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EXHIBIT 10.20
UNIT PURCHASE AND AGENCY AGREEMENT
By and Between
iLinc Communications, Inc.,
a Delaware Corporation
and
Cerberus Financial, Inc.,
an Arizona Corporation
Acting for the Benefit of Certain Noteholders
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TABLE OF CONTENTS
PAGE
----
Article 1.
RECITALS...........................................................1
1.1 Purchase
of Units...........................................1
1.2 Agency
Duties...............................................1
Article 2. DEFINITIONS;
INTERPRETATION........................................1
2.1
Definitions.................................................1
2.2 Accounting
Principles.......................................4
Article 3. ISSUE, DESCRIPTION, EXECUTION,
REGISTRATION
AND EXCHANGE OF
NOTES..............................................5
3.1 Amount and
Issue of Notes...................................5
3.2 Form of
Notes...............................................5
3.3
Denominations and Date of Notes.............................5
3.4 Execution
of Notes..........................................5
3.5
Registration, Exchange and
Registration of Transfer of Notes...........................5
3.6 Mutilated,
Destroyed, Lost or Stolen Notes..................6
3.7
Cancellation of Notes; Acquisition of Notes by the
Company.....................................................6
3.8 Persons
Entitled to Interest Payments.......................7
3.9 Benefits
of Provisions of This Agreement....................7
Article 4.
REDEMPTION.........................................................7
4.1 Redemption
Generally........................................7
4.2 Optional
Redemption.........................................7
4.3 Change of
Control Redemption................................8
Article 5. PAYMENT OF PRINCIPAL AND
INTEREST..................................8
5.1 Date for
Payment of Principal and Interest..................8
5.2 Interest
Payable on Notes...................................8
5.3 Paying
Agent................................................8
5.4
Application of Payment......................................8
Article 6. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY......................9
6.1
Organization, Good Standing, and Qualification..............9
6.2
Authorization...............................................9
6.3
Capitalization..............................................9
6.4 Compliance
with Laws........................................9
6.5
Taxes.......................................................9
6.6
Intellectual Property.......................................9
6.7 SEC
Reports and Financial Statements.......................10
6.8
Litigation.................................................11
6.9
Governmental Authorizations and Regulations................11
6.10
No Untrue Statements.......................................11
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Article 7. COVENANTS OF THE
COMPANY..........................................11
7.1
Maintenance of Office; Operation of Business...............11
7.2 Compliance
with Laws and Regulations;
Licenses and Permits; No Violation.........................12
7.3
Appointment to Fill a Vacancy in Office of Note Agent......12
7.4 Further
Instruments and Acts...............................12
7.5 Payment of
Notes...........................................12
7.6 Compliance
Certificates and Annual Reports.................12
7.7 Corporate
Existence........................................13
7.8 Waiver of
Stay, Extension or Usury Laws....................13
7.9
Maintenance of Properties and Insurance....................13
7.10
Sale of Assets; Consolidation; Equity; Merger..............13
7.11
Limitation on Incurrence of Additional Indebtedness........14
7.12
Restricted Payments........................................14
7.13
Limitations on Payment Restrictions
Affecting Subsidiaries.....................................14
7.14
Loans, Acquisitions and Guaranties.........................14
7.15
Issuance of Stock; Change in Ownership
or Control.................................................14
7.16
Payment on or Modification of Subordinated
Indebtedness...............................................14
7.17
Limitations on Pledge of Capital Stock of
Company or Subsidiaries....................................15
Article 8. NOTEHOLDER'S
LIST.................................................15
8.1
Noteholders' List..........................................15
8.2
Preservation and Disclosure of List........................15
Article 9. REMEDIES OF THE NOTE AGENT AND
THE NOTEHOLDERS
IN EVENT OF
DEFAULT...............................................15
9.1 Events of
Default..........................................15
9.2 Payment of
Notes on Default; Suit Therefor.................16
9.3
Application of Moneys Collected by Note Agent..............17
9.4
Proceedings by Noteholders.................................18
9.5
Proceedings by Note Agent..................................18
9.6 Remedies
Cumulative and Continuing.........................18
9.7 Direction
of Proceedings and Waiver of
Defaults by Majority of Noteholders........................19
9.8 Notice of
Defaults.........................................19
9.9
Undertaking to Pay Costs...................................19
9.10
Default on Indebtedness....................................19
Article 10. NOTE
AGENT.......................................................19
10.1
Duties and Liabilities of Note Agent.......................19
10.2
Reliance on Documents, Opinions, Etc.......................21
10.3
No Responsibility for Recitals; etc........................22
10.4
Moneys to be Held in Trust.................................22
10.5
Compensation of Note Agent.................................22
10.6
Expenses of Note Agent.....................................22
10.7
Resignation or Removal of Note Agent.......................22
10.8
Acceptance by Successor Note Agent.........................23
Article 11. ACTS OF NOTEHOLDERS; EVIDENCE
OF OWNERSHIP OF NOTES..............23
11.1
Acts of Noteholders........................................23
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11.2
Ownership of Notes.........................................23
11.3
Action Taken by the Noteholders............................23
Article 12. registration
rights..............................................24
12.1
Required Registration.......................................24
12.2
Incidental Registration....................................25
12.3
Registration Procedures....................................25
12.4
Expenses...................................................27
12.5
Information by Holder......................................27
12.6
Indemnification and Contribution...........................27
12.7
Changes in Common Stock or Preferred Shares................29
12.8
Damages....................................................30
Article 13. AMENDMENTS AND
SUPPLEMENTS.......................................30
13.1
Amendments and Supplements Without Noteholders'
Consent....................................................30
13.2
Amendments With Noteholders'
Consent....................................................30
13.3
Note Agent Authorized to Join Amendments; Reliance on
Counsel....................................................30
Article 14. SATISFACTION AND DISCHARGE OF
AGREEMENT; UNCLAIMED
MONIES...........................................................30
14.1
Discharge of Agreement.....................................30
14.2
Deposited Moneys to be Held in
Trust by the Note Agent....................................30
14.3
Unclaimed Moneys...........................................30
Article 15. NO REGISTRATION OF NOTES;
RESTRICTIONS ON
TRANSFERABILITY..................................31
Article 16. MISCELLANEOUS
PROVISIONS.........................................31
16.1
Provisions Binding on the Company's
Successors.................................................31
16.2
Addresses for Notice.......................................31
16.3
Representations and Warranties.............................31
16.4
Governing Law..............................................31
16.5
Effect of Invalidity of Provisions.........................31
16.6
Table of Contents and Headings.............................32
16.7
Execution in Counterparts..................................32
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UNIT PURCHASE AND AGENCY AGREEMENT
This Unit Purchase and Agency Agreement
("AGREEMENT") dated as of April 19,
2004, is made by and between iLinc
Communications, Inc., a Delaware corporation
("COMPANY"), and Cerberus Financial, Inc.,
an Arizona corporation ("NOTE
AGENT"), acting for the equal and ratable
benefit of and on behalf of certain
Noteholders identified in Schedule 1
attached hereto.
