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EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement") is made and entered
into as of this 2nd day of April, 2001 (hereinafter, the "Closing Date"), by and
among CIERA NETWORK SYSTEMS, INC., a Texas corporation located at 0000
Xxxxxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (as such, together with its
successors and permitted assigns, "Borrower"), CCC GLOBALCOM CORPORATION, a
Nevada corporation located at 00000 Xxxx Xxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000 (as such, together with its successor and permitted assigns, "Guarantor"),
and RFC CAPITAL CORPORATION, a Delaware corporation, located at 000 Xxxx
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxx 00000 (as such, together with its
successors and assigns, "Lender").
WITNESSETH
WHEREAS, Lender desires to make one or more loans to Borrowers to be
used for working capital and for such other purposes as Borrowers and Lender
mutually agree in writing, pursuant to the terms and provisions specified herein
and as evidenced by that certain Promissory Note dated as of even date herewith
(the "Promissory Note").
WHEREAS, Borrowers acknowledge that each derives material benefit and
valuable consideration from the Promissory Note.
WHEREAS, as security for the performance of Borrowers' obligations
hereunder and under the Promissory Note, each Borrower shall grant to Lender a
security interest in certain of such Borrower's assets as more fully described
herein.
NOW, THEREFORE, in order to secure performance of Borrower's
obligations hereunder and under the Promissory Note, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:
1. Recitals; Definitions. The recitals set forth above are hereby
incorporated as terms and provisions hereof. As used in this Agreement:
"Affiliate" means any individual, partnership, corporation, or other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with either Borrower, or is a family member related by
birth or marriage.
"Attrition Rate" means the combined monthly decrease in the number of
customers of Ciera Post-Paid and the Equalnet Business, expressed as a
percentage, and shall be computed according to the following formula:
C(MB1) - C(ME1) + C(MB2) - C(ME2) + C(MB3) - C(ME3)
--------------- --------------- ---------------
C(MB1) C(MB2) C(MB3)
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where C(MB1) means the number of Ciera Post-Paid's and Equalnet
Business' customers as of the first business day of the calendar month in which
the Attrition Rate is determined (the "Determination Month"), C(ME1) means the
number of Ciera Post-Paid's and Equalnet Business' customers as of the last
business day of the Determination Month who were also Ciera Post-Paid's and
Equalnet Business' customers as of the first business day of the Determination
Month, C(MB2) means the number of Ciera Post-Paid's and Equalnet Business'
customers as of the first business day of the first calendar month immediately
preceding the
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Determination Month, C(ME2) means the number of Ciera Post-Paid's and Equalnet
Business' customers as of the last business day of the first calendar month
immediately preceding the Determination Month who were also Ciera Post-Paid's
and Equalnet Business' customers as of the first business day of the first
calendar month immediately preceding the Determination Month, C(MB3) means the
number of Ciera Post-Paid's and Equalnet Business' customers as of the first
business day of the second calendar month immediately preceding the
Determination Month, and C(ME3) means the number of Ciera Post-Paid's and
Equalnet Business' customers as of the last business day of the second calendar
month immediately preceding the Determination Month who were also Ciera
Post-Paid's and Equalnet Business' customers as of the first business day of the
second calendar month immediately preceding the Determination Month.
"Availability Formula" means, unless otherwise modified by Lender, an
amount equal to the sum of:
(i) the product of (x) the Equalnet Revenue Multiple
times (y) the lesser of (1) the average combined revenues of the Equalnet
Business for the rolling three month period immediately preceding the date of
determination, or (2) the combined revenues of the Equalnet Business for the
month immediately preceding the date of determination; plus
(ii) the product of (x) the Ciera Post-Paid Revenue
Multiple times (y) the lesser of (1) the average Cash Collections of Ciera
Post-Paid for the rolling three month period immediately preceding the date of
determination, or (2) the Cash Collections of Ciera Post-Paid for the month
immediately preceding the date of determination; plus
(iii) the product of (x) the Ciera Pre-Paid Revenue
Multiple times (y) the lesser of (1) the average Cash Collections of Ciera
Pre-Paid for the rolling three month period immediately preceding the date of
determination, or (2) the Cash Collections of Ciera Pre-Paid for the month
immediately preceding the date of determination;
provided, however, if the Ciera Pre-Paid Net Growth Rate is less than 1.00%, the
amount calculated in (iii) above shall be excluded from the Availability
Formula.
"Cash Collections" means all cash, monies, receipts, proceeds and the
like received in the Lockbox Account that represent the collection of Borrower's
accounts receivable received within 90 days of the invoice date.
"Ciera Post-Paid" shall mean Ciera Post-Paid Local Services.
"Ciera Post-Paid Revenue Multiple", for the purpose of determining the
Availability Formula, shall be determined as follows:
(i) to the extent Ciera Post-Paid's average Cash
Collections for the rolling three month period immediately preceding the date of
determination is greater than or equal to eighty-five percent (85%), the Ciera
Post-Paid Revenue Multiple shall be 3.0;
(ii) to the extent Ciera Post-Paid's average Cash
Collections for the rolling three month period immediately preceding the date of
determination is greater than or equal to seventy-five percent (75%), but less
than eighty-five percent (85%), the Ciera Post-Paid Revenue Multiple shall be
2.5;
(iii) to the extent Ciera Post-Paid's average Cash
Collections for the rolling three month period immediately preceding the date of
determination is less than seventy-five percent (75%), the Ciera Post-Paid
Revenue Multiple shall be 2.0.
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"Ciera Pre-Paid" shall mean Ciera Pre-Paid Local Services.
"Ciera Pre-Paid Net Growth Rate" means the monthly increase in the
number of customers of Ciera Pre-Paid, expressed as a percentage, and shall be
computed according to the following formula:
C(ME1) - C(MB1) + C(ME2) - C(MB2) + C(ME3) - C(MB3)
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C(MB1) C(MB2) C(MB3)
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where C(MB1) means the number of Ciera Pre-Paid's customers as of the
first business day of the calendar month in which the Ciera Pre-Paid Net Growth
Rate is determined (the "Ciera Pre-Paid Net Growth Rate Determination Month"),
C(ME1) means the number of Ciera Pre-Paid's customers as of the last business
day of the Ciera Pre-Paid Net Growth Rate Determination Month, C(MB2) means the
number of Ciera Pre-Paid's customers as of the first business day of the first
calendar month immediately preceding the Ciera Pre-Paid Net Growth Rate
Determination Month, C(ME2) means the number of Ciera Pre-Paid's customers as of
the last business day of the first calendar month immediately preceding the
Ciera Pre-Paid Net Growth Rate Determination Month, C(MB3) means the number of
Ciera Pre-Paid's customers as of the first business day of the second calendar
month immediately preceding the Ciera Pre-Paid Net Growth Rate Determination
Month, and C(ME3) means the number of Ciera Pre-Paid's customers as of the last
business day of the second calendar month immediately preceding the Ciera
Pre-Paid Net Growth Rate Determination Month.
"Ciera Pre-Paid Revenue Multiple", for the purpose of determining the
Availability Formula, shall be determined as follows:
(i) to the extent the Ciera Pre-Paid Net Growth Rate
is greater than or equal to three percent (3%), the Ciera Pre-Paid Revenue
Multiple shall be 3.0;
(ii) to the extent the Ciera Pre-Paid Net Growth Rate
is greater than or equal to two percent (2%), but less than three percent (3%),
the Ciera Pre-Paid Revenue Multiple shall be 2.0;
(iii) to the extent the Ciera Pre-Paid Net Growth
Rate is less than two percent (2%), the Ciera Pre-Paid Revenue Multiple shall be
1.0;
"ECC" means Equalnet Communications Corp.
"ENC" means Equalnet Corporation.
"Equalnet Companies" means ECC, ENC and USC.
"Equalnet Business" means the business of Borrower relating to the
assets of the Equalnet Companies which are being purchased out of Chapter 11
bankruptcy.
"Equalnet Revenue Multiple", for the purpose of determining the
Availability Formula, shall be calculated as follows: on the Closing Date and
for a period of 179 days, the Equalnet Revenue Multiple shall be equal to the
quotient of (x) the sum of all obligations owed to RFC by the Equalnet Companies
as of the Closing Date, divided by (y) the Equalnet Companies gross monthly
xxxxxxxx for March 2001; thereafter, beginning 180 days after the Closing Date,
the Equalnet Revenue Multiple shall decrease .05 every two months for the first
six months, .10 every month for the next 12 months, and .14 every month for the
next 12 months; provided, however, that in no event shall the Equalnet Revenue
Multiple be less than 3.0.
