-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iddbc6XrbmiyLcCiEVqPgdoN09/+PU7Ko4o0Xf9XVlU40waCSqJi08zRtnavbpFH r6b3RT/4izR07IrjLTsaQA== 0001015402-02-002274.txt : 20020705 0001015402-02-002274.hdr.sgml : 20020704 20020705145913 ACCESSION NUMBER: 0001015402-02-002274 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020702 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020705 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IEXALT INC CENTRAL INDEX KEY: 0000313625 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING, DATA PROCESSING, ETC. [7370] IRS NUMBER: 751667097 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09322 FILM NUMBER: 02697296 BUSINESS ADDRESS: STREET 1: 12000 AEROSPACE AVE STREET 2: SUITE 375 CITY: HOUSTON STATE: TX ZIP: 77034 BUSINESS PHONE: 2814648400 MAIL ADDRESS: STREET 1: 12000 AEROSPACE AVE STREET 2: SUITE 375 CITY: HOUSTON STATE: TX ZIP: 77034 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHWEST ENERGY CORP DATE OF NAME CHANGE: 19800111 FORMER COMPANY: FORMER CONFORMED NAME: SUNBELT EXPLORATION INC DATE OF NAME CHANGE: 19980821 8-K 1 doc1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 2, 2002 IEXALT, INC. (Exact name of registrant as specified in its charter) Nevada 00-09322 75-1667097 (State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 12000 Aerospace Avenue, Suite 375 Houston, Texas 77034 (Address of Registrant's principal executive offices including zip code) (281) 464-8400 (Registrant's telephone number, including area code) ITEM 1. CHANGES IN CONTROL OF REGISTRANT. On July 1, 2002, iExalt, Inc., a Nevada corporation ("iExalt"), signed an agreement relating to a capital investment by J.A.K. IV LP of up to $1,000,000. The funding agreement allows for the consolidation of five previously executed convertible debentures with an aggregate value of $464,227 as of May 31, 2002 and an agreement to lend up to $1,000,000 in additional funds. The partners within J.A.K. IV LP include a number of business leaders determined to achieve the mission of iExalt. The agreement allows for conversion of the principal and accrued interest to fully paid and non-assessable shares of restricted common stock at a price per share equal to $0.225 per share and not to exceed a total of 7,500,000 shares of the Company's restricted common stock. The lender may exercise its conversion rights at any time. iExalt has the right to convert with the consent of the management committee upon the achievement of positive cash flow by the Company on or before May 31, 2003, provided that all interest has been paid or is converted. As of June 30, 2002, there were outstanding 2,220,509 shares of the Company's common stock. J.A.K. IV LP could acquire control of the Company as a result of the conversion of principal and interest under this loan agreement. The agreement includes the issuance of 1,600,000 common stock warrants. The purchase price per share of the warrants would be equal to $0.50 per share, have a term of three years, and are fully vested. The agreement also provides for the establishment of a management committee for the purpose of ensuring and safeguarding the lender's interests. The committee is to work in conjunction with the executive management of the company to approve funding requests. The management committee has the authority to negotiate with any and all lenders, employees, potential acquisitions, and subsidiaries to execute a tactical plan to allow the company to achieve a positive cash flow position. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits. The following exhibits are filed herewith: EXHIBIT NO. DESCRIPTION ----------- ----------- 4.1 Interim Loan Agreement between iExalt, Inc. and J.A.K. IV LP dated July 1, 2002 4.2 Security Agreement between iExalt, Inc. and J.A.K. IV LP SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. DATE: July 2, 2002. iExalt, Inc. By: /s/ Chris L. Sisk --------------------------------- Chris L. Sisk Executive Vice President and Primary Financial Officer INDEX TO EXHIBITS The following exhibits are filed herewith: EXHIBIT NO. DESCRIPTION ------------ ----------- 4.1 Interim Loan Agreement between iExalt, Inc. and J.A.K. IV LP dated July 1, 2002 4.2 Security Agreement between iExalt, Inc. and J.A.K. IV LP EX-4.1 3 doc2.txt Exhibit 4.1 INTERIM LOAN AGREEMENT THIS LOAN AGREEMENT (the "Loan Agreement") is entered into by and between -------------- iEXALT, INC., a Nevada corporation ("Borrower"), whose address is 12000 -------- Aerospace Avenue, Suite 375, Houston, Texas 77034, and J.A.K. IV LP ("Lender"), ------ whose address is P.O. Box 1752, Alvin, Texas 77512: 1. Credit Facilities. Subject to the terms and conditions set forth in ------------------ this Loan Agreement and the other agreements, instruments and documents evidencing, securing, governing, guaranteeing and/or pertaining to the Loans, as hereinafter defined (collectively, together with the Loan Agreement, referred to hereinafter as the "Loan Documents"), Lender hereby agrees to provide to --------------- Borrower the credit facility or facilities herein below (whether one or more, the "Credit Facilities"): ------------------ Operating Capital. Lender agrees to finance Borrower's operating ------------------ capital needs, up to and including an amount not to exceed One Million dollars ($1,000,000), as necessary so that Borrower can continue to operate its business in a normal and customary manner. However, Lender shall not be obligated to provide any new financing in excess of $1,000,000 ("Operating Capital Limit") on or after September 30, 2002. It is understood that the Operating Capital Limit specifically excludes any amounts funded prior to May 30, 2002, by the Lender, or any affiliated party, as defined in Exhibit A. Advances. All advances under the Credit Facilities shall be -------- collectively called the "Loans". Lender reserves the right to require ----- Borrower to give Lender not less than three (3) business days prior notice of each requested advance under the Credit Facilities, specifying (i) the aggregate amount of such requested advance, (ii) the requested date of such advance, and (iii) the purpose for such advance, (iv) a signed Advance Authorization request by the Management Committee (see Section 8 of this document), with such advances to be requested in a form satisfactory to Lender. Lender agrees the Advance contemplated herein is a material condition of this Loan Agreement, and thus agrees to fund such advance, without delay, as deemed necessary to the Management Committee and not to exceed the Operating Capital Limit, provided the Borrower is not in default, as defined herein. Such Advance request shall be in a reasonable form more fully described in Exhibit B. Term. The Term of this Loan Agreement shall be twelve (12) months from ---- the effective date as defined herein. 