Exhibit 10.10
PLEDGE AND SECURITY AGREEMENT
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(NET-tel Communications, Inc.)
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement") dated as of July 28, 1999,
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is by and between NET-TEL COMMUNICATIONS, INC., a Delaware corporation
("Debtor"), whose address is 0000 00xx Xxxxxx X.X., Xxxxxxxxxx, X.X. 00000 and
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whose Tax I.D. Number is 00-0000000 and NORTEL NETWORKS INC., a Delaware
corporation ("Secured Party"), as Administrative Agent for the "Lenders", as
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that term is defined below, whose address is 0000 Xxxxxxxx Xxxx., Xxxxxxxxxx,
Xxxxx 00000.
R E C I T A L S:
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A. NET-tel Corporation ("Borrower") is, concurrently herewith, entering
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into that certain Credit Agreement dated as of July 28, 1999, with the lenders
party thereto (each individually a "Lender" and collectively, the "Lenders") and
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Secured Party (such agreement, as it may be amended, renewed, extended,
restated, replaced, substituted, supplemented or otherwise modified from time to
time, is referred to herein as the "Credit Agreement").
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B. Debtor has directly and indirectly benefitted and will directly and
indirectly benefit from the Loans evidenced and governed by the Credit Agreement
and the other transactions evidenced by and contemplated in the Loan Documents
(as defined in the Credit Agreement), and execution and delivery of this
Agreement is necessary and convenient to the conduct, promotion and attainment
of the business of Debtor.
C. The execution and delivery of this Agreement is required by the terms
of the Credit Agreement and is a condition to the availability of the Loans to
Borrower pursuant to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
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Section 1.1 Definitions. As used in this Agreement, the following terms
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have the following meanings:
"Borrower" means NET-tel Corporation, a Florida corporation, with its
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chief executive office located at 0000 00xx Xxxxxx X.X., Xxxxxxxxxx, X.X.
00000.
"Broker" means any "broker," as such term is defined in Article or
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Chapter 8 of the UCC, and in any event shall include, but not be limited
to, any Person defined as a broker or dealer under the federal securities
laws, but without excluding a bank acting in that capacity.
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"Capital Lease Obligations" means, as to the Borrower and its
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Consolidated Subsidiaries, the obligations of such Persons to pay rent or
other amounts under a lease of (or other agreement conveying the right to
use) real and/or personal Property, which obligations are classified as a
capital lease on a balance sheet of such Persons under GAAP. For purposes
of this Agreement, the amount of such Capital Lease Obligations shall be
the capitalized amount thereof, determined in accordance with GAAP.
"Capital Stock" means corporate stock and any and all securities,
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shares, partnership interests, limited partnership interests, limited
liability company interests, membership interests, equity interests,
participations, rights or other equivalents (however designated) of
corporate stock or any of the foregoing issued by any entity (whether a
corporation, a partnership, a limited liability company or another entity)
and includes, without limitation, securities convertible into Capital Stock
and rights or options to acquire Capital Stock.
"Clearing Corporation" means any "clearing corporation," as such term
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is defined in Article or Chapter 8 of the UCC, and in any event shall
include, but not be limited to, any (a) Person that is registered as a
"clearing agency" under the federal securities laws, (b) federal reserve
bank, or (c) other Person that provides clearance or settlement services
with respect to Financial Assets that would require it to register as a
clearing agency under the federal securities laws but for an exclusion or
exemption from the registration requirement, if its activities as a
clearing corporation, including, without limitation, promulgation of rules,
are subject to regulation by a federal or state governmental authority.
"Closing Date" means July 28, 1999, the date of the Credit Agreement.
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"Collateral" means as specified in Section 2.1.
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"Consolidated Subsidiary" means, with respect to any Person, any
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Subsidiary the financial attributes of which are or would be consolidated
with those of such Person in the consolidated financial statements of such
Person in accordance with GAAP.
"Debt" means as to any Person at any time (without duplication): (a)
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all indebtedness, liabilities and obligations of such Person for borrowed
money; (b) all indebtedness, liabilities and obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments; (c) all
indebtedness, liabilities and obligations of such Person to pay the
deferred purchase price of Property or services, except trade accounts
payable of such Person arising in the ordinary course of business that are
not past due by more than 90 days; (d) all Capital Lease Obligations of
such Person; (e) all Debt of others Guaranteed by such Person; (f) all
indebtedness, liabilities and obligations secured by a Lien existing on
Property owned by such Person, whether or not the indebtedness, liabilities
or obligations secured thereby have been assumed by such Person or are non-
recourse to such Person; (g) all reimbursement obligations of such Person
(whether contingent or otherwise) in respect of letters of credit, bankers'
acceptances, surety or other bonds and similar instruments; (h) all
indebtedness, liabilities and obligations of such Person to redeem or
retire shares of Capital Stock of such Person; (i) all indebtedness,
liabilities and obligations of such Person under Interest Rate
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Protection Agreements; and (j) all indebtedness, liabilities and
obligations of such Person in respect of unfunded vested benefits under any
pension plans.
"FCC" means the Federal Communications Commission and any successor
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agency.
"Financial Asset" means any "financial asset," as such term is defined
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in Article or Chapter 8 of the UCC, and in any event shall include, but not
be limited to, any (a) Security, (b) obligation of a Person or a share,
participation or other interest in a Person or in property or an enterprise
of a Person, which is, or is of a type, dealt in or traded on financial
markets, or which is recognized in any area in which it is issued or dealt
in as a medium for investment, and (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article or Chapter 8
of the UCC.
"GAAP" means generally accepted accounting principles, applied on a
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consistent basis, as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants and/or in
statements of the Financial Accounting Standards Board and/or their
respective successors and which are applicable in the circumstances as of
the date in question. Accounting principles are applied on a "consistent
basis" when the accounting principles applied in a current period are
comparable in all material respects to those accounting principles applied
in a preceding period.
"Governmental Authority" means any nation or government, any state,
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provincial or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guarantee" by any Person means any indebtedness, liability or
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obligation, contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any indebtedness, liability or
obligation, direct or indirect, contingent or otherwise, of such Person (a)
to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other indebtedness, liability
or obligation as to the payment thereof or to protect the obligee against
loss in respect thereof (in whole or in part), provided that the term
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Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. The amount of any Guarantee shall be deemed to be
an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee is made or, if not stated or
determinable, the maximum anticipated liability in respect thereof
(assuming such Person is required to perform thereunder).
"Instrument" means any "instrument", as such term is defined in
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Article or Chapter 9 of the UCC, now owned or hereafter acquired by Debtor
which evidences, whether in whole
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or in part, any indebtedness which constitutes a part of the Collateral,
and, in any event, shall include the promissory notes described on Schedule
1 and all other promissory notes, drafts, bills of exchange and trade
acceptances of Debtor which constitute a part of the Collateral, whether
now owned or hereafter acquired.