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"GAAP" means generally accepted accounting principles.
"Lockbox Account" means that certain account as defined at Section
13(e) hereof.
"Net Growth Rate" means the combined monthly increase in the number of
customers of Ciera Post-Paid and the Equalnet Business, expressed as a
percentage, and shall be computed according to the following formula:
C(ME1) - C(MB1) + C(ME2) - C(MB2) + C(ME3) - C(MB3)
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C(MB1) C(MB2) C(MB3)
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where C(MB1) means the number of Ciera Post-Paid's and Equalnet
Business' customers as of the first business day of the calendar month in which
the Net Growth Rate is determined (the "Net Growth Rate Determination Month"),
C(ME1) means the number of Ciera Post-Paid's and Equalnet Business' customers as
of the last business day of the Net Growth Rate Determination Month, C(MB2)
means the number of Ciera Post-Paid's and Equalnet Business' customers as of the
first business day of the first calendar month immediately preceding the Net
Growth Rate Determination Month, C(ME2) means the number of Ciera Post-Paid's
and Equalnet Business' customers as of the last business day of the first
calendar month immediately preceding the Net Growth Rate Determination Month,
C(MB3) means the number of Ciera Post-Paid's and Equalnet Business' customers as
of the first business day of the second calendar month immediately preceding the
Net Growth Rate Determination Month, and C(ME3) means the number of Ciera
Post-Paid's and Equalnet Business' customers as of the last business day of the
second calendar month immediately preceding the Net Growth Rate Determination
Month.
"Obligations" is defined in Section 10.
"Permitted Liens" means (a) liens in favor of the Lender; (b) liens for
taxes, assessments or other governmental charges not delinquent or being
contested in good faith and by appropriate proceedings and with respect to which
proper reserves have been taken by the Borrower provided, that, the lien shall
have no effect on the priority of the liens in favor of the Lender or the value
of the Collateral and a stay of enforcement of any such lien shall be in effect;
(c) liens disclosed in the financial statements referred to in Section 14, the
existence of which the Lender has consented to in writing; (d) deposits or
pledges to secure obligations under worker's compensation, social security or
similar laws, or under unemployment insurance; and (e) liens disclosed on
Schedule 11(g); and (f) liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof, provided that any such lien
shall not encumber any other property of the Borrower.
"Person" means any individual, corporation, firm, enterprise,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, limited liability company or any other entity of any kind
or any government or political subdivision or any agency, department or
instrumentality thereof.
"USC" means USC Telecom, Inc.
2. Capitalized Terms. Capitalized terms shall have the respective
meanings ascribed thereto in this Agreement.
3. Maximum Loan Amount; Term of Loan; Determination of Availability.
(a) Lender hereby agrees to loan to Borrower a principal
amount of up to Ten Million
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Dollars ($10,000,000.00) ("Maximum Loan Amount") on the terms and conditions set
forth herein.
(b) From the Closing Date through the period ending on January
2, 2004 ("Draw Period"), Borrower may from time to time request in writing that
Lender make one or more loans to it pursuant to the terms and provisions of this
Agreement (each such advance made hereunder, a "Loan" and the aggregate
principal amount outstanding of all Loans made hereunder, the "Principal Sum").
The Principal Sum, plus any and all accrued and unpaid interest shall not exceed
the Maximum Loan Amount. Lender shall have no obligation to make any Loan at any
time when a set of facts or circumstances exists, which, by itself, upon the
giving of notice, the lapse of time, or any one or more of the foregoing would
constitute an Event of Default (as defined in Section 23) under this Agreement
(a "Pending Default").
(c) Notwithstanding anything to the contrary in this
Agreement, the Principal Sum shall not exceed (i) the sum of (x) the
Availability Formula plus (y) the product of the Availability Formula multiplied
by .10 for the period beginning on April 2, 2001 and ending on July 2, 2001, and
(ii) the Availability Formula at any time after July 2, 2001.
(d) Subject to Section 29 hereof and unless otherwise agreed
by Lender and Borrower in writing and provided there has not otherwise been an
Event of Default, the term of this Agreement shall commence as of the Closing
Date and continue until April 2, 2005 (the "Stated Maturity").
(e) Lender reserves the right, after providing notice to
Borrower in accordance with Section 26 of this Agreement and the expiration of
any applicable cure period, to deduct from any Loan made hereunder, such amounts
as Lender may deem proper and necessary, in its sole discretion, for the payment
of interest, fees, and expenses under this Agreement or any other agreement in
favor of Lender, and such other purposes as Lender may deem appropriate.
4. Interest. From the date of the Promissory Note, the Principal Sum
shall bear interest, until the Stated Maturity and payment in full of the
Promissory Note, at a rate equal to the prime lending rate as listed at all
times during which this Agreement is in effect in The Wall Street Journal,
Midwest Edition, plus one and three-quarters percent (1.75%) per annum
("Interest Rate). Interest payments shall be calculated on a 360-day year basis
and shall be based on the actual number of days that elapse during the interest
calculation period.
5. Expenses. Borrower shall be responsible for all out-of-pocket
expenses of Lender associated with the negotiation, preparation and execution of
this Agreement including but not limited to Lender's reasonable legal fees,
audit fees, appraisal fees and banking fees related hereto. All such expenses
shall be netted on the Closing Date against the Loan proceeds or added to the
Principal Sum, as the case may be.
6. Payment of Principal and Interest. The Principal Sum, or so much
thereof as shall have been advanced by Lender at any time and not thereafter
repaid, plus any and all accrued and unpaid interest shall be immediately due
and payable upon the Stated Maturity, whether by demand, acceleration or
otherwise. In addition, accrued interest shall be payable by Borrower to Lender
on a monthly basis in arrears; provided, however, that one and three-quarters
percent of the Interest Rate shall be deferred during the period beginning on
the Closing Date and ending on April 2, 2002, and repaid in equal monthly
installments during the period beginning on April 3, 2002 and ending on April 2,
2003. Lender shall apply all collections, as of the date they are received and
collected in the Lockbox, first against any fees or other charges, then second
against accrued interest, and then third against the Principal Sum, until all
amounts due under the Loan are paid in full.
Upon the occurrence of an Event of Default, including, but not limited to, an
event where an installment of interest or the unpaid principal balance is not
received by Lender on or before the date such payment is due, Borrower shall be
deemed to be delinquent and in default of the terms and provisions hereof and,
at Lender's
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sole discretion and in addition to Lender's other rights hereunder, Lender shall
have the right, without any further notice or demand for payment, to increase
the Interest Rate to a rate equal to the prime lending rate as listed at all
times during which this Agreement is in effect in The Wall Street Journal,
Midwest Edition, plus six and three-quarters percent (6.75%) per annum, or the
highest rate legally permitted, on the outstanding Principal Sum and accrued and
unpaid interest amount. In addition, in such event Borrower agrees to
immediately suspend the payment of any and all cash bonuses to any director,
officer and/or management personnel until such time as Borrower is in compliance
with the terms and conditions of this Agreement.
7. Payment.
(a) Borrower shall expressly instruct all of its end users and
other payors, including master payors on credit card receipts, to remit payment
to the Lockbox Account. Pursuant to this Agreement and/or the execution of any
other documentation in connection herewith or with respect to the Lockbox
Account, Borrower hereby authorizes Lender to withdraw funds from the Lockbox
Account in order to satisfy any Obligations then due and owing Lender by
Borrower, and, to the extent such available funds are not sufficient to satisfy
the Obligations then due and owing Lender, Borrower shall immediately remit such
payment to Lender, by wire transfer, in lawful money of the United States of
America, to an account designated by Lender, or in the event no such account has
been identified, by certified check payable to RFC Capital Corporation and
delivered at 000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxx 00000,
Attention: President or at such other place as Lender may designate in writing.
(b) If Borrower fails to maintain, as minimum security for the
Loans, sufficient collections such that availability as determined in accordance
with Section 3 hereof equals or exceeds the Principal Sum, Borrower shall
immediately pay to Lender such difference.
