Draft: August 26, 1996
8.0% SECURED TERM NOTE
SHALCOR INVESTMENTS INC.
in favour of
DATALINK COMMUNICATIONS CORPORATION
8.0% TERM NOTE MADE AS OF AUGUST 21, 1996.
Principal Sum: Cdn. $36,730,000
Due Date: December 31, 2006
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Note, unless the context otherwise requires:
a. "Application Software Purchase Agreement" means the Application Software
Purchase Agreement made as of June 14, 1996, among the Corporation, the Holder
and DataLink Systems Corporation;
b. "Corporation" means Shalcor Investments Inc. and its permitted assignees;
c. "Default" means any event which after notice or lapse of time or both,
would constitute an Event of Default;
d. "Event of Default" means any of the events specified in Article 8;
e. "Holder" means DataLink Communications Corporation or its permitted
assignees;
f. "Management and Marketing Agreement" means the Management and Marketing
Agreement made as of August 21, 1996, between Shalcor Investments Inc. and
DataLink Systems Corporation;
g. "Note" means this 8.0% Secured Term Note as originally executed, or as
amended or supplemented as herein provided;
h. "Person" includes any individual, firm, corporation, company, joint
venture, partnership, association, trust or unincorporated body of persons;
i. "Principal Sum" has the meaning specified above;
j. "Sale Proceeds" has the meaning specified in Section 8.3;
k. "Service" means a service that provides screening and notification of the
delivery of E-Mail messages utilizing wireless technology which service is
currently known as MailXpress;
l. "Service Proceeds" means the Interest Amount and the Principal Payments, as
these terms are defined in the Management and Marketing Agreement, paid to the
Corporation pursuant to that agreement;
m. "Security Agent Agreement" means the Security Agent Agreement entered into
by the Corporation, the Holder and National Trust, as security agent, for the
purpose of holding the Technology pursuant to the terms hereof; and
n. "Technology" means the Purchased Assets, as defined in the Application
Software Purchase Agreement.
1.2 Interpretation
a. The terms "this Note", "hereof" "hereunder" and similar expressions refer
to this Note and not to any particular Section, Subsection or other portion of
this Note and include any agreement amending or supplemental to this Note.
Unless something in the subject matter or context is inconsistent therewith,
reference herein to Sections and Subsections are to Sections and Subsections
of this Note.
b. Except as specifically stated in this Agreement, all references to
currency is to Canadian dollars. Any currency conversion required or
contemplated by this Agreement with respect to Canadian and United States of
America currency will be based on the rate published by the Bank of Canada as
the noon spot rate applicable for the purchase of United States of America
dollars on the business day immediately before the date of conversion.
c. Except as set forth in Section 8.2, this Note shall be governed by and
interpreted in accordance with the laws of the Province of Alberta and the
laws of Canada applicable therein, except the conflict of law rules, and the
Parties attorn to the jurisdiction of the Court of Queen's Bench of the
Province of Alberta.
d. Wherever the singular, plural, masculine, feminine or neuter is used
throughout this Note the same will be construed as meaning the singular,
plural, masculine, feminine, neuter, body politic or body corporate where the
fact or context so requires and the provisions hereof and all covenants herein
will be construed to be joint and several when applicable to more than one
party.
e. Headings are inserted in the Note for convenience of reference only and
are not intended to affect the Note's interpretation.
ARTICLE 2
PROMISE TO PAY
2.1 The Corporation, for value received, and in consideration of these
premises hereby acknowledges itself indebted to the Holder and promises and
covenants with the Holder to pay to the Holder:
a. the Principal Sum outstanding from time to time;
b. interest on the Principal Sum outstanding from time to time, such
interest to be calculated, payable and paid as set out in Section 3.2; and
c. all other monies which may be owing by the Corporation to the Holder
pursuant to this Note,
subject to the terms and conditions of this Note and to the Corporation's
obligations to pay withholding taxes on any such payments.
ARTICLE 3
PAYMENT OF PRINCIPAL AND INTEREST
3.1 Principal
a. The Principal Sum outstanding on December 31, 2006 will be paid on
December 31, 2006.
b. Prepayment of the Principal Sum outstanding, from time to time for each
year ended December 31 will be made annually, within thirty (30) days of
receipt of Service Proceeds for the year, if the amount of Service Proceeds
received for such year exceeds the amount of accrued and unpaid interest as at
the end of such year. The amount of the annual prepayment, if any, against
the Principal Sum outstanding from time to time will be equal to the
difference between the Service Proceeds received for the year and the amount
of accrued and unpaid interest as at the end of such year.