"Interest Rate Protection Agreements" means, with respect to Borrower,
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an interest rate swap, cap or collar agreement or similar arrangement
between Borrower and one or more Lenders providing for the transfer or
mitigation of interest rate risks either generally or under specified
contingencies.
"Issuer" means any "issuer," as such term is defined in Article or
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Chapter 8 of the UCC, and in any event shall include, but not be limited
to, any Person that, with respect to an obligation on or a defense to a
Security, (a) places or authorizes the placing of its name on a Security
Certificate, other than as authenticating trustee, registrar, transfer
agent or the like, to evidence a share, participation or other interest in
its property or in an enterprise, or to evidence its duty to perform an
obligation represented by the certificate; (b) creates a share,
participation or other interest in its property or in an enterprise, or
undertakes an obligation, that is an Uncertificated Security; (c) directly
or indirectly creates a fractional interest in its rights or property, if
the fractional interest is represented by a Security Certificate; or (d)
becomes responsible for, or in the place of, another Issuer.
"Lien" means, with respect to any Property, any mortgage or deed of
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trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, tax lien, financing statement, pledge, charge, hypothecation or
other lien, charge, easement (other than any easement not materially
impairing usefulness), encumbrance, preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever on
or with respect to such Property (including, without limitation, any
conditional sale or other title retention agreement having substantially
the same economic effect as any of the foregoing).
"Obligations" means the "Obligations," as such term is defined in the
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Credit Agreement, and the obligations, indebtedness and liabilities of
Debtor under this Agreement and any other Loan Document to which Debtor may
be a party, including, without limitation, that certain Guaranty Agreement
dated as of July 28, 1999 executed by Debtor in favor of Secured Party.
"Person" means any individual, corporation, trust, association,
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company, partnership, joint venture, limited liability company, joint stock
company, Governmental Authority or other entity.
"Pledged Collateral" has the meaning specified in Section 4.7(b)(i).
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"Pledged Shares" means all Capital Stock or other equity interests in,
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of or issued by Borrower now or hereafter owned by Debtor, including,
without limitation, the shares of Capital Stock in, of or issued by
Borrower described on Schedule 2.
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"Proceeds" means any "proceeds," as such term is defined in Article or
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Chapter 9 of the UCC and, in any event, shall include, but not be limited
to, (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to Debtor from time to time with respect to any of the
Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to Debtor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Collateral by any Governmental Authority (or any Person acting, or
purporting to act, for or on behalf of any Governmental Authority), and (c)
any and all other amounts from time to time paid or payable under or in
connection with any of the Collateral.
"Property" means property and assets of all kinds, whether real,
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personal or mixed, tangible or intangible (including, without limitation,
all rights relating thereto), whether owned or acquired on or after the
Closing Date.
"Securities Account" means any "securities account," as such term is
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defined in Article or Chapter 8 of the UCC, and in any event shall include,
but not be limited to, any account to which a Financial Asset is or may be
credited in accordance with an agreement under which the Person maintaining
the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise the rights that comprise the Financial
Asset.
"Securities Intermediary" means any "securities intermediary," as such
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term is defined in Article or Chapter 8 of the UCC, and in any event shall
include, but not be limited to, any (a) Clearing Corporation, or (b)
Person, including a bank or Broker, that in the ordinary course of its
business maintains Securities Accounts for others and is acting in that
capacity.
"Security" means any "security," as such term is defined in Article or
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Chapter 8 of the UCC and, in any event, shall include, but not be limited
to, any obligation of an Issuer or a share, participation or other interest
in an Issuer or in property or an enterprise of an Issuer (a) which is
represented by a Security Certificate in bearer or registered form, or the
transfer of which may be registered upon books maintained for that purpose
by or on behalf of the Issuer, (b) which is one of a class or series or by
its terms is divisible into a class or series of shares, participations,
interests or obligations, and (c) which (i) is, or is of a type, dealt in
or traded on securities exchanges or securities markets, or (ii) is a
medium for investment and by its terms expressly provides that it is a
security governed by Article or Chapter 8 of the UCC.
"Security Certificate" means any "security certificate," as such term
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is defined in Article or Chapter 8 of the UCC, and in any event shall
include, but not be limited to, any certificate representing a Security.
"Subsidiary" means, with respect to any Person, any corporation or
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other entity of which at least a majority of the outstanding shares of
stock or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors (or Persons
performing similar functions) of such corporation or entity (irrespective
of whether or not at the time, in the case of a corporation, stock of any
other class or classes
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of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned
or controlled by such Person or one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries.
"UCC" means the Uniform Commercial Code as in effect in the State of
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New York; provided, that if, by applicable law, the perfection or effect of
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perfection or non-perfection of the security interest created hereunder in
any Collateral is governed by the Uniform Commercial Code as in effect on
or after the date hereof in any other jurisdiction, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or the effect of perfection
or non-perfection.
"Uncertificated Security" means any "uncertificated security," as such
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term is defined in Article or Chapter 8 of the UCC, and in any event shall
include, but not be limited to, any Security that is not represented by a
certificate.
Section 1.2 Other Definitional Provisions. Terms used herein that are
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defined in the Credit Agreement and are not otherwise defined herein shall have
the meanings therefor specified in the Credit Agreement. References to
"Sections," "Subsections," "Exhibits" and "Schedules" shall be to Sections,
Subsections, Exhibits and Schedules, respectively, of this Agreement unless
otherwise specifically provided. All definitions contained in this Agreement
are equally applicable to the singular and plural forms of the terms defined.
All references to statutes and regulations shall include any amendments of the
same and any successor statutes and regulations. References to particular
sections of the UCC should be read to refer also to parallel sections of the
Uniform Commercial Code as enacted in each state or other jurisdiction where any
portion of the Collateral is or may be located.
ARTICLE 2
SECURITY INTEREST
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Section 2.1 Security Interest. As collateral security for the prompt
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payment and performance in full when due of the Obligations (whether at stated
maturity, by acceleration or otherwise), Debtor hereby pledges and assigns (as
collateral) to Secured Party, and grants to Secured Party a continuing Lien on
and security interest in, all of Debtor's right, title and interest in and to
the following, whether now owned or hereafter arising or acquired and wherever
located (collectively, the "Collateral"):
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(a) the Pledged Shares and the certificates representing the Pledged
Shares, and all dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed or distributable in respect
of or in exchange for any or all of the Pledged Shares, and all rights,
interests and other property, including, without limitation, general
intangibles, relating to any or all of the Pledged Shares and such dividends,
cash, investments and other property;
(b) all Debt from time to time owed to Debtor by Borrower and/or any
Subsidiary of Borrower and the Instruments evidencing such Debt, and all
interest, cash, instruments and other
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property from time to time received, receivable or otherwise distributed or
distributable in respect of or in exchange for any or all of such Debt;
(c) all proceeds, in cash or otherwise, of any of the property described in
the foregoing clauses (a) through (b) and all liens, security, rights, remedies
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and claims of Debtor with respect thereto; and
(d) all Proceeds and products of any or all of the foregoing.
