EXHIBIT 10.4
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CREDIT AND SECURITY AGREEMENT
BY AND AMONG
XIT CORPORATION,
CXR TELCOM CORPORATION
AND
XXXXX FARGO BUSINESS CREDIT, INC.
Dated as of: August 16, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS ................................................................................1
Section 1.1 Definitions .........................................................................1
Section 1.2 Cross References ...................................................................11
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY ...................................................11
Section 2.1 Revolving Advances .................................................................11
Section 2.2 Term Advances ......................................................................12
Section 2.3 Payment of Term Notes ..............................................................12
Section 2.4 Interest; Minimum Interest Charge; Default Interest; Participations;
Usury ..............................................................................12
Section 2.5 Fees ...............................................................................13
Section 2.6 Computation of Interest and Fees; When Interest Due and Payable ....................14
Section 2.7 Capital Adequacy ...................................................................14
Section 2.8 Maturity Date ......................................................................15
Section 2.9 Voluntary Prepayment; Termination of the Credit Facility by the
Borrowers ..........................................................................15
Section 2.10 Termination and Prepayment Fees; Waiver of Termination and
Prepayment Fees ....................................................................15
Section 2.11 Mandatory Prepayment ...............................................................16
Section 2.12 Payment ............................................................................16
Section 2.13 Payment on Non-Banking Days ........................................................16
Section 2.14 Use of Proceeds ....................................................................16
Section 2.15 Liability Records ..................................................................17
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF ......................................................17
Section 3.1 Grant of Security Interest .........................................................17
Section 3.2 Notification of Account Debtors and Other Obligors .................................17
Section 3.3 Assignment of Insurance ............................................................17
Section 3.4 Occupancy ..........................................................................18
Section 3.5 License ............................................................................18
Section 3.6 Financing Statement ................................................................18
Section 3.7 Setoff .............................................................................18
ARTICLE IV CONDITIONS OF LENDING .....................................................................19
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TABLE OF CONTENTS
(continued)
PAGE
Section 4.1 Conditions Precedent to the Initial Revolving Advances and the
Term Advances ......................................................................19
Section 4.2 Conditions Precedent to All Advances ...............................................22
ARTICLE V REPRESENTATIONS AND WARRANTIES ............................................................22
Section 5.1 Corporate Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Tax Identification Number .......................22
Section 5.2 Authorization of Borrowing; No Conflict as to Law or Agreements ....................23
Section 5.3 Legal Agreements ...................................................................23
Section 5.4 Subsidiaries .......................................................................23
Section 5.5 Financial Condition; No Adverse Change .............................................23
Section 5.6 Litigation .........................................................................24
Section 5.7 Regulation U .......................................................................24
Section 5.8 Taxes ..............................................................................24
Section 5.9 Titles and Liens ...................................................................24
Section 5.10 Plans ..............................................................................24
Section 5.11 Default ............................................................................25
Section 5.12 Environmental Matters ..............................................................25
Section 5.13 Submissions to Lender ..............................................................26
Section 5.14 Financing Statements ...............................................................26
Section 5.15 Rights to Payment ..................................................................26
Section 5.16 Bank Accounts ......................................................................26
Section 5.17 Financial Solvency .................................................................26
ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS ..........................................................27
Section 6.1 Reporting Requirements .............................................................27
Section 6.2 Books and Records; Inspection and Examination ......................................30
Section 6.3 Account Verification ...............................................................30
Section 6.4 Compliance with Laws ...............................................................30
Section 6.5 Payment of Taxes and Other Claims ..................................................31
Section 6.6 Maintenance of Properties ..........................................................31
Section 6.7 Insurance ..........................................................................31
Section 6.8 Preservation of Existence ..........................................................31
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TABLE OF CONTENTS
(continued)
PAGE
Section 6.9 Delivery of Instruments, etc .......................................................32
Section 6.10 Collateral Account .................................................................32
Section 6.11 Performance by the Lender ..........................................................32
Section 6.12 Minimum Debt Service Coverage Ratio ................................................33
Section 6.13 Minimum Tangible Net Worth .........................................................33
Section 6.14 Minimum Net Income .................................................................33
Section 6.15 Minimum Earnings Before Taxes ......................................................33
Section 6.16 New Covenants ......................................................................33
Section 6.17 Government Contracts ...............................................................33
ARTICLE VII NEGATIVE COVENANTS ........................................................................33
Section 7. l Liens ..............................................................................33
Section 7.2 Indebtedness .......................................................................34
Section 7.3 Guaranties .........................................................................34
Section 7.4 Investments and Subsidiaries .......................................................34
Section 7.5 Dividends ..........................................................................35
Section 7.6 Sale or Transfer of Assets; Suspension of Business Operations ......................35
Section 7.7 Consolidation and Merger; Asset Acquisitions .......................................35
Section 7.8 Sale and Leaseback .................................................................35
Section 7.9 Restrictions on Nature of Business .................................................36
Section 7.10 Capital Expenditures ...............................................................36
Section 7.11 Accounting .........................................................................36
Section 7.12 Discounts, etc .....................................................................36
Section 7.13 Defined Benefit Pension Plans ......................................................36
Section 7.14 Other Defaults .....................................................................36
Section 7.15 Place of Business; Name ............................................................36
Section 7.16 Organizational Documents; S Corporation Status .....................................36
Section 7.17 Salaries ...........................................................................36
Section 7.18 Change in Ownership ................................................................36
Section 7.19 Transaction with Affiliates ........................................................37
Section 7.20 Additional Bank Accounts ...........................................................37
ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES ....................................................37
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TABLE OF CONTENTS
(continued)
PAGE
Section 8.1 Events of Default ..................................................................37
Section 8.2 Rights and Remedies ................................................................39
ARTICLE IX MISCELLANEOUS .............................................................................40
Section 9.1 No Waiver; Cumulative Remedies .....................................................40
Section 9.2 Amendments, Etc ....................................................................40
Section 9.3 Addresses for Notices, Etc .........................................................40
Section 9.4 Further Documents ..................................................................41
Section 9.5 Collateral .........................................................................41
Section 9.6 Costs and Expenses .................................................................42
Section 9.7 Indemnity ..........................................................................42
Section 9.8 Participants .......................................................................43
Section 9.9 Execution in Counterparts ..........................................................43
Section 9.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information ........................................................................43
Section 9.11 Severability of Provisions .........................................................43
Section 9.12 Headings ...........................................................................43
Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial ...........................43
ARTICLE X JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS ........................................44
Section 10.1 independent Obligations; Subrogation ...............................................44
Section 10.2 Authority to Modify Obligations and Security .......................................44
Section 10.3 Waiver of Defenses .................................................................45
Section 10.4 Exercise of Lender's Rights ........................................................45
Section 10.5 Additional Waivers .................................................................45
Section 10.6 Additional Indebtedness ............................................................45
Section 10.7 Notices, Demands, Etc ..............................................................46
Section 10.8 Subordination ......................................................................46
Section 10.9 Revival ............................................................................47
Section 10.10 Understanding of Waivers ...........................................................47
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CREDIT AND SECURITY AGREEMENT
Dated as of August 16, 2000
XIT CORPORATION, a New Jersey corporation ("XIT"), CXR
TELCOM CORPORATION, a Delaware corporation ("CXR" and together with XIT, the
"Borrowers"), and XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation
(the "Lender"), hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrowers' accounts, as such term
is defined in the UCC, including without limitation the aggregate
unpaid obligations of customers and other account debtors to the
Borrowers arising out of the sale or lease of goods or rendition of
services by the Borrowers on an open account or deferred payment basis.
"Advance" means a Revolving Advance or a Term Advance.
"Affiliate" or "Affiliates" means MicroTel and any other
Person controlled by, controlling or under common control with any
Borrower, including (without limitation) any Subsidiary of any
Borrower. For purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Availability" means the difference of (i) the sum of the XIT
Borrowing Base and the CXR Borrowing Base and (ii) the then outstanding
principal balance of the Revolving Note.
"Availability Reserve" means as of any date of determination,
such amount or amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Revolving Advances which
would otherwise be available to any Borrower
under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined by
Lender in good faith, do or may affect either (i) the Collateral or
its value, (ii) the assets, business or prospects of such Borrower,
or (iii) the security interests and other rights of Lender in the
Collateral (including the enforceability, perfection and priority
thereof), or (b) to reflect Lender's good faith belief that any
collateral report or financial information furnished by or on behalf
of Borrowers to Lender is or may have been incomplete, inaccurate or
misleading in any material respect, or (c) in respect of any state
of facts which Lender determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both,
constitute an Event of Default. Without limiting the Availability
Reserves that Lender may establish, Lender will establish an
Availability Reserve for the judgment lien in favor of Xxxx
Industries against CXR.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in
Pasadena, California.
"Base Rate" means the rate of interest publicly announced from
time to time by Xxxxx Fargo Bank, N.A. as its "base rate" or, if such
bank ceases to announce a rate so designated, any similar successor
rate designated by the Lender.
"Capital Expenditures" for a period means any expenditure of
money for the purchase or construction of assets, or for improvements
or additions thereto, which are capitalized on the Borrowers' balance
sheets.
"Collateral" means all current or hereafter acquired or
arising Equipment, General Intangibles, Inventory, Receivables,
Investment Property, deposit accounts, letters of credit, proceeds of
letters of credit, chattel paper and all sums on deposit in any
Collateral Account, and any items in any Lockbox; together with (i) all
substitutions and replacements for and products of any of the
foregoing; (ii) proceeds of any and all of the foregoing; (iii) in the
case of all tangible goods, all accessions; (iv) all accessories,
attachments, parts, equipment and repairs now or hereafter attached or
affixed to or used in connection with any tangible goods; and (v) all
warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods.
"Collateral Accounts" means the "WFBCI Accounts" as defined in
the Collection Account Agreements and the "Lender Accounts" as defined
in the Lockbox Agreements.
"Collection Account Agreements" means the Collection Account
Agreements of even date herewith by and among the respective Borrowers,
Xxxxx Fargo Bank, N.A. and the Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrowers' account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrowers by the Lender pursuant to Article II.
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"CXR Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line, minus the aggregate outstanding sum of
the Revolving Advances to XIT; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum off
(i) eighty-five percent (85%) of the Eligible
Accounts of CXR, plus
(ii) the lesser of (A) $200,000, minus the aggregate
outstanding sum of the Revolving Advances to XIT base upon its
Eligible Inventory, or (B) the sum of twenty-five percent
(25%) of the Eligible Inventory of CXR consisting of raw
materials plus forty percent (40%) of the Eligible Inventory
of CXR consisting of finished goods, and minus
(iii) any Availability Reserves for CXR.
"Current Maturities of Long Term Debt" of a Person as of a
given date means the amount of such Person's long-term debt and
capitalized leases which will become due during the twelve (12) month
period beginning on the designated date.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time, "Debt" shall also include the aggregate payments required to
be made by such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Debt Service Coverage Ratio" of a Person as of a given date
means the ratio of (i) the sum of such Person's (A) Funds from
Operations and (B) Interest Expense MINUS (C) Capital Expenditures
during the twelve (12) month period ending on the designated date to
(ii) the sum of such Person's (A) Current Maturities of Long Term Debt
as of the designated date and (B) Interest Expense.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has
occurred and ending on the date the Lender notifies the Borrowers in
writing that such Default or Event of Default has been cured or waived.
"Default Rate" means, with respect to the Revolving Advances,
an annual rate equal to three percent (3%) over the Revolving Floating
Rate, which rate shall change when and as the Revolving Floating Rate
changes and with respect to the Term
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Advances, an annual rate equal to three percent (3%) over the Term
Floating Rate, which rate shall change when and as the Term Floating
Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Earnings Before Taxes" of a Person for a period means such
Person's pretax earnings from continuing operations before (i) special
extraordinary gains, (ii) minority interests, and (iii) miscellaneous
gains and losses, in each case for such period.