ARTICLE 1.
RECITALS
1.1 PURCHASE OF UNITS. The Company is offering in a private
placement
transaction that is exempt from
registration (the "Offering") up to 60 units
(the "Units") that will provide gross
proceeds to the Company of $3,000,000;
with the total units consisting of
$2,250,000 in notes (more fully described
herein) and $750,000 of the Company's
common stock (the "Stock"). Each unit will
cost the purchaser of the unit $50,000 and
will entitle the Purchaser to: (i) a
Note with a principal balance of $37,500,
and (ii) $12,500 of the Company's
common stock. The Offering and number of
units sold may be increased in the sole
discretion of the Company by 20 Units to a
total of 80 Units thereby providing
gross proceeds of $4,000,000 (with the
total of all units then consisting of
$3,000,000 in Notes and $1,000,000 of
common stock).
1.2 AGENCY DUTIES. This Agreement provides the terms and
conditions
upon which the Notes are to be
authenticated, issued, delivered, registered, and
transferred, the terms upon which the Note
Agent will act as note registrar and
paying agent with respect to the Notes, and
the terms upon which the Note Agent
will act as the agent of the Noteholders in
the collection of amounts due under
the Notes if an Event of Default occurs and
in the enforcement of the rights of
the Noteholders pursuant to this Agreement
and the Notes.
ARTICLE 2.
DEFINITIONS; INTERPRETATION
2.1 Definitions. As used in this Agreement, the following terms
shall
have the following respective meanings:
AGREEMENT means this Unit Purchase and Agency Agreement, as may
be
amended by mutual written consent and in
force from time to time.
AUTHORIZED
DENOMINATIONS means minimum principal amounts of $18,750 and
integral multiples of $3,750 in excess of
$18,750.
BOARD OF DIRECTORS means, with respect to the Company, the Board
of
Directors of such the Company or any
committee of the Board of Directors of the
Company duly authorized to act on behalf of
the Board of Directors.
BUSINESS DAY means any day other than (i) a Saturday or Sunday, or
(ii)
a day on which banking institutions in
Arizona are authorized or obligated by
law or executive order to be closed.
CAPITAL STOCK means, with respect to the Company any and all
classes of
common stock of the Company.
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CAPITALIZED LEASE OBLIGATIONS of the Company means the obligations
of
the Company to pay rent or other amounts
under a lease of property, real or
personal, that is appropriately capitalized
for financial reporting purposes in
accordance with GAAP.
CHANGE OF CONTROL means any event or series of events by which (i)
any
"person" (as such term is used in SECTIONS
13(d) and 14(d) of the Securities
Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rules
13d-3 and 13-d5 under the Exchange Act) of
50% or more of the total voting power
of the voting stock of the Company; (ii)
the Company consolidates with or merges
with or into another entity or any entity
consolidates with, or merges with or
into the Company, in any such event
pursuant to a transaction in which the
outstanding voting stock of the Company is
changed into or exchanged for cash,
securities or other property, other than
any such transaction where the
outstanding voting stock of the Company is
changed into or exchanged for voting
stock of the surviving corporation and the
holders of the voting stock of the
Company immediately prior to such
transaction own, directly or indirectly, not
less than a majority of the voting stock of
the surviving corporation
immediately after such transaction; or
(iii) the stockholders of the Company
approve any plan of liquidation or
dissolution of the Company.
CLOSING means any closing of the Offering and the issuance and sale
of
the Units.
CLOSING DATE has the meaning set forth in SECTION 3.1(b).
COMPANY means iLinc Communications, Inc. and its successors or
assigns
in accordance with the terms of this
Agreement.
DEFAULT means any event which is, or after notice or passage of
time
would be, an Event of Default, after notice
as provided herein and failure to
cure such default provided such cure is
permitted.
DISCLOSURE DOCUMENT means that certain Confidential Private
Placement
Memorandum of the Company dated March 19,
2004, as it may be amended or
supplemented from time to time.
ERISA means the Employee Retirement Income Security Act of 1974,
as
amended, and any successor statute of
similar import, together with the
regulations thereunder, in each case as in
effect from time to time.
EVENT OF DEFAULT means one of the events listed as such in Section
9.1.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended,
and
the rules and regulations promulgated
thereunder, in each case as in effect from
time to time.
GAAP means generally accepted accounting principles as in effect in
the
United States of America from time to
time.
HOLDER or NOTEHOLDER means a Person in whose name a Note is
registered
on the books of the Company.
