Exhibit 10.14
LOAN AGREEMENT
Dated February 23, 2001
between
WOODCREST CAPITAL II LIMITED PARTNERSHIP,
a Texas Limited Partnership
and
iEXALT, INC.,
a Nevada Corporation
LOAN AGREEMENT
This Loan and Security Agreement (this "Agreement") is made and entered
into as of February 23, 2001, by and between iExalt, Inc., a Nevada corporation
(the "Company"), and Woodcrest Capital II Limited Partnership, a Texas limited
partnership ("Lender").
ARTICLE 1
AMOUNT AND TERMS OF CREDIT
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1.1. Secured Term Loan. Subject to the terms and conditions of this Agreement,
at the Closing, (i) Lender agrees to lend and the Company agrees to borrow an
amount equal to the amount set forth on the attached Lender Schedule in a
minimum amount of one million dollars ($1,000,000.00) (herein called "Initial
Loan"), and (ii) Lender agrees to deliver to Company after Closing the
additional amounts set forth on the Lender Schedule opposite Lender's name
(herein called Lender's "Subsequent Loans"; the Initial Loan and all Subsequent
Loans that are funded to the Company pursuant to the terms hereunder are called
the "Loans", pursuant to a promissory note in the form of Exhibit A, with
appropriate insertions (herein called Lender's "Note") to be dated as of the
Closing Date (as defined herein). In the event that additional amounts are
loaned hereunder, the Company and Lender shall amend the Lender's Schedule
accordingly.
1.2 Closing and Funding of the Initial Loan and the Subsequent Loans. The
funding of the Initial Loan (the "Closing") shall occur upon the satisfaction of
all conditions to Closing specified in Sections 4.1 and 4.2 hereof (the "Closing
Date"), and may be accomplished via the exchange of all requisite documentation
by overnight mail, messenger, e-mail or telecopy, as deemed necessary and
appropriate by Lender. The funding of the Subsequent Loans to the Company shall
occur upon the satisfaction of the Subsequent Loans Conditions (as defined
herein).
1.3. Documentation Expenses. The Company shall pay all reasonable fees and
expenses relating to the negotiation and preparation of this Agreement and the
consummation of the transactions contemplated hereby including, without
limitation, (a) the cost of producing and re-producing this Agreement, the Note
and the Security Documents, (b) the fees and disbursements of W. Michael Greene,
P.C., counsel to Lender or any of its Affiliates in connection with the Closing,
not to exceed $15,000, which will be paid by Company's issuance of 93,750 shares
of Company common stock to Lender's counsel [to be registered as described in
Section 5.30 herein], (c) the Lender's reasonable out-of-pocket expenses, and
(d) all expenses (including reasonable attorneys' fees of counsel to Lender at
any time and all recording and filing fees) incurred by Lender relating to any
amendments, supplements, waivers, releases or consents pursuant to the
provisions of this Agreement, the Note or the Security Documents (including in
connection with any work-out, restructuring or similar proceeding relating to
the performance of the obligations of the Company hereunder or thereunder). The
aggregate of all such fees and expenses shall not exceed $20,000.00. To the
extent the same are known, all such fees and expenses shall be paid by the
Company on the Closing Date.
1.4 Placement Fee. The Company will issue a Warrant Certificate for three
million (3,000,000) shares of the Company's common stock (the "Placement Fee")
to Woodcrest Capital, L.L.C., a Texas limited liability company for securing
and/or arranging the Loans. The Warrant Certificate will entitle the holder to
subscribe for and purchase from the Company three million (3,000,000) shares of
the Company's common stock at an exercise price of $.16 per share. The Warrant
Certificate will be earned at Closing and vested upon the Company's execution of
the Loan Documents. The form of the Warrant Certificate will be substantially
the same as that form attached hereto as Exhibit B.
ARTICLE 2
NOTE PAYMENTS
2.1. Interest Payments. The principal balance due and owing on the Loans shall
bear interest as stated in the Note and shall be due and payable as stated in
the Note.
2.2. Principal Payments. Principal payments shall be due and payable as stated
in the Note.
2.3. Voluntary Prepayment. The Company may from time to time, without premium or
penalty, prepay the Loans in whole or in part. Any prepayment of the full amount
of the Loans shall include all accrued interest thereon. All payments and
prepayments of the Loans shall be first applied to accrued and unpaid interest
on the unpaid principal balance of the Loans, and the remainder, if any, to any
unpaid principal balance.
ARTICLE 3
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WARRANTIES AND REPRESENTATIONS
The Company represents and warrants to Lender as follows:
3.1. Corporate Organization and Authority.
(a) the Company and each Material Subsidiary [as defined herein] is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation;
(b) the Company has duly taken all action necessary to authorize the execution
and delivery by it of the Loan Documents and to authorize the consummation of
the transactions contemplated thereby and the performance of its obligations
thereunder;
(c) the Company is duly authorized to borrow funds hereunder;
(d) except as set forth on Schedule 3.1(d), the Company is duly licensed or
qualified and is in good standing as a foreign corporation in each jurisdiction
wherein the nature of the business transacted by it or the nature of the
property owned or leased by it makes such licensing or qualification necessary;
and
(e) the Company does not presently have any Subsidiary or own any stock in any
other corporation or association except the following entities:
(i) CleanWeb, Inc., a Texas corporation, (ii) ListenFirst.com, Inc., a
Tennessee corporation, (iii) Global Christian Network, Inc., a Nevada
corporation [to be acquired March 2001], (iv) Solutions Global, Inc., a
West Virginia corporation d/b/a iExalt.com, (v) Capital Artists Agency,
Incorporated, a Tennessee corporation [to be acquired March 2001], (vi)
PremierCare, L.L.C., a Delaware limited liability company, (vii) Christian
Speakers.com, a Tennessee corporation, (viii) Word Cross Enterprises,
Inc., an Ohio corporation d/b/a Christian Happenings, (ix) Keener
Communications Group, Inc., a California corporation d/b/a Christian
Times, GCN Combination Corporation, a Nevada corporation, (x) Integral
Behavioral Health Services, Inc., an Ariziona corporation [7% equity
interest] and (xi) iExalt Operating, Inc., a Texas corporation d/b/a [aa]
iExalt.net, [bb] iExalt Electronic Publishing, [cc] NavPress Software,
[dd] iExalt Radio, [ee] Life Perspectives Radio, [ff] iSermons, [gg]
Gilmore Marketing, and [hh] Rapha.
3.2. Financial Statements. The Company has heretofore delivered to Lender true,
correct and complete copies of the Initial Financial Statements. The Initial
Financial Statements fairly present the Company's consolidated financial
position at the respective dates thereof and the consolidated results of the
Company's operations and the Company's consolidated cash flows for the
respective periods thereof. Since the date of the annual Initial Financial
Statements no Material Adverse Change has occurred, except as reflected in the
quarterly Initial Financial Statements or on Schedule 3.2. All Initial Financial
Statements were prepared in accordance with GAAP.
3.3. Full Disclosure. Except to the extent set forth in Schedule 3.3 and except
to the extent that any previous filings have been corrected in the Company's
Form 10-KSB/A and Form 10-QSB/A filed with the Securities and Exchange
Commission and NASDAQ, all filings of the Company with the Securities and
Exchange Commission and the NASDAQ ("SEC Filings") have been timely made, are
true and correct and are not being investigated, challenged or supplemented or
amended in any way except for the currently contemplated S-1 registration of the
Secondary Offering. The Initial Financial Statements do not, nor does any other
written statement furnished by the Company to the Lender in connection with the
negotiation of the Loans and the issuance of the Note, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact peculiar
to the Company that the Company has not disclosed to Lender in writing that
materially
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affects adversely nor, so far as the Company can now foresee, will materially
affect adversely the properties, business, prospects, profits or condition
(financial or otherwise) of the Company.
3.3.A. Present Material Indebtedness. The Company has disclosed its significant
debts to Lender, which significant debts are (i) a $550,000 loan owed to Chase
Bank; (ii) a $150,000 loan owed to Chase Bank; (iii) a $600,000 loan owed to
Thomson & Kernaghan; (iv) a $545,000 loan owed to Mr. Jack Thompkins; (v) a
$180,000 loan owed to Mr. Ignatius Leonards; (vi) a $90,000 loan owed to Mr.
Frank Fisher; and (vii) a $90,000 loan owed to Mr. Steve Tebo. In addition, Mr.
Fisher and Mr. Tebo each have a $250,000 convertible debenture obligating the
Company.
3.4. Pending Litigation. Except as set forth in the SEC Filings or that do not
involve amounts in excess of $250,000 collectively and except as disclosed on
Schedule 3.4: (a) there are no proceedings or governmental investigations
pending or, to the best knowledge of the Company, threatened against or
affecting the Company in any court or before any governmental authority or
arbitration board or tribunal, (b) there are no outstanding judgments,
injunctions, writs, rulings or orders by any such court, governmental authority,
arbitration board or tribunal against the Company or any of the Company's
stockholders, partners, directors or officers that could cause a Material
Adverse Change, and (c) the Company is not in default with respect to any
contract or agreement to which it is a party or any order of any court or
governmental authority or arbitration board or tribunal.
Company has disclosed to Lender that there are currently disagreements or
disputes with each of the following persons or entities, which disagreements or
disputes could conceivably lead to litigation in the future:
(i) the indebtedness owed Chase Bank
(ii) the indebtedness owed Thomson & Kernaghan
(iii) the indebtedness owed Mr. Jack Thompkins
3.5. No Conflicts. The borrowing under the Loans and the issuance of the Note
and compliance by the Company with all of the provisions of this Agreement, the
Note and the other Loan Documents do not and will not (i) violate any provisions
of any law or any order of any court or governmental authority or agency, (ii)
conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Certificate of Incorporation or
Bylaws of the Company or any indenture or other contract or agreement or
instrument to which the Company is a party or by which it may be bound, (iii)
result in the acceleration of any Indebtedness owed by the Company, or (iv)
result in the imposition of any liens or encumbrances on any property of the
Company, except as expressly contemplated or permitted in the Loan Documents.
3.6. No Defaults. No Default or Event of Default as defined herein has occurred
and is continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness and is not in default under any instrument or
instruments or agreements under and subject to which any Indebtedness has been
issued and no event has occurred and is continuing under the provisions of any
such instrument, contract or agreement which with the lapse of time or the
giving of notice, or both, would constitute an event of default thereunder,
except as disclosed on Schedule 3.1(b). The Company is in material compliance
with all laws, regulations, orders and Environmental Legal Requirements
affecting its business and operations except such non-compliance as would not
materially adversely affect the Company's properties, business, prospects,
profits or condition (financial or otherwise) and has not received any notice of
any violation or potential violation which has not been cured or remedied.
3.7. Governmental Consent. Except for the approvals or consents obtained and
disclosed on Schedule 3.1(b), no approval, consent or withholding of objection
on the part of any regulatory body, state, Federal or local, is necessary in
connection with the execution and delivery by the Company of this Agreement, the
Note or the Loan Documents or compliance by the Company with any of the
provisions of this Agreement, the Note or the Loan Documents.
3.8. Taxes. All tax returns required to be filed by the Company in any
jurisdiction have, in fact, been filed, and all taxes, assessments, fees and
other governmental charges upon the Company or upon any of its properties,
income or franchises, which are shown to be due and payable in such returns have
been paid. The Company does not know of any proposed additional tax assessment
against it for which adequate provision has not been made on its accounts. The
provisions for taxes on the books of the Company are adequate for all open
years, and for its current fiscal
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period. There are no outstanding agreements or waivers extending the statutory
period of limitations applicable to any tax return of the Company.