"Eligible Accounts" of a Borrower means all of its unpaid
Accounts, net of any credits, except the following shall not in any
event be deemed Eligible Accounts:
(i) That portion of Accounts unpaid 90 days or more
after the invoice date;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by such Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which such Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws, including,
without limitation, the Federal Assignment of Claims Act of
1940, as amended, or any similar law);
(v) Accounts owed by an account debtor located
outside the United States or Canada which are not (A) backed
by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole
discretion, (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject' of bankruptcy proceedings or has gone
out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of any Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any Person
other than the Lender including without limitation any payment
or performance bond;
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(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(xi) Accounts of such Borrower owed by an account
debtor, regardless of whether otherwise eligible, if 25% or
more of the total amount due under such Accounts from such
account debtor is ineligible under clauses (i), (ii) or (ix)
above;
(xii) That portion of Accounts of such Borrower owed
by a single account debtor or its affiliates which constitute
more than 15% of all of such Borrower's Accounts; and
(xiii) Accounts, or portions thereof, otherwise
deemed ineligible by the Lender in its sole discretion.
"Eligible Inventory" of a Borrower means all Inventory of such
Borrower, at the lower of cost or market value as determined in
accordance with GAAP; provided, however, that the following shall not
in any event be deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from any Person; on
consignment to any Person or subject to any bailment unless
such consignee or bailee has executed an agreement with the
Lender;
(ii) Supplies, packaging, maintenance parts or sample
Inventory;
(iii) Work-in-process Inventory;
(iv) Finished goods Inventory, in the case of XIT
only;
(v) Inventory that is damaged, obsolete, slow moving
or not currently saleable in the normal course of such
Borrower's operations;
(vi) Inventory that such Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(vii) Inventory that is perishable or live;
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(viii) Inventory manufactured by such Borrower
pursuant to a license unless the applicable licensor has
agreed in writing to permit the Lender to exercise its rights
and remedies against such Inventory;
(ix) Inventory that is subject to a security interest
in favor of any Person other than the Lender; and
(x) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section
5.12.
"Equipment" means all of the Borrowers' equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
office and recordkeeping equipment, parts, tools, supplies, and
including specifically (without limitation) the goods described in any
equipment schedule or list herewith or hereafter furnished to the
Lender by any Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Funding Date" has the meaning specified in Section 2.1.
"Funds From Operations" of a Person for a given period means
the sum of such Person's (i) Net Income, (ii) depreciation and
amortization, (iii) deferred income taxes, and (iv) other non-cash
items, each as determined for such period in accordance with GAAP.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5, except for any change in
accounting practices to the extent that, due to a promulgation of the
Financial Accounting Standards Board changing or implementing any new
accounting standard, any Borrower of any of its Affiliates either (i)
is required to implement such change, or (ii) for future periods will
be required to and for the current period may in accordance with
generally accepted accounting principles implement such change, for its
financial statements to be in conformity with generally accepted
accounting principles (any such change is herein referred to as a
"Required GAAP Change"), provided that (1) the Borrowers shall fully
disclose in such financial statements any such Required GAAP Change and
the effects of the Required GAAP Change on the subject Borrower's or
Affiliate's income, retained earnings or other accounts, as applicable,
and (2) the Borrowers' financial covenants set forth in Sections 6.12,
6.13, 6.14, 6.15, and 7.10 shall be adjusted as necessary to reflect
the effects of such Required GAAP Change.
"General Intangibles" means all of the Borrowers' general
intangibles, as such term is defined in the UCC, whether now owned or
hereafter acquired, including (without limitation) all present and
future patents, patent applications, copyrights, trademarks,
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trade names, trade secrets, customer or supplier lists and contracts,
manuals, operating instructions, permits, franchises, the right to use
any Borrower's name, and the goodwill of the Borrowers' business.
"Guarantors" means MicroTel and Xxxxxxx X. Xxxxx.
"Hazardous Substance" has the meaning specified in Section
5.12.
"Interest Expense" of a Person for a period means such
Person's total gross interest expense during such period (excluding
interest income), and shall in any event include, without limitation,
(i) interest expensed (whether or not paid) on all Debt, (ii) the
amortization of debt discounts, (iii) the amortization of all fees
payable in connection with the incurrence of Debt to the extent
included in interest expense, and (iv) the portion of any capitalized
lease obligation allocable to interest expense.
"Inventory" means all of the Borrowers' inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired,
whether consisting of whole goods, spare parts or components, supplies
or materials, whether acquired, held or furnished for sale, for lease
or under service contracts or for manufacture or processing, and
wherever located.
"Investment Property" means all of the Borrowers' investment
property, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all securities,
security entitlements, securities accounts, commodity contracts,
commodity accounts, stocks, bonds, mutual fund shares, money market
shares and U.S. Government securities.
"Loan Documents" means this Agreement, the Notes, the Security
Documents and all other notes, guaranties and other agreements,
documents and instruments now or at any time hereafter executed and/or
delivered by any Borrower or any Guarantor in connection with this
Agreement, as the same may hereafter be amended, supplemented or
restated from time to time.
"Lockboxes" has the meaning given in the Lockbox Agreements.
"Lockbox Agreements" means the Lockbox and Collection Account
Agreements by and among the respective Borrowers, Xxxxx Fargo Bank,
N.A., Regulus West, LLC and the Lender, of even date herewith.
"Maturity Date" has the meaning specified in Section 2.8.
"Maximum Line" means $3,000,000.
"MicroTel" means MicroTel International Inc., a Delaware
corporation, which owns all of the issued and outstanding capital stock
of the Borrowers.
"Minimum Interest Charge" has the meaning specified in
Section 2.4(c).
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"Net Income" of a Person for a period means such Person's
after-tax net income for such period DECREASED by the sum of any
extraordinary, non-operating or non-cash income recorded by such Person
and INCREASED by any extraordinary, non-cash or non-operating expense
or loss recorded by such Person, as determined in accordance with GAAP.
"Note" means the Revolving Note or any Term Note, and "Notes"
means the Revolving Note and the Term Notes.
"Obligations" means the Notes and each and every other debt,
liability and obligation of every type and description which any
Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created
or incurred, whether it arises in a transaction involving the Lender
alone or in a transaction involving other creditors of any Borrower,
and whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole,
joint, several or joint and several, and including specifically, but
not limited to, all indebtedness of any Borrower arising under this
Agreement, the Notes or any other loan or credit agreement or guaranty
between any Borrower and the Lender, whether now in effect or hereafter
entered into.
"Patent and Trademark Security Agreements" means the Patent
and Trademark Security Agreements by the respective Borrowers in favor
of the Lender of even date herewith.
"Permitted Lien" has the meaning specified in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for any Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where any Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in EXHIBIT E attached
hereto.
"Receivables" means each and every right of the Borrowers to
the payment of money, whether such right to payment now exists or
hereafter arises, whether such right to payment arises out of a sale,
lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by any Borrower or by some other person who subsequently
transfers such person's interest to any Borrower, whether such right to
payment is or is not already earned by performance, and howsoever such
right to payment may be evidenced, together with all other rights and
interests (including all liens and
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security interests) which any Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make
any such payment or against any property of such account debtor or
other obligor; all including but not limited to all present and future
accounts, contract rights, loans and obligations receivable, chattel
papers, bonds, notes and other debt instruments, tax refunds and rights
to payment in the nature of general intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning specified in Section 2.1.
"Revolving Floating Rate" means an annual rate equal to the
sum of the Base Rate plus two percent (2.0%), which annual rate shall
change when and as the Base Rate changes; PROVIDED, HOWEVER, that so
long as no Default or Event of Default has occurred and is continuing,
and effective upon the Lender's receipt and approval of MicroTel's
audited financial statements for the fiscal year ending December 31,
2000, complying with all of the requirements set forth in
Section 6.1(a), such annual rate shall be reduced to the sum of the
Base Rate plus one and one-half percent (1.5%) if the Net Income of
Borrowers on a consolidated basis is greater than $250,000 (but not
greater than $500,000) during such fiscal year, and such annual rate
shall be reduced to the sum of the Base Rate plus one percent (1.0%)
if such Net Income is greater than $500,000 during such fiscal year.
"Revolving Note" means the Borrowers' revolving promissory
note, payable to the order of the Lender in substantially the form of
EXHIBIT A hereto and any note or notes issued in substitution therefor,
as the same may hereafter be amended, supplemented or restated from
time to time.
"Security Documents" means this Agreement, the Collection
Account Agreement, the Lockbox Agreement, the Patent and Trademark
Security Agreements, and any other document delivered to the Lender
from time to time to secure the Obligations, as the same may hereafter
be amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power
under ordinary circumstances to elect a majority of the board of
directors of such corporation, irrespective of whether or not at the
time stock of any other class or classes shall have or might have
voting power by reason of the happening of any contingency, is at the
time directly or indirectly owned by the Borrowers, by the Borrowers
and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Tangible Net Worth" means the difference between (i) the
tangible assets of MicroTel and its subsidiaries on a consolidated
basis, which, in accordance with GAAP
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are tangible assets, after deducting adequate reserves in each case
where, in accordance with GAAP, a reserve is proper and (ii) all Debt
of MicroTel and its subsidiaries on a consolidated basis; PROVIDED,
HOWEVER, that notwithstanding the foregoing in no event shall there be
included as such tangible assets patents, trademarks, trade names,
copyrights, licenses, goodwill, receivables from Affiliates, directors,
officers or employees, prepaid expenses, deposits, deferred charges or
treasury stock or any securities or Debt of MicroTel or its
subsidiaries, or any other securities unless the same are readily
marketable in the United States of America or entitled to be used as a
credit against federal income tax liabilities, and any other assets
designated from time to time by the Lender, in its sole discretion.
"Term Advances" has the meaning specified in Section 2.2.
"Term Floating Rate" means an annual rate equal to the sum of
the Base Rate plus two percent (2.0%), which annual rate shall change
when and as the Base Rate changes; PROVIDED, HOWEVER, that so long as
no Default or Event of Default has occurred and is continuing, and
effective upon the Lender's receipt and approval of MicroTel's audited
financial statements for the fiscal year ending December 31, 2000,
complying with all of the requirements set forth in Section 6.1(a),
such annual rate shall be reduced to the sum of the Base Rate plus one
and one-half percent (1.5%) if the Net Income of Borrowers on a
consolidated basis is greater than $250,000 (but not greater than
$500,000) during such fiscal year, and such annual rate shall be
reduced to the sum of the Base Rate plus one percent (1.0%) if such Net
Income is greater than $500,000 during such fiscal year.
"Term Notes" means the respective Borrowers' promissory notes,
payable to the order of the Lender in substantially the forms
of EXHIBIT B and EXHIBIT C hereto and any note or notes issued in
substitution therefor, as the same may hereafter be amended,
supplemented or restated from time to time.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrowers terminate the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
"XIT Borrowing Base" means, at any time the lesser of:
(a) the Maximum Line, minus the aggregate outstanding sum of
the Revolving Advances to CXR; or
(b) subject to change from time to time in the Lender's sole
discretion, the sum of:
(i) eighty-five percent (85%) of the Eligible
Accounts of XIT, plus
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(ii) the lesser of (A) $200,000, minus the
aggregate outstanding sum of the Revolving Advances to CXR base upon its
Eligible Inventory, or (B) twenty-five percent (25%) of the Eligible
Inventory of XIT consisting of raw materials, and minus
(iii) any Availability Reserves for XIT.
Section 1.2 CROSS REFERENCES. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 REVOLVING ADVANCES. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances to the
respective Borrowers from time to time from the date all of the conditions
set forth in Section 4.1 are satisfied (the "FUNDING DATE") to the
Termination Date (the "REVOLVING ADVANCES"). The Lender shall have no
obligation to make a Revolving Advance to XIT if, after giving effect to such
requested Revolving Advance, the sum of the outstanding and unpaid Revolving
Advances to XIT would exceed the XIT Borrowing Base. The Lender shall have no
obligation to make a Revolving Loan to CXR if, after giving effect to such
requested Revolving Advance, the sum of the outstanding and unpaid Revolving
Advances to CXR would exceed the CXR Borrowing Base. The Borrowers'
obligation to pay the Revolving Advances shall be evidenced by the Revolving
Note and shall be secured by the Collateral as provided in Article III.
