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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (together with
each Schedule, Exhibit, Rider and amendment hereto, this "Agreement") is made as
of the 14th day of July 2000, by and between CRITICAL CAPITAL GROWTH FUND, L.P.,
a Delaware limited partnership ("Lender") with an office at 00 Xxxx Xxxxxx -
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("Lender's Office") and FOCUS AFFILIATES,
INC., a Delaware corporation with its principal place of business at 000 Xxxx
Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 ("Focus" and any newly formed
or acquired direct or indirect subsidiaries of Focus on or after the date hereof
(including without limitation, Intellicell Merger Sub, Inc. ("Mergersub") are
collectively referred to herein as "Borrower"), with reference to the following:
WHEREAS, Borrower and Lender are parties to a certain Loan and Security
Agreement dated as of October 29, 1999 pursuant to which a senior subordinated
secured loan of $1,000,000 was extended to Borrower ("Original Loan");
WHEREAS, Borrower has requested, and Lender has consented, to increase
the Original Loan by an amount of $750,000 so that the total amount of the Loan
shall be $1,750,000, all on the terms and conditions set forth herein;
WHEREAS, Borrower acknowledges that the new value being extended to the
Borrower as represented by the increased principal amount of the Loan will
provide real value to the Company by enabling it to further its business plans;
WHEREAS, Borrower hereby acknowledges that Lender is Borrower's sole
Senior Lender as of the date hereof;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, Lender and Borrower agree as follows:
1. DEFINITIONS.
1.1 Rules of Construction. Unless otherwise noted, references to
Sections, Exhibits, Schedules, and Riders refer to Sections, Exhibits,
Schedules, and Riders hereof. "Hereof," "herein," "hereunder," and similar words
refer to this Agreement in its entirety. "Or" is not necessarily exclusive.
Terms used and not otherwise defined herein, including "Documents", "Financing
Statements" and "Instruments", are defined in the Uniform Commercial Code (the
"Code"), except for "Affiliate", which has the meaning given in Rule 144
promulgated under the Securities Act of 1933, as amended. All accounting terms
and computations, such as "Capital Expenditures", are construed in accordance
with generally accepted accounting principles consistently applied ("GAAP").
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"Account" means any right to the payment of money in which Borrower has
any interest, whether due or to become due, arising out of the sale or lease of
goods or the rendering of services, whether or not earned by performance,
including, but not limited to, all accounts as that term is defined in the Code,
accounts receivable, contract rights, rights to payment or performance, chattel
paper, franchisee fees, royalties, Instruments, Documents and notes.
"Account Debtor" means the person or entity obligated to Borrower on an
Account or a General Intangible.
"Advance" means a loan from Lender advanced to Borrower.
"Bank Accounts" means any accounts that Company maintains with
financial institutions.
"Charges" means federal, state, county, city, municipal, or other
governmental taxes, levies, assessments, charges, liens, claims or encumbrances
upon or relating to the Collateral, the Liabilities, Borrower's employees,
payroll, income or gross receipts, Borrower's ownership or use of any of its
assets, or any other aspect of Borrower's business.
"Default" means an event that, with the passage of time, the giving of
notice, or both, would become an Event of Default.
"Disclosed Addresses" means those locations and addresses disclosed on
Exhibit D, Schedule of Business Locations.
"Equipment" means all equipment, as that term is defined in the Code,
all machinery, furniture, furnishings, motor vehicles, office equipment, and
fixtures, and goods used or bought for use in Borrower's business and all
attachments, accessions, additions, replacements and substitutions thereto or
therefor.
"General Intangibles" means all general intangibles, as that term is
defined in the Code, all choses in action, causes of action, intangible personal
property, corporate or other business records, Intellectual Property, goodwill,
purchase orders, computer programs, tax refunds, all rights under contracts of
insurance covering any of the Collateral, copyrights, registrations, licenses,
including, without limitation, the property set forth on Exhibit H, franchises,
customer lists, tax refund claims, and the guaranty claims, security interests
or other property held by or granted to Borrower to secure payment of any
obligation of any obligor of Borrower.
"Hazardous Materials" means substances, materials or waste the
generation, handling, storage, treatment or disposal of which is regulated by
any local or state government authority or laws, as a "hazardous waste,"
"hazardous material," or "hazardous substance," and including, without
limitation, those designated as a "hazardous substance" under Section 311 or
listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Secs. 1321,
1317), defined as a "hazardous waste" under Section 1004 of the Resource
Conservation and Recovery Act, (42 U.S.C. Sec. 6903) or defined as a "hazardous
substance" under Section 101 of the Comprehensive
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Environmental Response, Compensation, and Liability Act, (42 U.S.C. Sec. 9601),
and petroleum products and byproducts.
"Indebtedness" means all liabilities, obligations and present and
future indebtedness of Borrower of every kind and nature, including, without
limitation, the Liabilities, and all obligations payable from Borrower to any
person or entity, regardless of how evidenced, incurred, acquired or owing,
whether direct, contingent, fixed, or otherwise. Without limiting the generality
of the foregoing, Indebtedness includes: (a) all obligations or liabilities of
any person or entity secured by any lien, claim, encumbrance, or security
interest upon Borrower's property whether or not Borrower has assumed or become
liable for the payment thereof; (b) all obligations or liabilities created or
arising under any lease of real or personal property or conditional sale or
other title retention agreement with respect to property used or acquired by
Borrower; and (c) all Charges, including obligations to pay taxes that are due
but not yet payable.
"Intellectual Property" includes, but is not limited to, all trade
secrets, formulae, computer software, service marks, trademarks, inventions,
designs, patents, service marks, trade names, trade styles, copyrights,
applications for any of the foregoing, customer lists, working drawings,
instructional manuals, and rights in process for technical manufacturing,
packaging, labeling and promotion, in which Borrower has any right or interest
whether by ownership, license, contract or otherwise.
"Inventory" means all inventory, as that term is defined in the Code,
goods, and merchandise, wheresoever located and whether or not in transit,
whether or not covered by a Document, whether held for sale or lease, or
furnished under any contract of service, raw materials, work in process,
supplies or materials used or consumed in Borrower's business, and all property
the sale or other disposition of which has given rise to Accounts and which has
been returned to or repossessed or stopped in transit.
"Liabilities" means all liabilities, obligations and indebtedness of
any and every kind and nature of Borrower to Lender, including, without
limitation, the Loan and all present and future disbursements and all other
amounts outstanding under the Loan Documents, all interest, charges, fees,
expenses, attorneys' fees and other sums chargeable to Borrower by Lender to or
for the benefit of Borrower, whether or not arising hereunder, whether arising
under any of the Loan Documents or acquired by Lender from any other source,
whether heretofore, now or hereafter owing, arising, due, or payable regardless
of how evidenced, created, incurred, acquired or owing, whether primary,
secondary, direct, contingent, fixed, or otherwise, and including obligations of
performance.
"Loan Documents" means this Agreement and all agreements, notes,
guaranties, mortgages, deeds of trusts, stock pledges, chattel mortgages,
pledges, powers of attorney, consents, assignments, notices, security
agreements, financing statements, subordination agreements, instruments,
documents, warrant agreements, warrant certificates and any written matter
necessary or requested by Lender to carry out this Agreement and the
transactions contemplated hereunder or to perfect or protect Lender's security
interest in the Collateral, now or hereafter executed by or on behalf of
Borrower or delivered to Lender.
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"Material Adverse Change" means any material adverse change in the
financial performance or condition, business or operations of Borrower,
including, without limitation, any material deterioration or adverse change in
financial ratios, contingent liabilities or realizable value of assets, change
caused by or resulting from any governmental or private action, intervention,
litigation, arbitration or regulatory proceeding or any significant change in
technology, markets or labor force, which, in Lender's reasonable opinion, is
likely materially to impair (i) Borrower's ability to perform its obligations
under the Loan Documents, (ii) Lender's interest in, or ability to inspect,
remove, sell or otherwise dispose of any Collateral, (iii) the value of the
Collateral or Lender's security interest therein or the priority thereof, or
(iv) Lender's rights and remedies hereunder. Each determination of whether a
Material Adverse Change has occurred will be made in good faith by Lender and
take into account all relevant facts and circumstances existing as of that date.
"Special Collateral" means Collateral evidenced by chattel paper,
Instruments, or Documents, including, without limitation, franchise agreements,
royalty agreements, promissory notes, documents of title, and warehouse
receipts.
"Subordinated Debt" means indebtedness, liabilities and obligations of
Focus for money borrowed from Subordinated Lender pursuant to a promissory note
dated October 29, 1999 in the principal amount of $1,374,999.99.
"Subordinated Lender" means American National Bank & Trust Company of
Chicago and any assignors or successors in interest to the Subordinated Debt.
"Tangible Net Worth" means total assets (exclusive of goodwill,
patents, trademarks, trade names, organization expense, treasury stock,
unamortized debt discount and premium, deferred charges and other like
intangibles) less all liabilities (including accrued and deferred income taxes
and subordinated liabilities).
"Use of Proceeds Schedule" means that certain schedule annexed hereto
as Schedule 2.2 detailing the manner in which the proceeds from this Loan may be
applied.
2. LOAN: GENERAL TERMS.
2.1 Loan. Pursuant to the terms of a amended and restated senior
secured note in the form of Exhibit B (the "Note"), Lender makes a loan to
Borrower in the principal amount of $1,750,000 (the "Loan"). The Loan shall be
made on a "demand" basis, subject to prepayment or acceleration pursuant to the
terms set forth herein or in the Note.
2.2 Loan Purpose. Borrower will use the Loan for the business purposes
set forth in the Use of Proceeds Schedule and as approved by Lender.
2.3 One Loan. The Liabilities constitute one loan and all
indebtedness and obligations of Borrower to Lender under the Loan Documents
constitute one general obligation, part of the Liabilities and secured by
Lender's lien and security interest in all of the Collateral (as hereinafter
defined) and, to the extent permitted by law, by all other security interests,
liens,
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claims and encumbrances now or hereafter granted by Borrower or any person or
entity to Lender.
2.4 Interest Rate. Borrower will pay interest on the unpaid
balance of the Liabilities in accordance with the terms of the Note, calculated
daily on the basis of actual calendar days outstanding and a 360 day year at a
per annum rate equal to eighteen percent (18%).
2.5 Indemnity. Borrower will indemnify and hold Lender and
Lender's officers, directors, employees, attorneys and agents (each an
"Indemnified Person") harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses (including
reasonable attorney's fees, expenses and costs of investigation or defense)
which an Indemnified Person may sustain or incur based upon or arising out of
any of the transactions contemplated by this Agreement or any of the Loan
Documents, any of the Liabilities or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Liabilities (except any such amounts sustained or incurred as a result of
the gross negligence or willful misconduct of the Indemnified Persons). The
foregoing indemnification shall also cover Borrower's purchase, transport,
storing, use or disposing of Hazardous Materials. Borrower acknowledges that (i)
Lender is not now, and has not ever been, in control of Borrower's affairs, (ii)
Lender does not have the capacity to influence Borrower's conduct with respect
to the ownership, operation or management of Borrower or any of its businesses,
facilities or its handling or disposal of Hazardous Materials (other than to
require compliance with applicable law) and (iii) each of Focus and its
subsidiaries together constitute a common enterprise.
2.6 Closing Charges. Borrower is reimbursing Lender on the date hereof
for all reasonable costs and expenses incurred in connection with the
transactions contemplated hereby including, without limitation, legal fees and
costs, due diligence expenditures and other out-of pocket expenses.
2.7 Warrants. Focus shall issue to Lender on the date hereof for due
and adequate consideration as set forth therein warrants to purchase 514,348
shares of its common stock, par value $.01 per share ("Common Stock"),
exercisable for a period of five years from the date hereof, evidenced by, and
subject to the terms and conditions set forth in, the Warrant Agreement attached
hereto as Exhibit I. Lender acknowledges receipt of a copy of Focus' Annual
Report on Form 10-K for the fiscal year ended December 31, 1999 and Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000.
3. LOANS AND REPAYMENTS.
3.1 Evidence of Liabilities. Principal, interest and all other
sums constituting Liabilities due Lender hereunder will be evidenced by entries
in Lender's records. Each payment on and any other credits with respect to
principal, interest and all other sums due hereunder will be evidenced by
entries to records maintained by Lender.
3.2 Payments. All payments to Lender will be payable at Lender's
New York City Office or at such other place or places as Lender may designate
from time to time Borrower
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understands and agrees that interest and service charges not paid when due will,
at Lender's sole option, and to the extent not prohibited by applicable law, be
added to principal of the Loan and will bear interest at the rate applicable to
principal. Unless otherwise specified herein, the Liabilities are due and
payable on the required due date, without any notice from Lender.
3.3 Receipt of Payment. All payments by or for the account of
Borrower which are delivered to Lender, and of which Lender has been notified,
before 2:30 p.m. (Eastern Time) on account of the Liabilities will be applied
one business day after receipt by Lender of said notification, provided that no
third-party instruments received by Lender will constitute payment to Lender
until such has actually been collected and credited to Lender's account.
Notwithstanding the foregoing, payments by or for the account of Borrower which
are delivered to Lender in the form of immediately available funds, including
federal wire transfers, and of which Lender has been notified, before 2:30 p.m.
(Eastern Time) on account of the Liabilities will be applied that same day of
receipt by Lender of the payment. Borrower hereby authorizes Lender as its
attorney-in-fact to debit electronically Borrower's specific bank accounts
identified on Schedule 3.3 hereto for payments due to Lender hereunder.
3.4 Application of Payments and Collections. Borrower
irrevocably waives the right to direct the application of any payments and
collections hereafter received by Lender from or on behalf of Borrower, and
Borrower irrevocably agrees that Lender will have the continuing exclusive right
to apply and reapply all such payments and collections received against the
Liabilities, in such manner as Lender may deem advisable, notwithstanding any
entry by Lender upon any of its books and records.
4. COLLATERAL.
4.1 Security Interest. To secure the prompt payment and
performance to Lender of the Liabilities, Borrower hereby grants to
Lender a lien and continuing security interest in and to all of the
Borrower's property and interests in property, whether tangible or
intangible, now owned or in existence or hereafter acquired or arising
and wherever located, including Borrower's interest in all of the
following, whether or not eligible for lending purposes (collectively,
the "Collateral"): all Accounts, Instruments, Documents, Equipment,
Inventory, General Intangibles, cash, money, investment accounts, Bank
Accounts, all property in which Lender receives possession or which is
described on any UCC-1 Financing Statement now or hereafter executed by
Borrower, including, without limitation the collateral set forth in
Schedule 4.1 hereto, all accessions to, substitutions for and all
replacements for any of the foregoing, all products and proceeds of the
foregoing, including proceeds of insurance policies and proceeds of
proceeds; and all books and records (including, without limitation,
customer lists, credit files, computer programs, and printouts)
pertaining to any of the foregoing; provided, however, that Collateral
will not include any property now or hereafter designated in writing by
Lender as Hazardous Materials not to be included as Collateral. The
security interest granted to Lender hereunder is the senior most
obligation of Borrower.
4.2 Further Assurances. At any time and from time to time, at
the expense of Borrower, Borrower will promptly execute and deliver all further
instruments and documents, in
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form and substance acceptable to Lender, and take all further action, that may
be necessary or desirable, or that Lender may request, in order to perfect and
protect any security interest granted, intended or purported to be granted
hereby or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to any Collateral or to preserve and protect Lender's
interest in or the value of the Collateral, and pay the costs of any recording
or filing of the same, and Lender may do anything which it in its discretion
deems reasonably necessary to perfect and protect its interest in the
Collateral. Without limiting the generality of the foregoing, Borrower will make
appropriate entries upon its financial statements and its books and records
disclosing Lender's security interest in the Collateral. Borrower authorizes
Lender to notify any parties of the existence and terms of Lender's security
interest in the Collateral. During the term of the Loan and at any time in which
any Liabilities remain unpaid or unsatisfied, Borrower is required to segregate
all collections and proceeds of the Collateral so that they are capable of
identification and to deliver daily such collections and proceeds to Lender in
kind; and Borrower shall obtain Lender's prior written consent with respect to
any sale, lease, agreement to sell or lease, or other disposition of any
Inventory or other tangible or intangible assets; provided, however, that an
individual or a series of related sales of Inventory not exceeding $100,000 in
the aggregate or a liquidation sale conducted on behalf of the Borrower by a
liquidation specialist previously approved by Lender shall only require one
business day prior notice to Lender.