3.9. Use of Proceeds. The Company will use the Loan proceeds as follows:
to provide working capital for its operations and for other general
business purposes provided that none of the transactions contemplated in this
Agreement (including, without limitation thereof, the use of proceeds from the
Loans) will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended, or any regulation issued pursuant thereto,
including, without limitation, Regulations T, U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter II. None of the proceeds from
the Loans will be used to purchase, or refinance any borrowing, the proceeds of
which were used to purchase any "security" within the meaning of the Securities
Exchange Act of 1934, as amended.
3.10. Employee Retirement Income Security Act of 1974. The consummation of the
transactions provided for in this Agreement and compliance by the Company with
the provisions thereof and the Note issued hereunder will not involve any
prohibited transaction within the meaning of the Employee Retirement Income
Security Act of 1974, as amended, ("ERISA") or Section 4975 of the Internal
Revenue Code of 1986, as amended. Neither the Company nor any person who is
under common control with the Company within the meaning of Section 4001(b) of
ERISA maintains or has ever maintained any (a) "employee pension benefit plans"
as defined in ERISA or (b) duty or obligation to contribute to any plan or trust
under the Multiemployer Pension Plan Act Amendments of 1980, as amended. In the
case of any multiemployer plans to which the Company contributes or participates
in, there is no withdrawal liability to the Company from any of such plans.
3.11. No Other Liens. Except for Permitted Liens, specifically including a
security interest evidenced by a UCC filing filed by Chase Bank and purporting
to encumber the assets of an entity formally known as "iExalt, Inc., a Texas
corporation," none of the Company's assets or properties have been pledged,
transferred or otherwise granted as security. The Company agrees that it will
notify and give Lender copies of all documents involving any Permitted Lien.
3.12. Enforceable Obligations. This Agreement is, and the other Loan Documents
when duly executed and delivered will be, legal, valid and binding obligations
of the Company, enforceable in accordance with their terms except as such
enforcement may be limited by bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights.
3.13. Other Obligations and Restrictions. The Company has no outstanding
Liabilities of any kind (including contingent obligations, tax assessments, and
unusual forward or long-term commitments) which are, in the aggregate, material
to the Company or material with respect to the Company's consolidated financial
condition and not shown in the Initial Financial Statements or disclosed in the
Disclosure Schedule. Except as shown in the Initial Financial Statements or
disclosed in the Disclosure Schedule, the Company is not subject to or
restricted by any franchise, contract, deed, charter restriction, or other
instrument or restriction which could cause a Material Adverse Change.
3.14. Labor Disputes and Acts of God. Except as disclosed in the Disclosure
Schedule, neither the business nor the properties of the Company has been
affected by any fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance), which could cause
a Material Adverse Change.
3.15. Names and Places of Business. The Company has not, during the preceding
five years, had, been known by, or used any other trade or fictitious name,
except as disclosed in the Disclosure Schedule. Except as otherwise indicated in
the Disclosure Schedule, the chief executive office and principal place of
business of the Company is (and for the preceding years has been) located at the
address of the Company set out on the signature pages hereto. Except as
indicated in the Disclosure Schedule, the Company does not have any other office
or place of business.
3.16. Government Regulation. The Company is not subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 (as any of the preceding acts have been amended)
or any other law which regulates the incurring by the Company of Indebtedness,
including laws relating to common contract carriers or the sale of electricity,
gas, steam, water or other public utility services.
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3.17. Solvency. Upon giving effect to the issuance of the Note, the execution of
the Loan Documents by the Company and the consummation of the transactions
contemplated hereby, the Company will be solvent (as such term is used in
applicable bankruptcy, liquidation, receivership, insolvency or similar laws).
3.18. Title to Properties; Licenses. The Company has good and marketable title
to all of the Collateral and to all of its material properties and assets, free
and clear of all Liens, encumbrances, or adverse claims other than Permitted
Liens and Other Liens and free and clear of all impediments to the use of such
properties and assets in the Company's business. Except as set forth in Schedule
3.1(b), the Company possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, and other intellectual property (or
otherwise possesses the right to use such intellectual property without
violation of the rights of any other Person) which are necessary to carry out
its business as presently conducted and as presently proposed to be conducted
hereafter, and the Company is not in violation in any material respect of the
terms under which it possesses such intellectual property or the right to use
such intellectual property. The amount of Liabilities secured by Permitted Liens
encumbering Collateral on the date hereof (excluding only inchoate Liens for
taxes not yet due and payable) does not exceed $50,000.
3.19. Outstanding Indebtedness. The amount of the Company's Permitted
Indebtedness on the date hereof does not exceed the aggregate of $4,000,000.00.
3.20. Security Document Representations and Warranties. Capitalized terms used
in this section, not otherwise defined in this Agreement, and defined in the
Security Documents shall when used in this section have the meanings given them
in the Security Documents.
(a) Ownership Free of Liens. No effective financing statement or
other registration or instrument similar in effect covering all or any
part of the Collateral is on file in any recording office except any that
have been filed in favor of Lender relating to the Security Documents and
any that have been filed to perfect or protect any Permitted Lien or any
Other Lien. None of the Collateral is in the possession of any Person
other than the Company or the Lender, except for Collateral being
transported in the ordinary course of business.
(b) Receivables. Each Receivable represents the valid and legally
binding indebtedness of a bona fide account debtor arising from the sale
or lease by the Company of goods or the rendition by the Company of
services and is not subject to contra-accounts, setoffs, defenses or
counterclaims by or available to account debtors obligated on the
Receivables, except for those for which adequate reserves have been taken
in substantially the same amount as is shown on the Initial Financial
Statements.
(c) General Intangibles. Each General Intangible included within the
Collateral that is material to the Company's business represents the valid
and legally binding obligation of each other Person who is a party thereto
or who is otherwise stated to be obligated thereunder, subject to no
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to account debtors
obligated thereon (in this subsection collectively called "adjustments"),
except (i) in the case of General Intangibles under which money is owing
to the Company, for those adjustments for which adequate reserves have
been taken in substantially the same amount as is shown on the Initial
Financial Statements, and (ii) in the case of other General Intangibles,
for those adjustments which do not materially impair the value to the
Company or the enforcement by the Company of such General Intangibles.
(d) Documents and Instruments. All Documents and Instruments
included within the Collateral are valid and genuine. Any such Document or
Instrument has only one original counterpart which constitutes collateral
within the meaning of the UCC or the law of any applicable jurisdiction,
and all such original counterparts (other than checks delivered in payment
of Receivables in the ordinary course of business) have been delivered
into the possession of such Person designated by Lender as agent pursuant
to the Security Agreement.
(e) Goods. None of the Collateral that constitutes goods is covered
by any Document (other than Documents which are subject hereto and have
been delivered to Lender), is subject to any landlord's lien or similar
Lien (other than Permitted Liens and Other Liens), has been related to,
attached to, or used in connection with any real property so as to
constitute a fixture upon such real property (except for real property
that is subject to a Lien in favor of Lender), is installed in or affixed
to other goods so as to be an accession to such other goods (unless such
other goods are included in the Collateral), or has been
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produced in violation of the Fair Labor Standards Act, as amended. All
such goods are insured to the extent required under this Agreement.
(f) Address. The chief executive office and principal place of
business and the office where all records concerning the Collateral are
kept at the Company's address set forth on its signature page hereto.
3.20. Inclusion of Subsidiaries. As used in this Article 3 (with the exception
of Sections 3.1, 3.2, 3.9, 3.15 and 3.17), the term "the Company" shall include
all Subsidiaries of the Company.
The representations and warranties contained in this Agreement, the Note and the
other Loan Documents are made by the Company as an inducement to Lender to make
its Loan, and the Company understands that Lender is relying on such
representations and warranties, and that such representations and warranties are
true and correct at the time of the first disbursement hereunder and shall
remain true and correct at all times thereafter so long as any part of the Loans
shall remain outstanding. The Closing shall constitute (i) an automatic warranty
and representation by the Company to Lender that there does not then exist a
Default or an Event of Default and (ii) a reaffirmation as of the date of said
request of all of the warranties and representations of the Company contained in
this Agreement.
ARTICLE 4
CONDITIONS TO DISBURSEMENT
4.1. Documents to be Delivered. Lender has no obligation to make its Initial
Loan or to distribute the Subsequent Loans to the Company unless Lender shall
have received all of the following, at Lender's office as set forth on the
Lender Schedule, duly executed and delivered and in form, substance and date
satisfactory to Lender:
(a) This Agreement.
(b) The Note.
(c) Each Security Document listed in the Security Schedule.
(d) Certain certificates of the Company including:
i. An "Omnibus Certificate" of the Secretary and of the Chairman of
the Board or President of the Company prepared by Company's independent
counsel, which shall contain the names and signatures of the officers of
the Company authorized to execute Loan Documents and which shall certify
to the truth, correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by the Board of
Directors of the Company and in full force and effect at the time this
Agreement is entered into, authorizing the execution of this Agreement and
the other Loan Documents delivered or to be delivered in connection
herewith and the consummation of the transactions contemplated herein and
therein, a copy of the charter documents of the Company and all amendments
thereto, certified by the appropriate official of the Company's state of
organization, and a copy of any bylaws of the Company; and
ii. A "Compliance Certificate" of the Chairman of the Board or
President and of the chief financial officer of the Company prepared by
Company's independent counsel, of even date with the Loan, in which such
officers certify to the satisfaction of the conditions set out in
subsections (a), (b), (c) and (d) of Section 4.2.
(e) Certificate (or certificates) of the due formation, valid existence
and good standing of the Company and its Material Subsidiaries in their
respective state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of the Company's [and its Material Subsidiaries']
good standing or due qualification to do business, issued by appropriate
officials in any states in which the Company owns property subject to Security
Documents. In place of actual certificates, Lender will accept specific, written
representations and warranties by the Company that any material subsidiary has
been duly formed, is validly in existence and in good standing as described
above.
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(f) An opinion dated the Closing Date and addressed to Lender from
independent counsel to the Company, satisfactory to Lender and its counsel,
covering such matters relative to the Company and relevant to the transactions
contemplated hereby as Lender or its counsel may reasonably request.
(g) The Initial Financial Statements.
(h) Certificates or binders evidencing the Company's insurance in effect
on the date hereof.
(i) A warrant agreement, duly executed by the Company and substantially in
the form as set forth in Exhibit C (the "Warrant").
(j) A registration rights agreement substantially in the form as set forth
in Exhibit D (the "Registration Rights Agreement").
(k) The Lock Out Agreement (the "Lock Out") in substantially the same form
as set forth in Exhibit E. The Company will obtain executed Lock Out Agreements
from [1] Donald W. Sapaugh and spouse, [2] Hunter A. Carr and spouse, [3] Morris
H. Chapman and spouse, and [4] will use its best efforts to obtain signed Lock
Out Agreements from Frank Fisher and spouse, Steve Tebo and spouse, John
Gilchrist and spouse, and Ignatius Leonards and spouse. In addition, the Lender
and Woodcrest Capital, L.L.C. will execute similar Lock Out Agreements
prohibiting the sale or disposition of Company common stock [with specific
exclusions for shares purchased in the open market, and amounts up to 20% of the
prior day's volume, and for transfers to entities that will continue to be bound
by the Lock Out Agreements, and exclusions for transfers to duly qualified
charitable organizations and ss.501(c)(3) organizations.