Section 2.2 Delivery of Collateral. All certificates or instruments
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representing, evidencing or constituting the Pledged Shares, any Instrument or
any other Collateral (now owned or hereafter acquired), promptly upon Debtor
gaining any rights therein, shall be delivered to and held by or on behalf of
Secured Party pursuant hereto in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance reasonably satisfactory to Secured Party. After the
occurrence and during the continuation of an Event of Default, Secured Party
shall have the right at any time to exchange certificates or instruments
representing or evidencing any Pledged Collateral in its possession for
certificates or instruments of smaller or larger denominations.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
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To induce Secured Party to enter into this Agreement, Debtor represents and
warrants to Secured Party that:
Section 3.1 Title. Debtor is, and with respect to Collateral acquired
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after the date hereof Debtor will be, the legal and beneficial owner of the
Collateral free and clear of any Lien or other encumbrance, except for Permitted
Liens and Liens in favor of Secured Party.
Section 3.2 Financing Statements. No financing statement, security
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agreement or other Lien instrument covering all or any part of the Collateral is
on file in any public office, except as may have been filed in favor of Secured
Party pursuant to this Agreement and except for financing statements evidencing
Permitted Liens in favor of Secured Party. Except as may be disclosed on
Schedule 3 hereto, Debtor does not do business and has not done business within
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the past five (5) years under a trade name or any name other than its legal name
set forth at the beginning of this Agreement.
Section 3.3 Principal Place of Business. The principal place of
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business and chief executive office of Debtor, and the office where Debtor keeps
its books and records, is located at the address of Debtor shown at the
beginning of this Agreement.
Section 3.4 Perfection. Upon the filing of Uniform Commercial Code
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financing statements in the jurisdictions listed on Schedule 4 hereto and
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Secured Party's obtaining possession of the Pledged Shares and Security
Certificates of Debtor and the Instruments, the security interest
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in favor of Secured Party created herein will constitute a valid and perfected
Lien upon and security interest in the Collateral, subject to no equal or prior
Liens.
Section 3.5 Pledged Shares and Instruments.
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(a) The Pledged Shares have been duly authorized and validly issued and are
fully paid and nonassessable under the laws of the jurisdiction of incorporation
or organization of Borrower. To the best knowledge of Debtor, the Instruments
have been duly authorized and validly issued by Borrower and constitute legally
enforceable indebtedness of Borrower.
(b) Debtor is the legal and beneficial owner of the Pledged Shares and the
Instruments, free and clear of any Lien (other than the Lien created by this
Agreement), and Debtor has not sold, granted any option with respect to,
assigned, transferred or otherwise disposed of any of its rights or interest in
or to the Pledged Shares or the Instruments.
(c) On the date hereof, the Pledged Shares constitute the percentage of the
issued and outstanding shares of Capital Stock of Borrower indicated on Schedule
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2, as such Schedule 2 may from time to time be supplemented, amended or
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modified.
Section 3.6 Consideration. Debtor expects to derive substantial benefit
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(and Debtor may reasonably be expected to derive substantial benefit), directly
and indirectly, from the Loans and the other transactions contemplated by the
Credit Agreement. Debtor will receive reasonably equivalent value in exchange
for the Collateral being provided by it pursuant to the Loan Documents to which
it is a party as security for the payment and performance of the Obligations.
ARTICLE 4
COVENANTS
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Debtor covenants and agrees with Secured Party that until the Obligations
are paid and performed in full and all Commitments under the Credit Agreement
have expired or have been terminated:
Section 4.1 Encumbrances. Debtor shall not create, permit or suffer to
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exist, and shall defend the Collateral against, any Lien or other encumbrance on
the Collateral except for those Permitted Liens (if any) which are permitted to
attach to the Collateral in accordance with the Credit Agreement, and shall
defend Debtor's rights in the Collateral and Secured Party's pledge and
collateral assignment of and security interest in the Collateral against the
claims and demands of all Persons. Debtor shall do nothing to impair the rights
of Secured Party in the Collateral.
Section 4.2 Disposition of Collateral. Except as expressly permitted by
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the terms of the Credit Agreement, Debtor shall not sell, lease, assign (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, the Collateral or any part thereof without the prior written consent
of Secured Party.
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Section 4.3 Further Assurances. At any time and from time to time, upon
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the request of Secured Party, and at the sole expense of Debtor, Debtor shall
promptly execute and deliver all such further agreements, documents and
instruments and take such further action as Secured Party may reasonably deem
necessary or appropriate to preserve and perfect its security interest in and
pledge and collateral assignment of the Collateral and carry out the provisions
and purposes of this Agreement or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral,
and, to the extent any of the Collateral at any time constitutes Investment
Property, then Debtor shall cause Secured Party to obtain "control," as defined
in Article or Chapter 8 of the UCC, of such Collateral in one (or more, if
Secured Party reasonably so requests) of the manners prescribed in Section 8-106
of the UCC. Debtor and Secured Party agree that the grant of the security
interest in the Investment Property pursuant to this Agreement shall have the
effect of a delivery of such securities to Secured Party pursuant to Section 8-
301 of the UCC, and the effect of a taking of delivery by Secured Party of such
Collateral in accordance with Section 8-302 of the UCC. Except as otherwise
expressly permitted by the terms of the Credit Agreement relating to disposition
of assets and except for Permitted Liens, Debtor agrees to defend the title to
the Collateral and the Lien thereon of Secured Party against the claim of any
other Person and to maintain and preserve such Lien. Without limiting the
generality of the foregoing, Debtor shall (a) execute and deliver to Secured
Party such financing statements as Secured Party may from time to time require;
(b) deliver and pledge to Secured Party all Instruments of Debtor with any
necessary endorsements; and (c) execute and deliver to Secured Party such other
agreements, documents and instruments as Secured Party may reasonably require to
perfect and maintain the validity, effectiveness and priority of the Liens
intended to be created by the Loan Documents. Debtor authorizes Secured Party
to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
Debtor where permitted by law. A carbon, photographic or other reproduction of
this Agreement or of any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement and may be filed as a
financing statement.
Section 4.4 Entity Maintenance and Changes. Debtor shall preserve and
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maintain its entity existence. Debtor shall not change its name, identity or
corporate structure in any manner that might make any financing statement filed
in connection with this Agreement seriously misleading unless Debtor shall have
given Secured Party thirty (30) days prior written notice thereof and shall have
taken all action deemed necessary or appropriate by Secured Party to protect its
Liens and the perfection and priority thereof. Debtor shall not change its
principal place of business, chief executive office or the place where it keeps
its books and records unless (except in the event of casualty or other
legitimate emergency which necessitates such a change, in which event Debtor
shall give Secured party prompt written notice of such change) it shall have
given Secured Party thirty (30) days prior written notice thereof and shall have
taken all action deemed necessary or reasonably appropriate by Secured Party to
cause its security interest in the Collateral to be perfected with the priority
required by this Agreement.