3.2 Interest
a. Interest on the Principal Sum outstanding from time to time pursuant to
this Note will accrue from the date hereof up to and including the date of
payment at the rate of 8.0% per annum calculated, but not compounded, yearly,
and not in advance.
b. Interest accrued and unpaid at December 31, 2006, will be paid on December
31, 2006.
c. Interest accrued and unpaid at December 31 of each year, will be prepaid
annually within thirty (30) days of receipt by the Corporation of Service
Proceeds for the year, to the extent of the Service Proceeds, if any.
d. Accrued interest, if any, that is not paid in any year will continue to
accrue and be outstanding until paid but will not be added to the Principal
Sum payable under this Note and will not bear interest.
e. The covenant of the Corporation to pay interest at the rate provided
herein will not merge in any judgment in respect of any obligation of the
Corporation hereunder and such judgment will bear interest as aforesaid and be
payable in the same manner.
3.3 Interest Acceleration
Notwithstanding Section 3.2 c., upon the occurrence of a Management
Agreement Termination Event:
a. interest accrued and unpaid at the Management Agreement Termination Date
will be prepaid within 30 days of the Management Agreement Termination Date;
and
b. interest accruing due under this Note, will be payable annually and will
be paid on December 31 of each year.
For the purposes of Section 3.3, the following terms have the meanings
set out below:
"Management Agreement Termination Date" means the date of the occurrence
of a Management Agreement Termination Event; and
"Management Agreement Termination Event" means the termination of the
Management and Marketing Agreement by the Corporation or any other Owner, as
that term is defined in the Management and Marketing Agreement, pursuant to
Section 5.4, of the Management and Marketing Agreement.
ARTICLE 4
ASSIGNMENT
4.1 Assignment of Service Proceeds
The Corporation hereby assigns the Service Proceeds to the Holder as
security for payment of the Corporation's obligations to the Holder under this
Note.
The provisions of this Section 4.1 and the rights of the Holder hereunder
will, notwithstanding any other provisions of this Note, wholly terminate on
the earlier of the date upon which this Note is retired or the indebtedness
hereunder is otherwise extinguished.
ARTICLE 5
SECURITY
5.1 Security for the Note
In consideration for the premises and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
the Corporation, and the due payment of all principal and interest on this
Note from time to time outstanding and on all other monies from time to time
owing on the security hereof and to secure the due performance by the
Corporation of obligations herein contained, the Corporation does hereby
grant, assign, mortgage, pledge, charge, hypothecate and create a security
interest in, to and in favour of the Holder in the Technology provided that
the charge hereby created will in no way hinder or prevent the Corporation at
any time and from time to time (until an Event of Default occurs pursuant to
Article 8 hereof and the Holder will have determined to enforce the same) from
selling, alienating, assigning, licensing or otherwise disposing of or dealing
with all or any part of the subject matter of the said charge in the ordinary
course of its business and for the purpose of carrying on or extending the
same or from entering into the Management and Marketing Agreement; provided
further that the Corporation will not, and the Corporation hereby covenants
that it will not, without the prior written consent of the Holder, make, give,
create and assume or allow to subsist any mortgage, pledge, hypothec, lien,
charge, encumbrance, assignment or other security, whether fixed or floating,
upon the Technology or any part thereof.
TO HAVE AND TO HOLD such assets and interests and all rights hereby
conferred unto the Holder, its successors and assigns forever, but in trust
nevertheless, for the uses and purposes and with the powers and authorities
subject to the terms and conditions mentioned and set forth in this Note.
5.2 Further Assurances
The Corporation will forthwith, and from time to time at its sole cost
and expense, execute and do or cause to be executed and done all deeds,
documents and things which, in the reasonable opinion of the Holder, are
necessary or advisable for giving the Holder (so far as may be possible under
the local laws of the places where the Technology is situated) a valid
mortgage, pledge, charge and hypothec of the nature herein specified upon the
Technology to secure payment of monies intended to be secured by this Note,
and for better assuring, mortgaging, pledging, charging, assigning,
hypothecating and confirming unto the Holder the Technology, and for
conferring upon the Holder such power of sale and other powers over the
Technology as are hereby expressed to be conferred.
