Exhibit 10.18
PROMISSORY NOTE
---------------
February 28, 2005
Jersey City, New Jersey $1,000,000
FOR VALUE RECEIVED, the undersigned, SPEECH SWITCH, INC., a New Jersey
corporation, formerly known as iVOICE TECHNOLOGY III, INC. (the "Company"),
promises to pay CORNELL CAPITAL PARTNERS, LP (the "Lender") at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or other address as the
Lender shall specify in writing, the principal sum of One Million Dollars
($1,000,000) and interest at the annual rate of twelve percent (12%) on the
unpaid balance pursuant to the following terms:
On or about August 10, 2004, the parties entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement"); a Secured Debenture
(the "Secured Debenture"); a Security Agreement (the "Security Agreement");
an Investor Registration Rights Agreement (the "Investor Registration Rights
Agreement"); and an Escrow Agreement (the "Escrow Agreement") (collectively,
the Securities Purchase Agreement, the Secured Debenture, the Security
Agreement, the Investor Registration Rights Agreement and the Escrow
Agreement are referred to as the "Transaction Documents"). The parties
hereby terminate the Transaction Documents and the respective rights and
obligations contained therein. None of the parties shall have any rights or
obligations under or with respect to the Transaction Documents.
1. Principal and Interest. For value received, the Company hereby
promises to pay to the order of the Lender in lawful money of the United
States of America and in immediately available funds the principal sum of One
Million Dollars ($1,000,000), of which Four Hundred Thousand Dollars
($400,000) was previously funded on August 10, 2004 and Four Hundred Thousand
Dollars ($400,000) was funded on November 17, 2004. The remaining amount of
this Promissory Note (the "Note") of Two Hundred Thousand Dollars ($200,000)
shall be funded within five (5) days from the date hereof (the "Closing").
The Company shall pay a commitment fee of ten percent (10%) of the principal
sum of this Note, which shall be paid and deducted from the gross proceeds
available from the Closing. The parties acknowledge that $80,000 of such
fee due and owing has already been paid.
2.
3. Payments. The first payment of principal shall be due and payable on
the first (1st) Monday of September 2005 (the "Initial Payment"), and with
weekly payments being due and payable each succeeding week thereafter until
all principal has been paid. The amount of each payment shall be Ten
Thousand Dollars ($10,000). Interest shall accrue from the date hereof. The
Company shall pay all accrued and unpaid interest at the time of the Final
Payment (as such term is defined herein). In the event all principal and
interest has not been satisfied by the one (1)
year anniversary from the Initial Payment, the Lender shall make a lump sum
payment (the "Final Payment") of all outstanding interest and principal on the
one (1) year anniversary from the Initial Payment.
4. Waiver and Consent. To the fullest extent permitted by law and except
as otherwise provided herein, the Company waives demand, presentment,
protest, notice of dishonor, suit against or joinder of any other person, and
all other requirements necessary to charge or hold the Company liable with
respect to this Note.
5. Costs, Indemnities and Expenses. In the event of default as described
herein, the Company agrees to pay all reasonable fees and costs incurred by
the Lender in collecting or securing or attempting to collect or secure this
Note, including reasonable attorneys' fees and expenses, whether or not
involving litigation, collecting upon any judgments and/or appellate or
bankruptcy proceedings. The Company agrees to pay any documentary stamp
taxes, intangible taxes or other taxes which may now or hereafter apply to
this Note or any payment made in respect of this Note, and the Company agrees
to indemnify and hold the Lender harmless from and against any liability,
costs, attorneys' fees, penalties, interest or expenses relating to any such
taxes, as and when the same may be incurred.
