EXHIBIT 10.16
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LOAN AND NOTE PURCHASE AGREEMENT
THIS LOAN AND NOTE PURCHASE AGREEMENT (this "Agreement") is
entered into as of this 9th day of April, 1999, by and among EGLOBE FINANCING
CORPORATION, a Delaware corporation (the "Company"), EXECUTIVE TELECARD, LTD., a
Delaware corporation (the "Parent"), and EXTL INVESTORS, LLC, a limited
liability company organized under the laws of Nevada (the "Investor").
WHEREAS, the Company desires to borrow, and the Investor
desires to lend, $7,000,000 upon the terms and conditions hereinafter set forth;
WHEREAS, the Company desires to issue, and the Investor
desires to purchase, 5% Secured Notes of the Company, upon the terms and
conditions hereinafter set forth;
WHEREAS, as incentives for the Investor to make such loan and
purchase, the Parent is willing to issue Warrants to purchase the Parent's
Common Stock, upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
ARTICLE I.
LOAN; PURCHASE AND SALE OF NOTES
SECTION 1.1. LOAN.
(a) Loan, Loan Note, Loan Warrants. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, the Company shall borrow from the Investor, and
Investor shall lend to the Company, on the First Closing Date (as defined
below), the sum of $7,000,000 in aggregate principal amount, which loan ("Loan")
shall be evidenced by a Promissory Note substantially in the form attached
hereto as Exhibit A (the "Loan Note"). As an incentive for the Investor to make
such Loan, since the Investor would not realize a sufficient return from the
interest payable on the Loan Note to make the Investor willing to make the Loan,
on the First Closing Date the Parent shall issue to the Investor, as additional
consideration to the Investor, Warrants, the terms of which are set forth in
Exhibit B hereto (the "Loan Warrants"), to purchase 1,500,000 shares of Common
Stock, par value $.001 per share, of the Parent for $0.01 per share (the "Parent
Common Stock").
(b) Repayment of Loan Principal at Maturity. The entire
principal amount of the Loan shall be repaid to the Investor, together with any
accrued but unpaid interest thereon, in cash on the earliest to occur of (i) the
first anniversary of the First Closing Date, (ii) the date of closing of an
offering by the Parent of debt or equity securities, in a single transaction or
series of related transactions, from which the Parent receives net proceeds of
$30 million or more, (iii) the Second Closing Date or (iv) the occurrence of an
Event of Default while the Loan is outstanding (the "Loan Maturity Date").
(c) Loan Interest Rate. The Loan shall bear interest on the
unpaid portion of the principal amount thereof, from the date of issuance until
the unpaid portion of the principal shall have become due and payable (whether
on the Loan Maturity Date, by acceleration or otherwise), at the Loan Interest
Rate (as defined below). Interest shall be due and payable in cash in arrears on
the first day of each month, commencing on the first day of the month following
the date hereof (each, a "Loan Interest Payment Date"), until and including the
Loan Maturity Date. To the extent not prohibited by applicable law, the Loan
shall bear interest on overdue principal, on any overdue amounts arising out of
a required or optional prepayment of principal and on any overdue installment of
interest at the Loan Overdue Rate (as defined below), from after the date on
which such amounts were due and payable, whether by acceleration or otherwise,
until paid.
(d) Prepayment at the Election of the Company. The Loan may be
prepaid without premium or penalty, at the option of the Company exercised by
written notice to the Investor, at any time in whole or from time to time in
part in integral multiples of $100,000. Any prepayment will be applied first to
accrued interest and then to payment of principal. If the Loan is prepaid only
in part, the Loan Note shall be surrendered at the Company's principal office
and the payment shall be recorded directly on the Loan Note or by an amendment
thereto, whereupon the Loan Note will be returned to the Investor promptly.
(e) Capital Contribution Agreement. At or prior to the First
Closing, the Parent shall enter into a Subscription Agreement (the "Loan Capital
Contribution Agreement") substantially in the form attached hereto as Exhibit C.
During the period in which any portion of the Loan is outstanding, the Investor
shall be a third party beneficiary of, and shall be entitled to enforce, the
Loan Capital Contribution Agreement.
SECTION 1.2. SALE AND ISSUANCE OF NOTES; TERMS OF THE NOTES.
(a) Purchase and Sale of Notes. On the basis of the
representations, warranties and agreements contained herein, and subject to the
terms and conditions hereof, including the receipt of Stockholder Approval (as
defined below), if the Company and the Parent so elect by written notice to the
Investor within 15 days after receiving such Stockholder Approval (a "Second
Closing Election"), the Company shall issue and sell to the Investor, and
Investor
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shall purchase from the Company, on the Second Closing Date (as defined below),
for the purchase price of $20,000,000, $20,000,000 aggregate principal amount of
the Company's 5% Secured Notes, substantially in the form attached hereto as
Exhibit D (the "Notes"). As an incentive for the Investor to make such purchase,
since the Investor would not realize a sufficient return from the interest
payable on the Notes to make the Investor willing to invest in the Notes, on the
Second Closing Date the Parent shall issue to the Investor, as additional
consideration to the Investor, Warrants, the terms of which are set forth in
Exhibit E hereto (the "Note Warrants", and together with the Loan Warrants, the
"Warrants"), to purchase 5,000,000 shares of Parent Common Stock for $1.00 per
share.
(b) Repayment of Principal and Interest. Principal and
interest shall be due and payable in 36 equal monthly installments (based upon a
level payment debt service amortization over a five year period) according to a
schedule attached to the Notes, in arrears on the first day of each month,
commencing on the first day of the month following the date hereof, with the
entire remaining unpaid principal amount (together with accrued interest
thereon) to be due and payable in a single payment on the earlier to occur of
(i) the third anniversary of the Second Closing Date, or (ii) the date of
closing of a Qualified Offering (the "Note Maturity Date").
(c) Interest Rate. The Notes shall bear interest on the unpaid
portion of the principal amount thereof, from the date of issuance until the
unpaid portion of the principal shall have become due and payable (whether on
the Note Maturity Date, by acceleration or otherwise), at the Note Interest Rate
(as defined below). To the extent not prohibited by applicable law, the Notes
shall bear interest on overdue principal, on any overdue amounts arising out of
a required or optional prepayment of principal and on any overdue installment of
interest at the Note Overdue Rate (as defined below), from after the date on
which such amounts were due and payable, whether by acceleration or otherwise,
until paid.
(d) Prepayment at the Election of the Company. The Notes may
be prepaid without premium or penalty, at the option of the Company exercised by
written notice to each holder of Notes, at any time in whole or from time to
time in part in integral multiples of $100,000. Any prepayment will be applied
first to accrued interest and then to payment of principal. If the Notes are
prepaid only in part, the Notes shall be surrendered at the Company's principal
office and the payment shall be recorded directly on the Notes or by an
amendment thereto, whereupon the Notes will be returned to the Investor
promptly.
(e) Manner of Payment of Principal. Interest on the Notes
shall be paid in cash. Principal of the Notes shall be paid in cash except as
provided in this paragraph. In the event that (1) the Closing Price (as defined
below) of the Parent Common Stock on Nasdaq is $8.00 or more for any 15
consecutive trading days during any period in which Notes are outstanding that
is not more than five
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Business Days preceding the date of a written election made in accordance with
this sentence, (2) the Parent closes a public offering of equity securities of
the Parent at a price of at least $5.00 per share and with gross proceeds to the
Parent of at least $30 million, or (3) the Parent closes a Qualified Offering
(as defined below) (at a price of at least $5.00 per share, in the case of an
offering of equity securities), principal of the Notes equal to up to 50% of the
original principal amount of the Notes may be paid in Parent Common Stock at the
option of the Company if a written election to make such prepayment in Parent
Common Stock is made by the Company (and delivered to the Investor) prior to the
date that is five Business Days after the occurrence of the event specified in
clauses (1), (2) or (3) of this sentence. For purposes of payment in Parent
Common Stock, each share of Parent Common Stock shall be valued as follows: (A)
if the Market Price of Parent Common Stock is less than $6.00 as of the date of
payment, the value of each share of Parent Common Stock shall equal the Market
Price of Parent Common Stock (if the Market Price of Parent Common Stock is less
than $5.00 as of the date of payment, Parent Common Stock may not be used for
such prepayment unless the issuance of the Parent Common Stock would not require
any Stockholder Approval that has not been obtained); or (B) if the Market Price
of Parent Common Stock is greater than or equal to $6.00 as of the date of
payment, the value of each share of Parent Common Stock shall be $6.00.
