Execution Copy
SECURITY AGREEMENT
This Security Agreement ("Agreement") dated as of February 24, 2004, by
and between Fonix Corporation, a Delaware corporation ("Fonix"), LTEL
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Fonix ("Debtor") and XxXxxxxxx Avenue Ltd., a British Virgin Islands corporation
("Secured Party").
Background
A. Secured Party has extended credit to Fonix as evidenced by that certain
Secured Note dated as of February 24, 2004 (as amended, restated, modified, or
replaced from time to time, the "Note"). Capitalized terms used, but not defined
herein, shall have the respective meanings set forth in the Note. As used
herein, property shall mean all personal and real property of every kind and
description (whether tangible or intangible) in which a person has any right,
title or interest.
B. Debtor and Fonix desire to grant to Secured Party security interests in the
property described herein to secure all of Fonix's obligations and undertakings
to Secured Party under the Note. Debtor is the direct or indirect owner of all
of the equity interest in LTEL Holdings Corporation, a Delaware corporation
("LTEL") and its subsidiaries (collectively the "Subsidiaries").
C. The extension of credit to Fonix by Secured Party is necessary for the
operation of the Debtor's business.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
SECTION 1 - SECURITY INTEREST
1.1 Description: As security for the payment of all obligations and
undertakings of every kind or nature whatsoever of Fonix to Secured Party,
whether now existing or hereafter incurred, matured or unmatured, direct or
indirect, primary or secondary, related or unrelated or due or to become due,
arising under the Note, and any extensions, modifications, substitutions,
increases and renewals thereof, and substitutions therefor; the payment of all
amounts advanced by Secured Party to preserve, protect, defend, and enforce its
rights hereunder and in the following property in accordance with the terms of
this Agreement; and the payment of all expenses incurred by Secured Party in
connection therewith (collectively the "Obligations"), Debtor hereby assigns and
grants to Secured Party a continuing lien on and security interest in, upon and
to the following property (the "Collateral"):
(a) Accounts, Contract Rights, Etc. - All of Debtor's now owned and
hereafter acquired, created, or arising accounts, accounts receivable,
notes receivable, contract rights, chattel paper, documents (including
documents of title), instruments, letters of credit and goods;
(b) Inventory - All of Debtor's now owned or hereafter acquired
inventory of every nature and kind, wherever located;
(c) General Intangibles - All of Debtor's now owned and hereafter
acquired, created or arising general intangibles of every kind and
description, including, but not limited, to all existing and future rights
to commissions, customer lists, choses in action, claims, books, records,
patents and patent applications, copyrights, trademarks, tradenames,
tradestyles, trademark applications, blueprints, drawings, designs and
plans, trade secrets, contracts, contract rights, license agreements,
formulae, tax and any other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies including
without limitation, credit insurance and key man life insurance policies,
and computer information, software, records and data;
(d) Equipment - All of Debtor's now owned and hereafter acquired
equipment, including, without limitation, machinery, vehicles, furniture
and fixtures, wherever located, and all replacements, parts, accessories,
substitutions and additions thereto;
(e) Deposit Accounts - All of Debtor's now existing and hereafter
acquired or arising deposit accounts of every nature, wherever located, and
all documents and records associated therewith;
(f) Property in Secured Party's Possession - All property of Debtor,
now or hereafter in Secured Party's possession;
(g) Investment Property - All of Debtor's now owned or hereafter
acquired investment property whether registered or unregistered;
(h) Goods - All of Debtor's now owned or hereafter acquired goods;
(i) Letter of Credit Rights - All of Debtor's now owned or hereafter,
letter of credit rights;
(j) Commercial Tort Claims - All of Debtor's commercial tort claims
against any party arising prior to, on or after the date hereof; and
(k) Proceeds - The proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the foregoing.
All terms defined in the Uniform Commercial Code as in effect
in the State of Delaware from time to time (the "UCC") and used herein shall
have the same definitions as specified in the UCC. However, if a term is defined
in Article 9 of the UCC differently than in another Article of the UCC, the term
has the meaning specified in Article 9.