4.2. Additional Conditions Precedent. Lender has no obligation to distribute its
Subsequent Loans to Company unless the following conditions precedent have been
satisfied:
(a) All representations and warranties made by the Company in any Loan
Document shall be true on and as of the date of the Loan (except to the extent
that the facts upon which such representations are based have been changed by
the extension of credit hereunder) as if such representations and warranties had
been made as of the date of the Loan.
(b) No Default shall exist at the date of the Loan.
(c) No Material Adverse Change shall have occurred since the date of the
Initial Financial Statements.
(d) The Company shall have performed and complied with all agreements and
conditions required in the Loan Documents to be performed or complied with by it
on or prior to the date of the Loan.
(e) The making of the Loan shall not be prohibited by any law and shall
not subject the Lender to any penalty or other onerous condition under or
pursuant to any such law.
(f) Lender shall have received all documents and instruments that Lender
has then requested, in addition to those described in Section 4.1 (including
corporate documents and records; documents evidencing governmental
authorizations, consents, approvals, licenses and exemptions; certificates of
public officials and of officers and representatives of the Company; and all
reports, records, certificates and other documents requested in relation to any
Security Document delivered pursuant hereto), as to the accuracy and validity of
or compliance with all representations, warranties and covenants made by the
Company in this Agreement and the other Loan Documents, the satisfaction of all
conditions contained herein or therein, and all other matters pertaining hereto
and thereto. All such additional documents and instruments shall be satisfactory
to Lender in form, substance and date.
ARTICLE 4A
SUBSEQUENT LOANS
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4.1A. Distribution of Subsequent Loans to the Company. So long as the Initial
Loan has been repaid or, if not due, the Company is not otherwise in default and
the Subsequent Loans Conditions are satisfied, the Subsequent Loans shall be
funded to the Company by the Lender.
4.1B. Subsequent Loans Conditions. After the funding of the Initial Loan, the
Company may draw up to $100,000 of the Loan proceeds for each 30 day period
thereafter, provided and after the Company satisfies the following Subsequent
Loans Conditions:
(a) the Company is not in default under the Note, nor any of the Loan
Documents; and
(b) the Company is in full compliance with all applicable and materially
mandated SEC filings, rules, and regulations; and
(c) the Company is cash flow positive, as determined by Lender; and
(d) the Company is earnings positive, as determined by Lender; and
(e) Lender determines, in Lender's sole discretion, that the Company is
still an acceptable credit risk; and
(f) Lender determines, in Lender's sole discretion, that the Company is
not a going concern risk.
ARTICLE 5
COMPANY COVENANTS
From and after the date hereof and continuing so long as any amount remains
unpaid on the Note, unless Lender have previously agreed otherwise:
5.1. Corporate Existence, Etc. The Company will preserve and keep in force and
effect its corporate existence, its rights and franchises and all licenses and
permits that it currently has, that are necessary to the proper conduct of its
business and will qualify to do business in all states or jurisdictions where
required by applicable law, except where the failure to so qualify will not
cause a Material Adverse Change.
5.2. Insurance.
(a) The Company will at all times maintain casualty and liability
insurance coverage in accordance with the Insurance Schedule or by financially
sound and reputable insurers in such forms and amounts and against such risks as
are customary for corporations of established reputation engaged in the same or
a similar business and owning and operating similar properties with limits and
scope of coverage reasonably acceptable to Lender. All policies evidencing such
insurance shall name the Lender as an additional insured and shall contain a
loss payable endorsement to the Lender in form and substance acceptable to
Lender that will become effective upon the occurrence of an Event of Default.
Within seven days after the occurrence of an Event of Default, the Company shall
cause any insurance policies covering Collateral to be endorsed to provide for
payment of losses to the Lender, to provide that such policies may not be
canceled or reduced or affected in any material manner for any reason without
fifteen days prior notice to Lender, to provide for any other matters specified
in any applicable Security Document or which Lender may reasonably require, and
to provide for insurance against fire, casualty and any other hazards normally
insured against, in the amount of the full value (less a reasonable deductible
not to exceed amounts customary in the industry for similarly situated
businesses and properties) of the property insured.
(b) Each policy for liability insurance shall provide for all losses after
the occurrence of an Event of Default to be paid on behalf of Lender and the
Company as their respective interests may appear, and each policy insuring loss
or damage to Collateral shall provide for all losses to be paid directly to the
Lender. Each such policy shall in addition (A) within seven days after the
occurrence of an Event of Default, name the Company and the Lender as insured
parties thereunder (without any representation or warranty by or obligation upon
the Lender) as their interests may appear, (B) within seven days after the
occurrence of an Event of Default, be amended to contain the agreement by the
insurer that any loss thereunder shall be payable to the Lender notwithstanding
any action, inaction or breach of representation or warranty by the Company, (C)
provide that there shall be no recourse against Lender for payment of premiums
or other amounts with respect thereto and (D) provide that at least thirty (30)
days' prior written notice of cancellation or of lapse shall be given to Lender
by the insurer. The Company will, if so requested by Lender, deliver to Lender
original or duplicate policies of such insurance and, as often as Lender may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. The Company will also, at the request of Lender, duly execute
and deliver instruments of assignment of such insurance policies and cause the
9
respective insurers to acknowledge notice of such assignment. Lender is hereby
authorized to enforce payment under all such insurance policies and to
compromise and settle any claims thereunder, in its own name or in the name of
the Company.
(c) Reimbursement under any liability insurance maintained by the Company
pursuant to this Section 5.2 may be paid directly to the Person who has incurred
the liability covered by such insurance. With respect to any loss involving
damage to Collateral as to which subsection (d) of this Section 5.2 is not
applicable, the Company will make or cause to be made the necessary repairs to
or replacements of such Collateral, and any proceeds of insurance maintained by
the Company pursuant to this Section 5.2 shall be paid to the Company by Lender
as reimbursement for the costs of such repairs or replacements as such repairs
or replacements are made or acquired.
(d) Upon the occurrence and during the continuance of an Event of Default,
all insurance payments in respect of such Collateral shall be paid to Lender and
applied as specified in Section 4.3 of the Security Agreement.
5.3. Taxes, Claims for Labor and Materials. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent (i) all
taxes, assessments and governmental charges levied or imposed upon it or upon
the income, profits or property of the Company, and (ii) all lawful claims for
labor, materials and supplies which, if unpaid might by law become a Lien upon
the property of the Company; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceeding. The Company will promptly pay
and discharge when due all other Liabilities now or hereafter owed by it.
5.4. Maintenance, Etc. The Company will maintain, preserve and keep all
Collateral and all other property used or useful in the conduct of its business
in good repair and working order, ordinary wear and tear excepted, in compliance
with all applicable laws, and from time to time will, as determined in the
reasonable judgment of the Company, make all necessary repairs, replacements,
renewals and additions thereto needed to enable the business and operations
carried on in connection therewith to be promptly and advantageously conducted
at all times.
5.5. Nature of Business. The Company will not engage in any business if, as a
result, the general nature of the business that would then be engaged in by the
Company would be substantially changed from the general nature of the business
engaged in by the Company on the date of this Agreement.
5.6. Pending or Threatened Suits. The Company will promptly notify Lender, in
writing, of any pending, or threatened administrative, judicial or governmental
suit, claim or proceeding, in law or in equity, which seek damages or other
relief against the Company in excess of $50,000 or that could cause a Material
Adverse Change.
5.7. SEC Filings. The Company shall at all times make all materially mandated
SEC Filings required pursuant to the Securities Exchange Act of 1934, as
amended, and the rules of any stock exchange upon which the Company shall have
listed its securities, and shall notify Lender of any inquiries from the SEC or
any stock exchange with respect to all of its SEC Filings. The Company shall
promptly prepare, file and pursue and keep effective, once filed, its
registration statement with the SEC for its secondary offering, unless the board
of directors of the Company determines that keeping the registration effective
is not in the best interests of the stockholders of the Company. The Company
shall provide Lender with copies of all such SEC Filings.
5.7A Secondary Offering. The Company will use its best efforts to raise funds in
an approximate amount of at least $2,000,000.00 in a Secondary Offering or
private placement within two years, or such time as the parties may mutually
agree.
5.8. Reports. The Company will keep proper books of record and account in which
full and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company in accordance with GAAP, and
will furnish to Lender throughout the term hereof, at the Company's expense (in
duplicate if so specified below or otherwise requested):
(a) Within forty-five (45) days after the end of each month during the term
hereof, reports detailing accounts receivable aging and cash collections as of
the last day of the preceding calendar month;
(b) As soon as available, and in any event within ninety-one (91) days after the
end of each Fiscal Year, complete consolidated and consolidating financial
statements of the Company together with all notes thereto, prepared in
10
reasonable detail in accordance with GAAP, together with an unqualified opinion,
based on an audit using generally accepted auditing standards, by independent
certified public accountants selected by the Company and acceptable to Lender,
[Harper & Pearson, P.C. are accepted to the parties through filing of year 2001
form 10-K] stating that such consolidated financial statements have been so
prepared. These financial statements shall contain a consolidated and
consolidating balance sheet as of the end of such Fiscal Year and consolidated
and consolidating statements of earnings, of cash flows, and of changes in
owners' equity for such Fiscal Year, each setting forth in comparative form the
corresponding figures for the preceding Fiscal Year.
(c) As soon as available, and in any event within forty-five (45) days after the
end of each Fiscal Quarter, the Company's consolidated and consolidating balance
sheet as of the end of such Fiscal Quarter and consolidated and consolidating
statements of the Company's earnings and cash flows for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all
in reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments. In addition the Company will,
together with each such set of financial statements and each set of financial
statements furnished under subsection (b) of this section, furnish a certificate
in the form of Exhibit B signed by the chief financial officer of Borrower
stating that such financial statements are accurate and complete (subject to
normal year-end adjustments) and stating that no Default exists at the end of
such Fiscal Quarter or at the time of such certificate or specifying the nature
and period of existence of any such Default.
5.9. Payment and Performance. The Company will pay all amounts due under the
Loan Documents in accordance with the terms thereof and will observe, perform
and comply with every covenant, term and condition expressed or implied in the
Loan Documents.
5.10. Other Information and Inspections. After 72 hours prior written notice,
the Company will furnish to Lender any information that Lender may from time to
time reasonably request concerning any provision of the Loan Documents, any
Collateral, or any matter in connection with the Company's businesses,
properties, prospects, financial condition and operations. The Company will
permit representatives appointed by Lender (including independent accountants,
auditors, agents, attorneys, appraisers and any other Persons) to visit and
inspect during normal business hours any of the Company's property, including
its books of account, other books and records, and any facilities or other
business assets, and to make extra copies therefrom and photocopies and
photographs thereof, and to write down and record any information such
representatives obtain, and the Company shall permit Lender or its
representatives to investigate and verify the accuracy of the information
furnished to the Lender in connection with the Loan Documents and to discuss all
such matters with its officers, employees and representatives. Lender agrees
that it will take all reasonable steps to keep confidential any proprietary
information given to it by the Company, provided, however, that this restriction
shall not apply to information which (i) has at the time in question entered the
public domain, (ii) is required to be disclosed by Law (whether valid or
invalid), (iii) is disclosed to Lender's Affiliates, auditors, attorneys or
agents (provided such Persons are obligated to hold such information in
confidence on the terms provided in this section), (iv) is furnished to Lender
or to any purchaser or prospective purchaser of participations in any Loan or
Loan Document (provided each such purchaser or prospective purchaser first
agrees to hold such information in confidence on the terms provided in this
section), or (v) is disclosed in the course of enforcing its rights and remedies
during the existence of an Event of Default.
