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EXHIBIT 10.28
NOTE AND SECURITY AGREEMENT
[Corporate Debtor with Individual Guarantors]
Note #079-21846-000
$1,000,000.00 Date: October 28, 1997
This Note and Security Agreement is entered into by, and among PIC
Resources, a Texas corporation and ATN Communications, Inc., a Delaware
corporation, ("Debtors"), Priority International Communications, Inc.
("Guarantor"), and Xxxxxxx Xxxxxx & Company Leasing, Inc., an Iowa corporation,
000 Xxxxxx Xxxxxx XX, Xxxxx Xxxxxx, Xxxx ("Lender").
RECITALS
A. Debtor has requested that Lender provide Debtor with a working
capital loan.
B. The Guarantor derives benefit from Debtor's operations.
C. Debtor and the Guarantor each individually perceive
substantial business advantage from the transactions contemplated by this Note
and Security Agreement;
D. Lender has, as a condition to making the Loan to Debtor
required that Debtor and the Guarantor each participate and that the parties
execute and deliver this Note and Security Agreement.
The parties agree:
1. Definitions.
"Equipment" means certain equipment specified on Schedule A attached
hereto.
"Obligations" shall mean (a) the unpaid principal amount of, and
accrued interest on, the loan to Debtor evidenced by this Note and Security
Agreement and (b) all other indebtedness, obligations, and liabilities of Debtor
to Lender, now existing or hereafter incurred under, arising out of, or in
connection with this Note and Security Agreement, whether for principal
interest, fees, expenses or otherwise.
2. Payments. Debtor promises to pay to the order of Lender or its
assignee the principal sum of One Million Dollars ($1,000,000.00) with interest
at the rate of fourteen and one half percent (14.5%) per annum on the unpaid
balance remaining from time to time. The unpaid is based upon a 360 day year.
The principal and interest shall be paid in 60 equal monthly installments of
$23,528.28 beginning December 1, 1997 and each month thereafter for the
remaining term of the Note. All accrued interest and principal shall be due and
payable on November 1, 2002.
Debtor acknowledges and agrees that (i) all costs, expenses and
liabilities in connection with its operations shall be borne by Debtor, (ii)
Debtor's obligation to pay Lender all amounts due is absolute and unconditional,
and (iii) Debtor shall not be entitled to any abatement, reduction, set-off, or
counterclaim.
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If the payment is not received by Lender within ten (10) days of the
due date, Debtor agrees to pay Lender an amount equal to five percent (5%) (or
the maximum amount provided by law if five percent is in excess of the amount
Lender is entitled to receive under and applicable law) of the monthly payment
amount.
All payments called for under this Note and Security Agreement to be
made to Lender shall be made as designated by Lender or Lender's assignee.
Each such payment shall be applied first to interest due on the unpaid
principal and the remainder in reduction of the principal.
It is agreed that in no event and under no circumstances shall any
amount paid by the Debtor to Lender exceed the highest lawful rate permissible,
under applicable law. If in any circumstances whatsoever, it is determined that
performance under this Note and Security Agreement shall result in payment of
interest in excess of that allowed by applicable law, then such excess interest
collected shall not be applied to the payment of interest and interest shall be
at the highest rate allowed by applicable law.
In the event of default and acceleration or in the event Debtor prepays
the Obligations, the amount due upon payment after default or upon prepayment is
all late charges and unpaid interest plus unpaid principal plus a three percent
fee on the amount of unpaid principal.
3. Security Interest. Debtor grants to Lender a security interest
in the following described collateral (collectively the "Collateral") to secure
the Obligations.
(a) All Equipment, attachments and enclosures located as
specified on Schedule A attached hereto.
(b) All additions, substitutions, repairs, replacements,
accessories, accessions, parts and equipment now or hereafter affixed to the
Equipment.
(c) The proceeds of all insurance polices covering the
Collateral and all proceeds of the Collateral.
(d) All accounts, instruments, documents, chattel paper,
general intangibles and contract rights, now owned or hereafter acquired.
4. Expenses. Debtor, upon demand, shall pay to Lender all
expenses, including, but not limited to, reasonable attorney's fees and legal
expenses incurred by Lender in seeking to collect the Obligations or to defend
or enforce any of Lender's rights in the Collateral. Such amounts shall be an
Obligation under this Note and Security Agreement and if not paid on demand
shall bear interest at a default rate of 1 1/2 times the rate specified in
paragraph 2.