(f) Security Agreement; Asset Transfer. The Notes shall be
secured by and shall be entitled to the benefits of a Security Agreement (the
"Security Agreement") substantially in the form attached hereto as Exhibit F to
be entered into by the Company and the Investor at the Second Closing. At or
prior to the Second Closing, the Parent shall convey or cause its subsidiaries
to convey to the Company, on the terms and conditions set forth in the transfer
documents reasonably acceptable to the Investor (the "Transfer Documents"), the
assets described in Exhibit G-1. The Parent shall convey or cause its
subsidiaries to convey to the Company, during the period in which the Notes are
outstanding, all assets acquired after the date hereof which are described in
Exhibit G-2. (If such assets cannot be conveyed without violating the terms of
Material Contracts, the Parent or relevant subsidiary shall enter into a
comparable security agreement granting a security interest, to the extent
permitted by applicable Material Contracts.) In the event that any of the
transferred assets are already encumbered by an Encumbrance that is not
prohibited hereunder, it is intended that the Investor would receive a second
priority security interest to the extent permitted by the documents evidencing
the first security interest, and the Company and the Parent agree to use all
reasonable efforts to obtain such consents as may be necessary from the holders
of such first security interests to allow a second security interest to be
placed on such assets for the benefit of the Investor.
(g) Guaranty; Parent Security Agreement. At or prior to the
Second Closing, the Parent (and each of the subsidiaries of the Parent that have
more than $250,000 of accounts receivable individually and such other
subsidiaries of the
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Parent that may need to be added so that the subsidiaries of the Parent not
parties thereto hold no more than $500,000 of accounts receivable in the
aggregate) shall enter into a Guaranty (the "Guaranty") substantially in the
form attached hereto as Exhibit H and a Security Agreement (the "Parent Security
Agreement") substantially in the form attached hereto as Exhibit I.
SECTION 1.3. CLOSING.
(a) The closing of the transactions contemplated by Section
1.1 (the "First Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ on a date (the
"First Closing Date") that is as soon as practicable following satisfaction or
waiver of any conditions to such closing. At the First Closing the Investor
shall deliver to the Company the amount specified in Section 1.1 in lawful money
of the United States of America in immediately available funds to the Company's
account at a bank which has been designated by the Company. At the First Closing
(i) the Company shall issue and deliver to the Investor the Loan Note in the
principal amount specified in Section 1.1; (ii) the Parent shall issue and
deliver to the Investor the Loan Warrants to purchase the number of shares of
Parent Common Stock specified in Section 1.1, registered in the name of the
Investor; (iii) the Company and the Parent shall execute and deliver (with a
copy to the Investor) the Loan Capital Contribution Agreement; (iv) the Parent
shall execute and deliver to the Investor the Registration Rights Agreement; and
(v) the Company and the Parent shall provide to the Investor a legal opinion of
its counsel in form and substance reasonably satisfactory to the Investor and
the Investor's counsel.
(b) The closing of the transactions contemplated by Section
1.2 (the "Second Closing") shall take place at the offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇ on a date (the
"Second Closing Date") that is within five Business Days, or as soon as
practicable thereafter, following a Second Closing Election by the Company and
Parent to the Investor (which includes written notice that any required
Stockholder Approval for the Parent to complete the Second Closing has been
obtained). At the Second Closing the Investor shall deliver to the Company the
amount specified in Section 1.2 in lawful money of the United States of America
in immediately available funds to the Company's account at a bank which has been
designated by the Company. At the Second Closing (i) the Company shall issue and
deliver to the Investor the Notes in the principal amount specified in Section
1.2; (ii) the Parent shall issue and deliver to the Investor the Note Warrants
to purchase the number of shares of Parent Common Stock specified in Section
1.2, registered in the name of the Investor; (iii) the Company shall execute and
deliver to the Investor the Security Agreement; (iv) the Parent and its
subsidiaries who are parties thereto shall execute and deliver to the Investor
the Guaranty and the Parent Security Agreement; (v) the Parent shall execute and
deliver to the Investor the Registration Rights Agreement; and
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(vi) the Company and the Parent shall provide to the Investor a legal opinion of
its counsel in form and substance reasonably satisfactory to the Investor and
the Investor's counsel. Also at the Second Closing the Company shall repay the
Loan to the Investor as provided herein and in the Loan Note.
SECTION 1.4. PARTICIPATION OPTION.
In the event that the Notes are being repaid or prepaid in
connection with a Qualified Offering, the Parent shall extend to the Investor an
option to purchase securities in the Qualified Offering, upon substantially the
same terms and conditions as other investors purchasing in the Qualified
Offering (but subject to such reasonable differences not affecting the economic
factors of such investment as the managing placement agent or underwriter
conducting the Qualified Offering may reasonably request), up to an aggregate
purchase price equal to the principal amount of the Notes being repaid or
prepaid in connection with the Qualified Offering.
SECTION 1.5. STOCKHOLDER APPROVAL AND SECOND CLOSING ELECTION;
STOCK SUBSTITUTION.
(a) Unless the Company and the Parent have elected (by written
notice to the Investor) not to proceed with the Second Closing, the Parent will
use all reasonable efforts to obtain, at its next annual meeting of
stockholders, or at an adjourned or reconvened meeting (the date on which the
stockholder vote occurs being referred to herein as the "Stockholder Vote
Date"), to be held within 120 days after the date hereof, any required
Stockholder Approval for the Second Closing and the transactions to occur at the
Second Closing. The Parent also will use all reasonable efforts to obtain, on
the Stockholder Vote Date (whether or not the Second Closing Election is made),
any required Stockholder Approval for the Investor and its Affiliates, and ▇▇.
▇▇▇▇▇▇ ▇▇▇▇▇▇, all members of his immediate family and all Affiliates of either,
to be able to convert all preferred stock and exercise all warrants held (or
that will be held following the Second Closing) by them into Parent Common Stock
or transfer Parent Common Stock owned by them to the Investor. If a required
Stockholder Approval for the Second Closing and the transactions to occur at the
Second Closing is sought but not obtained on the Stockholder Vote Date, and the
Parent is therefore not able to issue the Note Warrants at the Second Closing,
the parties shall negotiate in good faith revisions to the transactions
contemplated to occur at the Second Closing that would avoid the need for such
Stockholder Approval and that would provide an economically equivalent result
for each party. If the parties cannot agree upon such revisions (or if the
Company and the Parent do not deliver the Second Closing Election) within 30
days after the Stockholder Vote Date, or if the Company and the Parent have
elected (by written notice to the Investor) not to proceed with the Second
Closing,
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none of the parties hereto shall be obligated to proceed with the
Second Closing, and all obligations of the parties relating to the Second
Closing shall expire.
(b) All rights of the Company under this Agreement to make
payments in Parent Common Stock shall be subject to receipt by the Parent of any
required Stockholder Approval. Notwithstanding the prior sentence, to the extent
it would avoid the need for Stockholder Approval, the Company shall be entitled
to substitute, in lieu of Parent Common Stock, a preferred stock of Parent that
(i) shall be equivalent to Parent Common Stock in all economic respects,
including with respect to liquidation, dividends and other economic terms, (ii)
shall be non-voting in the event that the holder (together with all of its
Affiliates) is the beneficial owner (as such term is defined under the federal
securities laws and the rules and regulations thereunder) of 19.9% or more of
the Parent Common Stock but otherwise shall vote with the Parent Common Stock as
a single class and be entitled to the same number of votes per share as the
number of shares of Parent Common Stock issuable upon conversion of such
preferred stock, and (iii) shall be convertible into Parent Common Stock,
provided that the conversion right may not be exercised without Stockholder
Approval in the event that the holder (together with all of its Affiliates) is,
or following such conversion would be, the beneficial owner of 19.9% or more of
the Parent Common Stock. For purposes of the provisions relating to use of
Parent Common Stock (or, pursuant to this Section, such preferred stock) to
prepay the Notes, such preferred stock shall be deemed to have the same value as
the value of the Parent Common Stock into which the preferred stock is
convertible (whether or not the conversion right may then be exercised).
SECTION 1.6. ACCOUNTS RECEIVABLE FINANCING.
If so requested by the Company from time to time in written
notices to the Investor, the Investor shall advance to the Company such amounts
as the Company may request, not to exceed, in the aggregate, the lesser of (i)
50% of the amount of the accounts receivable of the Company, the Parent and
those subsidiaries that are parties to the Parent Security Agreement (taken
collectively) which have been outstanding for not more than 90 days ("Eligible
Receivables") and (ii) the aggregate amount of the principal payments received
(and not reborrowed by the Company under this Section 1.6) by the Investor under
the Notes. Such advances shall be evidenced by a Note substantially in the form
attached hereto as Exhibit J (the "A/R Note"), which shall be considered one of
the Notes for all purposes hereunder, and shall be governed by all provisions of
this Agreement relating to the Notes (including without limitation be secured by
and having the benefit of the Security Agreement and having the benefit of the
Guaranty and the Parent Security Agreement).
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PARENT
The Company and the Parent jointly and severally represent and
warrant to the Investor as follows:
SECTION 2.1. ORGANIZATION AND QUALIFICATION.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has the requisite power and authority to own, lease and operate its
assets and properties, to carry on its business as now being conducted and to
execute, deliver and perform this Agreement and the Transaction Documents to
which it is a party. The Company is duly qualified to conduct its business, and
is in good standing, in each jurisdiction where the ownership or leasing of its
properties or the nature of its activities in connection with the conduct of its
business makes such qualification necessary.
