LOAN AND SECURITY AGREEMENT
Dated March , 1998
by and between
NETCO ACQUISITION CORP.
as Borrower
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(Federal Tax ID No. of Borrower)
and
FINOVA CAPITAL CORPORATION
as Lender
$6,050,000
Amount of Loan
COMMERCIAL EQUIPMENT FINANCE
LOAN AND SECURITY AGREEMENT
AGREEMENT, dated as of March , 1998, by and between NETCO ACQUISITION
CORP., a Delaware corporation ("BORROWER"), having its principal place of
business at EqualNet Plaza, 0000 Xxxx Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxx
00000-0000; and FINOVA CAPITAL CORPORATION, a Delaware corporation ("LENDER"),
having a place of business at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000.
W I T N E S S E T H :
WHEREAS, Borrower has requested Lender to make a loan to Borrower and
Lender is willing to make such loan to Borrower upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto covenant and agree as follows:
ARTICLE 2. DEFINITIONS; CONSTRUCTION
2.1 DEFINITIONS.
In addition to other words and terms defined elsewhere in this Agreement
(including the Schedule), as used herein the following words and terms have the
following meanings, respectively, unless the context hereof otherwise clearly
requires:
"AGREEMENT" means this Loan and Security Agreement (including the
Schedules) as amended, modified or supplemented from time to time.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which banking institutions are authorized or obligated to close in New Jersey or
Arizona.
"CLOSING DATE" means the date on which the parties enter into this
Agreement.
"COLLATERAL" means all assets of Borrower in which Borrower has granted or
will xxxxx x Xxxx to Lender, pursuant to this Agreement or otherwise, including
those assets described and defined as Collateral in Section 3.1.
"CONSTITUENT DOCUMENTS" means the certificate of incorporation, agreement
of partnership or limited partnership, organizational agreement, operating
agreement, by-laws, or such other similar document pursuant to which Borrower
and/or the Guarantors were organized or their affairs are governed.
"CORPORATE GUARANTOR(S)" means the "Corporate Guarantor(s)" defined on
the Schedule.
"DEFAULT" means an event which with notice or lapse of time, or both,
would constitute an Event of Default.
"DISBURSEMENT DATE" means the date on which all conditions to the Loan are
satisfied by Borrower (which shall not be later than the Outside Date) and the
Loan proceeds are disbursed to Borrower or to other Persons at Borrower's
direction.
"EQ ACQUISITION" means EQ Acquisition Sub, Inc., a Delaware corporation
and, prior to its merger into Borrower (which is one of the conditions to the
Loan), a wholly owned subsidiary of EqualNet Holding.
"EQUALNET CORPORATION" means EqualNet Corporation, a Delaware corporation,
a wholly owned subsidiary of EqualNet Holding and an affiliate of Borrower.
EqualNet Corporation is also a Corporate Guarantor.
"EQUALNET HOLDING" means EqualNet Holding Corp., a Texas corporation and
the owner of all of the issued and outstanding stock of Borrower.
EqualNet Holding is also a Guarantor.
"EQUIPMENT" means the telecommunication
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equipment and other machinery, equipment and assets described or listed on
Exhibit B annexed hereto, together with all parts, components, attachments,
accessories, accessions, additions, improvements and upgrades now or hereafter
to, of or for the Equipment or any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EVENT OF DEFAULT" means any of the Events of Default described in
Section 7.1 hereof.
"EXECUTIVE OFFICER" means the President, the Chief Executive Officer,
Chief Operating Officer or the Chief Financial Officer of Borrower elected
from time to time.
"GAAP" means generally accepted accounting principles in the United States
of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application in which Borrower's
independent certified public accountants concur), applied both to classification
of items and amounts.
"GUARANTY(IES)" means the unconditional Guarantees of the due payment and
performance of all of the Obligations of Borrower to Lender, executed by each of
the Guarantors, in form and substance satisfactory to Lender.
"GUARANTOR(S)" means the "Guarantor(s)" defined on the Schedule.
"INDIVIDUAL GUARANTOR" means the "Individual Guarantor" defined on the
Schedule.
"INTEREST RATE" means the "Interest Rate" defined on the Schedule.
"LAW" means any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
government or governmental agency.
"LEASE" means that certain agreement for the lease of the Equipment as
described in the Schedule.
"LEGAL REQUIREMENTS" means any and all present and future judicial, and
administrative rulings or decisions, and any and all present and future federal,
state, and local laws, ordinances, rules, regulations, permits and certificates,
in each case, in any way applicable to Borrower (or the ownership or use of the
Collateral or its other assets) and/or the Guarantors, or this transaction.
"LIEN" means any pledge, lien, mortgage, security interest (including
without limitation any conditional sale or other title retention agreement),
grant of a leasehold, charge or other encumbrance of any nature whatsoever, and
also means the filing of or the agreement to give any financing statement or
analogous document under the UCC or analogous law of any jurisdiction.
"LOAN" has the meaning given to such term in Section 2.1 hereof.
"LOAN DOCUMENTS" means this Agreement, the Note, the Guaranties, the
Insurance Letter, the Environmental Certificate with Representations, Covenants
and Warranties, the Environmental Questionnaire and Disclosure Statement and any
other agreements, instruments and documents required to be, or which are,
executed by Borrower or the Guarantors in connection with this Agreement or the
Loan (as the same may from time to time be amended, modified or supplemented).
"MATURITY DATE" means the "Maturity Date" defined on the Schedule.
"MCM" means MCM Partners, a Washington general partnership.
"MERGER AGREEMENT" means the Agreement of Merger and Plan of
Reorganization dated as of December 2, 1997 among EqualNet Holding, EQ
Acquisition, Netco LLC and Borrower, as amended by Amendment to Agreement of
Merger and Plan of Reorganization dated as of December 19, 1997 among EqualNet
Holding, EQ Acquisition, Netco LLC, Borrower, Xxxxxx Group, MCM and Advantage
Fund, Ltd., and Amendment to Agreement of Merger and Plan of Reorganization
dated February 12, 1998 pursuant to which, among other things, EQ Acquisition is
merging with and into Borrower and not less than $1,500,000 of indebtedness of
Netco LLC to Xxxxxx Group and MCM (being the Additional Working Capital Loans
and the Working Capital Loans defined in the
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Merger Agreement) is being cancelled and converted into common stock of Equal
Net Holding.
"NETCO LLC" means Netco Acquisition LLC, a Delaware limited liability
company.
"NOTE" means the promissory note of Borrower executed and delivered by
Borrower under this Agreement, in substantially the form annexed hereto as
Exhibit A with the blanks appropriately filled in.
"OBLIGATIONS" means all of the indebtedness, liabilities and obligations
of every kind and nature of Borrower to Lender, whether now existing or
hereafter arising, whether or not currently contemplated, howsoever arising,
including, without limitation, all indebtedness, liabilities and obligations
arising under, in connection with or evidenced by this Agreement, the Note, the
other Loan Documents, or otherwise.
"OFFICE", when used in connection with Lender, means its office located at
000 Xxxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000, or such other office of Lender
as may be designated in writing from time to time by Lender to Borrower.
"OUTSIDE DATE" means the "Outside Date" defined on the Schedule.
"PERSON" means an individual, corporation, national banking association,
partnership, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), governmental authority
or agency, or any other entity.
"PLAN" means any employee benefit plan which is covered by ERISA and which
is maintained by Borrower or, in the case of a plan to which more than one
employer contributes, to which Borrower made contributions at any time within
the five plan years preceding the date of termination.
"PREMISES" means the locations listed on Exhibit C annexed hereto.
"SCHEDULE" means the Schedule annexed to this Agreement and made a part
hereof. The Schedule is an integral part of this Agreement. All references to
Athis Agreement@, "herein", "herewith", "hereunder" and "hereof" and words of
similar import shall for all purposes be deemed to include the Schedule.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated
December 2, 1997 between Xxxxxx Group and EqualNet Holding, as amended by
Amendment to Stock Purchase Agreement dated as of December 19, 1997 between
Xxxxxx Group and EqualNet Holding, pursuant to which, among other things, Xxxxxx
Group is purchasing common stock of EqualNet Holding for a cash purchase price
of $4,000,000.
"SWITCH AGREEMENT" means the Switch Agreement dated as of December 2, 1997
among EqualNet Holding, EQ Acquisition and Xxxxxx Group, as amended by Amendment
to Switch Agreement dated February 12, 1998 among EqualNet Holding, EQ
Acquisition and Xxxxxx Group, pursuant to which, among other things, Xxxxxx
Group agrees to sell the Equipment to EQ Acquisition and EQ Acquisition agrees
to purchase the Equipment from Xxxxxx Group. All of the rights and obligations
of EQ Acquisition under the Switch Agreement was assumed by Borrower upon
consummation of the Merger Agreement.
"TERM" means the period beginning on the first payment date following the
Disbursement Date and ending on the Maturity Date.
"UCC" means the Uniform Commercial Code as adopted in the State of
Arizona.
"XXXXXX GROUP" means Xxxxxx Group, LLC, a Texas limited liability company.
2.2 GENERAL INTERPRETIVE PRINCIPLES.
For purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires:
(i) any pronoun used shall be deemed to cover both gender
forms as well as the neuter form;
(ii) all references to the plural shall include the singular,
the singular the plural and the part the whole;
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(iii) the word "or" has the inclusive meaning frequently
identified by the phrase "and/or";
(iv) accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(v) the words "herein", "herewith", "hereunder" and "hereof"
and similar terms in this Agreement refer to this Agreement as a whole and not
to any particular provision of this Agreement;
(vi) references herein to "Articles", "Sections",
"Subsections", "Paragraphs", and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(vii) a reference to a Subsection without further reference to
a Section is a reference to such Subsection as contained in the same Section in
which the reference appears, and this rule shall also apply to Paragraphs and
other subdivisions;
(viii) the term "include" or "including" shall mean, without
limitation, by reason of enumeration; and
(ix) the term "satisfactory to Lender" or "satisfaction of
Lender" or "satisfactory to counsel" or "satisfaction of counsel" or other
similar terms means satisfactory to Lender or its counsel in its sole and
absolute discretion.
ARTICLE 3. THE LOAN
3.1 THE LOAN.
Subject to the terms and conditions and relying upon the representations
and warranties herein set forth, including, without limitation, the fulfillment
of each and every condition of lending, Lender agrees to make a Loan to Borrower
in the principal amount set forth on the Schedule (the "Loan").
3.2 USE OF PROCEEDS.
The proceeds of the Loan shall be used by Borrower solely for the purposes
set forth on the Schedule.
3.3 THE NOTE.
The obligation of Borrower to repay the Loan and to pay interest thereon
shall be evidenced by the Note. The Note shall be dated the Closing Date and
shall be executed by Borrower delivered to Lender on the Closing Date.
3.4 DISBURSEMENT.
Subject to the conditions set forth herein, Lender shall, on the
Disbursement Date, credit, by wire transfer, the amount of the Loan to the
account of Borrower or the Person or Persons specified in writing by Borrower.
3.5 LOAN ACCOUNT.
Lender shall maintain a loan account on its books in the name of Borrower
for the Loan in which will be recorded all payments of principal thereof and all
accruals and payments of interest thereon. The entries in the loan account (in
the absence of manifest error in the making thereof) shall be conclusive
evidence of the outstanding principal thereof and accrued interest thereon from
time to time. Lender shall provide Borrower with statements of said account from
time to time on request.
3.6 INTEREST RATES.
3.6.1 INTEREST PRIOR TO MATURITY. Prior to maturity (whether by
acceleration or otherwise) the unpaid principal amount of the Loan shall bear
interest at the Interest Rate.
3.6.2 INTEREST AFTER MATURITY. Commencing with the day after the
principal amount of any part of the Loan shall have become due and payable (by
acceleration or otherwise), such part of the Loan or the entire Loan (as the
case may be) shall bear interest at the daily rate of four percent (4%) per
annum above the Interest Rate (the "Default Rate").
3.6.3 MAXIMUM RATE. Lender
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and Borrower intend the Loan Documents to comply in all respects with all
provisions of Law and not to violate, in any way, any legal limitations on
interest charges. Accordingly, if, for any reason, Borrower is required to pay,
or has paid, interest at a rate in excess of the highest rate of interest which
may be charged by Lender or which Borrower may legally contract to pay under
applicable law (the "Maximum Rate"), then the Interest Rate shall be deemed to
be reduced, automatically and immediately, to the Maximum Rate, and interest
payable hereunder shall be computed and paid at the Maximum Rate and the portion
of all prior payments of interest in excess of the Maximum Rate shall be deemed
to have been prepayments of the outstanding principal of the Loan and applied to
the installments in the inverse order of their maturities.