INDEBTEDNESS means, without duplication, with respect to the
Company,
(i) all obligations of the Company (A) in
respect of borrowed money (whether or
not the recourse of the lender is to the
whole of the assets of the Company or
only to a portion thereof), (B) evidenced
by bonds, notes, debentures or similar
instruments, (C) representing the balance
deferred and unpaid of the purchase
price of any property or services (other
than accounts payable or other
obligations arising in the ordinary course
of business), (D) evidenced by
bankers' acceptances or similar instruments
issued or accepted by banks, (E) for
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the payment of money relating to a
Capitalized Lease Obligation, or (F)
evidenced by a letter of credit or a
reimbursement obligation of the Company
with respect to any letter of credit; (ii)
all net obligations of the Company
under interest swap obligations and foreign
currency hedges; (iii) all
liabilities of others of the kind described
in the preceding clauses (i) or (ii)
that the Company has guaranteed or that are
otherwise its legal liability; (iv)
Indebtedness (as otherwise defined in this
definition) of another Person secured
by a Lien on any asset of the Company,
whether or not such Indebtedness is
assumed by the Company, the amount of such
obligations being deemed to be the
lesser of (A) the full amount of such
obligations so secured, and (B) the fair
market value of such asset, as determined
in good faith by the Board of
Directors of the Company, which
determination shall be evidenced by a resolution
of the Board of Directors of the Company;
and (v) any and all deferrals,
renewals, extensions, refinancings and
refundings (whether direct or indirect)
of, or amendments, modifications or
supplements to, any liability of the kind
described in any of the preceding clauses
(i), (ii), (iii), or (iv) or this
clause (v), whether or not between or among
the same parties.
INTEREST means the interest rate per annum on the unpaid
principal
balance of the Notes set forth in Section
3.1(a).
INTEREST PAYMENT DATES means the 15th day of January, April, July
and
October during the term of the Notes,
commencing July 15, 2004; provided,
however, if such date is not a Business
Day, the Interest Payment Date shall be
the immediately preceding Business Day.
ISSUE DATE means the date on which the Notes are originally
issued
under this Agreement.
LIEN means, with respect to the Company, any mortgage, pledge,
lien,
encumbrance, affecting title or resulting
in an encumbrance against property of
the Company, or a security interest arising
under the Uniform Commercial Code of
any kind (including any conditional sale or
other title retention agreement
securing obligations of the Company, and
any filing of or agreement to give any
financing statement under the Uniform
Commercial Code (or equivalent statute or
statutes) of any jurisdiction).
MATURITY DATE means July 15, 2007, which is the date on which the
Notes
become due and payable in full pursuant to
the terms of this Agreement.
NOTE AGENT means Cerberus Financial, Inc., and any successor
appointed
pursuant to this Agreement.
NOTES means the 10% Senior Notes due July 15, 2007 issued pursuant
to
the purchase of Units in accordance with
this Agreement, which Notes are
unsecured Senior Indebtedness of the
Company.
OSHA means the Occupational Safety and Health Act, as amended, and
any
successor statute of similar import,
together with the regulations thereunder,
in each case as in effect from time to
time.
OFFERING means
the offering of Notes to be issued hereunder pursuant to
the Disclosure Document.
OFFICE has the meaning set forth in Section 7.1(a).
OFFICER means, the CEO, the President, any Sr. Vice President,
the
Chief Financial Officer or the Secretary of
the Company.
OFFICERS' CERTIFICATE means a certificate signed by two Officers or
by
an Officer and the Secretary of the
Company.
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OPINION OF COUNSEL means a written opinion, in form and
substance
reasonably acceptable to the Note Agent or
other party receiving such opinion,
from legal counsel who is reasonably
acceptable to the Note Agent or other party
receiving such opinion. Such counsel may be
an employee of or counsel to the
Company or the Note Agent.
PERSON means any individual, corporation, limited liability
company,
partnership, joint venture, trust, estate,
unincorporated organization, or
government or any agency or political
subdivision thereof.
PLACEMENT AGENCY AGREEMENT means the Placement Agency Agreement
dated
March 19, 2004 between the Company and the
Placement Agent.
PLACEMENT AGENT means Peacock, Hislop, Staley & Given, Inc., an
Arizona
corporation.
PRINCIPAL BUSINESS means the business of the Company,
specifically
providing Web conferencing, virtual
classroom and Web collaboration software and
services more fully described in the
Disclosure Document.
RECORD DATE means with respect to any Interest payment, the
last
Business Day of the calendar month
preceding each Interest Payment Date.
REFERENCE PERIOD means, with respect to the Company, the four
full
fiscal quarters ended immediately preceding
any date upon which any
determination is to be made pursuant to the
terms of the Notes or this
Agreement.
REGISTRABLE SECURITIES shall mean (i) the Stock, and (ii) shares
of
Common Stock issued or issuable with
respect to the Stock upon an adjustment for
stock splits, stock dividends and similar
events.
RESTRICTED PAYMENT means, with respect to the Company, any of
the
following: (i) any dividend or other
distribution in cash or property to the
holders of the Company's Capital Stock; or
(ii) the purchase, redemption or
other acquisition or retirement for in cash
or property of any Capital Stock or
preferred stock or any option, warrant, or
other right to acquire shares of
Capital Stock of the Company or any of its
Subsidiaries.
SENIOR INDEBTEDNESS means any indebtedness of the Company which
is
senior in right of payment to or pari passu
with the Notes.
s
SUBORDINATED INDEBTEDNESS means any Indebtedness of the Company
(whether outstanding on the date hereof or
hereafter incurred), which is
contractually or by operation of law
subordinate or junior in right of payment
and priority to the Notes including,
without limitation, the Subordinated
Indebtedness set forth on EXHIBIT B
attached hereto.
SECURITIES ACT means the Securities Act of 1933, as amended, and
the
rules and regulations promulgated
thereunder, in each case as in effect from
time to time.
SUBSIDIARIES OR SUBSIDIARY means all or any of the subsidiaries as
are
identified now or hereafter in the audited
financial statements of the Company.
2.2
ACCOUNTING PRINCIPLES. Where the character or amount of any
asset
or liability or item of income or expense
is required to be determined, or any
consolidation or other accounting
computation is required to be made for the
purposes of this Agreement, the same shall
be done in accordance with GAAP, to
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the extent applicable, except where such
principles are inconsistent with the
requirements of this Agreement.