4.3 Power of Attorney. Borrower hereby irrevocably appoints
Lender as Borrower's attorney-in-fact and authorizes Lender, with full authority
in the place and stead of Borrower and in the name of Borrower or otherwise, to
exercise at any time in Lender's discretion all or any of the following powers,
at Borrower's sole expense, which powers of attorney, being coupled with an
interest, are irrevocable throughout the term hereof: (i) to take any action or
to execute any instrument to accomplish the purposes hereof and to sign
Borrower's name upon documents to be executed, recorded, or filed to perfect or
continue perfected Lender's security interest in the Collateral, including,
without limitation, to receive, indorse and collect all instruments made payable
to Borrower and to give full discharge for the same and sign the name of
Borrower on any financing statement, or amendment thereto, describing any
Collateral and to file and record the same; (ii) to settle any claim or other
matter with respect to any insurance concerning the Collateral, and to obtain at
Borrower's expense and adjust insurance required to be paid hereunder; and (iii)
to file any claim, action, or proceeding deemed advisable with respect to any of
the Collateral and Lender may execute on behalf of Borrower any documents that
Lender may, in its sole discretion, deem advisable in order to perfect and
maintain Lender's security interests in the Collateral, or to fully consummate
all the transactions contemplated by this Agreement and the other Loan Documents
(including such financing statements and continuation financing statements, and
amendments thereto, as Lender shall deem necessary or appropriate).
4.4 Special Collateral. Immediately upon Borrower's receipt of
any Special Collateral, Borrower will deliver the original thereof to Lender,
together with appropriate endorsements or other specific evidence of assignment
in the form and substance satisfactory to Lender.
4.5 Inspection. Lender will have the right, at any time and at
any place, to inspect the Collateral and all records related thereto, and to
discuss Borrower's affairs and finances with any person and to verify and audit
the amount, quality, quantity, value and condition of, or any other matter
relating to, the Collateral.
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4.6 Term of Security Interest. This Agreement and the rights
granted to Lender herein will continue in full force and effect until the final
and indefeasible payment and performance in full of all Liabilities. Upon such
termination, Lender will, at Borrower's expense, execute and deliver to Borrower
such documents as Borrower reasonably requests to evidence such termination.
4.7 Security Interest Absolute. All rights of Lender and the
security interest granted hereby, and all obligations of Borrower hereunder, are
absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of any Loan Document; (b) any amendment to, or waiver of, or any
consent to any departure from, any Loan Document; (c) any exchange, release or
non-perfection of any interest in, collateral for, or property subject to any
Loan Document, or any release under, amendment to, or waiver of, or consent to
departure from, any guaranty for all or any Loan Document; (d) Borrower's
bankruptcy, insolvency, reorganization, or liquidation; or (e) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, Borrower or a third-party pledgor against Lender. Lender may
release, surrender or substitute any Collateral, property or other security; or
accept any type of further Collateral or security, without in any way affecting
the Liabilities.
4.8 Reinstatement. This Agreement will remain in full force and
effect and continue to be effective should (a) any petition be filed by or
against Borrower for bankruptcy, liquidation or reorganization, (b) Borrower
become insolvent or make an assignment for the benefit of creditors or (c) a
receiver or trustee be appointed for all or any significant part of Borrower's
assets. This Agreement and the Liabilities will continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Liabilities, or any part thereof, is, pursuant to any applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
of the Liabilities, whether as a "voidable preference", "fraudulent conveyance",
or otherwise, all as though such payment or performance had not been made.
4.9 Lender's Duties and Standard of Care. Lender will have no
responsibility for taking any steps to preserve rights against any parties with
respect to any Collateral. Lender's powers hereunder are conferred solely to
protect its interest in the Collateral and do not impose any duty to exercise
any such powers. None of Lender or any of its owners, officers, directors,
employees, agents or counsel will be liable for any action lawfully taken or
omitted to be taken hereunder or in connection herewith (excepting gross
negligence or willful misconduct), nor under any circumstances have any
liability to Borrower for lost profits or other special or consequential
damages.
5. COLLATERAL: ACCOUNTS AND BANK ACCOUNTS.
5.1 Verification of Accounts and Bank Accounts. Lender has the right,
in Lender's or Borrower's name, to verify the validity, amount or any other
matter relating to any Accounts or Bank Accounts with any party at any time.
5.2 Assignments, Records and Schedules of Accounts. Borrower
will keep accurate and complete records of its Accounts and, upon demand,
deliver copies of customer statements,
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addresses, originals of all documents, payment histories and present status
reports, and such other matters and information relating to the Accounts as
Lender will reasonably request and at such time as such information is delivered
to the Senior Lender and will furnish Lender upon request a current Schedule of
Accounts ("Schedule of Accounts").
5.3 Notice Regarding Disputed Accounts. In the event any Account
over $5,000 is a subject of dispute between the Account Debtor and Borrower,
Borrower will provide Lender with written notice explaining in detail the
dispute, all claims related thereto and the amount in controversy.
5.4 Monitoring of Bank Accounts. Borrower has established a
facility for Lender to independently obtain electronic daily balance and
transaction reporting for each of Borrowers' Bank Accounts to the extent such
financial institutions can facilitate same, including, but not limited to its
"lockbox" and "blocked" accounts at Subordinated Lender.
6. COLLATERAL: INVENTORY.
6.1 Sale of Inventory. Given the continuation of multiple Events
of Default, Borrower may sell Inventory in the ordinary course of its business
(which does not include a transfer in partial or total satisfaction of
Indebtedness), provided that all proceeds from sales of Inventory are promptly
paid to Lender until such time as all Liabilities are paid.
6.2 Records and Schedules of Inventory. Borrower will keep
correct and accurate records with respect to the Inventory and will promptly
furnish Lender upon request a current Schedule of Inventory ("Schedule of
Inventory"), evidencing the results of a physical inventory which will be
conducted at such times as is customary in the industry in which the Borrower is
engaged (but in any event promptly upon request of the Lender) and supported by
copies of its inventory records, providing Lender with such information and,
upon demand, all documents, including, without limitation, invoices relating to
Borrower's purchase of goods so listed on said Schedule.
6.3 Consignment of Inventory. No consignments of any Inventory can be
made without the prior written consent of Lender.
7. COLLATERAL: EQUIPMENT.
7.1 Schedule of Equipment. Borrower is providing a complete
current listing, attached as Exhibit E, of all equipment ("Schedule of
Equipment") owned or leased by Borrower, including the location of such
equipment, cost and current book values.
7.2 Maintenance. Borrower will keep and maintain the Equipment
in good operating condition and repair and make all necessary replacements so
that the value and operating efficiency will at all times be maintained and
preserved, and will promptly inform Lender of any additions to, deletions from
or relocation of, the Schedule of Equipment. Borrower will use Equipment only
for its intended purpose. Borrower will not permit any Equipment to become a
fixture to real estate or an accession to other personal property.
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7.3 Evidence of Ownership of Equipment. Borrower, immediately on
demand by Lender, will deliver to Lender any and all evidence of ownership of
the Equipment including, without limitation, certificates of title. Borrower
will not attach any Collateral to any real property or fixture in a manner which
might cause such Collateral to become a part thereof.
7.4 Location of Equipment. Borrower shall not move any Equipment
without the prior written consent of Lender.
8. CONDITIONS PRECEDENT.
8.1 Conditions to Advance. Lender's obligation to extend credit
hereunder is subject to Lender's receipt of each and all of the following, in
form and substance satisfactory to Lender, before the Advance is made: (a) the
execution, delivery and performance by Borrower of this and any instrument or
agreement required hereunder, as appropriate; (b) such corporate and
organizational charters, articles, resolutions, certificates and agreements as
Lender may require, including, without limitation, Borrower's certificate or
articles of incorporation, certificates of incumbency, certificates of good
standing and qualification to transact business and resolutions of Borrower's
Board of Directors authorizing the transactions contemplated hereby, financial
statements (balance sheets, income statement and cash flow statements) of Focus
through June 30, 2000 certified by its Chief Executive Officer and Chief
Financial Officer; (c) a written opinion of counsel for Borrower (which counsel
must be satisfactory to Lender) with respect to such legal matters relating
hereto as Lender may reasonably request; (d) the execution and delivery of such
financing statements, fixture filings, deeds of trust, assignments, notices,
title insurance, and such other documentation as Lender may request to perfect
Lender's security interest in the Collateral; (e) all Collateral in which Lender
wishes to have a possessory security interest; (f) evidence that the security
interests or liens in favor of Lender are valid, enforceable, and prior to the
rights and interests of all others; (g) written evidence satisfactory to Lender,
that Borrower has begun the process of assembling all tangible Collateral at a
location satisfactory to Lender; (h) written evidence satisfactory to Lender,
that Borrower has begun the process of marking and identifying all tangible
Collateral to identify Lender's primary senior security interest in such
Collateral; (i) written evidence satisfactory to Lender, of the payment of all
unpaid insurance premiums for policies that insure Collateral; (j) written
evidence satisfactory to Lender confirming the payment, no later than the day of
Closing, of all taxes owed and to be owed by Borrower through and inclusive
August 15, 2000, including, without limitation, payroll and sales taxes; (k)
Borrower's provision to Lender of written evidence satisfactory to Lender, of
original certificates and other documents evidencing ownership of all intangible
Collateral, and all consents and other documents required for the negotiation or
sale of such intangible Collateral; (l) written reaffirmation of that certain
Subordination and Intercreditor Agreement between Lender and Subordinated
Lender; (m) evidence that Borrower has obtained any insurance coverage required
hereunder; (n) execution and delivery of certain conditional personal guarantees
of Xxxxxxx Xxxxx and Xxxx Xxxxxxx in form and substance acceptable to Lender,
(o) verified compliance by Borrower with all covenants and conditions herein
respecting Collateral and (p) such additional conditions precedent as may be
determined by Lender in its sole and absolute discretion as required based upon
its due diligence review.
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9. REPRESENTATIONS AND WARRANTIES.
9.1 General Representations and Warranties. Borrower warrants and
represents jointly and severally as to each entity of which it is comprised
(unless specifically provided otherwise) that:
9.1.1 Focus is a corporation duly organized and existing and
in good standing under the laws of its state of incorporation and is qualified
or licensed to do business in all jurisdictions in which it conducts its
business. There is no jurisdiction in which the conduct of Focus`s business or
ownership or leasing of its properties requires it to be qualified to do
business as a foreign corporation, except as set forth in Schedule 9.1.1 and
where such qualifications have been obtained or the failure to be so qualified
would not have a material adverse effect on the business, financial condition or
prospects of Focus. There currently exists as of the date hereof no subsidiaries
of Focus and Focus owns no equity interest in another entity other than as set
forth in Schedule 9.1.1. The capital stock of each subsidiary set forth in
Schedule 9.1.1 is wholly owned by Focus free and clear of all liens, pledges or
encumbrances of any nature whatsoever. Focus has not used any corporate or
fictitious name except as disclosed on Exhibit F hereto nor will Focus adopt or
use any such name, or change its name.
9.1.2 The Loan Documents and the Warrants (as hereinafter
defined), and each other instrument, certificate, document and agreement to be
executed and delivered in connection with the consummation of the transactions
contemplated hereby have been duly executed and delivered by Focus and Mergersub
and the execution, delivery and performance by Focus and Mergersub of the Loan
Documents have been duly authorized by all requisite corporate action of Focus
and Mergersub; and each constitutes, or will constitute, the legal, valid and
binding obligation of Focus and Mergersub, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, usury or other similar laws affecting the enforcement of
creditors' rights generally.
9.1.3 The audited balance sheet of Focus as of December 31,
1999, and the related consolidated statements of operations, stockholders equity
and cash flows of Focus for the year ended December 31, 1999 certified by Xxxxxx
Xxxxxxxx and the unaudited balance sheet of Focus as of March 31, 2000 ("Focus
Balance Sheet"), and the related unaudited statements of operations,
stockholders equity and statements of cash flow (collectively the "Focus
Financial Statements") have been delivered to Lender prior to the date hereof
and are set forth in Exhibit A annexed hereto. Except as may be otherwise
indicated therein, the Focus Financial Statements have been prepared in
conformity with GAAP consistently applied and present fairly the financial
position and results of operations of Focus as of the dates and for the periods
indicated. Focus has no outstanding claims, liabilities, obligations or
indebtedness, contingent or otherwise, whether asserted or threatened, except as
set forth in the above referenced financial statements, or referred to in any of
the notes thereto.
9.1.4 The issued and outstanding capital stock of Focus is as
set forth in the SEC Reports (as hereinafter defined). Except as set forth in
the SEC Reports, no shareholder owns in excess of 5% of the capital stock of
Focus. There are no outstanding rights to purchase or receive, or options, or
warrants, puts, calls, contracts, commitments or demands of any character
relating
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to, Focus's authorized or issued capital stock or which could require the
issuance of capital stock by Focus except as set forth in Schedule 9.1.4 hereto.
There are no voting trusts or other agreements or understandings to which Focus
or any of the principal shareholders of Focus is a party with respect to the
capital stock of Focus except as set forth in Schedule 9.1.4.
9.1.5 The execution, delivery and performance by Focus and
Mergersub hereof will not constitute a breach or violation of any applicable
law, agreement, instrument, statute, regulation, ordinance, or document by which
Focus or Mergersub is bound. The execution, delivery and performance of this
Agreement and the Loan Documents, and the consummation of the transactions
contemplated herein, will not result in any such violation or be in conflict
with, or constitute a default or allow acceleration of performance under any of
the foregoing or under any agreement or instrument to which Focus or Mergersub
is a party, or result in the creation of any lien, charge or encumbrance upon
any assets or properties of Focus or Mergersub, except as contemplated hereby.
Schedule 9.1.5 sets forth a list with a brief description of all written or oral
contracts, agreements, arrangements or understandings that are material to the
business of Focus or Mergersub on an ongoing basis. Except as set forth in
Schedule 9.1.5, Focus is not a party to any written or oral contract not made in
the ordinary course of business. Each contract pursuant to which Focus or
Mergersub is a party is valid and binding, and Focus or Mergersub has not
received notice that any such contract is not binding on any party thereto.
Except as set forth in Schedule 9.1.5, Focus has performed in all material
respects all obligations to be performed on such contracts through the date
hereof, and Focus is not in default in any material respect under any such
contract.
9.1.6 Focus and Mergersub have all government approvals,
permits, certificates, inspections, and consents necessary to conduct its
business as presently or proposed to be conducted and to own or lease and
operate its properties as now owned or leased by it.
