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EXHIBIT - 10.16
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT ("Agreement") is made by and between HARTFORD
HOLDINGS LTD., a Cayman Islands Corporation ("Hartford" or "Lenders") and
TELEHUB COMMUNICATIONS CORP., an Illinois corporation ("Borrower"),
RECITALS
WHEREAS, Hartford is a significant shareholder of Borrower and Xx. Xxxxxxx
X. Xxxxxx, an affiliate of Hartford, is Chairman an officer and director of
Borrower;
WHEREAS, Hartford previously lent Borrower $2,361,243 for operating capital
and further development of Borrower's Virtual Service Management System ("VSMS")
Platform;
WHEREAS, Borrower intends to complete a private offering of its securities
in 1997;
WHEREAS, Borrower requires additional funds before the private offering
will be completed;
WHEREAS, Hartford is willing to lend certain additional funds to Borrower
on the terms and conditions set forth in this Agreement and in the Note
(collectively, "Loan Documents") evidencing the Loan; and
WHEREAS, Borrower intends to repay the borrowed funds from the proceeds of
the private offering of Borrowers' securities.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreement contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, Lender and
Borrower hereby covenant and agree as follows:
1. AGREEMENT TO BORROW AND LEND. Subject to the terms and conditions of the
Loan Documents, Lender agree to make available to Borrower up to ONE MILLION
DOLLARS ($1,000,000.00). To evidence the Loan, Borrower will execute the
Promissory Note ("Note") attached to this Agreement as Exhibit 1.
2. DISBURSEMENTS. Lender will disburse Funds to the Borrower in accordance
with the following schedule:
2.1. $250,000 on December 13, 1996;
2.2. up to $250,000 on December 30, 1996;
2.3. up to $250,000 on January 15, 1997;
2.4. up to $250,000 on January 31, 1997; and,
2.5. if the entire $1 million has not been disbursed pursuant to
Sections 2.1-2.4 above, the lesser of the balance or $250,000 may be disbursed
on February 15, 1997.
Prior to disbursements pursuant to Sections 2.2 to 2.5, Borrower will fax a
disbursement request (using the Exhibit 3 form) to Lender and to Haligman and
Lottner, P.C.
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3. REPAYMENT. As provided in the Note, the Principal Amount, unpaid accrued
interest and any interest premium shall be paid to the Holder at the earlier of
July 1, 1997, or the business day following Borrower's receipt of the proceeds
from the sale of Borrower's securities.
4. WARRANT TO LENDER. Borrower will issue Lender common stock in the
aggregate amount of $672,248.60, which represents 20% of the total amount
($3,361,243) that Lender has advanced to Borrower. This shares will be issued at
completion of the private offering; the per-share exercise price will be the
same as the private offering per-share purchase price.
5. BORROWER'S REPRESENTATION. Borrower hereby represents and warrants that:
5.1. No Additional Advances. Lender has not promised, represented or
committed that it will loan any additional funds to Borrower, or that Lender
will renew or exceed this Loan at its maturity.
5.2. Accurate Financial Statements. The financial statements, business
plan and other information concerning the financial condition of Borrower
provided to Lender ("Financial Statements") is materially true and correct and
accurately depicts the financial condition of Borrower as of the date hereof.
Borrower acknowledges that Lender is making the Loan in reliance upon the
Financial Statements.
5.3. Valid Related Party Transaction. Lender has disclosed its
affiliations to Borrower and its financial interest in this transactions, this
transaction is fair to the Borrower and Borrower's directors (except Mr. Xxxxxxx
Xxxxxx, Hartford's affiliate) and shareholders have approved this transaction.
Accordingly, the Loan Documents are valid and binding obligations of the
Borrower.
6. BORROWER'S COVENANTS.
6.1. Use of Proceeds. Borrower covenants that the proceeds of the Loan
shall be used by Borrower solely to fund Borrower's corporate operations and the
development of its VSMS Platform. All expenditures and disbursements shall be
authorized and approved by the Borrower's Chief Executive Officer.