5.3 Defeasance
The Holder will at the written request and sole cost and expense of the
Corporation cancel and discharge the lien of this Note and execute and deliver
to the Corporation such deeds or other instruments as will be requisite to
discharge the lien hereof and to reconvey to the Corporation any part of the
Technology subject to the lien of this Note and to release the Corporation
from the covenants herein contained and upon delivery of such written request
to the Holder the estate and rights hereby granted will cease, determine and
be void, provided that the Corporation will have satisfied the payment of all
principal monies, and interests due or to become due on this Note.
5.4 Possession and Use of Technology
Until an Event of Default occurs pursuant to Article 8 hereof and the
Holder will have determined to enforce the same pursuant to the provisions of
this Note, the Corporation will, subject however to the express terms hereof,
be suffered and permitted to possess, manage, develop, operate and enjoy the
Technology, and freely to control the conduct of its business and to take and
use any income, rents, issues and profits thereof in the same manner, to the
same extent and with the same effect, except as provided herein, as if this
Note had not been made.
5.5 Notwithstanding Section 5.4 hereof the source code version of the
Application Software, as defined in the Application Software Purchase
Agreement, will be held by the Security Agent pursuant to the terms and
conditions of the Security Agent Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Corporation's Representations and Warranties
The Corporation hereby represents and warrants to the Holder for the
benefit of the Holder as follows:
a. the Corporation is a corporation duly incorporated, organized and validly
subsisting in good standing under the laws of the jurisdiction of its
incorporation, and has the requisite power and authority to carry on the
business now carried on by it, to own and to license the properties used in
its business, to execute and deliver this Note, to consummate the transactions
contemplated hereby and to duly observe and perform all its covenants and
obligations herein set forth;
b. the execution and delivery of this Note does not and will not conflict
with or result in a breach of or violate any of the terms, conditions or
provisions of any agreement governing the Corporation or violate any of the
terms, conditions or provisions of any law, judgment, order, injunction,
decree, regulation or ruling of any court or governmental authority, domestic
or foreign, to which the Corporation is subject or constitute or result in a
default under any agreement, contract or commitment to which the Corporation
is a party, the effect of which conflict, breach, violation or default might
materially adversely affect the financial condition of the Corporation or
would impair the ability of the Corporation to duly observe and perform their
respective obligations contained herein;
c. the execution and delivery of this Note will not constitute an event of
default or an event which, with the giving of notice or lapse of time or both,
would constitute an event of default, under any agreement, contract, indenture
or other instrument relating to any indebtedness (whether for borrowed money
or otherwise) of the Corporation which would give any party to any such
agreement, contract, indenture or other instrument the right to accelerate
maturity for the payment of any monies under any such agreement, contract,
indenture or other instrument; and
d. no authorization, approval, order, license, permit or consent of any
governmental authority, regulatory body or court, and no registration,
declaration or filing by the Corporation with any such governmental authority,
regulatory body or court is required in order for the Corporation:
i. to incur the obligations expressed to be incurred by the Corporation
in or pursuant to this Note;
ii. to execute and deliver all documents and instruments to be
delivered by the Corporation pursuant to this Note;
iii. to duly perform and observe the terms and provisions of this Note;
and
iv. to render this Note legal, valid, binding and enforceable against
the Corporation in accordance with its terms.
ARTICLE 7
COVENANTS OF THE CORPORATION
The Corporation hereby covenants and agrees with the Holder for the
benefit of the Holder as follows:
7.1 To Pay Principal and Interest
The Corporation will duly and punctually pay or cause to be paid to the
Holder the Principal Sum and accrued interest thereon and all other moneys
from time to time owing hereunder (subject to the Corporation's obligation to
pay withholding taxes), on the dates, at the places, in the moneys and in the
manner mentioned herein.
7.2 To Carry on Business
The Corporation will carry on and conduct its business in a proper and
efficient manner; and at all reasonable times it will furnish or cause to be
furnished to the Holder or its duly authorized agent or attorney such
information relating to the business of the Corporation involving the Service
as the Holder may reasonably require; and, subject to the express provisions
hereof, it will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and rights.
