EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), dated as of the 13th
day of May 1996, is made and entered into on the terms and conditions
hereinafter set forth, by and between ILD COMMUNICATIONS, INC., a Delaware
corporation ("ILD"), and INTELLICALL OPERATOR SERVICES, INC., a Delaware
corporation ("IOS") (individually, a "Borrower" and collectively, the
"Borrowers"), those entities set forth on Exhibit A attached hereto and
incorporated herein by reference (individually, a "Lender" and collectively,
the "Lenders"), and SIRROM CAPITAL CORPORATION, a Tennessee corporation, as
agent for itself and the other Lender ("Sirrom" or "Agent").
RECITALS:
WHEREAS, Borrowers have requested that Lenders make available to Borrowers
a loan in the original principal amount of Two Million Dollars ($2,000,000) (the
"Loan") on the terms and conditions hereinafter set forth, and for the
purpose(s) hereinafter set forth; and
WHEREAS, in order to induce Lenders to make the Loan to Borrowers,
Borrowers have made certain representations to Lenders; and
WHEREAS, Lenders, in reliance upon the representations and inducements of
Borrowers, have agreed to make the Loan upon the terms and conditions
hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the agreement of Lenders to make the
Loan, the mutual covenants and agreements hereinafter set forth, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrowers, Agent and Lenders hereby agree as follows:
ARTICLE 1
THE LOAN
1.1 EVIDENCE OF LOAN INDEBTEDNESS AND REPAYMENT. Subject to the terms and
conditions hereof, on the Closing Date (as hereinafter defined), Lenders agree
to loan to Borrowers the aggregate sum of Two Million Dollars ($2,000,000).
Each Lender's portion of the Loan shall be in the amount set forth opposite each
Lender's name on Exhibit A attached hereto. The Loan shall be evidenced by a
Secured Promissory Note, substantially in the form of Exhibit B attached hereto
and incorporated herein by this reference (individually, a "Note" and
collectively, the "Notes"), dated as of the date hereof, executed by Borrowers,
in the principal
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amount of each Lender's portion of the Loan. The Loan shall be payable in
accordance with the terms of the Notes. The Notes, this Agreement and any
other instruments and documents executed by Borrower, now or hereafter
evidencing, securing or in any way relating to the indebtednesses evidenced
by the Notes are herein individually referred to as a "Loan Document" and
collectively referred to as the "Loan Documents."
1.2 PREPAYMENT. The indebtedness evidenced by the Notes may be prepaid in
whole or in part, at any time and from time to time, without penalty.
1.3 PROCESSING FEE. Borrower shall pay Lenders a processing fee of Fifty
Thousand Dollars ($50,000) on a pro rata basis, $25,000 of which has already
been paid to Sirrom. On the date the Loan is funded, an additional $12,500
shall be paid to Sirrom and $12,500 shall be paid to Xxxxx River Ventures
Limited Partnership.
1.4 PURPOSE. The purpose of the Loan shall be to provide additional
working capital to Borrower.
ARTICLE 2
SECURITY
2.1 GRANT OF SECURITY INTEREST. Each Borrower hereby grants to Agent for
the benefit of each Lender a security interest in, and assigns to Agent for the
benefit of each Lender, all of such Borrower's right, title and interest in, to
or under the following described property, and any and all proceeds and products
thereof and accessions thereto (collectively the "Collateral"):
(a) EQUIPMENT. All equipment of Borrower of any kind and
description, whether now owned or hereafter acquired and wherever located,
together with all parts, accessories and attachments and all replacements
thereof and additions thereto;
(b) INVENTORY, ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER AND GENERAL
INTANGIBLES. All of Borrower's inventory and any agreements for lease of
same and rentals therefrom, and all of Borrower's accounts, accounts
receivable, contract rights (including, without limitation, all customer
contracts, rights, lists, records, billing and all other information
relating to customers of Borrower), chattel paper and general intangibles
and the proceeds therefrom, whether now in existence or owned or hereafter
arising or acquired, entered into or created, and wherever located; and
whether held for lease or sale, or furnished or to be furnished under
contracts of service;
(c) TRADEMARKS, ETC. All trademarks and service marks now held or
hereafter acquired by Borrower, both those that are registered with the
United States Patent and Trademark Office and any unregistered marks used
by Borrower in the United States, and trade dress, including logos and
designs, in connection with which any such marks are
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used, together with all registrations regarding such marks and the rights
to renewals thereof, and the goodwill of the business of Borrower
symbolized by such marks;
(d) COPYRIGHTS. All copyrights now held or hereafter acquired by
Borrower and any applications for U.S. copyrights hereafter made by
Borrower;
(e) PROPRIETARY INFORMATION, COMPUTER DATA, ETC. All proprietary
information and trade secrets of Borrower with respect to Borrower's
business now held or hereafter acquired and all of Borrower's computer
programs and the information contained therein and all intellectual
property rights with respect thereto now held or hereafter acquired;
(f) OTHER PROPERTY. All other current and future-acquired property,
in whatever form, both tangible and intangible; and
(g) EXCLUDED PROPERTY. Notwithstanding anything to the contrary
contained herein, the term Collateral shall not include any call records
and rights pertaining thereto purchased for cash by Integritel, but shall
specifically include the proceeds received from Integritel pursuant to such
purchases.
2.2 SECURED OBLIGATIONS. The indebtedness and other obligations secured
(the "Obligations") hereby consist of the following:
(a) The full and timely payment of the indebtednesses evidenced by
the Notes, together with interest thereon (including interest accruing on
or after the filing of any petition in bankruptcy or the commencement of
any insolvency, reorganization or similar proceeding, relating to the
Borrowers, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding), and any extensions, modifications,
replacements, consolidations and/or renewals thereof and any notes given in
payment thereof;
(b) The full and prompt performance of all other obligations of
Borrowers to the Lenders and/or the Agent, as applicable, direct or
contingent (including but not limited to obligations incurred as indorser,
guarantor or surety), however evidenced or denominated, and however and
whenever incurred, including but not limited to indebtednesses incurred
pursuant to any present or future commitment of Lenders to Borrowers;
(c) The full and prompt repayment of all advances and other
expenditures made by the Lenders and/or Agent for taxes, levies, or the
preservation or protection of the Collateral; and
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(d) The full and prompt payment of all court costs, expenses and
costs of whatever kind incident to the collection of the indebtednesses
evidenced by the Notes, the enforcement or protection of the security
interests or assignments granted herein, or the exercise by Agent or
Lenders of any rights or remedies of Agent or Lenders with respect to the
Notes or the Loan Documents, including without limitation reasonable
attorney's fees actually incurred by Lenders or Agent, all of which
Borrowers agree to pay to Lenders and/or the Agent, as applicable, upon
demand.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 BORROWER'S REPRESENTATIONS. Each Borrower hereby represents and
warrants to Lenders as follows:
(a) CORPORATE STATUS. Each Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware; and has the corporate power to own and operate its properties, to
carry on its business as now conducted and to enter into and to perform its
obligations under this Agreement and the other Loan Documents to which it
is a party. Each Borrower is duly qualified to do business and in good
standing in each state in which a failure to be so qualified would have a
material adverse effect on such Borrower's financial condition or its
ability to conduct its business in the manner now conducted.
(b) SUBSIDIARIES. Schedule 3.1(b) hereto is a complete list of each
corporation, partnership, joint venture or other business organization (the
"Subsidiary" or, with respect to all such organizations, the
"Subsidiaries") in which each Borrower or any Subsidiary owns, directly or
indirectly, any capital stock or other equity interest, or with respect to
which each Borrower or any Subsidiary, alone or in combination with others,
is in a control position, which list shows the jurisdiction of
incorporation or other organization and the percentage of stock or other
equity interest of each Subsidiary owned by each Borrower. Each Subsidiary
which is a corporation is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and is
duly qualified to transact business as a foreign corporation and is in good
standing in the jurisdictions listed in Schedule 3.1(b), which are the only
jurisdictions where the properties owned or leased or the business
transacted by it makes such licensing or qualification to do business as a
foreign corporation necessary, and no other jurisdiction has demanded,
requested or otherwise indicated that (or inquired whether) it is required
so to qualify. Each Subsidiary which is not a corporation is duly
organized and validly existing under the laws of the jurisdiction of its
organization. The outstanding capital stock of each Subsidiary which is a
corporation is validly issued, fully paid and nonassessable. Each Borrower
and the Subsidiaries have good and valid title to the equity interests in
the Subsidiaries shown as owned by each of them on Schedule 3.1(b), free
and clear of all liens, claims, charges, restrictions, security interests,
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equities, proxies, pledges or encumbrances of any kind. Except where
otherwise indicated herein or unless the context otherwise requires, any
reference to Borrowers herein shall include Borrowers and all of their
Subsidiaries.