(b) The Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Parent has the requisite power and authority to own, lease and operate its
assets and properties, to carry on its business as now being conducted and to
execute, deliver and perform this Agreement and the Transaction Documents to
which it is a party. The Parent is duly qualified to conduct its business, and
is in good standing, in each jurisdiction where the ownership or leasing of its
properties or the nature of its activities in connection with the conduct of its
business makes such qualification necessary.
SECTION 2.2. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Company has heretofore delivered to the Investor a
complete and correct copy of the certificate of incorporation and the bylaws of
the Company, each as amended to date. Such certificate of incorporation and
bylaws are in full force and effect. The Company is not in violation of any of
the provisions of its certificate of incorporation or bylaws or other
organizational or governing document.
(b) The Parent has heretofore delivered to the Investor a
complete and correct copy of the certificate of incorporation and the bylaws of
the Parent, each as amended to date. Such certificate of incorporation and
bylaws are in full force and effect. The Parent is not in violation of any of
the provisions of its
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certificate of incorporation or bylaws or other organizational or governing
document.
SECTION 2.3. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
2,000 shares of common stock of which 100 shares are validly issued and
outstanding, fully paid and non-assessable, all of which are held (directly or
indirectly) by Parent free and clear of all Encumbrances, and 1,000 shares of
preferred stock, none of which are issued or outstanding. There are no options,
warrants or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued capital stock of the Company or
obligating the Company to issue or sell any shares of capital stock of, or other
equity interests in the Company, including any securities directly or indirectly
convertible into or exercisable or exchangeable for any capital stock or other
equity securities of the Company, expect for options or rights held by the
Parent. All shares of common stock of the Company are duly and validly issued,
fully paid and nonassessable.
(b) The authorized capital stock of the Parent consists of:
(i) one hundred million (100,000,000) shares of Parent Common Stock of which
nineteen million three hundred thousand four hundred sixty-six (19,362,966)
shares are issued and outstanding on the date of execution of this Agreement;
and (ii) five million (5,000,000) shares of preferred stock, par value $.001 per
share, of which: (a) one million (1,000,000) shares of Series A Convertible
Preferred Stock are authorized, of which no shares are issued and outstanding;
(b) five hundred thousand (500,000) shares of Series B Convertible Preferred
Stock, all of which are issued and outstanding; (c) two hundred seventy-five
(275) shares of 8% Series C Cumulative Convertible Preferred Stock, of which no
shares are outstanding; (d) one hundred twenty-five (125) shares of 8% Series D
Cumulative Convertible Preferred Stock, of which thirty (30) shares are issued
and outstanding; (e) one hundred twenty-five (125) shares of 8% Series E
Cumulative Convertible Redeemable Preferred Stock, of which fifty (50) shares
are issued and outstanding; and (f) 2,020,000 shares of Series F Convertible
Preferred Stock, of which 1,010,000 shares are issued and outstanding. Except as
set forth in Schedule 2.3 and this Agreement, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Parent or obligating the Parent
to issue or sell any shares of capital stock of, or other equity interests in
the Parent, including any securities directly or indirectly convertible into or
exercisable or exchangeable for any capital stock or other equity securities of
the Parent. Except as set forth in Schedule 2.3 and this Agreement, there are no
outstanding obligations of the Parent to repurchase, redeem or otherwise acquire
any shares of its capital stock or make any investment (in the form of a loan,
capital contribution or otherwise) in any other
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Person. The Parent shall at all times reserve and keep available out of its
authorized but unissued Parent Common Stock, solely for the purpose of issuance
upon the exercise of the Warrants issued hereunder, such number of shares of
Parent Common Stock as shall then be issuable upon the exercise of the Warrants
issued hereunder. All shares of Parent Common Stock which shall be so issued
shall be duly and validly issued, fully paid and nonassessable and free from all
preemptive rights with respect to the issue thereof.
SECTION 2.4. AUTHORITY.
(a) The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been, and as of the First Closing and the Second Closing the
execution and delivery by the Company of the Transaction Documents to which it
will become a party at such closing and the consummation by the Company of the
transactions contemplated thereby will have been, duly and validly authorized by
all necessary corporate action and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Transaction
Documents or to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and as of the First Closing and the Second Closing the
execution and delivery by the Company of the Transaction Documents to which it
will become a party at such closing and the consummation by the Company of the
transactions contemplated thereby will have been, duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by the
Investor, each constitutes or will constitute, respectively, a legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general applicability
relating to or affecting creditors' rights generally and by the application of
general principles of equity.
(b) The execution and delivery of this Agreement by the Parent
and the consummation by the Parent of the transactions contemplated hereby have
been, and as of the First Closing and the Second Closing the execution and
delivery by the Parent of the Transaction Documents to which it will become a
party at such closing and the consummation by the Parent of the transactions
contemplated thereby will have been, duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Parent are necessary to authorize this Agreement or the Transaction Documents or
to consummate the transactions contemplated hereby or thereby. This Agreement
has been, and as of the First Closing and the Second Closing the execution and
delivery by the Parent of the Transaction Documents to which it will become a
party at such closing and the consummation by the Parent of the transactions
contemplated thereby will have been, duly executed and delivered by the Parent
and, assuming the due authorization, execution and delivery by the Investor,
each constitutes or will
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constitute, respectively, a legal, valid and binding obligation of the Parent,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general applicability relating to or affecting creditors' rights
generally and by the application of general principles of equity.
SECTION 2.5. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Schedule 2.5, the execution and
delivery of this Agreement by the Company do not, and the performance by the
Company of its obligations under this Agreement will not, (i) conflict with or
violate the certificate of incorporation or bylaws of the Company, (ii) conflict
with or violate any Law (as defined below) (including without limitation any
judgment or injunction) applicable to the Company or its assets and properties,
(iii) result in any breach of or constitute a default under any agreement or
contract to which the Company is a party or (iv) require any consent, approval,
authorization or permit of, or filing with or notification to, any Government
Entity (as defined below), except for the filing and recordation of one or more
of the Transfer Documents or documents relating to the perfection of security
interests granted under the Security Agreement.
(b) Except as set forth in Schedule 2.5, the execution and
delivery of this Agreement by the Parent do not, and the performance by the
Parent of its obligations under this Agreement will not, (i) conflict with or
violate the certificate of incorporation or bylaws of the Parent, (ii) conflict
with or violate any Law (including without limitation any judgment or
injunction) applicable to the Parent or its assets and properties, (iii) result
in any breach of or constitute a default under any Material Contracts (as
defined below) or (iv) require any consent, approval, authorization or permit
of, or filing with or notification to, any Government Entity or party to any
Material Contract, except for the filing and recordation of one or more of the
Transfer Documents or documents relating to the perfection of security interests
granted under the Security Agreement.
SECTION 2.6. FINANCIAL STATEMENTS.
(a) The unaudited balance sheet of the Company as of December
31, 1998 (the "Unaudited Company Balance Sheet"), presents fairly, in all
material respects, the assets and liabilities of the Company as of such date and
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis with the financial statements of the Parent
referred to in Section 2.6(b) (except that the Unaudited Company Balance Sheet
does not contain all required footnotes). Except as reflected in the Unaudited
Company Balance Sheet as of December 31, 1998 (the "Company Balance Sheet
Date"), the Company has no liabilities, contingent or absolute, matured or
unmatured, known or unknown, except for liabilities incurred in the ordinary
course of business since the Company
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Balance Sheet Date that would not have a Material Adverse Effect (as defined
below).
(b) The consolidated audited balance sheet of the Parent as of
the end of the Parent's fiscal year ending March 31, 1998, and the consolidated
audited statements of income and cash flows for such fiscal year (collectively,
the "Parent Audited Financial Statements"), and the consolidated unaudited
balance sheet of the Parent as of December 31, 1998 and the consolidated
unaudited statements of income and cash flows for the nine month period ended
December 31, 1998 (the "Parent Unaudited Financial Statements"), present fairly,
in all material respects, the financial condition of the Parent as of the
respective dates and the results of operations and cash flows for the respective
periods indicated and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except that such unaudited statements do not contain all required
footnotes and are subject to normal recurring year-end adjustments). Except as
reflected in the unaudited balance sheet of the Parent as of December 31, 1998
(the "Parent Balance Sheet Date"), the Parent has no liabilities, contingent or
absolute, matured or unmatured, known or unknown, except for liabilities
incurred in the ordinary course of business since the Parent Balance Sheet Date
that would not have a Material Adverse Effect.
SECTION 2.7. ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in Schedule 2.7, since the Company
Balance Sheet Date, the Company has not incurred any material liability, except
in the ordinary course of its business consistent with its past practices, and
the Company has conducted its business in the ordinary course consistent with
its past practices. Except as set forth in Schedule 2.7, since the Company
Balance Sheet Date, there has not been any change in the business, condition
(financial or otherwise) or results of operations of the Company, including any
transaction, commitment, dispute, damage, destruction or loss, whether or not
covered by insurance, or other event of any character (whether or not in the
ordinary course of business) individually or in the aggregate which has had, or
is reasonably likely to have, a Material Adverse Effect.