3.7 PAYMENTS.
3.7.1 TIME; PLACE; MANNER. All payments to be made in respect of
principal, interest, or other amounts due from Borrower hereunder or under the
Note shall become due at 12:00 o'clock noon, New Jersey time, on the day when
due without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived. Such payments shall be made to Lender in lawful money
of the United States of America in immediately available funds.
3.7.2 PAYMENTS OF PRINCIPAL AND INTEREST. The Loan, together with
interest thereon shall be repaid by Borrower to Lender in the amounts and on the
dates and as otherwise set forth on the Schedule.
3.7.3 APPLICATION OF PAYMENTS. Each payment under this Agreement and
the other Loan Documents shall be applied, first to fees, costs, expenses and
charges, if any, owing to Lender, then to interest as may be due hereunder, and
the balance of such payment shall be applied to the principal balance of the
Loan.
3.7.4 NET PAYMENTS. All payments hereunder and under the Note shall
be made by Borrower to Lender without defense, set-off, claim or counterclaim
and without deduction for any present or future income, stamp or other taxes,
levies, imposts, deductions, charges or withholdings whatsoever imposed,
assessed, levied or collected by or for the benefit of any jurisdiction or
taxing authority. In addition, Borrower shall pay any and all taxes (stamp or
otherwise) payable or determined to be payable in connection with the execution
and delivery of this Agreement, the Note and the other Loan Documents and on all
payments to be made by Borrower hereunder and under the Note and the other Loan
Documents (other than Lender's income taxes) and all taxes payable in connection
with or related to the Collateral.
3.8 PREPAYMENTS.
The Loan may be prepaid only as set forth on the Schedule.
3.9 ADMINISTRATIVE COSTS.
If Borrower shall fail to make any payment of principal or interest within
ten (10) days after the same is due, Borrower shall pay a late charge of five
percent (5%) of the unpaid amounts, but in no event greater than the maximum
rate permitted by law, and such amount shall be payable upon demand. Such
payment is not interest for the use of money, but is solely to cover Lender's
administrative costs occasioned by such delay.
ARTICLE 4. SECURITY
4.1 SECURITY.
As security for the full and timely payment and performance of all of the
Obligations of Borrower to Lender, Borrower hereby assigns, pledges, transfers
and sets over to Lender, and hereby agrees that Lender shall have, and hereby
grants to and creates in favor of Lender, a first security interest under the
UCC subject to no other Liens, in and to the following, in each case, whether
now existing or hereafter arising, now owned or hereafter acquired, wherever
located:
4.1.1 The Equipment;
4.1.2 All Software, now or hereafter used in, for, with respect to
or in connection with the use or operation of the Equipment; including Software
that has been licensed by Siemens for Call processing, maintenance and
administration and user data base management; and
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4.1.3 The Lease and all of the lease, rental and other payments and
amounts thereunder and all of Borrowers right, title and interest therein.
4.1.4 All accessions and additions thereto, substitutions for, and
all replacements of, any and all of the foregoing, and all proceeds of the
foregoing, cash and non-cash, including insurance proceeds.
4.2 LENDER HAS RIGHTS AND REMEDIES OF A SECURED PARTY.
In addition to all rights and remedies given to Lender by this Agreement,
Lender shall have all the rights and remedies of a secured party under the UCC.
4.3 ADDITIONAL PROVISIONS APPLICABLE TO THE COLLATERAL.
The parties agree that, at all times during the term of this Agreement,
the following provisions shall be applicable to the Collateral:
4.3.1 Borrower covenants and agrees that it will keep accurate and
complete books and records concerning the Collateral owned or acquired by it in
accordance with GAAP.
4.3.2 Lender shall have the right to review the books and records of
Borrower pertaining to the Collateral and to copy the same and to make excerpts
therefrom, all at such reasonable times upon reasonable notice and as often as
Lender may reasonably request.
4.3.3 Borrower shall maintain and keep its principal place of
business and its chief executive office at the address set forth at the
beginning of this Agreement, and at no other location without giving Lender at
least thirty (30) days prior written notice of any move. Borrower shall maintain
and keep its records concerning the Collateral at such address and at no other
location without giving Lender at least thirty (30) days prior written notice of
any move. Borrower shall keep all Collateral only at the Premises at which it is
presently located. Borrower may not move the Collateral without the prior
written consent of Lender.
4.3.4 Except for Liens granted to Lender hereunder and pursuant to
the Lease, Borrower shall not sell, lease, transfer or otherwise dispose of or
encumber any of the Collateral.
4.3.5 Borrower shall cause the Collateral to be maintained and
preserved in the same condition, repair and working order as when acquired by
Borrower, ordinary wear and tear excepted, and shall promptly make or cause to
be made all repairs, replacements and other improvements in connection therewith
which are necessary or desirable to that end.
4.3.6 Borrower shall not affix or permit the Collateral to become
affixed to real estate or to any other goods, and such Collateral shall remain
personal property, whether or not so affixed.
4.4 CERTAIN COVENANTS.
Borrower covenants and agrees with Lender for the benefit of Lender that:
4.4.1 Borrower has and will have good and merchantable title to all
of its assets, including the Collateral, in each case as from time to time owned
or acquired by it, and shall keep the Collateral free and clear of all Liens,
other than those granted to Lender and those pursuant to the Lease. Borrower
will defend such title against the claims and demands of all Persons whomsoever.
4.4.2 Borrower will faithfully preserve and protect Lender's Liens
in the Collateral and will, at its own cost and expense, cause said Liens to be
perfected and continued perfected, and for such purpose Borrower will from time
to time at the request of Lender and at the expense of Borrower, make, execute,
acknowledge and deliver, and file or record, or cause to be filed or recorded,
in the proper filing places, all such instruments, documents and notices,
including without limitation financing statements and continuation statements,
as Lender may deem necessary or advisable from time to time in order to perfect
and continue perfected said security interest. Borrower will do all such other
acts and things and make, execute, acknowledge and deliver all such other
instruments and documents, including without limitation further
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security agreements, pledges, endorsements, assignments and notices, as Lender
may deem necessary or advisable from time to time in order to perfect and
preserve the priority of said Liens as a first and only Lien on and security
interest in the Collateral prior to the rights of all other Persons therein or
thereto.
4.4.3 Borrower will not, without the prior written consent of
Lender, (i) borrow or permit any Person to borrow against the Collateral other
than the Loan to Borrower from Lender pursuant to this Agreement; (ii) create,
incur, assume or suffer to exist any Lien with respect to any of the Collateral
except as provided herein or pursuant to the Lease; (iii)
permit any levy or attachment to be made against any of the Collateral except
any levy or attachment relating to this Agreement; or (iv) permit any financing
statement to be on file with respect to any of the Collateral, except financing
statements in favor of Lender.
4.4.4 Risk of loss of, damage to or destruction of the Collateral is
and shall remain upon Borrower. Borrower will insure the Collateral as provided
in Section 6.3 of this Agreement. If Borrower fails to effect and keep in full
force and effect such insurance or fails to pay the premiums thereon when due,
Lender may do so for the account of Borrower and add the cost thereof to the
Obligations and the same shall be payable to Lender on demand. Borrower hereby
assigns and sets over unto Lender for the benefit of Lender all moneys which may
become payable on account of such insurance, including without limitation any
return of unearned premiums which may be due upon cancellation of any such
insurance, and directs the insurers to pay Lender any amount so due. Lender, its
officers, employees and authorized agents and its successors and assigns, are
hereby appointed attorneys-in-fact of Borrower, for the purpose of endorsing any
draft or check which may be payable to Borrower in order to collect the proceeds
of such insurance or any return of unearned premiums. Such appointment is
irrevocable and coupled with an interest. The proceeds of insurance shall be
applied to reduction of the Obligations in the manner set forth in Section 2.7.3
or, in Lender's sole discretion, to the repair or replacement of the Collateral,
or any part thereof, in which case Lender may impose such conditions on the
disbursement of the proceeds as Lender in its sole discretion deems appropriate.
4.4.5 Upon the occurrence and during the continuation or existence
of any Event of Default, Borrower shall promptly upon demand by Lender assemble
the Collateral and make it available to Lender at the place or places to be
designated by Lender. The right of Lender to have the Collateral assembled and
made available to it is of the essence of this Agreement and Lender may, at its
election, enforce such right in equity for specific performance.
4.4.6 Lender shall have no duty as to the collection or protection
of the Collateral or any part thereof or any income thereon, or as to the
preservation of any rights pertaining thereto, beyond exercising reasonable care
in the custody of any Collateral actually in the possession of Lender. Lender
shall be deemed to have exercised reasonable care in the custody and
preservation of such of the Collateral as may be in its possession if it takes
such action for that purpose as Borrower shall request in writing, provided that
such requested action shall not, in the judgment of Lender, impair Lender's
security interest in the Collateral or its rights in, or the value of, the
Collateral, and provided further that such written request is received by Lender
in sufficient time to permit it to take the requested action.
ARTICLE 5. CONDITIONS OF CLOSING
The obligation of Lender to make the Loan hereunder is subject to the
accuracy, as of the date hereof and the Disbursement Date, of the
representations and warranties herein contained, to the performance by Borrower
of its obligations to be performed hereunder on or before such Disbursement Date
and to the fulfillment (to the satisfaction of Lender and its counsel) of the
following further conditions. If all conditions contained herein are not so
satisfied by the Outside Date, Lender shall have no obligation whatsoever to
make the Loan and shall have no liability for its refusal to do so.
5.1 REPRESENTATIONS AND WARRANTIES.
The representations and warranties contained in Article 5 hereof shall be
true on the
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Closing Date and on and as of the Disbursement Date with the same effect as if
made on and as of such date.
5.2 CORPORATE ACTION.
On the Closing Date, Borrower shall deliver to Lender a certificate in
form and substance satisfactory to Lender, dated the Closing Date, signed by a
duly authorized officer of Borrower and the Corporate Guarantors, as the case
may be, certifying as to (a) true copies of the Constituent Documents of
Borrower and the Corporate Guarantors, all as in effect on such date, (b) true
copies of all action taken by Borrower and the Corporate Guarantors relative to
this Agreement, the Note and the other Loan Documents, and (c) the names, true
signatures and incumbency of the officer or officers of Borrower and the
Corporate Guarantors authorized to execute and deliver this Agreement, the Note
and the other Loan Documents on behalf of Borrower and the Corporate Guarantors
(and Lender may conclusively rely on such certificate unless and until a later
certificate revising the prior certificate has been furnished to Lender).
Borrower shall also deliver to Lender good standing certificates for Borrower
and the Corporate Guarantors issued by the Secretary of State of its State of
incorporation and each state listed in the Schedule.
5.3 OPINION OF COUNSEL.
On the Closing Date, Lender shall have received a favorable written
opinion of counsel for Borrower and the Guarantors, dated the Closing Date and
in form and substance satisfactory to Lender and its counsel, Xxxxxx & Rich,
P.C.
5.4 NO CHANGE OF LAW OR FACTS.
No change shall have occurred after the date of execution and delivery of
this Agreement in applicable Law or regulations thereunder or interpretations
thereof by appropriate regulatory authorities which, in the opinion of Lender or
its counsel, would make it illegal for Lender to acquire the Note, make the
Loan, or otherwise to participate in the Loan, nor shall any facts come to the
attention of Lender, concerning Borrower, its business or financial condition
which, in the opinion of Lender would increase the risk to Lender of repayment
of the Loan by Borrower.
5.5 DOCUMENTS.
The following documents shall have been duly authorized, executed and
delivered by the respective party or parties thereto, shall be in form and
substance satisfactory to Lender and its counsel and shall be in full force and
effect on the Closing Date and on the Disbursement Date, and an executed
counterpart of each thereof shall have been delivered to Lender and its counsel:
5.5.1 this Agreement;
5.5.2 the Note;
5.5.3 the Guaranties;
5.5.4 insurance certificates or policies of insurance evidencing the
coverages required by Section 6.3 hereof;
5.5.5 an agreement with respect to certain environmental matters
(the"Environmental Certificate with Representations, Covenants and Warranties")
and a questionnaire and disclosure statement with respect to such environmental
matters (the "Environmental Questionnaire and Disclosure Statement");
5.5.6 the Schedule, whose terms and conditions are incorporated in
this Agreement as if fully stated in this Agreement; and
5.5.7 other Loan Documents, if any.
