<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)
Win-Gate Equity Group, Inc.
---------------------------
(Name of Issuer)
Common Stock, par value $0.001 per share
----------------------------------------
(Title of Class of Securities)
972639 10 8
-------------
(CUSIP Number)
Gayle Coleman, Esq.
2255 Glades Road, Suite 340W
Boca Raton, Florida 33431
(561) 241-7400
-----------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
February 29, 2000
-------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 2 of 7 Pages
_______________________________________________________________________________
1 NAME OF REPORTING PERSONS GNB Bank Panama S.A.
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS N/A
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X] (1)
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS
SC(2)
______________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(D) OR 2(E) [ ]
______________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Republic of Panama
_______________________________________________________________________________
| |
NUMBER OF | 7 | SOLE VOTING POWER (3)
SHARES | |
BENEFICIALLY |_____|________________________________________________________
OWNED BY | |
EACH | 8 | SHARED VOTING POWER (4)
REPORTING | |
PERSON WITH |_____|________________________________________________________
| |
| 9 | SOLE DISPOSITIVE POWER (3)
| |
|_____|________________________________________________________
| |
| 10 | SHARED DISPOSITIVE POWER
| |
_______________|_____|_________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON (5)
______________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
______________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) (6)
______________________________________________________________________________
14 TYPE OF REPORTING PERSON
BK
______________________________________________________________________________
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 3 of 7 Pages
_______________________________________________________________________________
(1) In connection with the February Letter Agreement described in Item 6 below,
Morgan has agreed to vote his shares in accordance with the February Letter
Agreement. If Morgan fails to vote in accordance thereof, Morgan appoints the
Reporting Person as his proxy to vote Morgan's stock on all matters as described
in the February Letter Agreement. However, other than with respect to the
agreements and covenants described in the February Letter Agreement, the
Reporting person does not affirm the existence of any group.
(2) In connection with the Loan Agreement described in Item 3 below, the
Reporting Person may convert the principal portion of the Loan and Note into
Qualifying Shares, as defined in Item 3 below, of the Issuer.
(3) As described in Item 3 below, assuming conversion of the principal portion
of the Note and the Loan, the Reporting Person will have voting power of not
less than 2.68% of the outstanding stock of the Issuer, on a fully diluted
basis, as of the date of any such conversion.
(4) As described in Item 1 below, assuming conversion of the principal portion
of the Note and the Loan, the Reporting Person will have voting power of not
less than 2.68% of the outstanding stock of the Issuer, on a fully diluted
basis, as of the date of such conversion. In addition, based on a Schedule 13D
filed with the Securities and Exchange Commission on February 2, 2000 by Gary
Morgan (the "Morgan 13D"), a director and principal shareholder of the Issuer as
of the date of the filing of the Morgan 13D, Morgan disclosed that he had the
sole voting and sole dispositive power as to 8,294,000 shares of Issuer common
stock, which represented approximately 48.0% of the outstanding shares of common
stock of the Issuer. As described in Item 6 as to the February Letter Agreement,
Morgan agreed to vote his shares in accordance with the provisions of the
February Letter Agreement and if not so voted, to grant an irrevocable proxy to
the Reporting Person. Because the date upon which the Loan and Note may be
converted into Qualifying Shares of the Issuer, if ever, is not known, the
number of shares for which the Reporting Person has shared voting power cannot
be ascertained.
(5) Since the date upon which the principal portion of the Loan and Note may be
converted into stock of the Issuer, if ever, is not known, the number of shares
for which the Reporting Person has shared voting power cannot be ascertained.
(6) As described in Item 5(a) below, assuming conversion of the principal
portion of the Note and Loan, the Reporting Person will not own less than 2.68%
of the outstanding stock of the Issuer as of the effective date of the
conversion.
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 4 of 7 Pages
_______________________________________________________________________________
Item 1. Security and Issuer
This statement on Schedule 13D ("Schedule 13D") relates to "Qualifying Shares",
as defined in Item 3 below, of Win-Gate Equity Group, Inc., a Florida
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 100 North Biscayne Boulevard, Suite 2500, Miami, Florida 33132.
Item 2. Identity and Background
(a)-(c). This Schedule 13D is filed by GNB Bank Panama S.A. (the "Reporting
Person"), a bank organized under the laws of the Republic of Panama, having its
principal offices at Calle Manuel Icaza No. 18, Panama City, Republic of Panama.
(d)-(e) During the last five years, the Reporting Person has not been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors),
or been a party to a civil proceeding of a judicial or administrative body of
competent decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
(f) The Reporting Person is a bank organized under the laws of the Republic of
Panama.
Item 3. Source and Amount of Funds or Other Consideration
In connection with a Loan Agreement (the "Loan Agreement") dated February 29,
2000 by and among the Issuer, Globaltron Communications Corporation, a Delaware
corporation and a subsidiary of the Issuer (the "Guarantor"), and the Reporting
Person, the Reporting Person made a loan to the Issuer in the principal amount
of $5.0 million plus interest at the base rate announced by Citibank N.A plus 1%
(the "Loan") as evidenced by an unsecured convertible promissory note (the
"Note") due May 29, 2001 (the "Maturity Date"). The Loan was funded on February
29, 2000 and all transaction documents were exchanged on March 17, 2000. The
Loan and the Note are convertible if:
(i) prior to the Maturity Date, the Issuer consummates a private
placement of its common stock, par value $.001 (the "Common Stock") or any other
class of its equity securities with a preference (as to liquidation, dividend or
otherwise) to the Common Stock (collectively, the "Qualifying Shares") of not
less than $15.0 million to persons unrelated to the Reporting Person ( the
"Qualifying Private Placement") for cash consideration paid of
(A) $10 or more per share, then the principal portion of the
Note shall automatically convert into Qualifying Shares representing 2.68% of
the total issued and outstanding stock of the Issuer immediately after the
consummation of the Qualifying Private Placement, on a fully diluted basis, and
which Qualifying Shares are subject to certain additional rights, or
(B) less than $10 per share, then the principal portion of the
Note shall automatically convert into the number of Qualifying Shares equal to
the principal amount of the Note, divided by the offering price of the
Qualifying Shares pursuant to the terms of the Qualifying Private Placement;
provided that the Qualifying Shares to be received by the Reporting Person shall
represent not less than 2.68%, on a fully diluted basis, of the total issued and
outstanding stock of the Issuer immediately after the consummation of the
Qualifying Private Placement, and which Qualifying Shares are subject to certain
additional rights; and
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 5 of 7 Pages
_______________________________________________________________________________
(ii) at any time prior to the Maturity Date, at the Reporting
Person's request, the Reporting Person may convert the principal portion of the
Note into Common Stock or, at its selection, any other then outstanding stock of
the Issuer more senior to the Common Stock, upon 10 days' prior written notice,
at which time the principal portion of the Note will convert into that number of
shares of the Issuer equal to 2.68%, on a fully diluted basis, of the total
issued and outstanding stock of the issuer as of the conversion date.
