CREDIT AGREEMENT
This
CREDIT AGREEMENT, dated as of August 21, 2008 (this “Agreement”), is among
REMOTE KNOWLEDGE, INC., a Delaware corporation (“Borrower”), and MURAGAI LLC, a
Delaware limited liability company (the “Lender Representative”), and each of
the other Lenders (together with the Lender Representative, collectively the
“Lenders”, and each a “Lender”) shown on the signature pages
hereof.
R E C I T
A L S:
Borrower
has requested that Lenders extend credit to Borrower in the form of a
convertible advancing term loan in the amount of
$4,000,000.00. Lenders are willing to make such extension of credit
to Borrower upon the terms and conditions hereinafter set forth.
NOW
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE
I.
Definitions
Section
1.1. Definitions. As
used in this Agreement, the following terms have the following
meanings:
“Advance” means an
advance of funds by any Lender to Borrower pursuant to Article II.
“Advance Request
Form” means a certificate, in substantially the form of Exhibit “B”, properly
completed and signed by Borrower requesting an Advance.
“Affiliate” means,
with respect to any Person, any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person,
including, (a) any Person which beneficially owns or holds ten percent (10%) or
more of any class of voting stock of such Person or ten percent (10%) or more of
the equity interest in such Person, (b) any Person of which such Person
beneficially owns or holds ten percent (10%) or more of any class of voting
shares or in which such Person beneficially owns or holds ten percent (10%) or
more of the equity interests in such Person, and (c) any officer or director of
such Person.
“Applicable Rate”
means twelve percent (12%) per annum.
“Authorized
Representative” means any officer of Borrower who has been designated in
writing by Borrower to the Lender Representative to be an Authorized
Representative.
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“Business Day” means
any day on which commercial banks are not authorized or required to close in
Houston, Texas.
“Capital Expenditures”
means for Borrower and its Subsidiaries, all expenditures for assets which, in
accordance with GAAP, are required to be capitalized and so shown on the
consolidated balance sheet of Borrower and its Subsidiaries.
“Capital Interests”
shall mean any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, partnership interests in
a partnership, membership interests in a limited liability company or any and
all equivalent ownership interests in a Person and any and all warrants or
options to purchase any of the foregoing.
“Capitalized Lease
Obligations” means, for Borrower and its Subsidiaries, on a consolidated
basis, the obligations of Borrower and its Subsidiaries to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real
and/or personal property, which obligations, in accordance with GAAP, are
required to be classified and accounted for as a capital lease on a balance
sheet of any such Person.
“Cash Flow” means Cash
Flow From Operating Activities, as such term is defined by Statement of
Financial Accounting Standards No. 95.
“Change of Control”
shall mean when any Person and its Affiliates (or a group of Persons otherwise
acting in concert), other than the shareholders of Borrower as of the date
hereof, acquire more than 50% of the Capital Interests of the
Borrower.
“Claims” has the
meaning set forth in Section 10.2.
“Conversion Interests”
shall have the meaning prescribed in Section 3.4(a).
“Closing Date” means
the date on which this Agreement has been executed and delivered by the parties
hereto and the conditions set forth in Section 5.1 have been
satisfied.
“Collateral” has the
meaning specified in Section 4.1.
“Commitment” means the
obligation of Lenders to make their prorata share of Advances hereunder in an
aggregate principal amount at any time outstanding up to but not exceeding
$4,000,000.00, as such amount may be reduced pursuant to the terms
hereof. Each Lender’s pro rata share of the Commitment is reflected
on the signature pages hereof.
“Debt” means for any
Person (a) all indebtedness, whether or not represented by bonds, debentures,
notes, securities or other evidences of indebtedness, for the repayment of money
borrowed, including, with respect to Borrower, the indebtedness evidenced by the
Notes and all other indebtedness of Borrower to Lenders, (b) all indebtedness
representing deferred payment of the purchase price of property or assets, (c)
Capitalized Lease Obligations, (d) all indebtedness under guaranties,
endorsements, assumptions or other contingent obligations, in respect of, or to
purchase or otherwise acquire, indebtedness of others, (e) all indebtedness
secured by a Lien existing on property owned, subject to such Lien, whether or
not the indebtedness secured thereby shall have been assumed by the owner
thereof, and (f) any obligation to redeem or repurchase any of such Person's
capital stock, partnership or membership interests or other ownership interests
as applicable.
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“Default Rate” means
the lesser of (a) eighteen percent (18%) or (b) the Maximum Rate.
“Distribution” means
(a) any distribution, dividend or any other payment or distribution (in cash,
property or obligations) made by Borrower on account of its capital stock, (b)
any redemption, purchase, retirement or other acquisition by Borrower of any of
its capital stock, including any purchase of treasury stock or other treasury
obligations, or (c) the establishment of any fund for any such distribution,
dividend, payment or acquisition.
“Dollar,” “Dollars” and “$” means currency of
the United States of America which is at the time of payment legal tender for
the payment of public and private debts in the United States of
America.
“Environmental Laws”
means any and all laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
release or threatened release of Hazardous Substance or to health and safety
matters.
“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations and published interpretations thereof.
“Event of Default” has
the meaning specified in Section 9.1.
“Field Audits” means
audits, verifications and inspections of (a) the Collateral, (b) the accounting
and financial processes and procedures of the Borrower and its Subsidiaries, (c)
the financial condition of the Borrower and its Subsidiaries, (d) the books,
records and documents of the Borrower and it Subsidiaries, and (e) such other
items, documents and matters related to the Borrower and its Subsidiaries as the
Lender Representative may request or desire, in each case conducted by a Person
(who may be an employee of the Lender Representative or who may be independent)
satisfactory to the Lender Representative.
“Financial Officer”
means the Chief Executive Officer, the Chief Financial Officer or another
officer of Borrower, acceptable to the Lender Representative.
“GAAP” means generally
accepted accounting principles in the United States of America consistently
applied.
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“Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
“Hazardous Substance”
means any substance, product, waste, pollutant, material, chemical, contaminant,
constituent or other material which is or becomes listed, regulated or addressed
under any Environmental Law.
“Loan Documents” means
this Agreement and all promissory notes, security agreements, deeds of trust,
assignments, letters of credit, guaranties, and other instruments, documents and
agreements executed and delivered pursuant to or in connection with this
Agreement, as such instruments, documents and agreements may be amended,
modified, renewed, extended or supplemented.
“Loans” means
Advances.
“Material Adverse
Effect” means a material adverse effect on (a) the business, operations,
property or condition (financial or otherwise) of Borrower and its Subsidiaries,
taken as a whole, or any Obligated Party and its Subsidiaries, taken as a whole,
(b) the ability of Borrower to pay the Obligations or the ability of Borrower or
any Obligated Party to perform its respective obligations under this Agreement
or any of the other Loan Documents or (c) the validity or enforceability of this
Agreement or any of the other Loan Documents, or the rights or remedies of
Lenders hereunder or thereunder.
“Maturity Date” means
August 21, 2013.
“Maximum Rate” means
the maximum rate of nonusurious interest permitted from day to day by applicable
law, including Chapter 303 of the Texas Finance Code (the “Code”) (and as the
same may be incorporated by reference in other Texas statutes). To
the extent that Chapter 303 of the Code is relevant to Lenders for the purposes
of determining the Maximum Rate, Lenders may elect to determine such applicable
legal rate pursuant to the “weekly ceiling”, from time to time in effect, as
referred to and defined in Chapter 303 of the Code; subject, however, to the
limitations on such applicable ceiling referred to and defined in the Code, and
further subject to any right Lenders may have subsequently, under applicable
law, to change the method of determining the Maximum Rate.
“Notes” means the
convertible promissory notes executed by Borrower payable to the order of the
respective Lenders, in substantially the form of Exhibit “A”, properly
completed in the amount of such Lender’s pro rata share of the Commitment, as
the same may be renewed, extended or modified and all promissory notes executed
in renewal, extension, modification or substitution thereof.
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“Obligated Party”
means any Person who is or becomes a party to any agreement pursuant to which
such Person guarantees or secures payment and performance of the Obligations or
any part thereof.
“Obligations” means
(a) all obligations, indebtedness and liabilities of Borrower to Lenders, or any
of them, now existing or hereafter arising, including, without limitation, the
obligations, indebtedness and liabilities of Borrower under this Agreement and
the other Loan Documents, and (b) all interest accruing thereon and all
attorneys' fees and other expenses incurred in the enforcement or collection
thereof.
“Organizational
Documents” means, for any Person, (a) the articles of incorporation or
certificate of formation and bylaws of such Person if such Person is a
corporation, (b) the articles of organization or certificate of formation and
regulations of such Person if such Person is a limited liability company, (c)
the certificate of limited partnership or certificate of formation and the
limited partnership agreement of such Person if such Person is a limited
partnership, or (d) the documents under which such Person was created and is
governed if such person is not a corporation, limited liability company or
limited partnership.
“Person” means any
individual, corporation, limited liability company, partnership, joint venture,
company, trust, business trust, association, Governmental Authority or other
entity.
“Security Agreement”
means the Security Agreement executed by Borrower in favor of the Lender
Representative for the benefit of Lenders in substantially the form of Exhibit “C”, as the
same may be amended, supplemented or modified.
“Senior Convertible
Loan” means the Debt of Borrower outstanding under that certain Senior
Convertible Note (the “Senior Convertible Note”) dated of even date herewith
executed by Borrower and payable to the order of SLW International, LLC, a Texas
limited liability company (“Senior Lender”) in the original principal amount of
$800,000.00, as the same may be renewed, extended, amended, modified, restated
and/or supplemented from time to time.