6.2. Books and Records. Borrower shall maintain true and proper books,
records, reports and amounts ("Books and Records") of all of Borrower's business
operations and activities. Borrower shall keep such Books and Records at its
principal place of business.
6.3. Access to Books and Records. Borrower shall permit Lender to
examine all of Borrower's Books and Records at any time and to copy or to make
extracts from Books and Records as Lender deems necessary.
6.4. Tax Returns. Tax returns of the Borrower are to be provided to
Lenders upon request anytime during the term of the Loan.
6.5. Notice of Adverse Events. Borrower will immediately notify Lenders
of any event or circumstance which reasonably could be deemed to have a
materially adverse effect on Borrower's financial condition, Borrower's ability
to perform its obligation under the Loan Documents, its ability to sell
securities, or its ability to repay the Note.
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7. Events of Default. The occurrence of any one or more of the following
events or the existence of one or more of the following conditions shall
constitute an event of default under this Agreement:
7.1. Nonpayment. Failure to pay when due any installment of principal or
interest due under the Note, whether due on the date provided for therein or by
acceleration or otherwise or failure to pay the entire outstanding principal
balance of the Loan, together with all accrued and unpaid interest then
outstanding, on the Maturity date defined in the Note or upon acceleration.
7.2. False Representations. An event of default shall occur if any
representation or warranty made in writing to Lenders by Borrower herein or in
connection with the making of the Loan shall prove at any time to have been
incorrect in any material respect when made.
7.3. Breach of Covenants. An event of default shall also occur if
Borrower fails to comply with any covenant made in the Loan Documents.
8. Remedies for Default. Upon the occurrence of any event of default and at
any time thereafter:
8.1. Acceleration of Maturity. All principal, interest and other amounts
payable under the Note shall, at the option of Lenders, become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which Borrower hereby expressly waives.
8.2. Default Interest Rate. The outstanding principal balance of the
Note shall bear interest, payable upon demand, at a rate for each day equal to
eighteen percent (18%) annually (the "Default Interest Rate"). The application
of the Default Interest Rate shall not be interpreted or deemed to extend any
cure period set forth in any Loan Document or otherwise to limit any of Lenders'
remedies under this Agreement or any of the other Loan Documents.
8.3. Other Remedies. Lender may proceed with every remedy available at
law or in equity or provided for in the Loan Documents in such order or sequence
as Lender may determine in its sole discretion, including concurrently,
independently, or successively, and all expenses incurred by Lender in
connection with any remedy shall be deemed indebtedness of Borrower to Lender
including, but not limited to, attorneys' fees incurred by Leader.
9. Borrower not Released. Without affecting any obligation of Borrower
under this Agreement, Lender may renew, extend or otherwise change the terms and
conditions of the Loan, take or release any collateral as security for the Loan.
10. Amendments. No provision or term of the Loan Documents may be amended,
modified, revolted, supplemented, waived or otherwise changed except by a
written instrument duly executed by Borrower and Lender and designated as such.
11. Severability. Whenever possible, each provision of the Loan Documents
shall be interpreted so as to be effective and valid under Illinois law. Should
any provision, covenant or agreement contained in the Loan Documents be deemed
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions of the Loan Documents shall not
be impaired thereby, nor shall the validity, legality or enforceability of any
such defective provision be in any way affected or impaired in any other
Jurisdiction.
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12. SUCCESSORS AND ASSIGNS BOUND; ASSIGNMENT. The covenants and agreements
contained herein shall bind Borrower, its successors and assigns. This Agreement
may not be assigned by borrower without the prior written consent of Lender.
Subject to the foregoing restriction, this Agreement shall inure to the benefit
of Lender, their successors and assigns.
13. NO THIRD PARTY BENEFITS. This Agreement is made for the sole benefit of
Borrower and Lenders, and their respective successors and assigns, and no other
person or persons shall have any rights or remedies under or by reason of this
Agreement.
14. HEADINGS. The captions and headings of the paragraphs in the Agreement
are for convenience only and are not used to interpret or define the provisions
of the Agreement.