Interest on the Note and Loan is payable upon the earlier of (y) conversion of
the principal portion of the Note and Loan, or (z) the Maturity Date.
Item 4. Purpose of Transaction
The Qualifying Shares will be acquired by the Reporting Person pursuant to the
Loan Agreement and related exhibits described in Item 3 above. When and if the
Reporting Person converts the principal portion of the Loan and Note into
Qualifying Shares, it presently intends to hold the Issuer's shares for
investment.
(a) The Reporting Person is not aware of any plans or proposals that relate to
or would result in the acquisition by any person of additional securities of the
Issuer or the disposition of securities of the Issuer.
(b) The Reporting Person is not aware of any plans or proposals that relate to
or would result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Issuer or any of its subsidiaries,
other than the transactions contemplated by the Loan Agreement described herein.
(c) The Reporting Person is not aware of any plans or proposals that relate to
or would result in a sale or transfer of a material amount of assets of the
Issuer or of any of its subsidiaries.
(d) Gary Morgan, the chief executive officer, director and principal shareholder
of the Issuer, has agreed to vote in favor of appointing a person designated by
the Reporting Person to serve as one of the five directors of the Issuer's Board
of Directors.
(e) The Reporting Person is not aware of any plans or proposals that relate to
or would result in any material change in the present capitalization or dividend
policy of the Issuer other than as described herein.
(f) The Reporting Person is not aware of any other material changes in the
Issuer's business or corporate structure.
(g) The Reporting Person is not aware of any changes in the Issuer's charter,
bylaws or instruments corresponding thereto or other actions which may impede
the acquisition or control of the Issuer by any person.
(h) The Reporting Person is not aware of any plans or proposals that relate to
or would result in the securities of the Issuer to be delisted from a national
securities exchange or to cease to be authorized or to be quoted in an
inter-dealer quotation system of a registered national securities association.
(i) The Reporting Person is not aware of any plans or proposals that relate to
or would result in a class of equity securities of the Issuer becoming eligible
for termination of registration pursuant to Section 12(g)(4) of the Act.
(j) The Reporting Person is not aware of any plans or proposals that relate to
or would result in any action similar to any of those enumerated above.
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 6 of 7 Pages
_______________________________________________________________________________
Item 5. Interest in Securities of the Issuer
(a) The Reporting Person may be deemed to have the right to beneficially own not
less than 2.68% of the outstanding stock of the Issuer, on a fully diluted
basis, as of the effective date of the conversion.
(b) Prior to conversion of the principal portion of the Note and Loan by the
Reporting Person, the Reporting Person has sole power to direct the vote, with
respect to the issues described in Item 6 below, with respect to 8,294,000
shares held by Gary Morgan, based solely upon the Morgan 13D. Subsequent to the
conversion of the Note and Loan by the Reporting Person, the Reporting person
will have sole power to direct the vote, with respect to the issues described in
Item 6.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer.
As an inducement for the Reporting Person to enter into the Loan Agreement,
pursuant to a letter dated February 29, 2000 (the "February Letter Agreement")
from Gary Morgan ("Morgan"), who is a chief executive officer, director and the
principal shareholder of the Issuer to the Reporting Person , Morgan agreed
that:
(i) for a period of three years from the date of the February Letter
Agreement, Morgan will not sell, exchange or otherwise transfer (collectively,
the "transfer") all or part of Morgan's stock in the Issuer; provided, however,
that Morgan may transfer his shares in the Issuer in the event of a merger,
consolidation or other sale of assets or other reorganization;
(ii) after the three-year period referred in clause (i) above, if and
to the extent Morgan transfers all or part of his stock in the Issuer, the
Reporting Person has tag-along rights on the stock sold or transferred on the
same terms and conditions it is offered to Morgan;
(iii) Morgan will vote his stock in the Issuer in favor of the
Reporting Person's designee(s) nominated to serve as one of the five directors
on the board of directors of the Issuer; and
(iv) Morgan will not vote his stock in the Issuer, without the
Reporting Person's permission, in favor of:
(A) amending the Articles of Incorporation of the Issuer
(other than in connection with a Qualifying Private Placement or for
non-material amendments),
(B) incurring indebtedness in excess of $40.0 million in
principal amount prior to a Qualifying Private Placement and $80.0 million in
principal amount between such offering and a public offering of any Issuer
securities,
<PAGE>
_______________________________________________________________________________
CUSIP No. 972639 10 8 SCHEDULE 13D Page 7 of 7 Pages
_______________________________________________________________________________
(C) approving a redemption by the Issuer or any of its
affiliates of any securities of the Issuer (other than in connection with the
conversion of the principal portion of the Loan and Note into Qualifying
Shares),
(D) acquiring, or investing in, any entity (or its assets) in
excess of $1.0 million (in any one or a series of transactions), with certain
exceptions,
(E) undertaking a public offering of Issuer securities of less
than $90.0 million; provided that after the after the Qualifying Private
Placement and before any public offer of shares, there cannot be an offering
unless Qualifying Shares get a 50% promote per year, on a compounded basis,
(F) declaring any dividends or distributions,
(G) liquidating the Issuer or its affiliates,
(H) changing the compensation arrangements with employees or
current "cap" on compensation for new employees, except in certain instances,
(I) entering into any related party transactions, or
(J) merging, consolidating, reorganizing or selling the assets
unless the Issuer is valued at not less than $200 million, $375 million or $500
million in the three consecutive 12-month periods, respectively, commencing in
February, 2000, and any transaction is also conditioned upon the consideration
received being cash or securities immediately salable on an established
securities exchange or NASDAQ.
In the event that Morgan fails to vote his stock in accordance with clauses
(iii) and/or (iv) of the foregoing paragraph, then, in addition to such other
rights and remedies as may be available to the Reporting Person in law or in
equity (including without limitation an action for breach of contract), Morgan
appoints the Reporting Person as his proxy, which proxy is irrevocable and
coupled with an interest, to vote Morgan's stock on all such matters as are
within the contemplation of such clauses (iii) and/or (iv). In any such event,
the Reporting Person has full power of substitution with regard to such proxy.
Item 7. Material to Be Filed as Exhibits
(a) Loan Agreement dated February 29, 2000 among the Issuer, the Guarantor and
the Reporting Person (without Exhibits).
(b) February Letter Agreement dated February 29, 2000 from Morgan to the
Reporting Person.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
GNB BANK PANAMA S.A.
By:/s/ Camilo Verastegui
----------------------------------
Camilo Verastegui, General Manager
March 9, 2000
<PAGE>
LOAN AGREEMENT
dated as of February 29, 2000
by and among
WIN-GATE EQUITY GROUP, INC.
GLOBALTRON COMMUNICATIONS CORPORATION
and
GNB BANK PANAMA S.A.