“Subsidiary” means any
Person of which or in which Borrower or its other Subsidiaries own or control,
directly or indirectly, fifty percent (50%) or more of (a) the combined voting
power of all classes having general voting power under ordinary circumstances to
elect a majority of the directors (if it is a corporation), managers or
equivalent body of such Person, (b) the capital interest or profits interest of
such Person, if it is a partnership, limited liability company, joint venture or
similar entity, or (c) the beneficial interest of such Person, if it is a trust,
association or other unincorporated association or organization.
Section
1.2. Other Definitional
Provisions. All definitions contained in this Agreement are
equally applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein" and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless
otherwise specified, all Article and Section references pertain to this
Agreement. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. Terms used herein that are
defined in the Uniform Commercial Code as adopted by the State of Texas, unless
otherwise defined herein, shall have the meanings specified in the Uniform
Commercial Code as adopted by the State of Texas. In the event that,
at any time, Borrower has no Subsidiaries, all references to the Subsidiaries of
Borrower and the consolidation of certain financial information shall be deemed
to be inapplicable until such time as Borrower has a Subsidiary. All
times of day are Houston, Texas, time.
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ARTICLE
II.
Advances and
Terms
Section
2.1. Advances. Subject
to the terms and conditions of this Agreement, each Lender agrees to severally
make, through the Lender Representative, one or more Advances to Borrower from
time to time from the date hereof to and including the Maturity Date in an
aggregate principal amount at any time outstanding up to but not exceeding such
Lender’s prorata share of the Commitment. All Lenders agree to
provide Lender Representative with the full amount of their respective share of
the Commitment upon the execution hereof. Each Lender’s obligation to
fund an Advance is separate and several from the other Lenders and no Lenders
shall be liable for the failure of any other Lender to fund its required Advance
hereunder. Lenders shall have no obligation to make any
Advance if an Event of Default or an Unmatured Event of Default has occurred and
is continuing. Subject to the foregoing limitations, and the other
terms and provisions of this Agreement, Borrower may borrow the full amount of
the Commitment hereunder. No amounts repaid hereunder by Borrower may
be reborrowed.
Section
2.2. The
Notes. The obligation of Borrower to repay the Advances to the
respective Lenders shall be evidenced by a Note executed by Borrower, payable to
the order of each such Lender, in the principal amount of such Lender’s prorata
share of the Commitment.
Section
2.3. Repayment of
Advances. Borrower shall repay the unpaid principal amount of
all Advances on the earlier of (a) the Maturity Date or (b) such other dates on
which the Advances are or may be required to be paid pursuant to this
Agreement.
Section
2.4. Interest. The
unpaid principal amount of the Advances shall bear interest prior to maturity at
a fixed rate per annum equal from day to day to the lesser of (a) the Maximum
Rate or (b) the Applicable Rate. Accrued and unpaid interest on the
Advances shall be payable on the Maturity Date or as otherwise provided
herein. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, the outstanding principal of the Advances shall bear
interest at the Default Rate.
Section
2.5. Repayment of
Interest. (a) Accrued and unpaid interest on the Advances
(and, therefore, the Notes) shall be payable as follows:
(i) upon
the payment or prepayment of any Advance (on the amount prepaid unless otherwise
provided);
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(ii) at
any time after Borrower has achieved a positive Cash Flow for at least one (1)
fiscal quarter in an amount reasonably determined by the Lender Representative
(given Borrower’s then available funds); and
(iii) for
all Advances, on the Maturity Date.
(b) Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing, interest
payable at the Default Rate shall be payable from time to time on demand from
the Lender Representative.
Section
2.6. Requests for
Advances. Borrower shall give Lender Representative notice of
each requested Advance by delivery to the Lender Representative an Advance
Request Form executed by an Authorized Representative, properly completed and
containing the information required therein. Prior to making any
Advance, the Lender Representative may require that Borrower also deliver a
written approval from the board of directors of Borrower authorizing such
specific Advance dated as of a recent date acceptable to the Lender
Representative. Assuming that each Advance Request Form is in proper
form, if the Lender Representative receives an Advance Request Form prior to
12:00 p.m. on any Business Day, Lenders will make the requested Advance within
five (5) Business Days, and if the Lender Representative receives an Advance
Request Form after 12:00 p.m., Lenders will make the requested Advance within
six (6) Business Days. Advance Request Forms may be delivered by fax,
e-mail or other electronic method.
Section
2.7. Mandatory
Prepayment. Upon the demand of Lenders holding fifty-one
percent (51%) or more of the outstanding Loans, at any time, and from time to
time, after Borrower has achieved a positive Cash Flow for any three (3)
consecutive fiscal quarters, Borrower shall immediately prepay the
outstanding Advances by the amount demanded by such majority Lenders, plus
accrued and unpaid interest on the amount so prepaid, at any time but not to
exceed the amount of Borrower’s available funds (as reasonably determined by the
Lender Representative).
Section
2.8. Arrangement
Fee. Borrower agrees to pay to the Lender Representative an
arrangement fee in the amount of $50,000.00 on the Closing Date. Such
arrangement fee shall be fully earned when paid and may be funded from the
initial Advance.
Section
2.9. Use of
Proceeds. The proceeds of any Advance shall be used solely for
the purposes approved by the board of directors of Borrower and by the Lender
Representative in connection with such Advance Request Form.
Section
2.10. Lender
Warrants. Borrower shall issue to Lenders and Senior Lender,
each in accordance with their share of the Commitment and the Senior Convertible
Loan, respectively, warrants, in the form attached as Exhibit “E” (the
“Lender Warrants”), in the aggregate amount of 15,000,000. Such
Lender Warrants shall bear an exercise price of $.04 per share of Borrower’s
common stock and shall be exercisable for a period of ten (10) years from the
Closing Date.
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ARTICLE
III.
Payments
Section
3.1. Method of
Payment. All payments of principal, interest and other amounts
to be made by Borrower under this Agreement, the Notes or any other Loan
Documents shall be made to the Lender Representative at its designated office,
without setoff, deduction or counterclaim in immediately available
funds. Whenever any payment under this Agreement, the Notes or any
other Loan Document shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next Business Day, and interest shall
continue to accrue during such extension.
Section
3.2. Voluntary
Prepayment. Borrower may prepay the Notes in whole or in part
without premium or penalty, subject to a $500,000.00 minimum prepayment amount
(or such lesser amount as may be outstanding under the Notes) upon the later of
(a) thirty-six (36) months after the date hereof or (b) the achievement by
Borrower of positive Cash Flow for three (3) consecutive fiscal
quarters. Prior to any such prepayment Borrower shall give Lenders
written notice thereof, and Lenders shall have thirty (30) days thereafter to
convert, in accordance with the terms hereof and the Notes, all or any portions
of the Notes prior to such prepayment. Any such prepayment shall
include the payment of all accrued unpaid interest on such Notes prepaid to the
date of prepayment. Any prepayment shall be applied prorata on the
Notes prepaid, based on the relative outstanding amounts thereof.
Section
3.3. Computation of
Interest. Interest on the indebtedness evidenced by the Notes
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed (including the first day but excluding the last day) unless such
calculation would result in a usurious rate, in which case interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may
be.
Section
3.4. Conversion. (a) At
any time and from time to time, any Lender may elect, in its sole discretion
upon not less than seventy-five (75) days notice to the Borrower and the Lender
Representative, to convert or exchange all or any part of its Note and any
accrued interest thereon into Capital Interests (“Conversion Interests”) of
Borrower in accordance with the terms of its Note and this
Agreement.
(b) Any
such conversion shall be subject to a $200,000.00 minimum amount (in the
aggregate, among all Lenders converting) or such lesser amount as may
outstanding hereunder.
(c) In the
event a Lender elects to convert or exchange less than all of the outstanding
principal and accrued interest thereon into Conversion Interests in accordance
with Section 3.4(a) or is otherwise restricted from doing so, the un-converted
portion of its Note and accrued interest thereon shall, subject to the other
terms of this Agreement and its Note, remain outstanding and Borrower shall
promptly issue a replacement Note to such Lender to evidence the un-converted
portion of such principal and interest in exchange for such Lender’s existing
Note.
(d) In the
event any Lender shall notify Borrower of its intention to convert or exchange
all or any part of the accrued and unpaid interest under its Note into
Conversion Interests hereunder, Borrower shall have the right to pay such
accrued interest to the Lender in cash in lieu of issuing the Conversion
Interests related thereto.
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ARTICLE
IV.
Collateral
Section
4.1. Collateral. To
secure full and complete payment and performance of the Obligations, Borrower
shall execute and deliver or cause to be executed and delivered the documents
described below covering the property and collateral described therein and in
this Section 4.1 (which, together with any other property and collateral which
may now or hereafter secure the Obligations or any part thereof, is sometimes
herein called the “Collateral”):
(a) Borrower
shall grant to the Lender Representative for the benefit of the Lenders, a
second priority security interest, subject only to the prior security interest
in favor of the holder of the Senior Convertible Loan, in all of its patents,
copyrights, trademarks and other intellectual property, accounts, accounts
receivable, inventory, equipment, machinery, fixtures, chattel paper, documents,
instruments, deposit accounts, investment property, letter of credit rights,
general intangibles and all its other personal property, whether now owned or
hereafter acquired, and all products and proceeds thereof, pursuant to the
Security Agreement.
(b) Borrower
shall execute and cause to be executed such further documents and instruments as
the Lender Representative, in its sole discretion, deems necessary or desirable
to evidence and perfect Lender Representative’s liens and security interests in
the Collateral for the benefit of Lenders. Borrower authorizes,
directs and permits Lender Representative to file Uniform Commercial Code
financing statements with respect to the Collateral in such jurisdictions as
Lender Representative may desire.