9.1.7 (i) Schedule 9.1.7 hereto sets forth a complete list of
all (A) patents, patent applications, trade names and trade and service marks
which have been registered or for which an application for registration is
pending and all writings and source codes for which copyright is claimed, has
been recorded or is pending, in each case which are used or held for use by
Focus or Mergersub; (B) licenses, permits, authorizations or other agreements
pursuant to which Focus or Mergersub is obligated to pay or entitled to receive
royalties or other fees in connection with the sale, development or licensing of
the above and (C) other agreements relating to technology, know-how or processes
which Focus or Mergersub is licensed or authorized to use by others or which
Focus or Mergersub licenses or authorizes others to use (the foregoing and all
other confidential and proprietary information of Borrower is referred to herein
as "Intangible Property"). Except as set forth in Schedule 9.1.7, Focus or
Mergersub, as the case may be, is the sole and exclusive holder of all right,
title and interest in and to, and is in possession of all documentation
necessary for the effective use of, such Intangible Property and has sole and
exclusive rights (without being contractually obligated to pay any compensation
to any third party in respect thereof) to the use thereof or the material
covered thereby in connection with the services or products in respect of which
they are being used and no consent of third parties is required for the use
thereof by Focus or Mergersub. Except as set forth on Schedule 9.1.7 hereto, no
such Intangible Property is the subject of a proceeding for suspension or
revocation or any similar proceedings and to Focus's knowledge no such
suspension or revocation has been threatened by any governmental authority.
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(ii) No claims have been asserted by any person to the
ownership or use of any Intangible Property or challenging or questioning the
validity or effectiveness of any such license or agreement and Focus has no
knowledge of any valid basis for any such claim. Except as set forth in Schedule
9.1.7, the use of the Intangible Property by Focus or Mergersub does not
infringe on the rights of any person and there are no pending or, to the
knowledge of Focus, threatened claims nor has it been alleged that the
Intangible Property is engaged in such infringements. All of the trademark and
trade name registrations, patents and copyrights listed or required to be listed
on Schedule 9.1.7 are in full force and effect. No other person has any right to
use any Intangible Property listed or required to be listed in Schedule 9.1.7
for similar or related products in competition with the products of Focus or
Mergersub and no other person is infringing any of the Intangible Property.
9.1.8 Borrower is solvent, and reasonably expects to have
capital sufficient to carry on its current and future business and transactions,
and will be able to pay its debts as they come due. Schedule 9.1.8 sets forth a
list of all Indebtedness of the Borrower in excess of $10,000 as of the date
hereof.
9.1.9 Except as disclosed on Schedule 9.1.9, Borrower has no
litigation pending, has not guaranteed the obligations of any other person or
entity and has no known contingent liability of any kind. There is no proceeding
before any court, arbitrator or other governmental authority pending, or, to the
knowledge of Focus, threatened against or affecting Focus or Mergersub or any of
their respective properties, which (i) may adversely affect the performance by
Borrower hereunder or (ii) if adversely determined would be a Material Adverse
Change.
9.1.10 Since March 31, 2000 (the "Balance Sheet Date"), Focus
has not incurred any material liabilities, direct or contingent, including,
without limitation, liabilities for taxes, nor has there been any Default or
Material Adverse Change, nor has there been any event or condition which might
reasonably be expected to result in a Material Adverse Change. Except as
described in Schedule 9.1.10, Focus is not a party to any contract or agreement
or subject to any charge, corporate restriction, judgment, decree or order
materially and adversely affecting its business, property, assets, operations or
condition, financial or otherwise, and is not a party to any labor dispute; and
no such labor contract or collective bargaining agreement is scheduled to expire
before the first anniversary of the date hereof.
9.1.11 There is no applicable statute, regulation, order, or
ordinance of any governmental entity, municipal, federal, or state, materially
and adversely affecting the Collateral or Focus' business, property, assets,
operations or condition, financial or otherwise.
9.1.12 Focus' financial statements (including those financial
statements through March 31, 2000) fairly and completely present Focus' assets,
liabilities and financial condition and results of operations and such other
entities described therein as of the dates thereof, and there has been no
Material Adverse Change since the date of Focus's financial statements, there
are no equity investments or loans or other obligations outstanding to any
person or entity not reflected in Focus's financial statements, there are no
actions or proceedings which are pending or, to the
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best of Focus's knowledge, threatened against Focus which might result in any
Material Adverse Change and there are no confessions of judgments or default
judgments affecting Focus.
9.1.13 Borrower has received no notice or knowledge of
non-compliance with any of the requirements of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA") and the regulations promulgated
thereunder.
9.1.14 Borrower has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. All taxes, including, without
limitation, levies, imposts, duties, license and registration fees, income
taxes, gross receipt taxes, real estate taxes, transfer taxes, gains taxes,
franchise taxes, sales taxes, use taxes, property taxes, excise taxes, stamp
taxes, value-added taxes, taxes and other imposts required to be withheld from
or paid in respect of employees' salaries and other withholding taxes and
obligations and all deposits required to be made by or with respect to Borrower
with respect to such withholding taxes or otherwise, and other taxes, whether or
not measured in whole or in part by net income, due with respect to such tax
returns and any additions to taxes, and interest and penalties with respect
thereto (collectively "Taxes") of Borrower have been paid, or adequate provision
for the payment thereof has been made for all periods on or before the Balance
Sheet Date. Borrower has paid all Taxes pursuant to such returns or pursuant to
any assessments received by it or which it is obligated to withhold from amounts
owing to any employee, creditor or third party. During the last three fiscal
years, the tax returns of Borrower have not been audited by any state, local or
Federal authorities. Borrower has not waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect to any tax
assessment or deficiency. All tax elections have been made by Borrower in
accordance with generally accepted practice. No deficiency assessment with
respect to or proposed adjustment of Borrower's Federal, state, county or local
Taxes is pending or, to the best of each Borrower's knowledge, threatened. There
is no tax lien, whether imposed by any Federal, state, county or local taxing
authority, outstanding against the assets, properties or business of each
Borrower.
9.1.15 Borrower's execution and delivery of the Loan Documents
does not directly or indirectly violate or result in a violation of Section 7 of
the Securities Exchange Act of 1934, as amended, (the "Exchange Act") or any
regulations issued pursuant thereto, including, without limitation, Regulations
U and T of the Board of Governors of the Federal Reserve System (12 CFR Secs.
221, 207 and 220, respectively) and Borrower does not own or intend to purchase
or carry any "margin security", as defined in said regulations.
9.1.16 Borrower has good, indefeasible and merchantable title
to and ownership of the Collateral, free and clear of all liens, claims,
security interests and encumbrances, except those of Lender and those described
on Exhibit C.
9.1.17 No information contained in the Loan Documents or any
other documents or written materials furnished by or on behalf of Borrower
pursuant hereto contains any untrue statement of a material fact or, when
considered in light of disclosures otherwise made in writing by Borrower to
Lender, omits or fails to state a material fact necessary to make the statement
contained herein or therein not misleading in light of the circumstances under
which made.
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9.1.18 All real property owned, leased, subleased or operated
by Borrower and its current use and all off-site disposal by Borrower of any
Hazardous Materials comply with all environmental and zoning laws in their
respective locations.
9.1.19 Borrower is not in default in the performance or
observance of any obligation (i) under its Certificate or Articles of
Incorporation or similar document of organization, as amended to date, as the
case may be or its By-laws, or any indenture, mortgage, contract, purchase order
or other agreement or instrument to which Borrower is a party or by which it or
any of its property is bound or affected or (ii) with respect to any order,
writ, injunction or decree of any court of any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and there exists no condition, event or
act which constitutes, nor which after notice, the lapse of time or both, could
constitute a default under any of the foregoing or (iii) under any indenture,
loan agreement, mortgage, lease, deed or other agreement relating to the direct
or indirect borrowing of money.
9.1.20 Each agreement between or among Borrower and any
Affiliate of Borrower has fair and reasonable terms no less favorable to
Borrower than would be obtained between independent parties dealing at arm's
length.
9.1.21 The conduct of business by the Borrower as presently
and proposed to be conducted is not subject to continuing oversight,
supervision, regulation or examination by any governmental official or body of
the United States or any other jurisdiction wherein Borrower conducts or
proposes to conduct such business, except such regulation as is applicable to
commercial enterprises generally. Borrower has not received any notice of any
violation of or noncompliance with, any Federal, state, local or foreign laws,
ordinances, regulations and orders (including, without limitation, those
relating to environmental protection, occupational safety and health, Federal
securities laws, equal employment opportunity, consumer protection, credit
reporting, "truth-in-lending", and warranties and trade practices) applicable to
its business, the violation of, or noncompliance with, which would have a
materially adverse effect on Borrower's business or operations, and Borrower
knows of no facts or set of circumstances which would give rise to such a
notice. Borrower has all licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every Federal, state and local government or regulatory
body, including, but not limited to, the Federal Communications Commission, for
the operation of its business and the use of its properties. The Licenses are in
full force and effect and no violations are or have been recorded in respect of
any License and no proceeding is pending or threatened to revoke or limit any
thereof.
9.1.22 The Disclosed Addresses designate Focus's and
Mergersub's chief executive office, principal place of business and other
offices and places of business and are Borrower's sole offices and places of
business.
9.1.23 All Inventory is located at Disclosed Addresses or is
Inventory in transit to to a location acceptable to Lender.
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9.1.24 Except for that portion of the Inventory which has been
consigned as permitted hereunder, the offices or locations where Borrower keeps
the Collateral and its books and records are at Disclosed Addresses and the
books and records with respect to the Collateral and Borrower's business are
kept at Borrower's chief executive office set forth in the preamble hereof and
Borrower will not remove such books and records or the Collateral from that
respective location, except for removal of Inventory upon its sale or
consignment as permitted hereunder, and will not keep any of such books and
records or the Collateral at any other office or location unless (i) Focus gives
Lender written notice of such removal and the new location of said books and
records or the Collateral at least thirty (30) days prior thereto and (ii) the
other office or location is either a Disclosed Address and is within the
continental United States.
9.1.25 Focus has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the three years preceding the date hereof (or such shorter period as Focus
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Reports" and, together with the
Schedules to this Agreement the "Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
SEC promulgated thereunder, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which Focus is a party or to which the
property or assets of Focus are subject have been filed as exhibits to the SEC
Reports to the extent required. The financial statements of Focus included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Focus last filed audited financial
statements under the Exchange Act with the Commission on March 31, 2000, and has
not received any comments from the Commission in respect thereof.
9.1.26 Borrower has implemented a comprehensive, detailed
program to analyze and address the risk that the computer hardware and software
used by it may be unable to recognize and properly execute date-sensitive
functions involving certain dates prior to and any dates after December 31, 1999
(the "Year 2000 Problem"), and has determined that such risk will be remedied on
a timely basis without material expense and will not have a material adverse
effect on the condition (financial or otherwise), prospects, earnings, business
or properties of the Borrower; and the Borrower believes, after due inquiry,
that each supplier, vendor, contractor or financial service organization used or
served by the Borrower has remedied or will remedy on a timely basis the Year
2000 Problem, except to the extent that a failure to remedy by any such
supplier, vendor, contractor, or financial service organization would not have a
material adverse effect on the condition (financial or otherwise), prospects,
earnings, business or properties of the Borrower. Focus is in compliance with
Release No. 33-7558 under the Act, dated July 29, 1998, related to Year 2000
compliance.
9.2 Account Representations and Warranties. With respect to its
Accounts, Borrower warrants and represents to Lender that all Accounts listed on
any Schedule of Accounts (including the initial Schedule of Accounts which are
being furnished upon execution of this Agreement):
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9.2.1 are genuine, in all respects what they purport to be,
are not evidenced by a judgment, and are only evidenced by one, if any, executed
original instrument, agreement, contract, or document, which, if requested by
Lender, has been delivered to Lender;
9.2.2 represent undisputed, bona fide transactions completed
in accordance with the terms and provisions contained in any documents related
thereto;
9.2.3 are payable no more than 60 days from the date of
invoice or statement, which will be no more than 30 days from the date of the
performance of services or shipment of goods giving rise to said Account;
9.2.4 are actually and absolutely owing to Borrower in the
amounts stated and are not contingent in whole or in part for any reason;
9.2.5 are not subject to any setoff, counterclaim or dispute
or agreement for deduction or rebate except for discount or allowance in the
ordinary course of business for prompt payment reflected in the calculation of
the face value of each respective invoice;
9.2.6 are valid, binding and enforceable and not subject to
any fact or circumstance that would impair the validity or enforcement thereof
or tend to reduce the amount payable thereunder or the collectibility thereof;
and
9.2.7 have Account Debtors (i) with legal capacity to contract
at the time any contract giving rise to the Account was executed, (ii) that are
solvent and (iii) that are not the subject of bankruptcy or insolvency
proceeding or of proceedings that might materially impair their ability to pay
their debts as they are due.
9.3 Equipment Representations and Warranties. Borrower warrants
and represents to Lender that Borrower has reviewed its Schedule of Equipment,
that the Equipment is carried at the lower of cost or market, and that the
market value on the books and records of Borrower is net of cost less
depreciation calculated in accordance with GAAP. The book values for the
Equipment listed on the Schedule of Equipment represent reasonable estimations
of the value of the Equipment listed thereon, and that all Equipment is, and at
all times hereafter will be, kept or maintained solely at Disclosed Addresses.
9.4 Bank Account Representations and Warranties. Schedule 9.4
sets forth a complete list of information with respect to all Bank Accounts,
including names of financial institutions, branch locations, account numbers,
current available balances and authorized signatories on such Bank Accounts.
9.5 Small Business Administration Representations and Warranties.
9.5.1 Borrower, together with its affiliates (as that term is
defined in Title 13, Code of Federal Regulations, 121,103), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended (the "SBIA"), and the regulations
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thereunder, including Title 13, Code of Federal Regulations, 121.301(c). The
information set forth in Small Business Administration Forms 480, 652 and 1031
regarding Borrower and its affiliates, when delivered to Lender will be accurate
and complete. Copies of such forms have been completed and executed by the
Borrower and delivered to Lender on or before the date of this Agreement.
9.5.2 No portion of the proceeds from the sale of the Loan
will be used by Borrower (i) to provide capital to a corporation licensed under
the SBIA, (ii) outside the United States (except (A) to acquire abroad materials
and industrial property rights for a United States domestic operation or (B) for
transfer to a controlled foreign subsidiary of Borrower, so long as at least
fifty-one percent 51% of Borrower's assets and activities will remain within the
United States), or (iii) for any purpose contrary to the public interest
(including, but not limited to, activities which are in violation of law) or
inconsistent with free competitive enterprise, in each case within the meaning
of 13 C.F.R. 107,720.
9.5.3 Borrower's primary business activity does not involve,
directly or indirectly, providing funds to others, the purchase of or
discounting of debt obligations, factoring or long-term leasing of equipment
with no provision for maintenance or repair.
9.5.4 If Borrower breaches the representations in subsections
9.5.2 or 9.5.3 above in any material respect, then in addition to all other
remedies available to Lender, Lender may demand that Borrower immediately
repurchase all of the Note and Warrants acquired by Lender hereunder. The
purchase price of the Note shall be the outstanding principal and accrued
interest then remaining unpaid. The purchase price of the Warrants shall be
established by an appraisal ("Appraisal") conducted by an independent "Big Five"
accounting firm mutually agreed to by Focus and Lender.
9.5.5 On or before the date of this Agreement, and, in any
event, prior to Closing, Borrower shall have delivered to Lender duplicate
originals of (i) an executed copy of U.S. Small Business Administration (the
"SBA") Form 480 Size Status Declaration (ii) an executed copy of SBA Form 652
Assurance of Compliance for Nondiscrimination and (iii) the information needed
to complete Part A and Part B of SBA Form 1031 Portfolio Financing Report.
9.6 Covenants Respecting Small Business Administration Regulatory
Compliance
9.6.1 Within seventy-five (75) days after the date of this
agreement, Borrower shall provide to Lender a certificate of Borrower's chief
financial officer and chief executive officer (A) verifying (and describing in
reasonable detail) the use of the proceeds of the Lender's financing hereunder
to such date and (B) certifying compliance by Borrower with the provisions of
this Section 9.6.1. In addition to any other rights granted hereunder, Borrower
shall at all times provide Lender and the SBA access to Borrower's books and
records the purpose of verifying the use of the proceeds of Lender's financing
and for all other purposes required by the SBA.