1.2 Lien Documents: As Secured Party deems necessary, Debtor shall execute
and deliver to Secured Party, or have executed and delivered (all in form and
substance satisfactory to Secured Party), any agreements, documents, instruments
and writings, required to evidence, perfect or protect Secured Party's lien and
security interest in the Collateral required hereunder or as Secured Party may
request from time to time.
-2-
1.3 Other Actions:
(a) Secured Party is hereby authorized to file financing statements
and amendments to financing statements without Debtor's signature in
accordance with the UCC. Debtor hereby authorizes Secured Party to file all
financing statements and amendments to financing statements describing the
Collateral in any filing office as Secured Party, in its sole discretion
may determine, including financing statements listing "All Assets" in the
collateral description therein. Debtor agrees to comply with the
requirements of all state and federal laws and requests of Secured Party in
order for Secured Party to have and maintain a valid and perfected first
security interest in the Collateral including, without limitation,
executing such documents as Secured Party may require to obtain control (as
defined in the UCC) over all deposit accounts, letter of credit rights and
investment property.
(b) In addition to the foregoing, Debtor shall do anything further
that may be reasonably required by Secured Party to secure Secured Party
and effectuate the intentions and objects of this Agreement, including,
without limitation, the execution and delivery of security agreements,
contracts and any other documents required hereunder. At Secured Party's
request, Debtor shall also immediately deliver (with execution by Debtor of
all necessary documents or forms to reflect, implement or enforce the
security interest of Secured Party described herein) to Secured Party all
items of which Secured Party must receive possession to obtain a perfected
security interest, including without limitation, all notes, stock powers,
letters of credit, certificates and documents of title, chattel paper,
warehouse receipts, instruments, and any other similar instruments
constituting Collateral.
1.4 Filing Security Agreement: A carbon, photographic or other reproduction
or other copy of this Agreement or of a financing statement is sufficient as and
may be filed in lieu of a financing statement.
1.5 Landlord/Warehouseman Waiver: Debtor will use its best efforts to cause
each owner of any premises occupied by Debtor or to be occupied by Debtor and
each warehouseman of any warehouse, where, in either event, Collateral is held,
to execute and deliver to Secured Party an instrument, in form and substance
satisfactory to Secured Party, under which such owner(s) or warehouseman
subordinates its/his/their interests in and waives its/his/their right to
distrain on or foreclose against the Collateral and agrees to allow Secured
Party to remain on such premises to dispose of or deal with any Collateral
located thereon.
1.6 Power of Attorney: Each of the officers of Secured Party or its
representative is hereby irrevocably made, constituted and appointed the true
and lawful attorney for Debtor (without requiring it to act as such) with full
power of substitution to do the following: (a) if Debtor refuses or is unable
for more than three (3) business days after being requested to do so, execute,
in the name of Debtor, schedules, assignments, instruments, documents and
statements that Debtor is obligated to give Secured Party hereunder or that are
necessary to perfect (or continue to evidence the perfection of such security
interest); (b) during the continuance of an Event of Default, endorse the name
of Debtor upon any and all checks, drafts, money orders and other instruments
for the payment of monies that are payable to Debtor and constitute collections
on Debtor's accounts or other Collateral; and (c) during the continuance of any
Event of Default, do such other and further acts and deeds in the name of Debtor
that Secured Party, consistent with the requirements of the UCC, may reasonably
deem necessary or desirable to enforce any Account or other Collateral or
perfect Secured Party's security interest in the Collateral.
-3-
SECTION 2 - REPRESENTATIONS AND WARRANTIES
2.1 Debtor represents and warrants to Secured Party that:
(a) Organization - Debtor (i) is duly organized and validly existing
under the laws of its state of formation, (ii) has the power and authority
to operate its business and to own its property and (iii) is duly
qualified, is validly existing and in good standing and has lawful power
and authority to engage in the business it conducts in each state where the
nature and extent of its business requires qualification, except where any
such failure would not have a material adverse effect on the business,
operations or financial condition of Debtor.