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of
February 29, 2000 among Win-Gate Equity Group, Inc. ("Borrower"), a Florida
corporation, having its business address at 8700 N.W. 47th Drive, Coral Springs,
Florida, Globaltron Communications Corporation ("Guarantor"), a Delaware
corporation and a wholly owned subsidiary of the Borrower, having its principal
office at 111 NE 1st Street, Miami, Florida and GNB Bank Panama S.A. ("Lender")
a bank organized under the laws of the Republic of Panama, having its principal
offices at Calle Manuel Icaza No. 18, Panama City, Republic of Panama (the
"Office").
R E C I T A L S
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Lender is willing to make available to the Borrower certain
loaned money as provided for herein;
WHEREAS, as an inducement to the Lender, the Guarantor wishes
to guaranty Borrower's obligations hereunder, including but not limited to the
repayment of the Loan and its interest.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
(a) As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Accredited Investor" shall have the meaning set forth in Rule
501 (a) under the Securities Act.
"Agreement" means this Loan Agreement, the Exhibits and any
other documents or instruments delivered in accordance herewith, as the same may
be amended from time to time in accordance with the terms hereof.
"Base Rate" shall mean the rate which Citibank N.A. announces
from time to time as its base rate, the Base Rate to change when and as such
base rate changes. The Base Rate
-1-
<PAGE>
is a reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer.
"Borrower" has the meaning ascribed to it in the forepart of
this Agreement.
"Borrower SEC Reports" shall have the meaning set forth in
Section 4.4.
"Business Day" means any day other than a Saturday, Sunday or
any day on which State and Federal banking institutions in the States of New
York and Miami are authorized or obligated by law or executive order to close.
"Event of Default" has the meaning ascribed to it in Article
III.
"Exchange Act" shall mean the Securities Exchange Act of 1934
or any successor statute thereof.
"Guarantor" has the meaning ascribed to it in the forepart of
this Agreement.
"Guaranteed Obligations" shall have the meaning set forth in
Section 7.1.
"Indebtedness" shall mean as to any Person (i) all
indebtedness (including principal, interest, fees and charges) of such Person
(x) evidenced by any notes, bonds, debentures or similar instruments made or
issued by such Person, (y) for borrowed money or (z) for the deferred purchase
price of property or services, (ii) the face amount of all letters of credit
issued for the account of such Person, (iii) all liabilities secured by any lien
on any property owned by such Person, whether or not such liabilities have been
assumed by such Person (provided, however, if such liability is non-recourse to
such Person, the amount of the Indebtedness attributed thereto shall not exceed
the greater of the fair market value of such property or the book value of such
property), (iv) the aggregate amount required to be capitalized in accordance
with GAAP under leases under which such Person is the lessee and (v) all
guarantees or other contingent obligations of such Person as to any of the
foregoing.
"Lender" has the meaning attributed to it in the forepart of
this Agreement.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing or similar statement or notice filed under
any recording or notice statute, and any lease having substantially the same
effect as any of the foregoing).
"Loan" means the loan made by the Lender to the Borrower
pursuant to Section 2.1.
-2-
<PAGE>
"Material Adverse Effect" shall mean (a) any material adverse
effect on the financial condition, business, operations, assets, revenues or
properties of the Borrower and, unless the context indicates otherwise, the
Borrower's subsidiaries, including but not limited to the Guarantor, or (b) any
material adverse effect on the ability of the Borrower to perform any of its
obligations under any of the Operative Agreements.
"Maturity Date" shall mean May 29, 2001.
"Note" means the senior unsecured convertible Promissory Note
due May 29, 2001 of the Borrower issued pursuant to Section 2.2 and guaranteed
by the Guarantor, in the form attached as Exhibit 1 hereto and made a part
hereto.
"Office" shall have the meaning set forth in the forepart of
this Agreement.
"Operative Agreements" means the Note and this Agreement and
any supporting or other agreements required hereby to be entered into in
connection with the transactions contemplated by this Agreement.
"Person" means any natural person, corporation, limited
liability company, general partnership, limited partnership, limited liability
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Qualifying Private Placement" means a private placement in
the amount of not less than $15,000,000 to Persons unrelated to the Lender of
Qualifying Shares.
"Qualifying Shares" shall mean shares of common stock or any
other class of equity securities with a preference (as to liquidation, dividends
or otherwise) to the common stock of the Borrower that is convertible into
common stock, issued in a Qualifying Private Placement, having the rights set
forth in the certificate of incorporation of the Borrower.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor statute thereof.
(b) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the singular
or plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement; (iv) the terms "Article" or "Section" refer to the
specified Article or Section of this Agreement; and (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Borrower.
-3-
<PAGE>
ARTICLE II
THE LOAN
2.1 The Loan.
Subject to and upon the terms and conditions set forth herein,
Lender shall, on the date hereof, make a Loan to the Borrower in the principal
amount of US$5,000,000.
2.2 Note.
The Borrower's obligation to pay the principal of, and
interest on, the Loan made by the Lender are evidenced by the Note to be duly
executed and delivered by the Borrower, substantially in the form of Exhibit 1,
and delivered to the Lender.
2.3 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement or the Note
shall be made to the Lender not later than 12:00 Noon (New York time) on the
Maturity Date or on the date when due, in accordance with the terms of this
Agreement and shall be made in lawful money of the United States of America in
New York Clearing House funds, at the Office or such other place as may be
designated by the Lender in a written notice given to the Borrower. Whenever any
payment to be made hereunder or under the Note shall be stated to be due on a
day which is not a Business Day, the due date thereof shall be extended to the
next succeeding Business Day.
2.4 Prepayment. The Note may not be prepaid without the
express written consent of the Lender.
2.5 Net Payments. All payments made by the Borrower hereunder
or under the Note will be made without setoff, counterclaim or other defense.
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein.
2.6 Interest
(a) The Borrower shall pay interest in respect of the unpaid
principal amount of the Loan from the date hereof until the Maturity Date
(whether by acceleration or otherwise) at a rate per annum which shall be equal
to the Base Rate in effect from time to time plus 1%.
(b) If principal or interest on the Loan is not paid when due,
thereafter the Borrower shall pay interest in respect of the unpaid principal
amount of the Loan at a rate per annum equal to 6% in excess of the Base Rate in
effect from time to time.
(c) Accrued (and theretofore unpaid) interest in respect of
the Loan shall be payable (i) quarterly in arrears on the following dates:
-4-
<PAGE>
May 31, 2000;
August 31, 2000;
November 30, 2000;
February 28, 2001;
May 31, 2001; or
(ii) in the event of a Qualifying Private Placement, in accordance with Section
2.7; or (iii) in the occurrence of an Event of Default, on demand.