(c) AUTHORIZATION. Each Borrower is only engaged in the business of
selling long distance telecommunications services and providing operator
services. Each Borrower has full legal right, power and authority to
conduct its business and affairs. Each Borrower has full legal right,
power and authority to enter into and perform its obligations hereunder,
without the consent or approval of any other person, firm, governmental
agency or other legal entity. The execution and delivery of this
Agreement, the borrowing hereunder, the execution and delivery of each Loan
Document to which each Borrower is a party, and the performance by each
Borrower of its obligations thereunder are within the corporate powers of
each Borrower and have been duly authorized by all necessary corporate
action properly taken, have received all necessary governmental approvals
except as set forth on Schedule 3.1(k), if any were required, and do not
and will not contravene or conflict with any provision of law, any
applicable judgment, ordinance, regulation or order of any court or
governmental agency, the charter or bylaws of each Borrower, or any
agreement binding upon each Borrower or its properties. The officer(s)
executing this Agreement, the Notes and all of the other Loan Documents to
which each Borrower is a party are duly authorized to act on behalf of each
Borrower.
(d) VALIDITY AND BINDING EFFECT. This Agreement and the other Loan
Documents are the legal, valid and binding obligations of each Borrower,
enforceable in accordance with their respective terms, subject to
limitations imposed by bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally or the application of
general equitable principles.
(e) CAPITALIZATION. The authorized capital stock of ILD consists
solely of 300,000 shares of common stock, $.01 par value per share ("Common
Stock"), of which 1,000 shares are issued and outstanding and 200,000
shares of preferred stock of which 100,000 shares are designated as Series
A Preferred Stock, all of which is outstanding and 5,000 shares are
designated as Series B Preferred Stock, all of which is outstanding
(collectively, the "ILD Shares). The authorized capital stock of IOS
consists solely of 10,000 shares of common stock, $0.01 par value per
share, all of the outstanding shares of which are owned by ILD
(collectively with the ILD shares, the "Shares"). All of the Shares are
duly authorized, validly issued and outstanding and fully paid and
nonassessable and free of preemptive rights. Except for the Shares, there
are no shares of capital stock or other securities of Borrowers issued or
outstanding. Except as set forth on Schedule 3.1(e), there are no
outstanding options, warrants or rights to purchase or acquire from
Borrowers any securities of either Borrower, and there are no contracts,
commitments, agreements, understandings, registration rights agreements,
arrangements or restrictions as to which any Borrower is a party or by
which it is bound relating to any shares of
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capital stock or other securities of any Borrower (including the Shares),
whether or not outstanding.
(f) TRADEMARKS, PATENTS, ETC. Schedule 3.1(f) is an accurate and
complete list of all patents, trademarks, tradenames, trademark
registrations, service names, service marks, copyrights, licenses, formulas
and applications therefor owned by each Borrower or used or required by
each Borrower in the operation of each Borrower's business, title to each
of which is, except as set forth in Schedule 3.1(f) hereto, held by each
Borrower free and clear of all adverse claims, liens, security agreements,
restrictions or other encumbrances. There is no infringement action,
lawsuit, claim or complaint which asserts that each Borrower's operations
violate or infringe the rights or the trade names, trademarks, trademark
registration, service name, service xxxx or copyright of others with
respect to any apparatus or method of each Borrower or any adversely held
trademark, trade name, trademark registration, service name, service xxxx
or copyright, and each Borrower is not in any way making use of any
confidential information or trade secrets of any person except with the
consent of such person.
(g) NO CONFLICTS. Consummation of the transactions hereby
contemplated and the performance of the obligations of each Borrower under
and by virtue of the Loan Documents will not result in any breach of, or
constitute a default under, any mortgage, security deed or agreement, deed
of trust, lease, bank loan or credit agreement, corporate charter or
bylaws, agreement or certificate of limited partnership, partnership
agreement, license, franchise or any other instrument or agreement to which
either Borrower is a party or by which Borrower or its properties may be
bound or affected or to which either Borrower has not obtained an effective
waiver.
(h) LITIGATION. There are no actions, suits or proceedings pending,
or, to the knowledge of either Borrower threatened, against or affecting
either Borrower or involving the validity or enforceability of any of the
Loan Documents at law or in equity, or before any governmental or
administrative agency; and to each Borrower's knowledge, neither Borrower
is in default with respect to any order, writ, injunction, decree or demand
of any court or any governmental authority.
(i) FINANCIAL STATEMENTS. The consolidated balance sheet of
Borrowers dated as of the date hereof and the income statements of IOS for
the year ended December 31, 1995 and the quarter ended March 31, 1996
(collectively, the "Financial Statements"), which are attached hereto as
Schedule 3.1(i)(A), are true and correct in all material respects have been
prepared on the basis of generally accepted accounting principles
consistently applied, and fairly present the financial condition of the
Borrower as of the date(s) thereof. No material adverse change has
occurred in the financial condition of Borrowers since the date(s) thereof,
and no additional borrowings have been made by Borrowers since the date(s)
thereof other than as set forth on Schedule 3.1(i)(B).
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(j) OTHER AGREEMENTS; NO DEFAULTS. Neither Borrower is a party to
any indenture, loan or credit agreement, lease or other agreement or
instrument, or subject to any charter or corporate restriction, that could
have a material adverse effect on the business, properties, assets,
operations or conditions, financial or otherwise, of the Borrowers, or the
ability of the Borrowers to carry out their obligations under the Loan
Documents to which they are a party. Neither Borrower is in default in any
respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument material to its business to which they are a party, including
but not limited to this Agreement and the other Loan Documents, and no
other default or event has occurred and is continuing that with notice or
the passage of time or both would constitute a default or event of default
under any of same.
(k) COMPLIANCE WITH LAW. Except as disclosed in Schedule 3.1(k),
each Borrower has obtained all necessary licenses, permits and approvals
and authorizations necessary or required in order to conduct its business
and affairs as heretofore conducted and as hereafter intended to be
conducted. Failure of Borrowers to obtain, within six (6) months of the
date hereof, all licenses, permits, approvals and authorizations necessary
or required to conduct its business and affairs, including those described
on Schedule 3.1(k), shall constitute an Event of Default hereunder. To
each Borrower's knowledge, each Borrower is in compliance with all laws,
regulations, decrees and orders applicable to it (including but not limited
to laws, regulations, decrees and orders relating to environmental,
occupational and health standards and controls, antitrust, monopoly,
restraint of trade or unfair competition), except to the extent that
noncompliance, in the aggregate, cannot reasonably be expected to have a
material adverse effect on its business, operations, property or financial
condition and will not materially adversely affect such Borrower's ability
to perform its obligations under the Loan Documents.
(l) DEBT. Schedule 3.1(l) is a complete and correct list of all
credit agreements, indentures, purchase agreements, promissory notes and
other evidences of indebtedness, guaranties, capital leases and other
instruments, agreements and arrangements presently in effect providing for
or relating to extensions of credit (including agreements and arrangements
for the issuance of letters of credit or for acceptance financing) in
respect of which each Borrower or any of the properties thereof is in any
manner directly or contingently obligated; and the maximum principal or
face amounts of the credit in question that are outstanding and that can be
outstanding are correctly stated, and all liens of any nature given or
agreed to be given as security therefore are correctly described or
indicated in such Schedule.
(m) TAXES. Each Borrower has filed or caused to be filed all tax
returns that to its knowledge are required to be filed (except for returns
that have been appropriately extended), and has paid, or will pay when due,
all taxes shown to be due and payable on said returns and all other taxes,
impositions, assessments, fees or other charges imposed on them by any
governmental authority, agency or instrumentality, prior to any
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delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been reserved).
No tax liens have been filed against either Borrower or any of the property
thereof.