(b) Non-Contravention - The making and performance of this Agreement
and other agreements executed in connection herewith will not (immediately,
with the passage of time or with the giving of notice or both):
(i) violate the certificate of organization or bylaws or
operating agreement, as applicable, of Debtor or result in a default
under any contract, agreement or instrument to which Debtor is a party
or by which Debtor or its property is or may be bound, or
(ii) result in the creation or imposition of any security
interest in, or lien or encumbrance upon, any of the assets of Debtor,
except such as are in favor of Secured Party.
(c) Power and Authority - Debtor has the power and authority to enter
into and perform this Agreement and to incur the obligations herein and
therein provided for, and has taken all proper and necessary action to
authorize the execution, delivery and performance of this Agreement.
(d) Enforceable - This Agreement is valid, binding and enforceable
against Debtor in accordance with its terms.
(e) Consents and Approvals - All necessary consents, approvals or
authorizations of, or filing, registration or qualification with, any
Person, required to be obtained by Debtor in connection with the execution
and delivery of this Agreement or the undertaking or performance of any
obligation hereunder has been obtained.
(f) Names and Intellectual Property
(i) For the past five (5) years, Debtor has not conducted
business under or used any other name;
(ii) Debtor is the sole owner or due licensee of all trademarks,
service marks, patents or copyrights which Debtor uses, plans to use
or has a right to use. Debtor is not in violation of any rights of any
other Person with respect to such property; and
(iii) Except for generally available, shrink-wrapped software
products, Debtor does not require any copyrights, patents, trademarks
or other intellectual property, or any license(s) to use any patents,
trademarks or other intellectual property in order to conduct its
-4-
operations in the ordinary course of business.
(g) Title - The Collateral is free and clear of any and all liens,
claims, encumbrances or security interests other than the Permitted Liens
(as defined below).
(h) Perfection - This Agreement is effective to create in favor of
Secured Party legal, valid and enforceable security interest in all right,
title and interest of Debtor in the Collateral, and when financing
statements and mortgages have been filed in the appropriate offices,
Secured Party will have a perfected security interest in the Collateral,
superior in right to any and all other liens, security interest or other
encumbrances existing or future, other than the security interest in favor
of Secured Party and Permitted Liens (as defined below).
(i) Commercial Tort Claims - Debtor is not a party to any commercial
tort claims.
SECTION 3 - COVENANTS
3.1 Debtor covenants that:
(a) Payment of Taxes and Claims - Debtor shall pay, before they become
delinquent,
(i) all taxes, assessments and governmental charges or levies
imposed upon it or upon Debtor's property after the date hereof, and
(ii) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons entitled to the benefit of
statutory or common law liens or other encumbrances, which, if unpaid,
would result in the imposition of a lien or other encumbrance upon its
property; provided, however, that Debtor shall not be required to pay
any such tax, assessment, charge, levy, claim or demand if the amount,
applicability or validity thereof shall at the time be contested in
good faith and by appropriate proceedings by Debtor, and if Debtor
shall have set aside on its books adequate reserves in respect
thereof, if so required in accordance with GAAP; which deferment of
payment is permissible so long as no lien or other encumbrance has
been entered and Debtor's title to, and its right to use, its property
are not materially adversely affected thereby.
(b) Property - Debtor shall maintain its property in its current
condition (normal wear and tear excepted) and make all necessary renewals,
replacements, additions, betterments and improvements thereto and will pay
and discharge when due the cost of repairs and maintenance to its property,
and will pay all rentals when due for all real estate leased by Debtor.
(c) Financial Records - Debtor shall keep current and accurate books
of records and accounts in which full and correct entries will be made of
all of its business transactions, and will reflect in its financial
statements adequate accruals and appropriations to reserves, all in
accordance with GAAP.