5. Representations, Warranties and Covenants. Debtor and
Guarantors represent, warrant and agree (which shall survive until the
Obligations are paid in full):
(a) Corporate Authority. Debtor is duly organized and existing
under the laws of the state of its incorporation, is qualified and in good
standing in all states in which it is doing business, and the execution and
performance of this Note and Security Agreement are within the corporate powers,
have been duly authorized and are not in contravention of any
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law or Debtor's charter or any agreement or undertaking of which Debtor is party
or by which it is bound.
(b) Title to Collateral. Debtor is the owner of the Collateral
free and clear of any and all adverse liens, security interest, claims,
encumbrances and the like and has full authority to use same as Collateral.
Debtor will defend the Collateral against all other persons who, at any time,
may claim an interest in it.
(c) Outstanding Security Interests. Debtor warrants that there
are no outstanding security interests in the Collateral.
(d) Negative Pledge. Except for the security interests created
hereunder, Debtor agrees that during the term of this Note and Security
Agreement and as long as any Obligations are outstanding, Debtor will not grant
a security interest in the Collateral to any other person.
(e) Adverse Lien. During the term of this Agreement, Debtor
will keep the Collateral from any and all adverse liens or encumbrances.
(f) Sale of Collateral. Debtor will not sell, offer for sale,
transfer or dispose of the Collateral or any interest in the Collateral without
the prior written consent of Lender or Lender's assignee.
(g) Unlawful Uses of Collateral. Debtor will not use or permit
any person to use the Collateral in a manner prohibited by law, in violation of
any insurance policy or in any manner inconsistent with Lender's security
interest.
(h) Care of Collateral. Debtor agrees to maintain the
Collateral in good order and repair at all times and will not waste or destroy
the Collateral or any part of it. Debtor shall make no material alterations in
the Equipment without the prior written consent of Lender or Lender's assignee.
(i) Taxes. If Debtor fails to pay any tax or assessment
relating to the Collateral as required when due, Lender may, at, its option, pay
or discharge same, although it is not required to do so. Any payments made by
Lender under this Section shall become the Obligation of Debtor and shall be
secured by the Collateral.
(j) Insurance. Debtor shall either (i) procure insurance
insuring the Collateral against loss through theft, fire or casualty or (ii) may
be self-insured, if approved in advance by Lender. If insured, any insurance
policy shall name Lender as Loss Payee under the property damage provisions and
Additional Named Insured under the liability provisions where applicable and
provide evidence of insurance to the Lender and be satisfactory to Lender as to
the terms and duration and contain a term to the effect that notice of
termination will be sent to Lender at least thirty (30) days prior to any
contemplated termination and be delivered to Lender. If Debtor at any time adds
insurance covering the Collateral or changes policies, Debtor agrees that the
new policies will comply with the terms of this paragraph.
If self-insured, Debtor warrants and agrees that it will provide proof
of any fund or assets which Debtor has established or set aside for the payment
of any losses sustained with regard to the Collateral. Debtor continues to bear
the entire risk of loss for destruction of or
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damage to the Collateral. If Debtor shall obtain insurance coverage on the
Collateral from an outside insurance company Debtor agrees that the new policies
shall comply with the terms of this paragraph.
(k) Reports. Debtor shall provide Lender at its address all
quarterly reports of Debtor's financial condition and annual financial reports
reviewed by an independent certified public accountant or more frequently as
requested.
(l) Use of Equipment. Debtor will comply with all laws,
regulations, and ordinances, and all applicable requirements of the manufacturer
of the Equipment, applicable to the physical possession, operation, condition,
use and maintenance of the Equipment. Debtor agrees to obtain all permits and
licenses necessary for the operation of the Equipment.
(m) Corporate Changes. Debtor will not enter into any merger
or consolidation or effect any reorganization or recapitalization without the
prior written consent of Lender.
6. Default. It is agreed that the following events shall
constitute a default under this Note and Security Agreement:
(a) Nonpayment. Any failure of Debtor to pay when due any
Obligations secured by this Note and Security Agreement shall constitute a
default. This includes, but is not limited to, any failure to pay principal or
interest when due, failure to pay taxes, failure to pay insurance and failure to
pay delinquent charges.