Within the limits set forth in this Section 2.1, each Borrower may borrow,
prepay pursuant to Section 2.9 and reborrow. The Borrowers agree to comply
with the following procedures in requesting Revolving Advances under this
Section 2.1:
(a) Each Borrower shall make each request for a Revolving
Advance to the Lender before 10:30 a.m. (Los Angeles time) of the day
of the requested Revolving Advance. Requests may be made in writing or
by telephone, specifying the date of the requested Revolving Advance
and the amount thereof. Each request shall be by (i) any officer of the
applicable Borrower; or (ii) any person designated as the applicable
Borrower's agent by any officer of the applicable Borrower in a writing
delivered to the Lender; or (iii) any person whom the Lender
reasonably believes to be an officer of the applicable Borrower or such
a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to the applicable Borrower's
demand deposit account maintained with Xxxxx Fargo Bank, N.A. unless
the Lender and the applicable Borrower shall agree in writing to
another manner of disbursement. Upon the Lender's request, the
applicable Borrower shall promptly confirm each telephonic request for
an Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrowers shall repay all Advances even
if the Lender does not receive such confirmation and even if the person
requesting an Advance was not in fact authorized to do so. Any request
for an
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Advance, whether written or telephonic, shall be deemed to be a
representation by the Borrowers that the conditions set forth in
Section 4.2 have been satisfied as of the time of the request.
Section 2.2 TERM ADVANCES. The Lender agrees, on the terms
and subject to the conditions herein set forth, to make a one-time advance to
XIT on the Funding Date in the original principal amount of Six Hundred
Forty-Six Thousand Seven Hundred Sixty-Five Dollars ($646,765) and to make a
one-time advance to CXR on the Funding Date in the original principal amount
of Forty Thousand Two Hundred Thirty-Five Dollars ($40,235) (collectively,
the "TERM ADVANCES"). The Borrowers' obligation to pay the Term Advances
shall be evidenced by the Term Notes and shall be secured by the Collateral
as provided in Article III.
Section 2.3 PAYMENT OF TERM NOTES. The outstanding principal
balance of the Term Notes shall be due and payable as follows:
(a) As to the XIT Term Note, beginning on September 1, 2000,
and on the first day of each month thereafter, in substantially equal
monthly installments equal to the greater of $10,779.42 or an amount
sufficient to fully amortize the principal balance of the XIT Term Note
over an assumed term of sixty (60) months;
(b) As to the CXR Term Note, beginning on September 1, 2000,
and on the first day of each month thereafter, in substantially equal
monthly installments equal to the greater of $670.58 or an amount
sufficient to fully amortize the principal balance of the CXR Term Note
over an assumed term of sixty (60) months; and
(c) On the Termination Date, the entire unpaid principal
balances of the Term Notes, and all unpaid interest accrued thereon,
shall in any event be due and payable.
Section 2.4 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT
INTEREST; PARTICIPATIONS; USURY.
(a) REVOLVING NOTE. Except as set forth in Sections 2.4(d),
and 2.4(f), the outstanding principal balance of the Revolving Note
shall bear interest at the Revolving Floating Rate.
(b) TERM NOTES. Except as set forth in Sections 2.4(d) and
2.4(f), the outstanding principal balance of the Term Notes shall bear
interest at the Term Floating Rate.
(c) MINIMUM INTEREST CHARGE. Notwithstanding the interest
payable pursuant to Section 2.4(a), the Borrowers shall pay to the
Lender interest on the Revolving Advances of not less than 15,000 per
calendar month or, if the Revolving Floating Rate has been reduced
based upon the Borrowers' consolidated Net Income during the fiscal
year ending December 31, 2000, then $13,500 per calendar month (the
"MINIMUM INTEREST CHARGE") during the term 1 of this Agreement, and the
Borrowers shall pay any deficiency between the Minimum Interest Charge
and the amount of interest otherwise
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calculated on the Revolving Advances under Sections 2.4(a) and 2.4(d)
on the date and in the manner provided in Section 2.6.
(d) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the Obligations outstanding from time to
time shall bear interest at the Default Rate, effective for any periods
designated by the Lender from time to time during that Default Period.
(e) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrowers shall
be obligated to the Lender to pay the full amount of all interest
calculated under Sections 2.4(a) and 2.4(b), along with all other fees,
charges and other amounts due under this Agreement, regardless if such
Person elects to accept interest with respect to its participation at a
lower rate than the Revolving Floating Rate or the Term Floating Rate,
or otherwise elects to accept less than its prorata share of such
fees, charges and other amounts due under this Agreement.
(f) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law. Notwithstanding anything to the contrary contained in
any Loan Document, all agreements which either now are or which shall
become agreements between any Borrower and the Lender are hereby
limited so that in no contingency or event whatsoever shall the total
liability for payments in the nature of interest, additional interest
and other charges exceed the applicable limits imposed by any
applicable usury laws. If any payments in the nature of interest,
additional interest and other charges made under any Loan Document are
held to be in excess of the limits imposed by any applicable usury
laws, it is agreed that any such amount held to be in excess shall be
considered payment of principal hereunder, and the indebtedness
evidenced hereby shall be reduced by such amount so that the total
liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrowers
and the Lender. This provision shall never be superseded or waived and
shall control every other provision of the Loan Documents and all
agreements between any Borrower and the Lender, or their successors and
assigns.
Section 2.5 FEES.
(a) ORIGINATION FEE. The Borrowers hereby agree to pay the
Lender a fully earned and non-refundable origination fee of $36,870 due
and payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.5(b),
"UNUSED AMOUNT" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrowers agree to pay to the Lender an unused line fee
at the rate of one-quarter of one percent (0.25%) per annum on the
average daily Unused Amount from the date of this Agreement to and
including the Termination Date, due and payable quarterly in arrears on
the first day of each calendar quarter and on the Termination Date.
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(c) AUDIT FEES. The Borrowers hereby agree to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or any Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $81.25 per hour per auditor),
together with all actual out-of-pocket costs and expenses incurred in
conducting any such audit or inspection.
Section 2.6 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST
DUE AND PAYABLE. Interest accruing on the outstanding principal balance of
the Advances and fees hereunder outstanding from time to time shall be
computed on the basis of actual number of days elapsed in a year of 360 days.
Interest accruing on the Notes shall be due and payable in arrears on the
first day of each month and on the Termination Date.
Section 2.7 CAPITAL ADEQUACY. If any Related Lender
determines at any time that its Return has been reduced as a result of any
Rule Change, such Related Lender may require the Borrowers to pay it the
amount necessary to restore its return to what it would have been had there
been no Rule Change. For purposes of this Section 2.7:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "Return", for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital
requirements and a reasonable attribution formula that takes account of
the capital adequacy rules then in effect. Return may be calculated for
each calendar quarter and for the shorter period between the end of a
calendar quarter and the date of termination in whole of this
Agreement.
(c) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the date of this Agreement, but the term does not
include any changes in applicable requirements that at the closing date
are scheduled to take place under the existing Capital Adequacy Rules
or any increases in the capital that any Related Lender is required to
maintain to the extent that the increases are required due to a
regulatory authority's assessment of the financial condition of such
related lender.
(d) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
Certificates of any Related Lender sent to the Borrowers from time to time
claiming compensation under this Section 2.7, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender
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hereunder to restore its Return shall be conclusive absent manifest error. In
determining such amounts, the Related Lender may use any reasonable averaging
and attribution methods.
Section 2.8 MATURITY DATE. This Agreement and the other Loan
Documents shall become effective as of the date set forth on the first page
hereof and shall continue in full force and effect for a term ending on August
16, 2003 (the "MATURITY DATE"), unless earlier terminated by Lender or Borrowers
pursuant to the terms hereof. Upon the Termination Date, Borrowers shall
immediately pay to Lender, in full, all outstanding and unpaid Obligations and
shall furnish cash collateral to Lender in such amounts as Lender determines are
reasonably necessary to secure Lender from loss, cost, damage or expense,
including attorneys' fees and legal expenses, in connection with any contingent
Obligations, including checks and other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment.
Section 2.9 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT
FACILITY BY THE BORROWERS. Except as otherwise provided herein, the Borrowers
may prepay the Revolving Advances in whole at any time or from time to time in
part. The Borrowers may prepay the Term Advances (other than in accordance with
Section 2.3), or terminate the Credit Facility at any time if they (i) give the
Lender at least 30 days' prior written notice and (ii) pay the Lender the
prepayment or termination fees in accordance with Section 2.10. Any prepayment
of the Term Advances (other than in accordance with Section 2.3) must be in an
amount not less than $100,000 or an integral multiple thereof. Any partial
prepayments of the Term Notes (other than in accordance with Section 2.3) shall
be applied to principal payments due and owing in inverse order of their
maturities. Upon termination of the Credit Facility and payment and performance
of all Obligations, the Lender shall release or terminate the Security Interest
and the Security Documents to which the Borrowers are entitled by law.
Section 2.10 TERMINATION AND PREPAYMENT FEES; WAIVER OF
TERMINATION AND PREPAYMENT FEES.
(a) TERMINATION FEES. If the Credit Facility is terminated for
any reason as of a date other than the Maturity Date, the Borrowers
shall pay to the Lender a fee in an amount equal to a percentage of the
Maximum Line as follows: (i) three percent (3%) if the termination
occurs on or before the first anniversary of the Funding Date; (ii) two
percent (2%) if the termination occurs after the first anniversary of
the Funding Date but on or before the second anniversary of the Funding
Date; and (iii) one percent (1%) if the termination occurs after the
second anniversary of the Funding Date.
(b) PREPAYMENT FEES. If any Term Note is prepaid for any
reason except in accordance with Section 2.3, the Borrowers shall pay
to the Lender a fee in an amount equal to a percentage of the amount
prepaid as follows: (i) three percent (3%) if prepayment occurs on or
before the first anniversary of the Funding Date; (ii) two percent (2%)
if prepayment occurs after the first anniversary of the Funding Date
but on or before the second anniversary of the Funding Date; and (iii)
one percent (1%) if prepayment occurs after the second anniversary of
the Funding Date.
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(c) WAIVER OF TERMINATION AND PREPAYMENT FEES. The Borrowers
will not be required to pay the termination and prepayment fees
otherwise due under this Section 2.10 if such termination or prepayment
is made because of refinancing by an affiliate of the Lender.
Section 2.11 MANDATORY PREPAYMENT. Without notice or demand,
if the outstanding principal balance of the Revolving Advances to XIT shall at
any time exceed the XIT Borrowing Base, XIT shall immediately prepay such
Revolving Advances to the extent necessary to eliminate such excess, and if the
outstanding principal balance of the Revolving Advances to CXR shall at any time
exceed the CXR Borrowing Base, CXR shall immediately prepay such Revolving
Advances to the extent necessary to eliminate such excess. Any payment received
by the Lender under this Section 2.11 or under Section 2.9 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine; provided that any prepayment under Section 2.9
which any Borrower designates as a partial prepayment of its Term Note shall be
applied to principal installments of such Term Note in inverse order of
maturity.
Section 2.12 PAYMENT. For purposes of calculating the amount
of Revolving Advances available to any Borrower, each payment will be applied
(conditional upon final collection) to the outstanding principal balance of the
Revolving Advances to such Borrower on the Banking Day of receipt by Lender of
advices of deposit in the applicable Collateral Account, if such advices are
received within sufficient time (in accordance with Lender's usual and customary
practices as in effect from time to time) to credit such Borrower's loan account
on such day, and if not, then on the next Banking Day. Such payment shall be
applied in any order or manner of application satisfactory to Lender. For
purposes of calculating interest, Lender shall be entitled to charge Borrowers
for two (2) Banking Day of clearance at the Revolving Floating Rate on all
payments deposited into the Collateral Accounts, whether or not such payments
are applied to reduce the outstanding principal balance of the Revolving Note.
This clearance charge is acknowledged to constitute an integral part of the
pricing of the loans and financial accommodations contemplated herein, and shall
apply whether or not the amount of payments deposited exceeds the obligations
outstanding. Notwithstanding anything in Section 2.1, the Borrowers hereby
authorize the Lender, in its discretion at any time or from time to time without
the Borrowers' request and even if the conditions set forth in Section 4.2 would
not be satisfied, to make a Revolving Advance in an amount equal to the portion
of the Obligations from time to time due and payable. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Loan Documents may be charged directly to the loan
accounts of Borrowers.