2. Promissory Notes. The Loans shall be evidenced by one or more ----------------- promissory notes or an Application (whether one or more, together with any renewals, extensions and increases thereof, the "Notes") duly executed by ----- Borrower and payable to the order of Lender, in form and substance acceptable to Lender. Interest on the Notes shall accrue at the annual rate of 14% set forth therein. The principal of and interest on the Notes shall be due and payable in accordance with the terms and conditions set forth in the Notes and in this Loan Agreement. It is understood that this Loan Agreement reflects a consolidation of multiple existing Loans or Notes, entered into by the Borrower and related parties. This consolidation is more fully defined in Exhibit A attached hereto. The Maker/Lender of those Loans or Notes shall have consented to all terms herein as a condition of this Loan Agreement. 3. Collateral. As collateral and security for the indebtedness ---------- evidenced by the Notes and any and all other indebtedness or obligations from time to time owing by Borrower to Lender, Borrower shall grant, and hereby grants, to Lender, its successors and assigns, a first and prior lien and security interest in and to the property described herein below, together with any and all PRODUCTS AND PROCEEDS thereof (the "Collateral"): ---------- (a) All present and future accounts, chattel paper, documents, instruments, deposit accounts and general intangibles (including any right to payment for goods sold or services rendered arising out of the sale or delivery of personal property or work done or labor performed by Borrower), now or hereafter owned, held, or acquired by Borrower, together with any and all books of account, customer lists and other records relating in any way to the foregoing. (b) All present and hereafter acquired inventory (including without limitation, all raw materials, work in process and finished goods) held, possessed, owned, held on consignment, or held for sale, lease, return or to be furnished under contracts of service, in whole or in part, by Borrower wherever located. (c) All equipment and fixtures of whatsoever kind and character now or hereafter possessed, held, acquired, leased or owned by Borrower and used or usable in Borrower's business, together with all replacements, accessories, additions, substitutions and accessions to all of the foregoing. (d) All other assets of Borrower. (e) All assets and common stock of the defined subsidiaries of iExalt, Inc. including without limitation the following: (1) ChristianSpeakers.com, Inc. (Christian Speakers and Artists Agency) (2) Keener Communications, Inc. (Christian Times Newspaper) (3) Wordcross, Inc. (Christian Happenings, Inc.) (4) Church.com url, and all associated urls of i Exalt, Inc. (Nevada) or i Exalt, Inc. (Texas) - see attached listing. The term "Collateral" shall also include all records and data relating to any of ---------- the foregoing (including, without limitation, any computer software on which such records and data may be located). Borrower agrees to execute such security agreements, assignments, deeds of trust and other agreements and documents as Lender shall deem appropriate and otherwise require from time to time to more fully create and perfect Lender's lien and security interests in the Collateral. 4. Representations and Warranties. Borrower hereby represents and -------------------------------- warrants, and upon each request for an advance under the Credit Facilities further represents and warrants, to Lender as follows: (a) Existence. Borrower is a corporation duly organized, validly --------- existing and in good standing under the laws of the State of Nevada and all other states where it is doing business, and has all requisite power and authority to execute and deliver the Loan Documents. (b) Binding Obligations. The execution, delivery, and performance of -------------------- this Loan Agreement and all of the other Loan Documents by Borrower have been duly authorized by all necessary action by Borrower, and constitute legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as limited by Bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights and except to the extent specific remedies may generally be limited by equitable principles. (c) No Consent. The execution, delivery and performance of this Loan ----------- Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, do not (i) conflict with, result in a violation of, or constitute a default under (A) any provision of its articles or certificate of incorporation or bylaws, if Borrower is a corporation, or its partnership agreement, if Borrower is a partnership, or any agreement or other instrument binding upon Borrower, or (B) any law, governmental regulation, court decree or order applicable to Borrower, or (ii) require the consent, approval or authorization of any third party. (d) Financial Condition. Each financial statement of Borrower -------------------- supplied to the Lender truly discloses and fairly presents Borrower's financial condition as of the date of each such statement. There has been no material adverse change in such financial condition or results of operations of Borrower subsequent to the date of the most recent financial statement supplied to Lender. The Chief Financial Officer of the Borrower shall present a signed representation to the true and correct disclosure of such Financial statements which is to be supplied with each delivery of said Financial Statements. (e) Litigation. Other than those legal issues disclosed within the ---------- Momentum Equity Group Spec., there are no actions, suits or proceedings, pending or, to the knowledge of Borrower, threatened against or affecting Borrower or the properties of Borrower, before any court or governmental department, commission or board, which, if determined adversely to Borrower, would have a material adverse effect on the financial condition, properties, or operations of Borrower. (f) Taxes; Governmental Charges. Borrower has filed all federal, ----------------------------- state and local tax reports and returns required by any law or regulation to be filed by it and has either duly paid all taxes, duties and charges indicated due on the basis of such returns and reports, or made adequate provision for the payment thereof, and the assessment of any material amount of additional taxes in excess of those paid and reported is not reasonably expected. 5. Conditions Precedent to Advances. Lender's obligation to make any ----------------------------------- advance under this Loan Agreement and the other Loan Documents shall be subject to the conditions precedent that, as of the date of such advance and after giving effect thereto (i) all representations and warranties made to Lender in this Loan Agreement and the other Loan Documents shall be true and correct, as of and as if made on such date, (ii) no material adverse change in the financial condition of Borrower since the effective date of the most recent financial statements furnished to Lender by Borrower shall have occurred and be continuing, (iii) no event has occurred and is continuing, or would result from the requested advance, which with notice or lapse of time, or both, would constitute an Event of Default (as hereinafter defined), (iv) Lender's receipt of all Loan Documents appropriately executed by Borrower and all other proper parties and (v) the aforementioned Management Committee has authorized such Advance to be deemed necessary, such approval shall not be unreasonably withheld. 