(b) Nonperformance. Any failure of Debtor to perform or
observe fully and in any satisfactory manner the terms of any Obligations
secured by this Note and Security Agreement shall constitute a default.
(c) Warranties and Representations that Prove False. Any
warranty or representation made to Lender in order to induce the making of the
Loan to Debtor whether made by Debtor, or others on behalf of Debtor, including
agents, employees, sureties, guarantors, co-signors and the like, and whether
such representations are contained in this agreement or in related materials,
such as financial statements, loan applications, supporting documentation and
guarantees, or in any financial instrument, such as a promissory note, executed
in conjunction with this Note and Security Agreement, if incorrect in any
material respect shall operate as a default under this Note and Security
Agreement.
(d) Levy and Attachments. Seizure, attachment or levy on any
property of Debtor whether or not such property is the subject of the security
interest created by this Note and Security Agreement, shall operate as a default
under this Note and Security Agreement.
(e) Insolvency and the Like. It shall operate as a default
under this Note and Security Agreement if for any reason Debtor becomes
insolvent or Debtor becomes subject to any proceeding under the bankruptcy or
insolvency laws, including an assignment for the benefit of creditors or Debtor
has its property placed under the custody of a receiver or trustee.
(f) Alteration of Debtor's Operating Conditions. Without
Lender's written permission, dissolution or other termination of the existence
of Debtor or any forfeiture of its
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right to do business, as well as any merger, consolidation, or the like with
another, shall constitute a default under this Note and Security Agreement.
(g) Loss or Destruction of Collateral. The theft, loss,
destruction, substantial damage to or alteration of the Collateral, whether in
whole or in part, shall constitute a default under this Note and Security
Agreement.
7. Acceleration. Upon the occurrence of an event of default or at
any other time Lender may deem itself insecure, Lender may, without notice to
the Debtor, declare all or any of the Obligations immediately due and payable.
8. Rights and Remedies on Default.
(a) Code Rights. Upon the occurrence of an event of default,
Lender shall have all rights and remedies provided by law, including but not
limited to those provided in the Uniform Commercial Code with respect to the
Collateral.
(b) Right to Possession. Upon the occurrence of an event of
default lender shall have the right to take possession of the Collateral.
(c) Right to Sell. Upon the occurrence of an event of default
lender shall have the right to sell, assign, deliver, encumber or otherwise
dispose of any of the Collateral.
(d) Notice of Sale. Lender shall give Debtor notice of the
time and place of the public sale of the Collateral or of the time after which
any private sale or other intended disposition is to be made by sending a notice
of such sale to Debtor by regular mail at least ten (10) days before the sale or
disposition, which Debtor agrees shall be reasonable notice.
(e) Charges. In the event that Collateral is sold or otherwise
disposed of, the resale price or return shall be applied in the first instance
to the reasonable expenses retaking, holding, preparing for sale or lease,
selling, leasing and the like.
(f) Attorney's Fees. The proceeds of the disposition may be
applied in the first instance to Lender's attorney's fees and legal expenses.
(g) Attorney in Fact. Debtor appoints Lender the attorney in
fact of Debtor for the purpose of carrying out the provisions of this Note and
Security Agreement and taking any action and executing any instrument which the
Lender may deem necessary or advisable the accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Where allowed by law, Lender shall have the right to execute and file any
financing statements on behalf of Debtor to protect its interest in Collateral.
Lender shall also have the right to endorse the name of Debtor on any checks,
notes or any other instruments for the payment of money, to deposit the same in
bank accounts, in either Lender's own name or in the name of Debtor to
institute, prosecute, settle or compromise any summary or legal proceedings for
the recovery of any of the gross receipts from the operation of the Equipment
and to initiate, prosecute, settle or compromise any other proceedings for the
protection of the Equipment, for the recovery of any damages done to the
Equipment or to defend any legal proceedings brought against Debtor arising out
of the operation of the Equipment. Lender, as Debtor's attorney-in-fact, shall
also have the right to make claim for,
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receive payment or endorse all documents, checks or drafts for loss or damage or
return premium under insurance policies issued on collateral.
Debtor shall indemnify and hold Lender harmless from any loss, claim of
damage to persons or property arising out of Debtor's use, possession or storage
of the Equipment.