(b) Except as set forth in Schedule 2.7, since the Parent
Balance Sheet Date, the Parent has not incurred any material liability, except
in the ordinary course of its business consistent with its past practices, and
the Parent has conducted its business in the ordinary course consistent with its
past practices. Except as set forth in Schedule 2.7, since the Parent Balance
Sheet Date, there has not been any change in the business, condition (financial
or otherwise) or results of operations of the Parent, including any transaction,
commitment, dispute, damage, destruction or loss, whether or not covered by
insurance, or other event of any character (whether or not in the ordinary
course of business) individually or in the aggregate which has had, or is
reasonably likely to have, a Material Adverse Effect.
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SECTION 2.8. AGREEMENTS.
Except as set forth in Schedule 2.8, all existing agreements
that are or will be required to be filed as an exhibit to reports filed by the
Parent with the Securities and Exchange Commission (the "SEC") (collectively,
the "Material Contracts") are valid and in full force and effect on the date
hereof, and the Parent has not (and has no knowledge that any party thereto has)
violated any provision of, or committed or failed to perform any act which with
or without notice, lapse of time or both would constitute a default under the
provisions of, any Material Contract, except for defaults which would not
reasonably be expected to have a Material Adverse Effect.
SECTION 2.9. LITIGATION.
Except as set forth in Schedule 2.9, there is no action, suit,
investigation, claim, arbitration or litigation pending or, to the knowledge of
the Company or the Parent, threatened against or involving the Company or the
Parent or the business and operations of the Company or the Parent, at law or in
equity, or before or by any court, arbitrator or Government Entity. Neither, the
Company or the Parent is operating under or subject to any judgment, writ,
order, injunction, award or decree of any court, judge, justice or magistrate,
including any bankruptcy court or judge, or any order of or by any Government
Entity.
SECTION 2.10. TAXES AND ASSESSMENTS.
Except as set forth in Schedule 2.10, each of the Company and
the Parent has (i) duly and timely paid all Taxes (as defined below) which have
become due and payable by it; (ii) neither the Company nor the Parent has
received any notice of, nor does it have any knowledge of, any notice of
deficiency or assessment or proposed deficiency or assessment from any taxing
Government Entity; and (iii) to the knowledge of the Company and the Parent,
there are no audits pending and there are no outstanding agreements or waivers
by the Company or the Parent that extend the statutory period of limitations
applicable to any federal, state, local, or foreign tax returns or Taxes.
SECTION 2.11. BROKERS.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or the Parent, except as set forth on Schedule 2.11,
and the fees and commissions of any brokers, finders or investment bankers
described in Schedule 2.11 shall be borne by the Company or the Parent.
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SECTION 2.12. SEC FILINGS.
The Parent has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1998 (all such
forms, reports and other documents are collectively referred to herein as the
"Parent SEC Reports"), except for an amendment on Form 8-K/A with respect to the
IDX International acquisition. As of their respective filing dates, the Parent
SEC Reports (i) complied as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended, the Securities
Act of 1933, as amended (the "Securities Act"), and the SEC's rules and
regulations thereunder, and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. A draft of the
Parent's Form 10-K with respect to the fiscal year ended December 31, 1998 has
been provided to the Investor. Such draft does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 2.13. DISCLOSURE.
No representations or warranties by the Company or the Parent
in this Agreement and no statement or information contained in the Schedules
hereto or any certificate furnished or to be furnished by the Company or the
Parent to the Investor pursuant to the provisions of this Agreement (taken
collectively), contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
SECTION 2.14. NASDAQ LISTING.
The Parent has received no notice, either oral or written,
with respect to the continued eligibility of the Parent Common Stock for listing
on the Nasdaq National Market, and except as set forth on Schedule 2.14 the
Parent has maintained all requirements for the continuation of such listing.
SECTION 2.15. GOOD TITLE, ABSENCE OF LIENS.
Following the transfers contemplated by the transfer
documents, the Company will have good and marketable title to all assets and
property owned by it, in each case free and clear of all Encumbrances (as
defined below) (other than Encumbrances not prohibited by Section 4.9).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
The Investor hereby represents and warrants to the Company and the Parent as
follows:
SECTION 3.1. AUTHORITY AND CAPACITY.
The Investor has full legal right, capacity, power and
authority to execute and deliver this Agreement and all other documents,
instruments, certificates and agreements executed or to be executed by the
Investor pursuant hereto, and to consummate the transactions contemplated hereby
and thereby.
SECTION 3.2. ABSENCE OF VIOLATION.
The execution, delivery and performance by the Investor of
this Agreement and all other documents, instruments, certificates and agreements
contemplated hereby to which the Investor is a party, the fulfillment of and the
compliance with the respective terms and provisions hereof and thereof, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (a) conflict with, or violate any provision of, any Laws having
applicability to the Investor; or (b) conflict with, or result in any breach of,
or constitute a default under, any agreement to which the Investor is a party.
SECTION 3.3. RESTRICTIONS AND CONSENTS.
There are no agreements, Laws or other restrictions of any
kind to which the Investor is party or subject that would prevent or restrict
the execution, delivery or performance of this Agreement by the Investor.
SECTION 3.4. BINDING OBLIGATION.
This Agreement constitutes, and each document, instrument,
certificate and agreement to be executed by the Investor pursuant hereto, when
executed and delivered in accordance with the provisions hereof, assuming the
due authorization, execution and delivery by the Company and the Parent, shall
constitute, a valid and binding obligation of the Investor, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights generally and
by the application of general principles of equity.
SECTION 3.5. NO REGISTRATION UNDER THE SECURITIES ACT.
The Investor understands that the Notes and the Warrants to be
issued to the Investor under this Agreement (and the Loan, to the extent it is
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deemed to be a security) have not been and will not be registered under the
Securities Act in reliance upon exemptions contained in the Securities Act or
interpretations thereof, and neither such Notes or the Warrants, nor the Parent
Common Stock issuable in repayment or upon exercise thereof (nor the Loan, to
the extent it is deemed to be a security), can be offered for sale, sold or
otherwise transferred unless such shares or Warrants are so registered or
qualify for exemption from registration under the Securities Act.
SECTION 3.6. ACQUISITION FOR INVESTMENT.
The Notes and Warrants to be issued to the Investor under this
Agreement, and the Parent Common Stock issuable in repayment or upon exercise
thereof (and the Loan, to the extent it is deemed to be a security), are being
acquired by the Investor in good faith solely for its own account, for
investment and not with a view toward resale or other distribution within the
meaning of the Securities Act. Such securities will not be offered for sale,
sold or otherwise transferred by the Investor without either registration or
exemption from registration under the Securities Act.
SECTION 3.7. EVALUATION OF MERITS AND RISKS OF INVESTMENT.
The Investor has such knowledge and experience in financial
and business matters that the Investor is capable of evaluating the merits and
risks of the Investor's investment in the Notes and the Warrants to be acquired
hereunder and the Parent Common Stock in repayment or upon exercise thereof (and
the Loan, to the extent it is deemed to be a security). The Investor understands
and is able to bear any economic risks associated with such investment
(including, without limitation, the necessity of holding such securities for an
indefinite period of time (until the Note Maturity Date or earlier due dates
under the amortization schedule, in the case of the Notes), inasmuch as the
securities have not been registered under the Securities Act). The Investor is
an "accredited investor", as that term is defined in Regulation D promulgated
under the Securities Act. The Investor confirms that the Company and the Parent
have made available to the Investor and its representatives and agents the
opportunity to ask questions of the officers and management employees of the
Company and the Parent about the business and financial condition of the Company
and the Parent as the Investor or its representatives have requested.
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ARTICLE IV
COVENANTS
SECTION 4.1. CONSENTS AND APPROVALS; FILINGS AND NOTICES.
The Company and the Parent shall use reasonable efforts to as
promptly as possible make all filings with, provide all notices to and obtain
all consents and approvals from third parties required to be obtained by the
Company or the Parent in connection with the transactions contemplated
hereunder, including, without limitation, all filings with, notices to and
consents and approvals from Government Entities and other Persons.
SECTION 4.2. FURTHER ACTION; REASONABLE BEST EFFORTS.
Each of the parties shall use reasonable best efforts to take,
or cause to be taken, all appropriate action, and do, or cause to be done, all
things necessary, proper or advisable under applicable Laws or otherwise to
consummate and make effective the transactions contemplated by this Agreement as
promptly as practicable, including, without limitation, using its reasonable
best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Government Entities and parties to
contracts with the Company or the Parent as are necessary for the transactions
contemplated herein.
SECTION 4.3. PAYMENTS.
The Company shall duly and punctually pay the principal,
interest and any other amounts payable in respect of the Loan Note and the Notes
in accordance with their terms and the terms hereof.
SECTION 4.4. PERFORMANCE.