2.7 Conversion. The Loan and the Note will convert as follows:
(a) If, prior to the Maturity Date, the Borrower consummates a
Qualifying Private Placement, issuing Qualifying Shares at a cash consideration
paid of $10 or more per share, the principal portion of the Note shall
automatically convert (as of the date of consummation of the Qualifying Private
Placement) into Qualifying Shares which shall represent 2.68% of the total
issued and outstanding stock of the Borrower immediately after the consummation
of the Qualifying Private Placement, on a fully diluted basis and shall not have
less rights than those described in Exhibit 2 attached to this Agreement; or
(b) If, prior to the Maturity Date, the Borrower consummates a
Qualifying Private Placement, issuing Qualifying Shares at a cash consideration
paid of less than $10 per share, the Note shall automatically convert (as of the
date of consummation of the Qualifying Private Placement) into that number of
Qualifying Shares equal to the outstanding principal amount of the Note divided
by the offering price for Qualifying Shares pursuant to the terms of the
Qualifying Private Placement; provided, that in no event shall such Qualifying
Shares received by the Lender represent less than 2.68%, on a fully diluted
basis, of the total issued and outstanding stock of the Borrower immediately
after the consummation of the Qualifying Private Placement and shall not have
less rights than those described in Exhibit 2 attached to this Agreement;
(c) At any time, prior to the Maturity Date, at the request of
the Lender, it may convert the Note into common stock or, at its selection, any
other then outstanding stock of the Borrower more senior to the common stock, on
ten days prior written notice given to Borrower. The Note shall convert into
that number of shares of stock of the Borrower equal to 2.68%, on a fully
diluted basis, of the total issued and outstanding stock of the Borrower on such
conversion date and shall not have less rights than those described in Exhibit 2
attached to this Agreement.
Upon conversion of this Note, interest accrued on the
principal amount of the Loan to such date shall be paid to the Lender at the
Office or such other place as may be designated by the Lender in a written
notice given to the Borrower, on the date of conversion in the event the Note is
converted upon Section 2.7 (c) or on the date of consummation of the Qualifying
Private Placement and in the latter case the interest may be paid out of the
proceeds thereof.
-5-
<PAGE>
The Lender hereby agrees in the event of a conversion under
Sections 2.7 (a) or (b), (i) to enter into all agreements and other documents
generally applicable to purchasers of Qualifying Shares in the Qualifying
Private Placement and (ii) upon issuance of the Qualifying Shares to the Lender
or its designee and upon payment to the Lender of the interest that accrued on
the Note, to return the Note to the Borrower for cancellation on the date of
conversion of the Loan and the Note.
Upon conversion, receipt of the Qualifying Shares and payment
of interest as described in this Section 2.7 the terms and provisions of this
Agreement, other than the provisions of Exhibits 2, 2 (a) and 2(b) shall
automatically terminate and be of no further force or effect.
2.8 Compensation. The Borrower shall compensate the Lender for
all reasonable losses, expenses and liabilities (including, without limitation,
any loss, expense or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by the Lender to fund the Loan)
which the Lender may sustain as a consequence of any default of the Borrower of
its obligations under this Agreement or the Note, including but not limited to
the repayment of the Loan.
ARTICLE III
EVENTS OF DEFAULT
It shall be an Event of Default if any of the conditions or
events described in Sections 3.1 through 3.8 ("Events of Default") shall occur
the unpaid principal amount of and accrued interest on the Loan shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by the Borrower, and the obligations of the Lender hereunder shall
thereupon terminate; provided, however, that any event described in Section 3.2,
3.3, 3.7 or 3.8 shall not constitute an Event of Default unless Lender has
provided notice to Borrower declaring such event an Event of Default and
provided further, that upon the occurrence of any of such events the Borrower
have given prompt prior written notice to the Lender:
3.1 Failure To Make Payments When Due. The Borrower shall (i)
default in the payment when due of the principal amount or the interest on the
Loan or (ii) default, and such default shall continue unremedied for two or more
Business Days, in the payment when due of any interest on the Loan or the Note
or any other amounts owed by Borrower hereunder or under the Note;
3.2 Breach of Agreements. Failure of the Borrower to perform
or comply with any of its obligations contained in this Agreement other than
under Section 3.1 and such default shall continue for a period of ten days or
more;
3.3 Representations, etc. Any representation or warranty made
by or on behalf of the Borrower in this Agreement or in the Note or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made;
-6-
<PAGE>
3.4 Involuntary Bankruptcy. Appointment of Receiver, Etc. (i)
A court shall enter a decree or order for relief in respect of the Borrower or
the Guarantor in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, which decree or order is not
stayed; or any other similar relief shall be granted and remain unstayed under
any applicable federal or state law; or (ii) an involuntary case is commenced
against the Borrower or the Guarantor under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or a decree or order
of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over the Borrower, the Guarantor or over all or a substantial
part of any of its assets and properties, shall have been entered; or an interim
receiver, trustee or other custodian of the Borrower or the Guarantor for all or
a substantial part of their assets and properties is involuntarily appointed; or
a warrant of attachment, execution or similar process is issued against any
substantial part of the assets and properties of the Borrower or the Guarantor
and the continuance of any such events in this clause (ii) for thirty (30) days
unless dismissed, bonded, stayed, vacated or discharged; or
3.5 Voluntary Bankruptcy; Appointment of Receiver, Etc. The
Borrower or the Guarantor shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or making possession by a receiver, trustee
or other custodian for all or a possession by a receiver, trustee or other
custodian for all or a substantial part of its assets and properties; the making
by the Borrower or the Guarantor of any assignment for the benefit of creditors;
the admission by the Borrower or the Guarantor in writing of their inability to
pay its debts as such debts become due; or the board of directors of the
Borrower or the Guarantor (or any committee thereof) adopts any resolution or
otherwise authorizes action to approve any of the foregoing.
3.6 Default Under Other Agreements. If either the Borrower or
any of its subsidiaries shall (i) default in any payment of all or any portion
of any Indebtedness other than the Note or (ii) default in the observance or
performance of any agreement, covenant or condition relating to any Indebtedness
other than the Note, or contained in any instrument or agreement evidencing,
securing or relating thereto and, in the case of clauses (i) and (ii), and such
default shall continue without having been duly cured, waived or consented to,
beyond the period of grace, if any, specified in the agreement or instrument
relating thereto.
3.7 Judgments or Liens. One or more judgments or decrees shall
be entered against the Borrower or any of its subsidiaries involving in the
aggregate for them a liability of the equivalent of US$500,000 or more, and all
such judgments or decrees shall not have been vacated, discharged or stayed or
bounded pending appeal within 30 days after the entry thereof or a Lien is
imposed on the assets or properties of the Borrower or any of its subsidiaries
in an amount of in excess, together with other Liens, of US$500,000 other than
liens related to vendor finance as permitted in accordance with Section 6.1
hereof.
3.8 Change in Condition. Any material adverse change in the
financial condition, operations, assets or liabilities of the Borrower or any of
its subsidiaries from those set forth in the most recent financial statements
filed with the SEC delivered to the Lender.