9.6.2 Promptly after the end of each fiscal year (but in any
event prior to February 28 of each year) during which any Notes are outstanding,
Borrower shall provide to Lender a written assessment, in form and substance
reasonably satisfactory to Lender of the economic
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impact of Lender's financing hereunder, specifying the full-time equivalent jobs
created or retained, the impact of the financing on Borrower's business in terms
of expanded revenue and taxes and other appropriate economic benefits,
including, but not limited to, technology development or commercialization,
minority business development, urban or rural business development, expansion of
exports and assistance to manufacturing firms.
9.6.3 Upon the request of Lender for so long as any Notes are
outstanding, Borrower will (i) provide to Lender such financial statements and
other information as Lender may from time to time reasonably request for the
purpose of assessing Borrower's financial condition and (ii) furnish to Lender
all information reasonably requested by it in order for it to prepare and file
SBA Form 468 and any other information reasonably requested or required by any
governmental agency asserting jurisdiction over Lender.
9.6.4 For a period of one year following the date of this
Agreement, neither Borrower nor any of its subsidiaries will change its business
activity if such change would render Borrower ineligible to receive financial
assistance from an SBIC under the SBIA and the regulations thereunder (within
the meanings of 13 C.F.R. 107,720). If Borrower breaches this covenant, then, in
addition to all other remedies available to Lender, Lender may demand that
Borrower immediately repurchase all Notes and Warrants acquired by Lender at the
purchase price paid thereof. The valuation of the Warrants shall be established
by an Appraisal.
9.7 Survival of Representations and Warranties. Borrower's
representations and warranties will survive the execution, delivery and
acceptance hereof. Borrower agrees that any misrepresentation or breach of any
representation or warranty will be deemed material.
10. COVENANTS AND CONTINUING AGREEMENTS.
10.1 Affirmative Covenants. Borrower covenants and agrees that it will:
10.1.1 pay to Lender, on demand, any and all fees, costs or
expenses which Lender pays to a bank or other similar institution arising out of
or in connection with (i) the forwarding to Borrower or any other person or
entity on behalf of Borrower, by Lender, of proceeds of Loans, (ii) the
depositing for collection, by Lender, of any check or item of payment received
or delivered to Lender on account of the Liabilities, (iii) any lockbox or
similar agreement and (iv) any costs of Lender's collection of Collateral.
10.1.2 promptly upon, but in no event later than five (5)
business days after Borrower's learning thereof (i) inform Lender, in writing,
of any material delay in Borrower's performance of any of its material
obligations to any Account Debtor and/or any assertion of any claims, offsets or
counterclaims by any Account Debtor and of any allowances, credits or other
monies granted by Borrower to any Account Debtor; and (ii) furnish to and inform
Lender of all material adverse information relating to the financial condition
of any Account Debtor;
10.1.3 maintain adequate books, accounts and records and
prepare all financial statements required hereunder in accordance with GAAP, and
in compliance with the regulations of the SBA and any governmental regulatory
body having jurisdiction over Borrower or
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Borrower's business and permit employees or agents of Lender or any governmental
regulatory authority having jurisdiction over Lender at any reasonable time to
inspect and appraise the Collateral and Borrower's properties, to conduct
appraisals of the Collateral, and to examine or audit Borrower's books,
accounts, and records and make copies and memoranda thereof (in the event any
Collateral, properties, books, accounts or records are in the possession of or
under the control of a third party, Borrower will direct and hereby authorizes
such third party to permit access to Lender's employees or agents (including,
without limitation, any governmental regulatory authority having jurisdiction
over Lender) for the purpose of performing the inspections, appraisals,
examinations or audits permitted hereunder);
10.1.4 notify Lender in writing, promptly upon its learning
thereof, of the institution of any suit or administrative proceeding naming
Borrower as a party or which may directly or indirectly lead to a Material
Adverse Change if adversely determined, or of any event which affects the value
of any Collateral, the ability of Borrower or Lender to dispose of any
Collateral, or the rights and remedies of Lender in relation thereto, including,
but not limited to, the levy of any legal process against any Collateral and the
adoption of any marketing order, arrangement or procedure affecting the
Collateral, whether governmental or otherwise;
10.1.5 not later than the date hereof or the date of such
subsequent agreements, provide Lender with copies of all agreements between
Borrower and any warehouse at which Inventory may, from time to time, be kept
and all leases or similar agreements between Borrower or any of its Affiliates
and any other person or entity, whether Borrower or its Affiliate is lessor or
lessee thereunder;
10.1.6 make timely payments on account of its funded and
unfunded pension liabilities in such amounts as are determined by its pension
actuarial consultants to be required by law;
10.1.7 pay and discharge promptly when due all taxes,
assessments and governmental charges or levies of every kind imposed upon it or
upon its income or profits or in respect of its property or employees/personnel
before the same shall become delinquent or in default, which, if unpaid, might
reasonably be expected to give rise to liens or charges upon such properties or
any part thereof, unless, in each case, the validity or amount thereof is being
contested in good faith by appropriate proceedings and reserves established
therefor. In addition Borrower shall pay in full within five (5) business days
from the date hereof all accrued and unpaid payroll taxes;
10.1.8 timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
Focus after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange
Act;
10.1.9 notify Lender promptly upon any request by Borrower to
Subordinated Lender to amend or modify any documents or instruments evidencing
Subordinated Debt, including, without limitation, any increase in the amount of
Subordinated Indebtedness; and
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10.10 promptly upon, but in no event later than one (1)
business day after Borrower's learning thereof, inform Lender, in writing of any
event of default or alleged event of default under any document or instruments
evidencing Subordinated Debt.
10.2 Financial Reporting. Borrower agrees to furnish to Lender the
following:
10.2.1 Physical copies of all filings of any kind made by
Focus with the Securities and Exchange Commission (the "SEC") within three days
of the date as filed with the SEC. In the event that at any time Focus is no
longer subject to the reporting provisions of the Exchange Act, then within
ninety (90) days after the end of each fiscal year of Borrower (i) the
consolidated and consolidating balance sheets of the Borrower as at the end of
such year, and (ii) the related consolidated and consolidating statements of
income, retained earnings and cash flows for each year, setting forth in
comparative form with respect to such consolidated financial statements figures
for the previous fiscal year, all in reasonable detail, together with the
unqualified opinion thereon of the Borrower's independent certified public
accountants, which opinion shall state that such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of the preceding fiscal year (except for changes,
if any, which shall be specified and approved in such opinion) and that the
audit by such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards;
10.2.2 Not later than fifteen days after the end of each
month, monthly financial statements (including, but not limited to, balance
sheets, statements of operations, statements of cash flow and retained earnings
for the prior month and year-to-date, each in comparative form with comparable
prior year periods) of consolidated Borrower for the previous month, which
Lender agrees to keep confidential; and
10.2.3 At least 30 days prior to the beginning of each fiscal
year of Borrower, business plan, projections and monthly budgets of Borrower for
the coming year, together with a capital expenditures budget, all approved by
the Borrower's Board of Directors and which are certified to be true and correct
by the Chief Executive Officer and Chief Financial Officer of each Borrower.
10.2.4 Not later than 30 days after the end of each month,
calculation of Borrower's compliance with all financial covenants pursuant to
Section 10.5 hereof, which are certified to be true and correct by the Chief
Executive Officer and Chief Financial Officer of each Borrower.
10.2.5 At the time otherwise due, all reports of any nature
due to any other regulatory authorities not specifically provided above and
copies of all compliance and other reports that Borrower is required to deliver
to any other creditor of Borrower.
10.2.6 Not later than 30 days after the end of each month, a
report of all Inventory Returns identifying Account Debtor, inventory returned
and reason for return.
10.2.7 Not later than 30 days after the end of each month, a
statement reflecting Inventory, Equipment and other Collateral maintained in the
Disclosed Address in Mexico which is certified to be true and correct by the
Chief Executive Officer and Chief Financial Officer of each Borrower.
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10.2.8 Such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Borrower' financial condition or results of
operations.
10.3 Intentionally omitted.
10.4 Insurance.
10.4.1 Borrower will, at its own expense, maintain in force
with companies acceptable to Lender, (i) with respect to all tangible personal
property comprising the Collateral, insurance for loss or damage no less than
the greater of its fair market or full undepreciated replacement value, (ii)
business interruption insurance as Lender may require, (iii) comprehensive
general liability insurance (including product liability hazard coverage) for
combined single limit occurrences with no aggregate limit, (iv) key person life
insurance for Xxxxxxx Xxxxx and any successor thereto for not less than $5.0
million and (v) all other hazards and risks ordinarily insured against by other
owners or users of similar properties or similar businesses. Borrower will
notify Lender promptly of any event or occurrence causing or carrying the
potential to cause a material loss or decline in value of the Collateral and the
estimated (or actual, if available) amount of such loss or decline.
10.4.2 All insurance required hereunder will (i) be primary
without right of contribution from any other insurance which might otherwise be
available to Lender, (ii) be in effect, as a condition precedent to any Closing
hereunder, as evidenced by policies and endorsements delivered to Lender, (iii)
be in such amounts and covering such liabilities as are carried by similar
businesses, or as otherwise may be reasonably be required by Lender, (iv) name
Lender or its assignee as an additional named insured as their interests may
appear, (v) provide for at least 60 days' prior written notice to Lender of any
impending or actual cancellation, nonrenewal or material change in coverage,
(vi) provide that Lender will receive any and all endorsements or other
documentation relating to such policies and (vii) provide that in the event of
any loss payment thereunder, the insurer will waive any rights of subrogation
against the insured party and will waive any setoff or counterclaim or any other
deduction. Borrower will deliver to Lender, at Closing, the original (or
certified copy) of each policy of insurance and evidence of payment of all
premiums therefor. Such policies of insurance will provide that no act or
default of Borrower or any other person will affect the right of Lender to
recover thereunder in case of loss or damage. Borrower hereby directs all
insurers under such policies of insurance to pay all proceeds payable thereunder
directly to Lender. Upon receipt of the proceeds of any such insurance, Lender
shall apply such proceeds in reduction of the Liabilities as Lender shall
determine in its sole discretion.
10.4.3 In the event Borrower fails to obtain or maintain any
of the policies of insurance required herein or to pay any premium in whole or
in part relating thereto, then Lender, without waiving or releasing any
obligation or Default by Borrower hereunder, may (but will be under no
obligation to do so) obtain and maintain the same and pay such premium and take
any other action with respect thereto which Lender deems advisable. All sums so
disbursed by
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Lender, including reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, will be payable, on demand, by Borrower to Lender and
will be additional Liabilities hereunder secured by the Collateral.
10.4.4. Borrower agrees and covenants to facilitate in
implementing Lender's right to either elect its designee to Borrower's Board of
Directors or to designate a non-voting observer to the Borrower's Board of
Directors.
10.5 Negative Covenants. Without Lender's prior written consent,
Borrower covenants that it will not:
10.5.1 fail to maintain at anytime a tangible net worth of at
least the amounts set forth in Schedule 10.5.1;
10.5.2 fail to maintain at any time the applicable debt
service coverage as provided in Schedule 10.5.2;
10.5.3 fail to maintain at any time the applicable inventory
reliance formula as set forth in Schedule 10.5.3;
10.5.4 Intentionally Omitted;
10.5.5 Intentionally Omitted;
10.5.6 Intentionally Omitted;
10.5.7 make any loan, advance, repurchase obligation or
investment in the securities of any entity other than a wholly owned subsidiary
of Focus;
10.5.8 declare or pay dividends upon any of Borrower's
securities or make any distributions of Borrower's property or assets or make
any loans, advances or extensions of credit to any person or entity; provided
that the warrant dividend declared to Focus' shareholders prior to October 29,
1999 shall not constitute a breach of this covenant;
10.5.9 other than as set forth on Schedule 10.5.9 hereto, make
any secured or unsecured loans or other advances of money (other than salary) to
officers, directors, stockholders, employees or Affiliates of Borrower or any
person or entity without the prior written consent of the Lender;
10.5.10 redeem, retire, purchase or otherwise acquire,
directly or indirectly, any of Borrower's securities, except for this Note, the
redemption of currently existing public warrants and conversion of subordinated
notes as contemplated in the Memorandum dated October 29, 1999, without Lender's
prior written consent;
10.5.11 make any material change in Borrower's capital
structure or in any of its business objectives, purposes and operations which
might in any way adversely affect the repayment of the Liabilities;
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10.5.12 enter into, or be a party to, any transaction with any
Affiliate or stockholder of Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms which are fully disclosed to Lender in advance and are no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with a person not an Affiliate or stockholder of Borrower;
10.5.13 enter into any transaction which materially and
adversely affects the Collateral or Borrower's ability to repay the Indebtedness
or permit or agree to any extension, compromise or settlement or make any change
or modification of any kind or nature with respect to any Account, including any
of the terms relating thereto;
10.5.14 guarantee or otherwise in any way become liable with
respect to the obligations or liabilities of any person or entity except by
endorsement of instruments or items of payment for delivery to Lender on account
of the Liabilities;
10.5.15 except as otherwise expressly permitted herein,
assign, sell, lease, alienate or otherwise dispose of or transfer, whether by
sale, merger, consolidation, liquidation, dissolution, or otherwise, any of
Borrower's assets outside of the ordinary course of business or any change in
control of the majority of the equity voting stock of Focus;
10.5.16 further encumber, pledge, mortgage, grant a security
interest in, sell and leaseback, or assign any assets;
10.5.17 other than with respect to leases existing as of the
date hereof, become liable for, or permit any subsidiary to become liable for in
any way whether directly or indirectly, by assignment or as guarantor or other
surety for the obligations of a leasee under any lease of real property or
individual personal property lease requiring Borrower to expend more than
$10,000 or aggregate personal property leases in any calendar year requiring
Borrower to expend more than $100,000, unless consented to by Lender, which
consent shall not be unreasonably withheld; and
10.5.18 other than with respect to the Subordinated Debt and
the Liabilities and trade debt in the ordinary course of business, create,
incur, assume, guarantee or be or remain liable for, contingently or otherwise,
or suffer to exist or permit of its subsidiaries to create, incur, assume,
guarantee or be remain liable for, contingently or otherwise, or suffer to exist
any Indebtedness, unless consented to by Lender in writing.
10.6 Payment of Charges. Borrower will pay promptly when due
all of the Charges and defend the Collateral against any claims of third
parties. In the event Borrower fails to pay or promptly discharge any Charges or
claim Borrower will so advise Lender in writing and Lender may, without waiving
or releasing any obligation or liability of Borrower hereunder or any Event of
Default, in its sole discretion, without having any obligation to do so, make
such payment, or any part thereof, or obtain such discharge and take any other
action with respect thereto which Lender deems advisable. All sums so paid by
Lender and any expenses, including
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reasonable attorneys' fees, court costs, expenses and other charges relating
thereto, will be payable, upon demand, by Borrower to Lender and will be
additional Liabilities secured by the Collateral.
10.7 Collateral Taxes. Borrower will execute and deliver to Lender, on
demand, appropriate certificates attesting to the payment or deposit of all
Collateral Taxes. Lender may, but is not obligated to, pay any Collateral Taxes
(as defined below), which will thereupon be due from Borrower as if an Advance
hereunder, without waiving the foregoing indemnity. Borrower will pay when due,
indemnify and hold harmless, and reimburse Lender for, on an after-tax basis,
all Collateral Taxes. Borrower may, after proper payment of Collateral Taxes, at
its own expense contest the same in good faith with the appropriate taxing
authority, provided that said contest is not adverse to Lender, does not in any
way put at risk Lender's interest herein or in any Collateral and does not
create the risk of any further Collateral Taxes. "Collateral Taxes" means all
foreign, federal, state and local taxes, assessments, and other governmental
charges of any kind, and any interest, fines or penalties thereon, which may be
levied, directly or indirectly, with respect to any Collateral or its delivery,
ownership, possession, documentation, or other disposition or upon the receipts
or earnings arising therefrom, regardless of whether levied against Lender or
Borrower.