8. Prepayment; Termination.
(a) Borrower may prepay the Principal Sum outstanding plus
accrued but unpaid interest on the Promissory Note in whole or in part at any
time. The amount of any prepayment shall be applied first to satisfy the payment
of any fees, costs, charges or expenses incurred by Lender in connection with
this Agreement, including but not limited to attorneys' fees, then second in
reduction of accrued and unpaid interest, if any, and third, in reduction of the
Principal Sum.
(b) Notwithstanding the foregoing, Borrower may terminate this
Agreement in connection with Borrower's prepayment of the entire Principal Sum
and upon Lender's receipt of ninety (90) days prior written notice thereof. In
the event of any termination of this Agreement, Borrower shall be required to
discharge, no later than the effective date of termination, the Principal Sum,
all accrued and unpaid interest, all Obligations and all other amounts owing
from Borrower to Lender pursuant to this Agreement and any agreement or document
executed or delivered hereunder. The security interest created by Borrower in
favor of Lender pursuant to this Agreement, and all other rights and remedies of
Lender pursuant to this Agreement, shall continue in full force and effect
notwithstanding any termination of this Agreement, until the Principal Sum, all
accrued and unpaid interest, all Obligations and all other obligations owing
from Borrower to Lender are discharged in full.
9. Use of Proceeds. Borrower hereby agrees, represents, covenants and
warrants that all Loan proceeds received hereunder shall be used, unless
otherwise agreed in writing by Lender, to (a) refinance the current obligations
owed to Lender on two ENC and one USC Receivables Sale Agreements, (b) refinance
outstanding balances owed to Lender relating to one USC term loan, one ENC term
loan, and one ECC term loan up to a maximum of the permitted claim, (c) pay any
transaction costs incurred by Guarantor or Lender in excess of $500,000, and (d)
provide working capital. Any other use thereof is expressly subject to the prior
written approval of Lender.
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10. Grant of Security Interest.
(a) To secure the prompt payment and performance to Lender of
the Obligations, Borrower hereby grants, pledges, conveys and assigns to Lender
continuing security interests in and lien upon the following property and
interests in property, whether Borrower's interest therein be as owner,
co-owner, lessee, consignee, secured party or otherwise, and whether the same be
now owned or existing or hereafter arising or acquired, and wherever located,
together with all substitutions, replacements, additions and accessions therefor
or thereto, all documents, contracts, negotiable documents, documents of title,
warehouse receipts, storage receipts, dock receipts, dock warrants, express
bills, freight bills, airbills, bills of lading, and other documents relating
thereto, all products thereof and all cash and non-cash proceeds thereof
including, but not limited to, notes, drafts, checks, instruments, insurance
proceeds, indemnity proceeds, warranty and guaranty proceeds (herein the
"Proceeds"): (i) all inventory including, but not limited to, all goods,
merchandise and other personal property furnished under any contract of service
or intended for sale or lease, all parts, supplies, raw materials, work in
process, finished goods, materials used or consumed, and repossessed and
returned goods (herein the "Inventory"); (ii) all accounts, accounts receivable,
contract rights, chattel paper, general intangibles, income or other tax
refunds, proceeds of letters of credit, preference recoveries and all claims in
respect of any transfers of any kind, instruments, negotiable documents, notes,
drafts, acceptances and other forms of obligations, all contracts, books,
records, ledger cards, computer programs, and other documents or property,
including without limitation such items which are evidencing or relating to the
accounts and inventory and including, but not limited to, any of the foregoing
arising from or in connection with the sale, lease or other disposition of
Inventory (herein the "Accounts"); (iii) all machinery, equipment, tools, dies,
molds, rolling stock, furniture, furnishings and fixtures including, but not
limited to, all manufacturing, fabricating, processing, transporting and
packaging equipment, power systems, heating, cooling and ventilating systems,
lighting and communications systems, electric, gas and water distribution
systems, food service systems, fire prevention, alarm and security systems,
laundry systems and computing and data processing systems (herein the
"Equipment"); (iv) all trade names, trademarks, trademark applications, trade
secrets, domain names, service marks, data bases, software and software systems,
including the source and object codes, information systems, discs, tapes,
customer lists, telephone numbers, credit memoranda, goodwill, patents, patent
applications, patents pending, copyrights, royalties, literary rights, licenses
and franchises (herein the "Intellectual Property"); (v) all investment
property, including without limitation, securities, whether certificated or
uncertificated, securities entitlements, securities accounts, commodities
contracts and commodities accounts (herein the "Investment Property"); (vi) all
of Borrower's customer base, which shall include but not be limited to all of
Borrower's past, present and future customer contracts, agreements, lists,
documents, computer tapes, letters of agency or other arrangements, any customer
list relating thereto and any information regarding prospective customers and
contracts, agreements, goodwill and other intangible assets associated with any
of the foregoing (herein the "Customer Base"); (vii) all deposit accounts,
whether general, special, time, demand, provisional, or final, all cash or
monies wherever located, any and all deposits or other sums at any time due to
Borrower, any and all policies or certificates of insurance, goods, choses in
action, cash and property, which now or hereafter are at any time in the
possession or control of Lender or in transit by mail or carrier to or from
Lender, or in the possession of any third party acting in Lender's behalf,
without regard to whether Lender received the same in pledge for safekeeping, as
agent for collection or transmission or otherwise, or whether Lender has
conditionally released the same (herein the "Deposits"); and (viii) all
insurance proceeds of whatever nature (herein the "Insurance Proceeds") (all of
the Accounts, the Inventory, the Equipment, the Intellectual Property, the
Investment Property, the Customer Base, the Deposits, the Insurance Proceeds,
and the Proceeds herein are collectively termed the "Collateral").
(b) The security interests granted in the Collateral by this
Agreement are to secure the prompt and full payment and complete performance of
all obligations of Borrower to Lender under this Agreement, the Promissory Note
and all other indebtedness, liabilities and obligations whatsoever and
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whatever nature owed by Borrower to Lender whether direct or indirect, obsolete
or contingent, primary or secondary, due or to become due and whether now
existing or hereafter arising and howsoever evidenced or acquired, whether joint
or several, or joint and several (collectively, the "Obligations"). The word
"Obligations" is used in its most comprehensive sense and includes, without
limitation, all forbearances, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of Borrower to Lender, whether evidenced by note, warrant, pledge or
otherwise, and any and all renewals of or substitutions therefor. The absence of
any reference to this Agreement in any documents, instruments, or agreements
evidencing or relating to any Obligations secured hereby shall not limit or be
construed to limit the scope or applicability of this Agreement.
(c) It is Borrower's express intention that this Agreement and
the continuing security interest granted hereby, in addition to covering all
present obligations of Borrower to Lender and its Affiliates pursuant to the
Obligations, shall extend to all future obligations of Borrower to Lender
intended as replacements or substitutions for said Obligations, whether or not
such Obligations are reduced or entirely extinguished and thereafter increased
or reincurred.
(d) It is the intention of the parties hereto that this
Agreement shall constitute a security agreement under the Uniform Commercial
Code and any other applicable law and Lender and its affiliates, successors and
assigns shall have the rights and remedies of a Lender thereunder. Borrower
further agrees to deliver any financing statements or additional documents
Lender may reasonably request to perfect or evidence Lender's security interest
granted herein.
(e) At its option, Lender may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance and preservation of the Collateral. Borrower
agrees to reimburse Lender upon demand for any payment made or any expense
incurred (including reasonable attorneys' fees) by Lender pursuant to the
foregoing authorization. Should said sum not be paid to Lender upon demand,
interest shall accrue thereon from the date of demand until paid in full, at the
highest rate set forth in any document or instrument evidencing any of the
Obligations.
(f) Lender shall have no duty as to the collection or
protection of the Collateral or any income therefrom, nor as to the preservation
of rights against prior parties, nor as to the preservation of any right
pertaining thereto, beyond the safe custody of any Collateral in the possession
of Lender.