6. Affirmative Covenants. Until (i) the Notes and all other obligations --------------------- and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower agrees and covenants that it will, unless Lender shall otherwise consent in writing: (a) Accounts and Records. Maintain its books and records in ---------------------- accordance with generally accepted accounting principles. (b) Right of Inspection. Permit Lender to visit its properties and --------------------- installations and to examine, audit and make and take away copies or reproductions of Borrower's books and records, at all reasonable times. (c) Right to Additional Information. Furnish Lender with such ---------------------------------- additional information and statements, lists of assets and liabilities, tax returns, and other reports with respect to Borrower's financial condition and business operations as Lender may request from time to time. (d) Compliance with Laws. Conduct its business in an orderly and ---------------------- efficient manner consistent with good business practices, and perform and comply with all statutes, rules, regulations and/or ordinances imposed by any governmental unit upon Borrower and its businesses, operations and properties (including without limitation, all applicable environmental statutes, rules, regulations and ordinances). (e) Taxes. Pay and discharge when due all of its indebtedness and ----- obligations, including without limitation, all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits; provided, however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (i) the legality of the same shall be contested in good faith by appropriate judicial, administrative or other legal proceedings, and (ii) Borrower shall have established on its books adequate reserves with respect to such contested assessment, tax, charge, levy, lien or claim in accordance with generally accepted accounting principles, consistently applied. (f) Insurance. Maintain insurance, including but not limited to, --------- directors and officers insurance, fire insurance, comprehensive property damage, public liability, worker's compensation, business interruption and other insurance deemed necessary or otherwise required by Lender. (g) Notice of Indebtedness. Promptly inform Lender of the creation, ------------------------ incurrence or assumption by Borrower of any actual or contingent liabilities not permitted or not disclosed with the Momentum Spec. under this Loan Agreement. (h) Notice of Litigation. Promptly after the commencement thereof, ---------------------- notify Lender of all actions, suits and proceedings before any court or any governmental department, commission or board affecting Borrower or any of its properties. (i) Notice of Material Adverse Change. Promptly inform Lender of (i) ----------------------------------- any and all material adverse changes in Borrower's financial condition, and (ii) all claims made against Borrower which could materially affect the financial condition of Borrower. (j) Additional Documentation. Execute and deliver, or cause to be ------------------------- executed and delivered, any and all other agreements, instruments or documents which Lender may reasonably request in order to give effect to the transactions contemplated under this Loan Agreement and the other Loan Documents. 7. Negative Covenants. Until (i) the Notes and all other obligations ------------------- and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will not, without the prior written consent of Lender: (a) Nature of Business. Make any material change in the nature of its ------------------ business as carried on as of the date hereof unless agreed to by the Management Committee established within this document. (b) Liquidations, Mergers, Consolidations. Liquidate, merge or --------------------------------------- consolidate with or into any other entity, unless agreed to by the Management Committee established within this document. (c) Sale of Assets. Sell, transfer or otherwise dispose of any of its -------------- material assets or properties, other than in the ordinary course of business, unless agreed to by the Management Committee established within this document. (d) Liens. Create or incur any lien or encumbrance on any of its ----- assets, other than (i) liens and security interests securing indebtedness owing to Lender, (ii) liens for taxes, assessments or similar charges that are (1) not yet due or (2) being contested in good faith by appropriate proceedings and for which Borrower has established adequate reserves, and (iii) liens and security interests existing as of the date hereof which have been disclosed to and approved by Lender in writing, unless agreed to by the Management Committee established within this document. (e) Indebtedness. Create, incur or assume any indebtedness for ------------ borrowed money or issue or assume any other note, debenture, bond or other evidences of indebtedness, or guarantee any such indebtedness or such evidences of indebtedness of others, other than (i) borrowings from Lender, and (ii) borrowings outstanding on the date hereof and disclosed in writing to Lender, and (iii) those occurring in the normal course of business, unless agreed to by the Management Committee established within this document. (f) Transfer of Ownership. Permit the sale, pledge or other transfer ---------------------- of any of the ownership interests in Borrower, unless agreed to by the Management Committee established within this document. (g) Change in Management. Permit a change in the senior management of --------------------- Borrower, unless agreed to by the Management Committee established within this document. (h) Loans. Make any loans to any person or entity, unless agreed to ----- by the Management Committee established within this document. (i) Transactions with Affiliates. Enter into any transaction, ------------------------------ including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate (as hereinafter defined) of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrower's business and upon fair and reasonable terms no less favorable to Borrower than would be obtained in a comparable arm's-length transaction with a person or entity not an Affiliate of Borrower. As used herein, the term "Affiliate" means any individual or entity directly or indirectly controlling, controlled by, or under common control with, another individual or entity, unless agreed to by the Management Committee established within this document. (j) Dividends. Borrower agrees not to declare or pay any dividends on --------- any shares of Borrower's