(n) SMALL BUSINESS CONCERN. Borrowers, together with their
"affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, Section 121.103), is a "small business concern" within the
meaning of the Small Business Investment Act of 1958, as amended, and the
regulations promulgated thereunder. The information set forth in the Small
Business Administration Forms 480, 652 and Part A of Form 1031 regarding
Borrowers upon delivery, pursuant to Section 5.1 hereof, will be accurate
and complete. Borrowers do not presently engage in, and it will not
hereafter engage in, any activities, and Borrowers will not use directly or
indirectly, the proceeds from the Loan, for any purpose for which a Small
Business Investment Company is prohibited from providing funds by the Small
Business Investment Act and the regulations thereunder, including Title 13,
Code of Federal Regulations Section 107.720.
(o) CERTAIN TRANSACTIONS. Except as set forth on Schedule 3.1(o)
hereto, neither Borrower is indebted, directly or indirectly, to any of its
officers or directors or to their respective spouses or children, in any
amount whatsoever; none of said officers or directors or any members of
their immediate families, are indebted to either Borrower or have any
direct or indirect ownership interest in any firm or corporation with which
either Borrower has a business relationship, or any firm or corporation
which competes with either Borrower, except that officers and/or directors
of either Borrower may own no more than 4.9% of outstanding stock of
publicly traded companies which may compete with either Borrower. Except
as set forth on Schedule 3.1(o), no officer or director or any member of
their immediate families, is, directly or indirectly, interested in any
material contract with either Borrower. Neither Borrower is a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
(p) STATEMENTS NOT FALSE OR MISLEADING. No representation or
warranty given as of the date hereof by either Borrower contained in this
Agreement or any schedule attached hereto or any statement in any document,
certificate or other instrument furnished or to be furnished to Lenders
pursuant hereto, taken as a whole, contains or will (as of the time so
furnished) contain any untrue statement of a material fact, or omits or
will (as of the time so furnished) omit to state any material fact which is
necessary in order to make the statements contained therein not misleading.
(q) MARGIN REGULATIONS. Neither Borrower is engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock.
No proceeds received pursuant to this Agreement will be used to purchase or
carry any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
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(r) SIGNIFICANT CONTRACTS. Schedule 3.1(r) is a complete and correct
list of all contracts, agreements and other documents pursuant to which
each Borrower receives revenues in excess of $25,000 per annum. Each such
contract, agreement and other document is in full force and effect as of
the date hereof and each Borrower knows of no reason why such contracts,
agreements and other documents would not remain in full force and effect
pursuant to the terms thereof.
(s) ENVIRONMENT. Each Borrower has duly complied with, and its
business, operations, assets, equipment, property, leaseholds or other
facilities are in compliance with, the provisions of all federal, state and
local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder. Each Borrower has been
issued and will maintain all required federal, state and local permits,
licenses, certificates and approvals relating to (1) air emissions;
(2) discharges to surface water or groundwater; (3) noise emissions;
(4) solid or liquid waste disposal; (5) the use, generation, storage,
transportation or disposal of toxic or hazardous substances or wastes
(which shall include any and all such materials listed in any federal,
state or local law, code or ordinance and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (6) other
environmental, health or safety matters. Neither Borrower has received
notice of, or knows of, or suspects facts which might constitute any
violations of any federal, state or local environmental, health or safety
laws, codes or ordinances, and any rules or regulations promulgated
thereunder with respect to its businesses, operations, assets, equipment,
property, leaseholds, or other facilities. Except in accordance with a
valid governmental permit, license, certificate or approval, there has been
no emission, spill, release or discharge into or upon (1) the air;
(2) soils, or any improvements located thereon; (3) surface water or
groundwater; or (4) the sewer, septic system or waste treatment, storage or
disposal system servicing the premises, of any toxic or hazardous
substances or wastes at or from the premises; and accordingly the premises
of each Borrower are free of all such toxic or hazardous substances or
wastes. There has been no complaint, order, directive, claim, citation or
notice by any governmental authority or any person or entity with respect
to (1) air emissions; (2) spills, releases or discharges to soils or
improvements located thereon, surface water, groundwater or the sewer,
septic system or waste treatment, storage or disposal systems servicing the
premises; (3) noise emissions; (4) solid or liquid waste disposal; (5) the
use, generation, storage, transportation or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health or safety matters
affecting each Borrower or its business, operations, assets, equipment,
property, leaseholds or other facilities. Neither Borrower has any
indebtedness, obligation or liability (absolute or contingent, matured or
not matured), with respect to the storage, treatment, cleanup or disposal
of any solid wastes, hazardous wastes or other toxic or hazardous
substances (including without limitation any such indebtedness, obligation,
or liability with respect to any current regulation, law or statute
regarding such storage, treatment, cleanup or disposal).
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(t) COLLATERAL. Each Borrower is the lawful owner and holder of the
Collateral free and clear of any lien, charge, encumbrance or security
interest whatsoever in favor of any other person and has the full authority
to grant a security interest in the Collateral hereunder. The address set
forth in Section 9.9 of this Agreement is Borrowers' only place of business
and the location of all tangible Collateral and the place where the records
concerning all intangible Collateral are kept and/or maintained. This
Agreement, together with the filing of a UCC-1 with the Secretary of State
of Texas covering the Collateral creates a valid and perfected first
priority security interest in the Collateral. Neither Borrower has made
any further assignment of nor granted any further security interest in or
lien on, any of the Collateral.
(u) NO REAL PROPERTY. Borrowers do not own any real property.
(v) ACQUISITIONS. None of the revenues of IOS for the fiscal year
ended December 31, 1995 and subsequent periods were associated with
customer accounts which had been purchased by Intellicall, Inc. from a
third party.
ARTICLE 4
COVENANTS AND AGREEMENTS
Each Borrower covenants and agrees that during the term of this Agreement:
4.1 PAYMENT OF OBLIGATIONS. Borrowers shall pay the indebtedness
evidenced by the Notes according to the terms thereof, and shall timely pay or
perform, as the case may be, all of the other obligations of Borrowers to
Lenders, direct or contingent, however evidenced or denominated, and however and
whenever incurred, including but not limited to indebtedness incurred pursuant
to any present or future commitment of Lenders to Borrowers, together with
interest thereon, and any extensions, modifications, consolidations and/or
renewals thereof and any notes given in payment thereof.
4.2 FINANCIAL STATEMENTS AND REPORTS. ILD shall furnish to each of the
Lenders (i) as soon as practicable and in any event within one hundred twenty
(120) days after the end of each fiscal year of Borrowers, an audited
consolidated balance sheet of Borrowers as of the close of such fiscal year, an
audited consolidated statement of income and retained earnings of Borrower for
such fiscal year and an audited consolidated statement of cash flows for
Borrower for such fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by a certificate of
the President of ILD, stating that to the best of the knowledge of such officer,
Borrowers have kept, observed, performed and fulfilled each covenant, term and
condition of this Agreement and the other Loan Documents during the preceding
fiscal year and that no Event of Default (as defined in Section 6.1 hereof) has
occurred and is continuing (or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action Borrowers propose to take in connection therewith),
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(ii) within thirty (30) days of the end of each calendar month, a status
report indicating the financial performance of Borrowers during such month
and the financial position of Borrowers as of the end of such month, (iii)
within forty-five (45) days of the end of each quarter, a consolidated
balance sheet of Borrowers as of the close of such quarter and a consolidated
statement of income and retained earnings of Borrowers as of the close of
such quarter, all in reasonable detail, and prepared substantially in
accordance with generally accepted accounting principles consistently applied
(except for the absence of footnotes and subject to year-end adjustments),
and (iv) with reasonable promptness, such other financial data as Lenders may
reasonably request.
4.3 MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. Borrowers shall
maintain its books, accounts and records in accordance with generally accepted
accounting principles consistently applied, and upon reasonable notice permit
Lenders, its officers and employees and any professionals designated by Lenders
in writing, at Lenders's expense, to visit and inspect any of their properties,
corporate books and financial records, and to discuss its accounts, affairs and
finances with Borrowers or the principal officers of Borrowers during reasonable
business hours, all at such times as Lenders may reasonably request; provided
that no such inspection shall materially interfere with the conduct of
Borrowers' business.