11. Representations, Warranties and Covenants of Borrower and
Guarantor. Borrower and Guarantor, jointly and severally, represent, warrant,
covenant and agree that:
(a) each of Borrower and Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to execute, deliver
and perform this Agreement; and, within 90 days of the Closing Date, each of
Borrower and Guarantor (i) shall have all necessary licenses, permits and
authorizations to carry out all of the terms, covenants and provisions contained
herein, and to carry on its business as now conducted and as presently proposed
to be conducted, (ii) will not be doing business or conducting any activity in
any jurisdiction in which it has not duly qualified and become authorized to do
business, and (iii) will not be in violation of any laws, ordinances, orders,
governmental rules or regulations to which it is subject;
(b) the Board of Directors of each of Borrower and Guarantor,
as appropriate, has duly authorized the execution and delivery of this Agreement
and of the Promissory Note and other documents contemplated herein, and this
Agreement, the Promissory Note and other documents executed in connection with
this Agreement will constitute valid and binding obligations enforceable in
accordance with their respective terms;
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(c) the execution and delivery of this Agreement, and the
performance of the transactions contemplated hereby, do not violate, conflict
with, result in the breach of, or constitute a default under any applicable law,
the organizational documents of Borrower or Guarantor or any agreement or
instrument to which Borrower or Guarantor is a party, or result in the creation
or imposition of any lien, charge or encumbrance upon any assets of Borrower or
Guarantor, other than the liens granted to Lender pursuant to this Agreement,
pursuant to the terms of any agreement or instrument to which Borrower or
Guarantor is a party or by which Borrower or Guarantor or any of their assets
are bound;
(d) there are no actions, proceedings or investigations
pending or, to the knowledge of Borrower or Gurantor, threatened against
Borrower or Gurantor, whether or not covered by insurance, which may result,
either individually or in the aggregate, in any material adverse change in the
assets, financial condition or business prospects of Borrower or Guarantor;
(e) each of Borrower and Guarantor has timely filed all tax
returns which Borrower and Guarantor are required by law to file or has obtained
valid extensions and all taxes and other sums owing by Borrower or Guarantor to
any governmental authority have been fully paid and Borrower and Guarantor each
maintain adequate reserves to pay such tax liabilities as they accrue;
(f) except for Permitted Liens, no Person has any rights in or
to the Collateral other than Lender as created by this Agreement other than an
affiliate of Lender;
(g) except for Permitted Liens, Borrower has good title to all
the Collateral, free from any liens and encumbrances, and has not agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property whether now owned or hereafter acquired to be
subject to a lien or encumbrance and will warrant and defend the title thereto,
and the security interest therein, conveyed to Lender by this Agreement, against
the claims of all persons whomsoever and wheresoever situated;
(h) neither Borrower nor Guarantor has materially breached any
agreement, representation, warranty or covenant provided in any other agreement,
other than this Agreement, executed by and between Borrower and/or Guarantor
and/or any Affiliate and Lender and/or any affiliate of Lender;
(i) neither Borrower nor Guarantor is in default under any
indenture, mortgage, deed of trust, agreement or other instrument to which
Borrower or Guarantor is a party or by which Borrower or Guarantor or their
property is bound, and no event has occurred and no condition exists which would
constitute a Pending Default or an Event of Default pursuant to this Agreement,
and neither the nature of Borrower or Guarantor or their respective business or
properties, nor any relationship between Borrower or Guarantor and any other
Person, nor any circumstance in connection with the execution of this Agreement,
is such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Person;
(j) the financial statements of Borrower for the month ending
February 28, 2001, and the financial statements for Guarantor for the fiscal
year ending December 31, 2000, which have been supplied to Lender, have been
prepared in accordance with GAAP and fairly represent Borrower's and Guarantor's
financial conditions, respectively, as of such date; no material adverse change
in Borrower's or Guarantor's financial condition has occurred since such date;
(k) after giving effect to all indebtedness of Borrower on the
date of the initial advance hereunder (including, without limitation, the Loans)
and such other dates as advances are requested hereunder, Borrower (a) is able
to pay its obligations as they become due and payable, and (b) has sufficient
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capital to engage in its business; in addition, Borrower's grant of the
Collateral for the Loans constitutes fair consideration and reasonably
equivalent value because Borrower has received the proceeds of the Loans;
(l) subject to any limitation stated therein or in connection
therewith, all information furnished by Borrower concerning the Collateral or
otherwise in connection with the Obligations, is or shall be at the time the
same is furnished, accurate, correct and complete in all material respects;
(m) the Collateral is and shall be used primarily for business
purposes and Borrower shall keep the Collateral in good condition (normal wear
and tear excepted) and shall not misuse, abuse, waste or destroy any of the same
nor use the Collateral in violation of any statute, ordinance, regulation, rule,
decree or order;
(n) Borrower shall perform, in a timely manner, all of its
obligations pursuant to leases, mortgages, deeds of trust or other agreements to
which Borrower is a party, and shall pay when due all debt owed by Borrower and
all claims of mechanics, materialmen, carriers, landlords, warehousemen and
other like persons, unless such claims are being contested in good faith and by
appropriate proceedings and with respect to which Borrower has established
adequate reserves;
(o) Borrower shall maintain its existence as a corporation in
good standing and shall maintain its principal place of business and chief
executive office at the address set forth in Section 26 of this Agreement, and
the records concerning the Collateral shall be kept at that address unless
Lender gives its prior written consent otherwise;
(p) Borrower shall keep the Collateral at the locations set
forth in Schedule 11(p) attached hereto and maintain no other place of business
or place where Collateral is located except as shown on Schedule 11(p) and shall
deliver to Lender written notice, at least sixty (60) days in advance, of any
proposed change in Borrower's name, a change in the use of any trade name or new
trade names, Borrower's business locations, the location of Borrower's principal
place of business or chief executive office, the location of any of Borrower's
Equipment, or the location of Borrower's books and records and shall execute any
and all financing statements and other documents that Lender requests in
connection therewith;
(q) Borrower shall comply with all applicable laws and
regulations, shall pay all real and personal property taxes, assessments and
charges, and all franchise, income, unemployment, social security, withholding,
sales and all other taxes assessed against Borrower or the Collateral, at such
times and in such manner so as to avoid any penalty from accruing against
Borrower or any lien or charge from attaching to the Collateral, and shall
promptly deliver to Lender, upon reasonable request, receipted bills evidencing
payment of such taxes and assessments, unless such claims are being contested in
good faith and by appropriate proceedings and with respect to which Borrower has
established adequate reserves;
(r) Borrower and Guarantor shall notify Lender immediately
upon the occurrence of any circumstance which: (i) makes any representation or
warranty of Borrower or Guarantor contained in this Agreement or any other
agreement or document delivered hereunder incorrect or materially misleading;
(ii) puts Borrower or Guarantor other than in full compliance with all of
Borrower's and Guarantor's covenants and agreements contained in this Agreement
or any other agreement or document; or (iii) constitutes an Event of Default
under this Agreement;
(s) with respect to accounts, to the best of Borrower's
knowledge, (i) each account is based on an actual bona fide and genuine
rendering or performance of services in the ordinary course of business, the
account obligors have accepted such goods or services and unconditionally owe
and are obligated to pay the full amounts reflected in the invoices according to
the terms thereof without any defense, offset or counterclaim; (ii) all of the
documents provided or to be given to Lender with respect to the
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accounts are genuine; and (iii) pursuant to its customary credit investigation
in the ordinary course of business as of the date each account is created, each
of the account obligors is solvent and able to pay such account when due, or
with respect to any account obligors who are not solvent, Borrower has
established on its books and in its financial records bad debt reserves adequate
to cover such accounts;
(t) Borrower shall provide or cause to be provided to Lender
reasonable access to its facilities, books and records;
(u) Schedule 11(u) attached hereto accurately represents to
Lender the following: (i) the classes of capital stock of Borrower and par value
of each such class, all as authorized by Borrower's Articles of Incorporation,
(ii) the number of shares of each such class of stock issued and outstanding,
(iii) the registered owner or holder (legally or beneficially) thereof, (iv) the
certificate numbers evidencing the foregoing and (v) Borrower's employer tax
identification number. The outstanding capital stock of Borrower is duly
authorized, validly issued, fully paid and non-assessable. Borrower does not
have outstanding any other stock or other equity security or other instrument
convertible to an equity security or any commitment, understanding or agreement
or arrangement to issue, sell or have outstanding any of the foregoing;
(v) Borrower shall at all times keep accurate and complete
records of the Collateral in accordance with GAAP; and
(w) upon the execution of a definitive agreement for the
purchase of the assets of ENC, Borrower shall provide Lender with a $15,000
deposit for the payment of fees and expenses incurred by Lender in connection
with this Agreement, which, along with the $10,000 deposit already received by
Lender, shall be forfeited if Borrower fails to use its reasonable best efforts
to pursue the purchase of ENC.