5.6 COLLATERAL.
Borrower shall provide to Lender a complete description of the Collateral,
together with evidence, in form and substance satisfactory to Lender in its sole
discretion, that Borrower owns legal title to the Collateral, free and clear of
all Liens, except for Liens held by Lender.
5.7 FINANCING STATEMENTS.
On the Closing Date, UCC financing statements covering the security
interest created by this Agreement in the Collateral shall have been
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duly filed in the office of the Secretary of State of each State where the
Collateral is located and in all other places as, in the opinion of Lender, or
its counsel, are necessary or desirable to perfect such Liens, and Lender shall
have been granted a perfected first and only Lien covering the Collateral.
5.8 LICENSES AND PERMITS.
All appropriate action shall have been taken prior to the Closing Date in
order to permit consummation of the transactions contemplated herein and hereby
and enforcement of all of the terms hereof and thereof, and all licenses,
permits, waivers, exemptions, authorizations and approvals required (or, in the
opinion of Lender or its counsel, advisable) to be in effect on the Closing Date
shall have been issued and shall be in full force and effect on such date, and
copies thereof shall have been delivered to Lender.
5.9 ADDITIONAL CONDITIONS.
5.9.1 Lender shall have received all other agreements, instruments,
financing statements, certificates, waivers, searches, releases, terminations,
reports, confirmations, corporate or other action, opinion letters, copies of
acquisition documents, copies of all leases, evidence of delivery and acceptance
of the Collateral, evidence of performance of work, evidence of payment of
obligations, agreements with suppliers and contractors, evidence of ownership of
the Collateral and other documents as Lender or its counsel shall have requested
(each in form and substance satisfactory to Lender and its counsel), including,
without limitation, certificates of incorporation and by-laws, UCC-1 financing
statements, lien waivers, credit references, consents, approvals, authorization
to date documents, casualty and liability insurance policies and endorsements
related to such insurance, satisfactory environmental audits and other
environmental information and certificates, appraisals, surveys and financial
statements and other financial information.
5.9.2 Lender shall have completed its environmental due diligence.
5.9.3 After giving effect to the Loan, there shall be no Default or
Event of Default hereunder or under the other Loan Documents.
5.9.4 All legal matters incident to the Loan shall be satisfactory
to Lender and its counsel.
5.9.5 All additional conditions set forth on the Schedule shall have
been satisfied, true and in full force and effect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender that:
6.1 ORGANIZATION AND QUALIFICATION.
Borrower is duly organized, validly existing and in good standing as a
corporation under the Laws of the State set forth on the Schedule with full
power and authority to own its properties and to transact its business as now
transacted and as contemplated to be transacted. Borrower is qualified and in
good standing to transact business in each jurisdiction set forth on the
Schedule, which are all of the jurisdictions where the ownership of its
properties or the transaction of its business requires such qualification. Each
Corporate Guarantor is duly organized, validly existing and in good standing as
a corporation under the Laws of the State set forth on the Schedule with full
power and authority to own its properties and to transact its business as now
transacted and as contemplated to be transacted. Each Corporate Guarantor is
qualified and in good standing to transact business in each State set forth on
the Schedule, and in all other jurisdictions where the ownership of its
properties or the transaction of its business requires such qualification,
except where the failure to so qualify would not have a material adverse effect
on that business or operations thereof.
6.2 AUTHORITY AND AUTHORIZATION.
Borrower has full power and authority to execute, deliver and carry out
the provisions of this Agreement, the Note and the other Loan Documents to which
it is a party, to borrow hereunder and under the other Loan Documents and to
create the Liens provided for herein, and to perform its obligations hereunder
and thereunder, and all such action has been duly and validly authorized by all
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necessary proceedings on its part. Each Corporate Guarantor has full power and
authority to execute, deliver and carry out the provisions of its Guaranty and
the other Loan Documents to which it is a party and to perform its obligations
thereunder, and all such action has been duly and validly authorized by all
necessary proceedings on its part.
6.3 EXECUTION AND BINDING EFFECT.
This Agreement, the Note and the other Loan Documents to which Borrower is
a party have been duly and validly executed and delivered by Borrower and
constitute the legal, valid and binding obligation of Borrower enforceable in
accordance with their respective terms. The Guaranties and the other Loan
Documents to which the Guarantors are parties have been duly and validly
executed and delivered by the Guarantors and each constitutes the legal, valid
and binding obligation of the Guarantor executing the same, enforceable in
accordance with their respective terms.
6.4 AUTHORIZATIONS AND FILINGS.
Except for the filing of UCC financing statements, no authorization,
consent, approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any governmental
authority is or will be necessary or advisable in connection with the execution
and delivery of this Agreement, the Note, the Guaranties, the other Loan
Documents or the consummation by Borrower and the Guarantors of the transactions
herein and therein contemplated, or performance by Borrower and the Guarantors
of or compliance by Borrower and the Guarantors with, the terms and conditions
hereof or thereof.
6.5 ABSENCE OF CONFLICTS.
Neither the execution and delivery of this Agreement, the Note, the
Guaranties or the other Loan Documents, nor consummation of the transactions
herein or therein contemplated nor performance of, or compliance with the terms
and conditions hereof or thereof will (a) result in any violation or breach of
(i) the provisions of Borrower's or the Corporate Guarantors' Constituent
Documents, or (ii) any Law, or the order, rule or regulation of any court or
governmental agency or body having jurisdiction over Borrower or any Guarantor,
or any of their respective properties, or (iii) any agreement, bond, note,
instrument or indenture to which Borrower or any Guarantor is a party or
pursuant to which any of their respective properties are affected, or (b) result
in the creation or imposition of any Lien upon any property (now owned or
hereafter acquired) of Borrower or any Guarantor, except for the Lien created by
this Agreement.
6.6 FINANCIAL STATEMENTS.
Borrower and the Corporate Guarantors have heretofore furnished to Lender
certain financial statements and related financial information ("Financial
Statements"). Such Financial Statements (including the notes thereto) present
fairly the financial condition of Borrower and the Corporate Guarantors as of
the dates of the balance sheets contained therein, and the results of their
consolidated operations for the periods then ended, all in conformity with GAAP
on a basis consistent with that of Financial Statements for corresponding prior
periods. Except as disclosed therein, neither Borrower nor any Corporate
Guarantor has any material contingent liabilities (including liabilities for
taxes), unusual forward or long-term commitments or unrealized or anticipated
losses from unfavorable commitments.
6.7 NO DEFAULTS.
There is no Default under the Loan Documents.
6.8 LITIGATION.
Except as set forth in the Schedule, there is no pending or threatened
claim or proceeding by or before any court or governmental agency against or
affecting Borrower or any Guarantor which, if adversely decided would have a
material adverse effect on the business, operations or financial condition of
Borrower or any Guarantor or on the ability of Borrower or any Guarantor to
perform their respective obligations under this Agreement, the Note or the other
Loan Documents or on the Collateral.
6.9 TITLE TO COLLATERAL.
Borrower has good title to all of its assets,
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including, without limitation, the Collateral and all assets reflected in the
most recent balance sheet referred to in Section 5.6 hereof, free and clear of
all Liens covering the Collateral, other than the Liens granted hereunder to
Lender covering the Collateral, which are and will at all times be perfected
first Liens covering the Collateral and other than the interest pursuant to the
Lease (such other interest in the Collateral pursuant to the Lease being subject
and subordinate to the liens and interests granted to Lender hereunder).
6.10 TAXES.
All tax returns required to be filed by Borrower have been properly
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon Borrower or upon any of its properties, incomes, sales
or franchises which are due and payable have been paid.
6.11 FINANCIAL ACCOUNTING PRACTICES.
Borrower makes and keeps books, records and accounts which, in reasonable
detail, accurately and fairly reflect Borrower's transactions and dispositions
of its assets.
6.12 POWER TO CARRY ON BUSINESS.
Borrower and the Corporate Guarantors have all requisite power and
authority to own and operate their respective properties and to carry on their
businesses as now conducted and as presently planned to be conducted.
6.13 NO MATERIAL ADVERSE CHANGE.
Since December 31, 1997 there has been no material adverse change in the
business, operations or financial condition of Borrower or any Guarantor.
6.14 COMPLIANCE WITH LAWS.
Neither Borrower nor any Guarantor is in violation of any Law, except for
violations which in the aggregate do not have a material adverse effect on the
business, operations or financial condition of Borrower or any Guarantor or on
the Collateral.
6.15 COMPLIANCE WITH AGREEMENTS.
Neither Borrower nor any Guarantor is in default under any agreement,
bond, note, indenture or contract, except for defaults which in the aggregate do
not have a material adverse effect on the business, operation or financial
condition of Borrower or any Guarantor or on the Collateral.
6.16 BANKRUPTCY.
Neither Borrower nor the Guarantors have made or contemplate an assignment
for the benefit of creditors. No application or petition has been filed for the
appointment of a custodian, trustee, receiver or agent to take possession of the
Collateral, or to take possession of any of the other properties or assets of
Borrower or the Guarantors. Borrower and the Guarantors are generally paying
their respective debts as such debts become due. Neither Borrower nor the
Guarantors are "insolvent" as that term is defined in Section 101(26) of the
"Bankruptcy Code" (Title 11 of the United States Code, 11 U.S.C. Section 101, et
seq.) or would be insolvent after giving effect to the Loan and the transactions
contemplated by the Loan Documents. Neither Borrower nor the Guarantors have
filed a petition with the Bankruptcy Court under the Bankruptcy Code, or
commenced any proceeding relating to Borrower or the Guarantors under any
bankruptcy or reorganization statute or under any arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction. No
petition or application of the type described above has been filed or commenced
against Borrower or the Guarantors, in which (i) Borrower or either Guarantor,
by any act, has indicated or intends to indicate its approval thereof, consent
thereto, or acquiescence therein; (ii) an order has been or is expected to be
entered appointing any such custodian, trustee, receiver or agent, adjudicating
Borrower or Guarantors bankrupt or insolvent, or approving such petition or
application in any such proceeding; (iii) the Bankruptcy Court has ordered or is
expected to order relief against Borrower or Guarantors under the Bankruptcy
Code; or (iv) such petition or application was not dismissed within ninety (90)
days of such filing or commencement.
6.17 ACCURATE AND COMPLETE DISCLOSURE.
No representation or warranty made by
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Borrower in this Agreement and no statement made by Borrower or any Guarantor in
the Financial Statements furnished pursuant to Section 5.6 hereof or otherwise,
or any certificate, report, exhibit or document furnished by Borrower or any
Guarantor to Lender pursuant to or in connection with this Agreement or the Loan
is false or misleading in any material respect (including by omission of
material information necessary to make such representation, warranty or
statement not misleading).
6.18 REGULATIONS G AND U.
Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying "margin stock", as such term is used in
Regulations G or U promulgated by the Board of Governors of the Federal Reserve
System as amended from time to time. No part of the proceeds of the Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any "margin stock".
Borrower does not own any "margin stock".
6.19 PERFECTION.
Except for the filings under Article 9 of the UCC specified in Section 4.7
hereof (and continuation statements at periodic intervals), no further filing or
recording is necessary under the UCC or under any other Laws of any
jurisdiction, in order to perfect in all applicable jurisdictions the Liens of
Lender in the Collateral. Upon such filings, Lender will be granted a perfected
first Lien covering the Collateral. There are no other Liens covering the
Collateral.
6.20 PLACE OF BUSINESS.
Both the place of business (or chief executive office if there is more
than one place of business) of Borrower and the place where it keeps its
corporate records concerning the Collateral and all of its interest in, to and
under this Agreement are located at the address set forth at the beginning of
this Agreement.
6.21 LOCATION OF COLLATERAL.
For all purposes, including, without limitation, perfection of security
interests therein under Article 9 of the UCC, the Collateral is deemed located
and at all times shall be located at the Premises and shall not be moved from
the Premises at which it is presently located.
6.22 NAME CHANGES, MERGERS, ACQUISITIONS. Except in connection with the
Merger and the Switch Acquisition, Borrower has not within the six-year period
immediately preceding the Closing Date, changed its name, been the surviving
entity of a merger or consolidation, or acquired all or substantially all of the
assets of any Person.