capital stock, make any other distributions with respect to any payment on account of the purchase, redemption, or other acquisition or retirement of any shares of Borrower's capital stock, or make any other distribution, sale, transfer or lease of any of Borrower's assets other than in the ordinary course of business, unless any such amounts are directly utilized for the payment of principal or interest on indebtedness and obligations owing from time to time by Borrower to Lender, unless agreed to by the Management Committee established within this document. (k) Salaries. Borrower agrees not to pay or contract to pay to any -------- executive officer, director or senior management, or any member of his/her immediate family, in any one calendar year, salaries, commissions, bonuses or other compensation, in whatever form, which are in the aggregate in excess of 110% of the amount of salaries, commissions, bonuses or other compensation, in whatever form, payable to such persons during 2001, unless agreed to by the Management Committee established within this document. 8. Management Committee. Lender shall appoint a Management Committee --------------------- for the purpose of ensuring and safeguarding the Operating Capital of the Lender. This Management Committee shall be comprised of not more than three (3) and not less than one (1) individual reasonably acceptable to the Borrower. The Management Committee shall work in conjunction with the Executive Management of the Borrower to approve, which approval shall not be unreasonably withheld, any and all funding requests, as defined in Section (2) above. The Management Committee shall have requisite authority to negotiate with any and all lenders, employees, potential acquisitions, and subsidiaries of Borrower, for the purpose of execution of a tactical plan to allow the Borrower to become cash flow positive. The Management Committee shall be paid a fixed fee of $10,000 per month for services rendered such services may be paid in cash or the companies restricted common stock for the term of this agreement. Should stock be issued, the value of such stock shall be $.225/share, and shall be issued to an accredited investor for services rendered to the Company, on behalf of the Management Committee. 9. Financial Covenants. Until (i) the Notes and all other obligations -------------------- and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will maintain reasonable financial covenants as agreed to by and between the Lender and the Management Committee as defined herein. 10. Reporting Requirements. Until (i) the Notes and all other ----------------------- obligations and liabilities of Borrower under this Loan Agreement and the other Loan Documents are fully paid and satisfied, and (ii) the Lender has no further commitment to lend hereunder, Borrower will, unless Lender shall otherwise consent in writing, furnish to Lender: (a) Interim Financial Statements. As soon as available, and in any ------------------------------ event within 45 days after the end of each fiscal quarter, a balance sheet and income statement of Borrower as of the end of such fiscal quarter, all in form and substance and in reasonable detail satisfactory to Lender and duly certified (subject to year-end review adjustments) by the President and/or Chief Financial Officer of Borrower (i) as being true and correct in all material aspects to the best of his or her knowledge and (ii) as having been prepared in accordance with generally accepted accounting principles, consistently applied. (b) Annual Financial Statements. As soon as available and in any ----------------------------- event within 90 days after the end of each fiscal year, a balance sheet and income statement of Borrower as of the end of such fiscal year, in each case audited by independent public accountants of recognized standing acceptable to Lender. (c) Compliance Certificate. A certificate signed by Borrower's ----------------------- president, within 45 days after the end of each fiscal quarter, stating that Borrower is in full compliance with all of its obligations under this Loan Agreement and all other Loan Documents and is not in default of any term or provisions hereof or thereof, and demonstrating compliance with all financial ratios and covenants set forth in this Loan Agreement. (d) Borrowing Base Report. A borrowing base report signed by ----------------------- Borrower's president, within 45 days after the end of each fiscal quarter, in form and detail satisfactory to Lender. (e) Accounts Aging. An accounts receivable aging report within 45 --------------- days after the end of each fiscal quarter, in form and detail satisfactory to Lender. (f) Payables Aging. An accounts payable aging report within 45 days --------------- after the end of each fiscal quarter, in form and detail satisfactory to Lender. (g) Inventory Listing. A list of Borrower's inventory by location and ------------------ type (to include the following: raw materials, work in process and finished goods) within 45 days after the end of each fiscal quarter, in form and detail satisfactory to Lender. (h) Tax Returns. Copies of Borrower's and Guarantor's income tax ------------ returns (federal and state, if any) within 30 days after filing. 11. Events of Default. Each of the following shall constitute an ------------------- "Event of Default" under this Loan Agreement: ---------------- (a) The failure, refusal or neglect of Borrower to pay when due any part of the principal of, or interest on, the Notes or any other indebtedness or obligations owing to Lender by Borrower from time to time. (b) The failure of Borrower or any Obligated Party (as defined below) to timely and properly observe, keep or perform any covenant, agreement, warranty or condition required herein or in any of the other Loan Documents. (c) The occurrence of an event of default under any of the other Loan Documents or under any other agreement now existing or hereafter arising between Lender and Borrower. (d) Any representation contained herein or in any of the other Loan Documents made by Borrower or any Obligated Party is false or misleading in any material respect. (e) The occurrence of any event which permits the acceleration of the maturity of any indebtedness owing by Borrower to any third party under any agreement or understanding. (f) If Borrower or any Obligated Party: (i) becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due; (ii) generally is not paying its debts as such debts become due; (iii) has a receiver, trustee or custodian appointed for, or take possession of, all or substantially all of the assets of such party, either in a proceeding brought by such party or in a proceeding brought against such party and such appointment is not discharged or such possession is not terminated within 60 days after the effective date thereof or such party consents to or acquiesces in such appointment or possession; (iv) files a petition for relief under the United States Bankruptcy Code or any other