(d) Existence and Rights - Debtor shall do (or cause to be done) all
things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises. Debtor shall maintain any
-5-
and all licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its
businesses.
(e) Compliance with Laws - Debtor: (i) shall be in compliance with any
and all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal,
state or local, (including, without limitation, environmental laws) and
(ii) shall obtain any and all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or
to the conduct of its businesses. Debtor shall timely satisfy all
assessments, fines, costs and penalties imposed (after exhaustion of all
appeals, provided a stay has been put in effect during such appeal) by any
governmental authority against Debtor or any property of Debtor.
(f) Issue Taxes - Debtor shall pay all taxes (other than taxes based
upon or measured by any Secured Party's income or revenues or any personal
property tax), if any, in connection with the recording of any lien
documents. The obligations of Debtor hereunder shall survive the
termination of this Agreement.
(g) Merger, Consolidation, Dissolution or Liquidation - Debtor shall
not merge or consolidate with any other Person or commence a dissolution or
liquidation, except for the merger or consolidation of any of Debtor's
Subsidiaries with and into Debtor, or the merger or consolidation of Debtor
with and into Fonix. In the event of any such permitted merger or
consolidation, Debtor shall deliver to Secured Party: (i) notice thereof at
least five (5) days prior to the effective date of such event; and (ii) a
UCC-3 amendment reflecting any changes to the existing UCC financing
statement necessary in light of such transaction.
(h) Sale of Property - Debtor shall not engage in any sale of its
assets, except pursuant to a reorganization or consolidation of Debtor with
and into Fonix.
(i) Liens and Encumbrances - Debtor shall not: (i) execute a negative
pledge agreement with any Person covering any of its property or allow or
cause a negative pledge to exist with respect to any property of the
Subsidiaries, or (ii) cause or permit or agree or consent to cause or
permit in the future (upon the happening of a contingency or otherwise),
its property or property of the Subsidiaries (including, without
limitation, the Collateral), whether now owned or hereafter acquired, to be
subject to a lien, security interest or other claim or encumbrance except
for Permitted Liens. As used herein, "Permitted Liens" means: (x) liens
securing taxes, assessments or governmental charges or levies or the claims
or demands of materialmen, mechanics, carriers, warehousemen, landlords,
and other like persons, provided the payment thereof is not at the time
required by Section 3.1(a); (y) liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, social security and other like laws; and (z) those
liens, security interests or other encumbrances existing as of the date
hereof.
(j) Other Agreements - Debtor shall not become or be a party to any
contract or agreement which at the time of becoming a party to such
contract or agreement materially impairs Debtor's ability to perform under
this Agreement, or under any other instrument, agreement or document to
which Debtor is a party or by which it is or may be bound.
-6-
(k) Change of Location or Jurisdiction of Organization - Debtor agrees
that it shall not change its name or jurisdiction of organization without
ten (10) days' prior written notice to Secured Party and that if its
principal place of business changes from that indicated on the signature
page of this Agreement, Debtor will immediately notify the Secured Party in
writing of the additions or changes to the locations of the Collateral.
(l) Commercial Tort Claims: Debtor shall provide written notice to
Secured Party of any commercial tort claim to which Debtor is or becomes a
party or which otherwise inures to the benefit of Debtor. Such notice shall
contain a sufficient description of the commercial tort claim including the
parties, the court in which the claim was commenced (if applicable), the
docket number assigned to the case (if applicable) and an explanation of
the events giving rise to such claim. If requested by Secured Party, Debtor
shall grant Secured Party a security interest in such commercial tort claim
in which Debtor is plaintiff or cross-claimant as additional Collateral.
Debtor shall execute and deliver such instruments, documents and agreements
as Secured Party may require in order to obtain and perfect such security
interest including, without limitation, a security agreement or amendment
to any existing security agreement all in form and substance satisfactory
to Secured Party. Debtor authorizes Secured Party to file (without Debtor's
signature), financing statements or amendments to existing financing
statements as Secured Party deems necessary to perfect the security
interest.