6.23 MERGER; SWITCH ACQUISITION.
Borrower has heretofore delivered to Lender, true and correct copies of
the Merger Agreement and the Switch Agreement. Borrower has, prior to the
execution and delivery of this Agreement and the making of the Loan, consummated
the Merger pursuant to the Merger Agreement. Borrower has, concurrently with the
execution and delivery of this Agreement and the making of the Loan, consummated
the Switch Acquisition pursuant to the Switch Agreement. Borrower has acquired,
by virtue of the consummation of the Switch Acquisition and the Merger, and now
has, valid, legal and marketable title to all of the Equipment and valid, legal
and marketable title or the right to use while any of the Obligations are
outstanding, all software, computer programs, discs, tapes, tape files,
licenses, license agreements (including, without limitation, the Software
Product License from Siemens Xxxxxxxxx-Xxxxxxx) (the ALicense Agreement@),
copyrights, general intangibles, trademarks, consents, approvals and
authorizations and other intellectual property used in, for, with respect to or
in connection with the operation of the Equipment (collectively, the
ASoftware@). There is no other Software necessary for the normal and proper use
and operation of the Equipment. The License Agreement has been assigned to and
assumed by Borrower and Borrower possesses all rights to use and possess the
Software covered by the License Agreement. The License Agreement is assignable
without the consent of the licensor under the License Agreement and is in full
force and effect.
6.24 CONDITION OF COLLATERAL.
Borrower acknowledges that the proceeds of this loan are to be used to
acquire the Equipment
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and some or all of the other Collateral and the Loan is for all purposes
classified as purchase money financing. Prior to consummation of the Switch
Agreement Borrower examined, inspected and tested the Equipment and other
Collateral which is the subject thereof, and all such Equipment and other
Collateral is in good working order and repair as of the date hereof.
ARTICLE 7. COVENANTS
Borrower covenants that from and after the date hereof and until payment
in full of the Note and interest thereon and all other amounts due from Borrower
hereunder or under the Note or the other Loan Documents, unless Lender shall
otherwise consent in writing:
7.1 REPORTING AND INFORMATION REQUIREMENTS.
7.1.1 ANNUAL FINANCIAL STATEMENTS. As soon as practicable, and in
any event within one hundred (100) days after the close of each fiscal year of
Borrower and the Corporate Guarantors, Borrower and the Corporate Guarantors
shall furnish to Lender their consolidated annual audit reports for such year
for Borrower and the Corporate Guarantors, including audited statements of
income, retained earnings and statements of cash flow of Borrower and the
Corporate Guarantors for such fiscal year and audited balance sheets of Borrower
and the Corporate Guarantors as of the close of such fiscal year, and notes to
each, all in reasonable detail, setting forth in comparative form the
corresponding figures for the preceding fiscal year where such presentation is
appropriate under GAAP, certified without qualification by independent certified
public accountants of recognized standing selected by Borrower and the Corporate
Guarantors and satisfactory to Lender, together with (or included in such
certification) a written statement of such accountants substantially to the
effect that (i) such accountants examined such financial statements in
accordance with generally accepted auditing standards and accordingly made such
tests of accounting records and such other auditing procedures as they
considered necessary in the circumstances and (ii) in the opinion of such
accountants such financial statements present fairly the financial position of
Borrower and the Corporate Guarantors as of the end of such fiscal year and the
results of their operations and the changes in their financial position for the
fiscal year then ended, in conformity with GAAP applied on a basis consistent
with that of the preceding fiscal year (except for changes in application in
which such accountants concur).
7.1.2 QUARTERLY FINANCIAL STATEMENTS. Within sixty (60) days after
the end of each of the first three fiscal quarters of each fiscal year, Borrower
and the Corporate Guarantors shall furnish to Lender a copy of their
consolidated interim financial statements of the type described in Section 6.1.1
above (but without duplication of notes to the financial statements appearing in
the most recent annual audit report), certified by an Executive Officer of
Borrower and the Corporate Guarantors or if Borrower or the Corporate Guarantors
chooses, audited, as set forth in Section 6.1.1 above, and certified by an
Executive Officer of Borrower.
7.1.3 FURTHER REQUESTS. Borrower will promptly furnish to Lender
such other information (financial or otherwise) concerning Borrower, its assets,
the Collateral or the Guarantors, in such form as Lender may reasonably request.
7.1.4 COMPLIANCE CERTIFICATES. At the same time Borrower delivers
the financial statements required under the provisions of Sections 6.1.1 and
6.1.2, Borrower shall furnish to Lender a certificate of an Executive Officer to
the effect that no Default or Event of Default exists, or, if such cannot be so
certified, specifying in reasonable detail the exceptions, if any, to such
statement.
7.1.5 GUARANTOR FINANCIAL STATEMENTS. The Borrower shall cause the
Individual Guarantor to furnish to Lender all financial statements and other
information as is required to be delivered pursuant to his Guaranty.
7.1.6 NOTICE OF EVENT OF DEFAULT. Promptly upon becoming aware of
any Default or Event of Default, Borrower shall give Lender notice thereof,
together with a written statement of a Chief Executive Officer of Borrower
setting forth the details thereof and any action with respect thereto taken or
contemplated to be taken by Borrower.
7.1.7 NOTICE OF MATERIAL ADVERSE CHANGE. Promptly upon becoming
aware thereof,
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Borrower shall give Lender written notice about any material adverse change in
the business, operations or financial condition of Borrower or any Guarantor or
on the Collateral or on the ability of Borrower or any Guarantor to perform
their obligations under this Agreement, the Note or the other Loan Documents.
7.1.8 NOTICE OF MATERIAL PROCEEDINGS. Promptly upon becoming aware
thereof Borrower shall give Lender written notice of the commencement, existence
or threat of any proceeding by or before any court or administrative agency
against or affecting Borrower, any Guarantor or the Collateral which, if
adversely decided, would have a material adverse effect on the business,
operations or financial condition of Borrower or any Guarantor or on the ability
of Borrower or any Guarantor to perform its obligations under this Agreement,
the Note, the other Loan Documents or on the Collateral.
7.1.9 VISITATION. Borrower shall permit such persons as Lender may
designate to visit and inspect the Collateral and to examine the books and
records of Borrower and take copies and extracts therefrom, and to discuss its
affairs with officers of Borrower and its independent accountants, at such
reasonable times and as often as Lender may reasonably request.
7.1.10 OTHER DELIVERIES. Promptly upon their becoming available,
Borrower shall furnish to Lender, copies of all registration statements and any
amendments and supplements thereto and any regular and periodic reports filed by
Borrower or the Corporate Guarantors with any securities exchange or with the
Securities and Exchange Commission or any governmental authority succeeding to
any or all of the functions of said commissions and all letters of comment or
correspondence sent to Borrower or the Corporate Guarantors from such exchanges
or to such exchanges from Borrower or the Corporate Guarantors.
7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.
7.2.1 Neither Borrower nor the Corporate Guarantors shall enter into
any merger in which it is not the survivor, reorganization or consolidation, or
wind up, liquidate or dissolve, nor agree to do any of the foregoing without the
prior written consent of Lender. The Borrower shall not amend, modify or extend
the Lease without the prior written consent of Lender.
7.2.2 Borrower will qualify to do business and will remain in good
standing under the laws of each jurisdiction in which it is required to be
qualified by reason of the location of the properties owned or leased by it or
the conduct of its business. Each Corporate Guarantor will qualify to do
business and will remain in good standing under the laws of each jurisdiction in
which it is required to be qualified by reason of the location of the properties
owned or leased by it or the conduct of its business.
7.2.3 Borrower shall do, or cause to be done, all things reasonably
necessary to preserve and keep in full force and effect its corporate existence
and all permits, licenses, rights and privileges necessary or appropriate for
the conducting of its business as now and hereafter conducted. Borrower shall
not change its name. Borrower shall continue to engage in the same kind of
business and shall not make any material change in its business or in the nature
of its operations or engage in any unrelated line of business. Each Corporate
Guarantor shall do, or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its corporate existence and all
permits, licenses, rights and privileges necessary or appropriate for the
conducting of its business as now and hereafter conducted. No Corporate
Guarantor shall change its name without thirty (30) days prior written notice to
Lender. Each Corporate Guarantor shall continue to engage in the same kind of
business and shall not make any material change in its business or in the nature
of its operations or engage in any unrelated line of business.
7.2.4 Borrower will comply with all Laws relative to the conduct of
its business or the location of the properties owned or leased by it, the
non-compliance with which could have a material adverse effect on the business,
operations, assets or financial or other condition of Borrower, as contemplated
hereby, or the ability of Borrower to perform its Obligations under this
Agreement, the Note or the other Loan Documents and will obtain or cause to be
obtained as promptly as possible any permit, license, consent, privilege or
approval of
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any governmental authority and make any filing or registration therewith which
at the time shall be required with respect to the performance of its Obligations
under this Agreement, the Note or the other Loan Documents or for the operation
of its business as presently conducted or as contemplated by it. Each Corporate
Guarantor will comply with all Laws relative to the conduct of its business or
the location of the properties owned or leased by it, the non-compliance with
which could have a material adverse effect on the business, operations, assets
or financial or other condition of the Corporate Guarantors, as contemplated
hereby, or the ability of the Corporate Guarantors to perform their Obligations
under their Guaranties or the other Loan Documents and will obtain or cause to
be obtained as promptly as possible any permit, license, consent, privilege or
approval of any governmental authority and make any filing or registration
therewith which at the time shall be required with respect to the performance of
its Obligations under this Agreement, the Guaranties or the other Loan Documents
or for the operation of their business as presently conducted or as contemplated
by them.
7.2.5 Borrower shall not except as provided herein or pursuant to
the Lease convey, assign, sell, mortgage, encumber, pledge, hypothecate, grant a
security interest in, grant options with respect to, lease or otherwise dispose
of all or any part of any legal or beneficial interest in any part or all of the
Collateral or any interest therein. The Corporate Guarantors shall not, directly
or indirectly sell, assign, lease or otherwise dispose of or permit the sale,
assignment or other disposition of any legal or beneficial interest in the stock
or other ownership interest in the Borrower or the Collateral. Borrower shall
not convey, assign, transfer or otherwise dispose of a material portion of its
assets (other than the Collateral, the prohibition on transfer of which is
governed by the first sentence of this subparagraph 6.2.5 above). EqualNet
Holding will at all times following the Merger own and continue to own directly
all legal and beneficial equity ownership interest in Borrower.
7.3 INSURANCE.
Borrower shall, at its own expense, maintain and deliver evidence to
Lender of such insurance required by Lender, written by insurers and in amounts
satisfactory to Lender.
7.4 MAINTENANCE OF PROPERTIES.
Borrower shall maintain or cause to be maintained in good repair, working
order and condition the properties now or hereafter owned, leased or otherwise
possessed by it, including the Collateral, and shall make or cause to be made
all needful and proper repairs, renewals, replacements and improvements thereto
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
7.5 PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES.
Borrower shall pay or discharge
7.5.1 all taxes, assessments and other governmental charges or
levies imposed upon it or any of its properties, including the Collateral, or
income (including such as may arise under ERISA or any similar provision of
law), on or prior to the date on which penalties attach thereto (including,
without limitation, any and all sales, use or other taxes due or which may
become due pursuant to or as a result of consummation of the transactions
contemplated by the Switch Agreement); and
7.5.2 all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which, if unpaid, might result in
the creation of a Lien upon any such property, on or prior to the date when due;
PROVIDED, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, Borrower need not pay or discharge any
such tax, assessment, charge, levy, claim or current liability so long as (i)
the validity thereof is contested in good faith and by appropriate proceedings
diligently pursued, (ii) in Lender's sole judgment there is no reasonably
foreseeable risk of forfeiture of the Collateral, and (iii) such reserves or
other appropriate provisions as may be required by GAAP shall have been made
therefor, and so long as such failure to pay or discharge does not have a
material adverse effect on the business, operations or financial condition of
Borrower or the Collateral.
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7.6 FINANCIAL ACCOUNTING PRACTICES.
Borrower shall make and keep books, records and accounts which, in
reasonable detail, accurately and fairly reflect its business, including all
transactions and dispositions of its assets, all prepared in accordance with
GAAP. Lender and/or its agents shall have the right to review the books and
records of Borrower and to photocopy the same and to make excerpts therefrom, at
all reasonable times and upon reasonable notice and as often as Lender may
reasonably request.
