AMENDMENT TO LOAN AGREEMENT
(Increase in Loan Amount and Other Changes)
Amendment to Loan Agreement ("Amendment") made as of the 12th day of
May, 1999, by and among FONIX CORPORATION, a Delaware corporation, and FONIX/ASI
CORPORATION, a Utah corporation, jointly and severally (each a "Borrower", and
collectively, the "Borrowers"), and LERNOUT & HAUSPIE SPEECH PRODUCTS N.V., a
Belgian corporation ("Lender"), with respect to that certain Loan Agreement
dated April 22, 1999 by and among Borrowers and Lender (as amended, the "April
Loan Agreement"). Capitalized terms not defined herein shall have the meanings
ascribed thereto in the April Loan Agreement.
WHEREAS, Borrowers and the Lender are parties to the April Loan
Agreement pursuant to which the Lender has provided a loan of $1,000,000 on
April 28, 1999 to the Borrowers;
WHEREAS, the Borrowers have requested and the Lender has agreed that
the Lender will provide an additional loan of One Hundred Thousand Dollars
($100,000.00) on or before May 15, 1999 to the Borrowers, under the terms and
subject to the conditions of the April Loan Agreement, as amended hereby;
NOW THEREFORE, based on these premises, and in consideration of the
mutual promises contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties, the
Borrowers and the Lender hereby agree as follows:
1. Amendments to Loan Agreement.
a. Loan Amount. Section 2(a) of the April Loan Agreement is hereby
stricken and deleted in its entirety and replaced with the following in lieu
thereof:
"(a) The Lender shall make a loan to Borrowers in the original
principal amount of One Million One Hundred Thousand Dollars
($1,100,000.00) (the "Loan") by advancing One Million Dollars
($1,000,000) on April 28, 1999 and One Hundred Thousand Dollars
($100,000.00) on or before May 15, 1999, subject to the terms and
conditions contained in this Agreement, as amended. Once repaid,
the Loan may not be reborrowed. The Loan shall be due and payable
as set forth in the Note in the form attached hereto as Exhibit A,
as amended."
b. Loan Documents. Section 2(b) of the April Loan Agreement is hereby
stricken and deleted in its entirety and replaced with the following in lieu
thereof:
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"(b)The Loan shall be evidenced by the Note and shall be
secured by: (i) a first priority security interest in all of the
assets of Fonix/ASI Corporation pursuant to a Security Agreement
in the form attached hereto as Exhibit B, as amended (as amended,
the "Security Agreement"); (ii) a Patent Security Agreement in the
form attached hereto as Exhibit C ; (iii) a Copyright Security
Agreement in the form attached hereto as Exhibit D ; and (iv) a
Trademark Security Agreement in the form attached hereto as
Exhibit E . The Loan shall bear interest and be payable as set
forth in the Note. The term "Loan Documents", as used herein when
discussing Fonix/ASI Corporation, shall mean this Agreement and
the documents referred to in this subsection, as each such
document may be amended. The term "Loan Documents", as used herein
when discussing Fonix Corporation, shall mean this Agreement and
the Note."
c. Title. Section 3(f) of the April Loan Agreement is hereby stricken
and deleted in its entirety and replaced with the following in lieu thereof:
"(f)Title. Fonix/ASI Corporation has good and marketable title to
all of the Collateral (as defined in the Security Agreement), free
and clear of any liens other than the liens disclosed on Schedule
3(f) attached hereto or liens held by the Lender (the "Permitted
Liens")."
d. Note. The definition of "Note" in Schedule I - Definitions of the
April Loan Agreement is hereby amended to add the words "as amended" after the
word "hereto," as it appears therein.