4.4 INSURANCE. Without limiting any of the requirements of any of the
other Loan Documents, Borrowers shall maintain, in amounts customary for
entities engaged in comparable business activities, (i) to the extent required
by applicable law, worker's compensation insurance (or maintain a legally
sufficient amount of self insurance against worker's compensation liabilities,
with adequate reserves, under a plan approved by Lenders, such approval not to
be unreasonably withheld or delayed), and (ii) fire and "all risk" casualty
insurance on its properties against such hazards and in at least such amounts as
are customary in Borrowers' business. Borrowers will make reasonable efforts to
obtain and maintain public liability insurance in an amount, and at a cost,
deemed reasonable to the Borrower's Board of Directors. At the request of
Agent, Borrowers will deliver forthwith a certificate specifying the details of
such insurance in effect.
4.5 TAXES AND ASSESSMENTS. Borrowers shall (i) file all tax returns and
appropriate schedules thereto that are required to be filed under applicable
law, prior to the date of delinquency, (ii) pay and discharge all taxes,
assessments and governmental charges or levies imposed upon Borrowers upon their
income and profits or upon any properties belonging to them, prior to the date
on which penalties attach thereto, and (iii) pay all taxes, assessments and
governmental charges or levies that, if unpaid, might become a lien or charge
upon any of its properties; provided, however, that Borrowers in good faith may
contest any such tax, assessment, governmental charge or levy described in the
foregoing clauses (ii) and (iii) so long as appropriate reserves are maintained
with respect thereto.
4.6 CORPORATE EXISTENCE. Borrowers shall maintain its corporate existence
and good standing in the state of its incorporation, and its qualification and
good standing as a foreign
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corporation in each jurisdiction in which such qualification is necessary
pursuant to applicable law.
4.7 COMPLIANCE WITH LAW AND OTHER AGREEMENTS. Except where the failure to
do so would not materially adversely affect Borrowers' operations or their
ability to fulfill their obligations under the Loan Documents, Borrowers shall
maintain their business operations and property owned or used in connection
therewith in compliance with (i) all applicable federal, state and local laws,
regulations and ordinances governing such business operations and the use and
ownership of such property, and (ii) all agreements, licenses, franchises,
indentures and mortgages to which Borrowers are a party or by which Borrowers or
any of their properties are bound. Without limiting the foregoing, Borrowers
shall pay all of its indebtedness promptly in accordance with the terms thereof.
4.8 NOTICE OF DEFAULT. Borrowers shall give written notice to Lenders of
the occurrence of any default, event of default or Event of Default under this
Agreement or any other Loan Document promptly upon the occurrence thereof.
4.9 NOTICE OF LITIGATION. Borrowers shall give notice, in writing, to
Lenders of (i) any actions, suits or proceedings wherein the amount at issue is
in excess of Twenty-Five Thousand and No/100ths Dollars ($25,000.00) instituted
by any persons whomsoever against Borrowers or affecting any of the assets of
Borrowers, and (ii) any dispute, not resolved within sixty (60) days of the
commencement thereof, between Borrowers on the one hand and any governmental
regulatory body on the other hand, which dispute might materially interfere with
the normal operations of Borrowers.
4.10 CONDUCT OF BUSINESS. Borrowers will continue to engage in a business
of the same general type and manner as conducted by it on the date of this
Agreement.
4.11 ERISA PLAN. If either Borrower has in effect, or hereafter
institutes, a pension plan that is subject to the requirements of Title IV of
the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406,
September 2, 1974, 88 Stat. 829, 29 U.S.C.A. Section 1001 ET SEQ. (1975), as
amended from time to time ("ERISA"), then the following warranty and covenants
shall be applicable during such period as any such plan (the "Plan") shall be in
effect: (i) each Borrower hereby warrants that, to Borrower's knowledge, no
fact that might constitute grounds for the involuntary termination of the Plan,
or for the appointment by the appropriate United States District Court of a
trustee to administer the Plan, exists at the time of execution of this
Agreement, (ii) each Borrower hereby covenants that throughout the existence of
the Plan, Borrower's contributions under the Plan will meet the minimum funding
standards required by ERISA and Borrower will not institute a distress
termination of the Plan, and (iii) each Borrower covenants that it will send to
Lenders a copy of any notice of a reportable event (as defined in ERISA)
required by ERISA to be filed with the Labor Department or the Pension Benefit
Guaranty Corporation, at the time that such notice is so filed.
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4.12 DIVIDENDS, ETC. Neither Borrower shall declare or pay any dividend of
any kind (other than stock dividends payable to all holders of any class of
capital stock), in cash or in property, on any class of the capital stock of
Borrower, or purchase, redeem, retire or otherwise acquire for value any shares
of such stock, nor make any distribution of any kind in cash or property in
respect thereof, nor make any return of capital of shareholders, nor make any
payments in cash or property in respect of any stock options, stock bonus or
similar plan (except as required or permitted hereunder), without the prior
written consent of the holders of a majority of the principal amount of the Loan
outstanding at such time (the "Majority Lenders"). Notwithstanding anything to
the contrary contained herein, so long as an Event of Default hereunder has not
occurred and is not continuing, (i) ILD may make dividend payments to the
Holders of its Series B Preferred Stock as set forth in its Certificate of
Incorporation as amended as of the date hereof, and (ii) ILD may issue up to
27,500 shares of Common Stock pursuant to employee stock option plans.
4.13 GUARANTIES; LOANS; PAYMENT OF DEBT. Neither Borrower shall, without
the Majority Lenders' prior express written consent, guarantee nor be liable in
any manner, whether directly or indirectly, or become contingently liable after
the date of this Agreement in connection with the obligations or indebtedness of
any person or entity whatsoever, except for the endorsement of negotiable
instruments payable to such Borrower for deposit or collection in the ordinary
course of business. Neither Borrower shall, without the prior express written
consent of the Majority Lenders, (i) make any loan, advance or extension of
credit to any person other than in the ordinary course of business, or (ii) make
any payment on any subordinated debt (except ILD may make scheduled payments of
interest to the holders of the convertible debentures as of the date hereof in
the aggregate original principal amount of $2,000,000) other than trade payables
incurred in the ordinary course of business. Notwithstanding the foregoing,
Borrowers may make the payments to Intellicall, Inc. under the Operating
Agreement of even date herewith between ILD and Intellicall, Inc.
4.14 DEBT. Without the express prior written consent of the Majority
Lenders, neither Borrower shall create, incur, assume or suffer to exist
indebtedness of any description whatsoever, excluding:
(a) the indebtedness evidenced by the Note;
(b) the endorsement of negotiable instruments payable to Borrower for
deposit or collection in the ordinary course of business;
(c) trade payables;
(d) debts incurred in the ordinary course of business (each of which,
individually, does not exceed $25,000); and
(e) the indebtedness listed on Schedule 3.1(l) hereto.
(f) any indebtedness of Borrowers to Intellicall, Inc. under that certain
Operating Agreement dated as of the date hereof entered into by and
between Borrowers and Intellicall, Inc.;
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(g) indebtedness to any asset-based or working capital line lender that
bears interest at an annual rate not to exceed the prime rate of
interest plus 3%, to which Lenders agree to subordinate on such terms
and conditions as may be mutually acceptable to Borrowers, Lenders and
such senior lender;
(h) any operating and/or capitalized leases entered into in the ordinary
course of business; and
(i) any real estate lease entered into in the ordinary course of business.
4.15 NO LIENS. Without the prior written consent of Majority Lenders,
neither Borrower shall create, incur, assume or suffer to exist any lien,
security interest, security title, mortgage, deed of trust or other encumbrance
upon or with respect to any of its properties, now owned or hereafter acquired,
except:
(a) liens in favor of Lenders in connection with transactions
contemplated by this Agreement;
(b) liens for taxes or assessments or other governmental charges
or levies if not yet due and payable;
(c) liens in connection with the leasing of equipment in favor
of the lessor of such equipment;
(d) liens described on Schedule 3.1(l) hereto; and
(e) liens to secure the indebtedness described in Section 4.14(g).