5.11. Notice of Material Events and Change of Address The Company will promptly
notify Lender in writing, stating that such notice is being given pursuant to
this Agreement after the applicable cure period, upon:
a. occurrence of any Material Adverse Change,
b. the occurrence of any Default,
c. the acceleration of the maturity of any Indebtedness owed by the
Company or of any default by the Company under any indenture,
mortgage, agreement, contract or other instrument to which the
Company is a party or by which the Company or any of its properties
is bound, if such acceleration or default could cause a Material
Adverse Change, and
d. any claim of $100,000 or more, any notice of potential liability
under any Environmental Legal Requirements which might exceed such
amount, or any other material adverse claim asserted against the
Company or with respect to the Company's properties.
e. the occurrence of any of the foregoing the Company will take all
necessary or reasonably appropriate steps to remedy promptly any
such Material Adverse Change, Default, acceleration, or default to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of
the foregoing. The
11
Company will also notify Lender and Lender's counsel in writing at
least twenty Business Days prior to the date that the Company
changes its name or the location of its chief executive office or
principal place of business or the place where it keeps its books
and records concerning the Collateral, furnishing with such notice
any necessary financing statement amendments or requesting Lender
and its counsel to prepare the same.
5.13. Performance on Borrower's Behalf. If the Company fails to pay any taxes,
insurance premiums, expenses, attorneys' fees or other amounts it is required to
pay under any Loan Document, Lender may pay the same. The Company shall
immediately upon written notice of any such payment reimburse Lender for any
such payments and each amount paid by Lender shall constitute an Obligation owed
hereunder which is due and payable on the date such amount is paid by Lender.
5.14. Interest. The Company hereby promises to Lender to pay interest at the
Default Rate on all Obligations (including Obligations to pay fees or to
reimburse or indemnify Lender) that the Company has in this Agreement promised
to pay to the Lender and that are not paid when due. Such interest shall accrue
from the date such Obligations become due until they are paid.
5.15. Compliance with Agreements and Law. The Company will perform all material
obligations it is required to perform under the terms of each indenture,
mortgage, deed of trust, security agreement, lease, franchise, agreement,
contract or other instrument or obligation to which it is a party or by which it
or any of its properties is bound. The Company will conduct its business and
affairs in compliance with all laws applicable thereto and will maintain in good
standing all licenses that may be necessary or appropriate to carry on its
business, except where the failure to do any of the above would not constitute a
Material Adverse Change.
5.16. Environmental Matters; Environmental Reviews.
(a) The Company will comply in all material respects with all
Environmental Legal Requirements now or hereafter applicable to the Company, as
well as all contractual obligations and agreements with respect to environmental
remediation or other environmental matters, and shall obtain, at or prior to the
time required by applicable Environmental Legal Requirements, all environmental,
health and safety permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and effect,
except where the failure to obtain such permits, licenses and authorizations
would not constitute a Material Adverse Change. The Company will not do anything
or permit anything to be done that will subject any of its properties to any
remedial obligations under, or result in noncompliance with applicable permits
and licenses issued under, any applicable Environmental Legal Requirements,
assuming disclosure to the applicable governmental authorities of all relevant
facts, conditions and circumstances. Upon Lender's reasonable request, at any
time and from time to time, the Company will provide at its own expense an
environmental inspection of the Company's material real properties and audit of
their environmental compliance procedures and practices, in each case from an
engineering or consulting firm approved by Lender.
(b) The Company will promptly furnish to Lender all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by the Company or otherwise has notice, pending or
threatened against the Company by any governmental authority with respect to any
alleged violation of or non-compliance with any Environmental Legal Requirements
or any permits, licenses or authorizations in connection with the Company's
ownership or use of its properties or the operation of its business.
(c) The Company will promptly furnish to Lender all requests for
information, notices of claim, demand letters, and other notifications, received
by the Company in connection with the Company's ownership or use of its
properties or the conduct of its business, relating to potential responsibility
with respect to any investigation or clean-up of Hazardous Material at any
location.
5.17. Evidence of Compliance. The Company will furnish to Lender at the
Company's expense all evidence that Lender from time to time reasonably request
in writing as to the accuracy and validity of or compliance with all
representations, warranties and covenants made by the Company in the Loan
Documents, the satisfaction of all conditions contained therein, and all other
matters pertaining thereto.
5.18. Agreement to Deliver Security Documents. The Company agrees to deliver, to
further secure the Obligations whenever requested by Lender in its reasonable
discretion, deeds of trust, mortgages, chattel mortgages, security agreements,
financing statements, continuation statements, extension agreements,
acknowledgments, and other Security Documents in form and substance satisfactory
to Lender for the purpose of granting, confirming, protecting
12
and perfecting Liens or security interests in any real or personal property that
was intended to be Collateral pursuant to any Security Document previously
executed and not then released.
5.19. Indebtedness. The Company will not in any manner owe or be liable for
Indebtedness except Permitted Indebtedness; provided that the aggregate
outstanding principal amount of Permitted Indebtedness (excluding any purchase
money Indebtedness permitted by clause (e) of the definition of Permitted
Indebtedness) at any time shall not exceed $10,000,000 (the amount of such
Permitted Indebtedness that is allowed hereunder and that exists, from time to
time, being herein referred to as "Total Allowed Debt") and provided that the
Total Allowed Debt shall be decreased by any amounts that are used to repay
Permitted Indebtedness upon any such repayment.
In addition, the Company shall not take, acquire, or incur any senior debt
without Lender's prior written approval, which approval shall not be
unreasonably withheld.
5.20. Limitation on Liens. Except for Permitted Liens and Other Liens existing
on the Closing Date, the Company will not create, assume or permit to exist any
Lien upon any of the properties or assets that it now owns or hereafter
acquires. Furthermore, within thirty (30) days of the Closing, the Company shall
use its best efforts to obtain documents releasing and terminating all other
Liens that have not yet been released (or assigning such Other Liens to the
Lender) and Lender shall have received all such provided documents within such
thirty (30) day period.
5.21. Limitation on Mergers. Without the approval of Lender [which will not be
unreasonably withheld], the Company will not merge or consolidate with or into
any other Person, except that any Subsidiary of the Company may be merged into
or consolidated with the Company so long as the Company is the surviving
business entity.
5.22. Limitation on Sales of Property. Without the approval of Lender [which
will not be unreasonably withheld], the Company will not sell, transfer, lease,
exchange, alienate or dispose of any of its material assets or properties or any
material interest therein, or discount, sell, pledge or assign any notes payable
to it, accounts receivable or future income, except, to the extent not otherwise
forbidden under the Security Documents except for:
(a) equipment that is worthless or obsolete or which is replaced by
equipment of equal suitability and value; and
(b) inventory that is sold in the ordinary course of business on ordinary
trade terms.
5.23. Limitation on Dividends and Redemptions. The Company shall not declare or
make any dividends or other Distribution.
5.24. Limitation on Investments and New Businesses. The Company will not make
any expenditure or commitment or incur any obligation or enter into or engage in
any transaction except in the ordinary course of business, (b) engage directly
or indirectly in any business or conduct any operations except in connection
with or incidental to its present businesses and operations, or (c) make any
acquisitions of or capital contributions to or other Investments in any Person
or property, other than Permitted Investments. Notwithstanding anything else in
this Section 5.24, the Company may pursue alliance relationships with third
parties.
5.25. Limitation on Credit Extensions. Except for Permitted Investments, the
Company will not extend credit, make advances or make loans other than normal
and prudent extensions of credit to customers buying goods and services in the
ordinary course of business, which extensions shall not be for longer periods
than those extended by similar businesses operated in a normal and prudent
manner.
5.26. Transactions with Affiliates. The Company shall not engage in any material
transaction with any of its Affiliates on terms which are less favorable to it
than those which would have been obtainable at the time in arm's-length dealing
with Persons other than such Affiliates.
5.27. Observer at Board Meetings. The Company hereby agrees to allow the Lender
at least one observer at each Board of Directors meeting (which observer shall
be appointed by Lender) and, at such time as notice is given to each of the
Company's Board of Directors, the Company shall give the Lender written notice
of each such Board of Directors meeting. The Company shall give the Lender
similar advance notice of any proposed Board of Directors action to be taken
other than at a meeting. Any such observer shall agree to keep information
learned as a result of such meeting confidential, provided that such observer
may disclose any such information to the Lender.
13
5.28. General Covenants Applicable to Security Agreement Collateral. Capitalized
terms used in this Section and not otherwise defined herein and that are defined
in the Security Agreement shall have the meanings given them in the Security
Agreement.
(a) Change of Name, Location, or Structure; Additional Filings. The
Company recognizes that financing statements pertaining to the Collateral have
been or may be filed where the Company maintains any Collateral, has its records
concerning any Collateral or has its chief executive office or chief place of
business. Without limitation of any other covenant herein, the Company shall not
cause or permit any change to be made in its name, identity or corporate
structure, or any change to be made to a jurisdiction other than as otherwise
provided herein or in any other Loan Document or as represented herein in (i)
the location of any Collateral, (ii) the location of any records concerning any
Collateral or (iii) in the location of the Company's chief executive office or
principal place of business, unless the Company shall have first notified Lender
of such change at least forty-five (45) days prior to the effective date of such
change, taken all action requested by Lender (under the following subsection (b)
or otherwise) for the purpose of further confirming and protecting Lender's
security interests and rights under the Loan Documents and the perfection and
priority thereof, and if requested by Lender, provided to the Lender a legal
opinion to its satisfaction confirming that such change will not adversely
affect in any way Lender's security interests and rights under this Agreement or
the perfection or priority thereof. In any notice furnished pursuant to this
subsection, the Company will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements or other notices for the purposes of continuing perfection of the
Lender' security interest in the Collateral.
(b) Ownership and Liens. The Company will maintain good and marketable
title to all Collateral, free and clear of all Liens, encumbrances or adverse
claims except for the security interest created by this Agreement and any
Permitted Liens and any Other Liens, and the Company will not grant or allow any
such Liens, encumbrances or adverse claims to exist. The Company will not grant
or allow to remain in effect, and the Company will cause to be terminated, any
financing statement or other registration or instrument similar in effect
covering all or any part of the Collateral, except any which have been filed in
favor of the Lender relating to this Agreement or the Security Documents that
have been filed to perfect or protect any Permitted Lien. The Company (i) will
insure that all of the Collateral -- whether goods, Documents, Instruments, or
otherwise -- is and remains in the possession of the Company (or a bailee or
agent selected by Lender who is holding such Collateral for the benefit of
Lender), except for goods being transported in the ordinary course of business,
and (ii) will not sell, assign (by operation of law or otherwise), transfer,
exchange, lease or otherwise dispose of any of the Collateral.
(c) Further Assurances. The Company will defend Lender's right, title and
special property and security interest in and to the Collateral against the
claims of any Person (other Lender). The Company will not take or fail to take
any action that would in any manner impair the value or enforceability of
Lender's security interest in any Collateral. The Company will, at its expense
as from time to time requested by Lender, promptly execute and deliver all
further instruments, agreements, filings and registrations, and take all further
action to the fullest extent permitted by Law, in order: (i) to confirm and
validate this Agreement and the Security Documents and Lender's rights and
remedies hereunder and thereunder, (ii) to correct any errors or omissions in
the descriptions herein and therein of the Secured Obligations or the Collateral
or in any other provisions hereof and thereof, (iii) to perfect, register and
protect the security interests and rights created or purported to be created
hereby and thereby or to maintain or upgrade in rank the priority of such
security interests and rights, (iv) to enable any Lender to exercise and enforce
its rights and remedies hereunder and thereunder in respect of the Collateral,
or (v) to otherwise give Lender the full benefits of the rights and remedies
described in or granted under this Agreement. As part of the foregoing the
Company will, whenever requested by Lender (i) execute and file any financing
statements, continuation statements, and other filings or registrations relating
to Lender security interests and rights hereunder and under the Security
Documents, and any amendments thereto, and (ii) mark its books and records
relating to any Collateral to reflect that such Collateral is subject to this
Agreement, the Security Documents and the security interests hereunder and
thereunder. To the extent requested by Lender from time to time, the Company
will use its best efforts to obtain from any material account debtor or other
obligor on the Collateral the acknowledgment of such account debtor or obligor
that such Collateral is subject to this Agreement and the Security Documents.