2. Conditions Precedent.
Each Borrower acknowledges and agrees that Lender will not enter into
this Amendment unless and until all of the following conditions have been
satisfied and remain satisfied:
(a) Representations and Warranties. Borrowers' representations and
warranties contained herein and in each and every Loan Document shall be correct
and complete in all material respects;
(b) Covenants. Borrowers shall be in compliance in all material
respects with all covenants and agreements contained herein and in each and
every Loan Document;
(c) No Events of Default. There shall exist no Event of Default or any
event which, with the passage of time or the giving of notice or both, would
constitute an Event of Default; and
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(d) Delivery of Documents. Borrowers shall have executed and delivered,
or caused to be delivered, to Lender: (i) this Amendment, (ii) the Amendment To
Promissory Note in the form attached hereto as Exhibit A, and (iii) the
Amendment to Security Agreement in the form attached hereto as Exhibit B.
(e) No Material Adverse Effect. No event or condition having a material
adverse effect with respect to either Borrower shall have occurred.
3. Additional Provisions.
(a) No Prepayment of Indebtedness. Each Borrower represents, warrants,
covenants and agrees that it shall not prepay any indebtedness to any party
other than the Lender.
4. Representations and Warranties. To induce the Lender to enter into
this Amendment and perform its obligations hereunder, Borrowers hereby jointly
and severally represent and warrant as follows:
(a) Organization and Qualification. The Borrowers are corporations duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and have all required corporate power
and authority to own or lease their property, to carry on their businesses as
presently conducted and to carry out the transactions contemplated hereby.
(b) Charter. The Borrowers have delivered to counsel to the Lender true
and complete copies of their respective Certificates of Incorporation or
equivalent documents as amended from time to time (the "Charters") and their
by-laws ("By-laws") as currently in effect.
(c) Authorization of Transaction. The execution, delivery and
performance of this Amendment, the other documents executed and/or delivered in
connection herewith, and the other Loan Documents by Borrowers have been duly
authorized by all necessary corporate action of the Borrowers. The Loan
Documents are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors. The issuance of the Amendment to Promissory Note by Borrowers pursuant
to the terms of this Amendment is duly and validly authorized, and no further
approval or authority of the shareholders or the directors of the Borrowers or
of any governmental authority or agency will be required for the issuance and
sale of the Note as contemplated by this Agreement.
(d) Approvals; Compliance With Laws. The execution, delivery and
performance of this Amendment by Borrowers and the transactions contemplated
hereby: (i) do not require any approval or consent of, or filing with, any
governmental agency or authority in the United States of America or otherwise
which has not been obtained and which is not in full force and effect as of the
date hereof; (ii) will not conflict with or constitute a breach or violation of
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the Charters or By-laws of the Borrowers; and (iii) will not result in a
violation of any law or regulation to which they are subject.
(e) Disclosure. This Amendment, together with any financial statement,
schedule, exhibit or other statement (written or oral) pertaining to the
Borrowers, made, delivered or communicated to the Lender by the Borrowers, or
any representative thereof, in connection with this Amendment and the
transactions related thereto, contains no untrue statement of a material fact
and does not omit to state any material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which they were made.
(f) Title. Fonix/ASI Corporation has good and marketable title to all
of the Collateral (as defined in the Security Agreement), free and clear of any
liens other than the liens disclosed on Schedule 3(f) attached to the April Loan
Agreement or liens held by the Lender (the "Permitted Liens"), and Fonix
Corporation has good and marketable title to all of the capital stock of
Fonix/ASI Corporation, free and clear of any liens other than the Permitted
Liens.
(g) Enforcement; No Other Liens. The Borrowers have not performed any
acts which might prevent the Lender from enforcing any of the terms of this
Amendment or the Loan Documents or which would limit the Lender in any such
enforcement. Other than financing statements or other similar or equivalent
documents or instruments in favor of the Lender or with respect to the Permitted
Liens, no financing statement, mortgage or security agreement or similar or
equivalent document or instrument covering all or any part of the Collateral is
on file or of record in any jurisdiction in which such filing or recording would
be effected to perfect a lien on such Collateral. No Collateral is in the
possession of any person (other than the Borrowers) asserting any claim thereto
or security interest therein other than Collateral being repaired by third
parties in the ordinary course of business and inventory in transit.
(h) Perfection. The liens granted to Lender pursuant to the Loan
Documents constitute valid first priority security interests in the Collateral
securing the Obligations (as defined in the Security Agreements) and constitute
first priority perfected security interests in the Collateral to the extent that
a security interest therein may be perfected by filing pursuant to the UCC prior
to all other liens and rights of others therein except for the Permitted Liens.