12. Negative Covenants. Borrower and Guarantor, jointly and severally,
represent, warrant, covenant and agree that, except with the prior written
consent of Lender, neither Borrower nor Guarantor, as applicable, shall:
(a) in the event Borrower has failed to timely pay any amounts
due and owing Lender hereunder, pay to or compensate any director, officer
and/or management personnel of Borrower, any additional compensation in the form
of a bonus, stock options or other similar incentive compensation, and shall
suspend any then existing bonus and incentive compensation payment structure,
until such time as all amounts then due and owing Lender have been satisfied;
(b) as to Borrower, create, incur, assume or suffer to exist
any debt except (i) debt represented by the Promissory Note, (ii) other
indebtedness to Lender, (iii) any other debt which, in the sole opinion of
counsel to Lender, is satisfactorily subordinated to all indebtedness owing
Lender by Borrower, (iv) unsecured indebtedness to trade creditors arising in
the ordinary course of Borrower's business, or (v) any debt related to a
Permitted Lien;
(c) as to Borrower, assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable upon the obligation of any Person;
(d) as to Borrower, further sell, assign, transfer, pledge,
hypothecate, mortgage or otherwise encumber any right or rights with respect to
the Collateral or any rights or interests thereunder absent the express written
consent of Lender, except for (i) sales of Inventory in the ordinary course of
business and (ii) sales of surplus or obsolete Equipment, provided that the
aggregate fair market value of such Equipment does not exceed $25,000 in any
fiscal year;
(e) as to Borrower, convey, transfer, lease or otherwise
dispose of all or any portion of its assets (whether now owned or hereafter
acquired), be the subject of a merger or merge with or into or
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consolidate with or into another entity, enter into limited liability companies,
partnerships or joint ventures with another entity, or engage in any business
other than the businesses engaged in by Borrower on the date hereof and any
business or activities which are substantially similar or related thereto;
provided however, Lender shall not withhold its written consent in the event
that such transaction(s) provides for the full payment of any and all amounts
owed by Borrower to Lender;
(f) as to Borrower, acquire all or substantially all of the
assets or capital stock or other ownership interest of any entity;
(g) as to Borrower, redeem or acquire any of its own capital
stock, or any options, warrants or any securities in respect of its capital
stock, except through the use of the net proceeds from the simultaneous sale of
an equivalent amount of stock for the same purchase or redemption price;
(g) as to Borrower, declare or pay any cash or property
dividend;
(h) make any capital expenditures that in any one fiscal year
cause Guarantor's capital expenditures in that fiscal year to exceed an
aggregate amount of $500,000;
(i) at any time permit Guarantor's Adjusted Tangible Net Worth
(defined as the net worth of Guarantor minus any intangible assets plus any
subordinated debt) to be less than $2,500,000;
(j) at any time permit the ratio of Guarantor's current assets
to current liabilities to be less than 1.5 to 1.0;
(k) permit the Principal Sum to exceed (i) the sum of (x) the
Availability Formula plus (y) the product of the Availability Formula multiplied
by .10 for the period beginning on April 2, 2001 and ending on July 2, 2001, and
(ii) the Availability Formula at any time after June 2, 2001.
(l) beginning April 2, 2002, permit the ratio of the sum of
Borrower's net before tax income plus depreciation plus amortization plus
interest expense less shareholder dividends over the sum of current maturities
of long term debt plus interest expense to be less than 1.0 to 1.0;
(m) as to Borrower, except in accordance with Section 11(p)
make any change to (i) the location of its chief executive office or the
location of the office where records are kept or (ii) its corporate name,
tradenames, fictitious names, assumed names or "doing business as" names;
(n) change either Borrower's or Guarantor's fiscal year for
accounting or tax purposes from a period consisting of the twelve month period
ending on December 31 of each calendar year;
(o) make any material (as defined in GAAP) change in
accounting treatment and reporting practices or tax reporting treatment of
Borrower or Guarantor, except as required by GAAP or law and disclosed in
writing to Lender; and
(p) beginning July 2, 2001, permit (i) the Attrition Rate to
be greater than 5% and (ii) the Net Growth Rate to be less than 0%.
13. Conditions Precedent to Making Loan. Unless otherwise specified
herein, prior to Lender making any Loan hereunder, unless otherwise waived in
writing by Lender, Borrower and Guarantor, as applicable, shall fulfill to
Lender's good faith satisfaction, each of the following conditions precedent:
(a) each of Borrower and Guarantor is in compliance with any
representation, warranty or covenant provided under this Agreement or any other
agreement or certificate relating to the transactions contemplated hereby;
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(b) each of Borrower and Guarantor has delivered to Lender a
fully executed and complete copy of its respective Corporate Certificate and a
Certified Copy of Resolutions;
(c) each of Borrower and Guarantor has delivered to Lender
satisfactory evidence that each is in good standing and material compliance with
any and all relevant taxing authorities;
(d) each of Borrower and Guarantor shall have taken such other
action or delivered such other documents to Lender as Lender may reasonably
request, including but not limited to, (i) documents in connection with a full
follow-up due diligence review of all issues, including without limitation,
Borrower's and Guarantor's ownership and management, operations, financial
condition and strategic plan, (ii) background checks on certain of Borrower's
and Guarantor's shareholders, directors, officers or managers, and (iii)
satisfactory release or subordination of any existing debt from Borrower to any
shareholder, director, officer, manager or employee, or any affiliates thereof,
or any member of such person's family, (iv) execution by Guarantor of a certain
Stock Pledge Agreement dated as of even date herewith for the pledge of not less
than 100% of Borrower's fully diluted issued and outstanding shares of common
stock ("Stock Pledge Agreement") (the form of which is attached hereto as
Exhibit A), to further collateralize payment of the Promissory Note and
performance of Borrower's Obligations in connection therewith;
(e) execution of one or more account assignment agreements, or
the like, in a form satisfactory to Lender, whereby Lender obtains absolute
dominion, authority and control over the primary depository accounts and/or
lockbox accounts, to which all current and future obligors, payors, including
master payors on credit card receipts, or Account obligors of Borrower are
directed to remit their respective payment, by ACH or otherwise (the "Lockbox
Account");
(f) execution of an agreement by Guarantor to (i) purchase the
assets of the Equalnet Companies out of Chapter 11 bankruptcy subject to the
existing liens of Lender, (ii) assume the lesser of (x) the Equalnet Companies'
allowed secured obligations to Lender, as approved by the bankruptcy court, or
(y) $7,500,000, and (iii) pay $500,000, subject to any prorations and
adjustments as provided in the definitive agreement to purchase the assets of
the Equalnet Companies, to the estate of the Equalnet Companies; and
(g) approval by the bankruptcy court and consummation of the
purchase of the assets of the Equalnet Companies.
Each request for a Loan or conversion or continuation of a
Loan hereunder shall constitute a warranty and representation by Borrower and
Guarantor that (i) the warranties and representations of Borrower and Guarantor
set forth herein and each of the representations and warranties contained in any
certificate, document, or financial or other statement furnished at any time
pursuant to this Agreement or any related document are true and correct on and
as of such date, except to the extent that such representation or warranty is
stated to expressly relate solely to an earlier date, and (ii) Borrower and
Guarantor have complied and are in compliance with all the terms, covenants and
conditions of this Agreement which are binding on each of them, and no Event of
Default or Pending Default has occurred and is continuing on such date or after
giving effect to the Loan requested to be made.
14. Reporting.
(a) Borrower shall furnish, or cause to be furnished, to
Lender:
(i) as soon as available, and in any event within 30
days after the end of each month of its fiscal year, a financial statement,
including a balance sheet and income statement, of Borrower as of the end of
such month, commencing with the February 28, 2001 financial statements,
certified by the
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President, Chief Executive Officer or Controller of Borrower, and accompanied by
a management narrative summarizing circumstances and issues underlying such
results and those facing Borrower on a going forward basis; and
(ii) any and all other reasonably necessary and
material documentation that Lender may request in writing to Borrower,
including, but not limited to, the monthly delivery by Borrower to Lender of a
Borrowing Base Certificate in the form that Lender shall provide to Borrower and
the monthly delivery of a Compliance Certificate, the form of which is attached
hereto as Exhibit B.