-7-
<PAGE>
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS
In order to induce the Lender to enter into this Agreement and
to make the Loan, the Borrower and the Guarantor make the following
representations, warranties and agreements as of the date hereof, which shall
survive the execution and delivery of this Agreement and the Notes and the
making of the Loan:
4.1 Legal Status. The Borrower and each of its subsidiaries,
including but not limited to the Guarantor (i) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority and possesses all franchises,
permits, authorizations and approvals necessary to carry on their business as
now being conducted and to own its property and assets, and (iii) has good and
marketable title to its assets free and clear of any Lien (except as set forth
in Schedule 4.1). The Borrower and each of its subsidiaries is in good standing
in each jurisdiction where the ownership, leasing or operation of property or
the conduct of its business requires such qualification.
4.2 Subsidiaries. The only subsidiaries of the Borrower are
set forth on Schedule 4.2. Except as set forth on Schedule 4.2, all the
outstanding shares of common stock of each such subsidiary are owned by the
Borrower, by another wholly owned subsidiary of the Borrower or by the Borrower
and another wholly owned subsidiary of the Borrower, free and clear of all Liens
except as permitted in Section 6.4 hereof, and are duly authorized, validly
issued, fully paid and nonassessable.
4.3 Power and Authority. (i) The Borrower and the Guarantor
have the power and authority to execute, deliver and perform the terms and
provisions of the Operative Agreements and have taken, as the case may be, all
necessary corporate action to authorize the execution, delivery and performance
by them of this Agreement; (ii) the Borrower and the Guarantor have duly
executed and delivered the Operative Agreements and those Operative Agreements
constitute their legal, valid and binding obligation enforceable in accordance
with its terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization or other similar
laws relating to or limiting creditors' rights generally or by general equity
principles.
4.4 No Violation. Neither the execution, delivery or
performance by the Borrower and the Guarantor of this Agreement, nor compliance
by them with the terms and provisions thereof, nor the use of the proceeds of
the Loans (i) will contravene any provision of any law, statute, rule or
regulation or any order, writ, injunction or decree of any court or governmental
instrumentality binding on the Borrower or any of its subsidiaries, (ii) will
conflict or be inconsistent with or result in any breach of any of the terms,
covenants, conditions or provisions of, or constitute a default in respect of
the terms of any indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other agreement, contract or instrument to which the Borrower
or any of its subsidiaries is a party or by which its respective properties or
assets is bound or to which it may be subject.
-8-
<PAGE>
4.5 SEC Filings. Financial Statements. Borrower has filed all
reports required to be filed by it with the SEC since its incorporation
(collectively, the "Borrower SEC Reports"). As of the respective dates they
became effective, the Borrower SEC Reports which were filed pursuant to the
Securities Act, and as of the respective dates of filing of the last applicable
amendment thereto the Borrower SEC Reports which were filed pursuant to the
Exchange Act, did not contain any untrue statement of 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. The financial
statements of Borrower included in the Borrower SEC Reports complied as to form
in all material respects with the applicable published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as otherwise noted therein) and fairly present the
consolidated financial position of Borrower and its consolidated subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
for the perios then ended, except that in the case of the unaudited consolidated
financial statements included in any form 10-Q, the presentation and disclosure
conform with the applicable rules of the Exchange Act and are subject to
year-end adjustments.
4.6 Litigation. Except as set forth in Schedule 4.6, there is
no claim, counterclaim, action, suit, order, proceeding or investigation pending
or, to the knowledge of the Borrower and Guarantor, threatened against or
affecting any of them with respect to or affecting the Borrower or any of its
subsidiaries, or their assets, properties or rights, or relating to the
transactions contemplated hereby, before any court, agency, regulatory,
administrative or other governmental body or officer of before any arbitrator.
4.7 Undisclosed Liabilities. Except as set forth on Schedule
4.7 , the Borrower and its subsidiaries have no liabilities or obligations of
any nature (whether accrued, absolute, contingent, unasserted or otherwise),
including any liabilities or obligations the Borrower and its subsidiaries may
incur for product liability, misrepresentation, fraud or comparable claims
arising out of the conduct of the business of the Borrower and its subsidiaries
prior to the date hereof, except (i) as set forth on the Borrower Sec Reports,
(ii) for purchase contracts and orders for inventory, equipment and supplies in
the ordinary course of business and (iii) for liabilities and obligations
incurred in the ordinary course of business consistent with past practice. and
not in violation of this Agreement.
4.8 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower and the Guarantor in writing to the Lender for purposes of or in
connection with this Agreement or any transaction contemplated herein or in any
Operative Agreement is, and all other such factual information (taken as a
whole) hereafter furnished by or on behalf of the Borrower and the Guarantor in
writing to any Lender will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided. There is no fact or circumstance which has, or is
reasonably likely to have, a Material Adverse Effect on the Borrower or taken as
a whole which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lender for use in connection with
the transactions contemplated hereby.
-9-
<PAGE>
4.9 Tax Returns and Payments. The Borrower and the Guarantor
have filed all tax returns required to be filed by it and has paid all taxes
payable by it which have become due pursuant to such tax returns and all other
taxes and assessments payable by them which have become due, other than those
not yet delinquent and except for those contested in good faith and for which
adequate reserves have been established.
4.10. Employee Benefit Plans. The Borrower is in compliance
with its obligations relating to all employee benefit plans established,
maintained or contributed to by the Borrower and it has no outstanding
liabilities with respect to any such employee benefit plans.
4.11 Capitalization. On the date herein, the authorized
capital stock of the Borrower consists of (i) 20,000,000 shares of common stock,
$.001 par value per share, of which 18,150,702 shares are issued and outstanding
and (ii) 5,000,000 shares of preferred stock, $.001 par value per share, of
which none are issued and outstanding. All the outstanding shares of stock of
the Borrower and each of its subsidiaries have been duly and validly issued, are
fully paid and non-assessable. Neither the Borrower nor any of its subsidiaries
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
4.12 Compliance with Laws, etc. The Borrower and all its
subsidiaries are in compliance in all material respects with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all governmental bodies in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls), except such
noncompliance as would not, in the aggregate, have a Material Adverse Effect on
the Borrower or the Guarantor.
4.13 Labor Relations. (a) The Borrower is not engaged in any
unfair labor practice that could have a Material Adverse Effect on the Borrower.
There is (i) no significant unfair labor practice complaint pending against
either the Borrower, threatened against the Borrower or, before any governmental
body or agency and no significant grievance or significant arbitration
proceeding arising out of or under any collective bargaining agreement is so
pending against the Borrower or, threatened against the Borrower or, (ii) no
significant strike, labor dispute, slowdown or stoppage pending against the
Borrower or, threatened against the Borrower, (iii) to the best knowledge of the
Borrower, no union representation question existing with respect to the
employees of the Borrower.