The Company and the Parent shall duly and punctually perform
the Transaction Documents to which each is a party in accordance with their
terms and the terms hereof.
SECTION 4.5. MAINTENANCE OF THE COMPANY AND PARENT.
The Company and the Parent shall do or cause to be done, all
things necessary to preserve and keep in full force and effect the Company's and
the Parent's corporate existences. The Company and the Parent shall obtain, make
and keep in full force and effect all authorizations from and registrations with
Government Entities that may be required for the validity or enforceability
against it of this Agreement and the Transaction Documents and for the operation
of its
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business and the ownership of its properties, except where the failure to do so
would not have a Material Adverse Effect. Each of the Company and the Parent
shall timely file all tax returns or extensions and all information or similar
reports required by law to be filed by it, and will pay all applicable taxes and
other governmental charges required to be paid. Each of the Company and the
Parent shall comply with all applicable Laws in respect of the operation of all
properties (including, without limitation, leased or owned facilities) by the
Company and the Parent and the conduct of its business other than where
non-compliance would not have a Material Adverse Effect. The Company and the
Parent shall carry and maintain in full force and effect, at all times with
financially sound and reputable institutions, insurance in such forms and
amounts and against such risks as may be reasonable and prudent in the
circumstances for a company holding the assets it holds or will hold as of the
Second Closing Date and as may be required by applicable Laws.
SECTION 4.6. NO CONSOLIDATION, MERGER OR SALE OF ASSETS OR STOCK
OF THE COMPANY.
(a) The Company shall not consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, unless:
(i) the Person formed by such consolidation or
into which the Company is merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of the Company
substantially as an entirety shall be a corporation, partnership or trust
wholly-owned (directly or indirectly) by the Parent, shall be organized and
validly existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume the due and
punctual payment of the principal, interest and any other amounts payable in
respect of the Loan Note and the Notes and the performance of every other
covenant of the Company under the this Agreement and the Transaction Documents;
(ii) immediately after giving effect to such
transaction, no Event of Default (as defined below), and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing; and
(iii) immediately after giving effect to such
transaction, the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires its assets would have a net worth
no less than the net worth of the Company prior to giving effect to such
transaction, without giving effect to such transaction (other than transaction
costs paid or committed to be paid by the Parent).
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(b) The Company shall not dispose of all or any part of its
interest in any material asset, unless such sale or disposition is on an arm's
length basis and in the ordinary course of business.
(c) The Parent shall not dispose of all or any part of its
100% ownership (direct or indirect) of the capital stock of the Company.
SECTION 4.7. LIMITATION ON INDEBTEDNESS.
Without the prior written consent of the Investor, the Company
shall not incur or have outstanding any Indebtedness (as defined below) other
than (i) the Loan, the Loan Notes and the Notes, (ii) Indebtedness (in the form
of a building mortgage and capitalized leases) outstanding on the date hereof
and disclosed on Exhibit G-1 or refinancing of such Indebtedness, or (iii)
Indebtedness incurred for the financing (from the asset vendor or other
equipment or asset financier, not to exceed 100% of the acquisition cost of the
assets being acquired) of assets acquired after the date hereof and used in the
businesses of the Company, the Parent or the Parent's other subsidiaries.
Without the prior written consent of the Investor, the Parent shall not incur
any additional Indebtedness other than (a) Indebtedness to refinance, or
extensions of, Indebtedness outstanding as of the date hereof or other
Indebtedness not prohibited by the terms of this Agreement (to the extent such
refinancing or extension would be deemed to constitute additional Indebtedness),
provided that such refinancing or extension does not increase the amount of such
Indebtedness, (b) Indebtedness incurred to repay or prepay the Loan, the Loan
Notes and the Notes, (c) the accounts receivable facility referred to in Section
1.6, or (d) Indebtedness incurred for the financing (from the asset vendor or
other equipment or asset financier, not to exceed 100% of the acquisition cost
of the assets being acquired) of assets acquired after the date hereof and used
in the businesses of the Company, the Parent or the Parent's other subsidiaries.
SECTION 4.8. LIMITATION ON DIVIDENDS AND OTHER RESTRICTED PAYMENTS.
Without the prior written consent of the Investor, neither the
Company nor the Parent shall make any Restricted Payment (as defined below).
SECTION 4.9. GOOD TITLE, LIMITATION ON LIENS.
The Company shall maintain good and marketable title to all
assets and property owned by it, in each case (except with the prior written
consent of the Investor), free and clear of all Encumbrances (other than
Encumbrances for the benefit of the Investor), except for Permitted Liens (as
defined below), Encumbrances granted in connection with the purchase (from the
asset vendor or
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other equipment or asset financier, not to exceed 100% of the acquisition cost
of the assets being acquired) of assets acquired after the date hereof and used
in the businesses of the Company, the Parent or the Parent's other subsidiaries,
and such individual Encumbrances as do not secure Indebtedness in excess of
$100,000 and where the fair market value of the assets so encumbered does not
exceed $250,000.
The Parent shall maintain good and marketable title to all
assets and property to be transferred to the Company pursuant to the Transfer
Documents and as provided in this Agreement until such assets are transferred to
the Company, in each case (except with the prior written consent of the
Investor), free and clear of all Encumbrances (other than Encumbrances for the
benefit of the Investor or created under the Transaction Documents), except for
(i) Encumbrances outstanding as of the date hereof (or replacement Encumbrances
to the extent such replacement Encumbrances would not be deemed to constitute
additional Encumbrances), (ii) Permitted Liens (as defined below), (iii)
Encumbrances created in connection with the purchase (from the asset vendor or
other equipment or asset financier, not to exceed 100% of the acquisition cost
of the assets being acquired) of assets acquired after the date hereof and used
in the businesses of the Company, the Parent or the Parent's other subsidiaries,
and (iv) such individual Encumbrances as do not secure Indebtedness in excess of
$100,000 and where the fair market value of the assets so encumbered does not
exceed $250,000. In addition, all accounts receivable of the Parent and its
subsidiaries who are parties to the Parent Security Agreement shall be free and
clear of all Encumbrances (other than Encumbrances for the benefit of the
Investor or created under the Transaction Documents), except for items described
in clauses (ii), (iii) or (iv) of the definition of Permitted Liens.
Without the prior written consent of the Investor, from and
after the First Closing, the Parent shall not create any Encumbrances, or permit
any Encumbrances to exist) on the Parent's accounts receivable, other than
Encumbrances for the benefit of the Investor or created under the Transaction
Documents, or other than Encumbrances permitted by the immediately preceding
paragraph.
SECTION 4.10. NOTICE TO INVESTOR.
Upon the Company obtaining knowledge of (a) an Event of
Default or (b) the existence of any pending or threatened actions, suits,
investigations, litigations, or other judicial or administrative proceedings
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect, the Company shall deliver promptly (and in any event within five
Business Days after the obtaining of such knowledge) to the Investor a
certificate of an executive officer of the Company specifying the nature and
period of existence thereof and what action the Company proposes to take with
respect thereto.
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SECTION 4.11. COMPLIANCE WITH TRANSACTION DOCUMENTS.
The Company and the Parent shall comply with all of the
provisions of, and perform each of its obligations under, each of the
Transaction Documents to which it is a party.
SECTION 4.12. MAINTENANCE OF PROPERTIES.
The Company shall, in all material respects, maintain,
preserve and keep its properties which are used or useful in the conduct of its
business (whether owned in fee or a leasehold interest) in good repair and
working order and from time to time shall make all necessary repairs,
replacements, renewals and additions so that at all times the economic
efficiency thereof shall be maintained. The Company shall maintain, preserve and
keep its rights under or in all material patents, trademarks, trademark
registrations, service marks, service ▇▇▇▇ registrations, trade names,
copyrights, licenses, inventions, trade secrets and rights which are owned by
the Company and or which are reasonably necessary for the conduct of its
business, and the Company shall protect and defend such rights against any
infringing uses that would have a Material Adverse Effect.
SECTION 4.13. TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS.
Except for the transactions specifically contemplated by the
Transaction Documents, and transactions solely between or among the Company, the
Parent and the Parent's subsidiaries, the Company shall not enter into or be a
party to any transaction or arrangement with any Affiliate of the Company,
Related Person of the Company or Related Person of any Affiliate of the Company
involving the transfer of assets by the Company to such Affiliate or Related
Person, except in the ordinary course of and pursuant to the reasonable
requirements of the Company's business or upon fair and reasonable terms no less
favorable to the Company than could be obtained in a comparable arm's-length
transaction between unrelated parties.
SECTION 4.14. USE OF PROCEEDS.
(a) The proceeds from the Loan and the Loan Note shall be used
to purchase assets under the Transfer Documents or pay dividends or make other
payments to the Parent, with the end result that all of the net proceeds of the
Loan and the Loan Note shall be made available to the Parent. Such funds shall
be used by the Parent and its subsidiaries to fund capital expenditures relating
to the Parent's network of IP trunks and intelligent platforms for calling card
and unified messaging services, and for working capital and general corporation
purposes.