ARTICLE
V.
Conditions
Precedent
Section
5.1. Initial Extension of
Credit. The obligation of Lenders to make any initial Advance
is subject to the condition precedent that prior thereto the Lender
Representative shall have received all of the documents and/or evidence set
forth below in form and substance satisfactory to the Lender
Representative.
(a) Certificate -
Borrower. A certificate of the Secretary or another officer of
Borrower acceptable to the Lender Representative certifying (i) resolutions of
the board of directors of Borrower which authorize the execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents to which
Borrower is or is to be a party and (ii) the names of the officers of Borrower
authorized to sign this Agreement and each of the other Loan Documents to which
Borrower is or is to be a party together with specimen signatures of such
officers.
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(b) Organizational Documents -
Borrower. The certificate of incorporation and the bylaws of
Borrower certified by the Secretary or another officer of Borrower acceptable to
Lender Representative.
(c) Governmental Certificates -
Borrower. Certificates issued by the appropriate government
officials of the state of incorporation of Borrower as to the existence and good
standing of Borrower.
(d) Notes. The
Notes executed by Borrower.
(e) Security
Agreement. The Security Agreement executed by
Borrower.
(f) Financing
Statements. Uniform Commercial Code financing statements
showing Borrower as debtor.
(g) Arrangement
Fee. The arrangement fee referred to in Section
2.8.
(h) Existing Warrants and
Options. Evidence satisfactory to the Lender Representative
that at least sixty-six percent (66%) of all existing warrants or options for
Capital Interests have been exercised for the Borrower’s common stock or
cancelled.
(i) Debt
Holders. Evidence satisfactory to the Lender Representative
that the holders of any and all Debt owing by Borrower to any Person (other than
the holder of the Senior Convertible Loan) have converted such Debt into shares
of Borrower’s common stock at a conversion ratio not to exceed one (1) share of
such common stock for each $0.75 of Debt (or such higher ratio approved by the
Lender Representative in writing).
(j) Existing Granader Family
Contribution. Evidence satisfactory to the Lender
Representative that the Granader family contribution to Borrower (which has yet
to be assigned) in the amount of $1,500,000.00 has been converted into shares of
Borrower’s common stock at a conversion ratio of one (1) share of such common
stock for each $0.75 of contribution amount (excluding any accrued interest,
penalties or other fees or expenses, which shall be waived and
discharged).
(k) Existing Granader Group
Loan. Evidence satisfactory to the Lender Representative that
the liens and security interests granted by Borrower to secure the $3,600,000.00
loan, more or less, extended to Borrower by The Xxxx Xxxxxxxx Irrevocable Family
Trust, Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxx and, as a successor in interest, The Xxxxx
Xxxxxxxx Trust (collectively, the “Granader Lending Group”) on or around August
19, 2005 (as the same may have been amended, modified, restated and/or
supplemented, the “Granader Loan”) have been released and terminated of
record.
(l) [Intentionally
Left Blank]
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(m) UCC
Search. A Uniform Commercial Code search showing all financing
statements and other documents or instruments on file against Borrower in Xxxxxx
County, Texas, and the office of the Secretary of State of Delaware and
Texas.
(n) Attorneys' Fees and
Expenses. Evidence that the costs and expenses (including
reasonable attorneys' fees) referred to in Section 10.1, to the extent incurred,
have been paid in full by Borrower, which may be funded from the initial
Advance.
(o) Due Diligence
Reimbursement. Borrower shall have paid the Lender
Representative $68,000.00 for the due diligence expenses of the Lender
Representative in connection herewith, which may be funded from the initial
Advance.
(p) Management. (i) By
amendment to Borrower’s Bylaws acceptable to the Lender Representative to be
effective immediately following the Closing Date, Borrower’s board of directors
shall have been reduced to five (5) directors with a three (3) year term for
each member and such amended Bylaws shall provide that the Lender
Representative, on behalf of the Lenders, shall designate two (2) of the members
of the board of directors.
(ii) Borrower
shall have agreed to Lender Representative’s satisfaction that each director of
Borrower (or his assigns) appointed by the Lender Representative will within
thirty (30) days of the Closing Date be granted 350,000 shares of Borrower’s
common stock at a price of $0.04 per share vesting one-third at the end of each
consecutive year of board of director service. Such shares shall
provide that any shares not vested at the time a director leaves the board of
directors of Borrower for any reason during its first three (3) year term will
be cancelled. Such appointment shall provide that such directors will
be reimbursed all reasonable expenses associated with board of directors
service.
(iii) All
Borrower executive employees and any employee with a salary or total
compensation in excess of $100,000.00 shall have been specifically pre-approved
by the board of directors of Borrower.
(iv) All
existing Borrower employment agreements or other employment related commitments,
whether in writing or otherwise, shall have been cancelled.
(v) For
employees who are offered and agree to continuing employment and who earn more
than $100,000.00 per year, Borrower shall have caused one hundred percent (100%)
of any back pay due those continuing employees (as specifically approved by the
board of directors of Borrower) to be paid in the form of restricted Borrower
common shares at a conversion rate/price of one (1) such share for each $0.40 of
back pay issued on the Closing Date. Such restricted shares issued to
employees shall vest in full at the second anniversary of the Closing Date;
provided, however, that if such continuing employees are terminated for cause or
resign for any reason prior to such second anniversary of the Closing Date, such
shares shall not vest.
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(vi) For
employees who are offered and agree to continuing employment and who earn less
than $100,000.00 per year, Borrower shall have provided that one hundred percent
(100%) of any back pay due those continuing employees (as specifically approved
by the board of directors of Borrower) to be paid in the form of a cash “stay”
bonus payable fifty percent (50%) on January 1, 2009 and fifty percent (50%) on
January 1, 2010; provided, however, that if such continuing employees are
terminated for cause or resign for any reason prior to such scheduled payment
date, cash “stay” bonus payable on such date will not be paid.
(q) Approval. Approval
of the transactions evidenced by this Agreement in its entirety and without any
caveats by Borrower’s management (as represented by Xxxxx Xxxxx), the existing
board of directors of Borrower, the Granader family (Xxx and Xxxxx Xxxxxxxx) and
Sanders, Morris, Xxxxxx Group, Inc.
(r) The Lender Representative
Expense Reimbursement. Lenders shall have agreed to pay to the
Lender Representative their pro rata portion of $50,000.00 as a reimbursement
for the Lender Representative’s incurred expenses relating to this
Agreement.
(s) Conversion of
Loans. All outstanding Borrower bridge loans and other
outstanding Borrower loans shall have been converted to Borrower common shares
or otherwise extinguished and Borrower shall have no remaining liability
thereunder.
(t) Release of
Liens. Any and all Liens or encumbrances of any kind on any of
Borrower’s assets (other than in favor of the holder of the Senior Convertible
Loan) shall have been released.
(u) Capitalization. Borrower’s
total outstanding common stock and common stock equivalents (on a fully diluted
basis and after taking into account the cancellation or exercise of all
conversion or exercise rights by current warrant, option, convertible or
preferred security and note holders, whether cancelled, exercised or remaining
outstanding as of the Closing Date) shall not exceed 65,000,000 prior to the
issuance of shares in connection with this Loan and the Senior Convertible
Loan.
(v) Certificate of Incorporation
and Bylaws. Borrower shall have arranged to effect the
amendment of its Certificate of Incorporation and Bylaws and other corporate
documents as necessary in order to effect the transactions evidenced by this
Agreement following the Closing Date.
(w) Xxxx Xxx
Xxxx. Confirmation of terms of employment by Borrower of Xxxx
Xxx Xxxx acceptable to the Lender Representative.
(x) Cash Flow
Projection. The Lender Representative shall have approved, in
its discretion, Borrower Cash Flow Projection Schedule from July 15, 2008, to
February 28, 2009 (testing to sale) and from March 1, 2009, to February 28, 2010
(sale to cash flow break even) in the form attached as Exhibit
“D”.
12
(y) Lenders. Lenders
representing not less than a $500,000.00 participation, in the aggregate, in
this Loan shall have been obtained by the Borrower.
(z) Voting
Agreement. Holders of Borrower’s common and preferred stock
representing not less than fifty-one percent (51%) of the outstanding common and
preferred shares of the Borrower shall have entered into a voting agreement with
the Lender Representative wherein such shareholders agree to vote their shares
in favor of the amendment of the Borrower’s Certificate of Incorporation and
Bylaws as necessary to effect the increase in authorized shares contemplated
hereunder, in favor of the nominees for director specified by the Lender
Representative throughout the period the Loan remains outstanding and to
eliminate the specified liquidation preference, preemptive rights for dilutive
issuance and the dividend and distribution priority of the preferred stock
thereunder.
(aa) Right of First Offer
Agreement. The Right of First Offer Agreement executed by
Borrower.
(bb) Material Adverse
Effect. No Material Adverse Effect shall have
occurred.
(cc) Additional
Documentation. Such additional approvals, opinions or
documents as the Lender Representative may reasonably request.
(dd) Lender
Warrants. The Lender Warrants shall have been executed by
Borrower and delivered to Lender Representative as of the Closing
Date.
Section
5.2. All Extensions of
Credit. The obligation of Lenders to make any Advance
(including the initial Advance) is subject to receipt by the Lender
Representative of the items required by Section 2.6, as applicable, and such
additional approvals or documents as the Lender may reasonably
request.
ARTICLE
VI.