15. CONFLICT. Should any provision of any Loan Document conflict with any
provision of this Agreement, the provision selected by Lender, in their sole
discretion, shall govern and shall be controlling.
16. DEFINED TERMS. All capitalized terms used herein shall have the same
meaning as in the Loan Documents unless expressly defined herein.
17. GOVERNING LAW. The Loan Documents shall be governed by and interpreted
in accordance with the laws of the State of Illinois.
18. COUNTERPARTS. This Agreement may be executed in counterparts and all
such counterparts, as so executed, shall constitute one Agreement, binding upon
all the signatories thereto, notwithstanding that all of the signatories are not
signatories to the original or same counterpart.
TELEHUB COMMUNICATIONS CORP.,
an Illinois corporate
December 10, 1996 By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Chief Executive Officer
HARTFORD HOLDINGS LTD.
a Cayman Islands corporation
December 10, 1996 By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chairman
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EXHIBIT 1
TELEHUB COMMUNICATION CORP.
PROMISSORY NOTE #3
US $1,000,000,000 December 10, 1996
TELEHUB COMMUNICATIONS CORP., an Illinois corporation (the "Company"), for
value received, hereby promises to pay to HARTFORD HOLDINGS LTD. (the "Holder")
the sum of ONE MILLION U.S. DOLLARS ($1,000,000.00) (the "Principal Amounts)
together with interest on the outstanding Principal Amounts at the rate of 12.0%
per annum, compounded quarterly, as follows:
1. ADVANCEMENT OF PRINCIPAL AMOUNT. The Principal Amount shall not be
advanced upon execution hereof, but shall only be deemed to have been advanced
as and when funds are provided by Holder to the Company, under the Bridge Loan
Agreement dated December 10, 1996 (the "Bridge Loan"). Upon any disbursement by
the Holder, the Company shall be deemed to have received an advance under this
note in the amount of such disbursement. The aggregate amount of disbursements
shall not exceed the Principal Amounts. The Company acknowledges that all
disbursements shall be made pursuant to the Bridge Loan, and the Company
unconditionally agrees to repay all present and future disbursements.
2. MANDATORY PREPAYMENT. The Principal Amount, any prepaid accrued interest
plus an interest premium of 5% per annum interest on the Principal Amount, shall
be paid to the Holder from the net proceeds from any sale of Company equity or
debt securities. Net proceeds includes all amounts received by Borrower less any
related commissions, brokers' fees and other related costs incurred in
connection with the offer and sale of Borrower's securities. This Mandatory
Prepayment shall be made by the business day following Borrower's receipt of the
proceeds from the sale.
3. MATURITY. If not paid sooner, the entire outstanding Principal Amount
with any unpaid accrued interest and all other sums due hereunder or under any
of the other Loan Documents, shall be paid to the Holder on July 1, 1997.
4. SUBJECT TO LOAN AGREEMENT. This Note evidences the Loan made under, and
is entitled to the benefits of the Bridge Loan, between the Company and the
Holder. Reference is made so the Bridge Loan for provisions relating to default,
Holder's remedies for default and other terms and conditions.
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its name
and on its behalf by its duly authorized officer on the date first above
written.
TELEHUB COMMUNICATIONS CORP.,
an Illinois corporation
By: /s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Chief Executive officer
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ACTION BY WRITTEN CONSENT IN LIEU OF A MEETING OF
THE BOARD OF DOCTORS OF
TELEHUB COMMUNICATIONS CORP.
The following action is taken by written consent of the Board of Directors of
TELEHUB COMMUNICATIONS CORP., an Illinois corporation (the "Corporation"), in
lieu of a Meeting. BRIDGE LOAN BY HARTFORD. The Corporation requires funding for
development of its Virtual Services Management System ("VSMS") and Hartford
Holdings Ltd. ("Hartford"), a significant Corporation shareholder, has offered
to lend up to $1,000,000 to the Corporation pursuant to a Loan Agreement and
evidenced by Promissory Notes executed by the Corporation. Hartford also will
receive $672.248.60 of additional Corporation common shares, issuable after the
Corporation completes a Private Placement of entity securities.