(b) The proceeds from the sale of the Notes by the Company
shall be used to purchase assets under the Transfer Documents or pay dividends
or make other payments to the Parent, with the end result that all of the net
proceeds of the Notes shall be made available to the Parent. Such funds shall be
used by the
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Parent and its subsidiaries to fund capital expenditures relating to the
Parent's network of IP trunks and intelligent platforms for calling card and
unified messaging services, to repay debt (including the Loan and the Parent's
outstanding Indebtedness to IDT Corporation, which shall be repaid by the Parent
with such proceeds at the Second Closing) and for working capital and general
corporation purposes.
(c) None of the proceeds of the sale of the Notes shall be
used, directly or indirectly, for the purpose of purchasing or carrying any
"margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System. Neither the Company nor any agent
acting on its behalf shall take any action which might cause this Agreement or
the Notes to violate Regulation G, Regulation T, Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System.
SECTION 4.15. CONTINUANCE OF BUSINESS.
The Company shall limit itself to, and continue to conduct,
the business in which the Company is currently engaged during the period in
which the Loan, the Loan Note or the Notes are outstanding.
SECTION 4.16. FURTHER ASSURANCES.
The Company and the Parent shall promptly execute and deliver
all further instruments and documents, and take all further action that may be
necessary or that the Investor may reasonably request in order more fully to
give effect to the provisions of this Agreement.
SECTION 4.17. NASDAQ LISTING.
The Parent shall use all reasonable efforts, at the Parent's
expense, to cause the shares of Parent Common Stock issuable in repayment of the
Notes or upon exercise of the Warrants, respectively, to be approved for listing
on the Nasdaq National Market, as promptly as practicable after such stock has
been registered for resale pursuant to the Registration Rights Agreement (as
defined below).
SECTION 4.18. BLUE SKY.
The Parent shall use reasonable efforts, at the Parent's
expense, to obtain any necessary blue sky permits and approvals required to
permit the distribution of the shares of the Parent Common Stock issuable in
repayment of the Notes or upon exercise of the Warrants, respectively, to be
issued in accordance with the provisions of this Agreement.
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SECTION 4.19. REGISTRATION RIGHTS AGREEMENT.
At each of the First Closing and the Second Closing, the
Parent and the Investor will enter into a Registration Rights Agreement in the
form attached as Exhibit K (the "Registration Rights Agreement").
SECTION 4.20. ACCESS TO INFORMATION.
The Investor will be entitled to copies of all material
provided by the Parent to holders of Parent Common Stock, and upon request by
such holder copies of all filings made with the SEC pursuant to rules and
regulations thereof. In addition, the Investor will be given the opportunity
from time to time to meet with members of management and receive copies of such
information (other than material non-public information) regarding the Company
and the Parent and their businesses as the Investor may reasonably request. The
Parent will not provide the Investor with any material non-public information
other than pursuant to a confidentiality agreement reasonably acceptable to the
Parent.
ARTICLE V
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
SECTION 5.1. SURVIVAL OF REPRESENTATIONS.
All representations, warranties, covenants, indemnities and
other agreements made by any party to this Agreement herein or pursuant hereto,
shall be deemed made on and as of the Closing Date as though such
representations, warranties, covenants, indemnities and other agreements were
made on and as of such date, and all such representations, warranties,
covenants, indemnities and other agreements shall survive the Closing Date and
any investigation, audit or inspection at any time made by or on behalf of any
party hereto, as follows: (a) unless otherwise specified below, representations
and warranties shall survive for a period of two (2) years after the Closing
Date; and (b) the covenants and agreements in this Article V and the covenants
and agreements which by their terms survive the Closing Date shall continue in
full force and effect until fully discharged. Notwithstanding anything herein to
the contrary, any representation, warranty, covenant or agreement which is the
subject of a claim which is asserted in writing prior to the expiration of the
applicable period set forth above shall survive with respect to such claim or
dispute until the final resolution thereof.
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SECTION 5.2. AGREEMENT OF THE COMPANY AND THE PARENT TO INDEMNIFY.
Subject to the conditions and provisions of this Article V,
the Company and the Parent hereby agree to indemnify, defend and hold harmless
the Investor from and against and in respect of all Losses (as defined below)
resulting from, imposed upon or incurred by the Investor, directly or
indirectly, by reason of or resulting from any misrepresentation or breach of
any representation or warranty, or noncompliance with any conditions or other
agreements, given or made by the Company and the Parent in this Agreement or in
any document, certificate or agreement furnished by or on behalf of the Company
and the Parent pursuant to this Agreement. It shall be a condition to the rights
of the Investor to indemnification pursuant to this Section that the Investor
shall assert a claim for such indemnification within the applicable survival
period set forth in Section 5.1 hereof.
SECTION 5.3. CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of the Company and the Parent
hereunder with respect to their indemnities pursuant to this Article V,
resulting from any Third Party Claim (as defined below) shall be subject to the
following terms and conditions:
(a) To seek indemnification, the Investor must give the
Company and the Parent notice of any Third Party Claim which is asserted
against, imposed upon or incurred by the Investor and which may give rise to
liability of the Company and the Parent pursuant to this Article V, stating (to
the extent known or reasonably anticipated) the nature and basis of such Third
Party Claim and the amount thereof; provided that the failure to give such
notice shall not affect the rights of the Investor hereunder except to the
extent that the Company and the Parent shall have suffered actual material
damage by reason of such failure.
(b) Subject to Section 5.3(c) below, the Company and the
Parent shall have the right to undertake, by counsel or other representatives of
their own choosing, the defense of such Third Party Claim at the Company and the
Parent's risk and expense.
(c) In the event that (i) the Company and the Parent shall
elect not to undertake such defense, (ii) within a reasonable time after notice
from the Investor of any such Third Party Claim, the Company and the Parent
shall fail to undertake to defend such Third Party Claim, or (iii) there is a
reasonable probability that such Third Party Claim may materially and adversely
affect the Investor other than as a result of money damages or other money
payments, then the Investor (upon further written notice to the Company and the
Parent) shall
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have the right to undertake the defense, compromise or settlement of such Third
Party Claim, by counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the Company and the Parent. In the event that
the Investor undertakes the defense of a Third Party Claim under this Section
5.3(c), the Company and the Parent shall pay to the Investor, in addition to the
other sums required to be paid hereunder, the reasonable costs and expenses
incurred by the Investor in connection with such defense, compromise or
settlement as and when such costs and expenses are so incurred.
(d) Anything in this Section 5.3 to the contrary
notwithstanding, (i) the Company and the Parent shall not, without the
Investor's written consent, settle or compromise such Third Party Claim or
consent to entry of any judgment which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to the Investor of a release
from all liability in respect of such Third Party Claim in form and substance
satisfactory to the Investor; (ii) in the event that the Company and the Parent
undertakes the defense of such Third Party Claim, the Investor, by counsel or
other representative of their own choosing and at its sole cost and expense,
shall have the right to participate in the defense, compromise or settlement
thereof and each party and its counsel and other representatives shall cooperate
with the other party and its counsel and representatives in connection
therewith; and (iii) in the event that the Company and the Parent undertake the
defense of such Third Party Claim, the Company and the Parent shall have an
obligation to keep the Investor informed of the status of the defense of such
Third Party Claim and furnish the Investor with all documents, instruments and
information that the Investor shall reasonably request in connection therewith.
SECTION 5.4. REMEDIES CUMULATIVE.
The remedies provided herein shall be cumulative and shall not
preclude the assertion by the parties hereto of any other rights or the seeking
of any other remedies against the other, or their respective successors or
assigns.