10.8 Survival Upon Termination. Except as otherwise expressly provided
for in the Loan Documents, no termination or cancellation of the Loan Documents
will in any way affect or impair the powers, obligations, duties, rights, and
liabilities of Borrower in any way or respect relating to: (a) any transaction
or event occurring prior to such termination or cancellation, (b) the
Collateral, or (c) any of the undertakings, agreements, covenants,
representations and warranties of Borrower or Lender contained in the Loan
Documents. All such undertakings, agreements, covenants, representations and
warranties will survive such termination or cancellation.
11. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT.
11.1 Events of Default. The occurrence of any one or more of the
following will constitute an "Event of Default:"
11.1.1 Borrower fails to pay any Liabilities within three (3)
days of the date when due and payable or declared due and payable or is in
default in the payment of any other portion of the Indebtedness.
11.1.2 Any Borrower fails to carry and maintain the insurance
required herein.
11.1.3 Any Borrower fails or neglects to perform, keep or
observe any other term, provision, condition or covenant contained herein or in
the Loan Documents or to the extent any warranty or representation contained
herein or in the Loan Documents proves to be untrue or misleading in any
material respect when made or when reaffirmed, or in any other agreement or
mortgage relating to Indebtedness and the same is not cured within ten (10) days
after Borrower receives written notice thereof from Lender or fifteen (15) days
after Borrower shall become aware thereof.
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11.1.4 Any statement, report, financial statement, or
certificate made or delivered by any Borrower, or any of its respective
officers, employees or agents, to Lender is not true and correct in all material
respects..
11.1.5 The occurrence of any material uninsured damage to or
loss, theft, or destruction of any of the Collateral.
11.1.6 The Collateral or any other of any or all Borrower's
assets are attached, seized, levied upon or subjected to a levy, writ or
distress warrant, or come within the possession of any receiver, trustee,
sheriff, custodian or assignee for the benefit of creditors; an application is
made by any person or entity for the appointment of a receiver, trustee, or
custodian for the Collateral or any other of any or all Borrower's assets and
the same is not dismissed within twenty (20) days after the application
therefor.
11.1.7 Any Borrower voluntarily suspends its business or
ceases to do business or the termination of existence in good standing of any
Borrower.
11.1.8 Lender fails to have a valid and enforceable perfected
security interest in or lien on the Collateral or such security interest or lien
fails to be prior to the rights and interests of all others.
11.1.9 Any Borrower ceases to conduct its business as now
conducted or is enjoined, restrained or in any way prevented by court order from
conducting any material part of its business; any motion is filed against any
Borrower for its dissolution or liquidation and not dismissed within thirty (30)
days.
11.1.10 A notice of lien, levy or assessment is filed of
record with respect to any of any Borrower's assets by the United States, or any
department, agency or instrumentality thereof, or by any state, county,
municipal, international or other governmental agency, or political subdivision
or if any charge becomes a lien or encumbrance upon the Collateral and the same
is not released within thirty (30) days.
11.1.11 Any guaranty, subordination agreement or other
agreement or instrument required hereunder is breached or becomes ineffective or
any default occurs under any such agreement or instrument.
11.1.12 Lender, in good faith, considers any Collateral to be
unsafe or in danger or misused to the extent that Lender's prospect of or right
to payment or performance under this Agreement or any instrument or agreement
required hereunder is materially impaired, or any Collateral is used in a way
that could subject Lender to liability or the Collateral to impairment under any
municipal, state, international or federal law, rule, regulation or statute
relating to food and drug safety, Hazardous Materials, genetic research or
materials, government secrecy, or technology export.
11.1.13 (a) Any Borrower is generally not paying its debts as
they become due or any Borrower shall commence any proceeding or other action
relating to it in bankruptcy or seek reorganization, arrangement, readjustment
of its debts, receivership, dissolution, liquidation,
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winding-up, composition or any other relief under the Bankruptcy Act, as
amended, or under any other insolvency, reorganization, liquidation,
dissolution, arrangement, composition, readjustment of debt or any other similar
act, statute or law, of any jurisdiction, domestic or foreign, now or hereafter
existing; or (b) any Borrower shall admit the material allegations of any
petition or pleading in connection with any such proceeding; or (c) any Borrower
applies for, or consents or acquiesces to, the appointment of a receiver,
conservator, trustee or similar officer for it or for all or a substantial part
of its property; or (d) any Borrower makes a general assignment for the benefit
of creditors .
11.1.14 (a) Commencement of any proceedings or in the taking
of any other action against any Borrower in bankruptcy or seeking
reorganization, arrangement, readjustment of its debts, liquidation,
dissolution, arrangement, composition, readjustment of debt or any other similar
act, statute or law of any jurisdiction, domestic or foreign, now or hereafter
existing and the continuance of any of such events for sixty (60) days
undismissed, unbonded or undischarged; or (b) the appointment of a receiver,
conservator, trustee or similar officer for any Borrower or for all or
substantially all of its property and the continuance of any of such events for
sixty (60) days undismissed, unbonded or undisclosed; or (c) the issuance of a
warrant of attachment, execution or similar process against any of the material
assets of any Borrower and the continuance of such event for sixty (60) days
undismissed, unbonded and undischarged.
11.1.15 Any Borrower fails within ten (10) days to furnish
Lender with appropriate written notice of any adverse event pertaining to any
profit sharing or pension plan governed by ERISA .
11.1.16 If there is any change in the chief executive officer
or chief financial officer of Focus, who is not replaced within 30 days with an
individual who is reasonably satisfactory to Lender.
11.1.17 If any Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Liabilities other
than as permitted in the applicable intercreditor and subordination agreement,
or if any Person, including, without limitation the Subordinated Lender, who has
subordinated such indebtedness or obligations to the Liabilities takes action or
omits to take action in furtherance of limiting or terminating its subordination
agreement.
11.1.18 If there is an event of default under any loan
agreement or contract of any Borrower, including without limitation, that
certain promissory note evidencing the Subordinated Debt.
11.2 Remedies. Upon the occurrence of an Event of Default, Lender may
immediately cease advancing money or extending credit to Borrower, and Lender
may, at its election, without notice of its election and without demand, do any
one or more of the following:
11.2.1 Declare any Liabilities immediately due and payable;
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11.2.2 Terminate this Agreement as to any future liability or
obligation of Lender, but without affecting Lender's rights and security
interests in the Collateral and without affecting the obligations of Borrower
hereunder;
11.2.3 Enforce the security interest given hereunder pursuant
to the Code and any other applicable law;
11.2.4 If not fully accomplished previously, require Borrower
to assemble the Collateral, including any books and records pertaining thereto,
and make them available to Lender at a place designated by Lender;
11.2.5 Enter upon the property where any Collateral is located
and take possession of or render unusable such Collateral, and use such property
(including any buildings and facilities) and any of Borrower's equipment, if
Lender deems such use necessary or advisable in order to take possession of,
hold, preserve, process, assemble, prepare for sale or lease, market for sale or
lease, sell or lease, or otherwise dispose of, any Collateral;
11.2.6 Grant extensions and compromise or settle claims with
respect to the Collateral for less than face value, all without prior notice to
Borrower;
11.2.7 Use or transfer any of Borrower's rights and interest
in any Intellectual Property now owned or hereafter acquired by Borrower, if
Lender deems such use or transfer necessary or advisable in order to take
possession of, hold, preserve, process, assemble, prepare for sale or lease,
market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral, without any additional consideration to Borrower;
11.2.8 Have a receiver appointed by any court of competent
jurisdiction to take possession of the Collateral;
11.2.9 Take such measures as Lender may deem necessary or
advisable to take possession of, hold, preserve, process, assemble, insure,
prepare for sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Borrower hereby irrevocably constitutes and
appoints Lender as Borrower's attorney-in-fact to perform all acts and execute
all documents in connection therewith;
11.2.10 Require Borrower, at Lender's option, to elect
Lender's designee to Borrower's Board of Directors or become a Board Observer
for so long as such Event of Default remains uncured;
11.2.11 Require Borrower to pay all reasonable attorneys' fees
and expenses and all other costs and expenses incurred by Lender by reason of
any Event of Default or Lender's exercise of remedies, including all costs and
expenses incurred by Lender in connection with Collateral return, repossession,
or sale; or
11.2.12 Recover all such other amounts due hereunder as they
become due and payable; and if Borrower will fail to perform any of its
obligations, Lender at any time may, but is
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not obligated to, perform the same without waiving any Event of Default or
Default or any of Lender's rights or remedies. Borrower will reimburse Lender,
within five days after notice thereof, for all costs, expenses and liabilities
incurred by Lender in the performance of Borrower's obligations. Failure to pay
the same as required herein will entitle Lender to all the remedies as set forth
herein for failure to timely make a payment due hereunder.
Notwithstanding anything contained herein to the contrary, Borrower
hereby acknowledges that certain Events of Default currently exist and remain
uncured as referenced in Lender's letter to Borrower dated May 8, 2000.
11.3 Election of Remedies. To the extent that any Liabilities are now
or hereafter secured by property other than the Collateral or by a guarantee,
endorsement or property of any other entity, then Lender has the right to
proceed against such other property, guarantee or endorsement, and the sole
discretion to determine which rights, actions, security, liens, security
interests or remedies to pursue, relinquish, subordinate, modify or take with
respect thereto, without in any way modifying or affecting any of the remainder
of the Liabilities or any of Lender's rights or Borrower's obligations
hereunder.
11.4 Waivers. To the maximum extent permitted under applicable law,
Borrower hereby irrevocably waives all of the following:
11.4.1 Any right to assert against Lender as a defense,
counterclaim, set-off or crossclaim, any defense (legal or equitable), set-off,
counterclaim, crossclaim and/or other claim (i) which Borrower may now or at any
time hereafter have against any party liable to Lender in any way or manner, or
(ii) arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity and/or enforceability of any Loan Document, or
any security interest.
11.4.2 (i) presentment, demand and notice of presentment,
dishonor, notice of intent to accelerate, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
accounts, documents, instruments, chattel paper and guaranties at any time held
by Lender on which Borrower may in any way be liable and hereby ratifies and
confirms whatever Lender may do in this regard, (ii) any bond or security which
might be required by any court prior to allowing Lender to exercise any of its
remedies, and (iii) the benefit of all marshaling, valuation, appraisal and
exemption laws.
11.4.3 Any and all rights and remedies now or hereafter
conferred by statute or otherwise which may require Lender to take any judicial
proceedings in connection with any Collateral or to give any notice or to sell,
lease or otherwise use any Collateral in mitigation of Lender's damages as set
forth herein or which may otherwise limit or modify any of Lender's rights or
remedies hereunder.
11.4.4 The right, if any, to require Lender to (i) proceed
against any person liable for any of the Liabilities as a condition to or prior
to proceeding hereunder; and (ii) foreclose upon, sell or otherwise realize upon
or collect or apply any other property, real or personal, securing any of the
Liabilities, as a condition to, or prior to proceeding hereunder.
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11.4.5 If Lender seeks to take possession of any or all of the
Collateral by judicial process: (1) any bond and any surety or security relating
thereto which is otherwise required by any statute, court rule or otherwise as
an incident to such possession; (2) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (3) any
requirement that Lender retain possession and not dispose of any such Collateral
until after trial or final judgment.
11.5 Appointment of Lender as Borrower's Lawful Attorney. Effective
immediately, Borrower hereby irrevocably designates, makes, constitutes and
appoints Lender and all persons designated by Lender as Borrower's true and
lawful attorney-in-fact, which appointment is coupled with an interest to,
without notice to Borrower, and as Lender in its sole discretion may determine,
in Borrower's or Lender's name, to (i) demand and enforce payment of the
Accounts, by legal proceedings or otherwise; (ii) exercise all of Borrower's
rights and remedies with respect to the collection of the Accounts, and settle,
adjust, compromise, extend, release, discharge or renew the same, including
legal proceedings brought to collect the Accounts; (iii) to the extent permitted
by applicable law, sell or assign the Collateral, including without limitation,
the Accounts upon such terms, for such amounts and at such time or times as
Lender deems advisable; (iv) take control, in any manner, of any Collateral,
including without limitation Bank Accounts or any item of payment or proceeds of
any Accounts; (v) prepare, file and sign Borrower's name on any proof of claim
against any Account Debtor; (vi) prepare, file and sign Borrower's name on any
notice of lien, or satisfaction of lien or similar document in connection with
the Accounts and Special Collateral; (vii) endorse the name of Borrower upon any
chattel paper, document, instrument, invoice, freight xxxx, xxxx of lading or
similar document or agreement relating to any Collateral, including without
limitation, the Accounts, Inventory and Special Collateral; and use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Collateral to which Borrower has
access; and (viii) take such other actions deemed reasonable by the Lender to
the extent permitted by applicable law. In furtherance of the foregoing,
Borrower shall deliver to Lender in form annexed hereto as Exhibit J, a power of
attorney letter addressed to any financial institutions in which Bank Accounts
are maintained.
11.6 Rights and Remedies are Cumulative. All rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies otherwise
provided by law. Any single or partial exercise of any right or remedy will not
preclude the further exercise thereof or the exercise of any other right or
remedy.
12. MISCELLANEOUS.
12.1 Modification of Agreement; Assigned Sale of Interest. This
Agreement and the Loan Documents may not be modified, altered or amended, except
by an agreement in writing signed by Lender. Borrower may not sell, assign or
transfer this Agreement or the Loan Documents or any portion thereof, including,
without limitation, Borrower's rights, title, interests, remedies, powers, or
duties hereunder. Lender may transfer, assign or sell all or any part of its
interest hereunder to any party in whole or in part.
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12.2 Attorneys' Fees and Expenses. If at any time and regardless of the
existence of any Default, Lender employs counsel for advice or other
representation or incurs legal or other costs and expenses in connection with:
(a) the preparation or amendment of the Loan Documents; (b) any litigation,
contest, dispute, suit, proceeding or action whether instituted by Lender,
Borrower or any other person in any way relating to the Collateral, this
Agreement, any Loan Document or Borrower's affairs; (c) any attempt to enforce
any rights of Lender against Borrower or any other person or entity which may be
obligated to Lender by virtue of the Loan Documents, including, without
limitation, any guarantor or Account Debtor; or (d) any attempt to inspect,
verify, protect, collect, sell, liquidate or otherwise dispose of any
Collateral; then, in any such event, all expenses, costs, charges and other fees
arising in connection with or relating to any of the foregoing will be payable,
on demand, by Borrower to Lender and will be Liabilities secured by the
Collateral. Without limiting the generality of the foregoing, such expenses,
costs, charges and fees may include legal fees, accountants' fees; appraisal
fees; consulting fees, court costs; duplicating expenses; court reporter fees,
long distance telephone charges; air express charges; secretarial overtime
charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal services.
12.3 Expenses; Indemnity. Borrower will indemnify, reimburse, defend
and hold Lender harmless from and against any and all costs, expenses, actions,
claims, demands, losses, judgments, reasonable attorneys', accountants' and
consultants' fees and expenses, and liabilities of any kind incurred in
connection with, relating to or arising out of this Agreement, any Loan Document
or the Collateral, whether arising before or after the commencement of any
insolvency or bankruptcy proceedings, including, without limitation, those
incurred (a) in relation to any provision hereof, (b) upon any Event of Default
or the exercise of any remedy herein or any enforcement of this Agreement or
Lender's interest in the Collateral, (c) in the event of Borrower's insolvency
or bankruptcy, (d) in defense of any litigation or any action in the nature of
voidable preference or fraudulent conveyance, or (e) to remove or contest any
lien or security interest or right of another against any Collateral. Borrower
will reimburse Lender for all amounts due hereunder, together with interest
thereon as if an Advance hereunder. If Borrower fails to pay or perform any of
its obligations hereunder, Lender at any time may, but is not obligated to, pay
or perform the same without waiving any Default or any of Lender's rights or
remedies. Borrower hereby authorizes and approves all such advances and
payments.