-10-
<PAGE>
(b) No officer or director of the Borrower or any of its
subsidiaries, and no other employee of the Borrower or any of its subsidiaries,
is a party to or bound by the Borrower or other commitment or obligation, or
subject to any writ, injunction, stipulation, judgment, decree or order of any
governmental entity, that may interfere with the use of such director's,
officer's or other employee's best efforts to promote the interests of the
Borrower or any of its subsidiaries, conflict with the business of the Borrower
or any of its subsidiaries, as now conducted, or the transactions contemplated
by this Agreement or have a Material Adverse Effect on the Borrower or any of
its subsidiaries.
(c) Neither the Borrower nor any of its subsidiaries or any of
its or their officers or employees has any patents issued or applications
pending for any device, process, method, design or invention of any kind now
used in or necessary for the conduct of the business as presently conducted by
the Borrower or any of its subsidiaries, which patents or applications have not
been assigned to the Borrower or any of its subsidiaries with such assignment
duly recorded in the United States Patent Office or with the applicable foreign
governmental entity.
4.14 Properties. The Borrower and the Guarantor have good and
marketable title, without regard to defects of title which do not have a
Material Adverse Effect, to all properties owned by them, free and clear of all
Liens. With respect to any lease or rental agreement to which the Borrower and
the Guarantor are a party, (i) such lease or rental agreement is in full force
and effect, (ii) the Borrower has complied in all material respects with all of
the terms of such lease or rental agreement, (iii) there exists no event of
default or an event, act or condition (other than immaterial defaults or
conditions which are not reasonably likely to adversely affect the interests of
the Lenders) which with notice or lapse of time, or both, would constitute an
event of default thereunder by the Borrower, and (iv) the Borrower is in
possession of the premises demised under all such leases and rental agreements
and is conducting business an such premises.
4.15 Assets other than Real Property. Except as set forth on
Schedule 4.15 , the Borrower and each of its subsidiaries has good title to all
tangible assets owned by them reflected in the Borrower SEC Reports and
financial information, free and clear of all Liens that individually or in the
aggregate would not have a Material Adverse Effect on the Borrower or its
subsidiaries. The Borrower and each of its subsidiaries owns or, as set forth on
Schedule 4.15 , leases all tangible personal property currently used in the
conduct of its business as presently conducted. All the intangible personal
property owned by the Borrower and each of its subsidiaries is in all material
respects in good operating condition and repair, ordinary wear and tear
excepted, and all personal property leased by the Borrower and each of its
subsidiaries is in all material respects in the condition required of such
property by the terms of the lease applicable thereto.
4.16 Intellectual Property. Except as set forth on Schedule
4.16:
(a) the Company owns and possesses all right, title and
interest in and to, or has a valid license to use, all of the Proprietary Rights
(as defined below) used in the operation of its business as presently conducted
and none of such Proprietary Rights have been abandoned;
(b) The Borrower has not received any notice of any reasonable
basis for an allegation of, any infringement or misappropriation by, or conflict
with, any third party with respect to such Proprietary Rights; and
-11-
<PAGE>
(c) Neither the Borrower nor any of its subsidiaries has
infringed, misappropriated or otherwise violated any material Proprietary Rights
of any third parties, and the Borrower does not have knowledge of any
infringement, misappropriation or conflict which will occur as a result of the
continued operation of the Borrower as presently operated.
As used herein, the term "Proprietary Rights" means all
proprietary information of the Borrower, including all patents, patent
applications, patents rights and inventions, trademarks, service marks, trade
names, copyrights and trade secrets.
The consummation of the transactions contemplated by this
Agreement will not adversely affect the right of the Borrower to continue to use
the Proprietary Rights of the Borrower.
4.17 Patents, Licenses, Franchises and Formulas. The Borrower
and the Guarantor own all the patents, trademarks, permits, service marks, trade
names, copyrights, licenses, franchises and formulas, or rights with respect to
the foregoing, and have obtained assignments of all leases and other rights of
whatever nature, necessary for the present conduct of their business, without
any known conflict with the rights of others which, or the failure to obtain
which, as the case may be, would result in a Material Adverse Effect on the
Borrower or the Guarantor.
4.18 Environmental Laws. The Borrower and each of its
subsidiaries has obtained all permits, licenses and other authorizations which
are required with respect to the operation of its business and the ownership of
its assets under any and all Federal, state and local and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
licenses, agreements or other governmental restrictions relating to the
pollution or protection of the environment or to emissions, discharges or
releases of pollutants, contaminants, petroleum or petroleum products, or toxic
or hazardous substances or hazardous wastes into the environment (including the
ambient air, surface water, groundwater, or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport of handling of pollutants, contaminants, petroleum or petroleum
products, or toxic or hazardous substances or hazardous wastes or the clean-up
or other remediation thereof.
4.19 Insurance. The Borrower and its subsidiaries presently
maintains and have maintained in effect since their formation all the insurance
policies required by applicable law or reasonably appropriate in connection with
the operation of its business as presently conducted.
4.20 No Misrepresentation. The representations and warranties
contained in this Section 4 and any Exhibits contained attached hereto, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements and information contained in this
Section 4 and on such Exhibits not misleading.
-12-
<PAGE>
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower and the Guarantor covenant and agree that on and
after the date hereof and until the Note, together with all accrued interest,
fees and all other obligations incurred hereunder and thereunder, are paid in
full:
5.1 Information Covenants. The Borrower will furnish or cause
to be furnished to the Lender:
(a) Promptly, copies of all financial information, proxy
materials and material filings, reports and information which either of
the Borrower or any of its subsidiaries shall file or be required to
file with any agency, regulatory authority or instrumentality of the
Government, including without limitation, the SEC.
(b) Other Information. From time to time, such other
information or documents (financial or otherwise) as any Lender may reasonably
request.
5.2 Books, Records and Inspections. The Borrower and each of
its subsidiaries will keep proper books of record and account in which full,
true and correct entries in conformity with generally accepted accounting
principles in the United States consistently applied and all requirements of
applicable law shall be made of all dealings and transactions in relation to its
business and activities.
5.3 Maintenance of Property, Insurance. The Borrower and each
of its subsidiaries will (i) keep all property useful and necessary in its
business in good working order and condition (ordinary wear and tear excepted),
(ii) maintain with financially sound and reputable insurance companies insurance
on all its property in at least such amounts and against at least such risks as
are customary and in accordance with industry standards for the business in
which it is engaged.
5.4 Corporate Franchises. The Borrower and each of its
subsidiaries will do or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its existence and its material
rights, franchises, licenses and other intellectual property.
5.5 Compliance with Statutes, etc. The Borrower and each of
its subsidiaries will comply with all applicable statutes, regulations, decrees
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property, except where the failure to so comply would not have
a Material Adverse Effect on the Borrower or any of its subsidiaries
5.6 Performance of Obligations. The Borrower and each of its
subsidiaries will (i) perform all of its obligations under (a) this Agreement,
and (b) the terms of each other mortgage, indenture, security agreement, and
other debt instrument by which it is bound, except where the failure to so
perform would not have a Material Adverse Effect on the Borrower or any of its
subsidiaries.