present or future federal or state insolvency, bankruptcy or similar laws (all of the foregoing hereinafter collectively called "Applicable Bankruptcy Law") or an involuntary petition for relief -------------------------- is filed against such party under any Applicable Bankruptcy Law and such involuntary petition is not dismissed within 60 days after the filing thereof, or an order for relief naming such party is entered under any Applicable Bankruptcy Law, or any composition, rearrangement, extension, reorganization or other relief of debtors now or hereafter existing is requested or consented to by such party; (v) fails to have discharged within a period of 30 days any attachment, sequestration or similar writ levied upon any property of such party; or (vi) fails to pay within 30 days any final money judgment against such party. (g) If Borrower or any Obligated Party is an entity, the liquidation, dissolution, merger or consolidation of any such entity or, if Borrower or any Obligated Party is an individual, the death or legal incapacity of any such individual. (h) The entry of any judgment, arising from any litigation occurring after the creation of this Loan Agreement, against Borrower or the issuance or entry of any attachment or other lien against any of the property of Borrower for an amount in excess of $50,000, if undischarged, unbonded or undismissed within 30 days after such entry. Nothing contained in this Loan Agreement shall be construed to limit the events of default enumerated in any of the other Loan Documents and all such events of default shall be cumulative. The term "Obligated Party", as used herein, shall --------------- mean any party other than Borrower who secures, guarantees and/or is otherwise obligated to pay all or any portion of the indebtedness evidenced by the Notes. 12. Remedies. Upon the occurrence of any one or more of the foregoing -------- Events of Default, (a) the entire unpaid balance of principal of the Notes, together with all accrued but unpaid interest thereon, and all other indebtedness owing to Lender by Borrower at such time shall, at the option of Lender, become immediately due and payable without further notice, demand, presentation, notice of dishonor, notice of intent to accelerate, notice of acceleration, protest or notice of protest of any kind, all of which are expressly waived by Borrower, and (b) Lender may, at its option, cease further advances under any of the Notes. All rights and remedies of Lender set forth in this Loan Agreement and in any of the other Loan Documents may also be exercised by Lender, at its option to be exercised in its sole discretion, upon the occurrence of an Event of Default. 13. Rights Cumulative. All rights of Lender under the terms of this ------------------ Loan Agreement shall be cumulative of, and in addition to, the rights of Lender under any and all other agreements between Borrower and Lender (including, but not limited to, the other Loan Documents), and not in substitution or diminution of any rights now or hereafter held by Lender under the terms of any other agreement. 14. Waiver and Agreement. Neither the failure nor any delay on the ---------------------- part of Lender to exercise any right, power or privilege herein or under any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision in this Loan Agreement or in any of the other Loan Documents and no departure by Borrower therefrom shall be effective unless the same shall be in writing and signed by Lender, and then shall be effective only in the specific instance and for the purpose for which given and to the extent specified in such writing. No modification or amendment to this Loan Agreement or to any of the other Loan Documents shall be valid or effective unless the same is signed by the party against whom it is sought to be enforced. 15. Benefits. This Loan Agreement shall be binding upon and inure to -------- the benefit of Lender and Borrower, and their respective successors and assigns, provided, however, that Borrower may not, without the prior written consent of Lender, assign any rights, powers, duties or obligations under this Loan Agreement or any of the other Loan Documents. 16. Notices. All notices, requests, demands or other communications ------- required or permitted to be given pursuant to this Agreement shall be in writing and given by (i) personal delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the first page hereof and shall be deemed to have been received either, in the case of personal delivery, as of the time of personal delivery, in the case of expedited delivery service, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of mail, upon deposit in a depository receptacle under the care and custody of the United States Postal Service. Either party shall have the right to change its address for notice hereunder to any other location within the continental United States by notice to the other party of such new address at least 30 days prior to the effective date of such new address. 17. Construction. This Loan Agreement and the other Loan Documents ------------ have been executed and delivered in the State of Texas, shall be governed by and construed in accordance with the laws of the State of Texas, and shall be performable by the parties hereto in the county in Texas where the Lender's address set forth on the first page hereof is located. 18. Invalid Provisions. If any provision of this Loan Agreement or any ------------------- of the other Loan Documents is held to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable and the remaining provisions of this Loan Agreement or any of the other Loan Documents shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance. 19. Expenses. Borrower shall pay all costs and expenses (including, -------- without limitation, reasonable attorneys' fees) in connection with (i) any action required in the course of administration of the indebtedness and obligations evidenced by the Loan Documents, and (ii) any action in the enforcement of Lender's rights upon the occurrence of Event of Default. 20. Participation of the Loans. Borrower agrees that Lender may, at ----------------------------- its option, sell interests in the Loans and its rights under this Loan Agreement to a financial institution or institutions and, in connection with each such sale, Lender may disclose any financial and other information available to Lender concerning Borrower to each prospective purchaser. 21. Conflicts. In the event any term or provision hereof is inconsistent --------- with or conflicts with any provision of the other Loan Documents, the terms and provisions contained in this Loan Agreement shall be controlling. 22. Counterparts. This Loan Agreement may be separately executed in ------------ any number of counterparts, each of which shall be an original, but all of which, taken together, shall be deemed to constitute one and the same instrument. 