Section 4.5 Books and Records; Information. Debtor shall keep accurate
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and complete books and records of the Collateral and Debtor's business and
financial condition in accordance with GAAP. Debtor shall from time to time at
the request of Secured Party deliver to Secured Party such information regarding
the Collateral and Debtor as Secured Party may reasonably request, including,
without limitation, lists and descriptions of the Collateral and evidence of the
identity and existence
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of the Collateral. To the extent required by Section 4.4 of this Agreement,
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Debtor shall xxxx its books and records to reflect the security interest of
Secured Party under this Agreement.
Section 4.6 Notification. Debtor shall promptly notify Secured Party of
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(a) any Lien, encumbrance or claim (other than Permitted Liens) that has
attached to or been made or asserted against any of the Collateral, (b) any
material change in any of the Collateral, including, without limitation, any
material damage to or loss of Collateral and (c) the occurrence of any other
event or condition (including, without limitation, matters as to Lien priority)
that could reasonably be expected to have a material adverse effect on the
Collateral or the security interest created hereunder.
Section 4.7 Voting Rights; Distributions, Etc.
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(a) So long as no Event of Default or, if and to the extent provided below,
Default shall have occurred and be continuing:
(i) Debtor shall be entitled to exercise any and all voting and other
consensual rights (including, without limitation, the right to give
consents, waivers and notifications in respect of any of the Pledged
Collateral) pertaining to any of the Pledged Collateral or any part
thereof; provided, however, that without the prior written consent of
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Secured Party, no vote shall be cast or consent, waiver or ratification
given or action taken which would (A) be inconsistent with or violate any
provision of this Agreement or any other Loan Document or (B) amend, modify
or waive any term, provision or condition of the partnership agreement,
certificate of incorporation, by-laws, certificate of formation, operating
agreement or other charter document or other agreement relating to,
evidencing, providing for the issuance of or securing any Collateral; and
provided further that Debtor shall give Secured Party at least five (5)
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Business Days' prior written notice in the form of an officer's certificate
of the manner in which it intends to exercise, or the reasons for
refraining from exercising, any voting or other consensual rights
pertaining to the Collateral or any part thereof which might have a
material adverse effect on the value of the Collateral or any part thereof;
and
(ii) Unless a Default or an Event of Default shall have occurred and
be continuing, Debtor shall be entitled to receive and retain any and all
dividends and interest paid in respect of any of the Collateral to the
extent permitted by the Credit Agreement; provided, however, that any and
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all
(A) Restricted Payments paid or payable in violation of Section
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9.4 of the Credit Agreement,
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(B) Restricted Payments paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any
Collateral,
(C) Restricted Payments hereafter paid or payable in cash in
respect of any Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus, and
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(D) cash paid, payable or otherwise distributed in redemption of,
or in exchange for, any Collateral,
shall be, and shall be forthwith delivered to Secured Party to hold as,
Collateral and shall, if received by Debtor, be received in trust for the
benefit of Secured Party, be segregated from the other property or funds of
Debtor and be forthwith delivered to Secured Party as Collateral in the
same form as so received (with any necessary endorsement). All amounts
(other than amounts described in clauses (ii) (A)-(D) above which shall not
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be released to Debtor) received by Secured Party in respect of any Pledged
Collateral shall be either (1) promptly released to Debtor, so long as no
Default or Event of Default shall have occurred and be continuing or (2) if
any Default or Event of Default shall have occurred and be continuing, held
by Secured Party and (if an Event of Default shall have occurred and be
continuing) applied as provided by the Credit Agreement. During the
continuance of any Default, any dividends, interest or other distributions
(whether in cash, securities, property or otherwise) received by Debtor
with respect to any Pledged Collateral shall be held by Debtor in trust for
the benefit of Secured Party and, upon the request of Secured Party, shall
be delivered promptly to Secured Party to hold as Collateral or shall be
applied by Secured Party toward payment of the Obligations, as Secured
Party may in its discretion determine. If such Default is waived or cured
to the satisfaction of Secured Party, any such distributions (except those
of the types described in clauses (ii)(A-D) above which shall not be
-----------------
released to Debtor) shall be returned promptly to Debtor (provided that no
other Default or Event of Default exists). If such Default remains uncured
and becomes an Event of Default, any such distributions will be applied by
Secured Party as provided in the Credit Agreement.
(b) Upon the occurrence and during the continuance of an Event of Default
or, if and to the extent provided below, a Default:
(i) Secured Party may, without notice to Debtor, transfer or register
in the name of Secured Party or any of its nominees any or all of the
Collateral described in Section 2.1(a) or Section 2.1(b), the proceeds
-------------- --------------
thereof (in cash or otherwise) and all liens, security, rights, remedies
and claims of Debtor with respect thereto (collectively, the "Pledged
-------
Collateral") held by Secured Party hereunder, and Secured Party or its
----------
nominee may thereafter, after delivery of notice to Debtor, exercise all
voting and corporate rights at any meeting of any corporation, partnership
or other business entity issuing any of the Pledged Collateral and any and
all rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Pledged Collateral as if it
were the absolute owner thereof, including, without limitation, the right
to exchange at its discretion any and all of the Pledged Collateral upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of any corporation, partnership or other business entity
issuing any of such Pledged Collateral or upon the exercise by any such
issuer or Secured Party of any right, privilege or option pertaining to any
of the Pledged Collateral, and in connection therewith, to deposit and
deliver any and all of the Pledged Collateral with any committee,
depositary, transfer agent, registrar or other designated agency upon such
terms and conditions as it may determine, all without liability except to
account for property actually received by it but Secured Party shall have
no duty to exercise any of the aforesaid
Page 11
rights, privileges or options, and Secured Party shall not be responsible
for any failure to do so or delay in so doing.
(ii) All rights of Debtor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to Section
-------
4.7(a)(i) and to receive the dividends, interest and other distributions
---------
which it would otherwise be authorized to receive and retain pursuant to
Section 4.7(a)(ii) shall be suspended until such Default or Event of
------------------
Default (as applicable) shall no longer exist, and all such rights shall,
until such Default or Event of Default (as applicable) shall no longer
exist, thereupon become vested in Secured Party which shall thereupon have
the sole right to exercise such voting and other consensual rights and to
receive and hold as Collateral such dividends, interest and other
distributions.
(iii) All dividends, interest and other distributions which are
received by Debtor contrary to the provisions of this Section 4.7(b) shall
--------------
be received in trust for the benefit of Secured Party, shall be segregated
from other funds of Debtor, and shall be forthwith paid over to Secured
Party as Collateral in the same form as so received (with any necessary
endorsement).
(iv) Debtor shall execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies and other instruments as
Secured Party may reasonably request for the purpose of enabling Secured
Party to exercise the voting and other rights which it is entitled to
exercise pursuant to this Section 4.7(b) and to receive the dividends,
--------------
interest and other distributions which it is entitled to receive and retain
pursuant to this Section 4.7(b). The foregoing shall not in any way limit
--------------
Secured Party's power and authority granted pursuant to Section 5.1.