Representations and
Warranties
To induce
Lenders to enter into this Agreement, Borrower represents and warrants to
Lenders that:
Section
6.1. Existence. Borrower
and each Subsidiary, if any, (a) are duly organized, validly existing and in
good standing under the laws of their respective jurisdictions of organization,
(b) have all requisite power and authority to own their assets and carry on
their business as now being or as proposed to be conducted and (c) are qualified
to do business in all jurisdictions necessary and where failure to so qualify
would have a Material Adverse Effect. Borrower has the power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Loan Documents to which it is or may become a party.
13
Section
6.2. Financial
Statements. Borrower has delivered to Lenders audited
consolidated financial statements of Borrower and its Subsidiaries as at and for
the fiscal year ended December 31, 2006, and unaudited consolidated financial
statements of Borrower and its Subsidiaries as at and for the fiscal year ended
December 31, 2007 and for the three (3) month period ended March 31, 2008. Such financial
statements are true and correct, have been prepared in accordance with GAAP, and
fairly and accurately present, on a consolidated basis, the financial condition
of Borrower and its Subsidiaries as of the respective dates indicated therein
and the results of operations for the respective periods indicated
therein. Neither Borrower nor any of its Subsidiaries has any
material contingent liabilities, liabilities for taxes, material forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments not reflected in such financial statements. There has
been no Material Adverse Effect since the effective date of the most recent
financial statements referred to in this Section.
Section
6.3. Requisite Action; No
Breach. The execution, delivery and performance by Borrower of
this Agreement and the other Loan Documents to which Borrower is or may become a
party have been duly authorized by all requisite action on the part of Borrower
and do not and will not violate or conflict with the Organizational Documents of
Borrower or any law, rule or regulation or any order, writ,
injunction or decree of any court, Governmental Authority or arbitrator, and do
not and will not conflict with, result in a breach of, or constitute a default
under, or result in the imposition of any Lien (except as permitted by this
Agreement) upon any of the revenues or assets of Borrower or any Subsidiary
pursuant to the provisions of any indenture, mortgage, deed of trust, security
agreement, franchise, permit, license or other instrument or agreement by which
Borrower or any Subsidiary or any of their respective properties is
bound.
Section
6.4. Operation of
Business. Borrower and each Subsidiary possess all licenses,
permits, franchises, patents, copyrights, trademarks and trade names, or rights
thereto, to conduct their respective businesses substantially as now conducted
and as presently proposed to be conducted.
Section
6.5. Litigation and
Judgments. There is no action, suit, investigation or
proceeding before or by any Governmental Authority pending, or to the knowledge
of Borrower, threatened against or affecting Borrower or any Subsidiary, that
could, if adversely determined, reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 6.5, there
are no outstanding judgments against Borrower or any Subsidiary.
Section
6.6. Rights in Properties;
Liens. Borrower and each Subsidiary have good and marketable
title to or valid leasehold interests in their respective properties and assets,
real and personal, including the properties, assets and leasehold interests
reflected in the financial statements described in Section 6.2, and none of the
properties, assets or leasehold interests of Borrower or any Subsidiary is
subject to any Lien, except as permitted by this Agreement.
Section
6.7. Enforceability. This
Agreement constitutes, and the other Loan Documents to which Borrower is a
party, when delivered, shall constitute the legal, valid and binding obligations
of Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforceability thereof may be limited by bankruptcy, insolvency
or other laws of general application relating to the enforcement of creditor’s
rights.
14
Section
6.8. Approvals. No
authorization, approval or consent of, and no filing or registration with, any
Governmental Authority or third party is or will be necessary for the execution,
delivery or performance by Borrower of this Agreement and the other Loan
Documents to which Borrower is or may become a party or the validity or
enforceability thereof.
Section
6.9. Debt. Except
for the liabilities of Borrower which have not been converted to common stock
and which are set forth on Schedule 6.9,
Borrower and its Subsidiaries have no Debt except Debt permitted pursuant to
Section 8.1.
Section
6.10. ERISA. Borrower
and each Subsidiary have complied with all applicable minimum funding
requirements and all other applicable and material requirements of ERISA, and
there are no existing conditions that would give rise to liability
thereunder. No Reportable Event (as defined in Section 4043 of ERISA)
has occurred in connection with any employee benefit plan that might constitute
grounds for the termination thereof by the Pension Benefit Guaranty Corporation
or for the appointment by the appropriate United States District Court of a
trustee to administer such plan.
Section
6.11. Taxes. Borrower
and each Subsidiary have filed all tax returns (federal, state and local)
required to be filed, including all income, franchise, employment, property and
sales taxes, and have paid all of their liabilities for taxes, assessments,
governmental charges and other levies that are due and payable, and Borrower
knows of no pending investigation of Borrower or any Subsidiary by any taxing
authority or of any pending but unassessed tax liability of Borrower or any
Subsidiary.
Section
6.12. Disclosure. No
event has occurred, and no fact or condition exists, which has a Material
Adverse Effect or which could reasonably be expected to have a Material Adverse
Effect.
Section
6.13. Subsidiaries. Borrower
has no Subsidiaries.
Section
6.14. Compliance with
Laws. Other than Borrower’s failure to effect a timely filing
of its December 31, 2007 annual and subsequent periodic reports with the U.S.
Securities and Exchange Commission (“SEC”), none of Borrower or any Subsidiary
is in violation in any material respect of any law, rule, regulation, order, or
decree of any Governmental Authority or arbitrator.
Section
6.15. Compliance with
Agreements. Neither Borrower nor any Subsidiary is in
violation in any material respect of any document, agreement, contract or
instrument to which it is a party or by which it or its properties are
bound.
Section
6.16. Environmental
Matters. Borrower and each Subsidiary, and their respective
properties, are in compliance with all applicable Environmental Laws and neither
Borrower nor any Subsidiary is subject to any liability or obligation for
remedial action thereunder. There is no pending or threatened
investigation or inquiry by any Governmental Authority of Borrower or any
Subsidiary or any of their respective properties pertaining to any Hazardous
Substance. Except in the ordinary course of business and in
compliance with all Environmental Laws, there are no Hazardous Substances
located on or under any of the properties of Borrower or any
Subsidiary. Except in the ordinary course of business and in
compliance with all Environmental Laws, neither Borrower nor any Subsidiary has
caused or permitted any Hazardous Substance to be disposed of on or under or
released from any of its properties. Borrower and each Subsidiary
have obtained all permits, licenses and authorizations which are required under
and by all Environmental Laws.
15
ARTICLE
VII.
Affirmative
Covenants
Borrower
covenants and agrees that, as long as the Obligations or any part thereof are
outstanding or Lenders have any Commitment hereunder, Borrower will perform and
observe the covenants set forth below, unless the Lender Representative shall
otherwise consent in writing.
Section
7.1. Reporting
Requirements. Borrower will deliver to the Lender
Representative:
(a) Annual Financial Statements
- Borrower. As soon as available, and in any event within one
hundred twenty (120) days after the end of each fiscal year of Borrower,
beginning with the fiscal year ending December 31, 2008, a copy of the annual
audited financial statements of Borrower and its Subsidiaries for such fiscal
year containing, on a consolidated basis, balance sheets, statements of income,
statements of stockholder’s equity and statements of cash flows as at
the end of such fiscal year and for the 12-month period then ended, in each case
setting forth in comparative form the figures for the preceding fiscal year, all
in reasonable detail, prepared in accordance with GAAP, and audited and
certified without qualification by independent certified public accountants of
recognized standing acceptable to the Lender Representative.
(b) Quarterly Financial
Statements - Borrower. As soon as available, and in any event
within forty-five (45) days after the end of each quarter of each fiscal year of
Borrower (including the last fiscal quarter), a copy of the financial statements
of Borrower and its Subsidiaries as of the end of such fiscal quarter and for
the portion of the fiscal year then ended, containing, on a consolidated basis,
balance sheets, statements of income, statements of stockholder’s equity and
cash flows in each case setting forth in comparative form the figures for the
corresponding period of the preceding fiscal year, all in reasonable detail and
certified by a Financial Officer to have been prepared in accordance with GAAP
and to fairly and accurately present the financial condition and results of
operations of Borrower and its Subsidiaries, on a consolidated basis, at the
date and for the periods indicated therein.
(c) Monthly Financial Statements
- Borrower. As soon as available, and in any event within
thirty (30) days after the end of each month of each year (including each
December), a copy of the financial statements of Borrower and its Subsidiaries
as of the end of such month and for the portion of the fiscal year then ended,
containing, on a consolidated basis, balance sheets, statements of income and
statements of cash flows, in each case setting forth in comparative form the
figures for the corresponding period of the preceding fiscal year, all in
reasonable detail and certified by a Financial Officer to have been prepared in
accordance with GAAP and to fairly and accurately present the financial
condition and results of operations of Borrower and its Subsidiaries, on a
consolidated basis, at the date and for the periods indicated
therein.
16
(d) Notice of
Litigation. Promptly after the commencement thereof, notice of
all actions, suits and proceedings before any Governmental Authority against
Borrower or any Subsidiary which could have a Material Adverse
Effect.
(e) Judgments. Within
five (5) days of the rendering thereof, notice of any judgment against Borrower
or any Subsidiary.
(f) Notice of
Default. As soon as possible and in any event within five (5)
days after the occurrence of each Event of Default and Unmatured Event of
Default, a written notice setting forth the details of such Event of Default or
Unmatured Event of Default and the action which Borrower has taken and proposes
to take with respect thereto.
(g) Notice of Material Adverse
Effect. As soon as possible, and in any event within five (5)
days after Borrower becomes aware thereof, notice of the occurrence of any event
or the existence of any fact or condition which could have a Material Adverse
Effect.