ARTICLE 3.
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF
NOTES
3.1 AMOUNT AND ISSUE OF NOTES.
(a) If the conditions to the Closing set forth in the Placement
Agency
Agreement shall have been satisfied, a Note
shall be issued to each of the
Purchasers in accordance with the terms of
the Disclosure Document and
subscription agreement and delivered to the
Note Agent at the Closing. The Note
Agent shall authenticate and deliver such
Notes to the Noteholders. The Notes
shall bear interest from their date of
issue at the rate of ten percent (10.0%)
per annum, payable as provided in ARTICLE
5.
(b) Delivery of the Notes will be made through the Note Agent
upon
completion of the Offering, against payment
therefor, by the Noteholders to the
Company, in current and immediately
available funds in the amount of 100% of the
principal amount thereof, less commissions
and expenses payable to the Placement
Agent and less certain other expenses
payable by the Company in connection with
the Offering on the Business Day specified
by the Company, but not less than
three (3) Business Days prior written
notice to the Note Agent ("CLOSING DATE").
3.2 FORM OF NOTES. The Notes and the Note Agent's Certificate
of
Authentication to be borne by or attached
to the Notes shall be in the form of
Note attached as Exhibit "A" to this
Agreement. Any of the Notes may have
printed thereon such legends or
endorsements as the Company may deem appropriate
and as are not inconsistent with the
provisions of this Agreement, or as may be
required to comply with any law or with any
rule or regulation made pursuant to
such laws.
3.3 DENOMINATIONS AND DATE OF NOTES. The Notes shall be issued
in
Authorized Denominations, and shall be
numbered, lettered or otherwise
distinguished in such manner or in
accordance with such plan as the Company may
determine with the approval of the Note
Agent. The Notes shall be dated as of
the Issue Date, except that any Note issued
upon the transfer, exchange or
substitution of another Note shall be dated
the date of its authentication.
3.4 EXECUTION OF NOTES. The Notes shall be signed (manually or
in
facsimile) in the name of or on behalf of
the Company by an authorized Officer.
3.5
REGISTRATION, EXCHANGE AND REGISTRATION OF TRANSFER OF NOTES.
(a) The Note Agent will keep a register or registers in which it
will
register all Notes. The Note Agent will
serve as its own registrar and paying
agent for the Notes.
(b) Subject to the restrictions on transferability of the Notes
pursuant to Article 15, upon surrender for
registration of transfer of any Note,
the Company shall execute and deliver, in
the name of the transferee or
transferees, a new Note or Notes for with
an appropriate principal amount taking
into account any prepayments of principal
thereof.
(c) Notes to be exchanged shall be surrendered at the office of
the
Note Agent who will cause the Company to
execute and deliver in exchange
therefor the Note or Notes that the
Noteholder making the exchange shall be
entitled to receive, bearing serial numbers
not previously issued.
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(d) All Notes presented for registration of transfer, exchange
or
payment shall, if so required by the
Company, be duly endorsed by or be
accompanied by a written instrument or
instruments of transfer in form
reasonably satisfactory to the Company,
duly executed by the registered
Noteholder or by his, her or its duly
authorized attorney.
(e) Upon exchange or registration of transfer the Company may
require
payment of a sum sufficient to cover any
tax, or other governmental charge,
legal fees, agent fees or accounting
charges that may be imposed or incurred by
the Company in relation thereto and any
other expenses connected therewith.
3.6 MUTILATED, DESTROYED, LOST OR STOLEN NOTES.
(a) If any Note shall become mutilated or be destroyed, lost or
stolen,
the Company shall, upon the written request
of the Holder thereof, execute and
deliver a new Note, bearing a serial number
not previously issued, in exchange
and substitution for the mutilated Note or
in lieu of and substitution for the
Note destroyed, lost or stolen; provided,
however, that the Company shall not be
obligated to execute and deliver a new Note
unless, (i) in every case, the
applicant requesting a substituted Note
shall furnish to the Company such
security or indemnity as may be reasonably
required by the Company to save it
harmless, and (ii) in every case of
destruction, loss or theft, such applicant
shall also furnish to the Company evidence
reasonably satisfactory to it of the
destruction, loss or theft of such Note and
of the ownership thereof.
(b) Upon the issuance of any substituted Note, the Company may
require
the payment of a sum sufficient to cover
any tax or other governmental charge,
legal fees, agent fees or auditing fees
that may be incurred by the Company or
imposed in relation thereto and any other
expenses connected therewith,
including, without limitation, counsel fees
of the Note Agent, and in addition a
further sum not exceeding $100 for each
Note so issued in substitution. In case
any Note that has matured or is about to
mature shall have become mutilated or
be destroyed, lost or stolen, the Company
may, with the consent of the
applicant, instead of issuing a substitute
Note, pay or authorize the payment of
the same (without surrender thereof, except
in the case of a mutilated Note), if
the applicant for such payment shall
furnish the Company with such security or
indemnity as it may reasonably require to
save it harmless and, in case of
destruction, loss or theft, evidence
reasonably satisfactory to the Company of
the destruction, loss or theft of such Note
and of the ownership thereof. Every
substituted Note issued pursuant to the
provisions of this SECTION 3.6 by virtue
of the fact that any Note is destroyed,
lost or stolen, shall constitute an
additional contractual obligation of the
Company, whether or not the destroyed,
lost or stolen Note shall be found at any
time, and shall be entitled to all of
the benefits of this Agreement equally and
proportionately with any and all
other Notes duly issued hereunder. All
Notes shall be held and owned upon the
express condition that the foregoing
provisions are exclusive with respect to
the replacement or payment of mutilated,
destroyed, lost or stolen Notes and
shall preclude any and all other rights and
remedies, notwithstanding any law or
statute existing or hereafter enacted to
the contrary with respect to the
replacement or payment of negotiable
instruments or other securities without
their surrender.