Section 2.13 PAYMENT ON NON-BANKING DAYS. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.14 USE OF PROCEEDS. The Borrowers shall use the
initial proceeds of Advances only for: (a) payment to each of the Persons listed
in the disbursement direction letter
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furnished by Borrowers to Lender on or about the date hereof and (b) costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Loan Documents. All other Advances made
to any Borrower shall be used by such Borrower only for general operating,
working capital and other proper corporate purposes of such Borrower not
otherwise prohibited by the terms hereof.
Section 2.15 LIABILITY RECORDS. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrowers
establish the contrary. Upon the Lender's demand, the Borrowers will admit and
certify in writing the exact principal balance of the Obligations that the
Borrowers then assert to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrowers
unless the Borrowers give the Lender specific written notice of exception within
30 days after receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 GRANT OF SECURITY INTEREST. The Borrowers hereby
pledge, assign and grant to the Lender a security interest (collectively
referred to as the "SECURITY INTEREST") in the Collateral, as security for the
payment and performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER
OBLIGORS. The Lender may at any time (whether or not a Default Period then
exists) notify any account debtor or other person obligated to pay the amount
due that such right to payment has been assigned or transferred to the Lender
for security and shall be paid directly to the Lender. The Borrowers will
join in giving such notice if the Lender so requests. At any time after the
Borrowers or the Lender give such notice to an account debtor or other
obligor, the Lender may, but need not, in the Lender's name or in any
Borrower's name (a) demand, xxx for, collect or receive any money or property
at any time payable or receivable on account of, or securing, any such right
to payment, or grant any extension to, make any compromise or settlement with
or otherwise agree to waive, modify, amend or change the obligations
(including collateral obligations) of any such account debtor or other
obligor; and (b) as the Borrowers' agent and attorney-in-fact, notify the
United States Postal Service to change the address for delivery of any
Borrower's mail to any address designated by the Lender, otherwise intercept
any Borrower's mail, and receive, open and dispose of any Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all
other mail for such Borrower's account or forwarding such mail to such
Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security
for the payment and performance of the Obligations, the Borrowers hereby
assign to the Lender any and all monies (including, without limitation,
proceeds of insurance and refunds of unearned premiums) due or to become due
under, and all other rights of the Borrowers with respect to, any and all
policies of insurance now or at any time hereafter covering the Collateral or
any evidence thereof or any business records or valuable papers pertaining
thereto, and the Borrowers hereby direct the issuer of any such policy to pay
all such monies directly to the Lender. At any time, whether or not a
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Default Period then exists, the Lender may (but need not), in the Lender's name
or in any Borrower's name, execute and deliver proof of claim, receive all such
monies, endorse checks and other instruments representing payment of such
monies, and adjust, litigate, compromise or release any claim against the issuer
of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrowers hereby irrevocably grant to the Lender the
right to take possession of the Premises at any time during a Default
Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrowers shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrowers will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 LICENSE. Without limiting the generality of the
Patent and Trademark Security Agreements, the Borrowers hereby grant to the
Lender a non-exclusive, worldwide and royalty-free license to use or otherwise
exploit all trademarks, franchises, trade names, copyrights and patents of the
Borrowers for the purpose of selling, leasing or otherwise disposing of any or
all Collateral during any Default Period.
Section 3.6 FINANCING STATEMENT. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
any Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to perfect the security interests granted
hereby. For this purpose, the following information is set forth:
Section 3.7 SETOFF. The Borrowers agree that the Lender may at
any time or from time to time, at its sole discretion and without demand and
without notice to anyone, setoff any liability owed to any Borrower by the
Lender, whether or not due, against any Obligation, whether or not due. In
addition, each other Person holding a participating interest in any Obligations
shall have the right to appropriate or setoff any deposit or other liability
then owed
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by such Person to any Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to such Borrower the amount of such participating interest.
Name and address of Debtors:
XIT Corporation
CXR Telcom Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL REVOLVING
ADVANCES AND THE TERM ADVANCES. The Lender's obligation to make the initial
Revolving Advances and the Term Advances hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrowers.
(b) The Notes, properly executed by the Borrowers.
(c) A true and correct copy of any and all leases pursuant to
which any Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages pursuant
to which any Borrower has mortgaged the Premises, together with a
mortgagee's disclaimer and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant
to which any Borrower's property is in the possession of any Person
other than such Borrower, together with, in the case of any goods held
by such Person for resale, (i) a consignee's acknowledgment and waiver
of liens, (ii) UCC financing statements sufficient to protect such
Borrower's and the Lender's interests in such goods, and (iii) UCC
searches showing that no other secured party has filed a financing
statement against such Person
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and covering property similar to such Borrower's other than such
Borrower, or if there exists any such secured party, evidence that each
such secured party has received notice from such Borrower and the
Lender sufficient to protect such Borrower's and the Lender's interests
in such Borrower's goods from any claim by such secured party.
(f) An acknowledgment and waiver of liens from each warehouse
in which any Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant
to which any Borrower's property is in the possession of any Person
other than such Borrower, together with, (i) an acknowledgment and
waiver of liens from each subcontractor who has possession of such
Borrower's goods from time to time, (ii) UCC financing statements
sufficient to protect such Borrower's and the Lender's interests in
such goods, and (iii) UCC searches showing that no other secured party
has filed a financing statement covering such Person's property other
than such Borrower, or if there exists any such secured party, evidence
that each such secured party has received notice from such Borrower and
the Lender sufficient to protect such Borrower's and the Lender's
interests in such Borrower's goods from any claim by such secured
party.
(h) The Collection Account Agreements, properly executed by
the respective Borrowers and Xxxxx Fargo Bank, N.A.
(i) The Lockbox Agreements, properly executed by the
respective Borrowers, Xxxxx Fargo Bank, N.A. and Regulus West, LLC.
(j) The Patent and Trademark Security Agreements, properly
executed by the respective Borrowers.
(k) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against any Borrower, (ii) no financing statements or
assignments of patents, trademarks or copyrights have been filed and
remain in effect against any Borrower except those financing statements
and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing
that upon receipt of proceeds of the Advances, they will deliver UCC
releases and/or terminations and releases of such assignments of
patents, trademarks or copyrights satisfactory to the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interest, to the extent the Security Interest is capable
of being perfected by filing.
(1) A certificate of each Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of such Borrower's
directors and, if required, shareholders, authorizing the execution,
delivery and performance of the Loan Documents, (ii) such Borrower's
articles of incorporation and bylaws, and (iii) the signatures of such
Borrower's officers or agents authorized to execute and deliver the
Loan Documents and other instruments, agreements and certificates,
including Advance requests, on such Borrower's behalf.
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(m) A current certificate issued by the Secretary of State of
each Borrower's state of incorporation, certifying that such Borrower
is in compliance with all applicable organizational requirements of
such state.
(n) Evidence that each Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(o) A certificate of an officer of each Borrower confirming,
in his personal capacity, the representations and warranties set forth
in Article V.
(p) A support agreement in favor of the Lender, properly
executed by Xxxxxxx Xxxxx in his personal capacity.
(q) An opinion of counsel to the Borrowers, addressed to the
Lender.
(r) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the
Lender's favor and with all liability insurance naming the Lender as an
additional insured.
(s) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full
and prompt payment of all Obligations to the extent of each such
guaranty.
(t) A security agreement, properly executed by MicroTel.
(u) A waiver of interest, properly executed by the spouse of
Xxxxxxx Xxxxx, waiving any and all interest such spouse may have in
the assets disclosed to the Lender in the financial statements of such
Guarantor and in any future earnings or assets acquired by such
Guarantor.
(v) An opinion of counsel to each Guarantor, addressed to the
Lender.
(w) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.5 and expenses incurred by the
Lender through such date and required to be paid by the Borrowers under
Section 9.6, including all legal expenses incurred through the date of
this Agreement.
(x) Evidence that Availability as of the Funding Date is not
less than Four Hundred Thousand Dollars ($400,000) after giving effect
to the amount paid or to be paid to Borrowers' prior lender to retire
Borrowers' line of credit with such prior lender and bringing all other
obligations to a current status satisfactory to Lender.
(y) At Borrowers' cost, an appraisal of all Inventory and
Equipment, issued by an appraiser acceptable to Lender and in form,
substance and reflecting values satisfactory to Lender in its sole
discretion.
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(z) Completion of a field review of the books and records of
Borrowers and such other information with respect to the Collateral as
Lender may require and a review of Borrowers' projections, budgets,
business plans, cash flows and such other financial information as
Lender may require, the results of all of which shall be satisfactory
to Lender in its sole discretion.
(aa) Evidence that there has been no material adverse change,
as determined by Lender, in the financial condition or business of any
Borrower, nor any material decline, as determined by Lender, in the
market value of any Collateral or a substantial or material portion of
the assets of any Borrower since the date of the latest financial
statements of Borrowers delivered to Lender prior to the Funding Date.
(bb) Evidence that Borrowers have opened bank accounts of a
type mutually acceptable to Borrowers and Lender, including, without
limitation, the Collateral Accounts and any other accounts contemplated
by the Collection Account Agreements or the Lockbox Agreements.
(cc) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date;
(b) no material adverse change, as determined by Lender, shall
have occurred in the financial condition or business of any Borrower
nor any material decline, as determined by Lender, in the market value
of any Collateral or a substantial or material portion of the assets of
any Borrower since the date of the latest financial statements
delivered to Lender prior to the Funding Date; and
(c) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF
EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION
NUMBER. Each Borrower is a corporation, duly organized, validly existing and
in good standing under the laws of its state of incorporation and is duly
licensed or qualified to transact business in all jurisdictions where the
character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary. Each
Borrower has all requisite power and authority,
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corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. During its existence, each Borrower has done business solely under
the names set forth in SCHEDULE 5.1 hereto. Each Borrower's chief executive
office and principal place of business is located at the address set forth in
SCHEDULE 5.1 hereto, and all of such Borrower's records relating to its
business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set
forth in SCHEDULE 5.1 hereto. Each Borrower's tax identification number is
correctly set forth in Section 3.6 hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO
LAW OR AGREEMENTS. The execution, delivery and performance by each Borrower
of the Loan Documents and the borrowings from time to time hereunder have
been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of such Borrower's stockholders; (ii)
require any authorization, consent or approval by, or registration,
declaration or filing with, or notice to, any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given
prior to the date hereof; (iii) violate any provision of any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to such Borrower or of such
Borrower's articles of incorporation or bylaws; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which such Borrower is a
party or by which it or its properties may be bound or affected; or (v)
result in, or require, the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature (other than the Security Interest) upon or with respect to any of the
properties now owned or hereafter acquired by such Borrower.
Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes
and, upon due execution by the Borrowers, the other Loan Documents will
constitute the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms.
Section 5.4 SUBSIDIARIES. Except as set forth in SCHEDULE 5.4
hereto, the Borrowers have no Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The
Borrowers have heretofore furnished to the Lender the audited financial
statements of MicroTel and its subsidiaries for their fiscal year ended
December 31, 1999 and their unaudited financial statements for the fiscal
year-to-date period ended June 30, 2000 and those statements fairly present
each Borrower's financial condition on the dates thereof and the results of
its operations and cash flows for the periods then ended and were prepared in
accordance with GAAP. Since the date of the most recent financial statements,
there has been no material adverse change in any Borrower's business,
properties or condition (financial or otherwise).
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Section 5.6 LITIGATION. There are no actions, suits or
proceedings pending or, to any Borrower's knowledge, threatened against or
affecting any Borrower or any of its Affiliates or the properties of any
Borrower or any of its Affiliates before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to any Borrower or any of its
Affiliates, would have a material adverse effect on the financial condition,
properties or operations of any Borrower or any of its Affiliates.
Section 5.7 REGULATION U. Each Borrower is not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, as amended), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin stock
or to retire any indebtedness which was originally incurred to purchase or
carry any margin stock or for any other purpose which might cause any of the
Advances to be considered a "purpose credit" within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System, as amended.