4.16 MERGERS, CONSOLIDATIONS, ACQUISITIONS AND SALES. Each Borrower agrees
that in the event that it creates any subsidiaries, it shall pledge the stock of
such subsidiary to Lenders within 10 days of the date of creation of such
subsidiary pursuant to the terms of a Pledge and Security Agreement executed by
it in form and substance satisfactory to the Majority Lenders. Each Borrower
agrees not to transfer assets subject to this Agreement to a subsidiary without
the Majority Lenders' consent.
4.17 TRANSACTIONS WITH AFFILIATES. Neither Borrower shall enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any affiliate, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms no less favorable to Borrower than
Borrower would obtain in a comparable arm's length transaction with a person not
an affiliate. For the purposes of this Section 4.17, "affiliate" shall mean a
person, corporation, partnership or other entity controlling, controlled by or
under common control with such Borrower.
4.18 COLLATERAL.
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(a) Borrowers will not permit any of the Collateral to be removed
from the location specified herein, except for temporary periods in the
normal and customary use thereof, without the prior written consent of the
Majority Lenders, and will permit Lenders to inspect the Collateral at any
time; provided that no such inspection shall materially interfere with the
conduct of Borrowers' business.
(b) If any of the Collateral is or will be located outside Texas,
Borrowers will contemporaneously herewith furnish Lenders a list of the
states wherein such Collateral is or will be located, and hereafter will
notify Lenders in writing (i) of any other states in which such Collateral
is so used, and (ii) of any change in the location of Borrowers' chief
place of business.
(c) Borrowers will not sell, exchange, lease or otherwise dispose of
any of the Collateral or any interest therein without the prior written
consent of the Majority Lenders, except in the normal course of Borrowers'
business. Borrowers shall defend the Collateral against all claims and
demands of any or all persons claiming the Collateral or any interest
therein.
(d) Borrowers will keep the Collateral in good condition and repair
and will pay and discharge all taxes (subject to the provisions of Section
4.5 hereof), levies and other impositions levied thereon as well as the
cost of repairs to or maintenance of same, and will not permit anything to
be done that may impair the value of any of the Collateral. If Borrowers
fail to pay such sums, Agent may do so for Borrowers' account and add the
amount thereof to the other amounts secured hereby.
(e) Until default in any of the terms hereof, or the terms of any
indebtedness secured hereby, Borrowers shall be entitled to possession of
the Collateral and to use the same in any lawful manner, provided that such
use does not cause excessive wear and tear to the Collateral, cause it to
decline in value at an excessive rate, or violate the terms of any policy
of insurance thereon.
(f) Borrowers will not allow the Collateral to be attached to real
estate in such manner as to become a fixture or a part of any real estate.
(g) So long as Borrowers are not in default hereunder, Borrowers
shall have the right to process and sell their inventory in the regular
course of business. Lenders' security interest hereunder shall attach to
all proceeds of all sales or other dispositions of the Collateral. If at
any time any such proceeds shall be represented by any instruments, chattel
paper or documents of title, then such instruments, chattel paper or
documents of title shall be promptly delivered to Agent and subject to the
security interest granted hereby.
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If at any time any of Borrowers' inventory is represented by any document
of title, such document of title will be delivered promptly to Agent and
subject to the security interest granted hereby.
(h) By the execution of this Agreement, Lenders shall not be
obligated to do or perform any of the acts or things provided in any
contracts covered hereby that are to be done or performed by Borrowers, but
if there is a default by Borrowers in the payment of any amount due in
respect of any indebtedness secured hereby, then Agent may, at its
election, perform some or all of the obligations provided in said contracts
to be performed by Borrowers, and if Agent incurs any liability or expenses
by reason thereof, the same shall be payable by Borrowers upon demand and
shall also be secured by this Agreement.
(i) At any time after Borrowers are in default hereunder or under the
Loan Agreement, Agent shall have the right to notify the account debtors
obligated on any or all of Borrowers' accounts receivable to make payment
thereof directly to Agent, and to take control of all proceeds of any such
accounts receivable. Until such time as Agent elects to exercise such
right by mailing to Borrowers written notice thereof, Borrowers are
authorized, as agents of the Lenders, to collect and enforce said accounts
receivable.
4.19 ENVIRONMENT. Borrower shall be and remain in compliance with the
provisions of all federal, state, and local environmental, health, and safety
laws, codes and ordinances, and all rules and regulations issued thereunder;
notify each Lender immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify each Lender immediately of any hazardous discharge from or
affecting its premises; immediately contain and remove the same, in compliance
with all applicable laws; promptly pay any fine or penalty assessed in
connection therewith subject to the right to reasonably contest same; permit any
Lender to inspect the premises, to conduct tests thereon, and to inspect all
books, correspondence, and records pertaining thereto at reasonable times; and
at such Lender's request, and at Borrowers' expense, provide a report of a
qualified environmental engineer, satisfactory in scope, form, and content to
such Lender, and such other and further assurances reasonably satisfactory to
such Lender that the condition has been corrected.
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4.20 FINANCING STATEMENTS; POWER OF ATTORNEY. Upon the request of Agent,
Borrowers shall execute any and all financing statements and other documents
which are deemed by Agent from time to time to be necessary or desirable in
perfecting the security interests granted herein or otherwise effectuating the
transactions contemplated herein. Borrowers hereby constitute the Agent or its
designee, as Borrowers' attorney-in-fact with power, upon the occurrence and
during the continuance of an Event of Default, to endorse Borrowers' name upon
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment or Collateral that may come into either its or the Lenders' possession;
to sign the name of Borrowers on any invoice or xxxx of lading relating to any
of the accounts receivable, drafts against customers, assignments and
verifications of accounts receivable and notices to customers; to send
verifications of accounts receivable; to notify the Post Office authorities to
change the address for delivery of mail addressed to Borrowers to such address
as the Agent may designate; to execute any of the documents in order to perfect
and/or maintain the security interests and liens granted herein by Borrowers to
the Lenders; to do all other acts and things necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
commission or omission (other than acts of gross negligence or willful
misconduct), nor for any error of judgment or mistake of fact or law; this power
being coupled with an interest is irrevocable until all of the obligations
secured hereby are paid in full and any and all promissory notes executed in
connection therewith are terminated and satisfied.
ARTICLE 5
CONDITIONS TO CLOSING
5.1 CLOSING OF THE LOAN. The obligation of Lenders to fund the Loan on
the date hereof (the "Closing Date") is subject to the fulfillment, on or prior
to the Closing Date, of each of the following conditions:
(a) Borrowers shall have performed and complied in all material
respects with all of the covenants, agreements, obligations and conditions
required by this Agreement.
(b) Lenders shall have received an opinion of the Borrowers' counsel,
Xxxxxx, Xxxxxx & Xxxxxxx, dated the Closing Date, in form and substance
satisfactory to Agent's counsel, Xxxxxxxx & Xxxxxxxx, P.C.
(c) Borrowers shall have delivered to each of the Lenders a Note
executed by Borrowers, substantially in the form of Exhibit B attached
hereto.
(d) Borrowers shall have delivered to each of the Lenders a Stock
Purchase Warrant executed by ILD, substantially in the form of Exhibit C
attached hereto.
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(e) Borrowers shall have delivered to Agent the Small Business
Administration Forms 480, 652 and 1031 (Part A) and the Economic Impact
Assessment completed by Borrowers.
(f) Lenders shall have received UCC-1 Financing Statements executed
by Borrowers.
(g) Lenders shall have received a Letter Agreement from Intellicall,
Inc. and certain shareholders of ILD stating their agreement not to pledge
their shares of ILD to another lender following the release of the pledge
to Nomura Holding America, Inc.; provided that Intellicall, Inc. may pledge
its shares of ILD to another asset-based lender as collateral for a loan
from such lender.
(h) Lenders shall have received copies of the corporate charter and
other publicly filed organizational documents of Borrowers, certified by
the Secretary of State or other appropriate public official in the
jurisdiction in which Borrowers are incorporated.
(i) Lenders shall have received certified (as of the date of this
Agreement) copies of all corporate action taken by the Borrowers, including
resolutions of its Board of Directors, authorizing the execution, delivery
and performance of the Loan Documents.
(j) Lenders shall have received a certificate as to the legal
existence and good standing of the Borrowers, issued by the Secretary of
State or other appropriate public official in the jurisdiction in which the
Borrowers are incorporated.