(h) General
Information. Within a time period as Lenders may reasonably
request, such additional information and statements, lists of assets and
liabilities, tax returns, financial statements, reporting statements and any
other reports with respect to Borrower’s, and/or any Subsidiary’s financial
condition, business operations and properties as Lenders may request from time
to time.
Section
7.2. Maintenance of Existence;
Conduct of Business. Borrower will preserve and maintain, and
will cause each Subsidiary to preserve and maintain, its corporate existence and
all of its leases, privileges, licenses, permits, franchises, qualifications and
rights that are necessary or desirable in the ordinary conduct of its
business.
Section
7.3. Maintenance of
Properties. Borrower will maintain, and will cause each
Subsidiary to maintain, its assets and properties in good condition and
repair.
Section
7.4. Taxes and
Claims. Borrower will pay or discharge, and will cause each
Subsidiary to pay or discharge, at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments and governmental charges imposed
on it or its income or profits or any of its property and (b) all lawful claims
for labor, material and supplies, which, if unpaid, might become a Lien upon any
of its property; provided, however, that none of Borrower or any Subsidiary
shall be required to pay or discharge any claim, tax, levy, assessment or
governmental charge (a “Charge”), which is being contested in good faith by
appropriate proceedings diligently pursued, if (i) no Lien has been filed of
record with respect to such Charge, (ii) no Collateral or any portion thereof or
interest therein would be in any danger of sale, forfeiture or loss by reason of
the contest for such Charge, and (iii) Borrower or such Subsidiary has set aside
on its books adequate reserves
against such Charge.
17
Section
7.5. Insurance. Borrower
will maintain, and will cause each Subsidiary to maintain, with financially
sound and reputable insurance companies workmen's compensation insurance,
liability insurance automobile insurance and insurance on its property, assets
and business, all at least in such amounts and against such risks as are usually
insured against by Persons engaged in similar businesses and as are acceptable
to the Lender Representative. Each casualty insurance policy and each
insurance policy covering Collateral shall by endorsement name the Lender
Representative as lender loss payee and each policy of liability insurance shall
by endorsement name the Lender Representative as an additional
insured. All policies shall provide that they will not be cancelled
without thirty (30) days prior written notice to the Lender
Representative.
Section
7.6. Inspection; Field
Audits. At any reasonable time and from time to time, Borrower
will permit, and will cause each Subsidiary to permit, representatives of the
Lender Representative:
(a) To
examine and make copies of the books and records of, and visit and inspect the
properties or assets of Borrower and any Subsidiary and to discuss the business,
operations and financial condition of any such Persons with their respective
officers and employees and with their independent certified public accountants;
and
(b) To
conduct Field Audits; provided, however, that the cost of all Field Audits shall
be paid by Borrower.
Section
7.7. Keeping Books and
Records. Borrower will maintain, and will cause each
Subsidiary to maintain, proper books of record and account in which full, true
and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its business and activities.
Section
7.8. Compliance with
Laws. Borrower will comply, and will cause each Subsidiary to
comply, in all material respects with all applicable laws, rules, regulations
and orders of any court, Governmental Authority or arbitrator.
Section
7.9. Compliance with
Agreements. Borrower will comply, and will cause each
Subsidiary to comply, in all material respects with all agreements, contracts
and instruments binding on it or affecting its properties or
business.
Section
7.10. Further
Assurances. Borrower will execute and deliver, and will cause
each Subsidiary to execute and deliver, such further instruments as may be
requested by the Lender Representative to carry out the provisions and purposes
of this Agreement and the other Loan Documents and to preserve and perfect the
Liens of Lender Representative for the benefit of Lenders in the
Collateral.
18
Section
7.11. ERISA. Borrower
will comply, and will cause each Subsidiary to comply, with all minimum funding
requirements, and all other material requirements, of ERISA, if applicable, so
as not to give rise to any liability thereunder.
Section
7.12. Continuity of
Operations. Borrower will continue to conduct, and will cause
each Subsidiary to continue to conduct, its primary businesses as conducted as
of the Closing Date and to continue its operations in such
businesses.
Section
7.13. SEC
Requirements. Borrower will comply with all SEC reporting and
exchange listing requirements, including without limitation, all past due annual
and periodic reports within ninety (90) days of the Closing Date, and will
thereafter remain current in all required SEC filings and exchange listing
requirements so long as any of the Obligations are outstanding.
Section
7.14. Registration. Borrower
shall register with the SEC within one (1) year of the Closing Date, or as
otherwise requested by the Lender Representative, all shares of Borrower’s
common stock issued by Borrower in conversion of the Notes and shall take all
actions necessary and/or required to ensure that such registration remains
effective so long as any of the Obligations remain outstanding.
Section
7.15. Adequate
Capitalization. Borrower shall maintain sufficient duly
authorized and unissued common stock as may be necessary to permit the Lenders
to effect the conversion of the outstanding principal balance of the Notes and
accrued interest thereon at all times while any of the Obligations are
outstanding.
Section
7.16. Xxxxxxxx Back
Pay. Xxxx Xxxxxxxx shall receive cash payment of one hundred
percent (100%) of any back pay then due at the later of (a) March 31, 2009, or
(b) the completion of the current project (defined as three (3) months of
successful system operations).
Section
7.17. Management. (a)
Borrower shall cause all executive employees and all employees with a salary or
total compensation in excess of $100,000.00 to be specifically pre-approved by
the board of directors of Borrower.
(b) For
employees who are offered and agree to continuing employment and who earn more
than $100,000.00 per year, Borrower shall have caused one hundred percent (100%)
of any back pay due those continuing employees (as specifically approved by the
board of directors) to be paid in the form of restricted Borrower common shares
at a conversion rate/price of one (1) such share for each $0.40 of back pay
issued on the Closing Date. Such restricted shares issued to
employees shall vest in full at the second anniversary of the Closing Date;
provided, however, that if such continuing employees are terminated for cause or
resign for any reason prior to such second anniversary of the Closing Date, such
shares shall not vest.
(c) For
employees who are offered and agree to continuing employment and who earn less
than $100,000.00 per year, Borrower shall have provided that one hundred percent
(100%) of any back pay due those continuing employees (as specifically approved
by the board of directors) to be paid in the form of a cash “stay” bonus payable
fifty percent (50%) on January 1, 2009 and fifty percent (50%) on January 1,
2010; provided, however, that if such continuing employees are terminated for
cause or resign for any reason prior to such scheduled payment date, such cash
“stay” bonus payable on such date will not be paid.
19
ARTICLE
VIII.
Negative
Covenants
Borrower
covenants and agrees that, as long as the Obligations or any part thereof are
outstanding or Lenders has any Commitment hereunder, Borrower will perform and
observe the covenants set forth below, unless the Lender Representative shall
otherwise consent in writing.
Section
8.1. Debt. Borrower
will not incur, create, assume or permit to exist, and will not permit any
Subsidiary to incur, create, assume or permit to exist, any Debt, except (a)
Debt to the holder of the Senior Convertible Loan, (b) the Obligations, (c) Debt
in an aggregate principal amount which does not exceed $25,000 outstanding at
any time, (d) accounts payable in the ordinary course of business, and (e) Debt
arising from the endorsement of instruments for collection in the ordinary
course of business.
Section
8.2. Limitation on
Liens. Borrower will not incur, create, assume or permit to
exist, and will not permit any Subsidiary to incur, create, assume or permit to
exist, any Lien upon any of its property, assets or revenues, whether now owned
or hereafter acquired, except (a) Liens in favor of the holder of the Senior
Convertible Loan, (b) Liens securing the Obligations, (c) purchase money Liens
securing Debt permitted by Section 8.1(c), which Liens cover only the assets
financed with the Debt permitted by Section 8.1(c), (d) encumbrances consisting
of minor easements, zoning restrictions or other restrictions on the use of real
property that do not (individually or in the aggregate) materially affect the
value of the assets encumbered thereby or materially impair the ability of
Borrower or any Subsidiary to use such assets in its business, and none of which
is violated in any material aspect by existing or proposed structures or land
use, (e) Liens for taxes, assessments or other governmental charges (a ACharge@)
which (i) are not delinquent, or (ii) for which (a) no Lien has been filed of
record with respect to such Charge, (ii) no Collateral or any portion thereof or
interest therein would be in any danger of sale, forfeiture or loss by reason of
the contest for such Charge, and (iii) Borrower or such Subsidiary has set aside
on its books adequate reserves
against such Charge, and (f) Liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory Liens securing obligations that are not yet
due and are incurred in the ordinary course of business.
Section
8.3. Mergers, Acquisitions,
Dissolutions and Disposition of Assets. Borrower will not, and
will not permit any Subsidiary to, (a) become a party to a merger,
consolidation, partnership or joint venture or purchase or otherwise acquire all
or a substantial part of the assets of any Person or any shares or other
evidence of beneficial ownership of any Person, (b) dissolve or liquidate, (c)
amend its Organizational Documents, (d) sell, lease, assign, transfer or
otherwise dispose of substantially all of its assets, except dispositions of
inventory in the ordinary course of business, (e) create any new Subsidiary or
(f) enter into any agreement to do any of the foregoing.
20
Section
8.4. Subsidiaries. Borrower
will not, and will not permit any Subsidiary to, create or acquire any
Subsidiary.
Section
8.5. Restricted
Payments. Borrower will not declare or pay any
Distribution.
Section
8.6. Loans and
Advances. Borrower will not make, and will not permit any
Subsidiary to make, any advance, loan or extension of credit to any Person
including any employee, officer or director of Borrower or any
Subsidiary.