(b) Guarantor shall furnish, our cause to be furnished, to
Lender:
(i) as soon as available, and in any event within 45
days of the end of each quarter of its fiscal year, unaudited consolidating and
consolidated financial statements, certified by the President, Chief Executive
Officer or Controller of Guarantor, and accompanied by a management narrative
summarizing circumstances and issues underlying such results and those facing
Gurantor on a going forward basis;
(ii) as soon as available, and in any event within
120 days after the end of each fiscal year (including the most recent fiscal
year then ended), audited consolidating and consolidated financial statements,
prepared by and accounting firm acceptable to Lender, accompanied by a
management narrative summarizing circumstances and issues underlying such
results and those facing Guarantor on a going forward basis; and
(iii) any and all other reasonably necessary and
material documentation that Lender may request in writing to Guarantor,
including, but not limited to, the monthly delivery of a Compliance Certificate,
the form of which is attached hereto as Exhibit B.
15. Indemnification Obligations. Borrower shall indemnify and hold
Lender harmless from and against, and shall pay to Lender within ten business
days after Borrower's receipt of written demand from Lender, any and all
liabilities, obligations, losses, damages, penalties, costs, and expenses of any
kind or nature that may be imposed on Lender in any litigation, proceeding or
investigation instituted by any governmental authority or Person with respect to
any aspect of, or any transaction contemplated by, or referred to in, or any
matter related to, this Agreement; provided, however, Borrower shall not be
required to indemnify and hold Lender harmless from any such liabilities,
obligations, losses, damages, penalties, costs, and expenses arising from
Lender's gross negligence or willful misconduct. The failure of Borrower to pay
to Lender any such amounts as required under this Section shall trigger, in
addition to other rights and remedies available to it, Lender's right to
exercise any of its rights and remedies as more fully set forth in Section 24 of
this Agreement. The rights and remedies of Lender shall be cumulative, and any
exercise of any right or remedy under this Agreement or the underlying
documentation to guarantee the Obligations, shall not be deemed to be an
election of that right or remedy to the exclusion of any other right or remedy.
16. Further Assurances. Borrower covenants to execute such other
assignments, security agreements, financing statements, and other documents that
Lender may reasonably deem necessary to further evidence the Obligations, or to
perfect, extend, or clarify Lender's rights in the Collateral.
17. Insurance. Borrower shall keep the Inventory and Equipment insured
against all risks of loss or damage from every cause whatsoever for not less
than the full replacement value thereof, and shall carry public liability and
property damage insurance covering the Inventory and Equipment and their use in
amounts customary for such Inventory and Equipment. All such insurance shall be
in form and amount acceptable to Lender and name Lender and its assignee as Loss
Payee, as their interest may appear with respect to property damage coverage and
as Additional Insured with respect to public liability coverage. Borrower shall
pay the premiums therefor and deliver said policies, or duplicates thereof or
certificates of
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coverage therefor to Lender, with long form Lender's Loss Payable endorsement
upon the policy or policies or by independent instrument, that provides that no
act, default or breach of warranty or condition of the insured or any other
person shall affect the right of Lender to recover under such policy or policies
of insurance or to pay any premium in whole or in part relating thereto, and
that provides Lender a right to thirty (30) days prior written notice before the
policy can be altered or canceled without obligation of payment of premiums. In
the event Borrower fails to provide such insurance coverage, Lender may obtain
such coverage for its benefit or for the benefit of Borrower and charge Borrower
therefor. Borrower hereby appoints Lender as Borrower's attorney-in-fact to make
claim for, receive payment of, and execute and endorse all documents, checks, or
drafts for loss of damage under any said insurance policies and to apply the
proceeds in furtherance of the exercise of Lender's options as provided herein.
18. Guaranty. Borrower acknowledges that a certain amount of the
Obligations are guaranteed by Guarantor pursuant to a certain guaranty agreement
dated as of even date herewith, the form of which is attached hereto as Exhibit
C.
19. Audits. Lender shall have the right, in its sole discretion, to
conduct audits of Borrower up to four times annually, and Borrower will provide
access to all of its books and records and such other information which Lender
deems necessary to evaluate the status of the Loans or of the Collateral;
provided, however, that if an Event of Default occurs, Lender shall have the
right, in its sole discretion, to conduct audits of Borrower without limitation.
In connection therewith, Borrower will pay to Lender all reasonable costs and
expenses incurred in conjunction therewith.
20. Confidentiality. Lender, Borrower and Guarantor shall hold
confidential all non-public information obtained pursuant to the requirements
hereof and identified as such by Lender, Borrower or Guarantor in accordance
with Lender's, Borrower's or Guarantor's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
business practices, provided that Lender, Borrower or Guarantor may make
disclosures as required or requested by any governmental authority or any
representative thereof, or pursuant to any legal process, or to its accountants,
lawyers and other advisors.
21. Legal and Binding Agreement. Borrower and Guarantor warrant that
the execution and performance of this Agreement will not violate any judicial or
administrative order or governmental law or regulation to which either of
Borrower or Guarantor is subject, and that this Agreement is valid, binding and
enforceable against Borrower and Guarantor in every respect according to its
terms subject to all applicable laws.
22. No Consent Required. Borrower and Guarantor warrant that Borrower's
and Guarantor's execution, delivery and performance of this Agreement does not
require the consent of or the giving of notice to any third party, including,
but not limited to, any third party payor of accounts, any lender, governmental
body or regulatory authority.
23. Default Defined. The occurrence of any one or more of the following
events shall constitute a default under this Agreement ("Event of Default"):
(a) Monetary Default. The failure of Borrower to pay to Lender
any amount due hereunder or under the Promissory Note within one day following
the date such amount is due and owing by Borrower to Lender.
(b) Default Under Any Other Agreement. A default under (i) any
other agreement, document or instrument to which Borrower or Guarantor and
Lender are a party, (ii) any other agreement which one or more of Borrower's
Affiliates and Lender or one or more of Lender's affiliates are a party or (iii)
any other agreement to which Borrower is a party, and with respect to (i), (ii)
and (iii) which is not
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otherwise cured by Borrower or Guarantor, as applicable, within ten days
following the date upon which Borrower or Guarantor knew or in good faith should
have known of the occurrence of such Event of Default.
(c) Breach of Warranty/Covenant. The failure of Borrower or
Guarantor to perform or observe any obligation, covenant, agreement,
representation or warranty contained herein or in any document or agreement
executed or delivered in connection herewith within ten days following the date
upon which Borrower or Guarantor knew or in good faith should have known of the
occurrence of the breach at issue.
(d) Dissolution/Cessation of Business. The cessation of
Borrower's or Guarantor's business, Borrower's or Guarantor's liquidation, the
filing of a certificate of dissolution by Borrower or Guarantor, or the taking
of any action by Borrower or Guarantor to further a liquidation or dissolution.
(e) Creation of Lien. The garnishment or creation of a lien
against or security interest in any of the Collateral (other than existing
security interests as of the date hereof or liens otherwise permitted herein) in
which Borrower has granted a security interest to Lender pursuant to the terms
hereof which is otherwise not released or cured by Borrower in some other manner
acceptable to Lender within ten days following the date upon which Borrower knew
or in good faith should have known of the existence of the interest at issue.
(f) Loss of Licenses. The loss of license as a final act of
any applicable administrative or governmental authority required of Borrower to
conduct its business as presently conducted and as proposed to be conducted,
unless such loss of license would not have a Material Adverse Effect (as defined
below).
(g) Material Change of Personnel. Any additions or
replacements to the senior management teams of Borrower or Guarantor are made
without Lender's prior written approval, which consent shall not be unreasonably
withheld or delayed.
(h) Compromise of Security. A Material Adverse Effect or a
material adverse change, in Lender's reasonable discretion, has occurred in the
financial condition, operations or business of Borrower or Guarantor, or the
value of the Collateral or Lender's interest in such Collateral, which has not
been cured by Borrower or Guarantor, as applicable, within ten days following
the date upon which Borrower or Guarantor, as applicable, knew or in good faith
should have known of the existence of the Material Adverse Effect or material
adverse change. "Material Adverse Effect" means a material adverse effect upon
(a) the business, condition (financial or otherwise), operations, performance,
properties or prospects of Borrower or Guarantor, (b) the ability of Borrower or
Guarantor to perform its or his obligations under this Agreement or any
document, agreement, guaranty, or instrument executed in connection herewith, or
(c) the ability of Lender to enforce the terms of this Agreement, or any
document, agreement, guaranty, or instrument executed in connection herewith.