(k) Lenders shall have received certificates of the Secretaries of
State or other appropriate public officials as to Borrowers' qualification
to do business and good standing in each jurisdiction in which a failure to
be so qualified would have a material adverse effect on its financial
position or its ability to conduct its business in the manner now conducted
and as hereafter intended to be conducted.
(l) ILD shall have received a minimum capital equity and subordinated
debt contribution of $3 million from Triad-ILD Partners and Xxxxxx
Telecommunications, LLC.
ARTICLE 6
DEFAULT AND REMEDIES
6.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an Event of Default hereunder:
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(a) Default in the payment of the principal of or interest on the
indebted nesses evidenced by the Notes in accordance with the terms of the
Notes, which default is not cured within five (5) days;
(b) Any misrepresentation by Borrowers as to any material matter
hereunder or under any of the other Loan Documents, or delivery by
Borrowers of any schedule, statement, resolution, report, certificate,
notice or writing to Lenders that is untrue in any material respect on the
date as of which the facts set forth therein are stated or certified;
(c) Failure of Borrowers to perform any of its obligations, covenants
or agreements under this Agreement, the Notes or any of the other Loan
Documents;
(d) Borrowers (i) shall generally not pay or shall be unable to pay
its debts as such debts become due; or (ii) shall make an assignment for
the benefit of creditors or petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made; or (v) shall indicate,
by any act or intentional and purposeful omission, its consent to, approval
of or acquiescence in any such petition, application, proceeding or order
for relief or the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (vi) shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for a
period of sixty (60) days or more;
(e) Borrowers shall be liquidated, dissolved, partitioned or
terminated, or the charter thereof shall expire or be revoked;
(f) A default or event of default shall occur under any of the other
Loan Documents and, if subject to a cure right, such default or event of
default shall not be cured within the applicable cure period;
(g) Borrowers shall default in the timely payment or performance of
any obligation now or hereafter owed to Lenders in connection with any
other indebtedness of Borrowers now or hereafter owed to Lenders;
(h) Borrowers shall have defaulted and continue to be in default in
the timely payment or performance of any other indebtedness or obligation,
which in the aggregate exceeds One Hundred Thousand and No/100ths Dollars
($100,000.00) or materially adversely affects Borrowers' financial
condition, except for challenges made in good faith; or
(i) Xxxxxxx Xxxxx is no longer employed as an executive officer of
ILD.
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With respect to any Event of Default described above that is capable of
being cured and that does not already provide its own cure procedure (a "Curable
Default"), the occurrence of such Curable Default shall not constitute an Event
of Default hereunder if such Curable Default is fully cured and/or corrected
within thirty (30) days (ten (10) days, if such Curable Default may be cured by
payment of a sum of money) of notice thereof to Borrowers given in accordance
with the provisions hereof; provided, however, that this provision shall not
require notice to Borrower and an opportunity to cure any Curable Default of
which Borrowers has had actual knowledge for the requisite number of days set
forth above.
6.2 ACCELERATION OF MATURITY; REMEDIES.
(a) Upon the occurrence of any Event of Default described in
subsection 6.1(d), the indebtedness evidenced by the Notes as well as any
and all other indebtednesses of Borrowers to Lenders shall be immediately
due and payable in full; and upon the occurrence of any other Event of
Default described above, Agent, upon the direction or consent of the
Majority Lenders, at any time thereafter may accelerate the maturity of the
indebtednesses evidenced by the Notes as well as any and all other
indebtedness of Borrowers to Lenders; all without notice of any kind. Upon
the occurrence of any such Event of Default and the acceleration of the
maturity of the indebtednesses evidenced by the Notes, and upon written
direction of the Majority Lenders, Agent shall:
(i) exercise any or all of its rights and remedies with
respect to the Collateral under the Tennessee Uniform Commercial Code,
and such additional rights and remedies to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights
and remedies hereunder may be asserted, including, without limitation,
the right to exercise all powers of ownership pertaining to the
Collateral as if the Agent were the sole and absolute owner thereof
(and the Borrowers agree to take all such action as may be appropriate
to give effect to such right);
(ii) in its name, or in the name of the Borrowers or
otherwise, demand, xxx for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for any
of the Collateral;
(iii) upon ten (10) days' prior written notice to the
Borrowers, sell, assign or otherwise dispose of all or any portion of
the Collateral, at such place or places as the Agent deems best, for
cash or credit against the indebtednesses evidenced by the Notes, at
public or private sale, without demand or additional notice, and the
Agent may be the purchaser, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale), and thereafter shall hold the
same absolutely free from any claim or right of any kind, including
any right or equity of redemption (statutory or otherwise) of the
Borrowers, any such demand, notice, right or equity being expressly
waived, disclaimed and released; and/or
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(iv) Exercise any other powers, rights or remedies conferred
to Agent under this Agreement or the other Loan Documents, or at law
or equity.
(b) In exercising any right or remedy that Agent may have with
respect to the Collateral, Agent shall act for the benefit of each of the
Lenders. Upon any foreclosure sale or disposition of the Collateral, Agent
shall be entitled to enter a bid that is for ratable credit upon each of
the Notes. Agent shall not be required to enter a cash bid unless all of
the Lenders have contributed a ratable portion of such cash to Agent. In
the event that Agent acquires title to any of the Collateral, it shall do
so on behalf of all of the Lenders.
(c) All proceeds from the liquidation, foreclosure, repossession, or
public or private sale of the Collateral, or enforcement of Agent's
security interest in the Collateral, or Agent's exercise of any rights or
remedies pursuant to this Section 6.2 or otherwise shall be applied first
to the costs and expenses (including reasonable and actual attorneys' fees
and disbursements) incurred by the Agent, acting as Agent, and thereafter
paid pro rata to the Lenders as hereinafter set forth. Specifically,
regardless of how each Lender may treat the payments for the purpose of its
own accounting, for the purposes of computing the Borrowers' obligations
hereunder and calculating distributions under this subsection (c), all such
proceeds shall be applied FIRST, to the costs and expenses incurred by the
Agent, acting as Agent, as set forth above; SECOND, to the ratable payment
of accrued and unpaid interest on the Notes (in the same proportion that
the then unpaid interest under each Note bears to the aggregate of the then
unpaid interest under all of the Notes); THIRD, to the ratable payment of
the unpaid principal of the Notes (in the same proportion that the then
unpaid principal under each Note bears to the aggregate of the then unpaid
principal under all of the Notes); FOURTH, to the payment of all other
amounts then owing to the Agent or the Lenders under the Loan Documents;
and FIFTH, the remainder, if any, to the Borrowers or any other person
legally entitled thereto. No application of the payments will cure any
Event of Default or prevent acceleration, or continued acceleration, of
amounts payable under the Loan Documents or prevent the exercise, or
continued exercise, of rights or remedies of the Lenders hereunder or under
applicable law. To the extent that any Lender receives any payment in
excess of that which it is entitled to receive hereunder, it shall promptly
repay such amount to Agent to be distributed to the party or parties
entitled thereto.
(d) No disbursements shall be made by the Agent pursuant to Section
6.2(c) unless and until the Agent has first determined (based upon written
notices provided by each Lender) the ratio that the principal and interest
evidenced by each Lender's Note bears to the aggregate of all principal and
interest evidenced by all of the Notes. As used herein, the term
"proceeds" of the Collateral shall mean cash, securities and other property
realized in respect of, and distributions in kind of, the Collateral.
(e) If the Agent is required at any time to return to Borrowers or to
a trustee, receiver, liquidator, custodian or similar official any portion
of any payment or distribution
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made by the Agent to any of the Lenders pursuant to this Section 6.2 or
otherwise, then such Lender(s) shall, upon demand, immediately return to
the Agent any such payments made or transferred to such Lender(s), but
without interest or penalty (unless the Agent is required to pay interest
or penalty on such amounts to the person recovering such payments). If,
however, any such Lender(s) shall fail to make such payment within ten (10)
days of Agent's demand, then the amount of such payment shall bear interest
at the prime rate of interest plus one percent.