3.7 Cancellation of Notes; Acquisition of Notes by the Company.
All
Notes surrendered for the purpose of
payment, redemption, exchange or
registration of transfer shall be delivered
to the Company for cancellation and
the Company shall cancel such Notes and all
Notes that have been surrendered
directly to the Company for cancellation,
and no Notes shall be issued in lieu
thereof except as expressly permitted by
any of the provisions of this
Agreement. The Company shall indicate
clearly on the face and on each and every
page of such canceled Notes the fact that
such Notes are canceled. If the
Company shall acquire any of the Notes,
such acquisition shall not operate as a
redemption or satisfaction of the
Indebtedness represented by such Notes, unless
and until the same are canceled, and the
Company shall not be entitled to vote
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or participate in directing the activities
of the Note Agent pursuant to this
Agreement with respect to any such acquired
Notes.
3.8 PERSONS ENTITLED TO INTEREST PAYMENTS. The person in whose name
a
Note is registered at the close of business
on any Record Date with respect to
any Interest Payment Date shall be entitled
to receive any Interest payable with
respect to that Note on the Interest
Payment Date next following such Record
Date, notwithstanding the cancellation of
such Note upon any registration of
transfer or exchange thereof subsequent to
such Record Date and prior to such
Interest Payment Date. The Holder of any
Note issued upon the transfer, exchange
or substitution of another Note shall only
be entitled to receive Interest
payable with respect to that Note from and
after the Interest Payment Date next
following the first Record Date occurring
after the issuance of that Note.
3.9 BENEFITS OF PROVISIONS OF THIS AGREEMENT. Nothing in this
Agreement
or in the Notes, expressed or implied,
shall give or be construed to give the
Company, other than the parties thereto and
the Noteholders, any legal or
equitable right, remedy or claim under or
in respect of this Agreement, or under
any covenant, condition or provision herein
contained, all the covenants,
conditions and provisions contained in this
Agreement or in the Notes being for
the sole benefit of the parties hereto and
the Noteholders.
ARTICLE 4.
REDEMPTION
4.1 REDEMPTION GENERALLY. No redemption of the Notes shall be
made,
except to the extent and in the manner
provided in this Agreement.
4.2 OPTIONAL REDEMPTION.
(a) The Notes are redeemable, in whole or in part, at the option of
the
Company, at any time on or after July 15,
2005 by payment by the Company of a
sum that represents payment of principal of
the Notes or portion thereof or
accrued and unpaid interest thereon, if
any, to the date of such payment.
(b) The Company shall give written notice of its intent to prepay
any
portion of the Notes to the Note Agent, not
less than thirty (30) days nor more
than sixty (60) days before the date fixed
for such pre-payment. Such notice
shall state (i) the date of redemption;
(ii) the total amount of principal to be
redeemed on the redemption date and that,
after the redemption date, upon
surrender of such Note, a new Note or Notes
in principal amount equal to the
unredeemed portion will be issued; and
(iii) the estimated accrued interest
applicable to such payment. The Notes
called for redemption must be surrendered
to the Company at the address specified in
the notice to collect the redemption
price and the accrued interest thereon.
Unless the Company Defaults in the
payment of the redemption price or accrued
interest on Notes called for
redemption ceases to accrue interest and
the only remaining right of the Holders
is to receive payment of the redemption
prices upon surrender of the Notes to
the Company.
(c) If less than all of the balance of the Notes then outstanding
are
to be called for redemption, then upon
notice of the Company's intention to
redeem pursuant to SECTION 4.2(b) hereof,
the Holders shall forthwith surrender
their Notes to the Company (i) for payment
of the principal amount called for
redemption (including accrued and unpaid
interest thereon, if any, to the date
of redemption) and (ii) exchange for a new
Note of the aggregate principal
amount of the unredeemed balance with like
maturity and interest rate. New Notes
representing the unredeemed balance of the
principal amount of such Notes shall
be issued to the Holders thereof, without
charge. If the Holder of any Note
shall fail to present such Note for payment
and exchange to the extent of the
principal amount called for redemption (and
to that extent only), interest shall
cease to accrue on the portion of the
principal amount of such Notes called for
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redemption on and after the redemption
date, and such Notes shall not be
entitled to the benefit of this Agreement
to the extent of the portion of their
principal amounts (and accrued and unpaid
interest thereon, if any, to the date
of redemption) called for redemption.
(d) If less than all of the total principal balance of the Notes
then
outstanding are to be called for
redemption, the Note Agent shall select the
particular Notes or portions thereof to be
redeemed pro rata, by lot or by any
other method that the Note Agent considers
fair and appropriate.
4.3 CHANGE OF CONTROL REDEMPTION.
(a) In the event that a Change of Control shall occur, the Company
will
give written notice ("COMPANY NOTICE")
thereof to the Noteholders. The Company
Notice shall be delivered no later than
three (3) Business Days following the
occurrence of any Change of Control. The
Company Notice shall (i) describe the
facts and circumstances of such Change of
Control in reasonable detail; (ii)
make reference to this SECTION 4.3 and the
right of the Noteholders to require
payment on the terms and conditions
provided for in this SECTION 4.3; and (iii)
offer in writing to redeem the outstanding
Notes for a redemption price
("REDEMPTION PRICE") equal to 100% of the
principal amount of the Notes, plus
accrued interest to the date of redemption.
Each Noteholder shall have the right
to accept such offer and require redemption
of the Notes held by the Noteholder
by written notice to the Company
("NOTEHOLDER NOTICE") within thirty (30) days
following receipt of the Company Notice
specifying a date for redemption
("REDEMPTION DATE") which Redemption Date
shall not be later than three (3)
Business Days after the date of the
Noteholder Notice. The Company shall on each
Redemption Date pay the redemption price
with accrued interest to the Redemption
Date.