7.7 COMPLIANCE WITH LAWS.
Borrower shall comply with all applicable Laws in all respects, provided,
that Borrower shall not be deemed to be in violation of this Section 6.7 as a
result of any failures to comply which would not result in fines, penalties,
injunctive relief or other civil or criminal liabilities which, in the
aggregate, would not materially affect the business or operations of Borrower or
the ability of Borrower to perform its obligations under this Agreement, the
Note or the other Loan Documents or the Collateral.
7.8 MATERIAL OBLIGATIONS.
Borrower shall pay and satisfy, when due, all material liabilities and
obligations, including, without limitation, all obligations under all leases
(real or personal property) to which it is a party.
7.9 MAINTENANCE OF COLLATERAL.
Borrower will maintain and preserve the Collateral in good condition,
repair and working order, promptly repairing, replacing or rebuilding any part
of the Collateral which may be destroyed by any casualty, or become damaged,
worn or dilapidated.
7.10 MAINTENANCE OF PRINCIPAL PLACE OF BUSINESS.
Borrower shall maintain and keep its principal place of business and chief
executive office at the address set forth at the beginning of this Agreement,
and at no other location without giving Lender at least thirty (30) days prior
written notice of any move. Borrower shall maintain and keep its records at such
address and at no other location without giving Lender at least thirty (30) days
prior written notice of any move.
7.11 AMENDMENT TO CONSTITUENT DOCUMENTS.
Borrower shall not amend or modify any of its Constituent Documents.
7.12 NAMES.
Borrower shall not use any corporate or fictitious name other than its
corporate name as set forth in its Articles or Certificate of Incorporation on
the date hereof or as set forth on the Schedule;
7.13 PREPAYMENT.
Borrower shall not prepay any indebtedness, other than trade payables or
the Obligations.
7.14 MARGIN SECURITY.
Borrower shall not own, purchase or acquire (or enter into any contract to
purchase or acquire) any "margin security" as defined by any regulation of the
Federal Reserve Board as now in effect or as the same may hereafter be in
effect.
7.15 SATISFACTION OF CERTAIN OBLIGATIONS.
In the event Borrower fails to make any payment or do any act as herein
provided (including, but not limited to, maintaining any insurance required to
be maintained under the Loan Documents or paying all taxes in accordance with
the terms hereof) or there shall be a claim or Lien asserted or filed against
the Collateral, Lender may, but shall not be obligated to (and without releasing
Borrower from any obligation hereunder), make all such payments and perform all
such acts or otherwise satisfy such obligations. All sums paid by Lender in
respect thereof and all costs, fees and expenses, including reasonable
attorneys' fees, court costs, expenses and other charges relating thereto, which
are incurred by Lender on account thereof, shall bear interest at the Default
Rate, shall be payable on demand by Borrower to Lender, and shall be additional
Obligations hereunder secured by the Collateral.
7.16 GUARANTEES AND CONTINGENT LIABILITIES.
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Borrower shall not directly or indirectly assume, guarantee, endorse,
become or remain directly or contingently liable upon or with respect to any
obligations or liability of any other Person or entity other than in connection
with the endorsement or deposit of checks in the ordinary course of business.
7.17 DISTRIBUTIONS, DIVIDENDS.
Borrower shall not declare or pay any dividends or make any distributions
of any kind or make any other similar payments or set aside any sum for any such
purpose, except that Borrower may declare and make dividends payable solely in
shares of its common stock.
7.18 REDEMPTIONS.
Borrower shall not purchase, redeem, retire or otherwise acquire, directly
or indirectly, or make any sinking fund payments with respect to, any shares of
any class of stock of Borrower, now or hereafter existing, or set apart any sum
for such purposes.
7.19 STOCK ISSUANCE.
Borrower shall not issue any additional shares or any right or option to
acquire any shares, or any security convertible into any shares, of the capital
stock of Borrower.
7.20 INVESTMENTS, LOANS, ADVANCES.
Borrower shall not directly or indirectly make or have outstanding at any
time any investments in or loans to any other Person (including any subsidiary),
whether by way of advance, loan, guaranty, extension of credit, capital
contribution, purchase of stock, notes, bonds or other securities or evidence of
indebtedness, or acquisition of limited or general partnership or other
interests.
7.21 TRANSACTIONS WITH AFFILIATES.
Borrower shall not, and shall not permit any of its subsidiaries or
Guarantors, to, directly or indirectly, enter into any purchase, sale, lease or
other transaction with any affiliate, except for those transactions described in
the Proxy Statement in the ordinary course of business on terms that are no less
favorable than those which might be obtained at the time in a comparable arm's
length transaction with any Person who is not an affiliate.
7.22 FURTHER ASSURANCES.
Borrower shall cause to be done, executed, acknowledged and delivered all
and every such further act, conveyance and assurance as Lender shall require for
accomplishing the purposes of this Agreement, the Note and the other Loan
Documents. Borrower will defend and protect its title with respect to the
Collateral and will indemnify Lender with respect thereto. Any payment in
respect of such indemnity shall be made directly to Lender on demand in
immediately available funds. Forthwith after notice from Lender, Borrower shall
promptly, without further consideration, execute, acknowledge and deliver such
further instruments and documents and will take such other actions as Lender may
deem necessary or advisable from time to time to ensure the enforceability or
priority of the Liens granted hereby, or otherwise to confirm and carry out the
intent and purpose of this Agreement.
ARTICLE 8. DEFAULTS AND REMEDIES
8.1 EVENTS OF DEFAULT.
The occurrence of one or more of the following described events is an
Event of Default:
8.1.1 Borrower fails to make any payment of principal of or interest
on the Note, within ten (10) days after such payment is or shall become due; or
8.1.2 Borrower fails to perform or observe any of its covenants or
agreements contained herein or in any other Loan Documents which cannot be
cured; or
8.1.3 Borrower fails to perform or observe any other covenant or
agreement to be performed or observed by it hereunder or under the other Loan
Documents and such failure continues unremedied for a period of fifteen (15)
days after such failure; or
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8.1.4 Borrower voluntarily creates, suffers to exist, incurs or
assumes any Lien, security interest, charge or encumbrance on, or with respect
to, any part of or all the Collateral (other than Liens permitted under this
Agreement), or the Liens held by Lender in and to the Collateral shall cease to
be the first perfected Lien in and to the Collateral; or
8.1.5 Borrower sells, assigns, leases (other than the Lease), or
otherwise disposes of or relinquishes possession of, any Collateral; or
8.1.6 any representation or warranty made by Borrower or a Guarantor
herein or in any other Loan Document or in any document or certificate furnished
by Borrower to Lender in connection herewith or therewith at any time proves to
have been incorrect in any material respect when made; or
8.1.7 this Agreement or any Loan Document at any time for any reason
ceases to be in full force and effect or is declared by a court or governmental
agency of competent jurisdiction to be null and void; or
8.1.8 Borrower breaches or defaults under the terms of any
agreement, instrument or document with or for the benefit of Lender which is not
a Loan Document or under any other loan, credit facility or other financial
accommodation made by Lender to Borrower, including, without limitation, all
promissory notes, guarantees, equipment leases, security agreements and deeds of
trust; or
8.1.9 Borrower or any Guarantor is indicted or threatened with
indictment by a governmental authority under any criminal statute or there is
commenced against Borrower or any Guarantor a criminal or civil proceeding
pursuant to which the proceedings, penalties or remedies sought or available
include forfeiture of any of the Collateral or a material portion of the assets
of Borrower or any Guarantor; or
8.1.10 any Guarantor fails to perform or observe any of its
covenants or agreements contained in the Guaranties or any other Loan Documents
to which they are a party which cannot be cured; or
8.1.11 any Guarantor fails to perform or observe any other covenant
or agreement to be performed or observed by it under the Loan Documents to which
they are a party and such failure continues unremedied for a period of fifteen
(15) days after such failure; or
8.1.12 any Guarantor breaches or defaults under the terms of any
agreement, instrument or document with or for the benefit of Lender which is not
a Loan Document or under any other loan, credit facility or other financial
accommodation made by Lender to any or all of the Guarantors, including, without
limitation, all promissory notes, guarantees, equipment leases, security
agreements, mortgages and deeds of trust; or
8.1.13 there is a material adverse change in the business,
operations or financial condition of Borrower or any Guarantor or in the
Collateral; or
8.1.14 a proceeding is instituted seeking a decree or order for
relief in respect of Borrower or any Guarantor in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect or for the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of Borrower or any Guarantor,
or for any substantial part of its properties or for the dissolution, winding-up
or liquidation of its affairs or any substantial part of any of its properties
and such proceeding remains undismissed or unstayed for a period of sixty (60)
consecutive days or such court enters a decree or order granting the relief
sought in such proceeding; or
8.1.15 Borrower or any Guarantor voluntarily suspends transaction of
its business, commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, consents to the
entry of an order for relief in an involuntary case under any such law or
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of
Borrower or any Guarantor for any substantial part of any of its properties, or
makes a general assignment for the benefit of creditors, or takes any action in
furtherance of any of the foregoing; or
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8.1.16 there shall be a judgment or judgments against Borrower or
any Guarantor for any amount in excess of $75,000 in the aggregate, which shall
remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a
period of thirty (30) days or more; or
8.1.17 Borrower shall have conveyed, sold, assigned, encumbered or
otherwise transferred all or substantially all of its assets (or any interest
therein) (other than pursuant to the Lease) or any stock of Borrower is sold,
conveyed, transferred or encumbered; or
8.1.18 Borrower fails to perform or observe any of its covenants or
agreements contained in Section 6.3 hereof or in the letter regarding insurance
requirements delivered by Borrower in connection with the Loan or the Loan
Documents (the "Insurance Letter") or any such insurance shall at any time cease
to be in full force and effect; or
8.1.19 Borrower ceases to operate its business at any of the
Premises without the prior consent of Lender; or
8.1.20 the Letter of Credit shall at any time cease to be in full
force and effect or is terminated; or
8.1.21 Borrower shall default under or breach any term contained in
any loan agreement, promissory note, equipment lease, security document or other
agreement or evidence of indebtedness with any other lender, lessor or provider
of credit which relate to, or evidence, indebtedness for borrowed money or
capitalized lease obligations which on the date of default is in the principal
amount of not less than $100,000 or Borrower shall otherwise default in the
payment of such indebtedness.
8.1.22 Borrower shall fail to provide Lender with satisfactory
evidence that any and all sales, use and other similar taxes due pursuant to or
as a result of the consummation of the transaction contemplated by the Switch
Agreement have been fully paid within forty-five (45) days after the date hereof
or, if later, the date when due.
8.1.23 Any Corporate Guarantor breaches or defaults (which default
is not cured within any applicable cure period, if any) under the terms of any
agreement, instrument or document which such Corporate Guarantor has for any
loan, credit facility or other financial accommodation now or hereinafter
entered into with any other lender or other Person which on the date of breach
or default is in the principal amount of not less than $250,000.
8.1.24 There shall occur any default or event of default under the
Lease (which is not cured within any applicable cure period, if any).
8.2 CONSEQUENCES OF EVENT OF DEFAULT.
8.2.1 If an Event of Default occurs, Lender may, by notice to
Borrower, declare the unpaid principal amount of the Note and interest accrued
thereon and all other Obligations and liabilities of Borrower hereunder or under
the Note or the Loan Documents to be immediately due and payable and the same
shall thereupon become and be immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived, and an action therefor shall immediately accrue.
8.2.2 In addition, if an Event of Default occurs, Lender shall have
all rights and remedies granted herein and in the other Loan Documents and all
rights or remedies available at law (including, without limitation, the UCC) or
equity, whether as a secured party or otherwise (including specifically those
granted by the Uniform Commercial Code as in effect in the jurisdiction or
jurisdictions where the Collateral is located) and, except as limited by Law,
all remedies of Lender (i) shall be cumulative and concurrent; (ii) may be
pursued separately, successively or concurrently against Borrower or against all
or any portion of the Collateral, at the sole discretion of Lender; (iii) may be
exercised as often as occasion therefor shall arise, it being agreed by Borrower
that the exercise or failure to exercise any rights or remedies shall in no
event be construed as a waiver or release thereof or of any other right, remedy
or recourse; and (iv) are intended to be, and shall be, nonexclusive. To the
fullest extent permitted by applicable Law, Lender may resort to the rights,
remedies and
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recourses set forth herein and any other security therefor in such order and
manner as Lender may elect.