9. Reimbursement of Fees. In the event Lender is a party to any
litigation affecting the security or the lien of its security interest in the
Collateral, including any suit by Lender to close its security interest in the
Collateral or any suit in which Lender may be named a party defendant in which
it is obligated to protect its right or lien, including bankruptcy proceedings,
Lender may incur expenses and advance payments for lien searches, costs,
expenses and reasonable attorney's fees, which amount shall be deemed additional
Obligations secured by the Collateral.
10. Miscellaneous.
(a) All rights and remedies of Lender inure to the benefit of
its successors, assigns, representatives, receivers and trustees.
(b) In the event any provision of this Note and Security
Agreement shall be found to be unenforceable in any legal proceeding, the
remaining provisions shall remain in force and effect.
(c) Prior to Funding this Note, Debtor shall deliver to Lender
all documents required by this Note and Security Agreement in a form
satisfactory to Lender.
(d) This Note and Security Agreement becomes effective when
signed and delivered to Lender.
(e) Debtor acknowledges receipt of a copy of this Note and
Security Agreement.
(f) This Note and Security Agreement is and shall be deemed to
be binding upon and shall inure to the benefit of the successors and assigns of
Lender and Debtor, provided however, Debtor may not, assign any of its rights or
delegate any of its obligations hereunder without the prior written consent of
Lender. This Note and Security Agreement may be assigned by Lender without
notice to Debtor and the Guarantors, in which event the assignee shall be
entitled to exercise all rights and powers but not be chargeable with any
obligations or liabilities of Lender hereunder. Assignee may also grant a
security interest in the Collateral and this Note and Security Agreement. The
Assignee's rights or the rights of the Holder of a security interest in this
Note and Security Agreement shall be free from all defenses, set offs and
counterclaims which Debtor may be entitled to assert.
(g) This Note and Security Agreement is and shall be deemed to
be contract entered into and made pursuant to the laws of the State of Iowa and
shall in all respects be governed, construed, applied, and enforced in
accordance with the laws of said state and any action to enforce, construe,
invalidate or modify this Agreement shall be brought in a court of competent
jurisdiction in Linn County, Iowa. Debtor waive the right to demand a trial by
jury in any action hereunder.
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(h) Any demand or notice required or permitted to be given
shall be deemed effective when deposited in the United States mail addressed to
the party at the address shown or to such other address as may be provided in
writing prior to the giving of such notice by the party to be notified.
(i) This Note and Security Agreement constitutes the entire
agreement among the parties hereto and may not be changed or canceled orally,
but only in writing, signed by the party to be charged.
(j) Debtor agrees to deliver to Lender its successors and
assigns, upon request of Lender, such certificates, acknowledgement, consents,
opinions of counsel and any other instruments, all in form and substance
satisfactory to Lender, which Lender may, in its sole discretion, determine to
be necessary or proper to confirm any or all of the representations and
agreements made by Debtor hereunder or to facilitate the assignment by Lender of
its right, title and interest in and to the Collateral and this Note and
Security Agreement.
11. Guarantors. Lender has required the participation of the
Guarantor as a precondition to making the loan evidenced by this Note and
Security Agreement. The Guarantor by the execution of this Note and Security
Agreement acknowledge that the obligations of Debtor to Lender are enforceable
in accordance with their terms, that such obligations of Debtor to Lender
constitute guaranteed obligations of the Guarantor under the corporate guaranty
executed by the Guarantor this same date and that the guaranty is in full force
and effect, without amendment or defense of any description.
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Date: As of October 28, 1997
PIC Resources Corporation
By:
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Title:
-----------------------------------
ATN Communications, Inc.
By:
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Title:
-----------------------------------
Guarantor:
Priority International Communications, Inc.
By:
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Its:
----------------------------------------
Xxxxxxx Xxxxxx & Company Leasing, Inc.
By:
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Title:
-----------------------------------
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CONDITIONAL ASSIGNMENT & SECURITY AGREEMENT
This conditional Assignment and Security Agreement (hereinafter
Agreement) is entered into as of this 28th day of October, 1997, by PIC
Resources Corporation and ATN Communications, Inc., (hereinafter "Borrower") and
Xxxxxxx Xxxxxx & Company Leasing, Inc. (hereinafter BFCL).
Whereas, BFCL has entered into a Note and Security agreement (the
"Note") with PIC Resources Corporation and ATN Communications, Inc.,
co-borrowers (the "Borrowers"); and
Whereas Xxxxxx desires to assume the Note in the event of a default by
the Borrower; and
Whereas, BFCL desires that Xxxxxx assume the Note in the event of a
default by the Borrower.