SECTION 5.5. REIMBURSEMENT BY THE COMPANY
If (i) the Investor, other than by reason of its gross
negligence, willful misconduct, misrepresentation or violation of law, rule or
regulation (an "Investor Factor"), becomes involved in any capacity in any
action, proceeding or investigation brought by any stockholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by this Agreement, or if the Investor is impleaded in any such
action, proceeding or investigation by any Person, or (ii) the Investor, other
than by reason of any Investor Factor, or by reason of its trading of the Parent
Common Stock in a manner that is illegal under the federal securities laws,
becomes involved in any capacity in any action, proceeding or investigation
brought by the Securities and Exchange Commission
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against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement, or if the
Investor is impleaded in any such action, proceeding or investigation by any
Person, then in any such case, the Company will reimburse the Investor for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any matter in which the Investor is a named
party, the Company will reimburse the Investor for reasonable internal and
overhead costs for the time of any officers or employees of the Investor devoted
to appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have
(other than matters specifically addressed in the Registration Rights Agreement,
which shall be governed solely by that agreement), shall extend upon the same
terms and conditions to any Affiliates of the Investor who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling Persons (if any), as the case may be, of the Investor
and any such Affiliate, and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and Personal representatives of the Company, the
Investor, any such Affiliate and any such Person. The Company also agrees that
neither the Investor nor any such Affiliate, partner, director, agent, employee
or controlling Person shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of this Agreement, except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Company result
from any Investor Factor, and except as provided in or contemplated by this
Agreement.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES THEREFOR
SECTION 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) default shall occur in the payment of principal or
interest on the Loan, the Loan Note or the Notes, or under the Guaranty or Loan
Capital Contribution Agreement, on any date on which any of such amounts are due
and payable and such default shall continue for a period of five Business Days
after written notice to the Company by the Investor; or
(b) default shall occur in the observance or performance of
any covenant set forth in Sections 4.5, 4.6, 4.7, 4.8 or 4.9 (other than an
immaterial default); or
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(c) default shall occur in the observance or performance of
any other obligation, covenant, undertaking, condition or provision in respect
of the Loan, the Loan Note or the Notes or contained in this Agreement or the
Transaction Documents (other than an immaterial default) which is not remedied
within 30 days after the earlier of: (i) receipt by the Company of written
notice from the Investor requiring the same to be remedied and (ii) the date on
which the Company shall have obtained knowledge of the occurrence of any such
default; or
(d) the Company or the Parent defaults, in an amount equal to
or greater than $250,000, (beyond any applicable grace period) on any payment of
principal or of interest on any Indebtedness; or
(e) there shall be entered in any court of competent
jurisdiction, any final judgment ordering the Company or the Parent to pay money
in excess of $250,000 or the equivalent thereof in another currency, and such
judgment shall remain undismissed, undischarged, or unstayed pending appeal and
in effect for a period of 30 days from the entry thereof; or
(f) any representation or warranty made by the Company or the
Parent herein in connection with the consummation of the Loan or the issuance
and delivery of the Loan Note or the Notes shall prove to have been false or
incorrect in any material respect as of the date of the making thereof; or
(g) the Company or the Parent shall become insolvent or unable
to pay its debts as they come due, or shall stop, suspend or threaten to stop or
suspend payment of all or a material part of its debts or shall propose or make
a general assignment or an arrangement or composition with or for the benefit of
its creditors, or a moratorium shall be agreed or declared in respect of or
affecting all or a material part of the Indebtedness of the Company or the
Parent; or
(h) there shall be entered an order by any competent court, or
a resolution passed, for the winding up or dissolution of the Company or the
Parent, save for the purposes of reconstruction, amalgamation or reorganization
on terms approved by the Investor; or
(i) the Company or the Parent shall initiate or consent to
judicial proceedings relating to itself under any applicable liquidation,
bankruptcy, insolvency, composition, reorganization or other similar Laws
(including a proceeding to appoint a receiver, trustee, custodian or other
similar official for it or for all or any material part of its assets), or there
shall be commenced against the Company or the Parent any such proceeding that
results in the entry of an order for relief or remains undismissed, unbonded or
unstayed pending appeal and in effect for a period of 30 days from the date of
entry thereof; or the Company or the Parent shall make a conveyance or
assignment for the benefit of, or shall enter into any composition or other
arrangement with, its creditors generally, save for the purposes of
reconstruction, amalgamation or reorganization on terms approved by the
Investor.
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SECTION 6.2. ACCELERATION OF MATURITIES.
Upon the occurrence and during the continuation of any Event
of Default, the Investor may declare the Loan and the Loan Note, or the Notes,
as the case may be, to be immediately due and payable on the terms then due upon
optional prepayment by the Company pursuant to Section 1.1 or 1.2, as
applicable.
SECTION 6.3. ADDITIONAL REMEDIES; REMEDIES CUMULATIVE.
In addition to the remedies available under Section 6.2, upon
the occurrence and during the continuation of any Event of Default, the Investor
may exercise any other remedy it has under any Transaction Document, including
without limitation the Security Agreement, the Guaranty and the Parent Security
Agreement, and shall have the right to enforce the Loan Capital Contribution
Agreement (in the case of an Event of Default while the Loan is outstanding).
The Investor also shall have any other remedy available by law. No remedy herein
conferred upon the Investor is intended to be exclusive of any other remedy, and
to the extent permitted by law each and every such 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 or by statute or otherwise.
SECTION 6.4. REMEDIES NOT WAIVED.
Except for such waivers as may have been agreed to in writing
by the Investor, no course of dealing between the Company and the Investor and
no delay or failure in exercising any rights hereunder or under the Loan Note or
the Notes in respect thereof shall operate as a waiver of any of the rights of
the Investor.
SECTION 6.5. RESCISSION OF ACCELERATION.
The provisions of Section 6.2 are subject to the condition
that if the principal of and accrued but unpaid interest on the Loan and the
Loan Note, or the Notes, as the case may be, have been declared or have become
immediately due and payable by reason of the occurrence of any Event of Default
described in Section 6.1, the Investor may, by written instrument filed with the
Company, rescind and annul such declaration and the consequences thereof;
provided, that at the time such declaration is annulled and rescinded, (a) no
judgment or decree has been entered for the payment of any monies due pursuant
to the Loan and the Loan Note, or the Notes, as the case may be, or this
Agreement, (b) all arrears of interest upon all the applicable Notes and all
other sums payable under the Loan and the Loan Note, or the Notes, as the case
may be, and under this Agreement (except any principal or interest on the Notes
which has become due and payable solely by reason of such declaration under
Section 6.2) shall have been duly paid; and (c) each and every other Event of
Default shall have been cured or waived.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 7.1. NOTICES.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier number
specified below:
(a) If to the Company:
eGlobe Financing Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chairman
(b) If to the Parent:
Executive TeleCard, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chairman
(c) If to the Investor:
EXTL Investors, LLC
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
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SECTION 7.2. CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
"Affiliate" means a Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned Person.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in New York are required by law to close or are
customarily closed.
"Closing Price" of each share of Parent Common Stock or other
security means the composite closing price of the sales of the Parent Common
Stock or such other security on all securities exchanges on which such security
may at the time be listed (as reported in The Wall Street Journal), or, if there
has been no sale on any such exchange on any day, the average of the highest bid
and lowest asked prices of the Parent Common Stock or such other security on all
such exchanges at the end of such day, or, if such security is not so listed,
the closing price (or last price, if applicable) of sales of the Parent Common
Stock or such other security in the Nasdaq National Market (as reported in The
Wall Street Journal) on such day, or if such security is not quoted in the
Nasdaq National Market but is traded over-the-counter, the average of the
highest bid and lowest asked prices on such day in the over-the-counter market
as reported by the National Quotation Bureau Incorporated, or any similar
successor organization.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
"Encumbrance" means any mortgage, charge, lien, pledge,
hypothecation, assignment, deposit arrangement (excluding normal banking
transactions), security interest or other encumbrance of a similar nature
whatsoever.
"Government Entity" means any United States or other national,
state, municipal or local government, domestic or foreign, any subdivision,
agency, entity, commission or authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority.
"Indebtedness" means, with respect to any Person and without
duplication, (a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or other
similar
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instruments; (b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's acceptances
issued for the account of such Person; (c) all obligations of such Person as
lessee under leases that have been or should be, in accordance with generally
accepted accounting principles, recorded as capitalized lease obligations; (d)
indebtedness (excluding prepaid interest thereon) secured by an Encumbrance on
property owned or being purchased by such Person (including indebtedness arising
under conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited in
recourse; (e) all guarantees of such Person in respect of any of the foregoing;
and (f) amendments, renewals, extensions, modifications and refundings of any of
(a) through (e).
"Laws" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, rules, resolutions, orders, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified Persons or entities.
"Loan Interest Rate" means 8.0% per annum, simple interest,
computed on the basis of actual days elapsed and a year of 365 days; provided,
however, that in the event that any amount payable hereunder is determined to be
interest in excess of the maximum interest rate permitted by applicable law,
"Loan Interest Rate" shall mean such permitted maximum.
"Loan Maturity Date" means the earliest to occur of (i) the first
anniversary of the First Closing Date, (ii) the date of closing of an offering
by the Parent of debt or equity securities, in a single transaction or series of
related transactions, from which the Parent receives net proceeds of $30 million
or more, or (iii) the Second Closing Date or (iv) the occurrence of an Event of
Default while the Loan is outstanding.
"Loan Overdue Rate" means a rate per annum equal to the maximum
interest rate permitted by applicable law.
"Losses" means all demands, losses, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys' fees and
disbursements.
"Market Price" means (i) if the Parent Common Stock is listed on
any securities exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market, the Closing Price of the Parent Common Stock on the
date that is two days prior to the day as of which the Market Price is being
determined, or (ii) if the Parent Common Stock is not listed on any securities
exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market throughout the Pricing Period, the fair value of the
Parent Common Stock determined by agreement between the Parent and the Investor
or, if they are unable to reach
-31-
agreement within a reasonable period of time, the fair value of the Parent
Common Stock as determined by an independent appraiser selected by the Parent
(which appraiser may be the Parent's investment banker, and the fees and
expenses of such appraiser shall be borne by the Parent).