8.2.3 Without limiting any of the foregoing, Borrower agrees that
(i) Lender may, with or without notice and without legal process, enter upon any
property owned, leased or otherwise under the real or apparent control of
Borrower or any agent thereof or any other location where the Collateral may be
located and disassemble, disconnect, render unusable or repossess all or any
item of the Collateral; (ii) written notice mailed to Borrower, as provided in
this Agreement for the giving of notice, shall be reasonable if given ten (10)
days prior to (a) any public sale or (b) the date after which a private sale may
be made; (iii) a sale of the Collateral may be made as a unit or in parcels and
for cash and upon terms; (iv) Lender may buy the Collateral at any public sale
and at any private sale as permitted by the UCC; and (v) such public or private
sale or sales may be held or adjourned from time to time, and Lender shall have
the right to conduct such sale or sales on Borrower's premises (including,
without limitation, the Premises) or elsewhere where the Collateral is located,
and shall have the right to use Borrower's premises without charge for such sale
or sales for such time or times as Lender may determine.
ARTICLE 9. EXPENSES AND INDEMNITIES
9.1 EXPENSES.
Borrower shall promptly reimburse Lender for all costs, fees and expenses
incurred by Lender in connection with the negotiation, preparation, execution,
delivery, administration, operation and enforcement of each of the Loan
Documents, including, but not limited to, the attorneys' and paralegals' fees of
in-house and outside counsel, expert witness fees, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in connection
with any and all environmental reports and environmental remediation activities,
and all other costs, expenses, taxes and filing or recording fees payable in
connection with the transactions contemplated by this Agreement, including,
without limitation, all such costs, fees and expenses as Lender shall incur or
for which Lender shall become obligated in connection with (i) any inspection or
verification of the Collateral, (ii) any proceeding relating to the Loan
Documents or the Collateral, (iii) actions taken with respect to the Collateral
and Lender's security interest therein, including, without limitation, the
defense or prosecution of any action involving Lender and Borrower or any third
party, (iv) enforcement of any of Lender's rights and remedies with respect to
the Obligations or Collateral, (v) consultation with Lender's attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Borrower or any Guarantor or any affiliate, whether or not suit is
filed, and (vi) any other matters relating to or arising out of the Loan and/or
the Loan Documents.
9.2 ENVIRONMENTAL MATTERS.
9.2.1 DEFINITIONS. The following definitions apply to the provisions
of this Section 8.2: (a) the term "Applicable Law" shall include, but shall not
be limited to, each statute named or referred to in this Section 8.2.1 and all
rules and regulations thereunder, and any other local, state and/or federal
laws, rules, regulations or ordinances, whether currently in existence or
hereafter enacted, which govern, to the extent applicable to the Property or to
Borrower, (i) the existence, cleanup and/or remedy of contamination on real
property; (ii) the protection of the environment from soil, air or water
pollution, or from spilled, deposited or otherwise emplaced contamination; (iii)
the emission or discharge of hazardous substances into the environment; (iv) the
control of hazardous wastes; or (v) the use, generation, transport, treatment,
removal or recovery of Hazardous Substances; (b) the term "Hazardous
Substance(s)" shall mean (i) any oil, flammable substance, explosives,
radioactive materials, hazardous wastes or substances, toxic wastes or
substances or any other wastes, materials or pollutants which either pose a
hazard to the Property or to persons on or about the Property or cause the
Property to be in violation of any Applicable Law; (ii) asbestos in any form
which is or could become friable, urea formaldehyde foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of polychlorinated biphenyls, or radon gas; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"waste," "hazardous wastes,"
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hazardous materials," "extremely hazardous waste," "restricted hazardous waste,"
or "toxic substances" or words or similar import under any Applicable Law,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 USC " 9601 ET SEQ.; the Resource
Conservation and Recovery Act ("RCRA"), 42 USC " 6901 ET SEQ.; the Hazardous
Materials Transportation Act, 49 USC " 1801 ET SEQ.; the Federal Water Pollution
Control Act, 33 USC " 1251 ET SEQ.; and every other Applicable Law; (iv) any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority which may or could pose a hazard to
the health or safety of the occupants of the Property or the owners and/or
occupants of property adjacent to or surrounding the Property, or any other
person coming upon the property or adjacent property; and (v) any other
chemical, materials or substance which may or could pose a hazard to the
environment; and (c) the term "Property" shall mean all real property, wherever
located, in which Borrower has any right, title or interest, whether now
existing or hereafter arising, and including, without limitation, as owner,
lessor or lessee.
9.2.2 COVENANTS AND REPRESENTATIONS. (1) Borrower represents and
warrants that there have not been during the period of Borrower's possession of
any interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other time, any activities on the Property
involving, directly or indirectly, the use, generation, treatment, storage or
disposal of any Hazardous Substances except in compliance with Applicable Law
(i) under, on or in the land included in the Property, whether contained in
soil, tanks, sumps, ponds, lagoons, barrels, cans or other containments,
structures or equipment, (ii) incorporated in the buildings, structures or
improvements included in the Property, including any building material
containing asbestos, or (iii) used in connection with any operations on or in
the Property. (2) Without limiting the generality of the foregoing and to the
extent not included within the scope of this Section 8.2.2, Borrower represents
and warrants that it is in full compliance with Applicable Law and has received
no notice from any person or any governmental agency or other entity of any
violation by Borrower or its affiliates of any Applicable Law. (3) Borrower
shall be solely responsible for and agrees to indemnify Lender, protect and
defend Lender with counsel reasonably acceptable to Lender, and hold Lender
harmless from and against any claims, actions, administrative proceedings,
judgments, damages, punitive damages, penalties, fines, costs, liabilities
(including sums paid in settlements of claims), interest or losses, attorneys'
fees (including any fees and expenses incurred in enforcing this indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses actually
incurred by Lender (collectively, the "Environmental Costs"), that may, at any
time or from time to time, arise directly or indirectly from or in connection
with: (i) the presence, suspected presence, release or suspected release of any
Hazardous Substance whether into the air, soil, surface water or groundwater of
or at the Property, or any other violation of Applicable Law, or (ii) any breach
of the foregoing representations and covenants; except to the extent any of the
foregoing result from the actions of Lender, its employees, agents and
representatives. All Environmental Costs incurred or advanced by Lender shall be
deemed to be made by Lender in good faith and shall constitute Obligations
hereunder.
ARTICLE 10. MISCELLANEOUS
10.1 FURTHER ASSURANCES.
Borrower shall at any time and from time to time upon the written request
of Lender, execute and deliver such further agreements, instruments and
documents and do such further acts and things as Lender may reasonably request
in order to effect the purposes of this Agreement.
10.2 GENERAL INDEMNITY.
Borrower shall indemnify, defend and hold harmless Lender from and
against, and, upon demand, reimburse Lender for, all claims, demands,
liabilities, losses, damages, judgments, penalties, costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
which may be imposed upon, asserted against or incurred or paid by Lender, on
account of any act performed or omitted to be performed under this Agreement,
the Note or the other Loan Documents or on account of any
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transaction arising out of or in any way connected with the Collateral or this
Agreement, the Note or the other Loan Documents (including, without limitation,
any litigation matter involving claims or alleged claims by or disputes with
third parties), except as a result of the willful misconduct or gross negligence
of Lender.
10.3 NO IMPLIED WAIVER; CUMULATIVE REMEDIES.
No course of dealing and no delay or failure of Lender in exercising any
right, power or privilege under this Agreement, the Note or any of the other
Loan Documents shall affect such right, power or privilege except as and to the
extent that the assertion of any such right, power or privilege shall be barred
by an applicable statute of limitations; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such a
right, power or privilege preclude any further exercise thereof or of any other
right, power or privilege. The rights and remedies of Lender under this
Agreement, the Note or the other Loan Documents are cumulative and not exclusive
of any rights or remedies which Lender would otherwise have.
10.4 TAXES.
Borrower agrees to pay or reimburse Lender for any and all stamp,
document, transfer, recording or filing taxes or fees and all similar
impositions payable or hereafter determined by Lender to be payable in
connection with this Agreement, the Note or the other Loan Documents (including
but not limited to those necessary or advisable to record or to ensure the
enforceability or priority of this Agreement, the Note or the other Loan
Documents), as determined by Lender in its sole discretion from time to time,
and any other documents, instruments or transactions pursuant to or in
connection herewith, and Borrower agrees to save Lender harmless from and
against any and all present or future claims or liabilities with respect to or
resulting from any delay in paying or omission to pay any such taxes, fees or
similar impositions.
10.5 TIME OF ESSENCE.
Time is of the essence for the performance by Borrower of the Obligations
set forth in this Agreement and the other Loan Documents.
10.6 POWER OF ATTORNEY.
Borrower appoints Lender and its designees as Borrower's attorney, with
the power to endorse Borrower's name on any checks, notes, acceptances, money
orders or other forms of payment or security that come into Lender's possession;
to sign Borrower's name on any invoice or xxxx of lading relating to any
receivable, on drafts against customers, on assignments of receivables, on
notices of assignment, financing statements and other public records, on
verifications of accounts and on notices to customers or account debtors; to
send requests for verification of receivables to customers or account debtors;
after the occurrence of any Event of Default, to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender and to open and dispose of all mail addressed to Borrower;
and to do all other things Lender deems necessary or desirable to carry out the
terms of this Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither Lender nor any of its designees shall be liable for any acts
or omissions nor for any error of judgment or mistake of fact or law while
acting as Borrower's attorney. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and Lender's
obligation to provide loans hereunder shall have terminated.
10.7 MODIFICATIONS, AMENDMENTS OR WAIVERS.
Lender and Borrower may from time to time enter into written agreements
amending, modifying or supplementing this Agreement, the Note or the other Loan
Documents or changing the rights of Lender or Borrower hereunder or thereunder,
and Lender may from time to time grant waivers or consents to a departure from
the due performance of the obligations of Borrower thereunder. Any such
agreement, waiver or consent must be in writing and shall be effective only to
the extent set forth in such writing. In the case of any such waiver or consent,
any Event of Default so waived or consented to shall be deemed to be cured and
not continuing, but no such waiver or consent shall extend to any subsequent or
other Event of
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Default or impair any right consequent thereto.
10.8 HOLIDAYS.
Except as otherwise provided herein, whenever any payment or action to be
made or taken hereunder or the Note or any other Loan Document shall be stated
to be due on a day which is not a Business Day, such payment or action shall be
made or taken on the next following Business Day (and such day shall be included
in the calculation of interest due), unless such next succeeding Business Day
falls in a different calendar month, in which case payment or action shall be
made or taken on the next preceding Business Day.
10.9 NOTICES.
10.9.1 Except as otherwise provided herein, all notices and other
communications required under the terms and provisions of this Agreement, the
Note or the other Loan Documents shall be in writing and shall become effective
when delivered by hand or received by overnight courier, telex, facsimile,
telegram or registered first class mail, postage prepaid, addressed as follows:
If to Lender, at:
FINOVA Capital Corporation
000 Xxxx Xxxxxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Facsimile No. 000-000-0000
Attention: Xxxxxx Xxxxxxxx Vice President
with a copy to:
Winick & Rich, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. 000-000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to Borrower, at the address set forth on the Schedule.
or at such other address as either party may, from time to time, designate in
writing to the other party hereto.
10.9.2 If any notice is given by telex, facsimile transmission, or
telegram, the party giving such notice shall confirm such notice by a writing
delivered by hand or overnight courier; PROVIDED, HOWEVER, that for all purposes
hereunder, notice shall be deemed effective at the time given by telex,
telecopier or telegram.
10.10 GOVERNING LAW.
THIS AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.