(d) Impairment of Security Interest. The Company will not take or fail to
take any action that would in any manner impair the value or enforceability of
Lender's first priority security interest in any Collateral.
(e) Compromise of Collateral. The Company will not adjust, settle,
compromise, amend or modify any of its rights in the Collateral.
(f) Receivables & General Intangibles. The Company will use its best
efforts, except as otherwise expressly provided herein, to collect in compliance
with applicable Law and at its own expense all amounts due or to become due
under each Receivable and General Intangible that is included within the
Collateral. In connection with such collections, the Company may (and, at
Lender's direction, will) take such action (not otherwise forbidden hereunder)
as the Company or Lender may reasonably deem necessary or advisable to enforce
collection or
14
performance of each such Receivable or General Intangible. Except for actions
and omissions in the ordinary course of business that do not in the aggregate
cause material losses or reductions, the Company (i) will duly perform and cause
to be performed all of its obligations with respect to the goods or services,
the sale or lease or rendering of which gave rise or will give rise to each such
Receivable or General Intangible, and (ii) will not (whether through failure to
duly perform its obligations under any contracts, instruments, and agreements
are related to any such Receivable or General Intangible, or by any written
instrument, or otherwise) take or allow any action or omission which causes any
such Receivable or General Intangible to become subject to any contra-accounts,
setoffs, defenses, counterclaims, discounts, allowances, rebates, credits or
adjustments by or available to account debtors obligated on such Receivable or
General Intangible.
(g) Documents and Instruments. The Company will at all times cause any
Documents or Instruments that are included within the Collateral to be valid and
genuine. The Company will cause all Instruments included within the Collateral
to have only one original counterpart. Upon request by Lender, the Company will
promptly deliver to a bailee or agent selected by Lender who is holding any such
Collateral for the benefit of the Lender all originals of Documents or
Instruments that are included within the Collateral. The Company will not
(whether through failure to duly perform its obligations under any contracts,
instruments, and agreements that are related to any Documents or Instruments
that are included within the Collateral, or by any written instrument, or
otherwise) take or allow any action or omission that causes any Documents or
Instruments that are included within the Collateral to become subject to any
contra-accounts, setoffs, defenses, counterclaims, discounts, allowances,
rebates, credits or adjustments by or available to the Persons obligated
thereon. Upon request by Lender, the Company will mark each chattel paper that
is included within the Collateral with a legend indicating that such chattel
paper is subject to the security interest granted by the applicable Security
Document.
(h) Equipment. The Company will use its best efforts to maintain,
preserve, protect and keep all Equipment included within the Collateral in good
condition, repair and working order and will use its best efforts to cause such
Equipment to be used and operated in a good and workmanlike manner to the extent
commercially reasonable, in accordance with applicable law and in a manner which
will not make void or cancelable any insurance with respect to such Equipment.
The Company will promptly make or cause to be made all repairs, replacements and
other improvements to or in connection with such Equipment which are necessary
or desirable or that Lender may request to such end. The Company will promptly
furnish to Lender a statement respecting any loss or damage to any of such
Equipment with an aggregate value in excess of $25,000. Except for
transportation of Equipment in the ordinary course of business, the Company will
not allow any Equipment included within the Collateral to be located in any
jurisdiction other than those in which is filed an effective financing statement
which perfects Lender's security interest in such Equipment. The Company will
not cause or permit the removal of any item of Equipment from the Company's
possession, control and risk of loss, and the Company will not sell, assign (by
operation of law or otherwise), transfer, exchange, lease or otherwise dispose
of any Equipment, other than in connection with the following (which the Company
may elect to do):
(i) sale or other disposal, other than during the continuance of an
Event of Default, of any item of Equipment that is worn out or obsolete
and that has been replaced by an item of equal suitability and value,
owned by the Company and made subject to the security interest under any
Security Document, but which is otherwise free and clear of any Liens,
encumbrances or adverse claims, and/or
(ii) possession of Equipment by a bailee or agent selected by Lender
who is holding such Equipment for the benefit of the Lender.
The Company will not permit any of the Collateral that constitutes Equipment to
at any time become so related to attached to, or used in connection with any
particular real property so as to become a fixture upon such real property, or
to be installed in or affixed to other goods so as to become an accession to
such other goods unless such other goods are also included in the Collateral.
5.29. Inclusion of Subsidiaries. As used in this Article 5 (with the exception
of Sections 5.8, 5.9, 5.14, and 5.27), the term "the Company" shall
include all Subsidiaries of the Company.
5.30. Securities Registration. The Company will undertake at its sole expense to
register the securities (i) represented by the Warrants to be earned by
Woodcrest Capital, L.L.C. at Closing pursuant to section 1.4 herein, (ii)
represented by the Warrants to be earned by Lender at Closing pursuant to
section 2. of the Warrant Agreement attached as Exhibit C hereto, and
(iii) represented by the 93,750 shares of Company common stock to be paid
to Lender's counsel pursuant to Section 1.3 herein. The Company will use
its best efforts to file a registration statement as soon as possible, and
no later than 45 days after date of Closing, and
15
to have the underlying shares of common stock declared effective as soon
as possible, and no later than 120 days after Closing.
ARTICLE 6
DEFAULTS AND REMEDIES
6.1. Events of Default. Any one or more of the following shall constitute an
"Event of Default" as the term is used herein:
(a) The Company fails to pay any Obligation when due and payable, whether
at a date for the payment of a fixed installment or as a contingent or other
payment becomes due and payable or as a result of acceleration or otherwise,
within five days after the same becomes due; or
(b) Default shall occur in the observance or performance of any
nonmonetary covenant or agreement contained herein or in the other Loan
Documents that is not remedied within 30 days after notice thereof to the
Company by Lender; or
(c) If any representation or warranty made by the Company herein or in any
Loan Document, or made by the Company in any statement or certificate furnished
by the Company pursuant hereto, is untrue or incorrect in any material respect
as of the date of the making thereof or subsequently becomes untrue or incorrect
and such inaccuracy is not immediately disclosed to Lender; or
(d) The Company fails to duly observe, perform or comply with any
agreement with any Person or any term or condition of any instrument, if such
agreement or instrument is materially significant to such the Company, and such
failure is not remedied within the applicable period of grace (if any) provided
in such agreement or instrument; or
(e) The Company fails to pay any portion, when such portion is due, of any
of its Indebtedness in excess of $100,000, or breaches or defaults in the
performance of any agreement or instrument by which any such Indebtedness is
issued, evidences, governed, or secured, and any such failure, breach or default
continues beyond any applicable period of grace provided therefor; or
(f) The Company becomes insolvent or bankrupt, is generally not paying its
debts as they become due or makes an assignment for the benefit of creditors, or
the Company causes or suffers an order for relief to be entered with respect to
it under applicable Federal bankruptcy law or applies for or consents to the
appointment of a custodian, trustee, liquidator, or receiver for the Company; or
(g) A custodian, trustee, liquidator, or receiver is appointed for the
Company or for the major part of the property of either and is not discharged
within 30 days after such appointment; or
(h) Final judgment or final judgments for the payment of money aggregating
in excess of $100,000 (except for payments of amounts which are covered by
insurance) is or are outstanding against the Company or against any property or
assets of either and any one of such judgments has remained unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of 60 days from the
date of its entry; or
(i) Bankruptcy, reorganization, arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws for the
relief of debtors, are instituted by or against the Company and, if instituted
against the Company, are consented to or are not dismissed within 60 days after
such institution; or
(j) Any Change of Control occurs; or
(m) Any Material Adverse Change occurs, and Lender gives written notice
thereof to the Company.
6.2. Remedies. Upon the occurrence of an Event of Default described in
subsections (f), (g) or (i) of Section 6.1 with respect to the Company, all of
the Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of
16
which are hereby expressly waived by the Company. Upon any such acceleration,
any obligation of Lender hereunder to make any further Loans shall be
permanently terminated. During the continuance of any other Event of Default,
Lender at any time and from time to time may, without notice to the Company, do
either or both of the following: terminate any obligation of Lender to make
Loans hereunder, and declare any or all of the Obligations immediately due and
payable, and all such Obligations shall thereupon be immediately due and
payable, without demand, presentment, notice of demand or of dishonor and
nonpayment, protest, notice of protest, notice of intention to accelerate,
declaration or notice of acceleration, or any other notice or declaration of any
kind, all of which are hereby expressly waived by the Company. In addition,
Lender may pursue any or all of the rights available to it at law or in equity
or as provided herein and in the Notes, including, without limitation, all
rights and remedies of a secured party under the UCC. In connection therewith,
the Company agrees that a ten (10) day notice period is commercially reasonable
for the conduct of a public or private sale under the UCC, and the Company
hereby irrevocably makes, constitutes and appoints Lender or any other Person
designated by Lender for that purpose as the Company's true and lawful attorney
and agent-in-fact to sign the name of the Company on any continuation statement
or other document necessary to further perfect the Lender's security interest or
foreclose and/or take possession of the Collateral. Furthermore, upon the
occurrence of an Event of Default, the Default Rate shall commence to accrue.
6.3 Costs of Remedies. Any and all costs and expenses (including reasonable
attorney's fees) incurred by Lender in pursuing its remedies hereunder shall be
an additional indebtedness due and owing by the Company to Lender and shall be
governed by this Agreement, the Note and the other Loan Documents.
ARTICLE 7
CERTAIN DEFINITIONS
"Affiliate" shall mean a Person (a) that, directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, another Person (b) that beneficially owns or holds 10% or more of any
class of the voting interests of such Person, or (c) 10% or more of the voting
interests of which is beneficially owned or held by such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting interests, by contract or otherwise.
"Business Day" means a day. Other than a Saturday or Sunday, on which commercial
banks are open for business with the public in Fort Worth, Texas.
"Change of Control" means the occurrence of either of the following events: (a)
any Person or two or more Persons acting as a group shall acquire beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Act of 1934, as amended, and including holding
proxies to vote for the election of directors other than proxies held by the
Company's management or their designees to be voted in favor of Persons
nominated by the Company's Board of Directors) of 50% or more of the outstanding
voting securities of the Company, measured by voting power (including both
common stock and any preferred stock or other equity securities entitling the
holders thereof to vote with the holders of common stock in elections for
directors of the Company) or (b) one-third or more of the directors of the
Company shall consist of Persons not nominated by the Company's Board of
Directors (not including as Board nominees any directors which the Board is
obligated to nominate pursuant to shareholders agreements, voting trust
arrangements or similar arrangements).
"Closing" and "Closing Date" are defined in Section 1.2.
"Collateral" means all property of any kind that is subject to a Lien in favor
of Lender or which, under the terms of any Security Document, is purported to be
subject to such a Lien.
"Commitment Period" means the period from and including the Closing Date until
and including the date which is 10 Business Days after the Closing Date.