Section
8.7. Bonuses. (a)
Borrower will not pay, and will not permit any Subsidiary to pay, any bonus,
other form of additional cash compensation or any incentive compensation or
stock options, warrants or restrictive shares issued by Borrower to any officer
or employee of Borrower or any Subsidiary without Borrower’s express board of
director approval given after the date hereof.
(b)
Borrower shall pay the cash “stay” bonuses to its employees provided under
Section 5.1(p)(vi) fifty percent (50%) on January 1, 2008, and fifty percent
(50%) on January 1, 2010.
Section
8.8. Investments. Borrower
will not make, and will not permit any Subsidiary to make, any capital
contribution to or investment in, or purchase, or permit any Subsidiary to
purchase, any stock, bonds, notes, debentures, or other securities of any
Person, except (a) readily marketable direct obligations of the United States of
America, (b) fully insured certificates of deposit with maturities of one year
or less from the date of acquisition of any commercial bank operating in the
United States having capital and surplus in excess of $100,000,000.00, (c)
commercial paper of a domestic issuer if at the time of purchase such paper is
rated in one of the two highest rating categories of Standard and Poor's
Corporation or Xxxxx'x Lenders Service, Inc., and (d) investments approved by
Lender Representative.
Section
8.9. Compliance with
Environmental Laws. Borrower will not, and will not permit any
Subsidiary to, (a) use (or permit any tenant to use) any of their respective
properties or assets for the handling, processing, storage, transportation or
disposal of any Hazardous Substance, except in the ordinary course of business
and in compliance with all Environmental Laws, (b) generate any Hazardous
Substance, (c) conduct any activity which is likely to cause a release or
threatened release of any Hazardous Substance, or (d) otherwise conduct any
activity or use any of their respective properties or assets in any manner that
is likely to violate any Environmental Law.
Section
8.10. Accounting. Borrower
will not make, and will not permit any Subsidiary to make, any change in
accounting treatment or reporting practices, except as required by
GAAP.
Section
8.11. Change of
Business. Borrower will not enter into any Subsidiary to enter
into, any type of business which is materially different from the business in
which Borrower or such Subsidiary is engaged or contemplated to be engaged as of
the Closing Date.
21
Section
8.12. Transactions With
Affiliates. Borrower will not enter into, or permit to exist,
and will not permit any Subsidiary to enter into or permit to exist, any
transaction, arrangement or contract (including any lease or other rental
agreement) with any of its Affiliates which is on terms which are less favorable
than are obtainable from any Person who is not an Affiliate of Borrower or such
Subsidiary.
Section
8.13. Compliance with Government
Regulations. Borrower will not, and will not permit any
Subsidiary to, (a) be or become subject at any time to any law, regulation or
list of any governmental agency (including, without limitation, the U.S. Officer
of Foreign Asset Control list) that prohibits or limits Lenders from making any
advance or extension of credit to Borrower or from otherwise conducting business
with Borrower, or (b) fail to provide documentary and other evidence of
Borrower’s identity as may be requested by Lenders at any time to enable Lenders
to verify Borrower’s identity or to comply with any applicable law or
regulation, including, without limitation Section 326 of the USA Patriot Act of
2001, 31 U.S.C. Section 5318.
Section
8.14. Capital
Expenditures. Borrower will not, and will not permit any
Subsidiary to, make any Capital Expenditures except as expressly approved by the
board of directors of Borrower after the date hereof.
Section
8.15. Contract
Renewal. Borrower will not, and will not permit any Subsidiary
to, renew any long term contracts without the prior written authorization of
Borrower’s board of directors given after the Closing Date.
ARTICLE
IX.
Default
Section
9.1. Events of
Default. Each of the following shall be deemed an “Event of
Default”:
(a)
Borrower shall fail to pay the Obligations or any part thereof when
due.
(b) Any
representation or warranty made or deemed made by Borrower or any Obligated
Party (or any of their respective officers) in any Loan Document or in any
certificate, report, notice or financial statement furnished at any time in
connection with this Agreement shall be false, misleading or erroneous in any
material respect when made or deemed to have been made.
(c)
Borrower or any Obligated Party shall fail to perform, observe or comply with
any covenant, agreement or term contained in this Agreement or any other Loan
Document (other than as expressly provided in another clause of this Section
9.1) and such failure shall not have been remedied within ten (10) days after
the earlier to occur of (i) notice thereof from Lender Representative or (ii)
actual knowledge thereof by Borrower or such Obligated Party.
22
(d)
Borrower, any Subsidiary, or any Obligated Party shall commence a voluntary
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or a substantial part of
its property or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it or shall make a general assignment for the
benefit of creditors or shall generally fail to pay its debts as they become due
or shall take any corporate action to authorize any of the
foregoing.
(e)
An involuntary proceeding shall be commenced against Borrower, any Subsidiary or
any Obligated Party seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for it or a substantial part of
its property, and such involuntary proceeding shall remain undismissed and
unstayed for a period of sixty (60) days.
(f)
Borrower, any Subsidiary or any Obligated Party shall fail to discharge, within
a period of thirty (30) days after the commencement thereof, any attachment,
sequestration or similar proceeding or proceedings involving an aggregate amount
in excess of $25,000.00 against any of its assets or properties.
(g)
Borrower, any Subsidiary or any Obligated Party shall fail to satisfy and
discharge, within a period of thirty (30) days after the rendering thereof, any
judgment or judgments against it for the payment of money in an aggregate amount
in excess of $25,000.00.
(h)
Borrower, any Subsidiary or any Obligated Party shall fail to pay when due any
principal of or interest on any Debt (other than the Obligations), or the
maturity of any such Debt shall have been accelerated, or any such Debt shall
have been required to be prepaid prior to the stated maturity thereof, or any
event shall have occurred that permits (or, with the giving of notice or lapse
of time or both, would permit) any holder or holders of such Debt or any Person
acting on behalf of such holder or holders to accelerate the maturity thereof or
require any such prepayment.
(i)
An Event of Default, event of default, Default or default (however therein
defined) shall occur in any document evidencing Debt of Borrower, any Subsidiary
or any Obligated Party to Lenders or its Affiliates.
(j)
This Agreement or any other Loan Document shall cease to be in full force and
effect or shall be declared null and void or the validity or enforceability
thereof shall be contested or challenged by Borrower, any Subsidiary, any
Obligated Party or any of their respective owners, or Borrower or any Obligated
Party shall deny that it has any further liability or obligation under any of
the Loan Documents, or any Lien or security interest created by the Loan
Documents shall for any reason cease to be a valid, first priority perfected
security interest in and Lien upon any of the Collateral purported to be covered
thereby.
23
(k)
A Material Adverse Effect shall have occurred.
(l)
There shall have occurred an Event of Default, as defined in the Senior
Convertible Note.
(m) A
Change of Control of Borrower shall have occurred, other than a Change of
Control resulting from the exercise of conversion rights under the Senior
Convertible Note or the Loan Documents.
Section
9.2. Remedies Upon
Default. If any Event of Default shall occur, the Lender
Representative may do any one or more of the following: (a) declare the
outstanding principal of and accrued and unpaid interest on the Notes and the
Obligations or any part thereof to be immediately due and payable, and the same
shall thereupon become immediately due and payable, without notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, protest or other formalities of any
kind, all of which are hereby expressly waived by Borrower, (b) terminate the
Commitment without notice to Borrower, (c) foreclose or otherwise enforce any
Lien granted to the Lender Representative to secure payment and performance of
the Obligations and (d) exercise any and all rights and remedies afforded by the
laws of the State of Texas or any other jurisdiction by any of the Loan
Documents, by equity or otherwise; provided, however, that upon the occurrence
of an Event of Default under Section 9.1(d) or Section 9.1(e), the Commitment
shall automatically terminate, and the outstanding principal of and accrued and
unpaid interest on the Notes and the other Obligations shall become immediately
due and payable without notice, demand, presentment, notice of dishonor, notice
of acceleration, notice of intent to accelerate, notice of intent to demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by Borrower.
Section
9.3. Performance by
Lenders. If Borrower shall fail to perform any covenant, duty
or agreement contained in any of the Loan Documents, the Lender Representative
may perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower. In such event, Borrower shall, at the request of the Lender
Representative, promptly pay any amount expended by the Lender Representative in
such performance or attempted performance to the Lender Representative, together
with interest thereon at the Default Rate from the date of such expenditure
until paid. Notwithstanding the foregoing, it is expressly agreed
that the Lender Representative shall not have any liability or responsibility
for the performance of any obligation of Borrower under this Agreement or any
other Loan Document.
ARTICLE
X
The
Agent
Section
10.1. Appointment and
Authorization. Each Lender hereby irrevocably appoints
Muragai LLC to act as the Lender Representative hereunder, and under the Loan
Documents and authorizes the Lender Representative to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. The Lender
Representative shall have the same rights and powers in its capacity as a Lender
as any other Lender and may exercise the same as though it were not the Lender
Representative and the term “Lender” or “Lenders” shall include the Lender
Representative in its individual capacity.
24
Section
10.2. Delegation of
Duties. The Lender Representative may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Lender
Representative shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
Section
10.3. Liability of the Lender
Representative. (a) Notwithstanding any provision to the
contrary contained elsewhere in this Agreement or in any other Loan Document,
the Lender Representative shall not have any duty or responsibility except those
expressly set forth herein, nor shall the Lender Representative have or be
deemed to have any fiduciary relationship with any Lender (regardless of whether
an Event of Default exists), and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Documents or otherwise exist against the Lender
Representative. Without limiting the foregoing, the Lender
Representative shall not have any duty to take any discretionary action or
exercise any discretionary powers, except discretional rights and powers
expressly contemplated hereby or by the other Loan Documents that the Lender
Representative is required to exercise as directed in writing by the Lenders (or
such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents), provided that the Lender
Representative shall not be required to take any action that, in its opinion or
the opinion of its counsel, may expose the Lender Representative to liability or
that is contrary to any Loan Document or applicable law.