SECTION 4 - DEFAULT
4.1 Events of Default: The occurrence of an Event of Default (as defined in
the Note) shall constitute an event of default ("Event of Default") hereunder
and Secured Party shall thereupon have the option to declare Debtor in default
under this Agreement, and declare all liabilities, indebtedness and obligations
of Debtor to Secured Party under this Agreement and the Note, whether matured or
contingent, immediately due and payable including, but not limited to, interest,
principal, expenses, advances to protect Secured Party's position and all of
Secured Party's rights hereunder and thereunder, all without demand, notice,
presentment or protest or further action of any kind.
4.2 Rights and Remedies on Default: In addition to all other rights,
options and remedies granted to Secured Party under this Agreement (each of
which is also then exercisable by Secured Party), Secured Party may, upon the
occurrence of an Event of Default, exercise any other rights granted to it under
the UCC and any other applicable law, including, without limitation, the
following rights and remedies:
(a) the right to take possession of, send notices, and collect
directly the Collateral, with or without judicial process (including,
without limitation the right to notify the United States postal authority
to redirect all mail addressed to Debtor to an address designated by
Secured Party);
(b) by its own means or with judicial assistance, enter Debtor's
premises and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and Debtor shall not resist or interfere
with such action; or
-7-
(c) require Debtor at Debtor's expense to assemble all or any part of the
Collateral and make it available to Secured Party at any place designated by
Secured Party.
Debtor hereby agrees that a notice received by it at least ten
(10) days before the time of any intended public sale or of the time after which
any private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable inventory or Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Secured Party without prior notice to Debtor. Debtor covenants
and agrees not to interfere with or impose any obstacle to Secured Party's
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder.
To the extent that applicable law imposes duties on Secured
Party to exercise remedies in a commercially reasonable manner, Debtor
acknowledges and agrees that it is not commercially unreasonable for Secured
Party (a) to fail to incur expenses reasonably deemed significant by the Secured
Party to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (b) to fail to obtain third party consents for access to Collateral
to be disposed of, or to obtain or, if not required by other law, to fail to
obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
remove liens, security interests or other encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (f) to contact other
persons, whether or not in the same business as Debtor, for expressions of
interest in acquiring all or any portion of the Collateral, (g) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (h) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (i) to dispose of assets
in wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure Secured Party against
risks of loss, collection or disposition of Collateral or to provide to Secured
Party a guaranteed return from the collection or disposition of Collateral, or
(l) to the extent deemed appropriate by Secured Party, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
Secured Party in the collection or disposition of any of the Collateral. Debtor
acknowledges that the purpose of this paragraph is to provide non-exhaustive
indications of what actions or omissions by Secured Party would not be
commercially unreasonable in Secured Party's exercise of remedies against the
Collateral and that other actions or omissions by Secured Party shall not be
deemed commercially unreasonable solely on account of not being indicated in
this paragraph. Without limitation upon the foregoing, nothing contained in this
paragraph shall be construed to grant any rights to Debtor or to impose any
duties on Secured Party that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this paragraph.
-8-
4.3 Nature of Remedies: Secured Party shall have the right to proceed
against all or any portion of the Collateral in any order and may apply such
Collateral to the liabilities and obligations of Debtor to Secured Party in any
order. All rights and remedies granted Secured Party hereunder and under any
agreement referred to herein, or otherwise available at law or in equity, shall
be deemed concurrent and cumulative, and not alternative remedies, and Secured
Party may proceed with any number of remedies at the same time until all
existing and future liabilities and obligations of Debtor to Secured Party, are
satisfied in full. The exercise of any one right or remedy shall not be deemed a
waiver or release of any other right or remedy, and Secured Party, upon the
occurrence of an Event of Default, may proceed against Debtor, and/or the
Collateral, at any time, under any agreement, with any available remedy and in
any order.