ARTICLE 8
DEFAULT
8.1 Events of Default
If any one or more of the following events has occurred and is
continuing:
a. the non-payment when due of the Principal Sum, accrued interest thereon
and any other amounts due under this Note;
b. the breach by the Corporation of any material provision of this Note;
c. any representation or warranty made by the Corporation herein or in any
financial statements, reports or other documents supplied to the Holder by the
Corporation hereunder is false, incorrect or inaccurate in any materially
adverse respect;
d. if proceedings for the dissolution, liquidation or winding-up of the
Corporation or for the suspension of the business or operations of the
Corporation are commenced, unless such proceedings are being actively and
diligently contested by the Corporation in good faith, or in the event a
bankruptcy, liquidation, receivership or dissolution of the Corporation will
occur;
provided that the Corporation will not have remedied such default within
thirty (30) days following receipt by the Corporation from the Holder of
notice of the default, the Holder may, by written notice declare the Principal
Sum and accrued interest thereon and any other amounts payable to it under
this Note to be immediately due and payable without further presentation,
notice or demand and the Corporation will immediately pay to the Holder all
indebtedness of the Corporation owing to it pursuant to this Note, subject to
the Corporation's obligation to pay withholding taxes.
8.2 Remedies and Limitation of Recourse
If an Event of Default will occur and be continuing and the Corporation
will fail forthwith to pay the amounts owing hereunder, or remedy any breach
of any of its obligations secured by this Note as herein outlined, the Holder
shall have all of the rights and remedies of a secured party under the
California Uniform Commercial Code or other applicable law then in effect.
Without limiting the generality of the foregoing, the Holder, in addition to
any other rights and remedies it may have, in its own name will be entitled
and empowered to sell the Technology as provided in Section 8.3 below as well
as institute action or proceeding at law or in equity for the collection of
the sums so due and unpaid and may prosecute any such action or proceedings to
judgment or final decree, and may enforce any such judgment or final decree
against the Corporation or other obligor upon this Note and collect in the
manner provided by law out of the Technology, as provided for in this Note
wherever situated the monies adjudged or decreed to be payable.
Notwithstanding anything else contained in this Note, the Holder
covenants and agrees that its recourse for payment of any obligations of the
Corporation to the Holder under this Note and funds available from the
Corporation will be limited to the Service Proceeds and the Sale Proceeds
received by the Corporation which will be paid by the Corporation to the
Holder in the following order of priority:
a. to pay interest due and payable under this Note;
b. to pay the Principal Sum outstanding from time to time; and
c. to pay any other amounts owing by the Corporation to the Holder under this
Note.
8.3 Sale of Technology
a. If an Event of Default has occurred and is continuing as provided in
Section 8.2 hereof or the indebtedness created hereby either with respect to
principal or interest remains in whole or in part unpaid as of the Due Date,
the Holder will be entitled and empowered to dispose of the Technology or any
part thereof: i. at public sale, which public sale may be conducted at the
location designated by the trustee for cash or on credit and on such terms as
the trustee may in its sole discretion, elect after giving at least five days
notice of the time and place of sale in the manner provided by law, or ii. at
private sale upon like notice for cash or on credit and on such other terms as
the Holder may in its sole discretion elect.
b. The proceeds of the sale ("Sale Proceeds") of the Technology will be
allocated as follows:
i. to reimburse the Holder (to a maximum of 10% of the gross proceeds
of sale), for all costs and expenses incurred as the result of an Event of
Default and in connection with re-possession, storing, advertising, marketing
and selling the Technology including, without limitation, reasonable
attorneys' fees and costs;
ii. to the Holder as a reduction of amounts owing by the Corporation
under this Note allocated firstly as to interest and the remainder as to
principal; and
iii. the balance to the Corporation.
c. Any balance owing by the Corporation under this Note after the allocation
of the Sale Proceeds will be forgiven by the Holder and the Corporation will
have no further liability under this Note.
d. This Note is non-negotiable. The Holder will have no right or recourse
against any legal person in respect of the covenants contained in this Note
other than the Corporation, and its assigns but only severally and not jointly
and only to the extent of each person's interest in the Technology.
e. Limitation of Liability
Notwithstanding anything contained in this Note, the Corporation will not
have any obligation under the Note if any one or more of the following events
has occurred and is continuing with respect to the Holder of its rights or
obligations under the Management and Marketing Agreement:
a. the non-payment when due of amounts owing by the Holder to the Corporation
under the Management and Marketing Agreement;
b. the breach by the Holder of any other material provision of the Management
and Marketing Agreement; and
c. if proceedings for the dissolution, liquidation or winding-up of the
Holder or for the suspension of the business or operations of the Holder are
commenced, unless such proceedings are, being actively and diligently
contested by the Holder in good faith, or in the event a bankruptcy,
liquidation, receivership or dissolution of the Holder will occur;
provided that the Holder will not have remedied such default within thirty
(30) days following receipt by the Holder from the Corporation of notice of
the default.