10.11 PERSONAL JURISDICTION AND SERVICE OF PROCESS.
BORROWER IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING AGAINST
BORROWER UNDER, ARISING OUT OF, OR IN ANY MANNER RELATING TO THIS AGREEMENT, THE
NOTE OR THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY STATE COURT OF THE STATE
OF ARIZONA LOCATED IN MARICOPA COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF ARIZONA. BORROWER, BY ITS EXECUTION AND DELIVERY OF THIS
AGREEMENT, EXPRESSLY AND IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL
JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING. BORROWER
FURTHER AGREES THAT ANY LEGAL ACTION OR PROCEEDING BORROWER MAY BRING, ARISING
OUT OF OR IN ANY MANNER RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS,
SHALL ONLY BE BROUGHT IN ANY STATE COURT OF THE STATE OF ARIZONA LOCATED IN
MARICOPA COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA. BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT,
SUMMONS, NOTICE OR OTHER PROCESS RELATING TO SUCH ACTION OR
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PROCEEDING BY DELIVERY THEREOF TO BORROWER IN THE MANNER PROVIDED FOR NOTICES IN
THIS AGREEMENT. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR
DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS.
BORROWER SHALL NOT BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY
DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF
ARIZONA, UNLESS SUCH DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE
OF ARIZONA. NOTHING HEREIN SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT
THE RIGHT OF LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED
BY LAW.
10.12 WAIVER OF JURY TRIAL.
BORROWER AND LENDER HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY WITH RESPECT
TO ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY AGREEMENT,
INSTRUMENT OR DOCUMENT EXECUTED AND DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, INCLUDING THE LOAN DOCUMENTS.
10.13 SEVERABILITY.
The provisions of this Agreement, the Note and any other Loan Document are
intended to be severable. If any such provision is held invalid or unenforceable
in whole or in part in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.14 PRIOR UNDERSTANDINGS.
This Agreement and the other Loan Documents supersede all prior
understandings and agreements, whether written or oral, between the parties
hereto relating to the transactions provided for herein or therein.
10.15 SURVIVAL.
All representations and warranties of Borrower contained in this Agreement
or any other Loan Document or made in writing in connection herewith or
therewith shall survive the execution and delivery of this Agreement, the Note
and the other Loan Documents, any investigation or inspection by Lender, the
making of the Loan hereunder, the payment of the Note or the expiration of this
Agreement. All covenants and agreements of Borrower contained herein shall
continue in full force until payment in full of the Obligations. Borrower's
obligation to pay the principal of and interest on the Note and all such other
amounts shall be absolute and unconditional under any and all circumstances.
10.16 SUCCESSORS AND ASSIGNS.
This Agreement shall be binding upon and shall inure to the benefit of
Lender and Borrower and their respective successors and permitted assigns,
except that Borrower may not assign, delegate or transfer any of its rights or
obligations hereunder or any interest herein without the written consent of
Lender which Lender may withhold in its absolute discretion. Any actual or
attempted assignment by Borrower without Lender's consent shall be null, void
and of no effect whatsoever. Lender may assign or otherwise transfer any or all
of its rights, title, interests and obligations hereunder and under the Note and
the other Loan Documents in whole or in part. If Lender makes such an
assignment, the assignee shall have all of the rights of the Lender and Borrower
shall not assert against the assignee any defense, counterclaims or setoff which
Borrower may have against Lender. Except to the extent otherwise required by its
context, the word "Lender" where used in this Agreement shall mean and include
the holder of the Note originally issued to Lender, and the holder of such Note
shall be bound by and have the benefits of this Agreement to the same extent as
if such holder had been a signatory hereto, except that no assignee shall be
deemed to assume any obligation or duty imposed upon Lender hereunder or the
other Loan Documents and Borrower shall look only to Lender for performance
thereof. As used in this Section 9.16, "assign" shall be deemed to include a
pledge, sale of, or grant of a mortgage on, or a security interest in, any of
the Collateral (except as allowed by this Agreement) or this Agreement or the
other Loan Documents by Lender and the term "assignee" shall be deemed to refer
to the recipient of such pledge, sale, mortgage or security interest.
10.17 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which, when so
executed and delivered by the parties,
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constituting an original but all such counterparts together constituting but one
and the same instrument.
10.18 PUBLICITY.
Lender is hereby authorized to issue appropriate press releases and to
cause a tombstone to be published announcing the consummation of the
transactions contemplated in this Agreement, including the aggregate amount of
the Loan. Borrower and the Guarantors may with the prior consent (and approval
as to content) of Lender issue appropriate press releases regarding the
transaction contemplated by this Agreement. To the extent required by law,
Borrower and the Guarantors may include a copy of this Agreement and summary
descriptions transactions contemplated hereby in public disclosure documents.
Subject to the requirements of applicable laws, Borrower and Guarantors will use
their best efforts to provide summary descriptions of this Agreement and the
transactions contemplated hereby in lieu of filing copies of the Agreement.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Agreement effective as of the day
and year first above written.
NETCO ACQUISITION CORP.
By:________________________________
Title:_____________________________
FINOVA CAPITAL CORPORATION
By: ________________________________
Title:______________________________
EXHIBIT A
NOTE
See attached.
SECURED PROMISSORY NOTE
$6,050,000 _______________, 1998
Phoenix, Arizona
FOR VALUE RECEIVED, the undersigned, NETCO ACQUISITION CORP., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of FINOVA CAPITAL
CORPORATION ("Lender"), the principal sum of Six Million Fifty Thousand Dollars
($6,050,000), together with interest on the unpaid principal balance hereof from
time to time outstanding at the rate per annum and on the dates and all as
otherwise provided in that certain Loan and Security Agreement of even date
herewith (the "Loan Agreement") by and between Lender and Borrower.
This Note is the Note referred to in the Loan Agreement, is secured as set
forth in the Loan Agreement, may not be prepaid except as provided in the Loan
Agreement and is entitled to the benefits of the Loan Agreement. All capitalized
terms used in this Note which are not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
All payments of principal and interest on this Note are to be made in
lawful money of the United States of America in immediately available funds,
without setoff, counterclaim or deduction of any nature, at the office of Lender
at 000 Xxxx Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000 (or such other place as the
holder hereof shall designate to Borrower in writing), prior to 12:00 Noon,
local time, on the day when due.
If any payment of principal or interest becomes due on a day which is not
a Business Day, that payment shall be made on the next Business Day unless such
next Business Day falls in another calendar month in which event that payment
shall be made on the next preceding Business Day.
Lender and Borrower intend this Note to comply in all respects with all
provisions of law and not to violate, in any way, any legal limitations on
interest charges. Accordingly, if, for any reason, Borrower is required to pay,
or has paid, interest at a rate in excess of the highest rate of interest which
may be charged by Lender or which Borrower may legally contract to pay under
applicable law (the "Maximum Rate"), then the interest rate shall be deemed to
be reduced, automatically and immediately, to the Maximum Rate, and interest
payable hereunder shall be computed and paid at the Maximum Rate and the portion
of all prior payments of interest in excess of the Maximum Rate shall be deemed
to have been prepayments of the outstanding principal of this Note and applied
to the installments in the inverse order of their maturities.
If Borrower fails to make any payment of principal or interest within ten
(10) days after the payment is due, Borrower shall pay a late charge of five
percent (5%) of the unpaid amount, but in no event more than the maximum amount
permitted by applicable law, and such amount shall be payable upon demand. Such
payment is not interest for the use of money, but is intended to cover Lender's
administrative costs occasioned by such delay.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies contained in the Loan Agreement, including, without
limitation, the right, at its option, to declare all indebtedness under this
Note to be immediately due and payable.
Borrower hereby expressly waives presentment for payment, demand for
payment, notice of dishonor, protest, notice of protest, notice of non-payment,
and all lack of diligence or delays in collection or enforcement of this Note or
the Loan Agreement.
-1-
Lender may extend the time of payment of this Note, postpone the
enforcement hereof, release any Collateral, or grant any other indulgences
whatsoever, without affecting or diminishing Lender's right of recourse against
Borrower, as provided herein and in the Loan Agreement and in the other Loan
Documents, which right is hereby expressly reserved. The failure to assert any
right by Lender shall not be deemed a waiver thereof.
Borrower agrees to pay all costs, fees and expenses of collection,
including, without limitation, Lender's reasonable attorneys' fees and
disbursements, in the event that any action, suit or proceeding is brought by
the holder hereof to collect this Note or if an Event of Default occurs.
THIS NOTE IS DEEMED TO HAVE BEEN MADE IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF, THE STATE OF ARIZONA. BORROWER IRREVOCABLY CONSENTS
THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER UNDER, ARISING OUT OF, OR
IN ANY MANNER RELATING TO THIS NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN ANY STATE COURT OF THE STATE OF ARIZONA LOCATED IN
MARICOPA COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA. BORROWER, BY ITS EXECUTION AND DELIVERY OF THIS NOTE, EXPRESSLY AND
IRREVOCABLY CONSENTS AND SUBMITS TO THE PERSONAL JURISDICTION OF ANY OF SUCH
COURTS IN ANY SUCH ACTION OR PROCEEDING. BORROWER FURTHER AGREES THAT ANY LEGAL
ACTION OR PROCEEDING BORROWER MAY BRING, ARISING OUT OF OR IN ANY MANNER
RELATING TO THIS NOTE, THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS, SHALL
ONLY BE BROUGHT IN ANY STATE COURT OF THE STATE OF ARIZONA LOCATED IN MARICOPA
COUNTY OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA.
BORROWER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS,
NOTICE OR OTHER PROCESS RELATING TO SUCH ACTION OR PROCEEDING BY DELIVERY
THEREOF TO BORROWER IN THE MANNER PROVIDED FOR NOTICES IN THE LOAN AGREEMENT.
BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR DEFENSE IN ANY
SUCH ACTION OR PROCEEDING BASED ON ANY ALLEGED LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. BORROWER SHALL NOT
BE ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY DEFENSE GIVEN OR
ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF ARIZONA, UNLESS SUCH
DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF ARIZONA. NOTHING
HEREIN SHALL AFFECT OR IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF LENDER
TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER IN ANY OTHER
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
IN WITNESS WHEREOF, Borrower has duly executed this Note on the date first
above written.
NETCO ACQUISITION CORP.
By:________________________________
Title:______________________________
Federal Tax Identification No. 00-0000000
-2-
EXHIBIT B
EQUIPMENT
See attached.
EXHIBIT C
PREMISES
-------------------------------------------------------------------------------
ATLANTA SWITCH CHICAGO SWITCH
-------------- --------------
0000 Xxxxxxxx XX 600 S. Federal
Xxxx. 0, Xxxxx 000 Xxxxx 000
Xxxxxxx, Xxxxxxx 30305 Xxxxxxx, Xxxxxxxx 00000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
DALLAS SWITCH HOUSTON SWITCH
------------- --------------
00000 Xxxxxxx Xx. 000 X. Xxxxxx
Xxxx. X Xxxxx X-00
Xxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
LOS ANGELES SWITCH
KANSAS CITY SWITCH 700 S. Flowers
------------------
000 Xxxx 00xx Xxxxxx Xxxxx 000
Xxxxxx Xxxx, Xxxxxxxx 00000 Xxx Xxxxxxx, Xxxxxxxxxx 00000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NEW YORK SWITCH
MIAMI SWITCH 2 World Trade Center
0000 X.X. 00xx Xxxxxxx Xxxxx X0
Xxxxx, Xxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SEATTLE SWITCH
00000 000xx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: NETCO ACQUISITION CORP.
ADDRESS: EQUALNET PLAZA
0000 XXXX XXXXXX XXXX XXXXX
XXXXXXX, XXXXX 00000-0000
DATE: MARCH , 1998
THIS SCHEDULE FORMS AN INTEGRAL PART OF THE LOAN AND SECURITY AGREEMENT BETWEEN
THE ABOVE BORROWER AND FINOVA CAPITAL CORPORATION DATED THE ABOVE DATE, AND ALL
REFERENCES HEREIN AND THEREIN TO "THIS AGREEMENT" SHALL BE DEEMED TO REFER TO
SAID AGREEMENT AND TO THIS SCHEDULE (AS EACH OF THE SAME MAY BE AMENDED,
MODIFIED OR SUPPLEMENTED FROM TIME TO TIME.)
ADDITIONAL DEFINITIONS (SECTION 1.1):
"CORPORATE GUARANTOR(S)" MEANS EQUALNET HOLDING AND EQUALNET CORPORATION.
"GUARANTOR(S)" MEANS THE CORPORATE GUARANTORS AND THE INDIVIDUAL
GUARANTORS.
"INDIVIDUAL GUARANTOR" MEANS XXXXXXX X. XXXXXX.