6. Event of Default. An "Event of Default" shall be deemed to have
occurred upon the occurrence of any of the following: (i) the Company should
fail for any reason or for no reason to make any payment of the interest or
principal pursuant to this Note within fifteen (15) days of the date due as
prescribed herein and after five (5) days following written notice to the
Company; (ii) failure by the Company for twenty (20) days after notice to it
to satisfy any of its other obligations or requirements or comply with any of
its other agreements under this Note; (iii) any proceedings under any
bankruptcy laws of the United States of America or under any insolvency, not
disclosed to the Lender, reorganization, receivership, readjustment of debt,
dissolution, liquidation or any similar law or statute of any jurisdiction
now or hereinafter in effect (whether in law or at equity) is filed by or
against the Company or for all or any part of its property; or (iv) a breach
by the Company of its obligations, or an event of default, under the Security
Agreement, or any other agreements hereunder between the Company and the
Lender of even date herewith which is not cured by any applicable cure period
set forth therein. Upon an Event of Default (as defined above), the entire
principal balance and accrued interest outstanding under this Note, and all
other obligations of the Company under this Note, shall be immediately due
and payable without any action on the part of the Lender, interest shall
accrue on the unpaid principal balance at eighteen percent (18%) or the
highest rate permitted by applicable law, if lower, and the Lender shall be
entitled to seek and institute any and all remedies available to it.
7. Maximum Interest Rate. In no event shall any agreed to or actual
interest charged, reserved or taken by the Lender as consideration for this
Note exceed the limits imposed by New Jersey law. In the event that the
interest provisions of this Note shall result at any time or for any reason
in an effective rate of interest that exceeds the
2
maximum interest rate permitted by applicable law, then without further
agreement or notice the obligation to be fulfilled shall be automatically
reduced to such limit and all sums received by the Lender in excess of those
lawfully collectible as interest shall be applied against the principal of this
Note immediately upon the Lender's receipt thereof, with the same force and
effect as though the Company had specifically designated such extra sums to be
so applied to principal and the Lender had agreed to accept such extra
payment(s) as a premium-free prepayment or prepayments.
8. Secured Nature of the Note. This Note is secured by the Pledged
Property as defined in the Security Agreement between the Company and the
Lender of even date herewith.
9. Issuance of Capital Stock. So long as any portion of this Note is
outstanding, the Company shall not, without the prior written consent of the
Buyer(s), issue or sell shares of Common Stock or Preferred Stock (i) without
consideration or for a consideration per share less than the bid price of the
Common Stock (the "Bid Price") determined immediately prior to its issuance,
(ii) any warrant, option, right, contract, call, or other security instrument
granting the holder thereof, the right to acquire Common Stock without
consideration or for a consideration less than such Common Stock's Bid Price
value determined immediately prior to it's issuance, (iii) enter into any
security instrument granting the holder a security interest in any and all
assets of the Company, or (iv) file any registration statement on Form S-8,
except for the registration of an employee stock option plan.
Notwithstanding anything to the contrary, the Company may issue Common Stock
issuable pursuant to the Company's obligations upon the conversion of stock
options, convertible debt or Class B Common Stock. For purposes of this
Section, Bid Price shall mean, on any date, the closing bid price (as
reported by Bloomberg L.P.) of the Common Stock on the principal market (the
"Principal Market") or if the Common Stock is not traded on a Principal
Market, the highest reported bid price for the Common Stock, as furnished by
the National Association of Securities Dealers, Inc. The Principal Market
shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the
American Stock Exchange, the OTC Bulletin Board or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market
for the Common Stock.
10. Cancellation of Note. Upon the repayment by the Company of all of its
obligations hereunder to the Lender, including, without limitation, the
principal amount of this Note, plus accrued but unpaid interest, the
indebtedness evidenced hereby shall be deemed canceled and paid in full.
Except as otherwise required by law or by the provisions of this Note,
payments received by the Lender hereunder shall be applied first against
expenses and indemnities, next against interest accrued on this Note, and
next in reduction of the outstanding principal balance of this Note.
11. Severability. If any provision of this Note is, for any reason,
invalid or unenforceable, the remaining provisions of this Note will
nevertheless be valid and enforceable and will remain in full force and
effect. Any provision of this Note that is held invalid or unenforceable by
a court of competent jurisdiction will be deemed
3
modified to the extent necessary to make it valid and enforceable and as so
modified will remain in full force and effect.