(b) Without limiting the foregoing, notwithstanding the failure on
the
part of the Company to give the Company
Notice herein required as a result of
the occurrence of a Change of Control, each
Noteholder shall have the right to
require the Company to redeem such
Noteholder's Note for the Redemption Price
within thirty (30) days after such
Noteholder has actual knowledge of any Change
of Control. In such event, the Company
shall redeem such Noteholder's Note on
the date designated in the Noteholder's
Notice delivered by such Noteholder.
ARTICLE 5.
PAYMENT OF PRINCIPAL AND INTEREST
5.1 DATE FOR PAYMENT OF PRINCIPAL AND INTEREST. Interest shall
be
payable on the Interest Payment Dates and
on the Maturity Date; and principal
shall be payable on the Maturity Date.
5.2 INTEREST PAYABLE ON NOTES. The Company shall pay the Interest
on
the unpaid principal balance of the Notes
as provided herein.
5.3 PAYING AGENT. The Note Agent shall serve as paying agent for
the
Notes and shall make all payments pursuant
to the Notes and this Agreement to
the Holders when due, but only as received
in advance from the Company.
5.4 APPLICATION OF PAYMENT. All payments received shall be applied
to
the payment of the Notes in the following
order of priority: first, to the
payment of accrued interest, and second, to
the payment of principal then due.
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<PAGE>
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company on the Closing Date hereby represents and warrants
as
follows:
6.1 ORGANIZATION, GOOD STANDING, AND QUALIFICATION. The Company is
a
Delaware corporation duly organized,
validly existing, and in good standing
under the laws of the state of Delaware and
has all requisite power and
authority to own or lease and operate its
properties and assets and to carry on
its business as now conducted.
6.2 AUTHORIZATION. The Company has the power and authority to
enter
into this Agreement and to perform all of
its obligations hereunder. The
execution, delivery, and performance of
this Agreement by the Company has been
duly authorized by all necessary actions,
and this Agreement constitutes a
legal, valid, binding, and enforceable
obligation of the Company except as such
may be limited by bankruptcy, insolvency,
reorganization, assignment,
moratorium, or other similar laws relating
to or affecting the rights of
creditors generally. No consent, approval,
authorization, or order of any court
or governmental agency is required to
execute, delivery and perform this
Agreement. The issuance of the Notes and
the Stock has been duly authorized and,
when the Notes are executed and delivered
and paid for in accordance with the
terms of this Agreement, the Notes will be
valid and binding obligations of the
Company, enforceable in accordance with
their terms.
6.3 CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 100,000,000 shares of
Common Stock, par value $.001 per share,
and (b) 10,000,000 shares of Preferred
Stock, par value $.001 per share, of
which 17,665,647 shares of common stock
(net of all treasury stock) and 150,000
shares of preferred stock are issued and
outstanding. All of the issued and
outstanding shares of stock have been duly
authorized and are validly issued,
fully paid and nonassessable.
6.4 COMPLIANCE WITH LAWS. Except as set forth in the Disclosure
Document, the Company has at all times
complied and is in compliance in all
material respects with all laws applicable
to the Company and its assets,
properties, operations and businesses,
which failure or default would materially
adversely affect the business, properties,
operations, or financial condition of
the Company (a "Material Adverse
Effect").
6.5 TAXES. Except as set forth in the Disclosure Document, all
taxes
owed by the Company (whether or not shown
on any tax return) have been paid, and
the Company has adequately provided for
liability for current taxes not yet due
and payable on its books and records.
6.6 INTELLECTUAL PROPERTY.
(a) Except as set forth in the Disclosure Document, all
patents,
trademark or service mark registrations,
copyright registrations and
applications therefor (collectively,
"INTELLECTUAL PROPERTY") necessary to
conduct the Company's business, and all
such Intellectual Property is valid, in
full force, and has been properly
maintained and, if applicable, renewed in
accordance with the laws of any relevant
jurisdictions. Except as set forth in
the Disclosure Document, none of the
Intellectual Property has been or is now
involved in any opposition, invalidation or
cancellation proceeding, and no such
action is threatened.
(b) The Company owns or possesses adequate, enforceable and
transferable licenses or other rights to
use, without payment, all Intellectual
Property now used or employed in the
Company's business, and (ii) the
transactions contemplated by this Agreement
will not have a material adverse
effect on the rights of the Company in the
Intellectual Property.
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<PAGE>
(c) The right, title and interest of the Company in and to the
Intellectual Property are freely assignable
and not subject to liens of any
other person or entity (in whole or in
part) and are adequate and sufficient to
permit the Company to conduct its business
as presently being conducted.
(d) No action is presently planned or pending against any person
to
protect or enforce any right or interest of
the Company thereof in and to the
Intellectual Property.
(e) No other person has infringed, violated, conflicted or
interfered
with or is infringing, violating,
conflicting with or interfering with, or is
engaged in any activity which would
constitute a misappropriation of, any of the
rights or interest of the Company in and to
any of the Intellectual Property or
any contract rights of any third party,
(ii) the rendering by the Company of
their services and uses of the Intellectual
Property does not infringe, violate,
conflict with or interfere with the patent,
copyright, trademark, service mark,
trade secret, trade name or other
intellectual property or proprietary right of
any third party, and (iii) the Company has
not received any notice or any threat
of claim that the Intellectual Property
infringes, violates, conflicts with or
interferes with any proprietary right of
any other person.
6.7 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed on a timely basis with the SEC all
forms,
reports, schedules, registration
statements, definitive proxy statements and
other documents (as they have been amended
since the time of their filing, and
including any documents filed as exhibits
thereto, collectively, the "SEC
REPORTS") required to be filed by the
Company with the SEC since January 1,
2001, except that late filing of that
certain Form 8-K related to the
acquisition transaction with Quisic
Corporation, or any proper extensions
permitted by the Securities Laws. As of
their respective dates and for the
periods reflected therein, the SEC Reports
(including, without limitation, any
financial statements or schedules included
or incorporated by reference therein)
complied in all material respects with the
requirements of the Exchange Act or
the Securities Act, and the rules and
regulations of the SEC promulgated
thereunder applicable, as the case may be,
to such SEC Reports, and none of the
SEC Reports contained any untrue statement
of a material fact or omitted to
state a material fact required to be stated
therein or necessary to make the
statements made therein, in light of the
circumstances under which they were
made, not misleading.