24. Remedies Upon Default. Upon the occurrence of an Event of Default,
after notice has been provided to Borrower by Lender in accordance with Section
26 of this Agreement and after the expiration of any applicable cure period,
Lender may pursue any or all of the following remedies, without any further
notice to Borrower, except as required below, to allow Lender to proceed against
the Collateral.
(a) Acceleration. Lender may declare the entire amount due
under the Promissory Note due and payable at once. The entire unpaid balance
shall continue to accrue interest at the rate specified in Section 6 above until
all amounts due hereunder have been paid in full.
(b) Collection of Collateral. Upon written notice by Lender,
Borrower shall not make any further attempt to collect or receive payment with
respect to any of the Collateral. Any such attempt after the giving of such
notice shall constitute a wrongful conversion of the Collateral. Lender may
obtain a
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temporary restraining order or other equitable relief to enforce Borrower's
obligation to refrain from so impairing Lender's interest in the Collateral. To
the extent Borrower receives any collections or payments with respect to the
Collateral, Borrower shall hold such collections or payments in trust on behalf
of Lender and immediately turn the same over to Lender in the form so received.
(c) Repossession. Lender may take possession of any or all of
the Collateral and proceeds thereof.
(d) Disposition. Lender may dispose of the Collateral at
private or public sale. Any required notice of sale shall be deemed commercially
reasonable if given at least five (5) days prior to sale. Lender may adjourn any
public or private sale to a different time or place without notice or
publication of such adjournment, and may adjourn any sale either before or after
offers are received.
(e) Recovery of Proceeds of Collateral. Lender may recover any
or all proceeds of the Collateral from any bank, court or other custodian who
may have possession thereof. Borrower hereby authorizes and directs all
custodians of Borrower's assets to comply with any demand for payment made by
Lender pursuant to this Agreement, without the need of prior approval or
confirmation from Borrower and without making any inquiry as to the existence of
an Event of Default hereunder or any other matter. Lender may engage a
collection agent to collect the Collateral for a reasonable percentage
commission or under any other reasonable compensation arrangement.
(f) Enforcement of Rights of Collection. Lender may, but shall
not be obligated to, take such measures as Lender may deem necessary in order to
collect or otherwise liquidate the Collateral. Without limiting the foregoing,
Lender may institute or continue any administrative or judicial action that it
may deem necessary in the course of collecting and enforcing any or all of
Lender's rights in or under the Collateral. Any administrative or judicial
action or other action taken by Lender in the course of collecting the
Collateral may be taken by Lender in its own name or in Borrower's name. Lender
may compromise or settle any disputed claims, which compromises or settlements
shall be binding upon Borrower. Lender shall have no duty to pursue collection
of the Collateral, and may abandon efforts to collect the Collateral after such
efforts are initiated. All costs and expenses related to collection shall be the
responsibility of Borrower. Any deficiency balance owed Lender by Borrower shall
be a general claim against Borrower.
(g) Other Remedies. Lender may exercise any right that it may
have under any other document evidencing or securing the Loans or otherwise
available to Lender at law or equity.
(h) Application of Proceeds. All amounts received by Lender
for Borrower's account by exercise of its remedies hereunder shall be applied as
follows: first, to the payment of all expenses incurred by Lender in exercising
its rights hereunder, including reasonable attorneys' fees, and any other
expenses due Lender from Borrower; second, to the payment of all interest, if
any, outstanding under the Promissory Note in such order as Lender may elect;
third, to the payment of the Principal Sum outstanding under the Promissory
Note, in such order as Lender may elect; and, fourth, any excess to Borrower or
other party entitled thereto.
25. Not Partners; No Third Party Beneficiaries. Nothing contained
herein or in any related document shall be deemed to render Lender a partner of
Borrower or Guarantor for any purpose. This Agreement has been executed for the
sole benefit of Lender and its assignees and affiliates, and no other third
party is authorized to rely upon Lender's rights hereunder or to rely upon an
assumption that Lender has or will exercise its rights under this Agreement or
under any document referred to herein.
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26. Notices. (a) All communications regarding this Agreement shall be
in writing and shall be deemed to have been duly given if (i) delivered
personally, (ii) mailed by certified mail, return receipt requested, (iii) sent
by facsimile and confirmed by first-class mail, or (iv) sent by commercial
overnight courier, addressed as follows:
As to Borrower:
Ciera Network Systems, Inc.
0000 Xxxxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxx
with a copy to:
Xxxxx & Xxxxxx
Attn: Xxx Xxxxxxxx, Esq.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000
As to Guarantor:
CCC GlobalCom Corporation
00000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxx
with a copy to:
Xxxxx & Xxxxxx
Attn: Xxx Xxxxxxxx, Esq.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
(000) 000-0000
(000) 000-0000
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As to Lender:
RFC Capital Corporation
000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, Xxxx 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to:
Porter, Wright, Xxxxxx & Xxxxxx LLP
Attn: Xxxxx X. Xxxxxxxxxxxx, Esq.
00 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxx 00000-0000
Phone: (000) 000-0000
Fax: (000) 000-0000
(b) All communications regarding this Agreement shall be deemed to have
been duly given (i) when received by the intended recipient, if delivered in
accordance with items (i) or (ii) of paragraph (a) above, (b) when sent by
facsimile, if sent in accordance with item (iii) of paragraph (a) above, and (c)
the day after being delivered to a commercial overnight courier for overnight
delivery, if sent in accordance with item (iv) of paragraph (a) above.
27. Indulgence Not Waiver. Lender's indulgence in the existence of an
Event of Default hereunder or any other departure from the terms of this
Agreement shall not prejudice Lender's rights to declare an Event of Default or
otherwise demand strict compliance with this Agreement.
28. Cumulative Remedies. The remedies provided Lender in this Agreement
are not exclusive of any other remedies that may be available to Lender under
any other document or at law or equity.
29. Term; Reinstatement. The security interest granted herein shall
continue until all amounts due and owing hereunder and all amounts included in
the secured indebtedness and secured hereby have been irrevocably paid in full.
If, after receipt of payment of all or any part of the Loans, Lender is for any
reason required to surrender such payment to any Person because such payment is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference or diversion of trust funds, or for any other reason, then the
Loans or part thereof intended to be satisfied shall be revived and this
Agreement and the security interests granted herein or in connection herewith
shall continue in full force as if such payment had not been made, and Borrower
shall be liable to Lender, and hereby indemnifies Lender against and holds
Lender harmless from, the amount of such surrendered payment. These provisions
shall remain effective notwithstanding any contrary action taken by Lender in
reliance on such payment which such action shall be deemed to have been
conditioned on such payment having become final and irrevocable. The provisions
of this Agreement are irrevocable. Upon final and irrevocable payment of the
Loans and all amounts included in the secured indebtedness and performance of
all of Borrower's obligations hereunder, all filings under the Uniform
Commercial Code will be terminated within a reasonable time and the provisions
of this Agreement shall terminate.
30. Power of Attorney. Borrower hereby irrevocably constitutes and
appoints Lender and any officer or agent thereof, with full power of
substitution, as Borrower's true and lawful attorney-in-fact with full
irrevocable power and authority in its place and stead and in its name or in
Lender's own name, from time to time in Lender's discretion, for the purpose of
carrying out the terms of this Agreement, to take any
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and all appropriate action and to execute any and all documents and instruments
that may be necessary or desirable to accomplish the purposes of this Agreement
and, without limiting the generality of the foregoing, hereby grants to Lender
the power and right, on behalf of Borrower, without notice to or assent: (a) to
execute, file and record all such financing statements, certificates of title
and other certificates of registration and operation and similar documents and
instruments as Lender may deem necessary or desirable to protect, perfect and
validate Lender's security interest in the Collateral; (b) to receive, collect,
take, indorse, sign, and deliver in Borrower's or Lender's name, any and all
checks, notes, drafts, or other documents or instruments relating to the
Collateral; and (c) upon the occurrence of an Event of Default, (i) to notify
postal authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, (ii) to open such mail delivered to the designated
address, (iii) to sign and indorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and other documents
relating to the Collateral; (iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any part thereof and to enforce any other right in
respect of any Collateral; (v) to defend any suit, action or proceeding brought
with respect to any Collateral; (vi) to negotiate, settle, compromise or adjust
any account, suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as Lender may deem appropriate;
and (vii) generally, to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though Lender were the absolute owner thereof for all purposes, and to do, at
Lender's option, at any time or from time to time, all acts and things which
Lender deems necessary to protect, preserve or realize upon the Collateral and
the Lender's security interest therein, in order to effect the intent of this
Agreement.