ARTICLE 9
WAIVER
9.1 Either the Holder or the Corporation may waive any breach of any of the
provisions contained in this Note or any default by the other person in the
observance or performance of any covenant, condition or obligation required to
be observed or performed by such person under the terms of this Note, provided
any such waiver shall only be effective upon the delivery of written notice by
the waiving party. No waiver, consent, act or omission by the Holder or the
Corporation will extend to or be taken in any manner whatsoever to affect any
subsequent breach or default or the rights resulting therefrom and no waiver
or consent by the Holder will bind the Holder or the Corporation will bind
them unless it is in writing. The inspection or approval by the Holder or the
Corporation of any document or matter or thing done by the other will not be
deemed to be a warranty or holding out of the adequacy, effectiveness,
validity, or binding effect of such document, matter or thing or a waiver of
the obligations of the other.
ARTICLE 10
TIME OF THE ESSENCE
10.1 Time will be of the essence of this Note.
ARTICLE 11
NOTICES
11.1 Any notice required or permitted by any of the provisions of this Note
may be given to the Corporation or the Holder in writing at the following
addresses, or such other addresses as they may specify in writing from time to
time:
To the Corporation at:
2398 Scarth Street
Regina, Saskatchewan
S4P 2J7
Fax No. 306-522-8190
Attention: Secretary-Treasurer
To the Holder at:
17420 High Street
Los Gatos, California
Fax No. 408-354-9267
Attention: President
Notices shall be effective on delivery if delivered personally to the
Corporation or Holder. If sent by telecopy, notice will be effective on the
next business day after the date notice is sent.
ARTICLE 12
MISCELLANEOUS
12.1 Severability
If any one or more of the provisions or parts thereof contained in this
Note should be or become invalid, illegal or unenforceable in any respect in
any jurisdiction, the remaining provisions or parts thereof contained herein
will be and will be conclusively deemed to be, as to such jurisdiction,
severable therefrom and:
a. the validity, legality or enforceability of such remaining provisions or
parts thereof will not in any way be affected or impaired by the severance of
the provisions or parts thereof severed; and
b. the invalidity, illegality or unenforceability of any provision or part
thereof contained in this Note in any jurisdiction will not affect or impair
such provision or part thereof or any other provisions of this Note in any
other jurisdiction.
12.2 Further Assurances
The Corporation and the Holder will, at any time and from time to time at
the request of the other, execute and deliver any and all such further
instruments or assurances as may be necessary or desirable to give effect to
the terms and conditions of this Note.
12.3 Counterpart Execution
This Note may be executed in one or more counterparts and may be executed
by facsimile signatures and all such counterparts and facsimile signatures
taken together will constitute one and the same Note and will be binding on
the Corporation and the Holder as if they had originally signed one copy of
this Note.
12.4 Assignment
The Corporation may assign all or part of its interest in the Technology:
a. by giving written notice of the names and addresses of the assignees; and
b. by delivering to the Holder a written undertaking of the assignees
acknowledging receipt of a copy of the Note and agreeing to be bound by the
terms and conditions of the Note severally and not jointly with any other
person and only to the extent of the assignee's undivided interest in the
Technology.
The Holder may assign this Note in whole, but not in part, and only with
an assignment of all of its rights and obligations under the Management and
Marketing Agreement by giving the Corporation written notice of the name and
address of the assignee.
12.5 Binding Effect
This Note and all of its provisions will enure to the benefit of the
Holder and the Corporation and will be binding upon the Holder and the
Corporation. The expressions the "Holder" and the "Corporation" as used
herein will include the Holder's and the Corporation's assigns whether
immediate or derivative, respectively.
12.6 Time of the Essence
Time will be of the essence of this Note.
12.7 Amendment
This Note may be altered or amended in any of its provisions when any
such changes are reduced to writing and signed by the parties hereto but not
otherwise.
12.8 Costs
Each party hereto will bear its own legal, accounting and other costs
relating to all matters involved in the preparation, delivery and enforcement
of this Note.
12.9 Remedies Not Exclusive
Except as provided in Section 8.2 of this Note no right or remedy herein
is exclusive of any other right or remedy. Except as provided in Section 8.2
of this Note each and every right and remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity, and may be exercised from time to time as often as deemed
expedient, separately or concurrently.
IN WITNESS WHEREOF the Corporation and the Holder have duly executed
these presents under the hands of their proper officers in that behalf.
SHALCOR INVESTMENTS INC.
/s/ Shalcor Investments
DATALINK COMMUNICATIONS CORPORATION
/s/ Datalink Communications Corporation