(b) None
of the Lender Representative nor any of its directors, officers, employees or
agents shall (i) be liable for any action taken or omitted to be taken by
any of them under or in connection with this Agreement or any other Loan
Documents or the transactions contemplated hereby (except for their own gross
negligence or willful misconduct), or (ii) have any duty to inquire into or
be responsible in any manner to any Lender for any recital, statement,
representation or warranty made by Borrower or any Subsidiary or Affiliate of
Borrower, or any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Lender Representative under
or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. The Lender Representative shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of Borrower or any of Borrower's Subsidiaries or
Affiliates.
25
Section
10.4. Reliance by the Lender
Representative. The Lender Representative shall be entitled to
rely, and shall not incur any liability for relying, upon (a) any writing,
resolution, notice, consent, certificate, affidavit, letter, facsimile, email or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, (b) any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and (c) advice and
statements of legal counsel (including counsel to Borrower), independent
accountants and other experts selected by the Lender
Representative. The Lender Representative shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the Lenders
as it deems appropriate and, if it so requests, confirmation from Lenders of
their obligation to indemnify the Lender Representative against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Lender Representative shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Documents in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all Lenders. In determining
compliance with any condition hereunder to the making of a Loan, that by its
terms must be fulfilled to the satisfaction of a Lender, the Lender
Representative may presume that such condition is satisfactory to such Lender
unless the Lender Representative shall have received notice to the contrary from
such Lender prior to the making of such Loan.
Section
10.5. Notice of
Default. The Lender Representative shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Lender Representative for the account of Lenders, unless the
Lender Representative shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Event of Default and
stating that such notice is a “notice of default”. The Lender
Representative will notify Lenders of its receipt of any such
notice. The Lender Representative shall take such action with respect
to such Event of Default as may be requested by Lenders in accordance with
Article IX; provided that unless and until the Lender Representative has
received any such request, the Lender Representative may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Event of Default as it shall deem advisable or in the best interest of
Lenders.
Section
10.6. Credit
Decision. Each Lender acknowledges that the Lender
Representative has not made any representation or warranty to it, and that no
act by the Lender Representative hereafter taken, including any review of the
affairs of Borrower and its Subsidiaries, shall be deemed to constitute any
representation or warranty by the Lender Representative to any
Lender. Each Lender represents to the Lender Representative that it
has, independently and without reliance upon the Lender Representative and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and its
Subsidiaries, and made its own decision to enter into this Agreement and to
extend credit to Borrower hereunder. Each Lender also represents that
it will, independently and without reliance upon the Lender Representative and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and its Subsidiaries. Except for
notices, reports and other documents expressly herein required to be furnished
to the Lenders by the Lender Representative, the Lender Representative shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
or other condition or creditworthiness of Borrower or its Subsidiaries which may
come into the possession of the Lender Representative.
26
Section
10.7. Indemnification. WHETHER OR NOT THE TRANSACTIONS
CONTEMPLATED HEREBY ARE CONSUMMATED, EACH LENDER SHALL INDEMNIFY UPON DEMAND
LENDER REPRESENTATIVE AND ITS DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS (TO THE
EXTENT NOT REIMBURSED BY OR ON BEHALF OF BORROWER AND WITHOUT LIMITING THE
OBLIGATION OF BORROWER TO DO SO), BASED ON SUCH LENDER’S PRORATA PERCENTAGE
SHARE OF THE COMMITMENT (“LENDER’S PERCENTAGE SHARE”), FROM AND AGAINST ANY AND
ALL CLAIMS; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PAYMENT TO ANY SUCH
PERSON OF ANY PORTION OF THE CLAIMS TO THE EXTENT SUCH CLAIMS ARISE FROM SUCH
PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION
OF THE FOREGOING, EACH LENDER SHALL REIMBURSE LENDER REPRESENTATIVE UPON DEMAND
FOR ITS LENDER’S PERCENTAGE SHARE OF ANY COSTS OR OUT-OF-POCKET EXPENSES
(INCLUDING REASONABLE ATTORNEYS' FEES) INCURRED BY LENDER REPRESENTATIVE IN
CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY DOCUMENT
CONTEMPLATED BY OR REFERRED TO HEREIN, TO THE EXTENT THAT LENDER REPRESENTATIVE
IS NOT REIMBURSED FOR SUCH EXPENSES BY OR ON BEHALF OF BORROWER. THE
UNDERTAKING IN THIS SECTION SHALL SURVIVE REPAYMENT OF THE NOTES, ANY
FORECLOSURE UNDER, OR MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE
LOAN DOCUMENTS, TERMINATION OF THIS AGREEMENT AND THE RESIGNATION OR REPLACEMENT
OF LENDER REPRESENTATIVE.
Section
10.8. Lender Representative in
Individual Capacity. Muragai LLC and its Affiliates may make
loans to acquire equity interests in any kind of business with Borrower and its
Subsidiaries and Affiliates as though Muragai LLC were not the Lender
Representative hereunder and without notice to or consent of
Lenders. Lenders acknowledge that, pursuant to such activities,
Muragai LLC or its Affiliates may receive information regarding Borrower or its
Affiliates (including information that may be subject to confidentiality
obligations in favor of Borrower or such Affiliate) and acknowledge that the
Lender Representative shall be under no obligation to provide such information
to Lenders.
Section
10.9. Collateral
Matters. Lenders irrevocably authorize the Lender
Representative, at its option and in its discretion, to release any lien granted
to or held by the Lender Representative under any Loan Document (a) upon
termination of the Commitment and all other obligations of Borrower hereunder;
or (b) on property sold or to be sold or disposed of as part of or in
connection with any disposition permitted under Section 8.3(d). Upon
request by the Lender Representative at any time, Lenders will confirm in
writing the Lender Representative's authority to release, or subordinate its
interest in, particular types or items of collateral pursuant to this
Section 10.9.
27
ARTICLE
XI.
Miscellaneous
Section
11.1. Expenses of the Lender
Representative. Borrower hereby agrees to pay the Lender
Representative on demand (a) all reasonable costs and expenses incurred by the
Lender Representative in connection with the preparation, negotiation and
execution of this Agreement and the other Loan Documents and any and all
amendments, modifications, renewals, extensions and supplements thereof and
thereto, including, without limitation, the fees and expenses of the Lender
Representative's legal counsel, (b) all reasonable costs and expenses incurred
by the Lender Representative and/or any Lender in connection with the
enforcement of this Agreement or any other Loan Document, including, without
limitation, the fees and expenses of such Person’s legal counsel and (c) all
other reasonable costs and expenses incurred by the Lender Representative in
connection with this Agreement or any other Loan Document, including, without
limitation, all costs, expenses, taxes, assessments, filing fees and other
charges levied by any Governmental Authority or otherwise payable in respect of
this Agreement or any other Loan Document or in obtaining any insurance policy,
audit or appraisal in respect of the Collateral.
SECTION
11.2. INDEMNIFICATION-BORROWER. BORROWER HEREBY INDEMNIFIES LENDER
REPRESENTATIVE AND EACH LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS FROM, AND HOLDS EACH OF
THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING ATTORNEYS’
FEES) (COLLECTIVELY, “CLAIMS”) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH
DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION,
DELIVERY, PERFORMANCE, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN
DOCUMENTS, (B) ANY OF
THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY
REPRESENTATION, WARRANTY, COVENANT OR OTHER AGREEMENT CONTAINED IN ANY OF THE
LOAN DOCUMENTS, (D) THE
PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL OR CLEANUP OF ANY
HAZARDOUS SUBSTANCE LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES
OR ASSETS OF BORROWER OR ANY SUBSIDIARY, OR (E) ANY ACT OR OMISSION OF ANY LENDER
BASED UPON ANY FAX OR ELECTRONIC TRANSMISSION, INCLUDING,
WITH RESPECT TO ALL OF THE ABOVE, ANY CLAIM WHICH ARISES AS A RESULT OF THE
NEGLIGENCE OF LENDER REPRESENTATIVE OR ANY LENDER; PROVIDED, HOWEVER, THAT BORROWER'S
INDEMNIFICATION OBLIGATIONS UNDER THIS SECTION 11.2 SHALL NOT APPLY TO THE
EXTENT THAT THE CLAIMS ARISE AS A RESULT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY INDEMNIFIED PERSON.
28
Section
11.3. Limitation of
Liability. Neither Lender Representative nor any Lender nor
any Affiliate, officer, director, employee, attorney or agent of Lender
Representative or any Lender shall have any liability with respect to, and
Borrower hereby waives, releases and agrees not to xxx any of them upon, any
claim for any special, indirect, incidental, exemplary, punitive or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents.
Section
11.4. No Waiver; Cumulative
Remedies. No failure on the part of Lender Representative or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights
and remedies provided for in this Agreement and the other Loan Documents are
cumulative and not exclusive of any rights and remedies provided by
law.
Section
11.5. Successors and
Assigns. This Agreement is binding upon and shall inure to the
benefit of Lenders, the Lender Representative and Borrower and their respective
successors and assigns (except as otherwise provided in Section 11.19), except
that Borrower may not assign or transfer any of its rights or obligations under
this Agreement without prior written consent of the Lender
Representative.