12.4 No Waiver by Lender. Neither Lender's failure to require strict
performance by Borrower of any provision hereof nor Lender's implied or express
waiver of any right hereunder will waive or diminish Lender's right to demand
strict compliance therewith or with any other provision. Compliance with any
condition or provision hereof may be waived only by an instrument in writing
signed by an officer of Lender and delivered to Borrower. Any action by Borrower
against Lender for default hereunder, will be commenced within one (1) year
after such cause of action occurs. Any waiver of an Event of Default under any
Loan Document will not suspend, waive or affect any other Default.
12.5 Severability. Each provision hereof will be interpreted in such
manner as to be effective and valid under applicable law, but any provision that
is determined to be invalid under applicable law will be ineffective to the
extent of such prohibition or invalidity, without invalidating the remaining
provisions hereof.
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12.6 Conflict of Terms. The provisions of the Loan Documents and any
Riders, Exhibits and Schedules hereto are incorporated in this Agreement by this
reference. Except as otherwise specifically provided in this Agreement or the
Loan Documents, by specific reference to the applicable provision hereof, if any
provision contained in this Agreement is in conflict with, or inconsistent with,
any provision in the Loan Documents the provision contained in this Agreement
will govern and control.
12.7 Destruction of Borrower's Documents. Lender will be under no
obligation to return any schedules, invoices, statements, budgets, forecasts,
reports or other papers delivered by Borrower and will destroy or otherwise
dispose of same at such time as Lender, in its discretion, deems appropriate.
12.8 Participations. Lender may at any time sell, assign, grant
participations in, or otherwise transfer to any other person, firm, or
corporation (a "Participant"), all or part of the obligations of Borrower
hereunder. Borrower authorizes Lender to disclose to any prospective Participant
and any Participant any and all information in Lender's possession concerning
Borrower, this Agreement and any Collateral.
12.9 Mutual Waiver Of Jury Trial. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights or
remedies under any Loan Document. EACH PARTY FURTHER WAIVES ANY RIGHT TO
CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
12.10 Authorized Signature. The signature upon this Agreement and upon
the Loan Documents is duly authorized, will bind Borrower and be deemed to be
the act of Borrower affixed pursuant to and in accordance with resolutions duly
adopted by Borrower's Board of Directors.
12.11 Governing Law. This Agreement, will be governed by, and construed
in accordance with the laws of the State of New York applicable to contracts
made and performed in such state. The Borrower hereby irrevocably submits to the
exclusive jurisdiction of any New York State or United States federal court
sitting in New York County over any action or proceeding arising out of or
relating to this agreement or any agreement contemplated hereby, and the
Borrower hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or federal court.
The Borrower further waives any objection to venue in such state and any
objection to an action or proceeding in such state on the basis of a
non-convenient forum. The Borrower further agrees that any action or proceeding
brought against Lender or any of its principals shall be brought only in New
York State or United States federal courts sitting in New York County. Service
of process may be made upon the Borrower by mailing a copy thereof to it, by
United States certified or registered mail, at its address set forth in Section
12.12 hereof.
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12.12 Notice. Except as otherwise provided herein, any notice required
hereunder will be in writing, and will be deemed to have been validly served,
given or delivered upon deposit in the United States mails, with proper postage
prepaid, return receipt requested and addressed to the party to be notified as
follows:
(A) If to Lender, at
Critical Capital Growth Fund, L.P.
00 Xxxx Xxxxxx - 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx
with a copy to
Xxxxxxx Krooks Xxxx & Ball P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxxxxxx X. Xxxxxxx, Esq.
(B) If to Borrower, at
Focus Affiliates, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn.: Xxxxxxx Xxxxx, Chief Executive Officer
with a copy to
Xxxx & Xxxxx PC
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxxxxx, Esq.
or to such other address as each party may designate for itself by like written
notice. All document delivery charges will be borne by Borrower.
12.13 Integration Clause. This Agreement constitutes the entire
agreement and understanding of Borrower and Lender with respect to their subject
matter. All prior understandings, whether oral or written, are hereby
superseded, merged hereinto, and replaced hereby. THIS AGREEMENT MAY BE MODIFIED
ONLY BY A WRITING SIGNED BY ALL PARTIES HERETO. There are no intended
third-party beneficiaries. Notwithstanding anything to the contrary set forth
herein, nothing herein shall limit any rights or remedies of Lender against
Borrower or any Collateral set forth anywhere else, and nothing set forth
anywhere else shall limit any rights or remedies of Lender set forth herein.
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12.14 Further Assurances. At all times and from time to time subsequent
to the date hereof and until the Loan is paid, Borrower shall take all such
further action, and shall execute and deliver all such further documents, as the
Lender shall request and as may necessary or appropriate to consummate and
evidence the transactions contemplated hereunder.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
FOCUS AFFILIATES, INC.
By:
----------------------------------
Xxxxxxx X. Xxxxx
Chief Executive Officer
Intellicell Merger Sub, Inc.
By:
----------------------------------
Name:
Title:
CRITICAL CAPITAL GROWTH FUND, L.P.
By: Critical Capital L.P.
Its: General Partner
By: Critical Capital Corporation
Its: Managing General Partner
By:
------------------------------
Xxxxxx X. Xxxxx
Its: Chairman
By:
------------------------------
Its:
35
36
EXHIBITS
EXHIBIT
A Financial Statements:
- Fiscal Year End December 31, 1999
- unaudited for the three months ended March
31, 2000
B Amended and Restated Senior Secured Promissory Note
C Intentionally Omitted
D Schedule of Business Locations
E Schedule of Equipment
F Schedule of Fictitious or Other Names
G Intentionally Omitted
H Schedule of General Intangible Assets
I Warrant
J Power of Attorney Letter
SCHEDULES
2.2 Use of Proceeds Schedule
3.3 Bank Account Information for Electronic Payments
4.1 Additional Collateral
9.1.1 Organization
9.1.4 Capitalization
9.1.5 Contracts
9.1.7 Intangible Property
9.1.8 Indebtedness
9.1.9 Litigation
9.1.10 Material Adverse Change
9.4 Bank Account Information
10.5.1 Tangible Net Worth
10.5.2 Debt Service Coverage
10.5.3 Inventory Reliance
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SCHEDULE 2.2
Use of Proceeds
Repayment of Allowance to Lender: $70,000
Legal Fees of Lender: $ 7,500
Taxes (including payroll and sales Through August 15, 2000) $
Trade Creditors
Working Capital
SCHEDULE 10.5.1
NET TANGIBLE WORTH:
$2,000,000 at 12/31/99, which shall increase by $350,000 each quarter thereafter
commencing 6/30/99 thru 12/31/04.
SCHEDULE 10.5.2
TOTAL DEBT SERVICE COVERAGE
12/31/99 No requirement
3/31/00 - 50%
6/30/00 and each quarter thereafter 150%
For purposes hereof, such coverage shall be determined as follows:
"Free Cash Flow" /Total Debt
For purposes hereof, Free Cash Flow shall be equal to EBITDA less Cash Taxes
less Maintenance Capital Expenditures.
For purposes hereof, Total Debt means all interest and principal payable in
prior quarter on funded debt and capitalized leases.
SCHEDULE 10.5.3
INVENTORY RELIANCE
12/31/99: 100%
3/31/00: 50%
6/30/99 and thereafter: 50%
For purposes hereof, Inventory Reliance shall mean
(Current Liabilities-Quick Assets)/Inventories
Quick Assets = Cash & Money Market Equivalents + Net Accounts
Receivable
38
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT COVERING SUCH SECURITY UNLESS THE ISSUER RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THIS NOTE REASONABLY SATISFACTORY TO THE ISSUER
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS.
Amended and Restated Senior Secured Promissory Note
$1,750,000 Principal Amount July 14, 0000
Xxx Xxxx, Xxx Xxxx
FOR VALUE RECEIVED, Focus Affiliates, Inc. (d/b/a XxxxxXxxxxxxx.xxx), a
Delaware corporation ("Focus") and Intellicell Merger Sub, Inc., a Delaware
corporation ("Mergersub"; each of Focus, Mergersub and any newly formed or
acquired direct or indirect subsidiaries of either of such entities are
hereinafter referred to as "Maker", and collectively, as "Makers"), promises to
pay, in accordance with the terms, conditions, covenants and agreements provided
herein, to the order of Critical Capital Growth Fund, L.P., a Delaware limited
partnership (the "Payee" or the "Holder of this Note"), or registered assigns,
the principal amount of ONE MILLION SEVEN HUNDRED FIFTY THOUSAND ($1,750,000)
DOLLARS, together with interest on the outstanding principal balance at the rate
of 18% per annum from the date hereof until the Maturity Date (as hereinafter
defined), calculated daily on the basis of a 360 day year and actual calendar
days elapsed.
(i) Interest only will be payable on the first day of the month in
arrears commencing August 1, 2000 through and including the Maturity Date (as
hereinafter defined). Interest, along with the principal payments referenced in
(ii) below shall continue to be payable on November 1, 2000 and on the first day
of each month thereafter through and including the Maturity Date (as hereinafter
defined).
(ii) Principal will be payable at anytime UPON DEMAND of the Holder of
this Note (such date, as same may be accelerated in accordance with the terms
hereof, is referred to herein as the "Maturity Date"), when the outstanding
principal balance, if any, together with all accrued interest, and any other
Liabilities, shall be due and payable.
Payments of principal and interest shall be made at the offices of the
Payee, 00 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, in immediately available
lawful money of the United States of America.
This Note is issued pursuant to an Amended and Restated Loan and
Security Agreement by and among the Makers and the Payee of even date herewith
(the "Loan Agreement") and is subject and entitled to certain terms, conditions,
covenants and agreements contained in the Loan Agreement which are made a part
hereof by this reference. In addition, payment of this Note is secured by
certain collateral as described in the Loan Agreement. Any transferee or
transferees of this Note, by their acceptance hereof, assume the obligations of
the Makers in the Loan Agreement with respect to the conditions and procedures
for transfer of this Note. Reference to the Loan Agreement shall in no way
impair the absolute and unconditional obligation of each Maker to pay both
principal and interest hereon as provided herein. All capitalized terms not
defined herein shall have the meanings ascribed thereto in the Loan Agreement.
39
1. Senior. The indebtedness evidenced by this Note and the
payment of the principal thereof shall be Senior (as hereinafter defined) to,
and have priority in right of payment over, all indebtedness of the Makers, now
outstanding or hereinafter incurred. "Senior," as used herein, shall be deemed
to mean that, in the event of any default in the payment of the obligations
represented by this Note (after giving effect to "cure" provisions, if any) or
of any liquidation, insolvency, bankruptcy, reorganization, or similar
proceedings relating to any Maker, all sums payable on this Note and any other
Liabilities, shall first be paid in full, with interest, if any, before any
payment is made upon any other indebtedness, now outstanding or hereinafter
incurred, and, in any such event, any payment or distribution of any character
which shall be made in respect of any other indebtedness of any Maker, shall be
paid over to the holder of this Note for application to the payment hereof,
unless and until the obligations under this Note and the Loan Agreement (which
shall mean the principal and other obligations arising out of, premium, if any,
interest on, and any costs and expenses payable under, this Note and the
Liabilities) shall have been paid and satisfied in full.
2. Events of Default.
(a) Upon the occurrence of any of the following events (herein
called "Events of Default") which shall have occurred and be continuing:
(i) Any Maker shall default in the payment of
principal or interest of this Note when due; or
(ii) An Event of Default pursuant to the terms of the
Loan Agreement.
then, and in any such event the Holder of this Note may by written notice to the
Makers declare the entire unpaid principal amount of this Note outstanding,
together with accrued interest thereon, immediately due and payable, unless such
default be cured within the applicable grace period as provided in the Loan
Agreement, without presentment, demand, protest, or other notice of any kind,
all of which are expressly waived
(b) No course of dealing or delay on the part of the Holder of
this Note in exercising any right hereunder shall operate as a waiver thereof or
otherwise prejudice the right of the Holder of this Note. No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or
hereafter available at law, in equity, by statute or otherwise.
3. Prepayment Provisions.
(a) This Note may be prepaid, at the option of the Makers, as
a whole or in part, at any time or from time to time, in each case on any date
on or after the date of issuance and prior to maturity, at a redemption price of
100% of the principal amount of this Note, together with accrued interest
through the date of prepayment ("Voluntary Prepayment"); provided, however, that
this Note shall be prepaid in full ("Mandatory Prepayment") to the extent of or
upon the occurrence of (i) any sale, pledge, assignment, transfer or disposition
of any assets of any Maker, (ii) any merger or consolidation of any Maker with
any other entity or a "change of control" of any Maker (which shall mean the
acquisition by any person, entity or group of control (including, without
limitation, voting control) of any Maker) or (iii) the receipt of proceeds from
any and every source (other than $680,000 of the proceeds funded to Makers
pursuant to the Loan Agreement) including, but not limited to, equity or debt
financings, accounts receivable, sales of inventory or other Collateral.
(b) Mandatory Prepayments shall occur simultaneously with the
event causing the Mandatory Prepayment.
Upon notice of any prepayment being given as provided in this
subsection 3(b), Makers covenant and agree that Makers will prepay on the date
therein fixed for prepayment the entire principal amount of this Note so as to
be prepaid as specified in such notice as the principal amount thereof, together
with interest accrued thereon to such date fixed for prepayment, plus the
applicable premium, if any, in immediately available funds.
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(c) Upon any partial prepayment of this Note, upon
presentation as herein provided, there shall be paid to the Payee the principal
amount of the portion of this Note so to be prepaid together with the unpaid
interest accrued in respect thereof, and either (i) this Note shall be
surrendered by the Holder of this Note, in which event the each Maker shall
execute and deliver to or on the order of such Holder, at the expense of the
each Maker, a new Note for the principal amount of this Note remaining unpaid,
dated as of the date to which interest has been paid on this Note surrendered,
and registered in the name of the Holder of this Note, or (ii) if the Payee and
the Makers shall so determine, this Note need not be so surrendered, but may be
made available to the Makers, at the place of payment specified herein, for
notation thereon of the payment of the portion of the principal so paid, in
which case the Makers shall make such notation and return the Note to or on the
order of the Payee.
4. Principal Obligation. No provision of this Note shall alter
or impair the obligation of the Makers, which is absolute and unconditional, to
pay the principal of and interest on this Note and other Liabilities at the
place, at the respective times, at the rates, and in the currency herein
prescribed.
5. Required Consent. The Makers may not modify any of the
terms of this Note without the prior written consent of the Holder of this Note.
6. Lost Documents. Upon receipt by the Makers of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note or
any Note exchanged for it, and (in the case of loss, theft or destruction) of
indemnity satisfactory to it, and upon reimbursement to the Makers of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
such Note, if mutilated, the Makers will make and deliver in lieu of such Note a
new Note of like tenor and unpaid principal amount and dated as of the original
date of this Note.
7. Miscellaneous.
(a) Parties in Interest. All covenants, agreements and
undertakings in this Note by and on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective permitted successors and assigns
of the parties hereto whether so expressed or not.
(b) Notices. Any notices required or permitted to be sent
hereunder shall be delivered personally or mailed, certified mail, return
receipt requested, or delivered by overnight courier service to the addresses
stated in the Loan Agreement, or such other address as any party hereto
designates by written notice to the Makers, and shall be deemed to have been
given upon delivery, if delivered personally, three business days after mailing,
if mailed, or one business day after delivery to the courier, if delivered by
overnight courier service.