(b) The consolidated balance sheets as of March 31, 2003 and March
31,
2002 and the related consolidated
statements of income, shareholders' equity and
cash flows for each of the three years in
the period ended March 31, 2003
(including the related notes and schedules
thereto) of the Company contained in
the Company's Form 10-K for the year ended
March 31, 2003 included in the SEC
Reports present fairly, in all material
respects, the consolidated financial
position and the consolidated results of
operations and cash flows of the
Company and its consolidated subsidiaries
as of the dates or for the periods
presented therein in conformity with GAAP
applied on a consistent basis during
the periods involved except as otherwise
noted therein.
(c) The Company's unaudited consolidated balance sheet as of
December
31, 2003 and the related consolidated
statements of income, shareholders' equity
and cash flows for the three months and
nine months then ended, as applicable
(collectively, the "MOST RECENT FINANCIAL
STATEMENTS"), contained in the
Company's Form 10-Q for the fiscal quarter
ended December 31, 2003 present
fairly, in all material respects (subject
to normal year-end adjustments that
will not be material), the consolidated
financial position and the consolidated
results of operations and cash flows of the
Company and its consolidated
subsidiaries as of the date or for the
periods presented therein in conformity
with GAAP applied on a consistent basis
during the periods involved except as
otherwise noted therein.
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<PAGE>
6.8 LITIGATION. Except as set forth in the Disclosure Document, the
SEC
Reports set forth each instance in which
the Company (a) is subject to any
outstanding injunction, judgment, order,
decree, ruling or charge or (b) is a
party to any action, suit, proceeding,
hearing or investigation of, in or before
any governmental or regulatory authority or
before any arbitrator, is threatened
to be made a party to any action, suit,
proceeding, hearing or investigation of,
in or before any governmental or regulatory
authority or before any arbitrator.
6.9 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. The Company holds
all
permits necessary to the conduct of its
business. Such permits are valid,
binding and in full force and effect and
the Company is in compliance with the
terms thereof. The Company has received no
notice that any governmental or
regulatory authority intends to cancel,
terminate or not renew any such permit.
6.10 NO UNTRUE STATEMENTS. The representations and warranties
contained
in this Agreement, and the statements
contained in the Disclosure Document,
taken as a whole, do not contain any untrue
statement of a material fact or omit
to state a material fact necessary in order
to make the statement herein or
therein, in the light of the circumstances
under which they were made, not
misleading.
ARTICLE 7.
COVENANTS OF THE COMPANY
7.1 MAINTENANCE OF OFFICE; OPERATION OF BUSINESS. The Company
covenants
and agrees that, so long as any of the
Notes remain outstanding, it will:
(a) Maintain an office or agency where Notes may be presented
for
registration, registration of transfer,
exchange and payment as in this
Agreement provided, and where notices and
demands to or upon the Company in
respect of the Notes and this Agreement may
be served ("OFFICE"). The principal
office of the Company is currently located
at 2999 North 44th Street, Suite 650,
Phoenix, Arizona 85018, or such other place
as the Company may hereafter
designate by notice to the Note Agent and
to the Noteholders, shall be such
Office.
(b) Promptly pay and discharge, or cause to be paid and discharged,
all
taxes, assessments and governmental charges
or levies imposed upon the Company,
any of its Subsidiaries, or upon any of
their respective assets, or upon any
part thereof; provided, however, that the
Company shall not be required to pay
and discharge or cause to be paid and
discharged any such tax, assessment,
charge or levy so long as the validity
thereof shall be contested in good faith
by appropriate proceedings, nor shall the
Company be obligated hereunder to pay
and discharge or cause to be paid and
discharged any such tax, assessment,
charge or levy if such property shall, in
the opinion of the Company, no longer
be advantageous to the Company in the
conduct of its business, or if in the
opinion of the Company, any such tax
assessment or charge exceeds the value of
such property on which it is levied, except
where the failure to do so would not
result in a Material Adverse Effect.
(c) Pay or cause to be paid the principal of and interest on
all
Indebtedness heretofore or hereafter
incurred or assumed by the Company, when
and as the same shall become due and
payable, unless such Indebtedness shall be
renewed or extended, or unless such payment
is not permitted under provisions
subordinating such Indebtedness to the
Notes by operation of agreement or law
and not permit the occurrence of any act or
omission which is or may be declared
to be a default thereunder; provided,
however, that the Company shall not be
required to make any payment or to take any
action by reason of the provisions
of this subsection at any time while it
shall be contesting in good faith its
obligation to make such payment.
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<PAGE>
(d) At all times keep proper books of record and account and
consolidated financial statements of the
Company, together with all appropriate
notes and schedules that present fairly in
all material respects the financial
position and the results of operations of
the Company, as at the dates and for
the indicated periods in accordance with
GAAP.
(e) Continue to engage in the Principal Business.
(f) After the date of the Disclosure Document, not permit through
the
Company's act or omission any material
adverse change in or affecting the
financial condition of the Company or any
of its Subsidiaries or the earnings,
management, or business prospects of the
Company or any of its Subsidiaries,
whether or not occurring in the ordinary
course of business.
7.2 COMPLIANCE WITH LAWS AND REGULATIONS; LICENSES AND PERMITS;
NO
VIOLATION. The Company shall, and shall
cause each of its Subsidiaries, as
applicable, to:
(a) Conduct its business in compliance with all applicable
federal,
state and local laws, rules and
regulations. including, without limitation,
ERISA, OSHA, environmental laws, rules and
regulations, and all federal laws,
rules and regulations, except where the
failure to do so would not result in a
Material Adverse Effect.