"INTEREST RATE" MEANS THE INDEX RATE PLUS SIX AND FORTY-TWO HUNDREDTHS
PERCENT (6.42%)T. THE "INDEX RATE" SHALL BE THE HIGHEST YIELD, AS
PUBLISHED IN THE WALL STREET JOURNAL, on the first (1st) Business Day
preceding the Disbursement Date, for Treasury Notes having a maturity date
on or closest to the Maturity Date. Interest shall be calculated on the
basis of a year of 360 days and twelve months of thirty (30) days each and
charged on a daily basis.
XXXXXX@ means that certain Switches and Network Lease Agreement by and
between Borrower and EqualNet Corporation dated March , 1998 as may be
amended, modified or extended.
"MATURITY DATE" means the date upon which the thirty-sixth (36th)
consecutive monthly payment of principal and interest is due.
"OUTSIDE DATE" means March 30, 1998.
THE LOAN (SECTION 2.1):
"PRINCIPAL AMOUNT OF THE LOAN: $6,050,000
USE OF PROCEEDS (SECTION 2.2):
THE PROCEEDS OF THE LOAN SHALL BE USED BY BORROWER SOLELY TO PAY TO XXXXXX
GROUP THE COST OF THE PURCHASE OF THE EQUIPMENT UNDER THE SWITCH AGREEMENT
AND TO PAY CERTAIN SALES TAXES WITH RESPECT THERETO.
PAYMENTS OF PRINCIPAL AND INTEREST (SECTION 2.7.2):
THE LOAN, TOGETHER WITH INTEREST THEREON AT THE INTEREST RATE, SHALL BE
REPAID IN THIRTY-SIX (36) EQUAL CONSECUTIVE MONTHLY PAYMENTS CONSISTING OF
(A) PRINCIPAL AND INTEREST CALCULATED AT THE INTEREST RATE EACH IN AN
AMOUNT WHICH WILL FULLY AMORTIZE SEVENTY PERCENT (70%) OF THE LOAN AT THE
INTEREST RATE OVER THE TERM PLUS (B) INTEREST ON THIRTY PERCENT (30%) OF
THE LOAN CALCULATED AT THE INTEREST RATE. THE REMAINING UNPAID PRINCIPAL
BALANCE OF THE LOAN, PLUS ALL ACCRUED AND UNPAID INTEREST ON THE LOAN
CALCULATED AT THE INTEREST RATE SHALL BE PAYABLE WITH THE THIRTY-SIXTH
(36TH) PAYMENT ON THE MATURITY DATE. THE FIRST SUCH MONTHLY PAYMENT OF
PRINCIPAL AND INTEREST SHALL BE DUE AND PAYABLE ON THE THIRTIETH (30TH)
DAY OF THE MONTH IMMEDIATELY SUCCEEDING THE DISBURSEMENT DATE AND THE
PAYMENTS SHALL CONTINUE ON A LIKE DAY IN EACH AND EVERY MONTH THEREAFTER
THROUGH AND INCLUDING THE MATURITY DATE; PROVIDED THAT IF THE DISBURSEMENT
DATE IS NOT THE THIRTIETH (30TH) DAY OF THE MONTH, BORROWER SHALL PAY, ON
THE THIRTIETH (30TH) DAY OF THE MONTH IN WHICH THE DISBURSEMENT DATE
OCCURS, INTEREST ONLY, AT THE INTEREST RATE, FROM THE DISBURSEMENT DATE TO
THE THIRTIETH (30TH) DAY OF THE MONTH IN WHICH THE DISBURSEMENT DATE
OCCURS. LENDER SHALL COMPUTE THE AMOUNT OF EACH PAYMENT AND ADVISE
BORROWER OF SUCH AMOUNT. THE ENTIRE UNPAID PRINCIPAL BALANCE WHICH WAS NOT
PAYABLE EARLIER, WHETHER DUE TO REGULARLY SCHEDULED PAYMENTS, ACCELERATION
OR OTHERWISE, TOGETHER WITH ANY UNPAID INTEREST, FEES, COSTS AND CHARGES
SHALL BE DUE AND PAYABLE ON THE MATURITY DATE. AFTER THE MATURITY OF ALL
OR ANY PART OF THE LOAN (BY ACCELERATION OR OTHERWISE), INTEREST ON THE
LOAN OR SUCH PART THEREOF SHALL BE DUE AND PAYABLE AT THE DEFAULT RATE ON
DEMAND. CONTEMPORANEOUSLY HEREWITH, LENDER WILL DELIVER TO BORROWER AN
AMORTIZATION SCHEDULE.
PREPAYMENTS (SECTION 2.8):
BORROWER MAY NOT PREPAY THE LOAN, IN WHOLE OR IN PART, PRIOR TO THE FIRST
REGULARLY SCHEDULED PAYMENT DATE OCCURRING AFTER THE EIGHTEENTH (18TH)
MONTH ANNIVERSARY OF THE DISBURSEMENT DATE. BORROWER SHALL HAVE THE RIGHT,
UPON NOT LESS THAN TEN (10) DAYS PRIOR WRITTEN NOTICE TO LENDER, ON ANY
REGULARLY SCHEDULED PAYMENT DATE OCCURRING AFTER THE 18TH MONTH
ANNIVERSARY OF THE DISBURSEMENT DATE (SUBJECT TO THE FOLLOWING TERMS AND
CONDITIONS), TO PREPAY THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN IN
WHOLE, BUT NOT IN PART, PROVIDED THAT BORROWER SHALL PAY TO LENDER,
TOGETHER WITH THE PRINCIPAL BALANCE OF THE LOAN, (I) ALL ACCRUED AND
UNPAID INTEREST ON THE AMOUNT PREPAID THROUGH THE DATE OF PREPAYMENT, (II)
ALL OUTSTANDING FEES, CHARGES AND OTHER AMOUNTS THEN DUE UNDER THE LOAN
DOCUMENTS, AND (III) A PREPAYMENT FEE IN AN AMOUNT EQUAL TO THE PRODUCT OF
(A) THE OUTSTANDING PRINCIPAL BALANCE OF THE LOAN AT THE TIME OF
PREPAYMENT, TIMES (B) IF PREPAYMENT OCCURS (I) AFTER THE 18TH MONTH BUT
PRIOR TO THE 25TH MONTH ANNIVERSARY OF THE DISBURSEMENT DATE THEN 5%; (II)
ON OR AFTER THE 25TH MONTH BUT PRIOR TO THE 31TH MONTH ANNIVERSARY OF THE
DISBURSEMENT DATE THEN 2%; (III) ON OR AFTER THE 31TH MONTH BUT PRIOR TO
THE 36TH MONTH ANNIVERSARY OF THE DISBURSEMENT DATE THEN 1.25%. ONCE
GIVEN, THE NOTICE OF PREPAYMENT SHALL BE IRREVOCABLE. ANY ACCELERATION OF
THE LOAN AS A CONSEQUENCE OF THE OCCURRENCE OF AN EVENT OF DEFAULT SHALL
BE PRESUMED TO BE A MECHANISM TO AVOID THE REQUIREMENTS OF THIS PROVISION
AND SHALL BE DEEMED A PREPAYMENT AND SUBJECT TO THE APPROPRIATE PREPAYMENT
PREMIUM SET FORTH ABOVE, IN ADDITION TO ALL DAMAGES AND OTHER AMOUNTS
OTHERWISE DUE UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. IF THE
LOAN IS ACCELERATED PRIOR TO THE DATE UPON WHICH PREPAYMENT IS PERMITTED
TO BE MADE HEREUNDER, THE APPLICABLE PERCENTAGE SHALL BE 5%.
ADDITIONAL CONDITIONS (SECTION 4.9.5):
THE OBLIGATION OF LENDER TO MAKE THE LOAN HEREUNDER IS SUBJECT TO THE
FULFILLMENT, TO THE SATISFACTION OF LENDER AND ITS COUNSEL, OF EACH OF THE
FOLLOWING CONDITIONS, IN ADDITION TO THE OTHER CONDITIONS SET FORTH IN
ARTICLE 4 ABOVE:
(A) THERE SHALL HAVE BEEN NO MATERIAL ADVERSE CHANGE IN THE BUSINESS,
OPERATIONS OR FINANCIAL CONDITION OF BORROWER OR ANY GUARANTOR OR IN
THE COLLATERAL SINCE DECEMBER 31, 1997.
(B) ADDITIONAL CONDITIONS:
(I) LETTER OF CREDIT. Borrower shall have delivered to Lender, an
Irrevocable Standby Letter of Credit in the face amount of
$2,117,500, issued by a bank satisfactory to Lender,
designating Lender as beneficiary, and otherwise in all
respects in form and substance satisfactory to Lender (the
ALetter of Credit@).
(ii) SWITCH ACQUISITION. Borrower shall have delivered to
Lender a true and correct copy of the Switch Agreement, and
all of the transactions contemplated by the Switch
Agreement shall have been fully consummated, including,
without limitation, the purchase by Borrower from Xxxxxx
Group of all of the Equipment for a purchase price of
$5,850,000 (plus $200,000 to be used solely for the payment
of sales taxes resulting from the Switch Acquisition), free
and clear of all Liens (the "Switch Acquisition"); and
Borrower shall have delivered to Lender evidence of the
foregoing satisfactory to Lender. Netco LLC shall have
contributed to the capital of Borrower all improvements and
upgrades to the Equipment which were financed by Netco LLC.
(iii) MERGER. Borrower shall have delivered to Lender a true and
correct copy of the Merger Agreement, and all of the
transactions contemplated by the Merger Agreement shall have
been fully consummated, including, without limitation, (A) EQ
Acquisition shall have merged with and into Borrower (the
"Merger"), and (B) not less than $1,500,000 of indebtedness of
Netco LLC to Xxxxxx Group and MCM (being the Additional
Working Capital Loans and the Working Capital Loans defined in
the Merger Agreement) shall have been cancelled and converted
into common stock of EqualNet Holding; and Borrower shall have
delivered to Lender evidence of the foregoing satisfactory to
Lender.
(iv) STOCK PURCHASE AGREEMENT. All of the transactions contemplated
by the Stock Purchase Agreement shall be simultaneously
consummated, including, without limitation, the purchase by
Xxxxxx Group of common stock of EqualNet Holding for a cash
purchase price of not less than $4,000,000; and Borrower shall
have delivered to Lender evidence of the foregoing
satisfactory to Lender.
(v) ADDITIONAL CONVERSION. Not less than $1,000,000 of additional
outstanding notes of EqualNet Holding Corp. to the Xxxxxx
Group shall have been cancelled and converted into shares of
common stock of EqualNet Holding; and Borrower shall have
delivered to Lender evidence thereof satisfactory to Lender.
(vi) CONSUMMATION OF OTHER TRANSACTIONS. All other Transactions
(under and as defined in EqualNet Holding=s Proxy Statement
dated February 17, 1998 (the AProxy Statement@)) shall have
been approved by the requisite number of shareholders of
EqualNet Holding and such Transactions shall have been
consummated in accordance with the terms of the Proxy
Statement.
(vii) ASSIGNMENT OF LEASE. Borrower shall execute and deliver an
Assignment of Lease (in form and substance acceptable to
Lender) pursuant to which Borrower assigns all of its right,
title and interest in and to the Lease to Lender and the
Lessee thereunder covenants and agrees that its interest under
the Lease (and the Equipment subject thereto) is subject and
subordinate to the interests of Lender hereunder.
ORGANIZATION AND QUALIFICATION (SECTION 5.1):
Borrower:
State of Organization, etc.: Delaware
States of Qualification, etc.: Texas
Corporate Guarantors:
EqualNet Holding.:
State of Organization, etc. Texas
States of Qualification, etc.: Texas
EqualNet Corporation:
State of Organization, etc. Delaware
States of Qualification, etc.: Delaware
Georgia
Illinois
Texas
Missouri
California
Florida
New York
Washington
LITIGATION (SECTION 5.8): See Exhibit 5.8 attached hereto.
NAMES (SECTION 6.12): None
NOTICES (SECTION 9.9.1)
Address of Notices to Borrower:
Netco Acquisition Corp.
c/o EqualNet Holding Corp.
EqualNet Plaza
0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
Facsimile No. 000-000-0000
Attention: General Counsel
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed and delivered this Schedule effective as of the day
and year first above written.
NETCO ACQUISITION CORP.
By:________________________________
Title:______________________________
Federal Tax Identification No. 00-0000000
FINOVA CAPITAL CORPORATION
By: ________________________________
Title:______________________________