6.3 REMEDIES CUMULATIVE; NO WAIVER. No right, power or remedy conferred
upon or reserved to Lenders and/or Agent by this Agreement or any of the other
Loan Documents is intended to be exclusive of any other right, power or remedy,
but each and every such right, power and remedy shall be cumulative and
concurrent and shall be in addition to any other right, power and remedy given
hereunder, under any of the other Loan Documents or now or hereafter existing at
law, in equity or by statute. No delay or omission by Lenders or Agent to
exercise any right, power or remedy accruing upon the occurrence of any Event of
Default shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein, and every right, power and remedy given by this Agreement and the other
Loan Documents to Lenders may be exercised from time to time and as often as may
be deemed expedient by Lenders or Agent.
ARTICLE 7
AGENCY PROVISIONS
7.1 AUTHORIZATION AND ACTION. Each Lender hereby irrevocably appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. The
duties of the Agent shall be mechanical and administrative in nature and the
Agent shall not by reason of this Agreement be a trustee or fiduciary for any
Lender. The Agent shall have no duties or responsibilities except those
expressly set forth herein. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement of Agent's security
interest in the Collateral), the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or so refraining from acting)
upon the instructions of the Majority Lenders, and such instructions shall be
binding upon all Lenders and all holders of Notes; provided, however, that the
Agent shall not be required to take any action which exposes the Agent to
personal liability or which is contrary to this Agreement or applicable law.
7.2 LIABILITY OF AGENT. Neither the Agent nor any of its partners,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement in the absence
of its or their own gross negligence or willful misconduct. Without limitation
of the generality of the foregoing, the Agent (a) may treat the payee of any
Note as the holder thereof until the Agent receives written notice of the
assignment or transfer
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thereof signed by such payee, which notice must be in form satisfactory to
the Agent; (b) may consult with legal counsel (including counsel for the
Borrowers), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants, or
experts; (c) makes no warranty or representation to any Lender and shall not
be responsible to any Lender for any statements, warranties, or
representations made in or in connection with this Agreement; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance
of any of the terms, covenants, or conditions of this Agreement on the part
of the Borrowers, or to inspect the property (including the books and
records) of the Borrowers; (e) shall not be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, perfection,
sufficiency, or value of this Agreement or any other instrument or document
furnished pursuant thereto; and (f) shall incur no liability under or in
respect of this Agreement by acting upon any notice, consent, certificate,
monthly billing statement or other instrument or writing (which may be sent
by telegram, telex, or facsimile transmission) believed by it to be genuine
and signed or sent by the proper party or parties.
7.3 RIGHTS OF AGENT AS A LENDER. With respect to the Loan made by it and
the Note issued to it, the Agent shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the Agent, and the term "Lender" shall, unless otherwise expressly
indicated, include the Agent in its individual capacity. The Agent and its
affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrowers
and any person who may do business with or own securities of the Borrower or any
subsidiary, all as if the Agent were not the Agent and without any duty to
account therefor to the Lenders.
7.4 INDEPENDENT CREDIT AND COLLATERAL DECISIONS. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit and collateral analysis (including an analysis of the nature
and value of the Collateral, the enforceability of the Agent's security interest
therein and the perfection of such security interest) and decision to enter into
this Agreement. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent shall
have no duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrowers or any of their subsidiaries (or any of their affiliates) which may
come into the possession of the Agent or any of its affiliates. Agent makes no
express or implied warranty concerning the value of the Collateral or the
perfection or enforceability of its security interest therein. Except for the
filing of continuation statements with the Texas Secretary of State when
required by applicable Texas laws, Agent shall have no duty to protect the
Collateral or the security interest granted therein.
7.5 INDEMNIFICATION. Lenders agree to indemnify the Agent (to the extent
not reimbursed by the Borrowers), ratably according to the respective amounts of
their portion of the Loan, from and
23
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
the Agent in any way relating to or arising out of this Agreement or any
action taken or omitted by the Agent under this Agreement, provided that no
Lender shall be liable for any portion of any of the foregoing resulting from
the Agent's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender agrees to reimburse the Agent (to the extent not
reimbursed by the Borrowers) promptly upon demand for its ratable share of
any reasonable out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preparation, administration, or
enforcement of, or legal advice in respect of rights or responsibilities
under, this Agreement.
7.6 SUCCESSOR AGENT. The Agent may resign at any time by giving at least
60 days' prior notice thereof to the Lenders and the Borrowers and the Majority
Lenders may remove the Agent at any time, with or without cause. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Agent. In the case of a retiring Agent, if no successor Agent shall
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the Agent, and the
retiring or removed Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article 7 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent under
this Agreement. Any Agent may be removed by a majority of the remaining Lenders
in the event the Agent is convicted of a crime, engages in any act of moral
turpitude which has an adverse effect upon the Borrowers or their business
reputation, or fails to perform its duties as required by this Agreement.
7.7 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right or setoff, or
otherwise) on account of the Note held by it in excess of its ratable share of
payments on account of the Notes obtained by all the Lenders, such Lender shall
purchase from the other Lenders such participations in the Notes held by them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of the other Lenders, provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and each Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (1) the amount of such Lender's required repayment to (2) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 7.7 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
setoff) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation. Each
Lender
24
shall give the Agent written notice within five (5) days of any payments or
other recoveries described above.
7.8 ENFORCEMENT BY AGENT. All rights of action under this Agreement, the
Notes and the other Loan Documents shall be instituted, maintained, pursued
and/or enforced by Agent. Any suit or proceeding instituted by Agent in
furtherance of such enforcement shall be brought in Agent's name without the
necessity of joining any of the other Lenders. In any event, the recovery of
any judgment by Agent shall be for the ratable benefit of all of the Lenders,
subject to the reimbursement of expenses and costs of Agent. When acting
pursuant to consent of Majority Lenders, Agent shall provide notice of any such
action to any Lenders whose consent was not sought within three business days
after such action.
7.9 PRO RATA TREATMENT. Except as specifically provided to the contrary
herein, the rights and obligations of the Lenders shall be prorata on the basis
of their percentage interests of the Loan as set forth on Exhibit A.
ARTICLE 8
TERMINATION
8.1 TERMINATION OF THIS AGREEMENT. This Agreement shall remain in full
force and effect until the later of (i) the Maturity Date (as defined in the
Notes), or (ii) the payment by Borrowers of all amounts owed to Lenders
hereunder and upon repayment of all amounts owned under the Notes, at which time
Lenders shall cancel the Notes and deliver them to Borrowers and do all things
and deliver all documents necessary to release the Collateral from the liens of
Lenders including UCC-3 financing statements and such other documents as
Borrowers may reasonably request; provided, however, that if at any time
Borrowers have satisfied all obligations to Lenders, Borrowers may terminate
this Agreement by providing written notice to each Lender.
ARTICLE 9
MISCELLANEOUS
9.1 PERFORMANCE BY AGENT. If Borrowers shall default in the payment,
performance or observance of any covenant, term or condition of this Agreement,
which default is not cured within the applicable cure period, then Agent may, at
the option of the Majority Lenders, pay, perform or observe the same, and all
payments made or costs or expenses incurred by Lenders and/or Agent in
connection therewith (including but not limited to reasonable and actual
attorney's fees), with interest thereon at the highest default rate provided in
the Notes (if none, then at the maximum rate from time to time allowed by
applicable law), shall be immediately repaid to Lenders and/or Agent by
Borrowers and shall constitute a part of the Obligations. The Majority Lenders
shall be the sole judge of the necessity for any such actions and of the amounts
to be paid.
25
9.2 SUCCESSORS AND ASSIGNS INCLUDED IN PARTIES. Whenever in this
Agreement one of the parties hereto is named or referred to, the heirs, legal
representatives, successors, successors-in-title and assigns of such parties
shall be included, and all covenants and agreements contained in this Agreement
by or on behalf of Borrowers or by or on behalf of Lenders or Agent shall bind
and inure to the benefit of their respective heirs, legal representatives,
successors-in-title and assigns, whether so expressed or not.
9.3 COSTS, EXPENSES, AND TAXES. Borrowers agree to pay on demand all
reasonable costs and expenses (not to exceed $25,000) incurred by any Lender in
connection with the preparation, execution, delivery and filing of the Loan
Documents, and of any amendment, modification, or supplement to the Loan
Documents, including without limitation, the fees and out-of-pocket expenses of
counsel for any Lender, incurred in connection with advising the Agent or any of
the Lenders as to their rights and responsibilities hereunder. Borrowers also
agrees to pay all such costs and expenses, including reasonable attorneys' fees
and court costs, incurred by the Agent and/or the Lenders in connection with
enforcement of the Loan Documents, or any amendment, modification, or supplement
thereto, whether by negotiation, legal proceedings, or otherwise. In addition,
Borrowers shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of any of the Loan Documents and the other documents to be delivered
under any such Loan Documents, and agrees to hold the Agent and each of the
Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or failing to pay such taxes and fees.