"Deed of Trust" means that certain deed of trust of even date herewith delivered
by the Company to the Lender in connection with this Agreement and listed on the
Security Schedule.
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"Default" shall mean any event or condition, the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default as defined in Section 6.1.
"Default Rate" shall mean 18% per annum calculated on the basis of a 365 day
year.
"Distribution" means (i) any dividend or other distribution made by the Company
on or in respect of any stock, partnership interest, or other equity interest in
the Company (including any option or warrant to buy such an equity interest), or
(ii) any payment made by the Company to purchase, redeem, acquire or retire any
stock, partnership interest, or other equity interest in the Company (including
any such option or warrant).
"Environmental Legal Requirement" shall mean any applicable law relating to
public health, safety or the environment, including, without limitation,
relating to releases, discharges or emissions to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use and handling of
polychlorinated biphenyls or asbestos, to the disposal, treatment, storage or
management of solid or hazardous wastes or to exposure to toxic or hazardous
materials, to the handling, transportation, discharge or release of gaseous or
liquid substances and any regulation, order, notice or demand issued pursuant to
such statute or ordinance, in each case applicable to the property of the
Company or the operation, construction or modification of any thereof, including
without limitation the following: the Clean Air Act, the Federal Water Pollution
Control Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the
Comprehensive Environmental Response Compensation and Liability Act as amended
by the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act as amended by the Solid and Hazardous Waste
Amendments of 1984, the Occupational Safety and Health Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Solid Waste Disposal Act,
and any state statutes addressing similar matters, and any state statute
providing for financial responsibility for cleanup or other actions with respect
to the release or threatened release of hazardous substances and any state
nuisance statute.
"Equipment" means all equipment (as defined in the UCC) in whatever form,
wherever located, and whether now or hereafter existing, and all parts thereof,
all accessions thereto, and all replacements therefor.
"ERISA" is defined in Section 3.12.
"Fiscal Quarter" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any year.
"GAAP" means those generally accepted accounting principles and practices which
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of the Company, are
applied for all periods after the date hereof in a manner consistent with the
manner in which such principles and practices were applied to the Initial
Financial Statements. If any change in any accounting principle or practice is
required by the Financial Accounting Standards Board (or any such successor) in
order for such principle or practice to continue as a generally accepted
accounting principle or practice, all reports and financial statements required
hereunder with respect to the Company shall be prepared in accordance with such
change.
"Hazardous Materials" means any substances regulated under any Environmental
Legal Requirement whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"Indebtedness" of any Person means Liabilities in any of the following
categories:
(a) Liabilities for borrowed money (including accrued and unpaid
interest),
(b) Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c) Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d) Liabilities that would under GAAP be shown on such Person's balance
sheet as a liability, and are payable more than one year from the date of
creation thereof (other than reserves for taxes and reserves for contingent
obligations),
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(e) Liabilities owing under direct or indirect guaranties of Liabilities
of any other Person or otherwise constituting obligations to purchase or acquire
or to otherwise protect or insure a creditor against loss in respect of
Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding endorsements
in the ordinary course of business of negotiable instruments in the course of
collection,
(f) Liabilities (for example, repurchase agreements, mandatorily
redeemable preferred stock and sale/leaseback agreements) consisting of an
obligation to purchase or redeem securities or other property, if such
Liabilities arises out of or in connection with the sale or issuance of the same
or similar securities or property,
(g) Liabilities with respect to letters of credit or applications or
reimbursement agreements therefore, or
(h) Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefore;
provided, however, that the "Indebtedness" of any Person shall not include (i)
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefore and (ii) indemnifications by such Person contained in the
Loan Documents or pursuant to the documents described herein.
"Initial Financial Statements" means the audited quarterly financial statement
of the Company dated as of November 30, 2000 and unaudited periodic financial
statements, including balance sheets of the Company and statements of income and
changes in cash flow, for the period from November 30, 2000 up to January 31,
2001.
"Insurance Schedule" means any Schedule describing policies of insurance
attached hereto.
"Investment" means any investment, made directly or indirectly, in any Person or
any property, whether by purchase, acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan, advance, capital
contribution or otherwise and whether made in cash, by the transfer of property,
or by any other means.
"Law" means any statute, law, regulation, ordinance, rule, treaty, judgment,
order, decree, permit, concession, franchise, license, agreement or other
governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"Lender Schedule" means Schedule so named and attached hereto.
"Liabilities" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"Lien" means, with respect to any property or assets, any right or interest
therein of a creditor to secure Liabilities owed to it or any other arrangement
with such creditor which provides for the payment of such Liabilities out of
such property or assets or which allows such creditor to have such Liabilities
satisfied out of such property or assets prior to the general creditors of any
owner thereof, including any lien, mortgage, security interest, pledge, deposit,
production payment, rights of a vendor under any title retention or conditional
sale agreement or lease substantially equivalent thereto, tax lien, mechanic's
or materialman's lien, or any other charge or encumbrance for security purposes,
whether arising by Law or agreement or otherwise, but excluding any right of
offset which arises without agreement in the ordinary course of business. "Lien"
also means any filed financing statement, any registration of a pledge (such as
with an issuer of uncertificated securities), or any other arrangement or action
which would serve to perfect a Lien described in the preceding sentence,
regardless of whether such financing statement is filed, such registration is
made, or such arrangement or action is undertaken before or after such Lien
exists.
"Loans" has the meaning given to such term in Section 1.1.
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"Loan Documents" means this Agreement, the Note, the Security Documents, the
Warrant, the Registration Rights Agreement, the Look-Up Agreement, and all
amendments, modifications and restatements of such documents and instruments.
"Material Adverse Change" means a material and adverse change, from the state of
affairs presented in the Initial Financial Statements or as represented or
warranted in any Loan Document, to (a) the Company's financial condition, (b)
the Company's operations, properties or prospects, considered as a whole, (c)
the Company's ability to timely pay the Obligations, (d) the enforceability of
the material terms of any Loan Documents, or (e) the Collateral or Lender' Liens
on the Collateral.
"Maximum Loan Amount" means the amount equal to $6,000,000.
"Maximum Rate" means, at any time and with respect to any Lender, the maximum
rate of nonusurious interest under applicable law that such Lender may contract
for, take, charge or receive with respect to the Obligations.
"Note" has the meaning given to such term in Section 1.1.
"Obligations" means all Liabilities from time to time owing by the Company to
any Lender under or pursuant to this Agreement, the Note or any Security
Document (including any modifications, amendments or restatements of any such
documents or instruments). "Obligation" means any part of the Obligations.
"Other Liens" means any Lien on the Company's property other than Permitted
Liens.
"Permitted Indebtedness" means the following:
(a) the Obligations.
(b) unsecured Indebtedness between the Company and its Subsidiaries
arising in the ordinary course of business.
(c) Indebtedness owed by the Company or its Subsidiaries that is
subordinated to the Obligations upon terms and conditions satisfactory to
Lender.
(d) outstanding Indebtedness of the Company and of any of the Company's
Subsidiaries on the Closing Date, but excluding any renewals or extensions of
such Liabilities.
(e) purchase money Indebtedness, provided that the original principal
amount of any such Indebtedness shall not be in excess of the purchase price of
the asset (including but not limited to equipment and assets comprising
television stations) acquired thereby and such Indebtedness shall be secured
only by the acquired asset.
"Permitted Investments" means
(a) property used in the ordinary course of business of Restricted
Persons;
(b) current assets arising from the sale or lease of goods and services in
the ordinary course of business by the Company or from sales permitted under
Section 5.23; and
"Permitted Liens" means:
(a) statutory Liens for taxes, assessments or other governmental charges
or levies which are not yet delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP;
(b) landlords', operators', carriers', warehousemen's, repairmen's,
mechanics', materialmen's, or other like Liens that do not secure Indebtedness,
in each case only to the extent arising in the ordinary course of business and
only to the extent securing obligations that are not delinquent or that are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP;
20
(c) minor defects and irregularities in title to any property, so long as
such defects and irregularities neither secure Indebtedness nor materially
impair the value of such property or the use of such property for the purposes
for which such property is held;
(d) deposits of cash or securities to secure the performance of bids,
trade contracts, leases, statutory obligations and other obligations of a like
nature (excluding appeal bonds) incurred in the ordinary course of business;
(e) Liens under the Security Documents;
(f) Liens securing purchase money Indebtedness, provided that such
Indebtedness shall be secured only by the acquired asset;
(g) Liens securing Indebtedness outstanding under the instruments and
agreements described in the attached Schedules;
(h) with respect only to property subject to any particular Security
Document, Liens burdening such property which are expressly allowed by such
Security Document.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Property" means that certain real property that is subject to the Lien pursuant
to the Deed of Trust.
"Restricted Person" means the Company and any Subsidiary of the Company.
"Security Agreement" means the security agreement of even date herewith
delivered by the Company to the Lender in connection with this Agreement and
listed on the Security Schedule.
"Security Documents" means the instruments listed in the Security Schedule and
all other security agreements, deeds of trust, mortgages, chattel mortgages,
pledges, guaranties, financing statements, continuation statements, extension
agreements and other agreements or instruments now, heretofore, or hereafter
delivered by the Company to Lender in connection with this Agreement or any
transaction contemplated hereby to secure or guarantee the payment of any part
of the Obligations or the performance of the Company's other duties and
obligations under the Loan Documents.
"Security Schedule" means the so named Schedule attached hereto..
"Subsidiary" means, with respect to any Person, any corporation, association,
partnership, limited liability company, joint venture, or other business or
corporate entity, enterprise or organization which is directly or indirectly
(through one or more intermediaries) controlled by or owned fifty percent or
more by such Person.
"Total Allowed Debt" means the aggregate outstanding principal amount of
Permitted Indebtedness.
"UCC" means the Uniform Commercial Code in effect in the State of Texas, as
amended.
ARTICLE 8
ADDITIONAL CONDITIONS
8.1. Determination of Facts. Lender shall, at all times, have the right to
establish, to its satisfaction and in its reasonable discretion, the existence
or non-existence of any fact that is a condition to this Agreement.
8.2. Protection of the Loan. Lender shall have the right, but not the
obligation, to perform any and all acts that Lender may deem reasonably
necessary to assure the protection of the Loans, including, but not limited to,
action during the continuance of an Event of Default, and the commencement of,
appearance in or defense of any action or proceeding purporting to affect the
rights, obligations or duties of the Company (provided that the claim against
the
21
Company in any such suit exceeds $100,000 individually or in the aggregate) or
the Lender. Any expense paid or incurred (including reasonable attorneys' fees)
or any advance made by the Lender in connection therewith shall be paid by the
Company to Lender upon demand.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1. Waivers and Amendments; Acknowledgments.
(a) Waivers and Amendments. No failure or delay (whether by course of
conduct or otherwise) by Lender in exercising any right, power or remedy that
Lender may have under any of the Loan Documents shall operate as a waiver
thereof or of any other right, power or remedy, nor shall any single or partial
exercise by Lender of any such right, power or remedy preclude any other or
further exercise thereof or of any other right, power or remedy. No waiver of
any provision of any Loan Document and no consent to any departure therefrom
shall ever be effective unless it is in writing and signed as provided below in
this section, and then such waiver or consent shall be effective only in the
specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on the Company shall in any
case of itself entitle the Company to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Loan Documents set
forth the entire understanding between the parties hereto with respect to the
transactions contemplated herein and therein and supersede all prior discussions
and understandings with respect to the subject matter hereof and thereof, and no
waiver, consent, release, modification or amendment of or supplement to this
Agreement or the other Loan Documents shall be valid or effective against any
party hereto unless the same is in writing and signed by (i) if such party is
the Company, by the Company, and (ii) if such party is the Lender, by the
Lender.