-----------
4.8 Transfers and Other Liens; Additional Investments.
-------------------------------------------------
(a) Except as may be expressly permitted by the terms of the Credit
Agreement, Debtor shall not grant any option with respect to, exchange, sell or
otherwise dispose of any of the Collateral or create or permit to exist any Lien
upon or with respect to any of the Collateral except for the Liens created
hereby.
(b) Debtor agrees that it will (i) cause each issuer of any of the Pledged
Collateral not to issue any Capital Stock, notes or other securities or
instruments in addition to or in substitution for any of the Pledged Collateral,
except, with the written consent of Secured Party, to Debtor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all such Capital Stock, notes or other securities or instruments, and
(iii) promptly (and in any event within three Business Days) deliver to Secured
Party an Amendment, duly executed by Debtor, in substantially the form of
Exhibit A (an "Amendment"), in respect of such Capital Stock, notes or other
--------- ---------
securities or instruments, together with all certificates, notes or other
securities or instruments representing or evidencing the same. Debtor hereby
(A) authorizes Secured Party to attach each Amendment to this Agreement, (B)
agrees that all such Capital Stock, notes or other securities or instruments
listed on any Amendment delivered to Secured Party shall for all purposes
hereunder constitute Pledged Collateral, and (iii) is deemed to have made, upon
such delivery, the representations and warranties contained in Article III with
-----------
respect to such Pledged Collateral.
Page 12
Section 4.9 Possession; Reasonable Care. Regardless of whether a
---------------------------
Default or an Event of Default has occurred or is continuing, Secured Party
shall have the right to hold in its possession all Pledged Collateral pledged,
assigned or transferred hereunder and from time to time constituting a portion
of the Collateral. Secured Party may, from time to time, in its sole
discretion, appoint one or more agents (which in no case shall be Debtor or an
Affiliate of Debtor) to hold physical custody, for the account of Secured Party,
of any or all of the Collateral. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which Secured Party accords its own property, it being understood that
Secured Party shall not have any responsibility for (a) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not Secured Party has or is
deemed to have knowledge of such matters, or (b) taking any necessary steps to
preserve rights against any parties with respect to any Collateral. Following
the occurrence and during the continuance of an Event of Default, Secured Party
shall be entitled to take possession of the Collateral.
Section 4.10 Constitutional Documents. Debtor will not agree or consent
------------------------
to or implement or permit any termination, amendment, modification, supplement
or waiver of the articles of incorporation, bylaws or other constitutional
documents of Debtor; provided, however, that Debtor may amend, modify or
-------- -------
supplement the foregoing if and to the extent that such amendment or
modification is not adverse to Borrower, Debtor, Secured Party or any Lender.
Debtor will deliver to Secured Party, promptly after the execution thereof, a
true and correct copy of each and every amendment, modification or supplement to
any one or more of the articles of incorporation, bylaws or other constitutional
documents of Debtor.
ARTICLE 5
Rights of Secured Party
-----------------------
Section 5.1 Power of Attorney. Debtor hereby irrevocably constitutes
-----------------
and appoints Secured Party and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the name of Debtor or in its own name, to take after the
occurrence and during the continuance of an Event of Default, any and all action
and to execute any and all documents and instruments which Secured Party at any
time and from time to time deems necessary or desirable to accomplish the
purposes of this Agreement and, without limiting the generality of the
foregoing, Debtor hereby gives Secured Party the power and right on behalf of
Debtor and in its own name to do any of the following after the occurrence and
during the continuance of an Event of Default, without notice to or the consent
of Debtor:
(a) to demand, xxx for, collect or receive, in the name of Debtor or in its
own name, any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral and, in connection therewith, endorse
checks, notes, drafts, acceptances, money orders, documents of title or any
other instruments for the payment of money under the Collateral or any policy of
insurance;
(b) to pay or discharge taxes, Liens or other encumbrances levied or placed
on or threatened against the Collateral;
Page 13
(c) (i) to direct account debtors and any other parties liable for any
payment under any of the Collateral to make payment of any and all monies due
and to become due thereunder directly to Secured Party or as Secured Party shall
direct; (ii) to receive payment of and receipt for any and all monies, claims
and other amounts due and to become due at any time in respect of or arising out
of any Collateral; (iii) to sign and endorse any drafts against debtors,
assignments, proxies, stock powers, verifications and notices in connection with
accounts and other documents relating to the Collateral; (iv) to commence and
prosecute any suit, action or proceeding at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral; (v) to defend any suit,
action or proceeding brought against Debtor with respect to any Collateral; (vi)
to settle, compromise or adjust any suit, action or proceeding described above
and, in connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (vii) to exchange any of the Collateral for other
property upon any merger, consolidation, reorganization, recapitalization or
other readjustment of the issuer thereof and, in connection therewith, deposit
any of the Collateral with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms as Secured Party may determine;
(viii) to add or release any guarantor, indorser, surety or other party to any
of the Collateral; (ix) to renew, extend or otherwise change the terms and
conditions of any of the Collateral; (x) to make, settle, compromise or adjust
any claims under or pertaining to any of the Collateral (including claims under
any policy of insurance); and (xi) to sell, transfer, pledge, convey, make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof for all
purposes, and to do, at Secured Party's option and Debtor's expense, at any
time, or from time to time, all acts and things which Secured Party deems
necessary to protect, preserve, maintain, or realize upon the Collateral and
Secured Party's security interest therein.
This power of attorney is a power coupled with an interest and shall be
irrevocable until this Agreement is terminated in accordance with its terms.
Secured Party shall be under no duty to exercise or withhold the exercise of any
of the rights, powers, privileges and options expressly or implicitly granted to
Secured Party in this Agreement, and shall not be liable for any failure to do
so or any delay in doing so. Neither Secured Party nor any Person designated by
Secured Party shall be liable for any act or omission or for any error of
judgment or any mistake of fact or law. This power of attorney is conferred on
Secured Party solely to protect, preserve, maintain and realize upon its
security interest in the Collateral. Secured Party shall not be responsible for
any decline in the value of the Collateral and shall not be required to take any
steps to preserve rights against prior parties or to protect, preserve or
maintain any Lien given to secure the Collateral.
Section 5.2 Set-off. If an Event of Default shall have occurred and be
-------
continuing, each of Secured Party and the Lenders shall have the right to set-
off and apply against the Obligations, at any time and without notice to Debtor,
any and all deposits (general or special, time or demand, provisional or final)
or other sums at any time credited by or owing from any of Secured Party or the
Lenders to Debtor and although such Obligations may be unmatured. The rights
and remedies of Secured Party and the Lenders hereunder are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that Secured Party and the Lenders may have.