23. Facsimile Documents and Signatures. For purposes of negotiating ------------------------------------- and finalizing this Loan Agreement, if this document or any document executed in connection with it is transmitted by facsimile machine ("fax"), it shall be --- treated for all purposes as an original document. Additionally, the signature of any party on this document transmitted by way of a facsimile machine shall be considered for all purposes as an original signature. Any such faxed document shall be considered to have the same binding legal effect as an original document. At the request of any party, any faxed document shall be re-executed by each signatory party in an original form. NOTICE TO COMPLY WITH STATE LAW For the purpose of this Notice, the term "WRITTEN AGREEMENT" shall include ----------------- the document set forth above, together with each and every other document relating to and/or securing the same loan transaction, regardless of the date of execution. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 24. Conversion Rights. At Lender's option, Lender shall have the right ------------------ to convert all or any unpaid principal amount of the Loans in to fully paid and non-assessable shares of restricted common stock of Borrower at a price per share equal to $.225, but not to exceed 7,500,000 shares, Borrower shall have the right to convert, upon the Management Committee's recognition and authorization on the achievement of the Borrower's acceptable positive cash flow, if such occurrence is before the maturity of this Loan, and provided all interest has been paid or converted and is current with Lender. 25. Warrants. The Lender will receive warrants to purchase 1,600,000 shares of the Borrower's common stock. The purchase price per share of the Warrants would be equal to $0.50 per share. The Warrants are to be i) in a form acceptable to the Lender, ii) fully vested and exercisable upon purchase, iii) exercisable in whole or in part from time to time, iv) contain a cashless exercise provision., and shall have an exercise term not to exceed three (3) years. 26. Reservation of Shares. (i) The Borrower shall reserve, free from ----------------------- preemptive rights, out of its treasury stock or its authorized but un-issued shares of Borrower's common stock, or both, solely for the purpose of effecting the conversion of the Loans, sufficient shares to provide for the conversion of the Loans; and (ii) the Borrower covenants that all shares of Borrower's common stock which may be issued upon conversion of the Loans will, upon issue, be validly issued, fully paid and non-assessable by the Borrower and free from all taxes, liens and charges with respect to the issuance thereof. 27. Registration Rights. All of the Borrower's common stock underlying -------------------- the warrants and conversion rights acquired by the Lender have one demand and unlimited piggyback registration rights with the specific form of rights acceptable to the Lender, whereby the Lender agrees to register in the appropriate filing with the SEC, the underlying shares indicated above in Section 24. Such filing of a registration statement shall be paid by the Lender, such costs not to exceed $25,000, and shall be made within ninety (90) days of such written request of the Borrower. In addition, Borrower shall use its best efforts to obtain approval of such registration, and should the registration of the underlying shares not be approved within ninety (90) days of filing, Borrower shall incur a penalty of 1% per week payable in common stock, for any delay, not to exceed 500,000 shares in total penalty payment to Lender. 28. Lock out/ Restricted Sales of Stock. Lender agrees that the Loan ---------------------------------------- contemplated herein, and the subsequent funding, could cause irreparable harm to the Borrowers existing shareholders, and as such, agrees, during the term of this loan, not sell more than ten percent (10%) of Lenders stock, if converted, in any given month, nor more than ten percent (10%) in any given day of the total volume of stock traded in the previous day. This agreement is intended by the parties to ensure the protection of the bid/ask price of the Borrower's common stock publicly traded. 29. Default. Upon any material default by Borrower, and notice provided ------- by Lender of such default, wherein the default has not been cured within ten (10) days, Lender may exercise its rights of foreclosure on the collateral as defined herein. Upon material default by Lender, and notice provided by Borrower of such default, wherein the default has not been cured within ten (10) days, Borrower may exercise its rights of conversion as defined herein. EFFECTIVE as of the 31st day of May, 2002. EXECUTION date on this the 1st day of July, 2002. BORROWER: IEXALT, INC. By: /s/ Donald W. Sapaugh ---------------------------------- Name: Donald W. Sapaugh ---------------------------------- Title: Chairman and CEO ---------------------------------- LENDER: J.A.K. IV LP By: /s/ Jay Gubert ---------------------------------- Name: Jay Gubert ---------------------------------- Title: President ---------------------------------- Exhibit A Previous Loan Agreements, Promissory Notes Consolidated into this Loan Agreement J. Gubert 1/16/2002 $105,178 ----------------------- ------- Signature Date Seafood Anywhere 2/20/2002 $102,192 ----------------------- ------- Signature Date Seafood Anywhere 2/20/2002 $101,600 ----------------------- ------- Signature Date Seafood Anywhere 2/20/2002 $ 66,820 ----------------------- ------- Signature Date Seafood Anywhere 2/20/2002 $ 88,437 ----------------------- ------- Signature Date Exhibit B Advance Request Use of Cash Date --------------------- Vendor Amount Due ------ ---------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- - ---------------------- -------------------- Total Due: $ -------------------- EX-4.2 4 doc3.txt Exhibit 4.2 SECURITY AGREEMENT DATE: May 31, 2002 DEBTOR: iExalt, Inc., a Nevada corporation DEBTOR'S MAILING ADDRESS (INCLUDING COUNTY): iExalt, Inc. 12000 Aerospace Avenue #375 Houston, Texas 77034 County of Harris SECURED PARTY: J.A.K. IV LP SECURED PARTY'S MAILING ADDRESS (INCLUDING COUNTY): P.O. Box 1752 Alvin, Texas 77512 Brazoria County CLASSIFICATION OF COLLATERAL: All assets and liabilities, and common stock of the following wholly owned subsidiaries of iExalt, Inc. (1) ChristianSpeakers.com, Inc. (Christian Speakers and Artists Agency) (2) Keener Communications, Inc. (Christian TimesNewspaper) (3) Wordcross, Inc. (Christian Happenings, Inc.) (4) Church.com url, and all associated urls of iExalt, Inc. (Nevada) or iExalt, Inc. (Texas) - see attached listing. COLLATERAL (INCLUDING ALL ACCESSIONS): Same as above OBLIGATION: Convertible Debenture DATE: May 31, 2002, three hundred sixty five days from the execution of this agreement. AMOUNT: $1,464,227 One million, four hundred sixty four thousand, two hundred twenty seven dollars and no cents MAKER/DEBTOR: iExalt, Inc., a Nevada corporation FINAL MATURITY DATE: As stated herein, and as further defined within the Loan Agreement dated May 31, 2003 TERMS OF PAYMENT (OPTIONAL): As stated therein. DEBTOR'S REPRESENTATION CONCERNING LOCATION OF COLLATERAL (OPTIONAL): Subject to the terms of this agreement, Debtor grants to Secured Party a security interest in the collateral and all its proceeds to secure payment and performance of Debtor's obligation in this security agreement and all renewals and extensions of any of the obligation. DEBTOR'S WARRANTIES 1. Financing Statement. Except for that in favor of Secured Party, no financing statement covering the collateral is filed in any public office. Debtor agrees to provide all information necessary for the filing of a form UCC-1. 