Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving (A) a claim of violation of or liability
under federal or state securities laws or (B) a claim of breach of
fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the
Company has no knowledge of any expected such request that would be made;
and (iv) there has not been, and to the best of the Company's knowledge
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company.
(q) Labor Relations. No material labor problem exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Lenders or its agents
or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that
the Lenders shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Lenders regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished
by or on behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Lenders. Each Lender hereby for
itself and for no other Lender represents and warrants to the Company as
follows:
(a) Authority. The Loan has been duly authorized by all necessary
action on the part of such Lender. This Agreement and the Transaction
Documents have been duly executed by such Lender, and when delivered by
such Lender in accordance with the terms hereof, will constitute the valid
and legally binding obligations of such Lender, enforceable against it in
accordance with their terms.
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(b) Investment Intent. Such Lender, in making the Loan, is acquiring
the Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such
Lender's right, subject to the provisions of this Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant
to an effective registration statement under the Securities Act and in
compliance with applicable federal and state securities laws or under an
exemption from such registration. Nothing contained herein shall be deemed
a representation or warranty by such Lender to hold Securities for any
amount of time. Such Lender is acquiring the Securities hereunder in the
ordinary course of its business. Such Lender does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any
Securities.
(c) Lender Status. At the time such Lender was offered the Notes, it
was, and at the date hereof it is, and at each conversion or exercise date
relative to the Notes, the Warrants or the Bridge Loan Warrants, it will
be, an "accredited investor" as defined in Rule 501(a) under the Securities
Act. Such Lender has not been formed solely for the purpose of acquiring
the Securities.
(d) Experience of such Lender. Such Lender, either alone or together
with its representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the
merits and risks of the prospective investment in the Securities, and has
so evaluated the merits and risks of such investment.
(e) Ability of such Lender to Bear Risk of Investment. Such Lender is
able to bear the economic risk of an investment in the Securities and, at
the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Lender acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of
the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with
respect to the investment and to verify the accuracy and completeness of
the information contained in the Disclosure Materials. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Lender or its representatives or counsel shall modify, amend or affect such
Lender's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. Such Lender is not purchasing the Securities
as a result of or subsequent to any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
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(h) Reliance. Such Lender understands and acknowledges that (i) the
Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such
exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Lender hereby
consents to such reliance.
The Company acknowledges and agrees that no Lender makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, except as otherwise set forth herein, the Company may require the
transferor thereof to provide to the Company an opinion of counsel selected by
the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act.
Notwithstanding the foregoing, the Company, without requiring a legal opinion as
described in the immediately preceding sentence, hereby consents to and agrees
to register on the books of the Company and with any transfer agent for the
securities of the Company any transfer of Securities by a Lender to an Affiliate
of such Lender or to one or more funds or managed accounts under common
management with such Lender, and any transfer among any such Affiliates or one
or more funds or managed accounts, provided that the transferee certifies to the
Company that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). Any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the rights
of a Lender under this Agreement.
(b) The Lenders agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
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Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Notes and exercise of the Warrants or Bridge
Loan Warrants or other issuances of Underlying Shares as contemplated hereby, by
the Notes, the Warrants or the Bridge Loan Warrants occurs at any time while a
registration statement relating to the Underlying Shares is effective under the
Securities Act or, in the event there is not an effective registration
statement, at such time, in the opinion of counsel to the Company, such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company agrees that, in the event any Underlying Shares are
issued with a legend in accordance with this Section 3.1(b), it will, within
three Trading Days after request therefor by a Lender, provide such Lender with
a certificate or certificates representing such Underlying Shares, free from
such legend at such time as such legend would not have been required under this
Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the Underlying Shares upon (i) conversion of the Notes in accordance with the
terms of the Notes, and (ii) exercise of the Warrants and the Bridge Loan
Warrants in accordance with their terms, will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Underlying Shares upon (x) conversion of the Notes in accordance with
the terms of the Notres, and (y) exercise of the Warrants and the Bridge Loan
Warrants in accordance with their terms, is unconditional and absolute, subject
to the limitations set forth herein in the Notes or pursuant to the Warrants or
the Bridge Loan Warrants, regardless of the effect of any such dilution.
3.3 Furnishing of Information. As long as the Lenders own Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act. As long as the Lenders own Securities, if the Company is not required to
file reports pursuant to such sections, it will prepare and furnish to the
Lenders and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act such information as is required for the Lenders to sell
the Securities under Rule 144 promulgated under the Securities Act. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer as
to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Lenders.