-13-
<PAGE>
5.7 Taxes. The Borrower and each of its subsidiaries will pay
and discharge or cause to be paid and discharged all applicable federal, state,
local and other material taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its property, real,
personal or mixed or upon any part thereof, when due, as well as all lawful
claims for labor, materials and supplies which, if unpaid might by law become a
lien upon such property.
5.8 Compliance. The Borrower and each of its subsidiaries will
maintain all material authorizations, qualifications, licenses and permits
necessary for the operation of their respective businesses and the ownership of
their respective property.
ARTICLE VI
NEGATIVE COVENANTS
The Borrower and the Guarantor covenant and agree that on and
after the date hereof and until the Loan and the Note, together with interest,
fees and all other obligations incurred hereunder and thereunder, are paid in
full:
6.1 Liens. The Borrower and each of its subsidiaries will not,
create, incur, assume or suffer to exist any Lien upon or with respect to any
property or assets (real or personal, tangible or intangible) of each of them,
whether now owned or hereafter acquired, other than any Lien securing
indebtedness not prohibited by Section 6.4 below.
6.2 Consolidation, Merger, Sale of Assets, etc. The Borrower
and each of its subsidiaries will not wind up, liquidate or dissolve its affairs
or enter into any transaction of merger or consolidation, or convey, sell, lease
or otherwise dispose of (or agree to do any of the foregoing, at any future
time) all or any part of its property or assets, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, materials and
equipment in the ordinary course of business) of any Person.
6.3 Dividends and Redemptions. (a) The Borrower and each of
its subsidiaries will not declare or pay any dividends, or return any capital,
to its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for any consideration,
any shares of any class of its capital stock now or hereafter outstanding (or
any options or warrants issued by the Borrower with respect to its capital
stock), or set aside any funds for any of the foregoing purposes; and (b) the
Borrower will not redeem any common stock of the Borrower.
6.4 Indebtedness. The Borrower will not, and will not permit
any of its subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except (i) certain vendor financing as described in Schedule
6.4 and (ii) charges payable incurred in the ordinary course of business.
-14-
<PAGE>
6.5 Advances, Investments and Loans. The Borrower will not,
and will not permit any of its subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any other Person, except that the following shall be permitted: (i) advances,
investments and loans to wholly-owned subsidiaries of the Borrower; (ii) loans
made in the ordinary course of business to employees; (iii) extensions of credit
made in the ordinary course of business in accordance with customary trade
practices; and (iv) capital expenditures; (v) presently outstanding loans and
investments if any, as disclosed on Schedule 6.5.
6.6 Transactions with Affiliates. The Borrower will not, and
will not permit any of its subsidiaries to, enter into any transaction or series
of related transactions, whether or not in the ordinary course of business, with
any affiliate other than on terms and conditions substantially as favorable to,
as the case may be, the Borrower or any such subsidiary as would be obtainable
by the Borrower or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than an affiliate.
6.7 Limitation on Issuance of Common Stock or other
Securities. The Borrower will not, and will not permit any of its subsidiaries
to, issue any common stock or other securities (including by way of sales of
treasury stock) or any options or warrants to purchase, or securities
convertible into, common stock, except for (i) transfers and replacements of
then outstanding shares of common stock, (ii) stock splits, stock dividends and
similar issuances which do not decrease the percentage ownership of the Borrower
in any class of the common stock of the any of the subsidiaries of the Borrower,
(iii) securities issued to employees of or consultants to the Borrower as part
of a compensation or incentive plan or arrangement (iv) the Qualifying Private
Placement; or (v) a public offering of shares of equity securities of the
Borrower in the amount of $90,000,000 or more.
6.8 Business. The Borrower will not, and will not permit any
of its subsidiaries to, engage (directly or indirectly) in any business other
than the business in which it is engaged on the date hereof.
ARTICLE VII
GUARANTY
7.1 The Guarantor irrevocably and unconditionally, guarantees
the full and prompt payment when due of the principal amount of and interest on
the Note issued under this Agreement and of all other obligations and
liabilities of the Borrower now existing or hereafter incurred under, arising
out of or in connection with the Operative Agreements and the due performance
and compliance with the terms of the Operative Agreements by the Borrower
("Guaranteed Obligations"). Guarantor understands, agrees and confirms that the
Lender may enforce this guaranty obligation up to the full amount of the
Guaranteed Obligations against it without proceeding against the Borrower.
Guarantor irrevocably and unconditionally promises to pay such Guaranteed
Obligations to the Lender, or order, on demand, in lawful money of the United
States of America. The guaranty provided herein shall constitute a guarantee of
payment and not of collection.
-15-
<PAGE>
7.2 Guarantor hereby waives notice of acceptance of this
guaranty obligation and notice of any liability to which it may apply, and
waives presentment, demand of payment, protest, notice of dishonor or nonpayment
of any such liability, suit or taking of other action by the Lender against, and
any other notice to, any party liable thereon (including the Guarantor).
7.3 The obligations of the Guarantor under this agreement are
absolute and unconditional and shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever.
ARTICLE VIII
MISCELLANEOUS
8.1 Investment Intent. Lender represents to the Borrower that:
(i) it will acquire the Note received by it pursuant to this Agreement and any
securities of the Borrower issuable upon conversion or exercise thereof for
investment purposes only and not with a view to the resale or distribution
thereof in a public offering within the meaning of the Securities Act, (ii) such
Note and other securities have not been registered under the Securities Act and
may not be resold unless they are registered under the Securities Act or
pursuant to an applicable exemption from such registration, and (iii) Lender has
such knowledge and experience in financial and business matters that he or it is
capable of evaluating the merits and risks in the investment in the Borrower
represented by the Notes and the shares issuable upon conversion of the Notes.
8.2 Notices. All notices, requests and other communications
hereunder must be in writing and delivered personally against written receipt,
by facsimile transmission with answerback confirmation or mailed by prepaid
first class certified mail (air mail, if faster delivery), return receipt
requested, or mailed by overnight (or in the case of notices being sent or
delivered outside the United States, second day) courier prepaid, to the parties
at the following addresses or facsimile numbers:
-16-
<PAGE>
If to Borrower, to:
Win-Gate Equity Group Inc.
New World Tower
100 N. Biscayne Blvd., Suite 2500
Miami, Florida,
Attn: Mr. Gary D. Morgan
Fax: 305.373.6540
with a copy to:
Tucker Anthony Cleary Gull
One Beacon Street, 6th Floor
Boston, MA 02108
Attn: Jeffery M. Bistrong
If to Guarantor, to:
Globaltron Communications Corporation
New World Tower
100 N. Biscayne Blvd., Suite 2500
Miami, Florida,
Attn: Gary Stukes
Fax: 305.373.6540
with a copy to:
Tucker Anthony Cleary Gull
One Beacon Street, 6th Floor
Boston, MA 02108
Attn: Jeffery M. Bistrong
If to Lender, to:
GNB Bank Panama S.A.