Section 5.8 TAXES. Each Borrower and its Affiliates have
paid or caused to be paid to the proper authorities when due all federal,
state and local taxes required to be withheld by each of them. Each Borrower
and its Affiliates have filed all federal, state and local tax returns which
to the knowledge of the officers of the Borrowers or any Affiliate, as the
case may be, are required to be filed, and the Borrowers and their Affiliates
have paid or caused to be paid to the respective taxing authorities all taxes
as shown on said returns or on any assessment received by any of them to the
extent such taxes have become due.
Section 5.9 TITLES AND LIENS. Each Borrower has good and
absolute title to all Collateral described in the collateral reports provided
to the Lender and all other Collateral, properties and assets reflected in
the latest financial statements referred to in Section 5.5 and all proceeds
thereof, free and clear of all mortgages, security interests, liens and
encumbrances, except for Permitted Liens. No financing statement naming any
Borrower as debtor is on file in any office except to perfect only Permitted
Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in
writing prior to the date hereof, neither the Borrowers nor any of their
Affiliates maintain or have maintained any Plan. Neither the Borrowers nor
any Affiliate have received any notice or has any knowledge to the effect
that they are not in full compliance with any of the requirements of ERISA.
No Reportable Event or other fact or circumstance which may have an adverse
effect on the Plan's tax qualified status exists in connection with any Plan.
Neither the Borrowers nor any of their Affiliates have:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or know of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than
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accrued benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 DEFAULT. Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on such Borrower's financial
condition, properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To the Borrowers' best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or
quantity as to create any liability or obligation for either the
Borrowers or the Lender under common law of any jurisdiction or under
any Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in, on
or under the Premises in such a way as to create any such liability.
(c) To the Borrowers' best knowledge, the Borrowers have not
disposed of Hazardous Substances in such a manner as to create any
liability under any Environmental Law.
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings,
hearings or litigation, relating in any way to the Premises or the
Borrowers, alleging liability under, violation of, or noncompliance
with any Environmental Law or any license, permit or other
authorization issued pursuant thereto. To the Borrowers' best
knowledge, no such matter is threatened or impending.
(e) To the Borrowers' best knowledge, the Borrowers'
businesses are and have in the past always been conducted in accordance
with all Environmental Laws and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary
for the lawful and efficient operation of such businesses are in the
Borrowers' possession and are in full force and effect. No permit
required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
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(f) To the Borrowers' best knowledge, the Premises are not and
never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list,
schedule, log, inventory or database.
(g) The Borrowers have delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents
describing or relating in any way to the Premises or Borrowers'
businesses.
Section 5.13 SUBMISSIONS TO LENDER. All financial and other
information provided to the Lender by or on behalf of the Borrowers in
connection with the Borrowers' request for the credit facilities contemplated
hereby is true and correct in all material respects and, as to projections,
valuations or pro forma financial statements, present a good faith opinion as to
such projections, valuations and pro forma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrowers have provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrowers' records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 BANK ACCOUNTS. All of the deposit accounts,
investment accounts or other accounts in the name of or used by Borrowers
maintained at any bank or other financial institution are set forth on SCHEDULE
5.16 hereto.
Section 5.17 FINANCIAL SOLVENCY. Both before and after giving
effect to the all of the transactions contemplated in the Loan Documents, none
of the Borrowers or their Affiliates:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
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(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of
the Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to, nor believes
that it will, incur debts beyond its ability to pay them as they
mature;
(d) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or
by taking any action with respect thereto, intends to hinder, delay or
defraud either its present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy
or for an arrangement or reorganization or similar proceeding under any
law any jurisdiction, nor, to the best knowledge of the Borrowers, is
the subject of any actual, pending or threatened bankruptcy, insolvency
or similar proceedings under any law of any jurisdiction.
ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrowers will
deliver, or cause to be delivered, to the Lender each of the following, which
shall be in form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrowers, the audited
financial statements of MicroTel and its subsidiaries on a consolidated
and consolidating basis, with the unqualified opinion of independent
certified public accountants selected by the Borrowers and acceptable
to the Lender, which annual financial statements shall include the
balance sheets as at the end of such fiscal year and the related
statements of the income, retained earnings and cash flows for the
fiscal year then ended, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management
letters prepared by such accountants; (ii) a report signed by such
accountants stating that in making the investigations necessary for
said opinion they obtained no knowledge, except as specifically stated,
of any Default or Event of Default hereunder and all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not the Borrowers are in compliance with the requirements set forth in
Sections 6.12, 6.13, 6.14, 6.15, and 7.10; and (iii) a certificate of
the Borrowers' chief financial officer stating that such financial
statements have been prepared in accordance with GAAP and whether or
not
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such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts
with respect thereto;
(b) as soon as available and in any event within 25 days after
the end of each month, unaudited/internal balance sheets and statements
of income and retained earnings of MicroTel and its subsidiaries, on a
consolidated and consolidating basis, as at the end of and for such
month and for the year to date period then ended, in reasonable detail
and stating in comparative form the figures for the corresponding date
and periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments; and accompanied by a certificate
of the Borrowers' chief financial officer, substantially in the form of
EXHIBIT D hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore
reported and remedied and, if so, stating in reasonable detail the
facts with respect thereto, and (iii) all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the
Borrowers are in compliance with the requirements set forth in Sections
6.12, 6.13, 6.14, 6.15,, and 7.10;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrowers' accounts
receivable and their accounts payable, a report of open purchase
orders, a summary perpetual Inventory report, with a summary breakdown
of Inventory by classification and location, a detailed report
regarding sales contracts and approved overages, and a calculation of
the Borrowers' Accounts, Eligible Accounts, Inventory and Eligible
Inventory as at the end of such month or shorter time period;
(d) at least 30 days before the beginning of each fiscal year
of the Borrowers, the projected balance sheets and income statements of
MicroTel and its subsidiaries, on a consolidated and consolidating
basis, for each month of such year, each in reasonable detail,
representing the Borrowers' good faith projections and certified by the
Borrowers' chief financial officer as being the most accurate
projections available and identical to the projections used by the
Borrowers for internal planning purposes, together with such supporting
schedules and information as the Lender may in its discretion require;
(e) within 15 days after the end of each month, borrowing base
certificates of each Borrower as of the end of such month;
(f) daily reports of cash collateral, sales assignments,
credit memos and adjustments and deposits;
(g) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any Borrower of the type
described in Section 5.12 or which seek a monetary recovery against any
Borrower in excess of $5,000;
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(h) as promptly as practicable (but in any event not later
than five business days) after an officer of any Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of the Borrowers of the
steps being taken by the Borrowers to cure the effect of such breach,
default or event;
(i) as soon as possible and in any event within 30 days after
any Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of the Borrowers' chief
financial officer setting forth details as to such Reportable Event and
the action which the Borrowers propose to take with respect thereto,
together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation;
(j) as soon as possible, and in any event within 10 days after
any Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of the Borrowers' chief financial
officer setting forth details as to such failure and the action which
the Borrowers propose to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(k) promptly upon knowledge thereof, notice of (i) any
disputes or claims by any Borrower's customers exceeding $1,000
individually or $5,000 in the aggregate during any fiscal year; (ii)
credit memos; (iii) any goods returned to or recovered by any Borrower;
and (iv) any change in the persons constituting any Borrower's officers
and directors;
(1) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in any
Collateral or such other collateral or the prospect of payment thereof;
(m) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which MicroTel or its
subsidiaries shall have sent to its stockholders;
(n) promptly after the sending or filing thereof, copies of
all regular and periodic reports which MicroTel or its subsidiaries
shall file with the Securities and Exchange Commission or any national
securities exchange;
(o) as soon as possible, and in any event by not later than
April 30th of each year, copies of the state and federal tax returns of
MicroTel and its subsidiaries and all schedules thereto and an updated
personal financial statement of each individual Guarantor;
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(p) promptly upon knowledge thereof, notice of any Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect any Borrower's business or its
financial condition; and
(q) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION.
Each Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to such Borrower's business and
financial condition and such other matters as the Lender may from time to
time request in which true and complete entries will be made in accordance
with GAAP and, upon the Lender's request, will permit any officer, employee,
attorney or accountant for the Lender to audit, review, make extracts from or
copy any and all corporate and financial books and records of such Borrower
at all times during ordinary business hours, to send and discuss with account
debtors and other obligors requests for verification of amounts owed to such
Borrower, and to discuss such Borrower's affairs with any of its directors,
officers, employees or agents. Each Borrower will permit the Lender, or its
employees, accountants, attorneys or agents, to examine and inspect any
Collateral, other collateral covered by the Security Documents or any other
property of such Borrower at any time during ordinary business hours.
Borrowers shall, at their expense, provide Lender with appraisals of the
Equipment, in form, using methodologies and by appraisers satisfactory to
Lender, and with such frequency as Lender may require; PROVIDED, HOWEVER,
that so long as no Default or Event of Default has occurred and is
continuing, Borrowers shall not be responsible for the costs of more than one
(1) such appraisal during any twelve (12) month period.
Section 6.3 ACCOUNT VERIFICATION. The Lender may at any
time and from time to time send or require the Borrowers to send requests for
verification of accounts or notices of assignment to account debtors and
other obligors. The Lender may also at any time and from time to time
telephone account debtors and other obligors to verify accounts.
Section 6.4 COMPLIANCE WITH LAWS.
(a) Each Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, each Borrower
specifically agrees that it will comply with all applicable
Environmental Laws and obtain and comply with all permits, licenses and
similar approvals required by any Environmental Laws, and will not
generate, use, transport, treat, store or dispose of any Hazardous
Substances in such a manner as to create any liability or obligation
under the common law of any jurisdiction or any Environmental Law.
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Section 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. Each
Borrower will pay or discharge, when due, (a) all taxes, assessments and
governmental charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including, without limitation, the
Collateral) or upon or against the creation, perfection or continuance of the
Security Interest, prior to the date on which penalties attach thereto, (b)
all federal, state and local taxes required to be withheld by it, and (c) all
lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien or charge upon any properties of any Borrower; provided,
that the Borrowers shall not be required to pay any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which proper reserves have been
made.
Section 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrowers will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of their
other properties necessary or useful in their business in good
condition, repair and working order (normal wear and tear excepted) and
will from time to time replace or repair any worn, defective or broken
parts; provided, however, that nothing in this Section 6.6 shall
prevent the Borrowers from discontinuing the operation and maintenance
of any of their properties if such discontinuance is, in the Lender's
judgment, desirable in the conduct of their businesses and not
disadvantageous in any material respect to the Lender.
(b) The Borrowers will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) The Borrowers will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 INSURANCE. The Borrowers will obtain and at all
times maintain insurance with insurers believed by the Borrowers to be
responsible and reputable, in such amounts and against such risks as may from
time to time be required by the Lender, but in all events in such amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar properties in the same general areas in which the
Borrowers operate. Without limiting the generality of the foregoing, the
Borrowers will at all times maintain business interruption insurance
including coverage for force majeure and keep all tangible Collateral insured
against risks of fire (including so-called extended coverage), theft,
collision (for Collateral consisting of motor vehicles) and such other risks
and in such amounts as the Lender may reasonably request, with any loss
payable to the Lender to the extent of its interest, and all policies of such
insurance shall contain a lender's loss payable endorsement for the Lender's
benefit acceptable to the Lender. All policies of liability insurance
required hereunder shall name the Lender as an additional insured.
Section 6.8 PRESERVATION OF EXISTENCE. Each Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
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Section 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by
the Lender, the Borrowers will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly
endorsed or assigned by the applicable Borrower.
Section 6.10 COLLATERAL ACCOUNT.
(a) If, notwithstanding the instructions to debtors to make
payments to its Lockbox, any Borrower receives any payments on
Receivables, such Borrower shall deposit such payments into its
Collateral Account. Until so deposited, such Borrower shall hold all
such payments in trust for and as the property of the Lender and shall
not commingle such payments with any of its other funds or property.