2. Ownership. Debtor owns the collateral and has the authority to grant this security interest. Ownership is free from any setoff, claim, restriction, lien, security interest, or encumbrance except this security interest and liens for taxes not yet due. 3. Fixtures and Accessions. None of the collateral is affixed to real estate, is an accession to any goods, is commingled with other goods, or will become a fixture, accession, or part of a product or mass with other goods except as expressly provided in this agreement. 4. Financial Statements. All information about Debtor's financial condition provided to Secured Party was accurate when submitted, as will be any information subsequently provided. DEBTOR'S COVENANTS 1. Protection of Collateral. Debtor will defend the collateral against all claims and demands adverse to Secured Party's interest in it and will keep it free from all liens except those for taxes not yet due and from all security interests except this one. The collateral will remain in Debtor's possession or control at all times, except as otherwise provided in this agreement. Debtor will maintain the collateral in good condition and protect it against misuse, abuse, waste, and deterioration except for ordinary wear and tear resulting from its intended use. 2. Insurance. Debtor will insure the collateral in accord with Secured Party's reasonable requirements regarding choice of carrier, casualties insured against, and amount of coverage. Policies will be written in favor of Debtor and Secured Party according to their respective interests or according to Secured Party's other requirements. All policies will provide that Secured Party will receive at least ten days' notice before cancellation, and the policies or certificates evidencing them will be provided to Secured Party when issued. Debtor assumes all risk of loss and damage to the collateral to the extent of any deficiency in insurance coverage. Debtor irrevocably appoints Secured Party as attorney-in-fact to collect any return, unearned premiums, and proceeds of any insurance on the collateral and to endorse any draft or check deriving from the policies and made payable to Debtor. 3. Secured Party's Costs. Debtor will pay all expenses incurred by Secured Party in obtaining, preserving, perfecting, defending, and enforcing this security interest or the collateral and in collecting or enforcing the note. Expenses for which Debtor is liable include, but are not limited to, taxes, assessments, reasonable attorney's fees, and other legal expenses. These expenses will bear interest from the dates of payments at the highest rate stated in notes that are part of the obligation, and Debtor will pay Secured Party this interest on demand at a time and place reasonably specified by Secured Party. These expenses and interest will be part of the obligation and will be recoverable as such in all respects. 4. Additional Documents. Debtor will sign any papers that Secured Party considers necessary to obtain, maintain, and perfect this security interest or to comply with any relevant law. 5. Notice of Changes. Debtor will immediately notify Secured Party of any material change in the collateral; change in Debtor's name, address, or location; change in any matter warranted or represented in this agreement; change that may affect this security interest; and any event of default. 6. Use and Removal of Collateral. Debtor will use the collateral primarily according to the stated classification unless Secured Party consents otherwise in writing. Debtor will not permit the collateral to the affixed to any real estate, to become an accession to any goods, to be commingled with other goods, or to become a fixture, accession, or part of a product or mass with other goods except as expressly provided in this agreement. 7. Sale. Debtor will not sell, transfer, or encumber any of the collateral without the prior written consent of Secured Party. RIGHTS AND REMEDIES OF SECURED PARTY 1. Generally. Secured Party may exercise the following rights and remedies either before or after default: a. take control of any proceeds of the collateral; b. release any collateral in Secured Party's possession to any debtor, temporarily or otherwise; c. take control of any funds generated by the collateral, such as refunds from and proceeds of insurance, and reduce any part of the obligation accordingly or permit Debtor to use such funds to repair or replace damaged or destroyed collateral covered by insurance; and d. demand, collect, convert, redeem, settle, compromise, receipt for, realize on, adjust, sue for, and foreclose on the collateral either in Secured Party's or Debtor's name, as Secured Party desires. 2. Insurance. If Debtor fails to maintain insurance as required by this agreement or otherwise by Secured Party, then Secured Party may purchase single-interest insurance coverage that will protect only Secured Party. If Secured Party purchases this insurance, its premiums will become part of the obligation. EVENTS OF DEFAULT Each of the following conditions is an event of default: 1. if Debtor defaults in timely payment or performance of any obligation, covenant, or liability in any written agreement between Debtor and Secured Party or in any other transaction secured by this agreement; 2. if any warranty, covenant, or representation made to Secured Party by or on behalf of Debtor proves to have been false in any material respect when made; 3. if a receiver is appointed for Debtor or any of the collateral; 4. if the collateral is assigned for the benefit of creditors or, to the extent permitted by law, if bankruptcy or insolvency proceedings commence against or by any of these parties: Debtor; any partnership of which Debtor is a general partner; and any maker, drawer, acceptor, endorser, guarantor, surety, accommodation party, or other person liable on or for any part of the obligation; 5. if any financing statement regarding the collateral but not related to this security interest and not favoring Secured Party is filed; 6. if any lien attaches to any of the collateral; 7. if any of the collateral is lost, stolen, damaged, or destroyed, unless it is promptly replaced with collateral of like quality or restored to its former condition. REMEDIES OF SECURED PARTY ON DEFAULT During the existence of any event of default, Secured Party