Section
11.6. Survival. All
representations and warranties made in this Agreement or any other Loan Document
or in any document, statement or certificate furnished in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
other Loan Documents, and no investigation by Lender Representative or any
Lender or any closing shall affect the representations and warranties or the
right of Lender Representative or any Lender to rely upon
them. Without prejudice to the survival of any other obligation of
Borrower hereunder, the obligations of Borrower under Sections 11.1 and 11.2
shall survive repayment of the Notes and termination of the
Commitment.
Section
11.7. Amendment. The
provisions of this Agreement may be amended or waived only by an instrument in
writing signed by the parties hereto.
Section
11.8. Maximum Interest
Rate. No provision of this Agreement or of any other Loan
Documents shall require the payment or the collection of interest in excess of
the Maximum Rate. If any excess of interest in such respect is hereby
provided for, or shall be adjudicated to be so provided, in any other Loan
Documents or otherwise in connection with this loan transaction, the provisions
of this Section shall govern and prevail and neither Borrower nor the sureties,
guarantors, successors or assigns of Borrower shall be obligated to pay the
excess amount of such interest or any other excess sum paid for the use,
forbearance or detention of sums loaned pursuant hereto. In the event
any Lender ever receives, collects or applies as interest any such sum, such
amount which would be in excess of the maximum amount permitted by applicable
law shall be applied as a payment and reduction of the principal of the
indebtedness evidenced by the Notes; and, if the principal of the Notes have
been paid in full, any remaining excess shall forthwith be paid to
Borrower. In determining whether or not the interest paid or payable
exceeds the Maximum Rate, Borrower and Lenders shall, to the extent permitted by
applicable law, (a) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof and (c) amortize, prorate, allocate and spread in equal or
unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by the Notes so that interest for the entire
term does not exceed the Maximum Rate.
29
Section
11.9. Notices. (a)
All notices and other communications provided for in this Agreement and the
other Loan Documents shall be in writing and may (subject to paragraph (b)
below) be telecopied (faxed), mailed by certified mail return receipt requested,
or delivered by hand or overnight courier service to the intended recipient at
the addresses specified on the signature pages hereof or at such other address
as shall be designated by any party listed below in a notice to the other
parties listed below given in accordance with this Section.
Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopy (fax), subject to confirmation
of receipt, when delivered if by hand or overnight courier service or, in the
case of a mailed notice, when duly deposited in the mails, in each case given or
addressed as aforesaid; provided, however, that notices to the Lender
Representative pursuant to Article II shall not be effective until received by
the Lender Representative.
(b) Lender
Representative or Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications. Unless the Lender
Representative otherwise prescribes, notices and other communications sent to an
e-mail address shall be deemed received upon the sender's receipt of an
acknowledgment from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgment), provided, that if such notice or other communication is not
sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day for the recipient.
Section
11.10. Applicable Law; Venue;
Service of Process. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America. This Agreement has been entered
into in Xxxxxx County, Texas and it shall be performable for all purposes in
Xxxxxx County, Texas. Any action or proceeding against Borrower under
or in connection with any of the Loan Documents may be brought in any state or
federal court in Xxxxxx County, Texas, and Borrower hereby irrevocably submits
to the nonexclusive jurisdiction of such courts and waives any objection it may
now or hereafter have as to the venue of any such action or proceeding brought
in any such court or that any such court is an inconvenient
forum. Borrower agrees that service of process upon it may be made by
certified or registered mail, return receipt requested, at its office specified
in this Agreement. Nothing herein or in any of the other Loan
Documents shall affect the right of the Lender Representative or any Lender to
serve process in any other manner permitted by law or shall limit the right of
the Lender Representative or any Lender to bring any action or proceeding
against Borrower or with respect to any of its property in courts in other
jurisdictions. Any action or proceeding by Borrower against the
Lender Representative or any Lender shall be brought only in a court located in
Xxxxxx County, Texas.
30
Section
11.11. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Section
11.12. Severability. Any
provision of this Agreement held by a court of competent jurisdiction to be
invalid or unenforceable shall not impair or invalidate the remainder of this
Agreement and the effect thereof shall be confined to the provision held to be
invalid or illegal.
Section
11.13. Headings. The
headings, captions and arrangements used in this Agreement are for convenience
only and shall not affect the interpretation of this Agreement.
Section
11.14. Non-Application of Chapter
346 of Texas Finance Code. The provisions of Chapter 346 of
the Texas Finance Code are specifically declared by the parties hereto not to be
applicable to this Agreement or any of the other Loan Documents or to the
transactions contemplated hereby.
Section
11.15. USA Patriot
Act. Lenders hereby notify Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies Borrower, which information includes the name and
address of Borrower and other information that will allow Lenders to identify
Borrower in accordance with the Act.
Section
11.16. Confidentiality. Lenders
agree to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to Agreement or the Loan Documents or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to (i)
any assignee of or Participant in, or any prospective assignee of or Participant
in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction
relating to the Borrower and its obligations, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
any Lender on a non-confidential basis from a source other than the
Borrower. For the purposes of this Section, “Information” as used
herein means all information received from the Borrower relating to the Borrower
or its business, other than any such information that is available to any Lender
on a non-confidential basis prior to disclosure by the Borrower; provided that, in the
case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
31
Section
11.17. Waiver of Trial By
Jury. BORROWER, LENDER REPRESENTATIVE AND EACH LENDER (BY ITS
ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) AMONG BORROWER, LENDER
REPRESENTATIVE AND LENDERS, OR ANY OF THEM, ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDERS TO PROVIDE THE FINANCING EVIDENCED BY THIS AGREEMENT AND
THE LOAN DOCUMENTS.
Section
11.18. ENTIRE
AGREEMENT. THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
THEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS
AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES
HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES
HERETO.
Section 11.19 Prohibition on
Participations. No Lender may at any time sell or transfer any
interests in its Note or the Loan Documents or the indebtedness evidenced
thereby (including, without limitation, any participation interests) to any
purchaser, whether or not related to such Lender, without the prior written
consent of Lender Representative.
[Remainder of Page Intentionally Left
Blank]
32
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the
day and year first above written.
BORROWER:
Address for
Notices: REMOTE
KNOWLEDGE, INC.
0000
Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000 By:
Xxxxx X.
Xxxxx
President
LENDER
REPRESENTATIVE:
MURAGAI
LLC, as lender representative,
a
Delaware limited liability company
By:
Xxxxxxx X. Gijon
Chief Financial Officer
LENDER:
Commitment
Amount:
$740,000 MURAGAI
LLC,
Commitment
Percentage: 18.49%
a Delaware limited liability company
Address for
Notices:
By:
0000 Xxxx
Xxxxxxx, No.
529 Xxxxxxx
X. Gijon
Xxxxxxx
Xxxxx 00000 Chief
Financial Officer
LENDER:
Commitment
Amount: $1,750,000
Commitment
Percentage:
43.75% ____________________________________
Xxxxx X. Xxxxx – Separate
Property
Address for
Notices:
0000
Xxxxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxx 00000
LENDER:
Commitment
Amount:
$250,000 THE
XXXX GROUP, INC. D/B/A
Commitment
Percentage: 6.25% THE
XXXX COMPANIES,
a Minnesota corporation
Address for
Notices: By:
Xxxxx X. Xxxx, President
and
The Xxxx
Group, Inc.
d/b/a Chief
Executive Officer
The Xxxx
Companies
IDS
Center, Suite 700
00 Xxxxx
Xxxxxx Xxxxxx
Xxxxxxxxxxx,
XX 00000
LENDER:
Commitment
Amount: $250,000
Commitment
Percentage:
6.25% ____________________________________
Xxxxxx X. Lack
Address for
Notices:
Xxxxxxxx,
Xxxxxxxx & Lack
00000
Xxxxx Xxxxxx Xxxx., 00xx
Xxxxx
Xxx
Xxxxxxx, XX 00000
LENDER:
Commitment
Amount: $125,000
Commitment
Percentage: 3.13% _____________________________________
Xxxxx X. Xxxxx
Address for
Notices:
0000
Xxxxxxx Xxxx Xx.
Xxxxxxx,
Xxxxx 00000
LENDER:
Commitment
Amount: $250,000 ATT
TECHNOLOGY LTD. D/B/A
Commitment
Percentage: 6.25% ARNCO
TECHNOLOGY TRUST LTD.
a Texas limited
partnership
Address for
Notices: By:
Name:
ATT
Technology Ltd.
d/b/a Title:
Arnco
Technology Trust Ltd.
0000
Xxxxxxxxx
Xxxxxxx,
Xxxxx 00000
LENDER:
Commitment
Amount: $135,000
Commitment
Percentage: 3.38% _____________________________________
Xxxx Xxxxxxxx
Address for
Notices:
000
Xxxxxx Xxxxxx
Xxx Xxxx,
XX 00000
LENDER:
Commitment
Amount: $250,000 JUNIPER
TRUST
Commitment
Percentage: 6.25%
Address for
Notices: By:
______________________________
Xxx X. Xxxxxx, Trustee
0000 Xxxx
Xxxxxxx, Xx. 000
Xxxxxxx,
Xxxxx 00000
[Signature Page to
Credit Agreement]
LENDER:
Commitment
Amount: $250,000 VLJ
TRUST
Commitment
Percentage: 6.25%
Address for
Notices: By:
_______________________________
Xxxx Xxxx, Jr., Trustee
0000 Xxxx
Xxxxxxx, Xx. 000
Xxxxxxx,
Xxxxx 00000
[Signature Page to
Credit Agreement]
LIST OF EXHIBITS
Exhibits Documents
A Note
B Advance
Request Form
C Security
Agreement
D Cash
Flow Projections
E Lender
Warrants