Calle Manuel Icaza No. 18,
Panama City,
Republic of Panama
Attn: Camilo Verastegui
Fax: (011507) 269-8094
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attn: David W. Sloan, Esq.
Fax: (212) 969-2900
-17-
<PAGE>
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the applicable
facsimile number as provided in this Section, be deemed given upon receipt,
(iii) if delivered by United States mail in the manner described above to the
address as provided in this Section, be deemed given on the earlier of the tenth
Business Day following mailing or upon receipt and (iv) if delivered by courier
to the address as provided in this Section, be deemed given on the earlier of
the first Business Day (second Business Day in the case of notices given or sent
outside the United States) following the date sent by such courier or upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section). Any party from time to time may
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other party
hereto at least ten (10) Business Days prior to the effective date of such
notice.
8.3 Assignment.
(a) The Lender shall have the right, at any time, to sell,
assign, transfer or negotiate all or any part of its rights and obligations
under the Loan Agreement and the Note; provided; however, that any such
assignment (i) shall only be made to a Person that is an Accredited Investor;
(ii) such assignee agrees in writing to be bound by all of the terms of this
Agreement; and (iii) the Lender provides notice to the Borrower of such
assignment on or prior to the date thereof.
(b) In the event of an assignment by any Lender, or any
subsequent assignment, the term "Lender" herein shall be deemed to refer to the
assignee.
8.4 Entire Agreement.
This Agreement and the Operative Agreements supersede all
prior discussions and agreements between the parties with respect to the subject
matter hereof and thereof and contain the sole and entire agreement between the
parties hereto with respect to the subject matter hereof and thereof.
8.5 Independence of Representations, Warranties and Covenants.
All representations, warranties and covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another representation, warranty
or covenant shall not avoid the occurrence of an Event of Default if such action
is taken or condition exists.
-18-
<PAGE>
8.6 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights.
8.7 Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by the Borrower or the
Guarantor without the prior written consent of each Lender and any attempt to do
so will be void. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective permitted successors and
assigns.
8.8 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
8.9 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
8.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE.
8.11 Fees and Expenses. The Borrower shall pay the
out-of-pocket costs and expenses, including attorney's fees, incurred by the
Lender in connection with the negotiation, drafting and execution and delivery
of this Agreement and the Note and the enforcement of the right of the Lender
hereunder and under the Note.
8.12 Computations. All computations of interest hereunder
shall be made on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest are payable.
8.13 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
-19-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party hereto as of the date
first above written.
WIN-GATE EQUITY GROUP INC
By: /s/ Gary P. Stukes
------------------------
Name: Gary P. Stukes
Title: President
GLOBALTRON COMMUNICATIONS
CORPORATION
By: /s/ Gary P. Stukes
-----------------------
Name: Gary P. Stukes
Title: President
GNB BANK PANAMA S.A.
By: /s/ Camilo Verastegui
-----------------------
Name: Camilo Verastegui
Title: General Manager
-20-
<PAGE>
February 29, 2000
GNB Bank Panama S.A.
Calle Manuel Icaza No. 18,
Panama City,
Republic of Panama
Re: Transfer and Voting Matters
Dear Sirs:
In connection with the Loan Agreement among Win-Gate Equity Group Inc.
(the "Borrower"), Globaltron Communications Corporation (the "Guarantor") and
you (the "Lender") dated as of February 29, 2000 (the "Loan Agreement") and as
an inducement to you to make the loan to the Borrower, I agree, and covenant to
you, that: (i) for a period of three years from the date hereof, I will not
sell, exchange or otherwise transfer (collectively, "transfer") all or part of
my stock in the Borrower; provided, however, that I may transfer my shares in
the Borrower in the event of a merger, consolidation or other sale of assets or
other reorganization approved as provided in Exhibit 2 (b) J of the Loan
Agreement; (ii) after the three year period referred in clause (i) above, if and
to the extent I transfer all or part of my stock in the Borrower you shall have
tag along rights on the stock sold or transferred on the same terms and
conditions it is offered to me; (iii) I will vote my stock in the Borrower in
favor of your designee(s) or those of your assignees, nominated to serve as one
of the five directors on the board of directors of the Borrower; and (iv) I will
not vote my stock in the Borrower for any of the issues described in Exhibit 2
(b) of the Loan Agreement without your prior written consent.
In the event that I should fail to vote my stock in accordance with
clauses (iii) and/or (iv) of the foregoing paragraph, then in addition to such
other rights and remedies as may be available to you in law or in equity
(including without limitation an action for breach of contract), I hereby
appoint you as my proxy, which proxy shall be IRREVOCABLE and coupled with an
interest, to vote my stock on all such matters as are within the contemplation
of such clauses (iii) and/or (iv). In any such event, you shall have full power
of substitution with regard to such proxy. I acknowledge that for purposes of
the phrase "coupled with an interest", your interest includes your interest both
as a lender under the Loan Agreement and your interest as a stockholder of the
Borrower in connection with any conversion of the Loan into stock of the
Borrower. I also agree that if and to the extent you shall, at anytime, acquire
stock of the Borrower, then this letter agreement shall automatically be deemed
a shareholders' agreement, that I will immediately execute an acknowledgment
that this letter agreement constitutes a shareholder agreement, together with
any such other agreements consistent with this letter agreement as you shall
request to further reflect the intent and purposes of this letter agreement.
In accordance with the foregoing, the Borrower shall provide a stop
transfer notice on the certificates representing the stock I now or hereafter
own in the Borrower to the transfer agent of the Borrower, so to reflect the
foregoing limitations on transfers of such stock. I also agree, upon your
<PAGE>
request, to tender all certificates representing my stock to the transfer agent
for purposes of application of appropriate restrictive legends consistent with
the terms of this letter agreement.
I and the Borrower acknowledge that any transfer of my stock, or other
act by me, in contravention of this letter agreement shall be null and void and
of no force or effect. This letter agreement shall inure to the benefit of, and
be enforceable by, you and your successors and assigns.
If you are in agreement with the terms of this letter agreement, please
so indicate by signing in the space provided below.
Very truly yours,
/s/ Gary D. Morgan
------------------
Gary D. Morgan
ACCEPTED AND AGREED WITH RESPECT
TO THE PROVISIONS APPLICABLE TO
THE BORROWER ABOVE:
WIN-GATE EQUITY GROUP, INC.
By: /s/ Gary P. Stukes
----------------------------
Name: Gary P. Stukes
Title: President
AGREED AND ACCEPTED:
GNB BANK PANAMA S.A.
By: /s/ Camilo Verastegui
----------------------------
Name: Camilo Verastegui
Title: General Manager