(c) Construction. This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of New York. The parties hereby: (i) in any legal proceeding brought
in connection with this Agreement or the transactions contemplated hereby,
irrevocably submit to the exclusive in personam jurisdiction of (A) any state or
Federal court of competent jurisdiction sitting in the State of New York, County
of New York or (B) in the event that any party is a defendant in any legal
proceeding in which it seeks to join the other as a third party defendant, then,
any state or Federal court in which such proceeding has properly been brought,
and consents to suit therein; and (ii) waive any objection they may now or
hereafter have to the venue of such proceeding in any such court or that such
proceeding was brought in an inconvenient court.
(d) Mutual Waiver Of Jury Trial. Because disputes arising in
connection with complex financial transactions are most quickly and economically
resolved by an experienced and expert person and the parties wish applicable
state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws.
Therefore, to achieve the best combination of the benefits of the judicial
system and of arbitration, the parties hereto waive all right to trial by jury
in any action, suit or proceeding brought to enforce or defend any rights or
remedies under this Note. EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
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This Note amends and restates in its entirety that certain Senior
Secured Subordinated Promissory Note dated October 29, 1999 in the principal
amount of $1,000,000.00 made by the Makers in favor of Lender.
IN WITNESS WHEREOF, this Note has been executed and delivered
on the date specified above by the duly authorized representative of the Makers.
FOCUS AFFILIATES, INC.
By:
-----------------------------------------
Name
------------------------
Title
----------------------
INTELLICELL MERGER SUB, INC.
By:
-----------------------------------------
Name
------------------------
Title
----------------------
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42
FOCUS AFFILIATES, INC.
AND
CRITICAL CAPITAL GROWTH FUND, L.P.
WARRANT AGREEMENT
Dated as of July 14, 2000
43
WARRANT AGREEMENT dated as of July 14, 2000 between FOCUS AFFILIATES,
INC., a Delaware corporation (the "Company") and CRITICAL CAPITAL GROWTH FUND,
L.P., a Delaware limited partnership (the "Holder").
WITNESSETH:
WHEREAS, the Holder and the Company have entered into an amended and
restated loan and security agreement as of even date herewith (hereinafter the
"Loan Agreement"), pursuant to which the Holder has made a loan in the principal
amount of $1,750,000 to the Company (the "Loan"), as evidenced by a Senior
Secured Promissory Note (the "Note"). In connection with the Loan, the Company
has agreed to issue to the Holder warrants ("Warrants") to purchase 514,348
shares of the Company's common stock, par value $.01 per share ("Common Stock"),
upon and subject to the terms and conditions of the Loan Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Holder to the Company of TWENTY FIVE ($25.00) DOLLARS, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agrees as follows:
1. Grant and Vesting.
Section 1.1 Grant. The Holder is hereby granted the right to
purchase, at any time from July 14, 2000 until 5:30 p.m., New York
time, on July 14, 2005, up to 514,348 shares of Common Stock (subject
to adjustment as provided in Section 8 hereof) (the "Total Warrants")
at an initial exercise price (subject to adjustment as provided in
Section 8 hereof) equal to $.69 per share.
Section 1.2 Vesting. The Warrants shall vest and become
exercisable in accordance with the following schedule, provided that,
all Warrants shall terminate and become null and void upon the
Expiration Date irrespective of the exercisability thereof:
(a) An aggregate of 150,000 Warrants shall vest and become
exercisable by the Holder upon the date hereof and shall be
exercisable until the date that is five years
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from the date hereof; and
(b) For each of the ensuing sixty (60) days following the date
hereof that any portion of the Liabilities (as such term is
defined in the Loan and Security Agreement relating to the
Loan) remain outstanding, 364,348 Warrants (representing the
difference between the Total Warrants and 150,000) shall vest
and be exercisable on an equal pro rata daily basis until an
aggregate maximum number of Warrants equal to the Total
Warrants vest and become eligible.
2. Warrant Certificates. The warrant certificates (the "Warrant Certificates")
delivered and to be delivered pursuant to this Agreement shall be in the form
set forth in Exhibit A attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
Section 3.1 Method of Exercise. The Warrants initially are exercisable
at an initial exercise price per share of Common Stock set forth in Section 6
hereof payable by certified or official bank check in New York Clearing House
funds, subject to adjustment as provided in Section 8 hereof. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the shares of Common Stock purchased at the Company's principal offices
(presently located at 000 Xxxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, XX
00000) the Holder shall be entitled to receive a certificate or certificates for
the shares of Common Stock so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
the Warrants). Warrants may be exercised to purchase all or part of the shares
of Common Stock represented thereby. In the case of the purchase of less than
all the shares of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock.
Section 3.2 Exercise by Surrender of Warrant. (a) In addition to the
method of payment set forth in Section 3.1 and in lieu of any cash payment
required thereunder, the Holder of the Warrants shall have the right at any time
and from time to time exercise the Warrants in full
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or in part by surrendering the Warrant Certificate in the manner specified in
Section 3.1 in exchange for the number of shares of Common Stock equal to the
product of (x) the number of shares to which the Warrants are being exercised
multiplied by (y) a fraction, the numerator of which is the Market Price (as
defined in Section 8.1 (vi) hereof) of the Common Stock less the Exercise Price
and the denominator of which is such Market Price.
(b) Solely for the purposes of this Section 3.2, Market Price shall be
calculated either (i) on the date on which the form of election attached hereto
is deemed to have been sent to the Company pursuant to Section 13 hereof
("Notice Date") or (ii) as the arithmetic average of the Market Price for each
of the five trading days preceding the Notice Date, whichever of (i) or (ii) is
greater.
4. Issuance of Certificates. Upon the exercise of the Warrants, the issuance of
certificates for shares of Common Stock or other securities, properties or
rights underlying such Warrants, shall be made forthwith (and in any event such
issuance shall be made within five (5) business days thereafter) without charge
to the Holder thereof including, without limitation, any tax which may be
payable in respect of the issuance thereof, and such certificates shall (subject
to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the shares
of Common Stock (and/or other securities, property or rights issuable upon
exercise of the Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman of the Board of
Directors or President or Chief Executive Officer of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be
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dated the date of execution by the Company upon initial issuance, division,
exchange, substitution or transfer.
5. Restriction on Transfer of Warrants. The Holder of a Warrant Certificate, by
its acceptance thereof, covenants and agrees that the Warrants are being
acquired as an investment and not with a view to the distribution thereof.
6. Exercise Price.
Section 6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $.69 per share of Common Stock. The adjusted exercise price shall be the
price, which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
Section 6.2 Exercise Price. The term "Exercise Price" herein shall mean
the initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
Section 7.1 Registration Under the Securities Act of 1933. The Warrants
and the shares of Common Stock issuable upon exercise of the Warrants and any of
the other securities issuable upon exercise of the Warrants have not been
registered under the Securities Act of 1933, as amended (the "Act") for public
resale. Upon exercise, in part or in whole, of the Warrants, certificates
representing the shares of Common Stock and any other securities issuable upon
exercise of the Warrants (collectively, the "Warrant Securities") shall bear the
following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") for public resale, and may not be offered or sold
except pursuant to (i) an effective registration statement
under the Act, or (ii) an opinion of counsel, if such opinion
shall be reasonably satisfactory to counsel to the issuer,
that an exemption from registration under such Act is
available.
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Section 7.2 Piggyback Registration. If the Company proposes for any
reason to register Primary Shares (as hereinafter defined) or Other Shares (as
hereinafter defined) under the Act (other than on Form S-4 or Form S-8
promulgated under the Act or any successor forms thereto) by filing a
registration statement with the Commission at any time following the date
hereof, it shall promptly give written notice to the Holder of its intention to
so register such Primary Shares or Other Shares and, upon the written request,
delivered to the Company within 30 days after delivery of any such notice by the
Company, of any Holder to include in such registration Warrant Securities (which
request shall specify the number of Warrant Securities proposed to be included
in such registration), the Company shall use its best efforts to cause all such
Warrant Securities of Holders delivering such notice to be included in such
registration on the same terms and conditions as the securities otherwise being
sold in such registration; provided, however, that if the managing underwriter
advises the Company that the inclusion of all Warrant Securities requested to be
included in such registration would interfere with the successful marketing
(including pricing) of the Primary Shares or Other Shares proposed to be
registered by the Company, then the number of Primary Shares, Warrant Securities
and Other Shares proposed to be included in such registration shall be included
in the following order:
(a) if the Company proposes to register Primary Shares:
(i) first, the Primary Shares; and
(ii) second, the Warrant Securities and Other Shares requested
to be included in such registration (or, if necessary, such Warrant
Securities and Other Shares pro rata among the holders thereof based
upon the number of Warrant Securities and Other Shares requested by
each such holder); or
(b) if the Company proposes to register Other Shares pursuant to a
request for registration by the holders of such Other Shares:
(i) first, the Other Shares held by the parties demanding such
registration;
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(ii) second, the Warrant Securities and Other Shares (other
than shares registered pursuant to Section 7.2(b)(i) hereof) requested
to be registered by the holders hereof (or, if necessary, pro rata
among the holders thereof based on the number of Warrant Securities and
Other Shares requested to be registered by such holders); and
(iii) Third, the Primary Shares.
For purposes hereof the term "Other Shares" means at any time those
shares of Common Stock held by any person (or issuable upon exercise or
conversion of any security held by such person) that do not constitute Primary
Shares or Warrant Securities. The term "Primary Shares" means at any time the
authorized but unissued shares of Common Stock and shares of Common Stock held
by the Company in its treasury.
Section 7.3 Demand Registration.
(a) At any time following the date hereof, the Holder shall have the
right (which right is in addition to the registration rights under Section 7.2
hereof), exercisable by written notice to the Company after that date, to have
the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus, as may
be necessary in the opinion of both counsel for the Company and counsel for the
Holder, in order to comply with the provisions of the Act, so as to permit a
public offering and sale of its Warrant Securities for the earlier of (i) four
years following the effectiveness of the registration statement or (ii) until
all of the Warrant Securities are sold.
(b) Notwithstanding the foregoing, the Company may delay the filing or
effectiveness of any registration statement for a period of up to 90 days after
the receipt of a demand for registration pursuant to subsection (a) above if at
the time of receipt of such demand the Company is engaged, or has fixed plans to
engage within 30 days of the time of such request, in a firm commitment
underwritten public offering of Primary Shares in which the Company may include
Warrant Securities pursuant to Section 7.2;
(c) Each holder of Warrant Securities, upon receipt of any notice from
the Company of any event of the kind described in Section 7.4(i) hereof, shall
forthwith discontinue disposition of the Warrant Securities pursuant to the
registration statement covering such Warrant
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49
Securities until such holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 7.4(i) hereof, and, if so directed by
the Company, such holder shall deliver to the Company all copies, other than
permanent file copies then in such holder's possession, of the prospectus
covering such Warrant Securities Shares at the time of receipt of such notice.
Section 7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use commercially reasonable best efforts to file
a registration statement within forty-five (45) days of receipt of any demand
therefor, shall use commercially reasonable best efforts to have any
registration statements declared effective at the earliest possible time, and
shall furnish the Holder desiring to sell Warrant Securities such number of
prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding any underwriting or
selling commissions or other charges of any broker-dealer or any attorney or
other person acting on behalf of Holder), fees and expenses in connection with
all registration statements filed pursuant to Sections 7.2 and 7.3(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 7.4(a), the Company shall, in addition to any other
equitable or other relief available to the Holder, be liable for any and all
loss of direct profit damages sustained by the Holder as a result of its
inability to sell the Warrant Securities due to such failure (but excluding any
indirect or consequential damages).
(c) The Company will take all necessary action which may be reasonably
required in qualifying or registering the Warrant Securities included in a
registration statement for offering and sale under the securities or blue sky
laws of the states requested by the Holder.
(d) The Company shall indemnify the Holder of the Warrant Securities to
be sold pursuant to any registration statement and each person, if any, who
controls such Holder within the meaning of Section 15 of the Act or Section
20(a) of the Securities Exchange Act of
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1934, as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from such
registration statement; provided, however, that (i) the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of the Holder specifically for inclusion therein.
(e) Nothing contained in this Agreement shall be construed as requiring
the Holder to exercise its Warrants prior to the initial filing of any
registration statement or the effectiveness thereof.
(f) If the offering is underwritten, the Company shall furnish to the
Holder participating in the offering and to each underwriter a signed
counterpart, addressed to such Holder or underwriter, of (i) an opinion of
counsel to the Company, dated the effective date of such registration statement
(and, an opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering; a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, are as customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offering of securities that utilize the particular form of registration
statement which is then being utilized by the Company.
(g) The Company shall as soon as practicable after the effective date
of the registration statement, and in any event within 15 months thereafter,
make "generally available to its security holders" (within the meaning of Rule
158 under the Act) an earnings statement (which
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need not be audited) complying with Section 11(a) of the Act and covering a
period of at least 12 consecutive months beginning after the effective date of
the registration agreement.
(h) The Company shall deliver promptly to the Holder participating in
the offering requesting the correspondence and memoranda described below and the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit the Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request
as it deems necessary to comply with applicable securities laws or NASD rules.
(i) The Company shall notify the Holders holding such Warrant
Securities on a timely basis at any time when a prospectus relating to such
Warrant Securities is required to be delivered under the Act within the
appropriate period set forth in Section 7.3(a), of the happening of any event as
a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and, at the request of the Holders, prepare and furnish to such Holders a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the offerees
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make statements therein not misleading in light of the
circumstances then existing.
8. Adjustments to Exercise and Number of Securities.
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8.1 Intentionally Omitted.
Section 8.2 Intentionally Omitted
Section 8.3 Subdivision and Combination. In case the Company shall at
any time subdivide or combine the outstanding shares of Common Stock, the
Exercise Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
Section 8.4 Adjustment in Number of Securities. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Section 8, the number of
Securities issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Securities
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
Section 8.5 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value.
Section 8.6 Merger or Consolidation. In case of any consolidation of
the Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such
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supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
Subsection shall similarly apply to successive consolidations or mergers.
Section 8.7 No Adjustment of Exercise Price in Certain Cases. No
adjustment of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares of
Common Stock issuable upon the exercise of the Warrants.
(b) If the amount of said adjustment shall be less than 2
cents ($.02) per Security, provided, however, that in such case any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the
next subsequent adjustment which, together with any adjustment so
carried forward, shall amount to at least two cents ($.02) per
Security; or
Section 8.8 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock or
dividends in the form of warrants declared prior to the date hereof) or
otherwise distribute to its stockholders any assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holder of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Section 8.8.
Section 8.9 Put Rights. Notwithstanding anything to the contrary
contained herein, during such period in which any Liabilities (as such term is
defined in the Loan Agreement)
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remain outstanding under the Loan Agreement, upon the earlier to occur of (i)
the occurrence of any SBA Put Event; or (ii) any time after July 14, 2005,
Holder shall have the right to require the Company to repurchase the shares of
Common Stock that have been issued upon exercise of the Total Warrants at a
price equal to the Put Amount:
For purposes hereof, an SBA Put Event is defined as: (i) a purchase,
sale, merger, or recapitalization of the Company wherein a change of control or
change in management occurs; (ii) the Company seeking, filing or otherwise
obtaining bankruptcy law protections, or seeking or commencing a liquidation,
dissolution or winding up; (iii) a public offering of the Company's securities;
or (iv) the Company's material breach of the Loan Agreement.
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For purposes hereof, the Put Amount is defined as the greater of (a)
the arithmetic average closing traded price of the Company's voting common stock
for the 30 trading days ending the trading day immediately preceding the date of
the Holder's Put election; (b) five (5) times the Company's most recent fiscal
year consolidated Earnings Before Interest, Taxes, Rents, Depreciation and
Amortization per share of Common Stock outstanding; and (c) $1.00.