SECTION 5 - MISCELLANEOUS
5.1 Governing Law: This Agreement, and all related agreements and
documents, and all matters arising hereunder or related hereto, shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to its otherwise applicable principles of conflicts of laws. The
provisions of this Agreement and other agreements and documents referred to
herein are to be deemed severable, and the invalidity or unenforceability of any
provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.
5.2 Waiver:
(a) No omission or delay by Secured Party in exercising any right or
power under this Agreement or any other document will impair such right or
power or be construed to be a waiver of any default, or Event of Default or
an acquiescence therein, and any single or partial exercise of any such
right or power will not preclude other or further exercise thereof or the
exercise of any other right, and no waiver of Secured Party's rights
hereunder will be valid unless in writing and signed by Secured Party, and
then only to the extent specified.
(b) Debtor releases Secured Party, its agents, administrators and
executors, its officers, employees and agents, of and from any claims for
loss or damage resulting from acts or conduct of any or all of them arising
through the date hereof, unless caused solely by willful misconduct or
gross negligence.
5.3 Modification: No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed on behalf of
the party against whom enforcement is sought.
5.4 Signatories: Each individual signatory hereto represents and warrants
that he is duly authorized to execute this Agreement on behalf of his principal
and that he executes the Agreement in such capacity and not as a party.
5.5 Successors and Assigns: All provisions herein shall inure to, become
binding upon the successors, representatives, trustees, administrators,
executors, heirs and assigns of the parties hereto.
-9-
5.6 Consent to Jurisdiction: Debtor irrevocably consents to the
jurisdiction of the Courts of the State of Delaware or the United States
District Court for the District of Delaware in any and all actions and
proceedings whether arising hereunder or under any other agreement or
undertaking and irrevocably agrees to service of process to the address of
Debtor set forth herein by certified mail, return receipt requested.
5.7 Waiver of Jury Trial: Debtor and Secured Party hereby waive any and all
rights any may have to a jury trial in connection with any litigation commenced
by or against Secured Party with respect to rights and obligations of the
parties hereto.
5.8 No Marshalling. Secured Party shall not be required to marshal any
present or future collateral security (including but not limited to this
Agreement and the Collateral) for, or other assurances of payment of, the
obligations (or any of them) secured hereunder or to resort to such collateral
security or other assurances of payment in any particular order, and all of its
rights hereunder and in respect of such collateral security and other assurances
of payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that it lawfully may, Debtor hereby agrees
that it will not invoke any law relating to the marshalling of collateral which
might cause delay in or impede the enforcement of Secured Party's rights under
this Agreement or under any other instrument creating or evidencing any of the
obligations secured hereunder or under which any of such obligations is
outstanding or by which any of such obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, Debtor hereby
irrevocably waives the benefits of all such laws.
5.9 Notices. All communications which any party may provide to any other
herein shall be sent in the manner set forth in the Exchange Agreement, If to
Debtor at 0000 Xxxxx 000 Xxxx, Xxxxx 000, Xxxxx, Xxxx 00000, Fax: 801-553- 6707,
Attn: President, and with a copy to Xxxxxxx X. Xxxxx, Xxxxxx Xxxxx & Xxxxxxx,
000 Xxxx Xxxxxxxx, Xxxxx 000, Xxxx Xxxx Xxxx, Xxxx 00000, Fax: 000-000-0000.
[SIGNATURES TO FOLLOW ON NEXT PAGE]
-10-
IN WITNESS WHEREOF, the undersigned parties have executed this
Agreement the day and year first above written.
LTEL ACQUISITION CORPORATION,
a Delaware corporation
By:
------------------------------------------
Xxxxxx X. Xxxxxxx, President
Acknowledged and Accepted:
XXXXXXXXX AVENUE LTD.
By:
--------------------------------------------------
Name/Title:
------------------------------------------
FONIX CORPORATION
By:
--------------------------------------------------
Xxxxxx X. Xxxxxxx, President