12. Amendment and Waiver. This Note may be amended, or any provision of
this Note may be waived, provided that any such amendment or waiver will be
binding on a party hereto only if such amendment or waiver is set forth in a
writing executed by the parties hereto. The waiver by any such party hereto
of a breach of any provision of this Note shall not operate or be construed
as a waiver of any other breach.
13. Successors. Except as otherwise provided herein, this Note shall bind
and inure to the benefit of and be enforceable by the parties hereto and
their permitted successors and assigns.
14. Assignment. This Note shall not be directly or indirectly assignable
or delegable by the Company. The Lender may assign this Note as long as such
assignment complies with the Securities Act of 1933, as amended.
15. No Strict Construction. The language used in this Note will be deemed
to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party.
16. Further Assurances. Each party hereto will execute all documents and
take such other actions as the other party may reasonably request in order to
consummate the transactions provided for herein and to accomplish the
purposes of this Note.
17. Notices, Consents, etc. Any notices, consents, waivers or other
communications required or permitted to be given under the terms hereof must
be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) trading
day after deposit with a nationally recognized overnight delivery service, in
each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
If to Company: Speech Switch, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender: Cornell Capital Partners, LP.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
4
or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice
given to each other party three (3) trading days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service
in accordance with clause (i), (ii) or (iii) above, respectively.
18. Remedies, Other Obligations, Breaches and Injunctive Relief. The
Lender's remedies provided in this Note shall be cumulative and in addition
to all other remedies available to the Lender under this Note, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Lender contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Lender's right to pursue actual damages for any failure by
the Company to comply with the terms of this Note. No remedy conferred under
this Note upon the Lender is intended to be exclusive of any other remedy
available to the Lender, pursuant to the terms of this Note or otherwise. No
single or partial exercise by the Lender of any right, power or remedy
hereunder shall preclude any other or further exercise thereof. The failure
of the Lender to exercise any right or remedy under this Note or otherwise,
or delay in exercising such right or remedy, shall not operate as a waiver
thereof. Every right and remedy of the Lender under any document executed in
connection with this transaction may be exercised from time to time and as
often as may be deemed expedient by the Lender. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to the Lender and that the remedy at law for any such breach may be
inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Lender shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, and
specific performance without the necessity of showing economic loss and
without any bond or other security being required.
19. Governing Law; Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of New Jersey, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
New Jersey or any other jurisdictions) that would cause the application of
the laws of any jurisdictions other than the State of New Jersey. Each party
hereby irrevocably submits to the exclusive jurisdiction of the Superior
Court of the State of New Jersey sitting in ▇▇▇▇▇▇ County, New Jersey and the
United States Federal District Court for the District of New Jersey sitting
in Newark, New Jersey, for the adjudication of any dispute hereunder or in
5
connection herewith or therewith, or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
20. No Inconsistent Agreements. None of the parties hereto will hereafter
enter into any agreement, which is inconsistent with the rights granted to
the parties in this Note.
21. Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or entity, other than
the parties to this Note and their respective permitted successor and
assigns, any rights or remedies under or by reason of this Note.
22. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THE LENDER TO LOAN
TO THE COMPANY THE MONIES HEREUNDER, THE COMPANY HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS AGREEMENT
AND/OR ANY AND ALL OF THE OTHER DOCUMENTS ASSOCIATED WITH THIS TRANSACTION.
23. Entire Agreement. This Note (including any recitals hereto) set forth
the entire understanding of the parties with respect to the subject matter
hereof, and shall not be modified or affected by any offer, proposal,
statement or representation, oral or written, made by or for any party in
connection with the negotiation of the terms hereof, and may be modified only
by instruments signed by all of the parties hereto.
[REMAINDER OF PAGE INTENTIONALY LEFT BLANK]
6
IN WITNESS WHEREOF, this Promissory Note is executed by the undersigned as of
the date hereof.
CORNELL CAPITAL PARTNERS, LP
By: Yorkville Advisors, LLC
Its: General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Its: Portfolio Manager
SPEECH SWITCH, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: CEO
7