(b) Amounts deposited in the Collateral Accounts shall not
bear interest and shall not be subject to withdrawal by the Borrowers,
except after full payment and discharge of all Obligations.
(c) All deposits in the Collateral Accounts shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations.
(d) All items deposited in the Collateral Accounts shall be
subject to final payment. If any such item is returned uncollected, the
applicable Borrower will immediately pay the Lender, or, for items
deposited in its Collateral Account, the bank maintaining such account,
the amount of that item, or such bank at its discretion may charge any
uncollected item to such Borrower's commercial account or other
account. The Borrowers shall be liable as an endorser on all items
deposited in the Collateral Accounts, whether or not in fact endorsed
by the Borrowers.
Section 6.11 PERFORMANCE BY THE LENDER. If any Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten (10) calendar days after the Lender gives the Borrowers written
notice thereof (or in the case of the agreements contained in Sections 6.5, 6.7
and 6.10, immediately upon the occurrence of such failure, without notice or
lapse of time), the Lender may, but need not, perform or observe such covenant
on behalf and in the name, place and stead of the Borrowers (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrowers shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Revolving Floating Rate. To facilitate the Lender's performance or observance of
such covenants of the Borrowers, the Borrowers hereby irrevocably appoint the
Lender, or the Lender's delegate, acting alone, as the Borrowers' attorney
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in fact (which appointment is coupled with an interest) with the right (but not
the duty) from time to time to create, prepare, complete, execute, deliver,
endorse or file in the name and on behalf of any Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrowers under this Section
6.11.
Section 6.12 MINIMUM DEBT SERVICE COVERAGE RATIO. The
Borrowers will cause MicroTel and its subsidiaries, on a consolidated basis,
to maintain a Debt Service Coverage Ratio of not less than 1.25 to 1.00 as of
September 30, 2000 and December 31, 2000.
Section 6.13 MINIMUM TANGIBLE NET WORTH. The Borrowers will
cause MicroTel and its subsidiaries, on a consolidated basis, to maintain
Tangible Net Worth of not less than $2,500,000 as of December 31, 2000.
Section 6.14 MINIMUM NET INCOME. The Borrowers will, on a
consolidated fiscal year to date basis, achieve Net Income of not less than
$1,196,000 as of September 30, 2000, and $1,414,400 as of December 31, 2000.
Section 6.15 MINIMUM EARNINGS BEFORE TAXES. The Borrowers
will on a consolidated basis achieve Earnings Before Taxes during each month
of not less than ($75,000).
Section 6.16 NEW COVENANTS. On or before December 31, 2000,
Lender shall set new covenant levels for Sections 6.12, 6.13, 6.14, 6.15, and
7.10 for periods after such date. The new covenant levels will be based on the
Borrower's projections for such periods received by Lender pursuant to Section
6.1(d) and shall be no less stringent than the present levels.
Section 6.17 GOVERNMENT CONTRACTS. With respect to any
contracts with any unit of government that may give rise to Accounts owing by
such governmental unit in excess of $10,000 in the aggregate (except for any
such contract expiring within 120 days of the Funding Date), Borrowers shall,
within 60 days of the Funding Date and thereafter, comply with the Federal
Assignment of Claims Act of 1940, as amended, or any similar law, for the
assignment of such contracts to Lender.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrowers agree that, without the
Lender's prior written consent:
Section 7.1 LIENS. Each Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
assignment or transfer upon or of any of its assets, now owned or hereafter
acquired, to secure any indebtedness; EXCLUDING, HOWEVER, from the operation of
the foregoing, the following (collectively, "PERMITTED LIENS"):
(a) in the case of any of the Borrowers' property which is not
Collateral or other collateral described in the Security Documents,
covenants, restrictions, rights,
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easements and minor irregularities in title which do not materially
interfere with any Borrower's business or operations as presently
conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in
SCHEDULE 7.1 hereto, securing indebtedness for borrowed money permitted
under Section 7.2; and
(c) the Security Interest and liens and security interests
created by the Security Documents.
Section 7.2 INDEBTEDNESS. The Borrowers will not incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness for borrowed money or letters of
credit issued on any Borrower's behalf, or any other indebtedness or
liability evidenced by notes, bonds, debentures or similar obligations,
except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrowers in existence on the date
hereof and listed in SCHEDULE 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 GUARANTIES. The Borrowers will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrowers
for deposit or collection or similar transactions in the ordinary
course of business; and
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in SCHEDULE 7.2 hereto.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrowers will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-I" or "A-2" by Standard & Poors Corporation or "P-I" or
"P-2" by Xxxxx'x Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess
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of $100,000,000 (which certificates of deposit or bankers'
acceptances are fully insured by the Federal Deposit Insurance
Corporation);
(ii) travel advances or loans to the Borrowers'
officers and employees not exceeding at any one time an
aggregate of $5,000;
(iii) advances in the form of progress payments,
prepaid rent not exceeding three (3) months or security
deposits; and
(iv) so long as no Default or Event of Default has
occurred and is continuing, advances to MicroTel in an amount
necessary to cover any outstanding accounting, tax and
administrative expenses incurred by MicroTel on the Borrowers'
behalf.
(b) The Borrowers will not create or permit to exist any
Subsidiary, other than the Subsidiaries in existence on the date hereof
and listed in SCHEDULE 5.4.
Section 7.5 DIVIDENDS. Except as set forth below, the
Borrowers will not declare or pay any dividends (other than dividends payable
solely in stock of the Borrowers) on any class of their stock or make any
payment on account of the purchase, redemption or other retirement of any
shares of such stock or make any distribution in respect thereof, either
directly, or indirectly; PROVIDED, HOWEVER, that so long as no Default or
Event of Default has occurred and is continuing, Borrowers may make such
dividends, payments or other distributions to MicroTel in an amount necessary
to cover any outstanding accounting, tax and administrative expenses incurred
by MicroTel on the Borrowers' behalf.
Section 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF
BUSINESS OPERATIONS. Each Borrower will not sell, lease, assign, transfer or
otherwise dispose of(i) the stock of any Subsidiary, (ii) all or a
substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any
other Person other than the sale of Inventory in the ordinary course of
business and will not liquidate, dissolve or suspend business operations. The
Borrowers will not in any manner transfer any property without prior or
present receipt of full and adequate consideration.
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS.
Each Borrower will not consolidate with or merge into any Person, or permit
any other Person to merge into it, or acquire (in a transaction analogous in
purpose or effect to a consolidation or merger) all or substantially all the
assets of any other Person.
Section 7.8 SALE AND LEASEBACK. Each Borrower will not
enter into any arrangement, directly or indirectly, with any other Person
whereby such Borrower shall sell or transfer any real or personal property,
whether now owned or hereafter acquired, and then or thereafter rent or lease
as lessee such property or any part thereof or any other property which such
Borrower intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
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Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrowers
will not engage in any line of business materially different from that presently
engaged in by the Borrowers and will not purchase, lease or otherwise acquire
assets not related to their business.
Section 7.10 CAPITAL EXPENDITURES. The Borrowers will not
incur or contract to incur Capital Expenditures of more than $100,000 in the
aggregate during the fiscal year ending December 31,2000.
Section 7.11 ACCOUNTING. The Borrowers will not adopt any
material change in accounting principles other than as required by GAAP. The
Borrowers will not adopt, permit or consent to any change in their fiscal year.
Section 7.12 DISCOUNTS, ETC. The Borrowers will not, after
notice from the Lender, grant any discount, credit or allowance to any customer
of the Borrowers or accept any return of goods sold, or at any time (whether
before or after notice from the Lender) modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of the
Borrowers.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrowers will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 OTHER DEFAULTS. The Borrowers will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon any Borrower.
Section 7.15 PLACE OF BUSINESS; NAME. The Borrowers will not
transfer their chief executive office or principal place of business, or move,
relocate, close or sell any business location. The Borrowers will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrowers will not change
their names.
Section 7.16 ORGANIZATIONAL DOCUMENTS; S CORPORATION STATUS.
Each Borrower will not amend its certificate of incorporation, articles of
incorporation or bylaws. The Borrowers will not become an S Corporation within
the meaning of the Internal Revenue Code of 1986, as amended.
Section 7.17 SALARIES. The Borrowers will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% in any one year, either individually or for all
such persons in the aggregate, or pay any such increase from any source other
than profits earned in the year of payment.
Section 7.18 CHANGE IN OWNERSHIP. The Borrowers will not
issue or sell any stock of the Borrowers to any Person other than MicroTel,
and the Borrowers will not permit or
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suffer to occur the sale, transfer, assignment, pledge or other disposition of
any or all of the issued and outstanding shares of stock of the Borrowers.
Section 7.19 TRANSACTION WITH AFFILIATES. Borrowers shall not
enter into any transaction for the purchase, sale or exchange of property or the
rendering of any service to or by any Affiliate, except in the ordinary course
of and pursuant to the reasonable requirements of their business and upon fair
and reasonable terms no less favorable to Borrowers than Borrowers would obtain
in a comparable arms length transaction with an unaffiliated Person.
Section 7.20 ADDITIONAL BANK ACCOUNTS. Borrowers shall not,
directly or indirectly, open, establish or maintain any deposit account,
investment account or any other account with any bank or other financial
institution, other than the Collateral Accounts and the accounts set forth in
SCHEDULE 5.16 hereto.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 EVENTS OF DEFAULT. "Event of Default", wherever
used herein, means any one of the following events, which Event of Default
shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 9.2 hereof:
(a) Default in the payment of the Obligations when they
become due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by any Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of any Borrower contained in this Agreement;
(d) Any Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his
debts as they mature, or make an assignment for the benefit of
creditors; or any Borrower or any Guarantor shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or him or for all or any substantial part of its or his property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of such Borrower or such Guarantor, as the
case may be; or any Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against such
Borrower or any such Guarantor; or any judgment, writ, warrant of
attachment or execution or similar process shall be issued or levied
against a substantial part of the property of any Borrower or any
Guarantor;
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(e) A petition shall be filed by or against any Borrower or
any Guarantor under the United States Bankruptcy Code naming any
Borrower or such Guarantor as debtor;
(f) Any representation or warranty made by any Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by any Borrower (or any of its officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(g) The rendering against any Borrower of a final judgment,
decree or order for the payment of money in excess of $10,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(h) A default under any bond, debenture, note or other
evidence of indebtedness of any Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
the Borrowers by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or any Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or any Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
any Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of any Borrower hereunder or under any note;
(k) Any Borrower shall liquidate, dissolve, terminate or
suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell all or substantially all of
its assets, without the Lender's prior written consent;
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(l) Any Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued;
(m) Default in the payment of any amount owed by any Borrower
to the Lender other than any indebtedness arising hereunder;
(n) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's
guaranty in favor of the Lender, any individual Guarantor shall die or
any other Guarantor shall cease to exist;
(o) Xxxxxxx X. Xxxxx shall repudiate, purport to revoke or
fail to perform any of his obligations under his support agreement in
favor of Lender, or shall fail to be actively involved in the
management of Borrowers.
(p) Any event or circumstance with respect to any Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by such Borrower under the Loan Documents is impaired or
any material adverse change in the business or financial condition of
any Borrower shall occur; or
(q) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the
Lender.
Section 8.2 RIGHTS AND REMEDIES. During any Default Period,
the Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrowers, declare the
Commitment to be terminated, whereupon the same shall forthwith
terminate;
(b) the Lender may, by notice to the Borrowers, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
the Borrowers hereby expressly waive;
(c) the Lender may, without notice to the Borrowers and
without further action, apply any and all money owing by the Lender to
any Borrower to the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which the Borrowers hereby expressly waive) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, the Borrowers will on demand
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assemble the Collateral and make it available to the Lender at a place
to be designated by the Lender which is reasonably convenient to both
parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other fights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrowers of
any intended disposition of Collateral or any other intended action is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given (in the manner specified in Section 9.3) at
least ten (10) calendar days before the date of intended disposition or other
action.
ARTICLE IX
MISCELLANEOUS
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or
delay by the Lender in exercising any fight, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such fight, power or remedy preclude any other or further
exercise thereof or the exercise of any other fight, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by any Borrower therefrom or any release of a Security Interest
shall be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No notice to
or demand on the Borrowers in any case shall entitle the Borrowers to any
other or further notice or demand in similar or other circumstances.