(b) Maintain in effect all certificates, licenses, permits or
other
authorities issued by federal, state or
local regulatory authorities which may
be required to conduct its business and
retain possession of its properties
except where the failure to do so will not
result in a Material Adverse Effect.
(c)
Not be in violation of or default under any provision of its
articles of incorporation, bylaws, or any
of its agreements, leases, licenses,
contracts, franchises, mortgages, permits,
deeds of trust, indentures or other
instruments or obligations to which it is a
party or by which it or any of its
properties is bound, except where the
failure to do so would not result in a
Material Adverse Effect.
7.3 APPOINTMENT TO FILL A VACANCY IN OFFICE OF NOTE AGENT. The
Company,
whenever necessary to fill a vacancy in the
office of the Note Agent, will
appoint, in the manner provided in SECTION
10.7, a new Note Agent, so that there
shall at times be a Note Agent hereunder;
provided, however, that the Company
shall not be deemed in Default hereunder
during the pendency of any court
proceeding to appoint a new Note Agent.
7.4 FURTHER INSTRUMENTS AND ACTS. The Company will, upon
receipt
thereof from the Note Agent, execute and
deliver such further instruments and do
such acts as may reasonably be necessary or
proper to carry out the purposes of
this Agreement.
7.5 PAYMENT OF NOTES. The Company shall pay the principal of
and
accrued interest on the Notes on the dates
and in the manner provided in the
Notes and this Agreement. The Company shall
pay Interest (including
post-petition interest in any proceeding
under any bankruptcy law) on overdue
principal at the default rate of interest
stated on the Notes to the extent
lawful; and it shall pay Interest
(including post-petition interest in any
proceeding under any bankruptcy law) on
overdue installments of Interest
(without regard to any applicable grace
period) at the same rate to the extent
lawful.
7.6 COMPLIANCE CERTIFICATES AND ANNUAL REPORTS.
(a) The Company shall deliver to the Note Agent, on the Issue Date,
an
Officers' Certificate stating that to the
best of such Officer's knowledge the
activities of the Company and its
Subsidiaries the Company is in compliance with
each and every covenant contained in this
Agreement and is not in default in the
12
<PAGE>
performance or observance of any of the
terms, provisions and conditions hereof
and that to the best of such Officer's
knowledge no event has occurred and
remains in existence by reason of which
payments on account of the principal of,
or Interest, if any, on the Notes would be
prohibited or, if such event has
occurred, a description of the event and
what action the Company is taking or
proposes to take with respect thereto.
(b) The Company shall, so long as any of the Notes are
outstanding,
deliver to the Note Agent forthwith upon
any Officer becoming aware of any
Default or Event of Default or default in
the performance of any covenant,
agreement or condition contained in this
Agreement, an Officers' Certificate
specifying such Default or Event of Default
and what action the Company or any
Subsidiary proposes to take with respect
thereto.
7.7 CORPORATE EXISTENCE. At its own cost and expense, the Company
will
do or cause to be done all things necessary
to preserve and keep in full force
and effect its corporate existence and the
corporate existence of each
Subsidiary in their respective
jurisdictions of formation, and all rights
(charter and statutory) and franchises of
the Company and the Subsidiaries;
provided, however, that the Company shall
not be required to preserve the
corporate existence of any Subsidiary, or
any such right or franchise, if the
Board of Directors of the Company shall
determine that the preservation thereof
is no longer desirable in the conduct of
the business of the Company and that
the loss thereof is not disadvantageous to
the Company.
7.8 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants
(to
the extent that it may lawfully do so) that
it will not at any time insist upon,
plead, or in any manner whatsoever claim an
interest arising under any Arizona
usury law.
7.9 MAINTENANCE OF PROPERTIES AND INSURANCE.
(a) The Company shall cause all properties used or held for use in
the
conduct of its business or the business of
any Subsidiary to be maintained and
kept in good condition, repair and working
order (ordinary wear and tear
excepted) and supplied with all necessary
equipment and shall cause to be made
all necessary repairs, renewals,
replacements, betterments, and improvements
thereof, all as in the judgment of the
Company may be necessary so that the
business carried on in connection therewith
may be properly and advantageously
conducted at all times, except where the
failure to do so would not result in a
Material Adverse Effect; provided further
that nothing in this SECTION 7.9 shall
prevent the Company from discontinuing the
operation or maintenance of any such
property, or disposing of it, if such
discontinuance or disposal is, in the
judgment of the Company, desirable in the
conduct of its business.
(b) The Company shall provide or cause to be provided, for itself
and
each of its Subsidiaries, insurance against
loss or damage of the kinds that, in
the reasonable, good faith opinion of the
Company are adequate and appropriate
for the conduct of the business of the
Company and such Subsidiaries in a
prudent manner, with reputable insurers or
with the government of the United
States or any agency or instrumentality
thereof in such amounts, with such
deductibles or retentions, and by such
methods as shall be customary, in the
reasonable, good faith opinion of the
Company.
7.10 SALE OF ASSETS; CONSOLIDATION; EQUITY; MERGER. The Company
shall
not (a) sell, transfer, or otherwise
dispose of or grant a security interest in,
or otherwise encumber any the Company's
property for an amount or value that is
less than the amount the Company reasonably
believes to be a fair and equivalent
value in return; or, (b) cease its
operations, liquidate or dissolve.
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7.11 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS.
(a) The Company will not, and will not permit any of the
Subsidiaries,
directly or indirectly, to authorize,
issue, incur, assume, guarantee, become
liable, or otherwise become responsible for
the payment of (collectively
"incur") any Indebtedness, except as
provided herein.
(b) The Company shall not, directly or indirectly, create or permit
to
be created or allow to exist any Lien on
any property now owned or hereafter
acquired by the Company, except (i) if the
Lien arises from an operating and/or
capital lease that is for a sum not to
exceed $50,000 per transaction; or (ii)
if the obligation giving rise to the Lien,
which Lien shall always be
Subordinate Indebtedness, is obtained upon
the writte
