EXTENSION AND MODIFICATION AGREEMENT ($10,000,000 Promissory Note)
($10,000,000
Promissory Note)
This
Extension and Modification Agreement (the “Extension
Agreement”)
is
made, executed and delivered as of May 12, 2006 by Fonix Corporation, a Delaware
corporation (“Borrower”),
in
favor of ▇▇▇▇▇▇▇▇▇ Avenue, Ltd., a British Virgin Islands corporation
(“Lender”).
RECITALS
A. On
or
about February 24, 2004, Borrower executed and delivered to Lender a Secured
Promissory Note (the “Note”)
in the
original principal amount of $10,000,000;
B. In
connection with the execution and delivery of the Note, Borrower caused to
be
delivered to Lender the following collateral security: (i) a Collateral Pledge
Agreement (the “Pledge
Agreement”)
dated
February 24, 2004 executed by Borrower and its wholly owned subsidiaries,
LTEL
Acquisition Corporation, a Delaware corporation (“Acquisition”),
and
LTEL Holding Corporation, a Delaware corporation (“Holdings”),
in
favor of Lender, whereby Borrower, Acquisition and Holdings granted to Lender
a
continuing lien and security interest in the shares of capital stock of
Acquisition, Holdings, LecStar Telecom, Inc., a Georgia corporation
(“Telecom”)
and
LecStar DataNet, Inc., a Georgia corporation (“DataNet”),
and
(ii) a Security Agreement (the “2004
Security Agreement”)
dated
February 24, 2004 executed by Borrower and Acquisition in favor of Lender,
whereby Borrower and Acquisition granted Lender a continuing lien and security
interest in all of the assets of Acquisition;
C. Borrower
has not made the payments to Lender under the terms of the Note due on January
15, 2006 and April 15, 2006; and
D. Borrower
desires to execute and deliver this Extension Agreement in favor of Lender
in
order to extend the terms of repayment of the Note and to provide Lender
with
additional collateral security for the Note, as more fully set forth
below.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein and other consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Lender hereby agree as follows:
1. Borrower
and Lender hereby agree that the payments due on January 15, 2006 and April
15,
2006 shall be due and payable on June 15, 2006. With respect to such payments,
Section 2(i) of the Note is modified to read as follows;
“(i) any
default by the Company in the payment of principal or interest payable in
respect of this Note, which default continues for a period of fifteen (15)
calendar days after the due date for such payment;”
2. Borrower
hereby agrees to execute and deliver to Lender the Security Agreement attached
hereto as Exhibit
A,
whereby
Telecom, DataNet and Gerogia Telecom Ventures, LLC, a Delaware limited liability
company (“Ventures”),
shall
grant Lender a continuing lien and security interest in all of the assets
of
Telecom, Ventures and DataNet.
3. Borrower
hereby agrees that this Extension Agreement is executed merely to memorialize
an
extension of the payments due under the Note on January 15, 2006 and April
15,
2006 and to provide Lender with additional collateral security for the Note
and
does not constitute or in any way operate as a release, discharge, satisfaction,
payment, or cancellation of said indebtedness or any part thereof. Except
as
expressly set forth in paragraphs 1 and 2 above, nothing herein contained
shall
affect or be construed to affect any of the terms or provisions of the Note,
the
Pledge Agreement, the 2004 Security Agreement or any other documents or
agreements made and executed by Borrower, Acquisition or Holding in connection
therewith (the “Loan
Documents”)
nor
impair the validity or security thereof or any rights or powers which Lender
now
or hereafter may have under or by virtue thereof for recovery of the obligation
evidenced by the Note or other obligations evidenced by the Loan Documents
in
case of any default or non-fulfillment of the terms of the Loan Documents
or
otherwise.
4. Borrower
hereby specifically ratifies and consents to each and every term of the Loan
Documents.
5. Unless
expressly defined herein, any defined term used herein shall have the meaning
established and set forth therefore in the Note.
DATED
the
day and year first written above.
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Fonix
Corportaion,
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a
Delaware corporation
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By:
_____________________________________
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Its:
_____________________________________
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▇▇▇▇▇▇▇▇▇
Avenue, LTD.,
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a
British Virgin Islands corporation
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By:
_____________________________________
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Its:
_____________________________________
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