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3.5 Increase in Authorized Shares. If on any date the Company would be, if
a notice of conversion or exercise (as the case may be) were to be delivered on
such date, precluded from (a) issuing (a) the number of Underlying Shares as
would then be issuable upon a conversion in full of the Notes, and (b) the
number of Underlying Shares issuable upon exercise in full of the Warrants and
the Bridge Loan Warrants, in either case, due to the unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Board of Directors of the Company shall promptly prepare and mail to
the stockholders of the Company proxy materials requesting authorization to
amend the Company's certificate or articles of incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as reasonably requested by the Lenders in order to
provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the Notes and
the Warrants and the Bridge Loan Warrants. In connection therewith, the Board of
Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Securities to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the Company's
certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall (i)
in the time and manner required by any exchange, market or quotation system on
which the Common Stock is traded, prepare and file with such national securities
exchange or market or trading or quotation facility, an additional shares
listing application covering a number of shares of Common Stock, (ii) take all
steps necessary to cause such shares of Common Stock to be approved for listing
on any such national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed, as soon as possible
thereafter, and (iii) provide to the Lenders evidence of such listing, and the
Company shall maintain the listing of its Common Stock thereon. If the number of
Underlying Shares issuable upon conversion in full of the then outstanding Notes
and upon exercise of the then unexercised portion of the Warrants and Bridge
Loan Warrants exceeds the number of Underlying Shares previously listed on
account thereof with any such required exchanges, then the Company shall take
the necessary actions to immediately list a number of Underlying Shares as is
necessary to enable the Company to fulfill its conversion and exercise
obligations under the Notes and Warrants and Bridge Loan Warrants.
(b) The Company shall maintain a reserve of shares of Common Stock for
issuance upon conversion of the Notes in full and upon exercise in full of
the Warrants and Bridge Loan Warrants in accordance with this Agreement,
the Notes, the Warrants and the Bridge Loan Warrants, respectively, in such
amount as may be required to fulfill its obligations in full under the
Transaction Documents.
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3.7 Conversion and Exercise Procedures. The Conversion Notice (as defined
in the Notes) and Notice of Exercise under the Warrants and Bridge Loan Warrants
set forth the totality of the procedures with respect to the conversion of the
Notes and exercise of the Warrants, including the form of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Lenders to convert their Notes and exercise their Warrants and Bridge Loan
Warrants as contemplated in the Notes and the Warrants (as applicable).
3.8 Conversion and Exercise Obligations of the Company. The Company shall
honor conversions of the Notes and exercises of the Warrants and Bridge Loan
Warrants and shall deliver Underlying Shares in accordance with the respective
terms, conditions and time periods set forth in the Notes and the Warrants and
Bridge Loan Warrants.
3.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.10 Certain Trading Restrictions. Each Lender agrees for itself and no
other Lender that it will not enter into any Short Sales (as hereinafter
defined) until the earlier to occur of the date that it no longer owns Notes and
the Maturity Date. For purposes hereof, a "Short Sale" by a Lender shall mean a
sale of Common Stock by such Lender that is marked as a short sale and that is
made at a time when there is no equivalent offsetting long position in the
Common Stock held by such Lender. For purposes of determining whether there is
an equivalent offsetting long position in the Common Stock held by a Lender,
shares of Common Stock issuable upon conversion of a Conversion Notice under the
Notes delivered not more than two Trading Days following the Trading Day that
such short sale is entered into, and shares of Common Stock issuable upon the
exercise in full of the Warrants or the Bridge Loan Warrans held by such Lender
shall be deemed to be held long by such Lender.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. The Company and the Lender shall each pay their own
legal fees and expenses incurred in connection with the preparation and
negotiation of the Transaction Documents.
4.2 Entire Agreement; Amendments. The Transaction Documents, together with
the Exhibits and Schedules thereto contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
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4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Fusion Networks Holdings Inc.
0000 XX 00xx Xxxxxx,
Xxxxx, XX 00000
Facsimile No.:(000) 000-0000
Attn: Chief Financial Officer
If to a Lender: To the address set forth under such Lender's
name on the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Lenders or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Lenders. Except as set forth in Section
3.1(a), the Lenders may not assign this Agreement or any of the rights or
obligations hereunder without the consent of the Company.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
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4.8 Governing Law. The corporate laws of the State of Delaware shall govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be governed by and construed and enforced
in accordance with the internal laws of the State of Florida, without regard to
the principles of conflicts of law thereof. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of Miami, for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
4.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Notes and the Warrants.
4.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together 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, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Lenders will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Lenders
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
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4.13 Independent Nature of Lenders' Obligations and Rights. The obligations
of each Lender under any Transaction Document is several and not joint with the
obligations of any other Lender and no Lender shall be responsible in any way
for the performance of the obligations of any other Lender under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no action
taken by any Lender pursuant thereto, shall be deemed to constitute the Lenders
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Lenders are in any way acting in concert with
respect to such obligations or the transactions contemplated by the Transaction
Document. Each Lender shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for any
other Lender to be joined as an additional party in any proceeding for such
purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their respective authorized signatories as of the date first
indicated above.
FUSION NETWORKS HOLDINGS, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Amount of Loan: $
-------------------
No. of Bridge Loan Warrants
--------
Address for Notice:
------------------------------------
------------------------------------
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