Now therefore, in consideration of the mutual benefits to be derived by
all parties hereto, receipt to which is acknowledged hereto, all parties agree
to the following:
1. The Note, which is identified as Exhibit A is attached to and made
a part hereof, will not be assigned, sold, or hypothecated except as a further
assigned to Firstar Financial Services. Borrowers do hereby conditionally sell,
assign, transfer and set over unto Xxxxxx all of right, title, and interest
under the Note. Should at any time, during the term of the Note, payments are
not made on a timely basis, or there is a default in any other manner, then this
Assignment will become a Present Assignment effective immediately. Xxxxxx will
be notified of the assignment immediately, either by Borrowers or BFCL or both,
and all payments due under the Note will be paid directly to BFCL. This
Agreement shall stay in effect throughout the entire term of the Note.
2. a) Borrowers hereby grant, sell, assign, convey, warrant, and
mortgage to Xxxxxx and gives and agrees that Xxxxxx does and shall have a
security interest under the Uniform Commercial Code in the following described
personal property, which is identified more fully on Schedule A which is
attached to Exhibit A and made a part hereof, (hereinafter the "Security").
Further, Borrowers agree to assign to Xxxxxx and file the UCC's executed in
connection with the Note.
b) Borrowers warrant that and Borrowers will keep and maintain the
Security free and clear of all encumbrances, charges and liens except as herein
provided.
c) Borrowers warrant that the Security will not be moved from the
state and country where it is currently located, nor will it be sold or
otherwise disposed of with out prior written consent of BFCL and Xxxxxx.
d) Borrowers will either keep and maintain the Security in good
order and repair and working condition at all times.
3. In the event of a default under the Note, BFCL agrees to the
assignment of the Note to Xxxxxx by the Borrowers and the assumption of the Note
by Xxxxxx, and Xxxxxx agrees
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to accept the assignment of the Note from the Borrowers and to assume the Note
and all its terms and conditions.
4. This Agreement shall be binding upon all parties and their heirs,
successors and assigns.
5. This Agreement shall be deemed to have been made in Iowa and
except for local filing requirements, shall be governed by and construed in
accordance with the laws of the state of Iowa.
In Witness Whereof, all parties hereto have executed this Agreement or
caused it to be executed by authorized representatives on the day and date set
out above.
XXXXXXX XXXXXX & COMPANY ATN COMMUNICATIONS, INC.
LEASING, INC.
By: By:
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Its: Its:
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PIC RESOURCES CORPORATION XXXXX XXXXXX
By:
-------------------------- ------------------------
Its:
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SCHEDULE "A"
Schedule attached to and made a part of that Note and Security Agreement dated
the 28th day of October, 1997, between the undersigned Debtor and Xxxxxxx Xxxxxx
& Company Leasing, Inc.
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Quantity/Manufacturer-Description
7 Cabinet Xxxxxx 20/20 Switching System w/ Protocol P2000 operating system
Switch#1 1,920 ports and 80 T's
Switch#2 1,200 ports and 50 Ts
Protocol system provides fully digital operator services center w/3,120 digital
channels 48 automated channel 50 live channels (existing capacity of 1,000,000 +
minutes per month)
35 complete operator center stations equipped w/ 386/586 PCs and auxilary
equipment
22 fully furnished offices w/work stations
Plus all trade accounts receivable, now owned and hereafter aquired
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This schedule is hereby verified as correct by the undersigned Debtor, who
acknowledges receipt thereof.
BORROWERS: PIC RESOURCES CORP.
BY:
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(AUTHORIZED SIGNATURE & TITLE)
ATN COMMUNICATIONS, INC.
BY:
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(AUTHORIZED SIGNATURE & TITLE)
UCC FILING:
THE EQUIPMENT DESCRIBED ON THIS SCHEDULE "A" IS THE SUBJECT OF A NOTE, AND THIS
FINANCING STATEMENT IS FILED FOR INFORMATIONAL PURPOSES. IF THE NOTE IS DEEMED
TO BE A NOTE INTENDED AS SECURITY, THEN THIS FINANCING STATEMENT IS FILED TO
PERFECT A PURCHASE MONEY SECURITY INTEREST.