9. Exchange and Replacement of Warrant Certificates. Each Warrant Certificate is
exchangeable without expense, upon the surrender thereof by the registered
Holder at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate the right to
purchase the same number of Securities in such denominations as shall be
designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not
be required to issue certificates representing fractions of shares of Common
Stock upon the exercise of the Warrants, nor shall it be required to issue scrip
or pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As
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long as the Warrants shall be outstanding, the Company shall use its
commercially reasonable best efforts to cause all shares of Common Stock
issuable upon the exercise of the Warrants to be listed (subject to official
notice of issuance) on all securities exchanges on which the Common Stock issued
to the public in connection herewith may then be listed and/or quoted on NASDAQ.
12. Notice to Warrant Holder. Nothing contained in this Agreement shall be
construed as conferring upon the Holder the right to vote or to consent or to
receive notice as a stockholder in respect of any meetings of stockholders for
the election of directors or any other manner, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any time prior to
the expiration of the Warrants and their exercise, any of the following events
shall occur:
(a) the Company shall take a record of the holders of its
shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchange for shares of capital stock of
the Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed;
then, in any one or more of said events, the Company shall give notice to the
Holder of such event at least fifteen (15) days prior to the date fixed as a
record date or the date of the closing the transfer books for the determination
of the stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notice shall specify
such record date or the date
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of closing the transfer books, as the case may be. Failure to give such notice
or any defect therein shall not affect the validity of any action taken in
connection with the declaration or payment of any such dividend, or the issuance
of any convertible or exchangeable securities, or subscription rights, options
or warrants, or any proposed dissolution, liquidation, winding up or sale.
13. Notices.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been duly made when delivered,
or mailed by registered or certified mail, return receipt requested:
(a) If to the Holder, 00 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000 as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3
hereof or to such other address as the Company may designate by notice to the
Holder.
14. Supplements and Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of the parties hereto. Any waiver,
permit, consent or approval of kind or character on the part of each Company or
the Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing.
15. Successors. All the covenants and provisions of this Agreement shall be
binding upon and inure to the benefit of the Company, the Holder and their
respective successors and assigns hereunder.
16. Governing Law; Submission to Jurisdiction. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all the purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company and the Holder hereby agree that any action, proceeding or
claim against it arising out of, or relating in any way to, this Agreement shall
be brought and enforced in the courts of the State of New York or of the United
States of America for the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive.
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58
The Company, and the Holder hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company and the Holder (at the option of the party
bringing such action, proceeding or claim) may be served by transmitting a copy
thereof, by registered or certified mail, return receipt requested, postage
prepaid, addressed to it at the address as set forth in Section 15 hereof. Such
mailing shall be deemed personal service and shall be legal and binding upon the
party so served in any action, proceeding or claim. The Company and the Holder
agree that the prevailing party(ies) in any such action or proceeding shall be
entitled to recover from the other party(ies) all of its/their reasonable legal
costs and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
17. Mutual Waiver Of Jury Trial. Because disputes arising in connection with
complex financial transactions are most quickly and economically resolved by an
experienced and expert person and the parties wish applicable state and federal
laws to apply (rather than arbitration rules), the parties desire that their
disputes be resolved by a judge applying such applicable laws. Therefore, to
achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Warrant Agreement. EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
18. Entire Agreement; Modification. This Agreement and the Loan Agreement (to
the extent portions thereof are referred to herein) contain the entire
understanding between the parties hereto with respect to the subject matter
hereof and may not be modified or amended except by a writing duly signed by the
party against whom enforcement of the modification or amendment is sought.
19. Severability. If any provision of this Agreement shall be held to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
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20. Captions. The caption headings of the Sections of this Agreement are for
convenience of reference only and are not intended, nor should they be construed
as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be construed to
give to any person or corporation other than the Company and the Holder any
legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Holder.
22. Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
FOCUS AFFILIATES, INC.
By:
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
Attest:
Secretary
CRITICAL CAPITAL GROWTH FUND, L.P.
By: Critical Capital L.P.
Its: General Partner
By: Critical Capital Corporation
Its: Managing General Partner
By:
-----------------------------
Xxxxxx X. Xxxxx
Its: Chairman
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EXHIBIT A-1
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. CC-2
WARRANT CERTIFICATE
This Warrant Certificate certifies that Critical Capital
Growth Fund, L.P., or registered assigns, is the registered holder of a Warrant
to purchase initially, at any time from July 14, 2000, until July 14, 2005
("Expiration Date"), up to 514,348 fully-paid and non-assessable shares of
common stock, $.01 par value ("Common Stock") of Focus Affiliates, Inc., a
Delaware corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $.69 per share of Common
Stock, upon surrender of this Warrant Certificate and payment of the Exercise
Price at an office or agency of the Company, or by surrender of this Warrant
Certificate in lieu of cash payment, but subject to the conditions set forth
herein and in the warrant agreement dated as of July 14, 2000 between the
Company and Critical Capital Growth Fund, L.P. (the "Warrant Agreement"). The
Warrants shall vest as follows: (a) An aggregate of 150,000 Warrants shall vest
and become exercisable upon the date hereof and shall be exercisable until the
Expiration Date and (b) For each of the ensuing sixty (60) days following the
date hereof that any portion of the Liabilities (as such term is defined in the
Loan and Security Agreement relating to the Loan) remain outstanding, 6,072
Warrants shall vest on a daily basis and be exercisable until the Expiration
Date until an aggregate maximum number of Warrants equal to the Total Warrants
vest. Payment of the Exercise Price shall be made by certified or official bank
check in New York Clearing House funds payable to the order of the Company
unless the Warrant represented hereby is surrendered in exchange for exercise as
permitted and provided for in the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby
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incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, obligations, duties and immunities
thereunder of the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax in
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings to them in the Warrant
Agreement.
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THIS PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the Company has caused this Warrant Agreement to be
duly executed under its corporate seal.
Dated as of July 14, 2000
Focus Affiliates, Inc.
[SEAL] By:
----------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Attest:
Secretary
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[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____ shares of Common
Stock and herewith tenders in payment for such Securities a certified or
official bank check payable in New York Clearing House Funds to the order of
____ in the amount of $____, all in accordance with the terms hereof. The
undersigned requests that a certificate for such Securities be registered in the
name of ___ whose address is ___ and that such Certificate be delivered to ___
whose address is ___.
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
23
66
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ______ shares of
Common Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of July 14, 2000 between Focus Affiliates, Inc. and Critical
Capital Growth Fund, L.P.. The Undersigned requests that a certificate for such
Securities be registered in the name of ___________ whose address is ___________
and that such Certificate be delivered to __________ whose address is _________.
Signature
-------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
----------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
24
67
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ______________ here sells, assigns and transfers
unto _______________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
--------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
(Insert Social Security or other
Identifying Number of Assignee)
25
68
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR (ii) AN
OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
No. CC-2
WARRANT CERTIFICATE
This Warrant Certificate certifies that Critical Capital
Growth Fund, L.P., or registered assigns, is the registered holder of a Warrant
to purchase initially, at any time from July 14, 2000, until July 14, 2005
("Expiration Date"), up to 430,360 fully-paid and non-assessable shares of
common stock, $.01 par value ("Common Stock") of Focus Affiliates, Inc., a
Delaware corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $.69 per share of Common
Stock, upon surrender of this Warrant Certificate and payment of the Exercise
Price at an office or agency of the Company, or by surrender of this Warrant
Certificate in lieu of cash payment, but subject to the conditions set forth
herein and in the warrant agreement dated as of July 14, 2000 between the
Company and Critical Capital Growth Fund, L.P. (the "Warrant Agreement"). The
Warrants shall vest as follows: (a) An aggregate of 150,000 Warrants shall vest
and become exercisable upon the date hereof and shall be exercisable until the
Expiration Date and (b) For each of the ensuing sixty (60) days following the
date hereof that any portion of the Liabilities (as such term is defined in the
Loan and Security Agreement relating to the Loan) remain outstanding, 4,673
warrants shall vest on a daily basis and be exercisable until the Expiration
Date until an aggregate maximum number of Warrants equal to the Total Warrants
vest. Payment of the Exercise Price shall be made by certified or official bank
check in New York Clearing House funds payable to the order of the Company
unless the Warrant represented hereby is surrendered in exchange for exercise as
permitted and provided for in the Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., New York time, on
the Expiration Date, at which time all Warrants evidenced hereby, unless
exercised prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and
69
the holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax in
other governmental charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings to them in the Warrant
Agreement.
2
70
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated as of July 14, 2000
Focus Affiliates, Inc.
[SEAL] By:
---------------------------------
Name:
----------------------------
Title:
--------------------------
Attest:
Secretary
3
71
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ______ shares of
Common Stock and herewith tenders in payment for such Securities a certified or
official bank check payable in New York Clearing House Funds to the order of
______________ in the amount of $____, all in accordance with the terms hereof.
The undersigned requests that a certificate for such Securities be registered in
the name of _____________ whose address is _____________ and that such
Certificate be delivered to _____________ whose address is _____________.
Signature
---------------------------------
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
-------------------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
4
72
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase ____ shares of
Common Stock in accordance with the terms of Section 3.2 of that certain Warrant
Agreement dated as of July 14, 2000 between Focus Affiliates, Inc. and Critical
Capital Growth Fund, L.P.. The Undersigned requests that a certificate for such
Securities be registered in the name of _____________ whose address is
_____________ and that such Certificate be delivered to _____________ whose
address is _____________.
Signature
------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
----------------------------------------------
(Insert Social Security or Other Identifying
Number of Holder)
5
73
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________ here sells, assigns and
transfers unto ________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
-----------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or other
Identifying Number of Assignee)
6
74
GUARANTEE AGREEMENT
GUARANTEE, dated as of July 14, 2000 (this "Guarantee"), by
Xxxxxxx Xxxxx and Xxxx Xxxxxxx (collectively the "Guarantors"), in favor of
Critical Capital Growth Fund, L.P., a Delaware limited partnership ("the
"Lender"), issued pursuant to the Amended and Restated Loan and Security
Agreement dated July 12, 2000 (the "Agreement") by and among Focus Affiliates,
Inc. ("Focus") and any subsidiaries formed or acquired by Focus (including
without limitation, Intellicell Merger Sub, Inc. (collectively, the "Borrower")
and Lender.
WITNESSETH:
WHEREAS, pursuant to the terms of the Agreement, Lender has
agreed to increase the principal amount of the Loan to an amount of $1,750,000;
and
WHEREAS, a condition precedent to Lender agreeing to execute
and deliver the Agreement is the execution and delivery by the Guarantors of
this Guarantee; and
WHEREAS, Guarantors expressly acknowledge good and valuable
consideration for furnishing this Guaranty based on the benefits such Guarantors
are deriving from the Agreement that Lender is executing and delivering; and
WHEREAS, all terms defined in the Agreement and used herein
shall have the meanings therein defined, except where otherwise defined herein
or where the context otherwise requires, and as used herein the term "Agreement"
includes such documents and instruments as the same may from time to time be
amended, supplemented, restated, extended or otherwise modified.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to execute and deliver to the Borrower the Agreement, the Guarantors
hereby agree with the Lender as follows:
1. Each of the Guarantors hereby irrevocably, absolutely and
unconditionally and on a joint and several basis, guarantee to Lender the
prompt, complete and full performance, when due, and no matter how the same
shall become due, of all Liabilities of the Borrower to Lender under, by reason
of, or pursuant to the Agreement. Each of the Guarantors represent and warrant
to Lender that this guarantee is a valid and binding obligation of such
Guarantors and is enforceable against each of them in accordance with its terms.
Notwithstanding anything contained herein the foregoing guarantee shall only be
operative in the event a state of facts exists in the reasonable judgment of the
Lender that the Borrower or any of its officers, employees, directors, agents or
affiliates (i) diverts, converts or misappropriates, from the Lender any
Collateral that consists of cash or the proceeds of any Collateral that consists
of cash without Lender's prior written consent or (ii) diverts, converts or
misappropriates, from the Lender any non-cash Collateral pursuant to
instructions given to them by either of the Guarantors to take such action,
without Lender's prior written consent (the occurrence of either of such events
is hereinafter referred to as a "Guarantee Event").
2. If the Borrower fails for any reason whatsoever punctually to
perform the Liabilities, Guarantors shall cause each and every such Liability
to be satisfied and performed as if Guarantors instead of the Borrower were the
primary obligor of the Borrower's obligations under the Agreement. If the
Borrower fails for any reason to perform or repay promptly any Liability after
expiration of any explicitly applicable cure periods under the Agreement,
Guarantors shall, upon demand by Lender, cause such Liabilities to be performed
or, if specified by Lender, provide sufficient immediately available funds for
the prompt, full and faithful performance of such Liabilities to Lender or to
such other party as Lender shall designate in writing.
3. If any payment received by Lender pursuant to the provisions of the
Agreement shall, on the subsequent bankruptcy, insolvency, or other similar
event applying to the Borrower, be avoided or set aside under any laws relating
to bankruptcy, insolvency, or other such similar event, such payments shall
expressly not be considered as discharging or diminishing the liability of
Guarantors and this Guarantee
75
shall continue to apply as if such payment had at all times remained owing by
the Borrower to Lender and Guarantors shall indemnify Lender in respect thereof.
4. Subject to the terms of Section 1 hereof, Guarantors hereby agree
that their obligations under this Guarantee shall be unconditional and
irrevocable and that Guarantors shall be fully liable in respect of the
Liabilities, whether or not any action has been taken to enforce the same or any
judgment obtained against the Borrower, whether or not any time or indulgence
has been granted to the Borrower by or on behalf of Lender and whether or not
there have been any dealings or transactions between the Borrower and Lender.
5. Guarantors hereby waive diligence, presentment, demand of payment,
filing or claims with a court in any jurisdiction in the event of dissolution,
liquidation, merger or bankruptcy of the Borrower, any right to require a
proceeding first against the Borrower, protest or notice with respect to the
Agreement and all demands whatsoever and hereby covenants that this Guarantee
shall be a continuing guarantee which will not be discharged except by complete
performance of the obligations of Guarantors contained in this Guarantee.
6. Guarantors hereby agree that they will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of
Lender as contemplated thereby.
7. This Guarantee may not be amended orally.
8. This Guarantee shall be governed by the laws of the State of New
York (regardless of any determination made under the conflicts of laws
principles of New York or any other jurisdiction). The parties hereby: (i) in
any legal proceeding brought in connection with this Agreement or the
transactions contemplated hereby, irrevocably submit to the exclusive in
personam jurisdiction of (A) any state or Federal court of competent
jurisdiction sitting in the State of New York, County of New York or (B) in the
event that any party is a defendant in any legal proceeding in which it seeks to
join the other as a third party defendant, then, any state or Federal court in
which such proceeding has properly been brought, and consents to suit therein;
and (ii) waive any objection they it may now or hereafter have to the venue of
such proceeding in any such court or that such proceeding was brought in an
inconvenient court. Because disputes arising in connection with complex
financial transactions are most quickly and economically resolved by an
experienced and expert person and the parties wish applicable state and federal
laws to apply (rather than arbitration rules), the parties desire that their
disputes be resolved by a judge applying such applicable laws. Therefore, to
achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Guarantee. EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY ACTION IN
WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL
CANNOT BE OR HAS NOT BEEN WAIVED.
9. This Guarantee shall expire and be rendered null and void upon
Borrower's repayment in full of the Liabilities. In addition, to the extent a
particular Guarantor is no longer employed or retained by Focus, this Guarantee
shall only be enforceable against such Guarantor for Guarantee Events alleged to
have occurred during the period in which such Guarantor was employed or
retained.
2
76
EXECUTED as of July 14, 2000.
-----------------------------
Xxxxxxx Xxxxx
-----------------------------
Xxxx Xxxxxxx
STATE OF )
)
COUNTY OF )
On the 14th day of July 2000, before me personally appeared Xxxxxxx
Xxxxx and Xxxx Xxxxxxx, to me known, who, being by me duly sworn, signed
deponent's name to the foregoing guarantee.
----------------------
Notary Public
3