Section 5.3 Assignment by Secured Party. In accordance with the
---------------------------
provisions of the Credit Agreement, any of Secured Party and the Lenders may at
any time assign or otherwise transfer all
Page 14
or any portion of its rights and obligations under this Agreement and the other
Loan Documents (including, without limitation, the Obligations), in connection
with an assignment of the Obligations, to any other Person, and such other
Person shall thereupon become vested with all the benefits thereof granted to
Secured Party and the Lenders, respectively, herein or otherwise.
Section 5.4 Performance by Secured Party. If Debtor shall fail to
----------------------------
perform any covenant or agreement contained in this Agreement, Secured Party may
perform or attempt to perform such covenant or agreement on behalf of Debtor.
In such event, Debtor shall, at the request of Secured Party, promptly pay any
amount expended by Secured Party in connection with such performance or
attempted performance to Secured Party, together with interest thereon at the
Default Rate from and including the date of such expenditure to but excluding
the date such expenditure is paid in full. Notwithstanding the foregoing, it is
expressly agreed that Secured Party shall not have any liability or
responsibility for the performance of any indebtedness, liability or obligation
of Debtor under this Agreement.
ARTICLE 6
Default
Section 6.1 Rights and Remedies. If an Event of Default shall have
-------------------
occurred and be continuing, Secured Party shall have the following rights and
remedies (subject to Section 6.3):
-----------
(a) In addition to all other rights and remedies granted to Secured Party
in this Agreement or in any other Loan Document or by applicable law, Secured
Party shall have all of the rights and remedies of a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) and Secured Party
may also, without notice except as specified below, sell the Collateral or any
part thereof in one or more parcels at public or private sale, at any exchange,
broker's board or at any of Secured Party's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as Secured Party may
deem commercially reasonable or otherwise as may be permitted by law. Without
limiting the generality of the foregoing, Secured Party may (i) without demand
or notice to Debtor, collect, receive or take possession of the Collateral or
any part thereof and for that purpose Secured Party may enter upon any premises
on which the Collateral is located and remove the Collateral therefrom or render
it inoperable, and/or (ii) sell, lease or otherwise dispose of the Collateral,
or any part thereof, in one or more parcels at public or private sale or sales,
at Secured Party's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as Secured Party may deem commercially
reasonable or otherwise as may be permitted by law. Secured Party shall have the
right at any public sale or sales, and, to the extent permitted by applicable
law, at any private sale or sales, to bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) and become a purchaser of the
Collateral or any part thereof free of any right or equity of redemption on the
part of Debtor, which right or equity of redemption is hereby expressly waived
and released by Debtor. Upon the request of Secured Party, Debtor shall
assemble the Collateral and make it available to Secured Party at any place
designated by Secured Party that is reasonably convenient to Debtor and Secured
Party. Debtor agrees that Secured Party shall not be obligated to give more
than five (5) days prior written notice of the time and place of any public sale
or of the time after which any private sale may take place and that such notice
shall constitute reasonable notice of such matters. Secured Party shall not be
obligated to make any sale
Page 15
of Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of Collateral may have been given. Secured Party may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. Debtor shall be liable for all expenses of
retaking, holding, preparing for sale or the like, and all attorneys' fees,
legal expenses and other costs and expenses incurred by Secured Party in
connection with the collection of the Obligations and the enforcement of Secured
Party's rights under this Agreement. Debtor shall remain liable for any
deficiency if the Proceeds of any sale or other disposition of the Collateral
applied to the Obligations are insufficient to pay the Obligations in full.
Secured Party may apply the Collateral against the Obligations in such order and
manner as Secured Party may elect in its sole discretion. Debtor waives all
rights of marshaling, valuation and appraisal in respect of the Collateral. Any
cash held by Secured Party as Collateral and all cash proceeds received by
Secured Party in respect of any sale of, collection from or other realization
upon all or any part of the Collateral may, in the discretion of Secured Party,
be held by Secured Party as collateral for, and then or at any time thereafter
applied in whole or in part by Secured Party against, the Obligations in such
order as Secured Party shall select. Any surplus of such cash or cash proceeds
and interest accrued thereon, if any, held by Secured Party and remaining after
payment in full of all the Obligations shall be paid over to Debtor or to
whoever may be lawfully entitled to receive such surplus; provided that Secured
-------- ----
Party shall have no obligation to invest or otherwise pay interest on any
amounts held by it in connection with or pursuant to this Agreement.
(b) Secured Party may cause any or all of the Collateral held by it to be
transferred into the name of Secured Party or the name or names of Secured
Party's nominee or nominees.
(c) Secured Party may exercise any and all rights and remedies of Debtor
under or in respect of the Collateral, including, without limitation, any and
all rights of Debtor to demand or otherwise require payment of any amount under,
or performance of any provision of, any of the Collateral and any and all voting
rights and corporate powers in respect of the Collateral.
(d) Secured Party may collect or receive all money or property at any time
payable or receivable on account of or in exchange for any of the Collateral,
but shall be under no obligation to do so.
(e) On any sale of the Collateral, Secured Party is hereby authorized to
comply with any limitation or restriction with which compliance is necessary, in
the view of Secured Party's counsel, in order to avoid any violation of
applicable law or in order to obtain any required approval of the purchaser or
purchasers by any applicable Governmental Authority.
Section 6.2 Registration Rights, Private Sales, Etc.
---------------------------------------
(a) If Secured Party shall determine to exercise its right to sell all or
any of the Collateral pursuant to Section 6.1, Debtor agrees that, upon the
-----------
request of Secured Party (which request may be made by Secured Party in its sole
discretion), Debtor will, at its own expense:
Page 16
(i) execute and deliver, and cause each issuer of any of the
Collateral contemplated to be sold and the directors and officers thereof
to execute and deliver, all such agreements, documents and instruments, and
do or cause to be done all such other acts and things, as may be necessary
or, in the opinion of Secured Party, advisable to register such Collateral
under the provisions of the Securities Act (as hereinafter defined) and to
cause the registration statement relating thereto to become effective and
to remain effective for such period as prospectuses are required by law to
be furnished and to make all amendments and supplements thereto and to the
related prospectus which, in the opinion of Secured Party, are necessary or
advisable, all in conformity with the requirements of the Securities Act
and the rules and regulations of the Securities and Exchange Commission
applicable thereto;
(ii) if reasonably necessary or, in the reasonable opinion of
Secured Party, advisable, use its best efforts to qualify such Collateral
under all applicable state securities or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of such Collateral, as
requested by Secured Party;
(iii) if reasonably necessary or, in the reasonable opinion of
Secured Party, advisable, cause each such issuer to make available to its
security holders, as soon as practicable, an earnings statement which will
satisfy the provisions of Section 11(a) of the Securities Act;
(iv) do or cause to be done all such other acts and things as may be
reasonably necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law; and
(v) bear all reasonable costs and expenses, including reasonable
attorneys' fees, of carrying out its obligations under this Section 6.2.