(b) Acknowledgments and Admissions. The Company hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents, (ii) it has made an
independent decision to enter into this Agreement and the other Loan Documents,
without reliance on any representation, warranty, covenant or undertaking by
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by Lender as to the Loan Documents except as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iv) Lender has no fiduciary obligation toward the Company with respect
to any Loan Document or the transactions contemplated thereby, (v) the
relationship pursuant to the Loan Documents between the Company and the Lender
is and shall be solely that of debtor and creditor, respectively, (vi) no
partnership or joint venture exists with respect to the Loan Documents between
the Company and the Lender, (vii) should an Event of Default occur or exist,
Lender will determine in its sole discretion and for its own reasons what
remedies and actions it will or will not exercise or take at that time, (viii)
without limiting any of the foregoing, the Company is not relying upon any
representation or covenant by Lender, or any representative thereof, and no such
representation or covenant has been made, that Lender will, at the time of an
Event of Default, or at any other time, waive, negotiate, discuss, or take or
refrain from taking any action permitted under the Loan Documents with respect
to any such Event of Default or any other provision of the Loan Documents, and
(ix) Lender has relied upon the truthfulness of the acknowledgments in this
section in deciding to execute and deliver this Agreement and to become
obligated hereunder.
(c) Joint Acknowledgment. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
22
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
9.2. Set-Off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and continuance of any Event of Default or any condition, event or
act which, with the giving of notice or lapse of time, or both, would constitute
such an Event of Default, the Lender is hereby authorized at any time or from
time to time, without prior notice to the Company or to any other Person, any
such prior notice being hereby expressly waived, to set-off and to appropriate
and apply any and all deposits (general or special) and any other indebtedness
at any time held or owing by any office of the Lender or its Affiliates to or
for the credit of the account of the Company, regardless of the currency of such
deposits or other indebtedness, against and on account of the obligations and
liabilities of the Company to the Lender under this Agreement and the other Loan
Documents, including, without limitation, all claims of any nature or
description arising out of or connected with this Agreement and the other Loan
Documents, irrespective of whether or not the Lender shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
shall be contingent or unmatured. The Lender shall provide Company with notice
of such set-off within a reasonable time after the occurrence of any such
set-off.
9.3. Survival of Agreements; Cumulative Nature. The Company's various
representations, warranties, covenants and agreements in the Loan Documents
shall survive the execution and delivery of this Agreement and the other Loan
Documents and the performance hereof and thereof, including the making or
granting of the Loan and the delivery of the Note and the other Loan Documents,
and shall further survive until all of the Obligations are paid in full to the
Lender and all of Lender's obligations to the Company are terminated. All
statements and agreements contained in any certificate or other instrument
delivered by the Company to Lender under any Loan Document shall be deemed
representations and warranties by the Company or agreements and covenants of the
Company under this Agreement. The representations, warranties, indemnities, and
covenants made by the Company in the Loan Documents, and the rights, powers, and
privileges granted to the Lender in the Loan Documents, are cumulative, and,
except for expressly specified waivers and consents, no Loan Document shall be
construed in the context of another to diminish, nullify, or otherwise reduce
the benefit to the Lender of any such representation, warranty, indemnity,
covenant, right, power or privilege. In particular and without limitation, no
exception set out in this Agreement to any representation, warranty, indemnity,
or covenant herein contained shall apply to any similar representation,
warranty, indemnity, or covenant contained in any other Loan Document, and each
such similar representation, warranty, indemnity, or covenant shall be subject
only to those exceptions which are expressly made applicable to it by the terms
of the various Loan Documents.
9.4. Indemnity. The Company agrees to indemnify Lender, upon demand, from and
against any and all liabilities, obligations, broker's fees, claims, losses,
damages, penalties, fines, actions, judgments, suits, settlements, costs,
expenses or disbursements (including reasonable fees of attorneys, accountants,
experts and advisors) of any kind or nature whatsoever (in this section
collectively called "liabilities and costs") that to any extent (in whole or in
part) may be imposed on, incurred by, or asserted against Lender growing out of,
resulting from or in any other way associated with any of the Collateral, the
Loan Documents and the transactions and events (including the enforcement or
defense thereof) at any time associated therewith or contemplated therein
(whether arising in contract or in tort or by statute or otherwise). Among other
things, the foregoing indemnification covers all liabilities and costs incurred
by Lender related to any breach of a Loan Document by the Company, any bodily
injury to any Person or damage to any Person's property, or any violation or
noncompliance with any Environmental Legal Requirements by Lender or any other
Person or any liabilities or duties of Lender or any other Person with respect
to Hazardous Materials found in or released into the environment.
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY
23
OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY
LENDER,
provided only that Lender shall be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs that is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including the Company or any
of its Affiliates) ever alleges such gross negligence or willful misconduct by
Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct. As used in
this section the term "Lender" shall include each director, officer, agent,
trustee, attorney, employee, representative and affiliate of or for Lender.
9.5. Execution in Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto or thereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
instrument.
9.6. Notices. Any notices to be served pursuant hereto will be deemed properly
delivered if delivered personally, by United States certified or registered
mail, postage prepaid, or by Federal Express or comparable overnight courier
service fare prepaid, or by legible facsimile transmission, to set forth on its
signature page hereto or to such other address as the Company may direct in
writing and to Lender at its address set forth on the Lender's Schedule or at
such other address as Lender may direct in writing. Such notices shall be deemed
received the same day if delivered personally or by legible facsimile, three
business days after delivery by certified or registered mail, and the next
business day if delivered by overnight courier.
9.7. Governing Law; Submission to Process. Except to the extent that the law of
another jurisdiction is expressly elected in a Loan Document, the Loan Documents
shall be deemed contracts and instruments made under the laws of the State of
Texas and shall be construed and enforced in accordance with and governed by the
laws of the State of Texas and the laws of the United States of America, without
regard to principles of conflicts of law. Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit loan accounts and revolving tri-party
accounts) does not apply to this Agreement or to the Note. The Company hereby
irrevocably submits itself to the non-exclusive jurisdiction of the state and
federal courts sitting in the State of Texas and agrees and consents that
service of process may be made upon it in any legal proceeding relating to the
Loan Documents or the Obligations by any means allowed under Texas or federal
law. In addition to the places of payment specified in the Notes, the Company
and Lender stipulate and agree that Tarrant County, Texas is an appropriate and
acceptable venue for any state or federal court action concerning the Loan
Documents.
NOTWITHSTANDING THE FOREGOING, ANY DISPUTE ARISING FROM THIS AGREEMENT OR ANY
DOCUMENT OR INSTRUMENT EXECUTED IN CONNECTION WITH THIS AGREEMENT SHALL BE
GOVERNED IN ACCORDANCE WTH THE RULES OF PROCEDURE FOR CHRISTIAN CONCILIATION, OF
THE INSTITUTE FOR CHRISTIAN CONCILIATION [PEACEMAKER MINISTRIES]. BOTH
24
PARTIES REALIZE AND AGREE THAT ARBITRATION WILL BE THE EXCLUSIVE REMEDY FOR ANY
AND ALL DISPUTES, AND MAY NOT LATER LITIGATE THESE OR ANY OTHER RELATED MATTERS
IN ANY COURT.
9.8. Construction. This Agreement shall not be construed more strictly against
Lender than against the Company merely by virtue of the fact that the same has
been prepared by counsel for Lender, it being recognized that both the Company
and the Lender have contributed substantially and materially to the preparation
of this Agreement.
9.9. Captions. The captions of various articles herein are for convenience only
and are not to be utilized in construing the content or meaning of the
substantive provisions hereof.
9.10. Potential Invalidity. In the event of any inconsistency among the terms
hereof (including incorporated terms) or between such terms and the terms of the
Note, the terms of this Agreement shall govern and prevail. The whole or partial
invalidity, illegality or unenforceability of any provision hereof or the Note
at any time, whether pursuant to the terms of then applicable law or otherwise,
shall not affect:
(a) in the instance of partial invalidity, illegality or unenforceability, the
validity, legality or enforceability of such provision at such time except to
the extent of such partial invalidity, illegality or unenforceability; or
(b) the validity, legality or enforceability of such provision at any other time
or of any other provision hereof at that or any other time.
9.11. Interpretation. All words herein which are expressed in the masculine or
neuter gender shall be deemed to include the masculine, feminine and neuter
genders. Any word herein that is expressed in the singular or plural shall be
deemed, whenever appropriate in the context, to include the plural and the
singular.
9.12. Agreement Binding on Successors. This Agreement shall be binding upon and
shall inure to the benefit of the Company and Lender, their respective
successors, permitted assigns, grantees and legal representatives. The Company
may not assign any of its rights or delegate any of its duties under this
Agreement, Notes or any other Loan Documents.
9.13. Limitation on Interest. The Lender and the Company and any other parties
to the Loan Documents intend to contract in strict compliance with applicable
usury law from time to time in effect. In furtherance thereof such Persons
stipulate and agree that none of the terms and provisions contained in the Loan
Documents shall ever be construed to create a contract to pay, for the use,
forbearance or detention of money, interest in excess of the maximum amount of
interest permitted to be charged by applicable law from time to time in effect.
Neither the Company nor any present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of any Obligation shall ever be
liable for unearned interest thereon or shall ever be required to pay interest
thereon in excess of the maximum amount that may be lawfully contracted for,
charged, or received under applicable law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. The Lender
expressly disavows any intention to contract for, charge, or collect excessive
unearned interest or finance charges in the event the maturity of any Obligation
is accelerated. If maturity of any Obligation is accelerated for any reason, any
Obligation is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the legal maximum, or Lender or any other
holder of any or all of the Obligations shall otherwise collect moneys which are
determined to constitute interest that would otherwise increase the interest on
any or all of the Obligations to an amount in excess of that permitted to be
charged by applicable law then in effect, then all sums determined to constitute
interest in excess of such legal limit shall, without penalty, be promptly
applied to reduce the then outstanding principal of the related Obligations or,
at Lender's or such holder's option, promptly returned to the Company or the
other payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the maximum
amount permitted under applicable law, Lender and the Company (and any other
payors thereof) shall to the greatest extent permitted under applicable law,
characterize any non-principal payment as an expense, fee or premium rather than
as interest, exclude voluntary prepayments and the effects thereof, and
amortize, prorate, allocate, and spread the total amount of interest throughout
the entire contemplated term of the instruments evidencing the Obligations in
accordance with the amounts outstanding from time to time
25
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully contract for, charge, or receive the
maximum amount of interest permitted under applicable law. In the event
applicable law provides for an interest ceiling under Chapter 303 of the Texas
Finance Code (the "Texas Finance Code") as amended, for that day, the ceiling
shall be the "weekly ceiling" as defined in the Texas Finance Code, provided
that if any applicable Law permits greater interest, the Law permitting the
greatest interest shall apply. As used in this section the term "applicable law"
means the laws of the State of Texas or the Laws of the United States of
America, whichever laws allow the greater interest, as such laws now exist or
may be changed or amended or come into effect in the future.
9.14. Exculpation. Nothing in the Loan Documents shall be construed to
constitute Lender a trustee, joint venturer, or other fiduciary of the Company.