9.4 ASSIGNMENT. The Notes, this Agreement and the other Loan Documents
may be endorsed, assigned and/or transferred in whole or in part by Lenders with
consent of Borrowers, which shall not be unreasonably withheld; provided that no
consent shall be required for an assignment to an affiliate of the assigning
Lender. Any such holder and/or assignee of the same shall succeed to and be
possessed of the rights and powers of Lenders under all of the same to the
extent transferred and assigned. Lenders may grant participations in all or any
portion of its interest in the indebtedness evidenced by the Notes, and in such
event Borrowers shall continue to make payments due under the Loan Documents to
Lenders and Lenders shall have the sole responsibility of allocating and
forwarding such payments in the appropriate manner and amounts. Borrowers shall
not assign any of its rights nor delegate any of its duties hereunder or under
any of the other Loan Documents without the prior express written consent of
Majority Lenders.
9.5 TIME OF THE ESSENCE. Time is of the essence with respect to each and
every covenant, agreement and obligation of Borrowers hereunder and under all of
the other Loan Documents.
9.6 SEVERABILITY. If any provision(s) of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
26
9.7 INTEREST AND LOAN CHARGES NOT TO EXCEED MAXIMUM ALLOWED BY LAW.
Anything in this Agreement, the Notes or any of the other Loan Documents to the
contrary notwithstanding, in no event whatsoever, whether by reason of
advancement of proceeds of the Loan, acceleration of the maturity of the unpaid
balance of the Loan or otherwise, shall the interest and loan charges agreed to
be paid to Lenders for the use of the money advanced or to be advanced hereunder
exceed the maximum amounts collectible under applicable laws in effect from time
to time. It is understood and agreed by the parties that, if for any reason
whatsoever the interest or loan charges paid or contracted to be paid by
Borrowers in respect of the indebtedness evidenced by the Note shall exceed the
maximum amounts collectible under applicable laws in effect from time to time,
then IPSO FACTO, the obligation to pay such interest and/or loan charges shall
be reduced to the maximum amounts collectible under applicable laws in effect
from time to time, and any amounts collected by Lenders that exceed such maximum
amounts shall be applied to the reduction of the principal balance of the
indebtedness evidenced by the Notes and/or refunded to Borrowers so that at no
time shall the interest or loan charges paid or payable in respect of the
indebtedness evidenced by the Notes exceed the maximum amounts permitted from
time to time by applicable law.
9.8 ARTICLE AND SECTION HEADINGS; DEFINED TERMS. Numbered and titled
article and section headings and defined terms are for convenience only and
shall not be construed as amplifying or limiting any of the provisions of this
Agreement.
9.9 NOTICES. Any and all notices, elections or demands permitted or
required to be made under this Agreement shall be in writing, signed by the
party giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery, telecopy or telex or two (2) business days after the date of mailing
(or the next business day after delivery to such courier service), as the case
may be, shall be the date of such notice, election or demand. For the purposes
of this Agreement:
The Address of Agent is: Sirrom Capital Corporation
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
with a copy to: Xxxxxxxx & Xxxxxxxx, P.C.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxx-Xxxx Xxxxxxxx, Esq.
27
The Addresses of Borrowers
are: ILD Communications, Inc.
0000 Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx
ILD Communications, Inc.
00000 Xxxxxxxx Xxxxxxx Xxxxxx
Xxxxx 0
Xxxxx Xxxxxx Xxxxx, XX 00000
with a copy to: Xxxxxx, Xxxxxx & Xxxxxxx
Two Midtown Plaza
0000 Xxxxxxxxx Xxxxxx, XX, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: C. Read Xxxxxx, Esq.
The Address of the Lenders
are: As set forth on Exhibit A hereto
9.10 ENTIRE AGREEMENT. This Agreement and the other Loan Documents dated
as of the date hereof between Borrowers, Agent and Lenders represent the entire
agreement between the parties concerning the subject matter hereof, and all oral
discussions and prior agreements are merged herein; provided, if there is a
conflict between this Agreement and any other document executed
contemporaneously herewith with respect to the Obligations, the provision of
this Agreement shall control. The execution and delivery of this Agreement and
the other Loan Documents by the Borrowers were not based upon any fact or
material provided by Lenders, nor were the Borrowers induced or influenced to
enter into this Agreement or the other Loan Documents by any representation,
statement, analysis or promise by Lenders.
9.11 GOVERNING LAW AND AMENDMENTS. This Agreement shall be construed and
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment, modification, termination or
waiver of any provision of any Loan Document to which Borrowers are a party, nor
consent to any departure by Borrowers from any Loan Document to which it is a
party, shall in any event be effective unless the same shall be in writing and
signed by the Majority Lenders. The terms of the Notes may only be modified by
the unanimous written consent of Lenders.
9.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made by or furnished on behalf of the Borrowers
in connection herewith shall survive the execution and delivery of this
Agreement and all other Loan Documents.
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9.13 JURISDICTION AND VENUE. Borrowers hereby consents to the jurisdiction
of the courts of the State of Tennessee and the United States District Court for
the Middle District of Tennessee, as well as to the jurisdiction of all courts
from which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations arising under
this Agreement or any other Loan Documents or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
9.14 WAIVER OF TRIAL BY JURY. LENDERS, AGENT AND BORROWER HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER IN
CONTRACT OR TORT, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY WAY RELATING TO
THIS AGREEMENT OR THE LOAN DOCUMENTS.
9.15 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties to this Agreement in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.
9.16 CONSTRUCTION AND INTERPRETATION. Should any provision of this
Agreement require judicial interpretation, the parties hereto agree that the
court interpreting or construing the same shall not apply a presumption that the
terms hereof shall be more strictly construed against one party by reason of the
rule of construction that a document is to be more strictly construed against
the party that itself or through its agent prepared the same, it being agreed
that the Borrowers, Agent, Lenders and their respective agents have participated
in the preparation hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be executed by their duly authorized officers, as
of the day and year first above written.
AGENT:
SIRROM CAPITAL CORPORATION, a Tennessee
corporation, as Agent
By: /s/ Xxxxx Xxxxxx
----------------------------------
Title: Vice President
-------------------------------
BORROWERS:
ILD COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Title: President
-------------------------------
INTELLICALL OPERATOR SERVICES, INC.,
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxxxxx
----------------------------------
Title: Vice President
-------------------------------
LENDERS:
SIRROM CAPITAL CORPORATION, a Tennessee
corporation
By: /s/ Xxxxx Xxxxxx
----------------------------------
Title: Vice President
-------------------------------
30
XXXXX RIVER VENTURES LIMITED PARTNERSHIP, a
South Carolina limited partnership
By: Emergent Equity Advisors, Inc.,
its general partner
By: /s/ Capers X. Xxxxxxxx
----------------------------------
Title: President
-------------------------------
31
INDEX OF SCHEDULES AND ATTACHMENTS
Exhibit A - List of Lenders
Exhibit B - Form of Note
Exhibit C - Stock Purchase Warrant
Schedule 3.1(b) - Subsidiaries
Schedule 3.1(e) - Capitalization
Schedule 3.1(e) - Shareholders
Schedule 3.1(f) - Trademarks and Patents
Schedule 3.1(i)(A) - Financial Statements
Schedule 3.1(i)(B) - Additional Borrowings
Schedule 3.1(k) - Compliance with Law
Schedule 3.1(l) - Debt and Liens
Schedule 3.1(o) - Certain Transactions
Schedule 3.1(r) - Significant Contracts
Schedule 4.17 - Transactions with Affiliates
EXHIBIT A
LIST OF LENDERS
Amount of
Name and Address Loan
--------------------------------------- -----------
Sirrom Capital Corporation $1,500,000
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Xxxxx River Ventures Limited $ 500,000
Partnership
00 Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
-----------
$2,000,000