(i) No Material Adverse Change. Other than as disclosed in Schedule
3(l) to the April Loan Agreement or as otherwise disclosed in the periodic
reports filed by Fonix Corporation with the Securities and Exchange Commission,
there has occurred, since December 31, 1998, no event which has had or is
reasonably likely to have a material adverse change on either Borrower or any of
their subsidiaries.
(j) Intellectual Property. Fonix/ASI Corporation owns or possesses the
adequate right to use all Intellectual Property Rights necessary to the conduct
of its business as presently conducted or presently contemplated to be conducted
as of the date of this Agreement. Schedule 3(m) attached to the April Loan
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Agreement contains a list of all patents, tradenames, trademarks, service marks,
and registered copyrights and applications for the same owned by Fonix/ASI
Corporation or any of its subsidiaries. Fonix/ASI Corporation has unencumbered
title to the Intellectual Property Rights which are owned by Fonix/ASI
Corporation and such title has not been challenged (pending, or to the knowledge
of the Borrowers, threatened) by others. All such patents, registered
trademarks, service marks, and copyrights owned by Fonix/ASI Corporation are in
good standing and are recorded on the public record in the name of Fonix/ASI
Corporation, except for those failures to be in good standing and so recorded
that would not, individually or in the aggregate, have a material adverse
effect.
(k) No Conflict. The execution, delivery and performance of this
Amendment and each document executed and/or delivered in connection herewith by
the Borrowers will not violate (i) any organizational documents of any Borrower,
or (ii) any requirement of law affecting any of the Borrowers or any of their
properties, and will not result in or require the creation (except as provided
in or contemplated by this Amendment) of any security interest or lien upon any
of such properties. None of the Borrowers is in violation of or default in any
material respect under any requirement of law, and no condition exists that
would, with the giving of notice or lapse of time, or both, constitute such a
violation or default.
(l) Loan Documents. Each Borrower represents and warrants to the Lender
that each of the representations and warranties in the Loan Documents,
including, without limitation, the April Loan Agreement (in Section 3 of the
April Loan Agreement or elsewhere) are still true as of the date hereof.
5. Confirmation. Except as specifically provided herein, all other terms
and conditions of the April Loan Agreement and the other Loan Documents shall
remain in full force and effect in accordance with their original terms. Without
limitation of the foregoing, Borrowers confirm that the new loans made by Lender
pursuant to this Amendment shall be governed by, secured by and entitled to the
benefit of the terms and conditions of the April Loan Agreement and the other
Loan Documents.
Each Borrower each hereby (a) consents to the execution of the
Amendment To Promissory Note, the Amendment to Security Agreement, and each
other document relating thereto, all of even date herewith, executed by each
other Borrower, and (b) agrees and confirms that any and all documents and
instruments securing any of their obligations shall be deemed to secure any
obligation of such party as it may be amended or affected hereby.
6. References. All references in the April Loan Agreement to "this
Agreement" shall hereafter be deemed to refer to the April Loan Agreement as
amended hereby and as otherwise hereafter amended, supplemented or modified. All
references in the Loan Documents shall hereafter be deemed to refer to the April
Loan Agreement as amended hereby and as otherwise hereafter amended,
supplemented or modified.
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7. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the Borrowers and the Lender have executed this
Amendment as of the date first above written, by their respective officers
hereunto duly authorized, under Massachusetts law as a document under seal.
WITNESS: FONIX CORPORATION
By:/s/
----------------------------- --------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
WITNESS: FONIX/ASI CORPORATION
By:/s/
----------------------------- --------------------------------------
Xxxxxx X. Xxxxxxx
President
WITNESS: LERNOUT & HAUSPIE SPEECH
PRODUCTS N.V.
By:/s/
----------------------------- --------------------------------------
Xxxxxx Xxxxxxxxx
President and Chief Executive Officer
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EXHIBIT A
Form of Amendment To Promissory Note
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EXHIBIT B
Form of Amendment To Security Agreement
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