-----------
(b) Debtor recognizes that Secured Party may be unable to effect a public
sale of any or all of the Collateral by reason of certain prohibitions contained
in the Securities Act of 1933, as amended from time to time (the "Securities
----------
Act") and applicable state securities laws but may be compelled to resort to one
---
or more private sales thereof to a restricted group of purchasers who will be
obliged to agree, among other things, to acquire such Collateral for their own
account for investment and not with a view to the distribution or resale
thereof. Debtor acknowledges and agrees that any such private sale may result
in prices and other terms less favorable to the seller than if such sale were a
public sale and, notwithstanding such circumstances, agrees that any such
private sale shall, to the extent permitted by law, be deemed to have been made
in a commercially reasonable manner. Neither Secured Party nor the Lenders
shall be under any obligation to delay a sale of any of the Collateral for the
period of time necessary to permit the issuer of such securities to register
such securities under the Securities Act or under any applicable state
securities laws, even if such issuer would agree to do so.
(c) Debtor further agrees to do or cause to be done, to the extent that
Debtor may do so under applicable law, all such other acts and things as may be
necessary to make such sales or resales of any portion or all of the Collateral
valid and binding and in compliance with any and all applicable laws,
regulations, orders, writs, injunctions, decrees or awards of any and all
courts,
Page 17
arbitrators or governmental instrumentalities, domestic or foreign,
having jurisdiction over any such sale or sales, all at Debtor's expense.
Debtor further agrees that a breach of any of the covenants contained in this
Section 6.2 will cause irreparable injury to Secured Party and the Lenders and
-----------
that Secured Party and the Lenders have no adequate remedy at law in respect of
such breach and, as a consequence, agrees that each and every covenant contained
in this Section 6.2 shall be specifically enforceable against Debtor, and Debtor
-----------
hereby waives and agrees, to the fullest extent permitted by law, not to assert
as a defense against an action for specific performance of such covenants that
(i) Debtor's failure to perform such covenants will not cause irreparable injury
to Secured Party and the Lenders or (ii) Secured Party and the Lenders have an
adequate remedy at law in respect of such breach. Debtor further acknowledges
the impossibility of ascertaining the amount of damages which would be suffered
by Secured Party and the Lenders by reason of a breach of any of the covenants
contained in this Section 6.2 and, consequently, agrees that, if Debtor shall
-----------
breach any of such covenants and Secured Party or any Lender shall xxx for
damages for such breach, Debtor shall pay to Secured Party or such Lender, as
liquidated damages and not as a penalty, an aggregate amount equal to the value
of the Collateral on the date Secured Party or such Lender shall demand
compliance with this Section 6.2.
-----------
(d) DEBTOR HEREBY AGREES TO INDEMNIFY, PROTECT AND SAVE HARMLESS SECURED
PARTY AND THE LENDERS AND ANY CONTROLLING PERSONS THEREOF WITHIN THE MEANING OF
THE SECURITIES ACT FROM AND AGAINST ANY AND ALL LIABILITIES, SUITS, CLAIMS,
COSTS AND EXPENSES (INCLUDING REASONABLE COUNSEL FEES AND DISBURSEMENTS) ARISING
UNDER THE SECURITIES ACT, THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED,
ANY APPLICABLE STATE SECURITIES STATUTE, OR AT COMMON LAW, OR PURSUANT TO ANY
OTHER APPLICABLE LAW IN CONNECTION WITH THE SALE OF ANY SECURITIES OR THE
EXERCISE OF ANY OTHER RIGHT OR REMEDY OF SECURED PARTY, INSOFAR AS SUCH
LIABILITIES, SUITS, CLAIMS, COSTS AND EXPENSES ARISE OUT OF, OR ARE BASED UPON,
ANY UNTRUE STATEMENT OR ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT MADE IN
WRITING BY DEBTOR OR ANY OF ITS SUBSIDIARIES IN CONNECTION WITH THE SALE OR
PROPOSED SALE OF ANY PART OF THE COLLATERAL, OR ARISES OUT OF, OR IS BASED UPON,
THE OMISSION OR ALLEGED OMISSION BY DEBTOR OR ANY OF ITS SUBSIDIARIES TO STATE A
MATERIAL FACT REQUIRED TO BE STATED IN CONNECTION THEREWITH OR NECESSARY TO MAKE
THE STATEMENTS MADE NOT MISLEADING; PROVIDED, HOWEVER, THAT DEBTOR SHALL NOT BE
-------- -------
LIABLE IN ANY SUCH CASE TO THE EXTENT THAT ANY SUCH LIABILITIES, SUITS, CLAIMS,
COSTS AND EXPENSES ARISE OUT OF, OR ARE BASED UPON, ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OR OMISSION OR ALLEGED OMISSION MADE IN RELIANCE UPON
AND IN CONFORMITY WITH WRITTEN INFORMATION FURNISHED TO DEBTOR BY SECURED PARTY
OR ANY LENDER SPECIFICALLY FOR INCLUSION IN CONNECTION THEREWITH. THE FOREGOING
INDEMNITY AGREEMENT IS IN ADDITION TO ANY INDEBTEDNESS, LIABILITY OR OBLIGATION
THAT DEBTOR MAY OTHERWISE HAVE TO SECURED PARTY OR ANY SUCH LENDER OR ANY SUCH
CONTROLLING PERSON.
Page 18
Section 6.3 Compliance with Laws. Notwithstanding anything to the
--------------------
contrary contained in any Loan Document or in any other agreement, instrument or
document executed by Debtor and delivered to Secured Party, Secured Party will
not take any action pursuant to this Agreement any document referred to herein
which would constitute or result in any assignment of any FCC license or any
change of control (whether de jure or de facto) of Debtor if such assignment of
any FCC license or change of control would require, under then existing law, the
prior approval of the FCC or any other Governmental Authority without first
obtaining such prior approval of the FCC or other Governmental Authority. Upon
the occurrence of an Event of Default or at any time thereafter during the
continuance thereof, subject to the terms and conditions of this Agreement,
Debtor agrees to take any action which Secured Party may reasonably request in
order to obtain from the FCC or such other Governmental Authority such approval
as may be necessary to enable Secured Party to exercise and enjoy the full
rights and benefits granted to Secured Party by this Agreement and the other
documents referred to above, including specifically, at the cost and expense of
Debtor, the use of reasonable efforts to assist in obtaining approval of the FCC
or such other Governmental Authority for any action or transaction contemplated
by this Agreement for which such approval is or shall be required by law, and
specifically, without limitation, upon request, to prepare, sign and file with
the FCC or such other Governmental Authority the assignor's or transferor's
portion of any application or applications for consent to the assignment of
license or transfer of control necessary or appropriate under the FCC's or such
other Governmental Authority's rules and regulations for approval of (a) any
sale or other disposition of the Collateral by or on behalf of Secured Party, or
(b) any assumption by Secured Party of voting rights in the Collateral effected
in accordance with the terms of this Agreement.