Section 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States
mail, (c) sent by overnight courier of national reputation, or (d)
transmitted by telecopy, in each case addressed or telecopied to the party to
whom notice is being given at its address or telecopier number as set forth
below:
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If to the Borrowers:
XIT Corporation/CXR Telcom Corporation
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxx
If to the Lender:
Xxxxx Fargo Business Credit, Inc.
000 Xxxxx Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.4 FURTHER DOCUMENTS. The Borrowers will from time
to time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's
rights under the Loan Documents (but any failure to request or assure that
the Borrowers execute, deliver or endorse any such item shall not affect or
impair the validity, sufficiency or enforceability of the Loan Documents and
the Security Interest, regardless of whether any such item was or was not
executed, delivered or endorsed in a similar context or on a prior occasion).
Section 9.5 COLLATERAL. This Agreement does not contemplate
a sale of accounts, contract rights or chattel paper, and, as provided by
law, the Borrowers are entitled to any surplus and shall remain liable for
any deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person,
exercises reasonable care in the selection of the bailee or other third
person, and the Lender need not otherwise preserve, protect, insure or care
for any Collateral. The Lender shall not be obligated to preserve any rights
the Borrowers may have against prior parties, to realize on the Collateral at
all or in any particular manner or order or to apply any cash proceeds of the
Collateral in any particular order of application.
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Section 9.6 COSTS AND EXPENSES. The Borrowers agree to pay
on demand all costs and expenses, including (without limitation) attorneys'
fees, incurred by the Lender in connection with the Obligations, this
Agreement, the Loan Documents, and any other document or agreement related
hereto or thereto, and the transactions contemplated hereby, including
without limitation all such costs, expenses and fees incurred in connection
with the negotiation, preparation, execution, amendment, administration,
performance, collection and enforcement of the Obligations and all such
documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 9.7 INDEMNITY. In addition to the payment of
expenses pursuant to Section 9.6, the Borrowers agree to indemnify, defend
and hold harmless the Lender, and any of its participants, parent
corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the "INDEMNITEES") from and against
any of the following (collectively, "INDEMNIFIED LIABILITIES"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrowers, or counsel designated by the Borrowers and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrowers' sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrowers shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrowers' obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrowers' other obligations hereunder.
- 42 -
Section 9.8 PARTICIPANTS. The Lender and its participants,
if any, are not partners or joint venturers, and the Lender shall not have
any liability or responsibility for any obligation, act or omission of any of
its participants. All rights and powers specifically conferred upon the
Lender may be transferred or delegated to any of the Lender's participants,
successors or assigns.
Section 9.9 EXECUTION IN COUNTERPARTS. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and
all of which counterparts, taken together, shall constitute but one and the
same instrument.
Section 9.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrowers and the Lender and their respective successors and
assigns, except that the Borrowers shall not have the right to assign their
rights thereunder or any interest therein without the Lender's prior written
consent. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. Without limiting the Lender's right to share information regarding the
Borrowers and their Affiliates with the Lender's participants, accountants,
lawyers and other advisors, the Lender, Xxxxx Fargo Corporation, and all direct
and indirect subsidiaries of Xxxxx Fargo Corporation, may exchange any and all
information they may have in their possession regarding the Borrowers and their
Affiliates, and the Borrowers waive any right of confidentiality they may have
with respect to such exchange of such information.
Section 9.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12 HEADINGS. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF
JURY TRIAL. This Agreement and the other Loan Documents shall be governed by and
construed in accordance with the substantive laws (other than conflict laws) of
the State of California. The Guaranties shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of
California. Each of the parties hereto hereby (i) consents to the personal
jurisdiction of the state and federal courts located in the State of California
in connection with any controversy related to this Agreement or the other Loan
Documents; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Lender or any
Borrower in connection with this Agreement or the other Loan Documents shall be
venued in either the State Courts of the County of Los Angeles, State of
California, or the United States District Court for the Central District of
California; and (iv) agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. THE PARTIES
- 43 -
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS AGREEMENT.
ARTICLE X
JOINT AND SEVERAL LIABILITY AND SURETYSHIP WAIVERS
Section 10.1 INDEPENDENT OBLIGATIONS; SUBROGATION. The
Obligations of each Borrower hereunder are joint and several, and each
Borrower guarantees the payment and performance of the other Borrower's
Obligations to Lender. To the maximum extent permitted by law, each Borrower
hereby waives any claim, right or remedy which either may now have or
hereafter acquire against the other Borrower that arises hereunder including,
without limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim,
right or remedy of Lender against the other Borrower or any Collateral which
Lender now has or hereafter acquires, whether or not such claim, right or
remedy arises in equity, under contract, by statute, under common law or
otherwise until the Obligations are fully paid and finally discharged. In
addition, each Borrower hereby waives any right to proceed against the other
Borrower, now or hereafter, for contribution, indemnity, reimbursement, and
any other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied contract
or by operation of law, which any Borrower may now have or hereafter have as
against the other Borrower with respect to the Obligations until the
Obligations are fully paid and finally discharged. Each Borrower also hereby
waives any rights of recourse to or with respect to any asset of the other
Borrower until the Obligations are fully paid and finally discharged.
Section 10.2 AUTHORITY TO MODIFY OBLIGATIONS AND SECURITY.
Each Borrower authorizes Lender, without notice or demand and without
affecting any Borrower's liability hereunder, from time to time, whether
before or after any notice of termination hereof or before or after any
default in respect of the Obligations, to: (i) renew, extend, accelerate, or
otherwise change the time for payment of, or otherwise change any other term
or condition of, any document or agreement evidencing or relating to any
Obligations as such Obligations relate to the other Borrower, including,
without limitation, to increase or decrease the rate of interest thereon;
(ii) accept, substitute, waive, defease, increase, release, exchange or
otherwise alter any Collateral, in whole or in part, securing the other
Borrower's Obligations; (iii) apply any and all such Collateral and direct
the order or manner of sale thereof as Lender, in its sole discretion, may
determine; (iv) deal with the other Borrower as Lender may elect; (v) in
Lender's sole discretion, settle, release on terms satisfactory to Lender, or
by operation of law or otherwise, compound, compromise, collect or otherwise
liquidate any of the other Borrower's Obligations and/or any of the
Collateral in any manner, and bid and purchase any of the collateral at any
sale thereof; (vi) apply any and all payments or recoveries from the other
Borrower as Lender, in its sole discretion, may determine, whether or not
such indebtedness relates to the Obligations; all whether such Obligations
are secured or unsecured or guaranteed or not guaranteed by others; and (vii)
apply any sums realized from Collateral furnished by the other Borrower upon
any of its indebtedness or obligations to Lender as it in its sole
discretion, may determine, whether or not
- 44 -
such indebtedness relates to the Obligations; all without in any way
diminishing, releasing or discharging the liability of any Borrower hereunder.
Section 10.3 WAIVER OF DEFENSES. Upon an Event of Default
by any Borrower in respect of any Obligations, Lender may, at its option and
without additional notice to any Borrower, proceed directly against any
Borrower to collect and recover the full amount of the liability hereunder,
or any portion thereof, and each Borrower waives any right to require Lender
to: (i) proceed against the other Borrower or any other person whomsoever;
(ii) proceed against or exhaust any Collateral given to or held by Lender in
connection with the Obligations; (iii) give notice of the terms, time and
place of any public or private sale of any of the Collateral except as
otherwise provided herein; or (iv) pursue any other remedy in Lender's power
whatsoever. A separate action or actions may be brought and prosecuted
against any Borrower whether or not action is brought against the other
Borrower and whether the other Borrower be joined in any such action or
actions; and each Borrower waives the benefit of any statute of limitations
affecting the liability hereunder or the enforcement hereof, and agrees that
any payment of any Obligations or other act which shall toll any statute of
limitations applicable thereto shall similarly operate to toll such statute
of limitations applicable to the liability hereunder.
Section 10.4 EXERCISE OF LENDER'S RIGHTS. Each Borrower
hereby authorizes and empowers Lender in its sole discretion, without any
notice or demand to such Borrower whatsoever and without affecting the
liability of such Borrower hereunder, to exercise any right or remedy which
Lender may have available to them against the other Borrower.
Section 10.5 ADDITIONAL WAIVERS. Each Borrower waives any
defense arising by reason of any disability or other defense of the other
Borrower or by reason of the cessation from any cause whatsoever of the
liability of the other Borrower or by reason of any act or omission of Lender
or others which directly or indirectly results in or aids the discharge or
release of the other Borrower or any Obligations or any Collateral by
operation of law or otherwise. The Obligations shall be enforceable against
each Borrower without regard to the validity, regularity or enforceability of
any of the Obligations with respect to the other Borrower or any of the
documents related thereto or any collateral security documents securing any
of the Obligations. No exercise by Lender of, and no omission of Lender to
exercise, any power or authority recognized herein and no impairment or
suspension of any right or remedy of Lender against any Borrower or any
Collateral shall in any way suspend, discharge, release, exonerate or
otherwise affect any of the Obligations or any Collateral furnished by the
Borrowers or give to the Borrowers any right of recourse against Lender. Each
Borrower specifically agrees that the failure of Lender: (i) to perfect any
lien on or security interest in any property heretofore or hereafter given
any Borrower to secure payment of the Obligations, or to record or file any
document relating thereto or (ii) to file or enforce a claim against the
estate (either in administration, bankruptcy or other proceeding) of any
Borrower shall not in any manner whatsoever terminate, diminish, exonerate or
otherwise affect the liability of any Borrower hereunder.
Section 10.6 ADDITIONAL INDEBTEDNESS. Additional
Obligations may be created from time to time at the request of any Borrower
and without further authorization from or notice to the other Borrower even
though the borrowing Borrower's financial condition may deteriorate
- 45 -
since the date hereof. Each Borrower waives the right, if any, to require
Lender to disclose to such Borrower any information it may now have or
hereafter acquire concerning the other Borrower's character, credit,
Collateral, financial condition or other matters. Each Borrower has
established adequate means to obtain from the other Borrower on a continuing
basis financial and other information pertaining to such Borrower's business
and affairs, and assumes the responsibility for being and keeping informed of
the financial and other conditions of the other Borrower and of all
circumstances bearing upon the risk of nonpayment of the Obligations which
diligent inquiry would reveal. Lender need not inquire into the powers of any
Borrower or the authority of any of its officers, directors, partners or
agents acting or purporting to act in their behalf, and any obligations
created in reliance upon the purported exercise of such power or authority is
hereby guaranteed. All obligations of each Borrower to Lender heretofore, now
or hereafter created shall be deemed to have been granted at each Borrower's
special insistence and request and in consideration of and in reliance upon
this Agreement.
Section 10.7 NOTICES, DEMANDS, ETC. Except as expressly
provided by this Agreement, Lender shall be under no obligation whatsoever to
make or give to any Borrower, and each Borrower hereby waives diligence, all
rights of setoff and counterclaim against Lender, all demands, presentments,
protests, notices of protests, notices of protests, notices of
nonperformance, notices of dishonor, and all other notices of every kind or
nature, including notice of the existence, creation or incurring of any new
or additional Obligations.