Hartford is a significant Corporation shareholder and Xx. Xxxxxxx X. Xxxxxx,
Hartford's principal shareholder, is the Corporation's Chairman. Hartford and
Xx. Xxxxxx have disclosed their financial interest in this transaction. The
independent Directors have reviewed this transaction, consider it to be fair to
the Corporation and deem it advisable that this Corporation enter into the Loan
Agreement with Hartford.
Accordingly, the Board of Directors adopt the following resolution:
RESOLVED: That the Corporation approves the Bridge Loan Agreement and
Promissory Notes and that Xx. Xxxxxx, the Corporation's Chief Executive
Officer is authorized to execute the Bridge Loan Agreement and issue the
Promissory Notes on behalf of the Corporation.
Adopted by Board of Directors as of December 10, 1996.
Each of the Corporation's Directors has signed below to evidence consent to the
Board of Directors' adoption of the resolutions dated December 10, 1996:
ABSTAINING /s/ Xxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Chairman Xxxxxx X. Xxxxxx, Vice-Chairman
/s/ Xxxxxxx X. XxXxxxxxxx /s/ Xxxx X. Xxxxxx
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Xxxxxxx X. XxXxxxxxxx Xxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
I certify that each of the Corporations directors in office on December 10,
1996, has executed this written consent.
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Secretary
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RATIFICATION BY DISINTERESTED SHAREHOLDERS
ROSEVILLE COMPUTER PROJECTS LIMITED, a Nevis, West Indies corporation
("Roseville"), holds 42.5 % of the issued and outstanding shares of TELEHUB
COMMUNICATIONS CORP., an Illinois corporation ("TELEHUB") and the XXXXXX FAMILY
TRUST ("Xxxxxx"), holds 15% of the issued and outstanding shares of TELEHUB.
Roseville and Xxxxxx have reviewed the proposed transaction whereby Hartford
Holdings Ltd. ("Hartford") the other shareholder of TELEHUB, will loan up to
$1,000,000 TO TELEHUB for operating capital. Hartford and Xx. Xxxxxxx X. Xxxxxx,
TELEHUB'S Chairman, have disclosed their financial interest in this transaction
to TELEHUB, Roseville and Xxxxxx. Roseville and Xxxxxx also believe the
transaction is fair to TELEHUB and necessary for TELEHUB's continued operations.
Roseville and Xxxxxx hereby approve and ratify the Bridge Loan Agreement
between TELEHUB and Hartford and the issuance of Promissory Notes to Hartford.
XXXXXX FAMILY TRUST ROSEVILLE COMPUTER PROJECTS LIMITED
a Nevis, West Indies corporation
By: /s/ Xxxxxx X. Xxxxxx By: /s/
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Xxxxxx X. Xxxxxx, Trustee
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EXHIBIT 3
FORM OF DISBURSEMENT REQUEST
TELEHUB COMMUNICATIONS CORPORATION, an Illinois corporation ("TeleHub"), hereby
requests HARTFORD HOLDINGS LTD., a Cayman Islands corporation ("Hartford"), to
make the following disbursement pursuant to the Bridge Loan Agreement between
TeleHub and Hartford:
Amount: $____________________ Disbursement Date: _____________________
Summary of Proposed Expenditures:
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TeleHub acknowledges that all amounts disbursed pursuant to this request are
governed by the Bridge Loan Agreement and associated Promissory Note.
TELEHUB COMMUNICATIONS CORP.,
an Illinois corporation
Date: By:/s/ Xxxxxx X. Xxxxxx
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Xxxxxx X. Xxxxxx, Chief Executive Officer
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Fax to: Hartford Holdings Ltd. Xxxxxxx X. Xxxxxx
c/o Xxxxxxx X. Xxxxxx Haligman & Lottner, P.C.
(000) 000-0000 (000) 000-0000