9.15. Waiver of Jury Trial, Punitive Damages. The Company hereby knowingly,
voluntarily, intentionally, and irrevocably waive, to the maximum extent not
prohibited by Law, any right it may have to a trial by jury in respect of any
litigation based hereon, or directly or indirectly at any time arising out of,
under or in connection with the Loan Documents or any transaction contemplated
thereby or associated therewith, before or after maturity; waives, to the
maximum extent not prohibited by Law, any right it may have to claim or recover
in any such litigation any "Special Damages", as defined below, certifies that
no party hereto nor any representative or agent or counsel for any party hereto
has represented, expressly or otherwise, or implied that such party would not,
in the event of litigation, seek to enforce the foregoing waivers, and
acknowledges that it has been induced to enter into this Agreement, the other
Loan Documents and the transactions contemplated hereby and thereby by, among
other things, the mutual waivers and certifications contained in this section.
As used in this section, "Special Damages" includes all special, consequential,
exemplary, or punitive damages (regardless of how named), but does not include
any payments or funds which any party hereto has expressly promised to pay or
deliver to any other party hereto.
9.16. Attorney Representation. Each party hereto understands and agrees that (i)
J. Wesley Christian represents only the Company and (ii). W. Michael Greene,
P.C. represents only the Lender only. Furthermore, each party hereto hereby
acknowledges that (i) such party has either consulted with or had the
opportunity to consult with independent legal counsel regarding the transactions
contemplated in this Agreement and in the other Loan Documents and (ii) such
party and its legal counsel (if applicable) have had a chance to review this
Agreement and the other Loan Documents.
9.17. Facsimile signatures. For purposes of the parties' execution of this
Agreement, it is expressly agreed that a facsimile or telecopy of a party's
signature hereto shall be as valid, binding and enforceable as the original.
Likewise, each party agrees that an e-mail communication acknowledging receipt
of this document, and containing an express statement that the sender of the
e-mail agrees to the document's terms and conditions, shall be as valid and
enforceable as that sender or party's original signature on this document.
9.18 Other Documents. The parties hereto shall execute such other and further
documents as may be necessary, appropriate or convenient to effectuate the
purposes of this agreement.
IN WITNESS OF THE FOREGOING, the Company and Lender have executed or
caused this Agreement to be executed by their duly authorized officers as of the
day and year first above written.
BORROWER:
iEXALT, INC., a Nevada corporation
By:/s/Donald W. Sapaugh
-------------------------------------
Donald W. Sapough, CEO
Address:
iExalt, Inc.
12000 Aerospace Avenue, Suite 375
Houston, Texas 77034
26
LENDER:
Woodcrest Capital II Limited Partnership
a Texas limited partnership
By:/s/James A. Ryffel
-------------------------------------
James A. Ryffel, Manager
Woodcrest Capital, L.L.C., General
Partner
Address:
Woodcrest Capital , L.L.C.
3113 S. University Dr., Ste. 600
Fort Worth, Texas 76109
27
LENDER'S SCHEDULE
Name and Address Amount Funding
- ---------------- ------ -------
Woodcrest Capital, L.L.C. $6,000,000 Initial Loan: $200,000 at
signing Loan Documents, and
$100,000 each 30 day period
thereafter, up to a maximum of
$1,000,000 in the aggregate,
upon Company's written
notification and request to
Lender, which written
notification and request must be
made at least 5 days but not
more than 10 days prior to the
expiration of 30 days from the
date of the last occurring
funding of any regularly
scheduled Loan proceeds.
Subsequent Loans: After a total
of $1,000,000 has been drawn by
the Company, the Company may
continue to draw $100,000 each
30 day period thereafter, upon
Company's written notification
and request to Lender, which
written notification and request
must be made at least 5 days but
not more than 10 days prior to
the expiration of 30 days from
the date of the last occurring
funding of any regularly
scheduled Loan proceeds.
28
SECURITY SCHEDULE
1. Security Agreement of even date herewith executed by the Company in favor
of Lender, covering all personal property of the Company (the "Security
Agreement").
2. UCC-1 Financing Statement naming the Company as debtor and Lender as
secured party, covering all personal property of the Company, to be filed
with the Secretary of States of Texas and Nevada.
3. UCC-1 Financing Statements naming the company as debtor and Lender as
secured party, covering the stock of the Company's Subsidiaries (if any),
to be filed with the Secretary of States of Texas and Nevada.
4. Deed of Trust, Security Agreement with Assignment of Rents and Fixture
Filing of even date herewith executed by the Company in favor of Lender,
pledging to Lender a security interest in certain real property located in
Harris County, Texas.
5. UCC-1 Financing Statements naming the Company as debtor and Lender as
secured party, covering certain real estate located in Harris County,
Texas, to be filed with the Secretary of State of Texas and the county
clerk of Harris County, Texas.
29
EXHIBIT A
30
PROMISSORY NOTE
$6,000,000 February 23, 2001
FOR VALUE RECEIVED, the undersigned, iExalt, Inc., a Nevada corporation
("Borrower"), hereby promises to pay to the order of Woodcrest Capital II
Limited Partnership, a Texas limited partnership ("Payee"), in lawful money of
the United States of America in immediately available funds, the principal sum
of six million Dollars ($6,000,000.00), or, if less, the aggregate unpaid
principal amount of the Loans made under this Note by Payee to Borrower pursuant
to the terms of the Loan Agreement and attached Lender's Schedule (as
hereinafter defined), together with interest on the unpaid principal balance
thereof as hereinafter set forth, both principal and interest payable as herein
provided in lawful money of the United States of America at the offices of Payee
at 3113 S. University Drive, Suite 600, Fort Worth, Tarrant County, Texas, as
from time to time may be designated by the holder of this Note.
All principal and interest on the outstanding principal balance shall be
payable in accordance with the following terms (i) accrued interest will be
payable monthly and (ii) principal will be repaid 180 days from the date of
funding. Both principal and interest payments hereunder may be paid at the
election of either Payee or Borrower, as the case may be, in cash or shares of
Borrower's common stock, which stock will be valued for purposes of payment
hereunder at the lesser of [a] $.20 per share or [b] seventy-five percent (75%)
of the average of the stock's closing price in the last 5 trading days; The
principal amount of the Loan (exclusive of any past due principal or interest)
from time to time outstanding shall bear interest on each day outstanding at the
rate of eleven percent (11.0%) per annum, calculated on the basis of actual days
elapsed and a year of 365 days. All past due principal of and interest on this
Note shall bear interest on each day outstanding at the rate of eighteen percent
(18.0%) per annum, calculated on the basis of actual days elapsed and a year of
365 days.
Borrower shall have the right to prepay, without premium or penalty, at
any time, any part or all of the indebtedness evidenced by this Note upon five
(5) days advance notice to Payee. Any prepayment shall include interest accrued
to the date of such prepayment, and all prepayments of principal shall be
applied first against accrued interest and then principal.
This Note (a) is issued and delivered under that certain Loan Agreement of
even date herewith among Borrower and Lender (as defined therein; including
Payee) (herein, as from time to time supplemented, amended or restated, called
the "Loan Agreement"), and is a "Note" as defined therein, (b) is subject to the
terms and provisions of the Loan Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof upon
the happening of certain stated events, and (c) is secured by and entitled to
the benefits of certain Security Documents (as identified and defined in the
Loan Agreement). Payments on this Note shall be made and applied as provided
herein and in the Loan Agreement. Reference is hereby made to the Loan Agreement
for a description of certain rights, limitations of rights, obligations and
duties of the parties hereto and for the meanings assigned to terms used and not
defined herein and to the Security Documents for a description of the nature and
extent of the security thereby provided and the rights of the parties thereto.
All remedies afforded by law shall be cumulative, and all shall be
available to Payee at all times until this Note has been paid and performed in
full. No delay or omission of Payee to exercise any right or power under this
Note shall impair such right or power or be construed to be a waiver of any
Default or Event of Default or acquiescence therein, and any single or partial
exercise of any such right or power shall not preclude any other or further
exercise thereof or the exercise of any other right or power, and no waiver
whatsoever shall be valid unless it is in a writing signed by Payee and then
only to the extent specifically set forth in such writing.
The terms and provisions of this Note shall inure to the benefit of any
assignee, transferee, or holder of this Note, and in the event of such transfer
or assignment, each of the rights, powers, privileges and benefits conferred
upon Payee by this Note shall automatically be vested in such transferee,
assignee, or holder.
The terms and provisions of this Note shall be binding upon Borrower and
its successors, assigns, and transferees, but any such assignment or transfer
shall not relieve Borrower of its obligations under this Note.
The invalidity or unenforceability of any of the provisions of this Note
shall not affect the validity or enforceability of the remainder hereof.
31
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is proved,
established or collected in any court or in any bankruptcy, receivership, debtor
relief, probate or other court proceedings, Borrower and all endorsers, sureties
and guarantors of this Note jointly and severally agree to pay reasonable
attorneys' fees and collection costs to the holder hereof in addition to the
principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration of
the maturity of this Note, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any extensions,
renewals, partial payments or changes in any manner of or in this Note or in any
of its terms, provisions and covenants, or any releases or substitutions of any
security, or any delay, indulgence or other act of any trustee or any holder
hereof, whether before or after maturity.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law, may
be contracted for, charged, or received on this Note, and this Note is expressly
made subject to the provisions of the Loan Agreement which more fully set out
the limitations on how interest accrues hereon. In the event applicable law
provides for an interest ceiling under Chapter 303 of the Texas Finance Code
(the "Texas Finance Code") as amended, for that day, the ceiling shall be the
"weekly ceiling" as defined in the Texas Finance Code and shall be used in this
Note for calculating the Maximum Rate and for all other purposes. The term
"applicable law" as used in this Note shall mean the laws of the State of Texas
or the laws of the United States, whichever laws allow the greater interest, as
such laws now exist or may be changed or amended or come into effect in the
future.
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE FEDERAL LAW.
BORROWER:
iEXALT, INC., a Nevada corporation
By: /s/ Donald W. Sapaugh
-------------------------------
Donald W. Sapaugh, CEO
32
EXHIBIT B
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Loan Agreement dated as of February 23,
2001 (as from time to time amended, the "Agreement"), by and among iExalt, Inc.,
a Nevada corporation (the "Company") and that lender named therein and listed on
the Lender's Schedule attached to the Agreement ("Lender"), which Agreement is
in full force and effect on the date hereof. Terms that are defined in the
Agreement are used herein with the meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 5.8 of the Agreement.
Together herewith the Company is furnishing to Lender the Company's audited
financial statements (the "Financial Statements") dated as of ________ (the
"Reporting Date"). The Company hereby represents, warrants, and acknowledges to
Lender that:
1. the officer of the Company signing this instrument is the duly
elected, qualified and acting ____________ of the Company and as such is
the Company's chief financial officer;
2. the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;
3. on the Reporting Date the Company was, and on the date hereof the
Company is, in full compliance with the disclosure requirements of Section
5.11 of the Agreement, and no Default otherwise existed on the Reporting
Date or otherwise exists on the date of this instrument;
4. The representations and warranties of the Company set forth in
the Agreement and the other Loan Documents are true and correct on and as
of the date hereof (except to the extent that the facts on which such
representations and warranties are based have been changed by the
extension of credit under the Agreement), with the same effect as though
such representations and warranties had been made on and as of the date
hereof.
The officer of the Company signing this instrument hereby certifies that
he has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion necessary to enable him
to express an informed opinion with respect to the above representations,
warranties and acknowledgments of the Company and, to the best of his knowledge,
such representations, warranties, and acknowledgments are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of February 23, 2001.
iEXALT, INC.
By:_____________________________
________________________, CFO
33
EXHIBIT C
WARRANT AGREEMENT
34
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
35