Borrower hereby ratifies all that said attorneys shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable. The powers conferred upon Lender
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon Lender to exercise any such powers. Lender shall be
accountable only for amounts that Lender actually receives as a result of the
exercise of such powers and neither Lender nor any of its officers, directors,
employees or agents shall be responsible to Borrower for any act or failure to
act, except for Lender's own gross negligence or willful misconduct, as
determined by a final non-appealable judgment by a court of competent
jurisdiction.
31. Outstanding Loans. The outstanding principal amount of, and accrued
interest on, the Loans and the Interest Rate applicable to the Loans from time
to time, shall be, at all times, ascertained from the records of Lender and
shall be conclusive absent manifest error.
32. Modifications and Course of Dealing. This Agreement constitutes the
entire agreement of Borrower, Lender and Guarantor relative to the subject
matter hereof. No modification of, or supplement to, this Agreement shall bind
Lender unless in writing and signed by an authorized officer of Lender. The
enumeration in this Agreement of Lender's rights and remedies is not intended to
be exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that Lender may have under the
Uniform Commercial Code or other applicable law. No course of dealing and no
delay or failure of Lender to exercise any right, power or privilege under this
Agreement, any other loan document or any other agreement will affect any other
or future exercise of such right, power or privilege. The exercise of any one
right, power or privilege shall not preclude the exercise of any others, all of
which shall be cumulative.
33. Assignment and Participation. Neither Borrower nor Guarantor may
assign or transfer any of its rights or delegate any of its obligations under
this Agreement. Lender shall have the right, from time to time, without notice
to Borrower or Guarantor, to sell, assign or otherwise transfer its interest in
this Agreement and the Loans, either in whole or in part, to any other party or
enter into participation arrangements with any other party. Borrower and
Guarantor authorize Lender to deliver to potential assignees or participants
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Borrower's and Guarantor's financial information and all other information
delivered to Lender pursuant to the terms of this Agreement.
34. Expenses. Borrower agrees to pay, and to hold Lender harmless from
and against, all expenses associated with any amendments, waivers or consents
relating to this Agreement or any agreement or document executed or delivered
hereunder or arising in connection with Lender's enforcement or preservation of
its rights under this Agreement, including expenses incurred by Lender in the
collection of any of the Loans.
35. Maximum Charges. In no event shall the interest rate and other
charges hereunder exceed the highest rate permissible under law which a court of
competent jurisdiction shall, in a final determination, deem applicable thereto.
In the event such a court determines that Lender has received interest and other
charges hereunder in excess of the highest rate applicable thereto, Lender shall
promptly refund such excess amount to Borrower, and the provisions hereof shall
be deemed amended to provide for such permissible rate.
36. No Consequential Damages. No claim may be made by Borrower or
Guarantor, or any of their officers, directors, or agents against Lender or its
affiliates, directors, officers, employees, attorneys or agents for agents for
any special, indirect, punitive, or consequential damages in respect of any
breach or wrongful conduct (whether the claim therefor is based in contract,
tort or duty imposed by law) in connection with, arising out of or in any way
related to the transactions contemplated and the relationship established by
this Agreement, or any act, omission, or event occurring in connection
therewith, and Borrower and Guarantor, hereby waive, release, and agree not to
xxx upon any such claim for any such damages, whether or not accrued and whether
or not know or suspected to exist in its favor.
37. Binding Effect, Severability and Governing Law. This Agreement
shall not be deemed to create any right in any party except as provided herein
and shall inure to the benefit of, and be binding upon, the successors and
assigns of Borrower, Lender and Guarantor. All of Borrower's and Guarantor's
obligations under this Agreement are absolute and unconditional, shall not be
subject to any offset or deduction whatsoever. The provisions of this Agreement
are intended to be severable. If any provision of this Agreement is held invalid
or unenforceable in whole or in part, such provision will be ineffective to the
extent of such invalidity or unenforceability without in any manner effecting
the validity or enforceability of the remaining provisions of this Agreement.
THE PROVISIONS OF THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO, WITHOUT REFERENCE TO APPLICABLE
CONFLICT OF LAW PRINCIPLES. BORROWER CONSENTS TO THE NON-EXCLUSIVE JURISDICTION
OF OHIO COURTS IN CONNECTION WITH THE RESOLUTION OF ANY DISPUTES RELATING TO
THIS AGREEMENT OR ANY OTHER AGREEMENT OR DOCUMENT EXECUTED OR DELIVERED
HEREUNDER. BORROWER AND GUARANTOR IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH EITHER PARTY MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT.
BORROWER AND GUARANTOR HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
THEM AND CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL
(RETURN RECEIPT REQUESTED) DIRECTED TO BORROWER AND/OR GUARANTOR AT THE ADDRESS
SET FORTH IN SECTION 26 OF THIS AGREEMENT AND SERVICE SO MADE SHALL BE DEEMED TO
BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE
U.S. MAILS. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
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38. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT,
AT LAW OR IN EQUITY WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
AGREEMENT, THE OTHER FINANCING AGREEMENTS, THE OBLIGATIONS OF BORROWER AND
GUARANTOR, THE COLLATERAL, OR ANY INSTRUMENT, DOCUMENT OR GUARANTY DELIVERED
PURSUANT HERETO OR TO ANY OF THE FOREGOING, OR THE VALIDITY, PROTECTION,
INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF, OR
ANY OTHER CLAIM OR DISPUTE HEREUNDER OR THEREUNDER. BORROWER AND GUARANTOR AGREE
THAT NEITHER WILL ASSERT AGAINST LENDER ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL,
SPECIAL, OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. NO OFFICER OF LENDER HAS AUTHORITY
TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.
39. Survival. All warranties, representations, and covenants made by
Borrower and Guarantor herein or in any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to
have been relied upon by Lender and shall survive the closing of any and all
Loans regardless of any investigation made by Lender on its behalf. All
statements in any such certificate or other instrument shall constitute
representations and warranties by Borrower and Guarantor.
40. Final Agreement. This Agreement is intended by Borrower, Lender and
Guarantor to be the final, complete, and exclusive expression of the agreement
between them. This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof. No modification, rescission,
waiver, release, or amendment of any provision of this Agreement or any other
loan document shall be made, except by a written agreement signed by Borrower,
Guarantor and a duly authorized officer of Lender.
41. Counterparts. This Agreement may be executed in any number of
counterparts, and by Lender, Borrower and Guarantor in separate counterparts,
each of which shall be an original, but all of which shall taken together
constitute one and the same agreement.
42. Captions. The captions contained in this Agreement are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.
43. Third Party Consultation. Borrower and Guarantor hereby agree and
acknowledge that each of them has had the opportunity to seek out and consult
with legal counsel and/or independent business advisors of its own choosing in
connection with the negotiation, execution and delivery of this Agreement. This
Agreement shall be construed without regard to any presumption or rule requiring
that it be construed against the party causing this Agreement, or any part
hereof, to be drafted.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWER: LENDER:
CIERA NETWORK SYSTEMS, INC. RFC CAPITAL CORPORATION
------------------------------------ -----------------------------------
By: Xxxxxx Xxxxxxxxxx By: Xxxxxxx X. Xxxxxxx
Its: Executive Vice President Its: Vice President
GUARANTOR:
CCC GLOBALCOM CORPORATION
------------------------------------
By: Xxxxxx Xxxxxxxxxx
Its: Executive Vice President
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Schedule 11(g): Permitted Liens and Encumbrances
Schedule 11(p): Schedule of Business Locations
Schedule 11(u): Schedule of Capital Structure
Exhibit A: Form of Stock Pledge Agreement
Exhibit B: Form of Compliance Certificate
Exhibit C: Form of Guaranty
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