Section 10.8 SUBORDINATION. Any indebtedness of any
Borrower now or hereafter owing to the other Borrower is hereby subordinated
to the Obligations, whether heretofore, now or hereafter created, and whether
before or after notice of termination hereof, and, following the occurrence
and during the continuation of an Event of Default, no Borrower shall,
without the prior consent of Lender, pay in whole or in part any of such
indebtedness nor will any such Borrower accept any payment of or on account
of any such indebtedness at any time while such Borrower remains liable
hereunder. At the request of Lender, after the occurrence and during the
continuance of an Event of Default, each Borrower shall pay to Lender all or
any part of such subordinated indebtedness and any amount so paid to Lender
at its request shall be applied to payment of the Obligations. Each payment
on the indebtedness of any Borrower to the other Borrower received in
violation of any of the provisions hereof shall be deemed to have been
received by the other Borrower as trustee for Lender and shall be paid over
to Lender immediately on account of the Obligations, but without otherwise
affecting in any manner any such Borrower's liability under any of the
provisions of this Agreement. Each Borrower agrees to file all claims against
the other Borrower in any bankruptcy or other proceeding in which the filing
of claims is required by law in respect of any indebtedness of the other
Borrower to such Borrower, and Lender shall be entitled to all of any such
Borrower's rights thereunder. If for any reason any such Borrower fails to
file such claim at least thirty (30) days prior to the last date on which
such claim should be filed, Lender, as such Borrower's attorney-in-fact, is
hereby authorized to do so in Borrowers' name or, in Lender's discretion, to
assign such claim to, and cause a proof of claim to be filed in the name of,
Lender's nominee. In all such cases, whether in administration, bankruptcy or
otherwise, the person or persons authorized to pay such claim shall pay to
Lender the full amount payable on the claim in the proceeding, and to the
full extent necessary for that purpose any such Borrower hereby assigns to
Lender all such Borrower's rights to any payments or distributions to which
such Borrower
- 46 -
otherwise would be entitled. If the amount so paid is greater than any such
Borrower's liability hereunder, Lender will pay the excess amount to the party
entitled thereto.
Section 10.9 REVIVAL. If any payments of money or transfers
of property made to Lender by any Borrower should for any reason subsequently
be declared to be, or in Lender's counsel's good faith opinion be determined
to be, fraudulent (within the meaning of any state or federal law relating to
fraudulent conveyances), preferential or otherwise voidable or recoverable in
whole or in part for any reason (hereinafter collectively called "voidable
transfers") under the Bankruptcy Code or any other federal or state law and
Lender is required to repay or restore, or in Lender's counsel's opinion may
be so liable to repay or restore, any such voidable transfer, or the amount
or any portion thereof, then as to any such voidable transfer or the amount
repaid or restored and all reasonable costs and expenses (including
reasonable attorneys' fees) of Lender related thereto, such Borrower's
liability hereunder shall automatically be revived, reinstated and restored
and shall exist as though such voidable transfer had never been made to
Lender.
Section 10.10 UNDERSTANDING OF WAIVERS. Each Borrower
warrants and agrees that the waivers set forth in this Article X are made
with full knowledge of their significance and consequences. If any of such
waivers are determined to be contrary to any applicable law or public policy,
such waivers shall be effective only to the maximum extent permitted by law.
- 47 -
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
XXXXX FARGO BUSINESS CREDIT, INC. XIT CORPORATION
a Minnesota corporation a New Jersey corporation
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxxx Xxxxx
-------------------------- --------------------------
Name: Xxxxxxx X. Xxxxxxx Name: Xxxxxxxx Xxxxx
------------------------ ------------------------
Its Asst. Vice President Its Vice President
-------------------- --------------------
CXR TELECOM CORPORATION
a Delaware corporation
By: /s/ Xxxxxxxx Xxxxx
--------------------------
Name: Xxxxxxxx Xxxxx
------------------------
Its Vice President
--------------------
- 48 -
TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Note
Exhibit B Form of XIT Term Note
Exhibit C Form of CXR Term Note
Exhibit D Compliance Certificate
Exhibit E Premises
--------------------------------------------------------------------------------
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 5.16 Bank Accounts
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$3,000,000 Pasadena, California
August 16, 2000
For value received, the undersigned, XIT CORPORATION, a New
Jersey corporation and CXR TELCOM CORPORATION, a Delaware corporation
(collectively the "BORROWERS"), jointly and severally, hereby promise to pay
on the Termination Date under the Credit Agreement (defined below), to the
order of XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the
"LENDER"), at its main office in Pasadena, California, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of
THREE MILLION DOLLARS ($3,000,000) or, if less, the aggregate unpaid
principal amount of all Revolving Advances made by the Lender to the
Borrowers under the Credit Agreement (defined below) together with interest
on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day
year, from the date hereof until this Note is fully paid at the rate from
time to time in effect under the Credit and Security Agreement of even date
herewith (as the same may hereafter be amended, supplemented or restated from
time to time, the "CREDIT AGREEMENT") by and between the Lender and the
Borrowers. The principal hereof and interest accruing thereon shall be due
and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Revolving Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not
paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
CXR TELCOM CORPORATION XIT CORPORATION
a Delaware corporation a New Jersey corporation
By: By:
------------------------ ------------------------
Name: Name:
---------------------- ----------------------
Its President Its President
A - 1
Exhibit B to Credit and Security Agreement
TERM NOTE
$646,765 Pasadena, California
August 16, 2000
For value received, the undersigned, XIT CORPORATION, a New
Jersey corporation (the "BORROWER"), hereby promises to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "LENDER"), at
its main office in Pasadena, California, or at any other place designated at
any time by the holder hereof, in lawful money of the United States of
America and in immediately available funds, the principal sum of SIX HUNDRED
FORTY-SIX THOUSAND SEVEN HUNDRED SIXTY-FIVE DOLLARS ($646,765) or, if less,
the aggregate unpaid principal amount of the Term Advance made by the Lender
to the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a
360-day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of even
date herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "CREDIT AGREEMENT") by and among the Lender, the
Borrower and CXR TELCOM CORPORATION. The principal hereof and interest
accruing thereon shall be due and payable as provided in the Credit
Agreement. This Note may be prepaid only in accordance with the Credit
Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Term Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security Documents
as therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
XIT CORPORATION,
a New Jersey corporation
By
------------------------------
Name:
----------------------------
Its President
B - 1
Exhibit C to Credit and Security Agreement
TERM NOTE
$40,235 Pasadena, California
August 16, 2000
For value received, the undersigned, CXR TELCOM
CORPORATION, a Delaware corporation (the "BORROWER"), hereby promises to pay
on the Termination Date under the Credit Agreement (defined below), to the
order of XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the
"LENDER"), at its main office in Pasadena, California, or at any other place
designated at any time by the holder hereof, in lawful money of the United
States of America and in immediately available funds, the principal sum of
FORTY THOUSAND TWO HUNDRED THIRTY-FIVE DOLLARS ($40,235) or, if less, the
aggregate unpaid principal amount of the Term Advance made by the Lender to
the Borrower under the Credit Agreement (defined below) together with
interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a
360-day year, from the date hereof until this Note is fully paid at the rate
from time to time in effect under the Credit and Security Agreement of even
date herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the "CREDIT AGREEMENT") by and among the Lender, the
Borrower and XIT CORPORATION. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This
Note may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Term Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments
or other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not
paid when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
CXR TELCOM CORPORATION,
a Delaware corporation
By
------------------------------
Name:
----------------------------
Its President
C - 1
Exhibit D to Credit and Security Agreement
COMPLIANCE CERTIFICATE
To:
---------------------------------
Xxxxx Fargo Business Credit, Inc.
Date: ,2000
--------------------------
Subject: XIT Corporation/CXR Telcom Corporation
FINANCIAL STATEMENTS
In accordance with our Credit and Security Agreement dated
as of August __, 2000 (the "CREDIT AGREEMENT"), attached are the financial
statements of XIT Corporation and CXR Telcom Corporation (collectively the
"BORROWERS") as of and for _________________,20__ (the "REPORTING DATE") and
the year-to-date period then ended (the "CURRENT FINANCIALS"). All terms used
in this certificate have the meanings given in the Credit Agreement.
I certify that the Current Financials have been prepared in
accordance with GAAP, subject to year-end audit adjustments, and fairly present
the Borrowers' financial condition and the results of its operations as of the
date thereof.
EVENTS OF DEFAULT. (Check one):
[ ] The undersigned does not have knowledge of the
occurrence of a Default or Event of Default under the
Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a
Default or Event of Default under the Credit
Agreement and attached hereto is a statement of the
facts with respect to thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of
the Borrowers' fiscal quarters, hence I am completing
only paragraph____below.
[ ] The Reporting Date marks the end of one of the
Borrowers' fiscal quarters, hence I am completing all
paragraphs below except paragraph__.
[ ] The Reporting Date marks the end of the Borrowers'
fiscal year, hence I am completing all paragraphs
below.
FINANCIAL COVENANTS. I further hereby certify as follows:
1. MINIMUM DEBT SERVICE COVERAGE RATIO. Pursuant to Section
6.12 of the Credit Agreement, as of the Reporting Date, the Debt
Service Coverage Ratio of MicroTel and its subsidiaries, on a
consolidated basis, was___to 1.00 which
D - 1
[ ] satisfies [ ] does not satisfy the requirement that such ratio be
no less than 1.25 to 1.00 on the Reporting Date.
2. MINIMUM TANGIBLE NET WORTH. Pursuant to Section 6.13 of the
Credit Agreement, as of the Reporting Date the Tangible Net Worth of
MicroTel and its subsidiaries, on a consolidated basis, was $ _________
which [ ] satisfies [ ] does not satisfy the requirement that such
amount be not less than $2,500,000 on the Reporting Date.
3. MINIMUM NET INCOME. Pursuant to Section 6.14 of the Credit
Agreement, the Borrowers' Net Income for the____month period ending on
the Reporting Date, was $______ , which [ ] satisfies [ ] does not
satisfy the requirement that such amount be not less than $1,196,000
during the 9 months ending September 30, 2000, and $1,414,400 during
the 12 months ending December 31, 2000.
4. MINIMUM EARNINGS BEFORE TAXES. Pursuant to Section 6.15 of
the Credit Agreement, the Borrowers' Earnings Before Taxes for the
monthly period ending on the Reporting Date, was $________ , which [ ]
satisfies [ ] does not satisfy the requirement that such amount be not
less than ($75,000) during such period.
5. CAPITAL EXPENDITURES. Pursuant to Section 7.10 of the
Credit Agreement, for the year-to-date period ending on the Reporting
Date, the Borrowers have expended or contracted to expend during the
fiscal year ended ________, 200_, for Capital Expenditures, $________
in the aggregate and at most $ _____ in any one transaction, which [ ]
satisfies [ ] does not satisfy the requirement that such expenditures
not exceed $100,000 in the aggregate and $________ for any one
transaction during such year.
6. Salaries. As of the Reporting Date, the Borrower [ ] is [ ]
is not in compliance with Section 7.17 of the Credit Agreement
concerning salaries.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
XIT CORPORATION
CXR TELCOM CORPORATION
By
----------------------------
----------------------------
Their Chief Financial Officer
D - 2
Exhibit E to Credit and Security Agreement
PREMISES
The Premises referred to in the Credit and Security Agreement
are legally described as follows:
[To be completed by Borrower]
E - 1
Schedule 5.1 to Credit and Security Agreement
TRADE NAMES, CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS, AND LOCATIONS OF COLLATERAL
TRADE NAMES
XIT Corporation: XCEL Etch-Tek; XCEL Information
Technologies; XCEL Info Tech; XCEL Circuits; Digitran
CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
OTHER INVENTORY AND EQUIPMENT LOCATIONS
XIT Corporation:
000 X. Xxxxxxxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxx
0000 X. Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxxxxx
0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx
0000-X Xxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx
0000 X. Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxx, Xxxxxxxxxx
CXR Telcom Corporation:
00000 Xxxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxxxxxxx
000 Xxxxxxxxx Xxxxxx, Xx. Xxxxxxx, Xxxxxxxx
Schedule 5.1 - page 1
Schedule 5.4 to Credit and Security Agreement
SUBSIDIARIES
XIT CORPORATION
XCEL Japan, Ltd.
SCHEDULE 5.4 -page 1
Schedule 5.16 to Credit and Security Agreement
BANK ACCOUNTS
Union Bank of California, N.A.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Deposit Account No.: 3340007742
(Account in the name of MicroTel International Inc.)
Schedule 7.1 - page 1
Schedule 7.1 to Credit and Security Agreement
PERMITTED LIENS
Various purchase money liens against
specific equipment
Judgment lien in favor of
Xxxx Industries
Schedule 7.1 - page 1
Schedule 7.2 to Credit and Security Agreement
PERMITTED INDEBTEDNESS AND GUARANTIES
INDEBTEDNESS
None
GUARANTIES
None
Schedule 7.2 - page 1