"Material Adverse Effect" means any material adverse effect on the
assets, business, financial condition or results of operations of the Parent and
its subsidiaries, taken as a whole, or upon the ability of the Company to
perform its obligations under this Agreement and the Transaction Documents.
"Note Interest Rate" means 5.0% per annum, simple interest,
computed on the basis of actual days elapsed and a year of 365 days; provided,
however, that in the event that any amount payable hereunder is determined to be
interest in excess of the maximum interest rate permitted by applicable law,
"Note Interest Rate" shall mean such permitted maximum.
"Note Maturity Date" means the earlier to occur of (i) the third
anniversary of the Second Closing Date, or (ii) the date of closing of a
Qualified Offering.
"Note Overdue Rate" means a rate per annum equal to the maximum
interest rate permitted by applicable law.
"Permitted Lien" means (i) Liens created in the ordinary course of
business securing Indebtedness incurred in customary amounts for the financing
(from the asset vendor or other equipment or asset financier, not to exceed 100%
of the acquisition cost of the assets being acquired) of assets (other than
accounts receivable) acquired after the date hereof and used in the businesses
of the Company, the Parent or the Parent's other subsidiaries; (ii) Liens
arising by reason of (A) taxes that are being contested in good faith by
appropriate proceedings properly instituted and diligently conducted and in
respect of which appropriate reserves are being maintained, (B) security for
payment of workmen's compensation or insurance, unemployment insurance and other
types of social security, (C) deposits in connection with tenders, contracts
(other than contracts for the payment of money) or leases entered into in the
ordinary course of business or (D) deposits to secure public or statutory
obligations, or in lieu of surety or appeal bonds; (iii) statutory inchoate
liens of mechanics, materialmen, laborers, employees or suppliers arising by
operation of law incurred in the ordinary course of business for sums which are
not overdue for a period of 45 or more days or that are being diligently
contested in good faith by negotiations or by appropriate proceedings that
suspend the collection thereof; and (iv) Liens arising out of judgments or
orders that have been adequately bonded or which do not constitute an Event of
Default.
"Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group.
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"Qualified Offering" means an offering by the Parent of debt or
equity securities, in a single transaction or series of related transactions,
from which the Parent receives net proceeds of $100 million or more.
"Related Person" of any Person means a director, nominee for
election as a director, or executive officer of such Person.
"Restricted Payment" means (a) the payment by the Parent of any
dividend or distribution on any class of share capital, other than dividends on
outstanding preferred stock or additional preferred stock issued after the date
hereof which has a required dividend that is within the range of reasonable and
customary preferred stock dividends, (b) the repurchase or redemption by the
Parent of shares of any class of share capital or any warrants, rights or
options to purchase or acquire any shares of any class of share capital, other
than from the proceeds of a substantially contemporaneous issuance of equity
securities, (c) the prepayment, purchase or redemption of any indebtedness pari
passu or subordinated to the Notes or (d) the setting aside of funds for any of
the foregoing purposes; provided, however, that the repurchase of shares of
Parent Common Stock from departing employees of the Parent shall not be deemed
to be a Restricted Payment so long as there is no existing Event of Default and
the sum of the amount of such repurchases from the First Closing Date to and
including such date of repurchase does not exceed $250,000.
"Senior Indebtedness" means the principal of and interest on (i)
all Indebtedness of the Parent (including Indebtedness of others guaranteed by
the Parent) to IDT Corporation outstanding on the date hereof, (ii) Indebtedness
(in the form of a building mortgage and capitalized leases) outstanding on the
date hereof and disclosed on Exhibit G-1 or refinancing of such Indebtedness, or
(iii) Indebtedness incurred for the financing (from the asset vendor or other
equipment or asset financier, not to exceed 100% of the acquisition cost of the
assets being acquired) of assets acquired after the date hereof and used in the
businesses of the Company, the Parent or the Parent's other subsidiaries, which
Indebtedness is secured or by its terms is senior or superior in right of
payment or otherwise to other Indebtedness of the Parent.
"Stockholder Approval" means any approval of stockholders of the
Parent which may be required, in the reasonable determination of the Parent upon
advice of its counsel, under the rules or regulations of the Nasdaq Stock
Market, as in effect at the applicable time.
"subsidiary" means a corporation, partnership, joint venture or
other entity of which the Company owns, directly or indirectly, at least 50% of
the outstanding securities or other interests the holders of which are generally
entitled
-33-
to vote for the election of the board of directors or other governing body or
otherwise exercise control of such entity.
"Taxes" means all federal, state, local and foreign taxes
(including, without limitation, income, profit, franchise, sales, use, VAT, real
property, personal property, ad valorem, excise, employment, social security and
wage withholding taxes) and installments of estimated taxes, assessments,
deficiencies, levies, imports, duties, license fees, registration fees,
withholdings or other similar charges of every kind, character or description
imposed by any governmental authorities, and any interest, penalties or
additions to tax imposed thereon or in connection therewith.
"Third Party Claim" means any claim or other assertion of
liability by a third party.
"Transaction Documents" means the Loan Note, Notes, Security
Agreement, Transfer Documents, Warrants, Loan Capital Contribution Agreement,
Guaranty and Parent Security Agreement.
SECTION 7.3. HEADINGS.
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 7.4. SEVERABILITY.
If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 7.5. ENTIRE AGREEMENT.
This Agreement (together with the Exhibits, the Schedules and
the other documents delivered pursuant hereto) constitutes the entire agreement
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof,
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except as otherwise expressly provided herein, are not intended to confer upon
any other Person any rights or remedies hereunder.
SECTION 7.6. SPECIFIC PERFORMANCE.
The transactions contemplated by this Agreement are unique.
Accordingly, each of the parties acknowledges and agrees that, in addition to
all other remedies to which the Investor may be entitled, the Investor is
entitled to a decree of specific performance, provided the Investor is not in
material default hereunder.
SECTION 7.7. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
SECTION 7.8. THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied,
is intended to or shall confer upon any other Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 7.9. FEES AND EXPENSES.
Except as otherwise provided for in this Agreement, each party
hereto shall pay its own fees, costs and expenses incurred in connection with
this Agreement and in the preparation for and consummation of the transactions
provided for herein; provided, however, that the Company and the Parent shall
reimburse the Investor for reasonable legal expenses incurred by the Investor in
connection with transactions contemplated hereby, up to a maximum of $20,000.
SECTION 7.10. AMENDMENT.
This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
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SECTION 7.11. SUBORDINATION.
The Investor covenants and agrees, and each subsequent holder
of the Loan Note, by its acceptance thereof, likewise covenants and agrees, that
to the extent the indebtedness represented by the Loan Note, either alone or
together with the rights of the holders of the Loan Note under the Transaction
Documents, could be deemed to constitute indebtedness of the Parent, the payment
of the principal, interest and any other amounts payable in respect of the Loan
and the Loan Note are hereby expressly made subordinate, and subject in right of
payment, to the prior payment in full of all amounts owing to holders of Senior
Indebtedness.
SECTION 7.12. LOSS, THEFT, ETC. OF NOTES.
Upon receipt of evidence satisfactory to the Company of the
loss, theft, mutilation or destruction of the Loan Note or any Note, and in the
case of any such loss, theft or destruction upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Company, or
in the event of such mutilation upon surrender and cancellation of the Loan, the
Loan Note or any Note, the Company shall make and deliver without expense to the
holder thereof, a new note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated note. If the Investor or any institutional holder is the
owner of any such lost, stolen or destroyed note, then the affidavit of the
Investor or an authorized officer of such owner, setting forth the fact of loss,
theft or destruction and of its ownership of the note at the time of such loss,
theft or destruction shall be accepted as satisfactory evidence thereof and an
unsecured agreement of indemnity submitted to the Company by the Investor or any
institutional holder shall satisfy the requirement of a bond of indemnity.
SECTION 7.13. CONSENT REQUIRED.
Any term, covenant, agreement or condition of this Agreement
may, with the consent of the Company and the Parent, be amended or compliance
therewith may be waived (either generally or in particular instance and either
retroactively or prospectively), if the Company and the Parent shall have
obtained the consent in writing of the Investor.
SECTION 7.14. GOVERNING LAW.
All corporate law matters arising under this Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware, and all other matters arising under this Agreement shall be governed
by and construed in accordance with the laws of the State of Texas, in each case
regardless of the laws that might otherwise govern under applicable principles
of conflicts of law. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the State of Texas or the
state courts of the State of Texas in connection with any dispute arising under
this Agreement and hereby
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waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions.
SECTION 7.15. COUNTERPARTS.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed and delivered shall be deemed to be an original but all
of which taken together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this LOAN
AND NOTE PURCHASE AGREEMENT to be executed and delivered as of the date first
written above.
EXECUTIVE TELECARD, LTD.
By:
--------------------------------
Name: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board of
Directors and Chief
Executive Officer
EGLOBE FINANCING CORPORATION
By:
--------------------------------
Name:
Title:
EXTL INVESTORS, LLC
By:
--------------------------------
Name:
Title:
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