may declare the unpaid principal and earned interest of the obligation immediately due in whole or part, enforce the obligation, and exercise any rights and remedies granted by the Texas Uniform Commercial Code or by this agreement, including the following: 1. require Debtor to deliver to Secured Party all books and records relating to the collateral; 2. require Debtor to assemble the collateral and make it available to Secured Party at a place reasonably convenient to both parties; 3. take possession of any of the collateral and for this purpose enter any premises where it is located if this can be done without breach of the peace; 4. sell, lease, or otherwise dispose of any of the collateral in accord with the rights, remedies, and duties of a secured party under chapters 2 and 9 of the Texas Uniform Commercial Code after giving notice as required by those chapters; unless the collateral threatens to decline speedily in value, is perishable, or would typically be sold on a recognized market, Secured Party will give Debtor reasonable notice of any public sale of the collateral or of a time after which it may be otherwise disposed of without further notice to Debtor; in this event, notice will be deemed reasonable if it is mailed, postage prepaid, to Debtor at the address specified in this agreement at least ten days before any public sale or ten days before the time when the collateral may be otherwise disposed of without further notice to Debtor; 5. surrender any insurance policies covering the collateral and receive the unearned premium; 6. apply any proceeds from disposition of the collateral after default in the manner specified in chapter 9 of the Texas Uniform Commercial Code, including payment of Secured Party's reasonable attorney's fees and court expenses; and 7. if disposition of the collateral leaves the obligation unsatisfied, collect the deficiency from Debtor. GENERAL PROVISIONS 1. Parties Bound. Secured Party's rights under this agreement shall inure to the benefit of its successors and assigns. Assignment of any part of the obligation and delivery by Secured Party of any part of the collateral will fully discharge Secured Party from responsibility for that part of the collateral. If Debtor is more than one, all their representations, warranties, and agreements are joint and several. Debtor's obligations under this agreement shall bind Debtor's personal representatives, successors, and assigns. 2. Waiver. Neither delay in exercise nor partial exercise of any of Secured Party's remedies or rights shall waive further exercise of those remedies or rights. Secured Party's failure to exercise remedies or rights does not waive subsequent exercise of those remedies or rights. Secured Party's waiver of any default does not waive further default. Secured Party's waiver of any right in this agreement or of any default is binding only if it is in writing. Secured Party may remedy any default without waiving it. 3. Reimbursement. If Debtor fails to perform any of Debtor's obligations, Secured Party may perform those obligations and be reimbursed by Debtor on demand at the place where the note is payable for any sums so paid, including attorney's fees and other legal expenses, plus interest on those sums from the dates of payment at the rate stated in the note for matured, unpaid amounts. The sum to be reimbursed shall be secured by this security agreement. 4. Interest Rate. Interest included in the obligations shall not exceed the maximum amount of non-usurious interest that may be contracted for, taken, reserved, charged, or received under law; any interest in excess of that maximum amount shall be credited to the principal of the obligation or, if that has been paid, refunded. On any acceleration or required or permitted prepayment of the obligation, any such excess shall be canceled automatically as of the acceleration or prepayment or, if already paid, credited on the principal amount of the obligation or, if the principal amount has been paid, refunded. This provision overrides other provisions in this and all other instruments concerning the obligation. 5. Modifications. No provisions of this agreement shall be modified or limited except by written agreement. 6. Severability. The unenforceability of any provision of this agreement will not affect the enforceability or validity of any other provision. 7. After-Acquired Consumer Goods. This security interest shall attach to after-acquired consumer goods only to the extent permitted by law. 8. Applicable Law. This agreement will be construed according to Texas laws. 9. Place of Performance. This agreement is to be performed in the county of Secured Party's mailing address. 10. Financing Statement. A carbon, photographic, or other reproduction of this agreement or any financing statement covering the collateral is sufficient as a financing statement. 11. Presumption of Truth and Validity. If the collateral is sold after default, recitals in the bill of sale or transfer will be prima facie evidence of their truth, and all prerequisites to the sale specified by this agreement and by the Texas Uniform Commercial Code will be presumed satisfied. 12. Singular and Plural. When the context requires, singular nouns and pronouns include the plural. 13. Priority of Security Interest. This security interest shall neither affect nor be affected by any other security for any of the obligation. Neither extensions of any of the obligation nor releases of any of the collateral will affect the priority or validity of this security interest with reference to any third person. 14. Cumulative Remedies. Foreclosure of this security interest by suit does not limit Secured Party's remedies, including the right to sell the collateral under the terms of this agreement. All remedies of Secured Party may be exercised at the same or different times, and no remedy shall be a defense to any other. Secured Party's rights and remedies include all those granted by law or otherwise, in addition to those specified in this agreement. 15. Agency. Debtor's appointment of Secured Party as Debtor's agent is coupled with an interest and will survive any disability of Debtor. 16. Attachments Incorporated. The addendum indicated below is attached to this agreement and incorporated into it for all purposes: 17. All matters herein shall be construed under the laws of the state of Texas. Venue on any dispute herein shall be in Harris County, Texas. SECURED PARTY: DEBTOR: J.A.K. IV LP iExalt, Inc., a Nevada corporation By: /s/ Jay Gubert By: /s/ Donald W. Sapaugh ------------------------------- -------------------------------- Title: President Title: Chairman & CEO ---------------------------- ----------------------------- Date: July 1, 2002 Date: July 1, 2002 ---------------------------- ------------------------------ AFTER RECORDING RETURN TO: - ------------------------- James W. Christian Christian, Smith, Wulkeson, and Jewel, L.L.P. 2302 Fannin, Suite 500 Houston, Texas 77002 -----END PRIVACY-ENHANCED MESSAGE-----