ARTICLE 7
Miscellaneous
-------------
Section 7.1 No Waiver; Cumulative Remedies. No failure on the part of
------------------------------
Secured Party to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies provided for in this Agreement are cumulative and not
exclusive of any rights and remedies provided by law.
Section 7.2 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of Debtor and Secured Party and their respective heirs,
successors and permitted assigns, except that Debtor may not assign any of its
rights, indebtedness, liabilities or obligations under this Agreement without
the prior written consent of Secured Party.
Section 7.3 Entire Agreement; Amendment . THIS AGREEMENT EMBODIES THE
----------------------------
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
Page 19
AGREEMENTS AMONG THE PARTIES HERETO. The provisions of this Agreement may be
amended or waived only by an instrument in writing signed by the parties hereto,
except as provided in Section 4.8(b).
--------------
Section 7.4 Notices. All notices and other communications provided for
-------
in this Agreement shall be given or made by telecopy or in writing and
telecopied, mailed by certified mail return receipt requested or delivered to
the intended recipient at the "Address for Notices" specified below its name on
the signature pages hereof; or, as to any party at such other address as shall
be designated by such party in a notice to the other party given in accordance
with this Section 7.4. Except as otherwise provided in this Agreement, all such
-----------
communications shall be deemed to have been duly given when transmitted by
telecopy or when personally delivered or, in the case of a mailed notice, three
(3) Business Days after deposit in the mails, in each case given or addressed as
aforesaid; provided, however, that notices to Secured Party shall be deemed
-------- -------
given when received by Secured Party.
Section 7.5 Governing Law; Submission to Jurisdiction; Service of
-----------------------------------------------------
Process. EXCEPT AS MAY BE EXPRESSLY STATED TO THE CONTRARY IN THE CREDIT
-------
AGREEMENT, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES) AND EACH OF THE PARTIES HERETO CHOOSES THE LAWS OF THE STATE OF NEW
YORK TO GOVERN THIS AGREEMENT PURSUANT TO N.Y. GEN. OBLIG. LAW SECTION 5-1401
(CONSOL. 1995) AND APPLICABLE LAWS OF THE U.S. DEBTOR HEREBY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF EACH OF (1) THE U.S. DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, (2) ANY NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK, (3) THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS,
AND (4) ANY TEXAS STATE COURT SITTING IN DALLAS, COUNTY, TEXAS, FOR THE PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. DEBTOR
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO DEBTOR AT ITS ADDRESS FOR
NOTICES SET FORTH UNDERNEATH ITS SIGNATURE HERETO. DEBTOR HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
Section 7.6 Headings. The headings, captions and arrangements used in
--------
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.
Section 7.7 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made in this Agreement or in any certificate
delivered pursuant hereto shall survive the
Page 20
execution and delivery of this Agreement, and no investigation by Secured Party
shall affect the representations and warranties or the right of Secured Party to
rely upon them.
Section 7.8 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7.9 Waiver of Bond. In the event Secured Party seeks to take
--------------
possession of any or all of the Collateral by judicial process, Debtor hereby
irrevocably waives any bonds and any surety or security relating thereto that
may be required by applicable law as an incident to such possession, and waives
any demand for possession prior to the commencement of any such suit or action.
Section 7.10 Severability. Any provision of this Agreement which is
------------
determined by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 7.11 Construction. Debtor and Secured Party acknowledge that
------------
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement with its legal counsel and that
this Agreement shall be construed as if jointly drafted by Debtor and Secured
Party.
Section 7.12 Termination. If all of the Obligations shall have been paid
-----------
and performed in full and all Commitments of the Lenders shall have expired or
terminated, Secured Party shall, upon the written request of Debtor, execute and
deliver to Debtor a proper instrument or instruments acknowledging the release
and termination of the security interests created by this Agreement, and shall
duly assign and deliver to Debtor (without recourse and without any
representation or warranty) such of the Collateral as may be in the possession
of Secured Party and has not previously been sold or otherwise applied pursuant
to this Agreement.
Section 7.13 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF SECURED
PARTY IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
[Remainder of page intentionally left blank.]
Page 21
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first written above.
DEBTOR:
------
NET-TEL COMMUNICATIONS, INC.
By:/s/ Xxxxx X. Xxxxxx
-----------------------------
Xxxxx X. Xxxxxx
Senior Vice President
Address for Notices:
-------------------
NET-tel Communications, Inc.
0000 00xx Xxxxxx X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxx, Senior Vice President
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Page 22
(From Pledge & Security Agreement)
SECURED PARTY:
-------------
NORTEL NETWORKS INC.
as Administrative Agent
By:/s/ Xxx X. Xxxxxxxxxx
-----------------------------
Xxx X. Xxxxxxxxxx
Director, Customer Finance
Address for Notices:
-------------------
Nortel Networks Inc.
0 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Vice President, Finance
Carrier Packet Solutions
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
Nortel Networks Inc.
GMS 991 15 A40
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxx 00000-0000
Attention: Vice President - Customer
Finance North America
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
and
Nortel Networks Inc.
X.X. Xxx 000000
Xxxxxxxxxx, Xxxxx 00000-0000
Mail Stop 04D/02/A40
Attention: Xxxxxxxx Xxx,
Loan Administration
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Page 23
(Pledge & Security Agreement)
SCHEDULE 1
----------
PROMISSORY NOTES
None.
Page 24
SCHEDULE 2
----------
PLEDGED SHARES
Percentage of
Number of Outstanding
Issuer Class of Shares Certificate No(s). Shares Shares
------ --------------- ------------------ -------- ------------
NET-tel Corporation Common, $.01 4 935,001 100%
par value per
share
Page 25
SCHEDULE 3
----------
OTHER NAMES
1. Debtor was formerly known as NET-tel Holding Company.
Page 26
SCHEDULE 4
----------
JURISDICTIONS FOR FILING
UCC-1 FINANCING STATEMENTS
1. District of Columbia
Page 27
EXHIBIT A
---------
FORM OF AMENDMENT
-----------------
This Amendment, dated ____________________, ____, is delivered pursuant to
Section 4.8(b) of the Pledge Agreement (as herein defined) referred to below.
--------------
The undersigned hereby agrees that this Amendment may be attached to the Pledge
and Security Agreement dated as of July 28, 1999, between the undersigned and
Nortel Networks Inc., as Secured Party (the "Pledge Agreement") and that the
----------------
Capital Stock or other instruments listed on Schedule 1 annexed hereto shall be
----------
and become part of the Collateral referred to in the Pledge Agreement and shall
secure payment and performance of all Obligations as provided in the Pledge
Agreement.
Capitalized terms used herein but not defined herein shall have the
meanings therefor provided in the Pledge Agreement.
DEBTOR:
------
NET-TEL COMMUNICATIONS, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Page 28
Schedule 1
to
Form of Amendment
-----------------
Percentage of
Class of Certificate Number of Outstanding
Issuer Shares No(s). Shares Shares
--------- -------- ----------- --------- -------------
Page 29
